Hey, Jackie, we're back a little bit off schedule here with a pop up
episode because we've had something happened in our community that we
felt the need to talk about, right?
Yeah.
And whenever there is something that we believe is kind of time sensitive,
we like to kind of discuss it.
And that's a good thing about doing the podcast with you.
We're friends and we have a lot of friends in the five community and
the personal finance community.
And our topic today is about one of those friends that we did not
get Very good news from this week.
Yeah, Jonathan Clements my friend and yours actually yesterday
released a blog on his blog, Humble Dollar, called The C Word.
When this came across My desk or my desktop as would be certainly a
catchy title and I don't read every blog But I definitely clicked in on
this one and it was not about what I wanted to read about It was about
Jonathan Clements divulging the fact that he'd been diagnosed with terminal
metastatic lung cancer He's 61 years old.
This was a shock to me and the way he wrote about it
was so eloquent and touching.
I thought we should talk about it.
Yeah.
And I just know of him.
I know his work and he's touched so many people, but you know
him personally and he's been a close personal friend of yours.
And I remember the first time we've been friends for years, you and I, and I just
remember the first time I learned about your whole story was on humble dollar.
And so that's when I knew you guys had a connection and you were close friends
beyond just professional acquaintances.
So I thought it was great that his platform was where you
first shared your story and you bared it all and it was great.
So yeah, this news was kind of hard and I'm sure it's been hard for
him and he's been processing it.
But he has an awesome community of people that love him like we do.
And we just wanted to talk about it a little bit because I think
there's some bigger implications and some takeaways that we wanted
to share with our community.
Yeah.
I mean, Jonathan was a guest on the early days of the show when we launched
it and it was after, as you said, my coming out party where I decided to say
to the world, I am catching up late.
I'm a physician.
I've made all the mistakes in the world and I've got to catch up.
And his blog was the platform on which that came out.
And that came out shortly before the launch of the podcast.
So he's been an advocate and a supporter.
Of this cause from the beginning,
And Bill, if you think about it he was just on the podcast a few months ago.
I think it was the end of 2023.
So I'm thinking it was like November, December, something like that.
He was on Episode 40.
I looked it up the other day and in that episode.
We talked about his book that I've read how to think about money.
And, for him, the conversation was.
Much larger than money.
It was more about happiness and the search for it, how to find it, how to
use money as a tool to help you find your own individual happiness his messaging
and philosophy transcends our generation.
Yeah.
And Bill, he so eloquently wrote about the C word on his blog, humble dollar.
And it was, it just shows his true gift, and that is writing.
And I think that he had a lot to say, even in this post, I'm sure
it's very difficult to write.
And, I feel like we're all put on this earth to do something.
And I think his purpose was the body of work that he put out.
And with all the books that he has, and Humble Dollar and all the
content he creates there, not to mention all his other accolades
and the work that he's done.
I think we were so lucky to have all this and to still have it, really.
But I know the way that he wrote it, it may have been the best outlet
for him because that's what he does.
And it was just so deep and heartfelt.
That it made me think about, what have I built?
What's my legacy?
And if I were to leave this earth tomorrow, would I feel like I accomplished
the things that I wanted to accomplish?
And I would say my work is not done.
However, I'd be satisfied with some of the things that I've put out in this world,
and I would love our audience to think about that for themselves, aside from the
monetary things, What have you built for your legacy and are you proud of what you
built and how people will remember you?
So if you had to ask yourself that bill, do you think that you have, created the
life you wanted if it was gone tomorrow?
Yes, I can say today.
The answer is yes.
Maybe even a couple of years ago, I couldn't have said the same thing.
you grow your family, you leave a legacy of a loving wife, two kids, a
job in emergency medicine that allows you the privilege of saving lives
occasionally and redirecting lives most of the time down the path that they
need to take with their own health.
The Catching Up to Fi movement, the Fi movement has redirected my life.
It's changed my life dramatically.
People like Jonathan, people like yourself, people like Becky,
our previous co host and all the friends in the Fi community, my life
would not be the same without it.
It is so much more of a robust thing.
It's so much more than about the money.
that's where we start.
But we get above the money into the clean or more rarefied air.
And that's where Jonathan lives.
And I wrote a letter to him that I'd like to read on the show.
And I'd encourage folks to go read his blog, the C word on June
15th yesterday on humble dollar
Yeah, Bill, I think that post I just looked at it.
It's been up for about a day and it's got nearly 300 comments which
shows how the community feels about him and I was going to ask you if
you didn't mind reading that letter.
I know it's a personal thing because you had that connection with him.
So I think our audience will benefit from you sharing what you wrote.
Yeah,
on the blog, but I wrote it to him in an email as well, and he responded, so.
I said, Jonathan, your clarity, poise, and courage in the face of your recent
terminal diagnosis is truly inspiring.
I am sad, and wish to send you, your family, and your countless
friends my love and support.
an emergency physician, I see the worst day of people's lives.
They come in with seemingly innocuous symptoms and leave
with a terminal diagnosis.
Telling people that I diagnosed with metastatic cancer that they are dying
is one of the hardest parts of my job.
I can imagine what that day must have been like for you.
As a friend, I consider myself incredibly lucky to know you and that
our lives collided because of our mutual interest in financial literacy.
We broke bread and shared a good bottle of wine after your marvelous talk at
Jim Dalley, the White Coat Investors first conference in Park City, Utah.
We recently saw each other again at last year's Bogleheads conference and
chatted with Bill Bernstein and Alan Roth about the merits of small cap value.
Also important, you are one of my heroes and you've had an
immeasurable impact on my life.
As a fellow creator, I'm in awe of the body of your work and the timeless
legacy it leaves in our world.
I have read all your books and have been a reader of your blog since the beginning.
I cherish the signed copies of your books that I have.
You generously helped me come out as a late starter on the journey to financial
independence by publishing my blog, saving our retirement on humble dollar.
In January of 2023, I think it was.
You graced us with guesting on my fledgling podcast, catching up to fi
where we talked about how to think about money, I am so grateful for
the time we have shared together.
You've shown us how to live.
And our wonderful mentor, you have gotten it right with life and have
enticed us how to value our most precious resources of time and
freedom in face of a premature death.
You recognize that you are not dead yet and still have so much more to give.
I hope to emulate your example.
I wish you a peaceful journey warmest regards bill.
Jonathan responded just a few hours later and he said many thanks for
the email bill and the kind words.
I hope things are going well for you.
He's also in the face of the worst news you can ever get thinking
about everybody else, a true Testament to the person that he is.
that was beautiful.
I know it must have been very hard for you to write that letter, but so
many wonderful uplifting things that you said that I'm sure means a lot
to him as all of the messages that he got on his blog after he shared that.
So I think that's awesome.
And I know that he, appreciated your words.
You're a pretty good writer yourself.
Yeah, well, I've written a few blogs, not too many.
And, I leave the writing to people like Donathan that are wordsmiths and can
He's the master.
leave the podcasting to us maybe, right?
Yeah, right.
So, creation is such a cool thing.
leaving a legacy personal and publicly is a cool thing.
It's what helps you come to grips with.
when your time is marked, when your time is numbered, and I look forward to seeing
what Jonathan does with his time left.
I think he has so much to give, and he recognizes that, and he's going to
work furiously to not only empty his bucket list, probably, but to continue
doing what he has already created.
I don't know that he would change his day very much from what he's living now.
