Afford Anything - JL Collins Part 2: What Happens When You Don't Need to Work Anymore?

Episode Date: July 15, 2025

#625: What do you do when you've reached financial independence? JL Collins says it depends entirely on your spending rate, not just your net worth. Collins joins us for part two of our conversation about what happens after you reach financial independence. He tackles the question of whether you should invest differently once you've "won the game." Someone with $5 million spending $100,000 per year sits in a completely different position than someone with the same amount spending $200,000 per year. The first person can afford to stay aggressive with stocks. The second person needs bonds to smooth the ride. Collins walks through his withdrawal strategy using his daughter as an example. She stepped away from corporate life in her early thirties and now follows an 80-20 stock/bond allocation. She pulls dividends from both funds into her checking account, covering about 2.5 percent of her target 4 percent withdrawal rate. Vanguard automatically sells shares to cover the remaining 1.5 percent. We cover Collins' thoughts on the 4 percent rule, which he calls extraordinarily conservative. He references Bill Bengen's research showing that 5 percent withdrawals succeed 86 percent of the time. Collins would take those odds to escape a soul-crushing job, especially since most financially independent people end up accidentally making money anyway. We discuss the tension between frugal habits that build wealth – and learning to spend money once you have it. Collins flies first class, but he drives a basic car. Collins explains why financially independent people often stay engaged with work — the problem was never work itself, but working without agency. Timestamps: Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths. (0:00) Intro (2:00) Investing when you've won the game (5:30) Spending rate versus total wealth (8:00) Three-year versus ten-year timelines (11:00) Adding bonds gradually or all at once (14:00) Why 4 percent is extraordinarily conservative (17:00) Soul crushing jobs and 5 percent risk (24:16) Withdrawal frequency and dividends (27:16) Automatic share sales setup (31:16) Starting business while financially independent (36:16) Accidentally making money after retirement (47:09) Agency versus having to work (50:09) Spending advice for frugal philanthropists (54:09) Charity auction magnifying effect Resources Mentioned: https://affordanything.com/377-how-i-discovered-the-4-percent-retirement-rule-with-bill-bengen/ https://affordanything.com/bill-bengen-created-the-4-rule-now-he-thinks-we-can-withdraw-more/ Learn more about your ad choices. Visit podcastchoices.com/adchoices

What do you do after you've, quote, unquote, won the game? What do you do once you've reached financial independence and you've made work optional? And if you haven't gotten there yet, in fact, if you're not even close, what do you need to know now so that you can prepare yourself for the wealth that you are about to build? We're going to discuss this and much more today in part two of our interview with J.L. Collins, the author of The Simple Path to Wealth. Welcome to the Afford Anything podcast, the show that knows you can afford anything but not everything. This show covers five pillars, financial psychology, increasing your income, investing, real estate and entrepreneurship. It's double-eye fire. I'm your host, Paula Pant.

Today's episode is part two of our interview with J.L. Collins. If you missed part one, you'll want to go back and listen to that first. We covered some fascinating ground. We talked about why simple often beats mathematically optimal in terms of human behavior, in terms of actually executing on the plan, because the plan that you implement is better than the theoretical idea that you don't. We covered a lot of ground, and if you're wondering where those questions came from, they came from you. So in both part one and part two, almost every question that I ask is listener submitted. It came directly from you.

That's not something that I typically do, but J.L. Collins is so well known in this community that I thought, let's open up the floor. So I emailed a subset of my newsletter subscribers, not all of them, but I emailed 2,000 of the most engaged subscribers of the 77,000 of you who are on the newsletter list. And if you're not, afford anything.com slash newsletter, please join. The subset of the most engaged subscribers came forward with some compelling questions. And so J.L. and I discussed the format beforehand. I was like, all right, J.L., you're ready?

You're ready for an interrogation? And he was like, bring it. And so we had a lot of fun. Jail and I have known each other for a decade. We took multiple trips to Ecuador together, hosting and speaking at the Chautauqua events. So this is truly a community participatory interview. And we get advanced level. You know, when you ask this community what they want to know, you get some pretty sophisticated questions.

So with that said, here is part two of our interview with J.L. Collins. I want to return to some of the questions that our listeners submitted. This question comes from chat. Chen asks, would you invest differently if you've won the game and you plan to retire soon? Oh, Chet, I love this question. There's two schools of thought. When you say you won the game, that means that, in my mind, you reach financial independence and then some. You are comfortably into that range, right?

You've got plenty of money. The common wisdom at that point says stop playing the game. game. And what that means in our context is you don't need to own these risky volatile equities anymore. You can go to bonds or you can go to treasuries. The classic example of this, by the way, is Ross Perrault. So anybody who was paying attention a little bit to history of Ross Perrault, I was a very successful tech guy in the fairly early days. He accumulated, I want to say about $3 billion, which was real money back then. He ran for president. And, he had won the game. And he famously went 100% into treasuries, right? Safest investment in the world then,

and still today, even given what we were talking about a little bit earlier. And that's great. There's nothing wrong with that. My approach is a little different. My thinking is a little different. I say if I've won the game, I can play it even more aggressively than before. So at that point, if I'm living on the portfolio, I'm not even going to bother with bonds anymore. Because bonds, while they smooth the ride, they're a lag on my performance. And one of the other ways I'm different in my thinking, Paula, is the classic thinking is the older you get, the more bonds you should have. But that assumes you're only investing for your own lifetime. And I'm not.

