A Man With F-You Money – An Interview with Jim Collins

From the minute I started reading Jim Collin’s blog, I was hooked. His eloquent writing style and intense knowledge of the stock market formed a sort of high-powered magnet that always kept me coming back for more. Plus, he’s the O.G. of early retirement.

After reading every post on his site, I felt like I could go toe-to-toe with any financial pundit that wanted to dispute the power of index-fund investing.

We spent a week together in Ecuador, and another long weekend in St. Louis. And it turns out that he’s a super nice guy in real life.

I recently had the chance to ask him a few questions about life, financial independence and the stock market. I hope you enjoy his answers as much as I do.

Jim and a fellow traveler in Ecuador.

You became financially independent decades ago — before it was the cool thing to do. Why did you wait so long to share your breadth of knowledge with the world?

 Ha! I’m not sure it is cool now given the hostility the idea seems to meet when it appears in the general press.

But to answer your question, it never occurred to me anyone would be interested.

Back in the Spring of 2011 I began writing a series of letters to my daughter discussing financial stuff I wanted her to know and that she was not yet ready to hear. It was my hedge against my maybe not being around once she was ready.

A friend liked them and suggested I put them on a blog for other friends and family. When I put my first post up I had never seen another blog. I had no idea that mine would develop an audience. I’m still a little stunned that it has.

Two of the biggest concerns about retiring are “will I have enough money?” and “can I keep myself occupied?” How have these questions impacted your life since leaving the workforce?

Well, I knew I’d have enough because I had been quitting jobs to do other stuff ever since 1989. I noticed that most years my net worth actually increased even when I wasn’t working.

Remember, back then there was no internet and, at least as far as I knew, no concept of early retirement based on being FI. Really I was flying blind. I just wanted the freedom having f-you money could provide.

Usually each time I stepped away it was to do something specific: Travel, start a company and the like. But I also always planned to go back to another job once whatever I set out to do was done or I got bored doing it.

It was only when I quit my last job in 2011 that I did so figuring I was done with working. But I never really gave any thought to keeping myself occupied. A classic mistake, but I got lucky.

My blog blossomed in ways I never could have guessed and has opened interesting doors I never knew were there. The problem has been discovering too many cool things I want to do and being way too busy to do them all.

Still I think I would have been fine with the reading, travel, volunteer work and puttering about I originally envisioned.

My plan for 2014 is to cut back and have more lazy time. That’s what I retired for after all!

With all of the investment brokers out there, why do you choose to use Vanguard?

Vanguard is the only investment company that is structured to align their interests with those of the investor.

When Jack Bogle founded Vanguard in 1975 he did so with a structure that remains unique in the investment world:  Vanguard is client-owned and it is operated at-cost.

As an investor in Vanguard Funds, your interest and that of Vanguard are precisely the same.  The reason is simple.  The Vanguard Funds, and by extension the investors in those funds, are the owners of Vanguard.

By way of contrast, every other investment company has two masters to serve:  The company owners and the investors in their funds.  The needs of each are not always, or even commonly, aligned.

I discuss this in some detail here: What if Vanguard gets nuked?

Since no one can predict the future of any individual stock, how can you have the confidence to believe that “the stock market will always go up“?

 Actually, I can precisely predict the future of each and every stock. They will, every one, turn to dust.

Way back in 1896 a guy named Charles Dow selected 12 stocks from leading American industries to create his Index.  Today the DJIA is comprised of 30 large American companies.

Care to guess how many of the original 12 are still in it?  Just one.  General Electric.  In fact, most of today’s companies didn’t exist when Mr. Dow crafted his list. Most of the originals have come and gone or morphed into something new.

Or take a look at “The Nifty Fifty”. Back in the late 1960s and early 1970s these were touted as a collection of stocks you could buy and hold forever.  While a few still thrive, a look down the list today is sobering as to how many did not.

50 years from now most of today’s companies will have faded away. This is a key point: Companies routinely fade away and are replaced with new blood. Creative destruction at work.

Jeff Bezos has said he fully expects some new company or companies to eventually sweep away Amazon. Of course he’s quick to add he is working hard to make sure that it is in the distant future. Still, it shows tremendous awareness on his part to see it. Maybe not surprising given Amazon has been the broom to so many others.

This is one of many reasons I don’t recommend investing in individual stocks. But investing in the entire stock market is an entirely different thing. And the best way to do that is with a low-cost broad-based Total Stock Market Index Fund like VTSAX.

To appreciate why the Stock Market relentlessly rises requires an understanding of what we actually own with VTSAX.  We own, quite literally, a piece of every publicly traded company in the USA. Currently about 3,300.

Stocks are not just little slips of traded paper.  When you own stock you own a piece of a business.  These are companies filled with people working relentlessly to expand and serve their customer base.  They are competing in an unforgiving environment that rewards those who can make it happen and discards those who can’t.  Some will fail, but others will increase 100, 200, 1000, 10,000% or more. It is this intense dynamic that make stocks and the companies they represent the most powerful and successful investment class in history.

But here is the difference between investing in individual stocks and the total market:  The market, and by extension VTSAX, is self cleansing. As some companies fail and fade away, they are replaced by others with new ideas, technologies and opportunities in a never ending cycle. The list of stocks held in VTSAX is not stagnate. It is in a constant process of slow but relentless evolution.