Yeah.
And Bill with that, shall we replay his episode?
So that everybody can get reacquainted with Jonathan Clements.
You can watch it on YouTube or you can listen to it via podcast or whatever way
you prefer to listen to our audio version.
But I think it's definitely worth re airing because our hearts are so warm.
I'm thinking about him and we want to send him all the love and support
that he deserves for putting out such amazing content and actually
making us all a little bit better.
Yeah.
Jackie, I think that's a fantastic idea.
Why don't we push play, right now?
Now.
Hello, and welcome back to Catching Up to FI.
I'm Bill Yount with my co host Becky Heptig, and we're so
excited about our guest today.
But first, let's find out about what Becky's up to.
How are you doing, Becky?
I'm doing great, Bill.
Steven and I just got back from several days over in Crested
Butte, where it's just beautiful.
And we e biked, not for the first time, but second time.
And it was the first time on an e bike that had a throttle on it.
So that was an interesting experience.
But it was
fun.
Well, you were visiting with Mark Troutman, one of our co hosts and
a frequent visitor on the podcast.
Isn't that right?
Yes, we were.
Mark and his daughter, Katie, we hung out with them and enjoyed
the beauty in Crested Butte.
Well, we're excited also to head this week to Podcast Movement.
Becky and I will be first timers there.
And we're looking forward to meeting up with friends of ours and learning
a little bit more about podcasting.
That's right.
Are you ready to roll here, Becky?
We are.
We
are.
Go for
it.
Okay.
We have today Jonathan Clements with us on the show.
Jonathan is a once wimpy English school boy who became
a prolific runner and cyclist.
He's the founder and editor of the personal finance website, Humble Dollar.
He also sits on the advisory board of creative planning, one of the country's
largest independent financial advisors.
And is the author of nine personal finance books.
Earlier in his career, Jonathan spent almost 20 years at the Wall Street
Journal, where he was the newspaper's personal finance columnist, and six years
at Citigroup, where he was the director of financial education for the bank's U.
S.
wealth management arm.
Born in England and educated at Cambridge University, Jonathan now lives in
Philadelphia, just a few blocks from his daughter, son in law, and grandson.
I met Jonathan at the inaugural White Coat Investor Conference
in Park City, Utah in 2019.
We went out to dinner after his excellent talk and shared a lovely bottle of wine.
We have stayed in touch virtually over the years.
When I was finally ready to come out of the closet with my Catching Up to
FI late starter story, he generously offered to publish a blog I wrote called
Saving Our Retirement on his website.
I am looking forward to seeing him again at the Bogleheads Conference
this October in Rockville, Maryland.
Today we are interested in speaking with Jonathan about topics he covers in two of
his books, How to Think About Money, and his most recent book, My Money Journey,
How 30 People Found Financial Freedom.
And you can too.
Please note that one of the journeys in this book is that of a person who makes a,
quote, comeback in midlife, just like us.
It's with great pleasure that we welcome Jonathan to Catching Up to Five.
How are you doing today, Jonathan?
Great,
Bill, and thank you for having me on.
Thank you, too, Becky.
It's great to be talking with you.
Okay.
Well, let's jump right in.
In My Money Journey, you tell your story.
To give us a little context, can you take us through your story
a bit through the lens of money?
So, as I explain in the book My Money Journey My financial life is really
divided in two with the dividing line falling around age 45 and the first half
of my financial journey followed a rather predictable course to the extent that
I did what a lot of people who achieve fire did, which is I lived way below
my means, saved huge amounts of money.
Stashed every dollar I could into stock index funds while at the same
time paying down debt and the result was that by age 45 or so, I had pretty
close to a seven figure portfolio.
The years since have been much more unpredictable.
I refer to it as my second childhood where I've tried my hand at a
whole bunch of different things.
Can continue to make money, but.
not nearly as as much as I did in the early years, but in many ways
that period of exploration has been a more fun part of my life.
I've tried my hand at a lot of different things including launching the website
that you mentioned, Bill HumbleDollar.
com, which is what I spend most of my days doing now.
Okay, well, your section of the book in which your story is described
is that of fierce frugality.
Do you feel like, given that you did that early on in your career, that
you suffered from any deprivation?
I would say
that in retrospect,
I should have cut myself a little bit more slack, that I held the
purse strings a little too tight.
I was too concerned about, amassing enough for the future.
But in a sense, , this is almost the inevitable result of the financial
uncertainty that we live in.
So we look ahead and we just don't know what sort of financial
hand we're going to be dealt.
We don't know whether we're going to end up getting divorced.
We don't know whether we were going to end up with no children or multiple children.
We don't know whether one of those children is going to have special needs.
And we don't know what sort of health needs we're going to have.
We don't know what's going to happen with our job situation.
So faced with an uncertain future.
It's almost rational to save too much early on, but some of us.
overdo it.
And I would say that I'm definitely in the camp who over did it, that I
saved too much in the early years.
One example of that is that I lived in this same house for 20 years
that I basically didn't really like the, it was an inexpensive house.
I paid off the mortgage quickly.
my property taxes were relatively low for somebody living in the northeast and this
allowed me to save great gulps of money.
It was a wonderful move from a financial point of view.
Whether it was a good move from the point of view of happiness, that's debatable.
There are a lot of folks in the FI community that I believe have
shifted over the last few years.
The mindset has sort of shifted from the extreme frugality to the we need to enjoy
our life as we go along the journey.
And I know that you made a comment on a podcast when you were speaking
with the folks over at the Longview that our children watch what
we are doing and that maybe you actually taught your son too well.
About the frugality.
I thought that was an interesting comment.
Yeah.
When we think about teaching our kids about money, we think that, the
lectures that we deliver to them are the things that are going to change their
attitude towards money, but it's not the thing that will change their attitude
towards money is the way we behave.
They will model our behavior.
And if they see us being extremely careful with money, they too are
likely to be extremely careful with money unless of course they react
and go to the opposite extreme.
It could be one or the other.
But in the case of both my Children, yes, they are extremely careful with money,
and in many ways that is a good thing.
I don't have to worry about them financially.
But, come back to what I was saying earlier.
Is that a prescription for a happier financial life?
I don't think the money necessarily buys happiness, but putting ourselves in too
tight of financial constraint and worrying too much about how much we're spending.
Yeah, that can be, that can cause unhappiness just as spending
too much can cause unhappiness.
I'm
interested to know what about your earlier money scripts led you to do things right?
Like a lot of folks that are, as you advocate, start early, start
strong, get free in 20 years and move on to your second financial life.
What about your upbringing got you to that mindset?
So one of the things that I grew up with was the great family story.
And the story was about my great, great.
who, when he died in the 1880s was described in the newspaper as being
one of the richest men in England.
He had made a fortune principally selling cigarettes.
And that fortune passed to my great grandmother, and she lived the sort
of life that you see on Downton Abbey.
And then she bequeathed her fortune to her five children, including my grandfather.
And that money disappeared in short order.
My grandfather's siblings wasted it on wine, women, and song.
And my grandfather wasted it on gentleman farming.
He started out with a big farm, didn't make a profit, traded down to a smaller
farm, as a way to free up capital.
And it just kept going until the farms got so small that he had to retire.
And that was the great family story that I grew up with how the
family fortune had been squandered.
And so if you look at me and you look at the behavior of my three siblings, all
of us are extremely careful with money.