I mean, my portfolio is going to outlive me. And I want it to be very productive for the charities I support and for my heirs. And so if I've won the game, I'm going back into all stocks. Candidly, something that I'm waiting for an opportunity to do as we speak. I was talking to somebody who said, and I think they were in a World Fund, actually, that they were only spending the dividend from their World Fund, which, if I remember correctly, is about 2%. And was that safe?

And in my world, that's about as safe as it gets because you don't care then the value of that fund fluctuates. If stocks go down for a while, you really don't care. Because dividends are a little stickier than stock prices. They can go down in a prolonged decline, make no mistake, but more slowly and not as dramatically. So if you're living on that dividend,

or even the dividend on B. DTSAX, which I want to say is about 1.3, 1.4% these days, if you can live on that dividend, it doesn't get any safer than that. If I've got $3 billion and the market cuts me in half, and I've only got a billion and a half, I think I could just squeak by. So, yeah, and then I know that it's going to return. That's my way of thinking, which, again, is not traditional for your consideration. Let's say we're not talking billions. But let's say we're talking few-mill. Would your answer change?

Well, the raw number that you have is only one part of the component, right? There's two components. There's how much do you have and how much you spend each year? So let's suppose you come to me and you say, I've got $5 million. And I am spending $100,000 a year. Well, you are well under the classic 4% withdrawal guideline. So yeah, to you, I'm going to say absolutely.

If it's me, I'm 100% stocks. But let's suppose on the other hand, you come to me and you say, you know, I've got this $5 million and I'm drawn exactly 4%. And I need every penny of that, which I think is $250. Am I math correct? Let's see. So it's $40,000 per mill. So $40, $40, $1.20, $200, $200,000.

$200,000. $200,000. All right. You're drawing 200. So you're drawing every bit of that 4%. And you need that to meet your expenses. Then no, my answer is going to be different. You don't have that margin to play with.

So, again, it's not just a matter of how much money you have. And I'm making an assumption with the billions that you probably have a lifestyle that can get by on a billion and a half, even if you have $3 billion. But to your point, and it's a very valid one for most of us, if you're way down in A few millions. In the single digit millions. In the single digit. Low single digit millions.

Yeah, right. Let's say you're in the low single digit millions. You poor devil. By the way, that's a pretty sweet place to be in my world. Yeah, then you're going to absolutely have to pay attention to what your spending rate is. And again, if your spending rate is modest, then yeah, you can push that envelope. If you're spending every bit of that and maybe even a little more, then you're going to have more of those bonds. And by the way, I would say the same thing when you're considering your bond allocation going into retirement.

So if you're going into retirement and you just barely have enough invested money to throw off at 4% what you need to live on, you're going to want more bonds. You don't have a lot of room to absorb that volatility. If on the other hand, you're going in and whatever amount you have invested, you're only pulling 2% of it, then, yeah, I'm probably going to be an all-stock. I love these questions. You have smart listeners. Very, very smart listeners. Another listener question asked about how a person would invest on a three-year timeline versus on a 10-year timeline. Let's say that there is a bucket of money that you want to spend within the next three years.

And then there is separately a different bucket of money that you want to spend within the next 10 years. What would your approach be? Yeah, so you're saving to buy a house or something, yeah, whatever. Yeah. Yeah, let's take the three-year one first. So if you're going to spend the money in three years, I'm probably going to be in cash, especially these days where money market funds are back up paying four or five percent or whatever it is. Not too many years ago, as you recall, they were paying nothing.

But even then, I would have been in cash because stocks and even bonds, as we discussed a little bit earlier, or become a little bit too volatile if you really want to have that money available in three years. But on the other hand, let's suppose you said to me, you know, I want that money in three years to buy whatever, but I'm a little bit flexible. And then I might say, well, okay, add some stocks, because if the wins that you're back, it might get you there before three years, and you can go on that world cruise a little bit earlier. And if you're willing to accept the fact that the wind might be in your face, and it might take you four years instead of three years or five years, then you can roll those dice. When you go out to a 10-year period, that applies even more.

Because historically, there are very, very few 10-year periods where stocks didn't produce great results, right? And there's a lot of one-year periods where you'd be hurt in three-year periods and even five-year periods. But the longer out you go, the more reliable your stock performance is. So the more inclined, I would be to roll the dice a little bit. But again, it depends on how absolutely positively you need that fixed amount of money at the end of the time period. And if you absolutely positively need it fixed, you need to be in cash. That's actually something I talk about with this audience as well.

And oftentimes if it's something like a 529 plan, and assuming that you really want your child to be able to go to college at the age of 18 straight out of high school and assuming that you don't have a lot of flexibility around that date, then you have a very, very fixed date for a thing like that versus something like taking a big six-month trip. Right. Or even buying a house. Yeah, or even buying a house. Like those are goals that might have some greater flexibility around the date. You know, is it really the end of the world if you buy a house in 2027 versus 2028? Yeah, I agree. Absolutely.