I’ve been told countless times that my goal of Early Retirement will never come to fruition by people who “know what the real world is like”. I’m sure you’ve had people tell you that you were crazy over the years, because of how you view and treat money. How have you dealt with these situations?

 Actually, I haven’t had that experience much. When I started my blog I had already been FI for 20 years and had retired. So it is a little tough to tell me it can’t be done.

Remember too when I was building my f-you money stash there was no internet around for those conversations.  So for me it was easier to fly under the radar.

Moreover, I never had early retirement as a goal. I just wanted the freedom having f-you money provided.

I knew on some level my savings, investing and spending habits were outside the norm enough to make my peers uncomfortable. So I just didn’t talk about it.

Perhaps some people noticed I didn’t live in the same fancy neighborhood, drive the same fancy cars or belong to the same fancy country clubs as my professional peers. But the truth is, most people are focused on themselves and, unless you make a point of telling them, they tend not to really notice you or your lifestyle much.

Plus in the days before the internet we simply all had much higher levels of privacy.

Our international travel did stand out a bit, especially those times when I was still at a job. Instead of taking a day or two at a time as preferred by the corporate overlords, I’d take my full three weeks all at once and disappear to India or Africa. Again, remember this was before cell phones and computers, so I would be completely out of touch.

It really freaked out my staff and bosses the first few times. But at the same time it probably also created a bit of an adventurous air about me that might have counterbalanced the negative of being too far outside the norm. At least a bit. Who knows? But it worked for me.

Here’s an example:

One time I rather abruptly quit a job. I just had enough. It was in the spring and I left with no other job prospects or even an updated resume. With the whole summer ahead, we decided to hop in the car and travel up to Canada for a few months.

Within a week of quitting, and before we left, I was invited to interview for a much better job. This one was a nice step up and very desirable to me. But we had these travel plans that we were excited about.

After a few days of agonizing, I finally thanked this company for their interest and told them I was taking the summer off. To my amazement, they asked me to call them when I returned. I did. They hired me and it was the best job of my career.

Maybe my being unavailable for a bit and confident enough to put them off added a bit of attractive mystic. Maybe their willingness to accept my sabbatical was an indicator of a good fit.

But, overall, it just really never came up. This is also the reason I am so surprised that my blog has developed a readership. It really never occurred to me anyone would be interested in what I’ve done.

As for dealing with the naysayers today: Ignore ‘em. There are plenty of people out there who have achieved FI at an early age. Focus on them.

 You started jlcollinsnh to teach your daughter about finances, yet you’ve ended up teaching thousands of others through the site. How does it make you feel to know that you have such a significant impact on so many people’s lives?

 Again, this is still a very big surprise to me. While I get a fairly steady stream of commenters on the blog saying that my posts have helped them it somehow feels a bit unreal. But good.

After all, I’m just sharing what has worked for me and what has kicked me in the ass.

I will say the effort I put into the blog has been the most psychically gratifying of my life. Lowest paying, too!

 Who or what have been your biggest influences in life? And, why?

 My drive for financial security very likely comes from watching my father’s business collapse. He had been very successful but, like many men of his generation, he was a cigarette smoker. As his health failed, so did his business.

In those days folks didn’t know how deadly cigarettes were. But now we do. While I understand why middle-aged and older folks smoke. Very tough addiction to break. But when I see young folks starting, it baffles me.

Some say, well ya gotta die of something. My guess is they’ve never watched emphysema kill somebody. Short of having somebody intentionally torture you to death it is hard to imagine a much tougher way to go.

OK, let me climb back down off of this soapbox here. There we go. That’s better.

So, during my teen years our comfortable family life slowly collapsed into poverty. There was no f-you money to cover the bills. The good times were expected to last. That was my Scarlett O’Hara moment: “As God is my witness, I’ll never be hungry again.”

Money can buy many wonderful and varied things. But for me, the most valuable purchase of all is financial freedom.

First published in 1926, The Richest Man in Babylon by George Clason is one of my favorite books on the principles of building wealth. I especially like the concept that once you have enough gold your purse overflows beyond your needs.

My only hesitation in recommending this simple little book is that it is so easy to read too many people miss just how profound its lessons are.

I first read How I Found Freedom in an Unfree World by Harry Browne when it came out in 1973. It was the book that told me choosing a different path was worth the effort, and it provided great tips on how to approach doing it and the traps to avoid.

 There are a bunch of ways to invest and things to invest in. What should modern investors who are seeking financial independence avoid in 2014?

•  Trying to pick individual stocks.

• Funds run by people trying to pick individual stocks.

The first is a waste of time and the second a waste of time and money.

The financial industry is geared to convince you investing is complicated and best left to them. It’s not.

In fact a good rule of thumb is the more complicated and fee laden an investment the more likely it is to under-perform.

The most profitable ways to invest are also the simplest and least expensive.

 What has been the best part about being a blogger?

Hands down, all the interesting and exceedingly bright people I would not otherwise have met. Not only the best, but the least expected.

 Are you going to continue blogging for the foreseeable future, or are you setting a time limit on it?

 So far it has taken far more time and effort than I ever expected, and it’s been far more gratifying and fun.

The third post I ever wrote was My Short Attention Span. In it I describe how I finally noticed, looking back over my career, that I’m good for about four years. After that, my enthusiasm and performance wane. This June it will have been three years for the blog. We’ll see.

If you haven’t already, go check out Jim’s blog “jlcollinsnh“. You’ll learn so much your head with explode– and so will your investment account!

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