We're also very different people.
Otherwise, we are all extremely careful with money.
And I attribute it.
To this great family story that we grew up with and it's the reason why even
though I grew up in a comfortable middle class household, I was pretty careful
with money almost from the get go And the other thing that contributed to my
frugality was the fact that I was not very good at family planning So I got
out of college and within two years.
I was a father having to support a family On a junior reporter's
salary in the New York area.
So I had to get financially smart super, super quickly.
And so that, too, led me to be.
almost overly frugal.
Why did you become a personal finance journalist?
Is it the same thing that you learned earlier in life?
Did that lead you to want to help folks find the path that you found?
Well, it was actually Couple of different reasons.
One is I was I was always interested in economics.
Two, I was always sort of more specifically interested in
money and how money worked.
But then in terms of being a journalist, my father had actually been a journalist
for the first 10 years of his life.
I don't have a recollection of that period.
He exited journalism when I was three years old.
Nonetheless, out of college in England, he worked for the Financial Times.
He had worked for the Daily Telegraph as a financial journalist.
And so In my mind, being a journalist was at least a possibility.
It was...
It was something that seemed like something I could do, whereas say,
Bill, being a doctor did not seem like something that I could do.
Well,
that was a defined path for me because I was afraid of launching
into the unknown and I wanted to, secure a job at the end of it.
But I succumbed to all the doctor bad financial moves, which I think
we've talked about on the show before.
We've also talked with folks like.
Paul Merriman, JL Collins, Rob Berger, and Alan Roth on the show.
Now, each expert agrees on many of the principles of portfolio construction,
but there are a few differences.
You have your thoughts about portfolio construction,
complexity, and diversification.
How have they changed over the years?
As I've grown older, my preference Has increasingly been for simplicity.
And so while I'm not there yet, I am on a path to essentially
reduce my portfolio to three funds.
So all of my stock market money is in the Vanguard total world stock index fund,
or it will be eventually even as of now, it's my largest single fund holding.
And what I get with that is the ultimate in stock market diversification.
Every company in the world weighted according to its market capitalization.
If anything good is happening in the global stock market,
I will be the beneficiary.
Of course, if anything bad is happening in the global stock market,
I will also suffer the consequences.
But, if you're an optimist, as I tend to be, and assume that the
world will continue to grow and things will get better over time,
as an owner of the Vanguard Total World Stock Index Fund, I know that
I will be the beneficiary of that.
world prosperity.
And then I counterbalance that with two short term bond funds
again, both from Vanguard.
One's a short term conventional government bond fund, and the other is
a short term inflation index bond fund.
And that is the money that I have set aside if I have a financial
emergency, or once I decide to...
Retire where I'll go for my spending money each year, but the vast majority
of my money isn't stocks And right now my biggest single holding and eventually
I hope my only holding will be the vanguard total world stock index fund
Now that's fascinating because that's the fund I choose as well, and I
don't hear a lot about that one.
JL Collins, for example, recommends the total U.
S.
He doesn't recommend any international diversification.
John Bogle did the same thing.
And on the other side, Alan Roth and Paul Merriman, Rick Ferry.
All have international interests, anywhere from, 20 to 40 percent and
in your case, potentially more why do you stick with the international
diversification and why do you think other folks, recommend actually against it for
simplicity in a word, Japan, I think that the collapse of the Japanese stock market
since year end 1989 is in many ways the lesson for investors to look at today.
The fact that the market that was the biggest stock market in the world at
the end of 1989, the most celebrated market in the world, for those who,
who don't remember the 1980s, we were all being told that we needed
to learn how to speak Japanese.
We were told that the way that our companies were run was mistaken and that,
we needed to learn from the Japanese.
I mean, at the time, the U.
S.
was seen as a country that was slipping and the Japan was dominant.
Now, Obviously, history has told us that's wrong, but for anybody who's
investing today, who thinks that the U.
S.
is dominant and that the U.
S.
way is the way, think about Japan at the end of 1989 and the way it was viewed and
ask yourself, what if you are wrong...
what if you are wrong...
Because as investors, what we need to think about is not, only what are
the investment bets we're making, but what are the consequences if we
are wrong for anybody who owns a U S only stock market portfolio, what
are the consequences if the U S turns out to be the next Japan, I think the
chances of it happening are de minimis.
I do think there's a significant chance the U S market will
underperform the rest of the world in the decade ahead, but I have.
I don't know, I have no crystal ball, but what I would say to people is you
need to consider the possibilities.
Consider the possibility that you are displaying massive home
bias in favoring only the U.
S.
market.
Consider the consequences if you are wrong and whether it
wouldn't be prudent to diversify.
So
Jonathan, what is your opinion about other alternative investments?
Such as REITs or gold or Bitcoin or other things that people invest
in, but they also tend to make your portfolio more complicated.
I see no reason to own this stuff.
At one point, I did have REITs in my portfolio.
I no longer do.
At one point, I did have a little bit of gold stocks in my portfolio.
I no longer do.
how do you diversify stocks?
You diversify stocks by owning bonds.
It's the simplest, cheapest way to do that.
You don't need all these alternative assets.
One of the problems with so many of these alternative investments,
this is not necessarily true of gold stocks, it's not necessarily
true of REITs, but many alternative investments involve active management.
And we know When you have active management, you
have high investment costs.
And when you have high investment costs, there is a great chance that
you will end up with mediocre returns.
So why not just keep it simple, diversify globally.
With your stocks and then keep it super simple and super safe with
your bonds to offset the risk of your stock, your stock market holdings.
And the way you do that is with short term high quality bonds.
Now you actually
split it between tips and short term treasuries.
Why do you do that?
As a bond holder, the biggest risk is inflation, at least a
holder of high quality bonds.
And we're not talking about, low quality bonds, junk bonds, but
in terms of high quality bonds, the number one risk is inflation.
So why not have part of it, hedged against inflation by favoring tips.
So that's why I split my money between the two.
And then you also have a particular interest in paying down a mortgage,
which is counterintuitive, sort of the popular thought.
Tell us about your thought of the mortgage as a bond versus, acquiring
more bonds in your portfolio.
So when I bought my first home in 1992, and in fact it was the only
house I ever bought where I took out a mortgage, I remember getting that first
mortgage payment slip and they had a little line to add extra principal.
And I remember adding 10 to it and thinking, hmm, this is interesting,
I can pay off this loan more quickly.
By adding a little bit of extra principle every month.
As I thought about it more, I came to realize that paying down a mortgage is
like buying a bond, except at the time, my mortgage rate was Close to eight percent
and the yield on bonds was below that So in other words, I could earn a higher
return by paying down my mortgage than I could by buying bonds So if i'm inclined
to buy bonds, why not pay down my mortgage instead and that is What I did I ended up,
paying off my Mortgage in a dozen years.
But having said that, Bill, I'll tell you that I would not
necessarily give that advice today.
And the simple reason is this, a lot of people at this point have
mortgages where they've locked in rates of 3 percent or less.
And if you have a mortgage that's in which you're paying 3% or less, and
you can go out and you can buy bonds paying five right now, I wouldn't be
inclined to pay down that 3% mortgage.
Instead, I would, buy those 5% bonds, preferably in a retirement account where
you, you won't have to pay tax each year on the interest that you earn.
So the advice that I followed back in the 1990s and the early two
thousands is not necessarily the, the advice you should follow today.