So it depends on what you're going to use the money for and how big a gambler you are, I suppose. On the topic of adding bonds into the portfolio, this is also a listener question, quote, Do you have a preference of slowly adding them to your portfolio over multiple years? or would you prefer larger contributions a few years before reaching retirement? Yeah, that's also an interesting question. And I suppose it goes back to what your risk portfolio is and how much you have. So using myself as an example, and I'm not suggesting this is what other people should necessarily do. But when I quit my last corporate job, which I did in 2011, the first time I stepped away from a lot of jobs in my career,

but that was the first time I stepped away with the intention and never going back. I was 100% stocks when I made that decision. And so the next day is when I added my bond allocation. I'm not sure that's ideal. I think that you would be well served in most cases for most people to ramp it up slowly over the course of, say, five years. And to begin adding those bonds just in case the... The day you happen to pull the trigger is a really bad day in the market or it's falling in a bear market year or what have you. And, you know, you don't want to be making the transition then.

So that would be the more prudent, careful thing to do. I have not always in my life done the prudent, careful thing. At what pace would you slowly add those in? Would it be like 20% a year per year over five years? Probably I do something like that. Yeah, I wouldn't particularly want to overcomplicate it. But if I happened, by the way, five years out, it happened to be in a bear market. I'd probably delay.

And because bear markets tend to run their course, in five years is a pretty, now they're bare markets, to be clear, that have extended longer than that. We had, again, that first decade of this century, you had the stagflation years and the 70s and what have you, but for the most part, they'll run their course. So I might delay a little bit. If, on the other hand, it was a raging bull that had been going on for a while and stock prices were really high, to be clear, there's no way you can predict that they're not going to go higher. But at that point, I might be a little more comfortable shifting into bonds sooner and maybe even a little more aggressively than that 20%. We received a lot of questions around what many people refer to as the decumulation phase, although to your point, during the quote-unquote,

decumulation phase, your portfolio might actually be growing, but the withdrawal phase or the retirement phase, we received a very large number of questions that were specifically around that. We've already talked about your suggested asset allocation during that phase, but this one question asks, and it's a little bit more broad. We know what your investment strategy is, but what safe withdrawal rate are you assuming? And what anticipated inflation rate do you use for planning? So the answer the second part first, about inflation, I don't. Because inflation, it's hard to know where it's going to go, right? It's sort of like taxes because those things change.

And so if you look at something like the 4% guideline, that also typically doesn't look at those things. So let's rule that out. And then it goes back to what is the withdrawal rate. And I think 4% is a great guideline. there's a lot of conversation out there. Not so much today, but a year or two ago about is the safe withdrawal rate really 3.92% or 3.0. Yeah.

It was like, what, 2018 or so, there was like a phase where everyone was obsessed with like, should it be 3%? Should it be 5%? I know. Yeah. I was saying at the time that the phase, by the way, went on for a number of years. Yeah, really did. You know, that was when we were doing the Chautauqua's in Ecuador together. Yeah, I think that's when it started.

That's when it started. But it lasted, right? I mean, I think it's, I remembered even being more recent than 2018. And I don't know what I'm about to say is actually historically accurate, but if it's not, it should be. It's because it's a great story. The way I heard is evidently about four or five hundred years ago, theologians were having serious discussions around how many angels could dance on the head of a pin.

That's how this was. withdrawal rate. Conversations struck me. It's a little bit absurd. Bill Bingen, who's the guy who came up with the concept, makes the point that it's 4% extraordinarily conservative, which is what his goal was, is to have something that would reliably survive the inevitable downturns of a long period of time. Market is corrections, bare markets, crashes are a perfectly normal part of the process that we all should expect and have to endure. And he took that into account in coming up with this 4%. And then the Trinity study comes along and did some in-depth analysis of actual 30-year periods and pretty much confirmed that's a good number. And it's good enough for me. You mentioned

Stalkwas a moment ago. And as you know, but some of our listeners might, because you were a speaker at Chautauqua, that people who attended could select a speaker to have a one-on-one conversation with. And I'll bet that what I'm about to say will resonate with you because I bet you would hear the same kind of thing. But one of the more common questions that I would get is somebody would come in and they'd say, you know, just hypothetically, I have a million dollars invested, which at 4% could throw up $40,000 a year. And I am in this soul crushing job. But I need $50,000 a year. And that would be 5%. What do I do? If you look at the Trinity study, 5% succeeds 86% of the time.

I'm in a soul-crushing job, and this is what I would tell these people, I'm gone tomorrow. I leave Chautauqua, and the day I'm home, I'm resigning, I'm going to take that risk. It's 86% to get me out of a soul-crushing job. And then the second part that I would throw in is, do you think that if you were on comfortable pulling that 5%. There is a way without your corporate gig that you could make $10,000 during the course of a year. And, Paul, you know this as well as anybody. Anybody who gets to that point to that close to financial independence is smart, resourceful, disciplined. I have never had a person say to me, no, I don't think I could figure out on to make $10,000, you know?

And the other thing is that a lot of these questions would come from young potential retirees. I have yet to meet somebody, but you will also agree and confirm this. I have yet to meet somebody in this space who retired early and then just sat on the beach for the rest of their life. Many times they'll go and do that for a few months. But again, these are smart, engaged people. So I also say to them, it's inevitable that you're going to do new things. things with your life, and it's equally inevitable that some of those things are going to throw off money. So yeah, go for the 5%. And Bengen, I think, has even said he toyed with making it 7%,

because that actually worked so often. And he just chose to be more conservative. And I'm a pretty conservative guy when it comes to that. So I like the 4% guideline. But as we said a moment to go to this idea of, well, should it be 3.29% is now we're just being silly. Now it's angels on the head of a pen. Bengin has been on this show multiple times, including most recently. We spoke face-to-face at the Boglehead's conference. And he made the point that 4.2% actually. Yeah, right, right. I saw that. He said 4.2% mathematically, if your lifespan extends out to infinity, like you can asymptotically be at 4.2% over a lifespan of infinity. So it isn't even a 30-year time span. It's an infinite retirement. I'd forgotten that 4.2. And I'm pretty sure

it was listening to your interview or one of your interviews with him that I was reminded of it. I think 4.42 was his original recommendation. And 4% is easier to remember. And that's how it became 4%. But yeah, to the same point we're making. Yeah. Like the rule of 72, it's actually like, 69 point something, something, something. But nobody can remember that many decimal points, so we all just round it up to 72. Exactly. Yeah. Exactly.

And I think our friend Merriman that we were talking about earlier, Benning in my sense, and you obviously know him better than I do, is that he's the guy who's done his homework. I mean, he didn't just pull a rabbit out of his hat. So, yeah, I'm very comfortable with that kind of number. And great point that it's actually 4.2 and the whole infinity thing, I love it. Yeah. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business.

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Sale ends December 7th. Continuing on with this conversation around the, quote-unquote, decumulation phase, the withdrawal, the retirement phase. Let's see. Katie asks, and I think we've covered. kind of covered this. Katie asks, please ask for more guidance around a decumulation account for retirement, asset allocation and safe withdrawal rate. She makes the point that there's a lot of accumulation advice, but we hear less often about accumulation. And I think we've covered that.

You've talked about asset allocation, which is essentially two funds. And depending on how close to the 4% level you are, in my mind determines how much percentage of bonds you need. By the way, a quick point on that, you never want to have less than 50% in stocks. Because if you look at the Trinity study as a guideline, when you get below 50% in stocks, you no longer are the growth engine you need for that extended survival of your portfolio. In fact, I don't think I'd ever go below 60, 40, 60% being stocks. And the other thing, and you're right, we covered most of her question, but it gives me an opportunity to touch on another aspect of it.

This goes back to the 4%. So the 4% rule says you can take 4% adjusted for inflation each year, incidentally, and it will last for the duration. I would never take the 4% and set that on autopilot and not look at it. And there are two reasons for that. One, according to the Trinity study, about 4% of the time, it doesn't last 30 years. You know, the market just the wind is at your face too much. obviously nobody wants to run out of money 30 years out. So you want to pay attention for that reason.

If you get an extended down market, you're probably going to want to adjust your living or figure out a way to make a little more money. But there's an even more important reason to pay attention. And that is if you're pulling 4% over 30 years, the likely outcome is your portfolio at the end of that 30 years, let's suppose you start with a million dollars, is not going to be running out. it's going to be $5 million or $6 or $7 or $15 million, depending on the market. Because of compounding, it's going to grow to extraordinary size. So you want to pay attention not only on the remote chance you might run out of money,

but on the much more likely chance that your portfolio is going to grow, and presumably you're going to want to enjoy that extra money. And you do that by paying attention, right? Yeah. How often would you make withdrawals or how often would you recommend a person make withdrawals? annually, twice a year, quarterly, monthly? Yeah, so my daughter's a good example. So she's in her early 30s.

She's been following the simple past. She last fall stepped away from her corporate career. I don't know if this is permanent or is going to wind up being a sabbatical or whatever you're listening to her now. She's really liking not being in the corporate world. But so when we went through her portfolio together, she did exactly what we're talking about. She added bonds, 20% in her case. And I said, the first thing you want to do is instead of having your dividends from VTSAX reinvested, which is what you should do when you're accumulating,

now you want to reach out to Vanguard or whoever your provider is and say, I want you to send me those dividends. I want you to drop those into my checking account. And if I'm remembering correctly, pays quarterly, maybe twice a year, I don't remember. But anyway, have that done. And then you add the bonds, and VBTLX, which is a total bond market fund, is thrown off, I want to say, 3.5, 3.6%, something like that. So you want to have that thrown in into your checking account as well. And if 4% is your target between those two at an 80, 20% allocation, you have account for about 2.5% of your 4%.

Have I confused anybody yet? Yeah, no, that makes sense. Okay. Just to outline the math in case anybody wants to, in your daughter's case, you're young and your early retiree, 80% of your portfolio is in equities. You're pulling the dividends out of those equities. And those dividends are at what percentage do you say? I think it's by 1.3, 1.3, something like that.

So essentially from 80% of your portfolio, you're pulling out 1.3% in dividends. And from 20% of your portfolio, you're pulling out ballpark 3.5% in dividends. Exactly. And so you mash up the two of those. And it comes out to about two and a half percent of the four percent you want to have to live on. So now the question becomes, well, where do I get the other percent and a half? Right. And the easy thing you do is you, again, reach out to Vanguard.