Let's jump
into your book, how to think about money and one of the I'd kind of
like to park for a few moments on what you talked about in chapter
one, which is money and happiness.
And this book is, is truly more of a money psychology kind of book.
And one of the quotes at the beginning of the book is from William
Bernstein's mother that says money doesn't buy you happiness, but at
least you can suffer and comfort.
And you make the comment that she didn't get it quite right.
That money can buy happiness, but only if you first save like mad,
then spend those savings with care.
So tell us
about that.
So, Becky, that is from the forward to the book, which was written by Bill Bernstein.
But I do agree with Bill.
there are essentially sort of three things.
The money can do for us.
And this goes the sort of definition of what financial independence is all about.
So the number one thing that money can do for us is that it can allow us to
control how we use our time, right?
And that is when we have total control over our time that
that is financial independence.
And so, if you start saving early in life and you reach that point
where you no longer have to work.
That is what Bill is alluding to there.
Second, by saving diligently early in life, we can allow ourselves
to have special experiences, especially with friends and family.
But the third thing that money can do for us.
And again, this sort of goes to not only what Bill is talking about, but also what
Bill's mother is talking about is one of the attributes of having enough money is
that you don't have to worry about money.
And I know it sounds like an An odd notion, but this is a crucial
part of financial happiness.
Simply not having to worry about money.
the parallel I always suggest is with health.
It's only when you're sick that you realize how great it is to feel healthy.
Similarly, it's only when you don't have money.
that you realize how great it is to have money in the bank.
The Consumer Financial Protection Bureau did this study of well being in America,
and what they found was the number one driver of people's sense of well being Is
there access to so called liquid assets?
What we're talking about is money sitting in the bank.
And if people had less than 250 in the bank, they were miserable.
And if they managed to amass 5, 000 or more.
In the bank, they were significantly happier, had a
far greater sense of well being.
So in terms of happiness and what money can buy, simply having
money buys happiness because we don't have to worry about it.
People talk a lot
about income and a level of income at which you realize happiness.
Back in the day, it was 75, 000.
Today, it might be 90, 000.
Is that really the way to think of it?
And what is the number today?
But is it better to think of it in terms of what is your spending?
What is the happiness spending level?
What do you think?
So first of all, that original study, which was by Danny Kahneman and Angus
Deaton, which conducted about 10 years ago, has since been revisited
and that cap of 75, 000, which, as you suggest, might be 100, 000 today
in the new research disappears.
It seems that happiness...
typically right, continues to rise with income level, but not at the same rate.
So it takes more and more money to boost your happiness.
But on average, it does tend to rise along with income.
But, of course, as you suggest, Bill, If your needs outstrip your
income, no matter what your income is, you're going to be miserable, right?
There's, there's nothing worse than spending money you can't afford
to spend and then sitting around worrying about, how you're going to
pay the credit card bill or the loan or whatever it is you, you borrowed
in order to Buy this, this good.
So sitting on your luxury lot or yacht worrying about how you're
going to pay the loan on the yacht is not going to be a happy experience.
So yes, having more income helps, but if your wants and needs grow
even faster, you got a problem.
Well,
that's interesting because both Becky and I have a boat story.
The very first episode of our show is a boat called YOLO, and I actually
had a boat about seven, eight years ago that was named YOLO and that
embodied my philosophy on money.
And shortly thereafter, we turned it around, sold the boat, downsized
the house and downsized our life.
Becky, what was your boat story?
Remind us a little bit, please.
Well,
my boat story actually is different than yours.
We, we truly, truly enjoyed our boat.
It was a big part of who we were and in our life at that point in time, we
spent lots of time on our sailboat.
We, we raced our sailboat.
So it was, it was just something that we love to do.
And I wish I could go back and do it again, but what the mistake that
we made was how we purchased it, how much money we sunk into it.
We could have done it a much better way.
But and, and, that brings me to a question that I wanted to ask you Jonathan.
I mean, I think most of us the first thought that comes to us is, well, of
course, if we had more money, we would be happier, but it doesn't always turn out
that way because sometimes we, we really can't even figure out what makes us happy.
And I know you address that in the book.
Could you comment on that for
us?
Yeah, there's this notion among psychologists saying that we miss want,
we imagine that we want something and then, when we get it, it turns out
that we're, we're deeply disappointed.
We strive, for months, weeks, even years after some particular
thing, a promotion, a pay raise, something that we want to buy.
And then when we finally get it, there may be some initial thrill, but then,
the thrill fades all too quickly.
This is this notion of hedonic adaptation or the hedonic treadmill.
So yes, before we go out and we spend our dollars or we devote our time to
pursuing something that we think is going to make us happy, it's really
worth thinking hard about whether this is something that we truly want.
Now, truth be told, we may still get it wrong.
But it's one of the reasons that I encourage people to create wishlists,
create a wishlist of all the things that you would like to do, or you
would like to buy, you would like to achieve with your life, put it up on
the refrigerator and then reflect on it.
And with the reflection, you may discover that something you truly
wanted is not necessarily something that's going to make you happy.
But yeah, I think people spend their entire lives pursuing things
they think are going to make them happy and end up being big whoop.
Well, you say something in the book, which is the great conundrum, and it
sort of reminds us a little bit about happiness, quote, we have twice as
much to spend as we had 42 years ago.
But our reported level of happiness is no higher, and our satisfaction with our
financial situation has actually declined.
What should we spend our money on?
What are the things that do make us happy?
So, first of all, the great conundrum, is otherwise known as the Easterlin
paradox is named after Dick Easterlin, who is an economics professor at
University of Southern California and Dick actually sort of Discovered what's
now known as the Eastland Paradox back in 1974, he saw that, income in America
and elsewhere in the world had risen dramatically and yet reported levels
of happiness had not increased, we had more money and yet we Felt no better.
And the reason that Dick identified is that we care not so much about
our absolute standard of living, but about how we compare to other people.
And of course, what has happened over time, even as, the typical
person earns more, is there are other people who are earning even more.
And so our relative situation has not necessarily changed.
And even that actually raises this issue, which is when you ask people whether
they're happy and go back to that study about income and happiness and how people
with more income tend to say they're happier, one of the things that goes on
is it's a so called focusing illusion, which is when we're asked, are we happy?
We tend to think about our economic circumstances and we think about how
we're doing relative to Those around us.
And if we're doing relatively well, it prompts us to say
we're happy, but it doesn't necessarily mean that we are happy.
It's just in that moment when we reflect upon it and we think
about our fortunate position, we're inclined to say we're happy.
So what is it that does make us happy?
Well, there are a few things that have been identified.
One of the things we've already talked about, having this sense of
financial security, having enough.
So that we don't worry about how we're going to pay the bills.
That can be a huge source of happiness.
As many people have now heard, we tend to be happy when we spend our money
on experiences rather than things.
if you want to get, more happiness out of your dollars, don't
go and buy the fancy new car.
Instead, take the family to Paris.
That, the research tells us will tend to make us happy.
And then the third, talking about taking the family somewhere, is having a robust
network of friends and family tends to be associated not only with improved
health, but also with greater happiness.
So, yeah, if you want a playbook for happiness, one, work on your network of
friends, two, spend on experiences rather than on possessions, and three, make sure
you manage your money in a way that you have a sense of financial security and
don't have to worry about money too much.
Yeah,
it's nice to combine those.
We're now planning in anticipation of a big trip.