You can either do this whenever you need the extra money, or you can set it up and Vanguard will do it automatically. And you calculate how many shares you need to sell in order. to accumulate that 1.5% and you just instruct them every month, every quarter, whatever frequency works for you and your spending habits, sell these shares and shift that money into my check account, and you're done. And then if, especially for younger people, again, let's use my daughter for an example. Let's suppose five years from now, she says, you know, I'm going to go back to the corporate world. Or maybe she starts a business that starts throwing off some cash. Well,

now you shift back into 100% stocks, and now you tell Vanguard start reinvesting those dividends, and you're back to accumulating. It's an interesting time. When my dad's generation came of age, if you were lucky, typically, you came out of school, you got a job, you work for the company for 40 years, you retired with a gold watch. For my generation, and this describes my career, you came out of school, you found yourself in an industry. In my case, it was magazine publishing,

but you probably went to a variety of different companies within that industry. In my case, whoever would pay me more money, okay, I'll join you. And that was it, and that made it interesting because I got to work for different companies. I think today what's really exciting for people younger and like my daughter is they're going to have multiple careers in multiple areas. And I see Jessica doing that already. So who knows what her next phase will be? I mean, well, right now she's in her next phase, but what follows that?

And if it starts throwing off significant money for whatever reason, then she's going to shift back her allocation into that growth phase, that accumulation. Let's say that she, in a year or two, says that she wants to start a business, but she's going to need some startup capital for that business. How would you recommend that she allocate that amount of money, that she would need a startup capital as it relates to her overall portfolio. Yeah, so first of all, if you're in the position that she's in where you have enough that you can step away, you have capital.

And now the question becomes, do you want to use your capital? Do you want to find outside financing? In which case you've got to give up part of your company, and those are tough decisions. I would also say you want to be very, very careful because you worked hard to put yourself into a very strong financial position. And starting a company can be a wonderful thing to do, and it can be extraordinarily lucrative, but it's also risky.

A lot of companies fail. So think long and hard before you take that step and how much of your money you pull out of your portfolio to support it, understanding that if it doesn't work, you've rolled a very good situation back and you're going to have to rebuild it. So there's no really easy answer.

to that question. But it's an important one to give long, deep thought to. But if she answered, let's say she thought about both, and her answer is, yes, I want to bootstrap this myself in order to retain full control. And I do want to go through with it. What should the parameters be when it comes to balancing the public equities or public bonds portion of the portfolio, public markets investments, as opposed to a company that you yourself are starting? So if I understand you, The first question I'm going to ask is, well, how soon are you going to have cash flow? How soon is this company going to be providing money for you to live on? If the answer to that is, well, it's going to take a while, then I'm going to hang on to my bonds

because I need that to smooth the ride. If the answer is, no, no, this is, I've got customers, I've got product or service, I've got customers right now. Day one, I'm going to have cash flow, and I'm going to divert a lot of that to grow the business, but I can take some of that to live on, then I'm probably going back. to all stocks. Does that, did I hit your question right? Yeah.

Okay. Yeah. And to your point, a lot of companies do, because you mentioned both product and service. Yeah. A lot of companies, especially if they're bootstrapped, will start a service in order to create the cash flow and then use that cash flow to develop product. Yeah.

That's what I did. Start a service and then later develop product. Yeah, you're a classic case of what we're talking about. Yeah. Yeah, exactly. That's actually why I ask because something that I'm, I think about a lot is how do I balance my overall portfolio with regard to the real estate portion, the private business portion, and then the public equities portion.

Yeah. I have a little bit of the same experience because when I quit my corporate job back in 2011, and that's just when I happened to start the blog, I happened to start this journey, but I didn't start the blog with the idea of it being a business. And I had no idea of doing Chautauas. I had no idea of writing books. I was just trying to archive this information for my daughter because I'd managed to turn her off to hearing it.

Yeah. Right now, I wanted to make sure it was there. And so the fact that the blog started to grow and then suddenly was making money, and then I wrote a book that turned out to be well received and suddenly I'm getting royalties, I still own bonds from when I left that corporate job. And one of the reasons is this all feels very temporary. to me. So I keep thinking, okay, it's been great. It's a great ride, but it's going to go away, and I still need my bond allocation. There was a guy, oh, I'm drawn a blank on his name. I bet you

met him because he and his wife came to several Chautauquas, and nice people we stayed friends, and my memory is just shot. But in any event, every time I gave a talk, it should talk in the Q&A section. He would raise his hands, and he'd say, yeah. How come you still own bonds? Because based on what you're telling us, you should be 100% stocks, and he was right. And I'd say, well, you know, I just, you know, this kind of thing I just said now and then the next year he'd show up. And you still have those bonds? Well, I still have them today to this day.

And I should have dumped him a decade ago. But there you go. And that goes back to your earlier point when you say people who retire, especially if you retire young or early. often are highly engaged with the world. And because generally you're interested in things, you're intellectually curious, you're highly engaged with the world, oftentimes you end up kind of accidentally making money. Yeah. And I'm an example of what you just said with one exception.

I wasn't young. I was 60 when I pulled the trigger. But yeah, I had no intention of ever having an income again. And yet here we are. It's almost impossible for it not to happen if you stay engaged. And it's fun. Well, and arguably, you're 74. Arguably, you're still, quote, unquote, working.

Absolutely. If you consider talking to me a job, you know, like. And how much better can a job possibly be than sitting here and talking to my friend? I mean, it really is, one sense, it's work, but it's joy. I mean, I, you know, we were talking to each other, well, I don't know, maybe the blog was making money by them, but it wasn't making enough for me to get rid of my bonds. So I was doing this before it threw off money just because it was fun. Yeah. The fact that throwing off money makes it more fun, but yeah.

It gives you the capital to reinvest. Like, the fact that it makes money gives you the capital to allow it to grow, which is, to me, that's been like the really, the fun part is, for me, it's been building. out that team, building out that support, like really being able to invest in the growth of this. And I imagine you can also relate to what I'm about to say from your Chastauqua experience and having your one-on-one sessions. But another thing that would commonly happen is I'd have a conversation in 101 and they would show me their numbers and they would be financially independent and not have to work anymore. And they'd say, but I love my job. I don't want to quit. Well, there's nothing that says you have to quit.

being financially independent just means you get to choose. And so if you want to quit, go ahead and quit. If you love what you're doing, then keep doing it. I was talking to a young Chautauqua just last week that we've stayed in touch with. He and his wife are quickly closing in on being full FI. He's an engineer. He loves what he does. And he said, you know, JL, what financial independence means to me is not that I'm going to stop

working in my job, but I'm going to be much bolder in the way I approach it. And that's probably going to take me further in my career because I have that FU money that allows me to make those bold choices because I'm not dependent on the check. Right. Yeah, and you will probably do even better. There's so many reasons to walk this path. Exactly. A point that I often like to make is The people that we think of as conventionally, quote unquote, wealthy, the majority of them are financially independent. Justin Bieber, I don't know what his spending is like, but I assume he's probably financially independent. Taylor Swift. Taylor Swift. One would hope. Yeah, exactly. She didn't go on the ERA's tour because she was worried about paying the rent. Warren Buffett, right,

who just announced his retirement at the age of 94. A slacker. Yeah. These people who we think of as conventionally wealthy, they're all financially independent, right? So no one's going to drag you, kicking and screaming away from your job. And in fact, it gives you the opportunity, as you said, to be bolder in the decisions that you make, to take bigger risks, to reinvest in growth, just to be louder, right? You just get to be louder. And have more agency. The running thread through all the people you named, and this includes you and me and probably a lot of people listening, work is not the problem.

People love to work because it makes them productive. It gives them a great satisfaction. The problem is when you have to work and you don't have agency, right? All of those people have agency. That's what makes a difference. If you're working in a job, paycheck to paycheck. because you have to pay the rent, you no longer have agency. It may still be a good situation.

You may be working for a company you love and be lucky enough to have a good boss, but that can change. Your boss can go take another job or get promoted, and now suddenly you have a boss that's not working out for you so well. That's the critical difference. So a lot of people, because they get in these soul-crushing jobs, I think, man, work is just terrible. Work sucks.

It's not the work. It's the fact that you're working without agency. And everybody you described has enormous autonomy over what they do. They can choose to spend out their time. They can choose to whether go on tour or not. You can choose how, in your case, how many podcasts to do, how many guests to have. I can choose how many I go on. I can choose whether to keep writing or.

or not, that makes all the difference. Right. Yeah. Mastery, autonomy, and purpose are the three biggest predictors of workplace satisfaction. Well said. Yeah. We'll close out kind of on what we were just talking about, autonomy, mastery, purpose. Right.

On this question, which also comes from Chen, advice on the spending phase. What advice do you have on the spending phase, especially if it's a big pot of money, if you have lived below your means all of your life. This is the important piece. And if you have philanthropic thoughts. So another question I love, because this is a topic that has been pretty hot in recent years in the space. And it's been a hot in a way that I object to. And what I mean by that is the Porsche recently seems to be, if you have money spent it.

Die with zero. Yeah. Not the only, but the classic. example is die with zero. There's a lot in that book to love, and there's a lot of that book that makes me uncomfortable. What I would say is a couple of things. First of all, the idea that money in general, or that spending money specifically is a key to happiness is a fallacy, right? Money can do a lot of things, as we've already had in this conversation. It can open magnificent paths to you that wouldn't exist otherwise, great opportunities.

I'm an advocate of accumulating and having money for those reasons. Money solves money problems, as somebody smarter than me once said. It's not the key to happiness. So if you think spending money is necessary to be happy, I would suggest that you do a little soul searching. Okay. Now, having said that, if I'm talking to somebody, and again, it takes a certain frugal mindset

to set aside the money to invest to get to where we're talking about. When you've arrived, when you've become wealthy, when you're financially independent, what's served you well to get you here is not necessarily what's going to serve you well going forward. I would never say spend the money just because you have it. It's not what I do. But if you said to me something along the lines of, man, flying has just become really uncomfortable. And I could afford to fly first class, and that would make it a little less miserable, but I just can't bring myself to pay what they charge for that.

I'm going to say you're making a mistake. High five first class everywhere I go now, because it makes life a little less miserable. I'm a little appalled at the premium they require for that, but I'm happy to pay it, and my life is a little better. I don't drive a fancy car. I could easily afford it. because I just don't care.

And just because I can easily afford a fancy car doesn't mean I'm going to go on and buy one, although I think there are people out there would say, oh, yeah, you should do that. In fact, not only does it not appeal to me, these days luxury cars are defined by having more and more complexity, more and more computer, more and more screens. Last thing in the world I want. When I go to buy a car, I walk in and say, what's the most basic car? you have that has the least technology in it. That's the car that I want. If you look out there and there's a way that spending money would make your life better and you've got plenty of money

and you're not spending it yet, you need to adjust that thinking. But if somebody says to you, Paula, you got plenty of money, you should be spending it on this, that, or the other thing. And these are things that you just don't value, you don't care about. Or in the case of a fancy car for me, actually make your life worse? No. Now, to the philanthropic part of it, and this is a great example, I would rather give my money away than buy that fancy car. I'd rather go by a $25,000 or $30,000 Subaru, which happens to be the car that we've been driving in recent years, over a $100,000 Porsche equivalent, and I'd rather give the remaining $75,000 away. For a couple of reasons, I think, A, it does more good in the world, but B, it's just

more satisfying to me. One of the remarkable things about giving money away, and maybe this isn't universal, but I imagine it's pretty close to it, is there are a few things that give you more joy with your money than giving it away. So from a purely selfish, let's suppose I've got that $100,000 sitting there, and I say, okay, I can buy this Porsche, or I can buy this Subaru, and I can give away the other $70,000, $75,000.