My wife turns 60 next year.
And one of our life goals was to go with friends and family to Israel
and Jordan and experience that with friends so you can combine these
things and I think there's actually a compounding involved there where you can,
exponentially increase your happiness by spending money intentionally on
those things that involve other people and involve experiences that can be
really Thanks impressive in some ways.
It doesn't have to be Israel Jordan.
It can be to a national park.
It can be a driving trip.
It doesn't have to be an expensive trip, but we're really looking forward to it.
And the anticipation of it makes us happy.
And I think
that's actually hit on a key concept, which is anticipation.
So, when we think about, the trips that we're going to take
we think about a lot of trips.
we go on YouTube and, look at videos of different places
that we might go and visit.
We have a list of places that we want to consider.
And the consequences is...
That before we spend a single dime, we've gone on all kinds of
trips in our head and, they are totally free and hugely enjoyable.
And you don't even have to worry about taking your passport with you.
Eventually, of course you do settle on where you're going to go.
And when you settle on it, you should try to settle on it months ahead of time.
So you have months of eager anticipation.
And in many cases, that anticipation will turn out to
be better than the actual trip.
I mean, because, you could imagine all kinds of wonderful things about this
trip, but once you actually start on the trip, there'll be things will go wrong.
You will have a bad day.
You will eat too much one evening, whatever it is, it will not be
as perfect as it is in your head.
It doesn't mean you shouldn't do it, but you may discover in
retrospect that the anticipation was the best part of the trip.
Jonathan, you say a couple of things in your book that really
intrigued me that and talking about what we should spend our money on.
And you say that spending money on others, along with the experiences that you just
mentioned, to sometimes delivers greater happiness than spending it on ourselves.
And then the second point.
Was we're often happier when we have less choice not more choice and both
of those things seem counterintuitive But I know i've experienced,
the joy of spending money on
others Yeah, no, it certainly is counterintuitive becky, but it is true.
I mean if you sit down and you Donate to a charity right after you
finish listening to this podcast.
I can almost guarantee that you will feel the glow of having made
that donation for days to come.
Whereas if you took that same amount of money and you went on line and you
bought something for yourself, you wouldn't feel nearly as great a glow.
It's just being generous with others.
gives us a kick in a way that spending on money on ourselves does not.
So, generosity is a wonderful thing.
And I would encourage people to do it, not because it's the right thing to do,
not because you will help others, but because you will make yourself happier.
And then second, yes.
Less choice can make us happier.
If you have too much choice, then you're faced with great uncertainty.
You just don't know.
Should I pick this color for the bedroom or that color for the bedroom?
One of the things that you can do is to narrow your choice so that.
there is less to agonize over one of the ways I restrict choice for myself
is I only buy funds from Vanguard.
if I sat there and said, I can buy any stock I want, I can buy any mutual
fund I want, any exchange traded fund I want, I can buy anything from anybody
I want for my investment portfolio.
it would be confounding.
I would just be drowning in this choice.
But what I do is I say, I'm only going to buy funds from Vanguard.
In fact, I'm only going to buy index funds from Vanguard.
And I thereby limit my choice and suddenly becomes a whole lot easier.
I do the same thing.
And I have a funny story about choice.
We were looking to paint our house.
And my wife got overwhelmed with choice.
We lived with I don't know, 20 samples on the walls for months.
It was driving me crazy.
And as you mentioned, it is important to limit choice because when I
initially went down the rabbit hole of investing, I made it very complicated.
I didn't know to make it simple and the thousands of choices
that you have are overwhelming.
It leads to analysis paralysis.
And I too use just Vanguard.
I too have been simplifying my portfolio.
It's just.
easier.
It gives you more peace of mind.
It makes you happier.
And then as a secondary thing, I'm the CFO of our family and my wife
has the big picture, but she's not as involved in the small picture.
And I want to make it simpler for her.
Should I pass away?
It's got to be easy for that other person.
Otherwise you haven't taken care.
Of your future and your future self and the future self of
your spouse or your partner.
So when we think about managing money, we all immediately think about investments
and our investment portfolio and so on.
But in fact, this is the thing that we should spend the least amount of time on.
there is.
the more time we spend on investing, the more damage we're likely to end up
doing what we should do is just find a couple of simple funds, settle on
them, and then move on because there are three other areas of our financial
life where we can spend time and get a much higher return for our money.
So when I think about the financial world, there's.
One, investing, then two, there's all these other aspects of personal finance,
what sort of house should you buy?
What insurance should you have?
When should you claim social security?
what sort of estate planning documents you should have?
These are areas of the financial world that never get covered on
CNBC, the need for The people don't tend to think about because they are
so distracted by the whiny demands of the financial markets each day.
And yet, these are areas are financial life where we can add enormous
amounts of value by spending time.
So that's the second area of your financial life.
First is investing.
Then there's sort of All these areas of personal finance.
Then there's this whole area of money and meaning, how can we get, greater happiness
out of the dollars that we spend?
How can we structure our life so that we're more satisfied?
What do we mean by terms like enough, the sort of stuff that
we've been talking about today in the podcast, and then the fourth.
Area that we need to focus on is behavior change change.
How do we get ourselves to do the things that we know are right?
I mean, we all know that we should, eat less exercise more, save more, trade less.
These are all things that we know are good for us.
And yet.
Every fiber of our being is saying, Oh, let's do another trade.
Oh, let's have another hamburger.
Oh, let's stay in bed rather than exercise and so on.
So, we need to work on changing our, our own behavior and avoiding all these
behavioral pitfalls that surround us.
So when you look at that spectrum of things, investing Broader
personal finance, money in meaning and then behavior change.
And you say, where should you focus your attention?
The first one, investing your portfolio, whether you should add
a little bit of gold, whether you should have 2 percent more or less
in stocks, forget all of that.
You're just wasting your time and you're probably going to get it wrong.
So get a simple portfolio and then take the time that you free up and
either go and do something fun with your life or focus on these other
three areas of your financial life where you really can add value.
I love that.
And in fact, just recently Bill and I were talking about having some future episodes
where we address the second part that you were talking about, the insurance,
the estate documents, all those things, because we spend our lifetime amassing our
wealth for our future, but yet sometimes we ignore all these other pieces that
what I like to call the safety net.
these are the things that are going to protect the wealth that we've created.
And, and I think those things are very important.
And then that last one about how to change our behavior.
So tell me, have you got some suggestions about how we change that behavior?
Behavior change is really tough.
I think one of the most effective things that you can do is just
to tell other people what you're, you're, you want to do, right?
Accountability partner, the accountability.
It's, it's huge, right?
If you, Tell yourself that, you're going to lose 10 pounds.
You're going to keep right on eating, but if you tell all your friends, your
family, your partner, whoever it is that you're going to lose 10 pounds,
suddenly you're on the hook because if you don't lose those 10 pounds,
you're going to feel awfully sheepish.
And the same thing goes for other parts of your financial life.
No, if you've got a lot of credit card debt, tell people, I've got 20,
000 in credit card debt and my goal.
A year from now is to tell you that I've got this paid off.
And if you do that, you are much more likely to act.
So, yeah, I think the making public commitments is a huge
deal and is very, very effective.
Actually, that's one of the things that we're proud of in our community.
We, talk about people's goals every week, and we ask if they've accomplished them.
And there's a lot of interaction in that regard.
And people find it very encouraging to watch other people's success.
So in your second chapter, let's move on a little bit so we can
get a little bit down the road.
You talk about living a long life.
Talk us through some of the financial impacts of living a long
life, please.
Well, there are the obvious things, Bill if you're going to live a long life,
then you should be open to things like delaying social security, should be open
to things like annuitizing part of your money, upon retirement so that you, you
have income for as long as you live, you should be committed to the stock
market because it's, one of the few ways where you can get better than stock
inflation returns over the long haul.
But, it also goes the way we conduct the rest of our life.
one of the things that many folks discover is that they will need
more than one career in order to get through their working years.
And so, you want to build some flexibility into your financial life.
So that perhaps in your forties, when you hit that midlife crisis and you
realize that you are Sick of living in a cubicle and you want to go off
and do something else that you have the financial flexibility to do that.
So a long life and the prospect of spending decades and decades in the
workforce leads to have a whole bunch of implications, not just about what to
do once you reach retirement, but also what you do on the way to retirement.
I think we have,
you know, as life expectancy extends, then, as you said, we can spend decades
in our working career, but then we can also have the, we have the possibility
of spending decades in retirement.
And so, I mean, the planning for that is something that is really important.
And in fact, in last week's episode with Mark Troutman, we
talked about some different.
Processes that you can go through for that.
And, I like your idea about really thinking about when you're going to take
Social Security and whether or not you want to annuitize part of your assets,
because that is, that's like buying and my understanding, if I'm correct, that's
like almost buying another pension, because most people these days don't have
a pension and So if you annuitize some of your assets, then you've bought yourself
some lifetime income, which I really love
that.
Well, you talk also about in retirement, there's a great quote in your book.
There's a reason the world's gardens are full of benches that no one ever sits on.
We are distant relatives or hunter gatherer ancestors.
And you talk a lot about this and the mindset that leads us down the
road of biases and how we handle our finances, but we are not built
for leisure or built to relax.
We talk a lot about how do you spend the last two or three decades of your
life after you become financially free, the soft sides of retirement.
We talked about with Fritz Gilbert, then the retirement manifesto.
So tell me a little bit about your focus on the hunter gatherer ancestors
and how they play a role in our
financial lives.
So let me, let me take this in two parts, Bill.
So just to come back to retirement and our restlessness As we prepare financially
for retirement, and a propo of what Becky was saying, we think about things like
delaying social security, and we think about things like annuitizing, so we
prepare financially for retirement, we also need to think about what it is that
we're going to do with all this time.
Because if you retire, And your notion is that, you're going to sit around and
relax for the final decades of your life.
I can almost guarantee you that you will be miserable.
We are not built to sit on the couch eating cheese doodles and
binging Netflix for decades on end.
It is simply not going to work for you.
You need to have things in retirement.
That you want to do, that you are passionate about, that you find
fulfilling, that you find challenging, that you think are important, that
you think will help the world.
Because if you don't have those things, then you will have a meaningless
retirement and a meaningless retirement will be an unhappy retirement.
So everybody, even as they prepare financially for retirement, should
be thinking about What it is that I'm going to do in retirement.
That's going to get me out of bed in the morning.
And I think one of the things that leads us to is the notion
that this distinction between work and retirement is sort of absurd.
the idea that we work like dogs for 40 years and then we stop
and we do nothing for the final decades of our life is ridiculous.
what I hope will evolve towards is something where people
ease out of the workforce.
they do things that may pay them, may not pay them, but where they continue
to have things to do that they feel are important and that are important
to society, at least a few days each week, we, we can't afford to have
a huge portions of the population sitting down around doing nothing.
And it's not good for them to be sitting around doing nothing.
And, thanks to progress in technology and so on, it's very possible for people to
work a couple of days a week for many, it could solve the financial puzzle
of retirement and make retirement much more affordable, even as it gives them a
sense of purpose for those final decades.
So, yeah, this distinction between work and retirement needs to disappear.
And one of the reasons is because of this restlessness that we have.
that we got from our hunter gatherer ancestors, this sense that, we're never
satisfied, we never reach the point where we say, I've done enough, I have enough.
we will never reach the point where we say to ourselves, I've
done enough, and I have enough.
We will always, in some sense, want to have more.
What we want to do is be thoughtful.
In the ways that we want more, we want more experiences rather than possessions.
We want to continue to work more, but we want to do stuff that
is important to us and that we think is important to the world.
Another thing you talk about in this chapter, and we had talked
earlier with Jordan Grumet in episode 22 about his book, Taking Stock.
You highlight a few exercises that are similar to what Jordan had suggested
about looking at the end of your life, reverse engineering your life to help
determine what you want your life to look.
Now we refer to, and I love this book, the seven stages of money maturity.
We refer to the kinder questions.
We haven't talked about these.
Can you take us through what they are and how important they are to
figuring these kinds of things out?
So you'll have to excuse me, Bill, because my, my memory is, is.
Maybe not as good as it should be, but the purpose of the kinder questions, there are
three of them is to get people to think about, what, they would do if they knew
that they were going to, I believe it's, you're going to live for five more years.
You're going to be in good health.
And what was, what is it where you would change about your life?
If you knew that that was going to be a case, you only had five years left,
but you would be up until the end.
And then I think one of the other questions is, you have 24 hours to live
when you look back what it is that you wish you had done, but what you haven't
done and the goal with these various questions is to get you to think about
what it is that you're doing now.
That really is not important to you is not meaningful to you and to get
you to focus on the things that are meaningful to you and make sure that
you focus on those through the rest of your life that you don't get to
the end of your life and have regrets.
And I think that's that's hugely important.
Of course, one of the big issues is we don't know how much time we have.
And there are all too many instances that I hear of people who feel
like they're in great health.
And the next day they discover that, time is limited.
So we need to think about it now.
About what it is that is important to us and what is it
going to be important to us.
It's going to be more than just getting the next promotion or next next pay raise.
And it's about thinking about what we're passionate about, what it is
that we would find the filling and give our lives a sense of purpose.
And,
Jonathan one of the things that that I have discovered in retirement is that I
definitely want to have purpose and to have a reason to get out of bed and, and
all those things that we've talked about.
I think that's terribly important, but I've discovered that what.
Works for people isn't always the world changing big event that sometimes it's,
your purpose can be, I want to be the best grandmother I can possibly be.
It could be something closer to home.
Now that doesn't mean don't strive for something big, but
what's right for one person may be different for another person.
And also, just trying things.
I have discovered that I have received so much joy from trying new things that I've
never had the opportunity to do before.
at the beginning, I mentioned riding an e bike.
Well, it took a little, it took a little practice.
I'm a little bit better at it now that when I first got on it, I about crashed
and burned on, on one, U turn up the hill.
But it's something that's like, Hey, I accomplished that
I was able to, to do that.
And there's other things I've tried that it's like, eh, that, that
one didn't work for me, but I want people to know they've got the
permission to try brand new things.
Even in retirement, even in those later years, because like you said, some of
us have decades to spend in retirement.
And I think it's a really important point, Becky not only to, to try new
things, but also to have a long list of new things that you want to try,
because you may discover that the thing that you think is going to make
your retirement fulfilling turns out to be, eh, just not the thing for you.
So to the extent that you have a long sort of wish list of potentially purposeful
activities for retirement, the better off you're going to be because some
of them are not going to work for you.
And one of the things that I had always thought that I would
love to do is teach college.