The move that is selfishly going to benefit me the most, selfishly give me the most happiness and satisfaction is giving that money away. I mean, setting aside whether it does any good in the world just from a purely selfish point of view. And the fact that it makes a world better is, I think, part of the reason it makes it so satisfying to do. That's how I think about it. And I think that's one of the reasons that wealthy people, by and large, in spite of the stereotype, are enormously generous. And I think part of it is that they're definitely, they're just good people.

who want to make the world better. But candidly, there's a whole lot of satisfaction to doing it in ways that you don't get anywhere else. Yeah. We had Robert Rosencrantz on the podcast recently. He's a billionaire. And I just learned this last night, actually. He was on the Time 100 Honories list for philanthropy. He's a big fan of stoicism and the Stoic philosophy.

But he spoke with great passion about the same concept about taking. some level of responsibility for creating the type of world that you would like to see. The only inevitable choice then is philanthropy. And he's very involved, personally, deeply involved in the philanthropic projects that he funds. Right. Yeah, Bill Gates does that. Warren Buffett is doing it. And it's contagious, too.

I can give you just a very small example from my own life. back when my daughter Jessica was in first second grade we were living in the Cleveland area and she was going to Catholic school they were always raising money and one of the things they would do is had charitable auctions I don't think it's there anymore but there is a restaurant in Cleveland that we really liked called Parker's and Parker's was a fairly expensive place especially for back in the day but it was really really good Parker the guy who owned a operate at the restaurant, his donation for this auction was dinner for 12 at his restaurant.

And when that came up for auction, I turned to my wife and I said, let's win this auction and gifted to the teachers at the school. I'm getting chills saying it because it gave us so much joy to do it. It also, by the way, gave us an enormous advantage in the auction because everybody who's bidding against us is mentally calculating, okay, Parker's is about $100 a person, So this is worth about $1,200. So if I can get it for less than $1,200, I'm going to do it. That's not our calculation. We don't care.

The bidding kept going up and up and up and up, and it got up to that $1,200, and then I was willing to go over it, and then it stopped and we won the auction. And the problem was there were more than 12 teachers. And so when I gifted it to the mother superior, afterwards in conversation, I said, I have one caveat, and that is you can't give your spot away. You have to go, because I knew she would do that otherwise. Somebody else in the crowd who was standing around heard me say that. And I think there were maybe 16 teachers rather than 12.

And this person stepped up and said, you know what, I'll cover the dinner for the other four. And then somebody else heard that. And they stepped up because wine wasn't included. And they stepped up and said, know what, I'll cover the wine for the dinner. Now, why didn't those two people bid on the dinner originally? Why weren't they bidding against me? Not because they're not generous enough.

It just didn't occur to them. I don't know why it occurred to me, just happened to. But it has a magnifying effect. They had the same instincts that I had, and they were obviously getting the same joy of doing it. And so I think when you engage in this, It inspires other people to engage in it. It doesn't, in my mind, create generosity that wasn't there.

But it triggers something in them to say, wow, that's the cool idea. And I could do that. It might not have occurred to them otherwise. It activates it. Yeah. And there are a few things that I've ever spent money on that have given me selfishly more pleasure than that. You know? Yeah, I think it's a good thing to do.

Excellent. Well, thank you for spending this time with us. Where can people find you if they'd like to know more? Well, first of all, it's been entirely my pleasure, Paul. Thank you for having me. I'm so glad we made this work. It wasn't easy. It took us a little time to get here. So the easiest way to find me, I suppose, is still the blog, which is J.L. Collins &H.com. And then from there, you'll find links to my three books. And I'm on X and I'm on Facebook. And so that's about the extent of my social media. And there you go. They still don't have TikTok yet, huh?

And probably never will. And the world can thank me for that later. Yeah. Well, thank you again. Entirely my pleasure. Maybe we'll go back to Ecuador again sometime. It sounds like a pleasure. I would love to get back there.

And if I remember the name of this little fishing village, that's where I would suggest we go and hang out. Excellent. Yeah. Thank you, J.L. What are three key takeaways that we got from this conversation? Key takeaway number one. your spending rate matters more than your net worth, or at least just as much. They matter in sync with one another. Once you've reached financial independence, how aggressively you can invest depends entirely on how much you're actually spending, not just how much you already have. And so somebody with $5 million who needs $100,000 a year to live is in a very, very different position than someone with that same $5 million net worth who needs or wants $200,000.

per year in order to live? The raw number that you have is only one part of the component, right? There's two components. There's how much do you have and how much you spend each year. So let's suppose you come to me and you say, I've got $5 million. And I am spending $100,000 a year. Well, you are well under the classic 4% withdrawal guideline. Right?