And so, in the last nine years, I actually taught at a small private
college as an adjunct professor.
I taught personal finance I enjoy public speaking.
I, love to talk about personal finance and I have to tell you,
it just didn't work for me.
I thought it was going to be this great experience.
I thought that, I would just, I would be a natural teacher and so on.
And what I really felt more than anything else was that, I just, I
wasn't as good at this as I thought.
I didn't feel like I was making enough of a difference in the kids lives.
And I think after, Writing about personal finance and, reaching tens
of thousands of people with any one article that standing up in front of
a room of 15 kids and talking about compounding didn't quite cut it.
But I, unless, until I tried it.
you didn't know.
I, I would've known that.
Right.
And so I'm glad I didn't decide to, base my whole retirement
on being an adjunct professor.
'cause it would've been a bad retirement.
Mm-hmm.
. But the, on the other hand, do you feel like that was a failure?
No, I would say it was.
I would say that it's not something that I would do again.
No.
And, and that's, that's my point is I don't think we should look
at these things as failures.
You try something and if it doesn't work, that's fine.
You move on to the next thing.
So, Jonathan, in chapter three you talk about rewiring your brain.
And I don't know if this conversation we've just been having is part
of that, but tell us what you mean by that we need to rewire
our brains.
So one of the things that we know, thanks to all the work
on behavioral finance is that
we make tons of financial mistakes, a lot of people are aware of, some of these
behavioral finance errors, we tend to engage in home bias, we, we invest too
much in our home country and companies that we know in our employer's stock
and so on, we tend to be loss averse.
This is the reason why, we tend to Tend to share away from stocks is why we tend to
freak out when the stock market goes down.
There are all of these behavioral finance mistakes that we make
and we need to understand ourselves so that we don't make.
A financial mistake that will end up imploding our future
because remember, we only get one shot at this financial journey.
We only get one chance of making it from here to retirement.
And you don't want to make the big error that's going to totally derail you.
And I would say that in thinking about behavioral finance and the need to rewire
our brains the number one thing that we need to do is to have the ability
to delay gratification to give some thought to our future self, not to be
so focused on today, coming back to our hunter gatherer brains, our hunter
gatherers did not have to fund 401k plans.
They did not have to worry about saving for retirement.
This is for us an unnatural act.
thanks to our hunter gatherer brains, our thought is let's consume
as much as possible today because who the heck knows where the food
is going to be available tomorrow.
And so somehow we need to overcome This focus on today and to show some
care and concern for our future self.
And that's why things like automatic contributions to a 401k plan are
so important because it helps to overcome this behavioral bias
towards consuming everything today.
The other one that I would say we need to try to overcome is an affliction
that's it's mostly found upon among the male portion of the population,
but it, women can also suffer from it, which is overconfidence.
We tend to be way too confident in our financial abilities and
particularly when it comes to picking investments and forecasting the
markets direction and so on and so on.
There's a reason why the website that I launched is called
humble dollar because humility.
When faced with all the financial decisions out there is a great virtue
and those who are too confident will, in the end, make a financial mistake that
will badly hurt them because in their overconfidence, not only will they be
convinced that they are right, but they will make a way too large investment bet.
One of the other things you talk about that I think is important is,
and can you explain it to us, we must train ourselves to focus on the
stock market's fundamental value.
What do you mean by fundamental value?
So when we trade stocks or we buy mutual funds, they just seem like,
notations on the computer screen.
They're just ticker symbols.
They seem like ephemeral things that just bounce up and down.
Every day, the financial markets are open, but in truth, when we invest in
stocks, we are investing in real companies that produce real goods and services,
the benefit from a growing economy.
And as a consequence, they have intrinsic value.
They have fundamental value.
And if we lose sight of that, we're much more likely to panic.
When the market goes down, if we see them for what they are, which is real companies
with produce real goods and services that have a fundamental value that have an
intrinsic value, we're less likely to Look at a market that's down 20 or 30 percent
and say, Oh my God, this is going to zero.
I've got to get out now before I lose everything.
I go back to the pandemic and what happened to the stock market, both
the drop and subsequent rebound.
And I think it's worth thinking about that time.
I mean, it was, it was not a great time.
We, we were all socially isolated.
There was a lot of fear.
But the middle of that, in many ways, it was a very optimistic event,
particularly from an economic point of view, because faced with this
disruption of the world economy, everything was turned upside down.
And yet somehow people found a way to go on doing business restaurants,
said, okay, if people won't sit shoulder to shoulder inside, we're
going to put them out on the sidewalk.
We'll feed them there.
And it worked, company said, okay, we can't come to the office.
So we'll do everything via zoom.
But in terms of the innovation, I mean, nothing could match.
The speed with which a vaccine was created.
I mean, when the pandemic started, people were saying, it'll be five
years till we have a vaccine.
What was it like seven or eight months before we had the first indication
that the vaccine would be created?
It was astonishing, every day.
8 billion people around the world wake up and say, how am I going
to make my life better today?
What is it that I'm going to do to make things better for me and for my family?
And because Individual effort.
We collectively benefit.
there is a reason to be optimistic, about not only the world, but also about
the financial markets and all of this energy and this entrepreneurship and this
innovation gets reflected in the stock market and in the value of companies.
And if you want to benefit from it.
It's very simple.
You buy a broad market index fund and you harness the energy of everybody else
and you benefit from their hard work.
That's fantastic advice again.
And the pandemic is a good place to talk about, resilience.
And that's one of the things, our late starter community.
Really has is resilience.
They may have experienced life and not paid attention to their
finances, but when they do wake up, they find a way to get there.
It's incredible.
And our audience really does.
Becky did her story is incredible.
She started with a net worth of zero at 50 and by 63, they were
retired with a seven figure portfolio and are living their best lives.
She is an example of the fact that it is possible to start late and
still get where you want to go with a comfortable financial life.
And then, with regards to thinking big, in chapter four, You talk
about human capital a lot.
I'd like you to describe what that is and how human capital plays
a role in our financial lives.
So for most of us, particularly early in our adult life, for most of us, our
most valuable asset is our human capital.
It's our income earning ability.
And our human capital should really drive so much of our financial behavior.
So you think about it, you For 40 years, we'll earn, a regular
or somewhat irregular paycheck.
I mean, what does that mean for your financial life?
Well, first of all, your human capital is your source of savings.
The goal here is to take a little piece of every paycheck
and put it away for the future.
So at some point.
What we call retirement, you can live without your human capital,
without your income earning ability.
Second, our human capital drives our ability to take on debt.
it is entirely rational for people in their 20s and early 30s to take on
college loans and to take on big mortgages because they know that they have decades
and decades of paychecks ahead of them, service these debts and eventually
pay them off before they retire.
So when we think about, insurance, our insurance needs are in large
part driven by our human capital.
We need to make sure that we stay healthy, so we need health insurance.
We need to make sure that we can still pay for our living expenses if we become
disabled, so we need disability insurance.
We need to make sure our family is okay if we go up under the next bus,
which is why we buy life insurance.
So our human capital also drives.
Our insurance needs.
So when you think about your financial life, you should put your
human capital at the center of it.
And, another key thought here is that when you think about your human capital,
for most of us, our human capital is not unlike owning a bond, our human
capital kicks off this regular paycheck, just like bond kicks off interest.
And that frees us up to invest heavily in the stock market during our working years.