So, yeah, to you, I'm going to say absolutely. If it's me, I'm 100% stocks. That is the first key takeaway. Key takeaway number two, the 4% rule is actually extraordinarily conservative. Bill Bengen's famous 4% withdrawal rate was designed to survive even the worst market conditions. But J.L. Collins argues that it is so conservative that you might be shortchanging yourself. He would rather take higher withdrawal rates in order to escape soul-crushing work situations, particularly because most financially independent people end up accidentally making money anyway.

If you look at the Trinity study, 5% succeeds 86% of the time. I'm in a soul-crushing job, and this is what I would tell these people, I'm gone tomorrow. I leave Chautauqua, and the day I'm home, I'm resigning, I'm going to, to take that risk. It's 86% to get me out of a soul-crushing job. And then the second part of that I would throw in is, do you think that if you were uncomfortable pulling that 5%, there is a way without your corporate gig that you could make $10,000 during the course of a year? By the way, before you move on, I should add a couple of points here. Number one, Bill Bangin himself, the guy who created the 4% rule would likely agree with this.

I don't want to put words in his mouth, which is why I hedge and use the word likely. We've interviewed him multiple times on this podcast. We'll drop the link in the show notes. He's also coming out with a new book later this year. I believe that book is coming out in August, if I'm not mistaken, and it's all about supercharging the 4% rule. And in that, Bill Benkin, who I will emphasize, is the creator of, of the 4% rule, he himself talks about how that 4% it truly is a worst case. It's a very pessimistic

rule. It's very conservative. It's designed to be a worst case scenario rather than the thing that you plan on. And that echoes, you know, when we interviewed him, and he said this, I think, in both of the interviews that we've done with him, he talks about how if you were to model a retirement and you extended human life to infinity, such that that retirement went on for infinity years, the safe withdrawal rate would asymptotically level at 4.2%. In any event, many, many retirement planning experts, including, and I don't want to put words in his mouth, but likely Bill Bengin himself would agree you can go higher than 4%. Again, we'll drop a link in the show notes to the two interviews that we've done with Bill Bengin so that you can hear him talk about his research

around the 4% rule, direct from his own mouth. All of that said, that wrap up. That wrap sub-key takeaway number two, which is that the 4% rule is extraordinarily conservative, and you can probably go higher. Finally, key takeaway number three, financial independence gives you agency, not early retirement. This is where the media gets it wrong. The mainstream media is obsessed with early retirement, early retirement. Of course they are, because it's extreme, it's headline grabbing, it's clickable,

it's a little bit rage-baity, at least in some corners of the internet, or it can be if you position the headline run just right. So, yeah, of course, it's the stories around early retirement that capture all the attention. The I retired at 35 stories. That's not what it's about. It's about having the power to choose. And J.L. Collins talks about this as well. He says the real value of financial independence is not the quitting your job bit. It's the choice, the optionality.

And the fact that when you don't depend on a paycheck, you can be bolder, more confident in the career decisions that you make, in the risks that you take. You can take bigger risks. You can speak up at work without fear. You can start companies. You can undertake projects. You can just try various money-making experiments, and some of them will work, and some of them will flop, and that's okay.

because the problem is not work itself. The problem is working without options. The running thread through all the people you named, and this includes you and me and probably a lot of people listening, work is not the problem. People love to work because it makes them productive. It gives them a great satisfaction. The problem is when you have to work and you don't have agency.

All of those people have agency. that's what makes the difference. I truly believe two things. Number one, I believe everyone has a calling. And a calling is something that is much higher purpose than simply a career. A calling is work that you do that is intrinsically meaningful. It is the work that you are drawn to do, not just work that pays the bills. It is inherently worthwhile.

You're naturally aligned with it. and it gives you a sense of contribution of meaning and purpose and a connection to something that is much, much larger than yourself. And I believe everyone has a calling. But we also have bills to pay, and sometimes paying the bills distracts us or pulls us away from our ability to pursue our calling. And financial independence, by contrast, or at least the journey to it, you don't even, not a binary. You don't have to hit a particular number, and all of a sudden it's not like a

cliff where suddenly everything changes. It's a gradual progression. It is a spectrum. And as you journey further and further along the path towards financial independence, you become increasingly and increasingly along that spectrum more and more capable of being able to lean in the direction of your calling. Those are the two things I believe. One that everyone has a calling, and two, that financial independence is not binary, it's not yes, no, it's a progression, a spectrum. And the further along that pathway, that journey that you travel, the more freedom you increasingly have. That's what makes this pursuit so worthwhile. Thank you for being part of the Afford anything community. If you want to talk to other members of

this community, other afforders, you can do so at afford anything.com slash community. completely free. Don't forget to join our newsletter. Sign up for free at afford anything.com slash newsletter. Now, if you've enjoyed today's episode, can I ask you for a favor? Could you please share this with the people in your life? Share this with friends, family, colleagues, coworkers. Share this with a person at the farmer's market who runs the vegetable stall or who makes the homemade jams. Share this with the cashier at the auto parts store. Share this with a person. at the hardware store. Share it with your crossing guard. Share it with your dentists, receptionist. Share it with the people who always win the chili cookoff every summer. Share it with your mail carrier. Share it with your elementary school librarian. Share it with the volunteer firefighter in the neighboring town. Share it with the people who run the local reptiles and amphibians expo that

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