We don't need income from our investments.
What we need is growth and the stock market is going to provide that.
But as we approach retirement and the disappearance of that paycheck
from our human capital, That's the reason we need to start moving towards
bonds so that we have the interest from bonds to replace the paycheck we
used to get from our human capital.
One thing I think I like you talk about in this chapter is
how to look at our paycheck.
And I did not learn to partition my first paycheck.
It was a means to an end of spending and enjoying life.
I didn't start with my future self.
I didn't start with...
Saving first, saving 10 to 20 percent early on.
It was a paycheck to paycheck lifestyle.
Do you have a particular recommendation as how we look at partitioning our paycheck?
I think
that the thing that I would say to people early on is that they should, to the
extent possible, focus on the fact that.
20 or 30 years down the road, they are not going to find the work world as exciting
as they are in their early twenties.
They will reach a point where they simply don't want to do what they're doing today.
And they want to have the financial freedom to do something else.
And if they want that financial freedom, then they're going to
have to start sucking away money.
today.
And so when you suck away that money, 10, 15, 20 percent of your paycheck,
yeah, you're, you're saving for what you might call retirement, but what
you're really doing is you're buying yourself future financial freedom.
In the near term, what you're buying is some freedom from financial worry.
But 20 or 30 years down the road, you're buying yourself freedom from your cubicle,
freedom to spend your time as you wish.
And so even though saving for the future seems like an absurd thing to do in your
20s when there's so many, shiny bubbles out there that you want to buy today.
if you want that freedom down the road, it's worth making
a little bit of a sacrifice
now.
Yeah.
You talk about in your book and I quote, we might strive to buy a home
in our thirties and our forties.
Our focus is often switches to the kids education with these two goals behind us.
We finally turn our attention to retirement, but at that point we might
be in our fifties and it is too late because 10 to 15 years is simply not
enough time to accumulate the money needed for a comfortable retirement.
Becky's story is counterintuitive to that.
Do you still feel this way?
Cause our audience wants to feel that it's not too late.
And then as a second question, why do we wake up late?
What is it about 50?
There's been a lot of discussion here.
And then in my mind, we have catch up contributions starting at 50, but why
aren't they earlier and why aren't they
more?
It's in terms of Becky's story, If you have a high enough income, yeah,
you can reach financial independence very quickly if you get your costs
down low enough, but most people.
Are not going to have, the ability to get the separation between their
income on the one hand and their expenses on the other hand, such that
they can reach financial freedom in a decade by, by saving like crazy.
It's just, it's too, it's too short a period unless your income
is super, super high and your expenses are super, super low.
So.
If you can starting, early is the better way to go.
What if you are age 50 and you haven't saved for a time today?
I would say that, the, the prescription beyond, yes, you need
to save like crazy starting today.
is to be prepared to do a couple of things.
One is delaying social security.
Age 70 makes total sense unless you're in ill health or both you and your
spouse are in health ill health to you should get yourself comfortable
with this notion that you're going to annuitize more of your income,
more of your savings upon retirement.
forget this notion about, oh, I don't want to annuitize because I
want to leave the money to the kids.
If you're starting late You want a decent retirement with a lot of
income, you need to seriously think about annuitizing a significant
part of the savings that you have.
Third, I think that working into retirement, not necessarily doing
what you're currently doing.
But doing something that you love that also brings in a little bit of money that
can also make the retirement numbers work.
I don't know why we have this notion that people should quit
the workforce at 60 or 65 and do nothing for the rest of their life.
I think it's a prescription for unhappiness.
So continue to do something purposeful and something purposeful that
comes with a little bit of money.
Why not?
That's another way for late starters to make the numbers work for them.
Fourth, if you have high expenses and you're planning to
downsize, why not downsize now?
Why not get your expenses lower?
not, that wouldn't simply make it easier to save.
You may actually find that you buy yourself happiness by having
a simpler life, a smaller home where you do less yard work and
there's less maintenance and so on.
simplicity.
Is a key to happiness.
you don't want to be worrying about all this nonsense.
And so I think maybe the 4th or 5th questions, or maybe it
was your 5th question, Bill.
Was about why do we leave it so late?
I think it's partly about financial literacy.
But I think it's also about societal attitudes and what, we are told
is the good life as opposed to what actually is the good life.
if you believe the good life is, going on.
exotic vacations and spending huge sums.
You think the good life is driving a luxury German sedan.
if you think a good life is living in a house where, there are three
or four empty rooms that nobody ever uses, then you, you are going to end
up spending most of your paycheck.
you need to think for yourself and think what is it that matters not to
the neighbors, not to the marketers of luxury products, what matters to you,
and then spend the money on things that matter to you and toss out all the rest.
And then finally, We are wired as we've already talked about, to live for
today and not to worry about tomorrow.
That is a huge behavioral issue.
So on top of, the financial literacy, on top of the marketing messages that
we get about what the good life is, we also need to engage in this major
behavioral change and overcome our hunter gatherer instincts to focus on the long
term and think about our future self.
And that If you don't do those things is why you went, you don't Start
thinking about retirement until age 50
in
chapter 5 you talk about to win Don't lose and I think this is a big thing for
our more mature audience because we don't have The decades in front of us to, to
let our investments compound, which is the simple way to get where you want to go.
So what do we need to focus on so that we don't lose?
Because our audiences is, not only do I need to make good
decisions, but I need to not make
big mistakes.
So I think there's some crucial issue, Becky, if you are behind the eight ball,
when it comes to retirement savings, the temptation is to roll the dice.
The temptation is to make big investment bets to try to make up for lost time.
And more often than not, that's going to come back to haunt you.
you are not going to pick the next Tesla.
you are not going to discover the next hot cryptocurrency.
These things are not going to happen.
Yeah, you cannot at that late stage afford to take a lot of risks because
more often than not, those risks are going to come back to haunt you.
So at that point, you need to be very Cognizant of risk.
And in fact, as an investor, remember, you cannot guarantee that you're going to
get good returns, but you can manage risk.
we, as investors should be much more focused on managing risk
rather than pursuing returns.
And so.
If you've got a short runway to retirement I would limit risk,
which means diversify broadly.
Yes.
Have some stocks in your portfolio, but, balance it with some bonds,
stick with simple investment products, favor index funds, favor low expenses,
and take that sure route toward retirement because anything else.
Is more likely to put you further behind and get you there quicker.
So much of your book is about mindset.
And I think mindset is 80%.
You talk about the math being the last thing in some ways you want to talk about.
Because you don't want to waste your time being anything other than simple.
This book is pivotal for our late starter audience in getting
their minds wrapped around.
How do I do this?
So that I'm happy.
focus on happiness in some ways is so much more important than
a focus on the math of finance.
We need...
To shift our mindsets a little bit so that you use our finances as a
tool to reach the time freedom and be happy along the way, but also enjoy
the happiness through retirement.
I love this book.
I also loved your book, My Money Journey.
There's actually a story in there from a late starter that I
would encourage people to read.
This book is about 30 people that did it in so many different ways.
Personal finance is personal, and there are just as many ways as there are
people in our community to get this done.
Yes, there are some commonalities about the methods, but, the challenges we face.
And the way to overcome those challenges with accountability, partners,
encouragement, and tangible action steps.
You've given us both this podcast is about mindset, money, and life.
I think we've touched on all topics and I thank you immensely for joining us today.
It's been my pleasure.
It's been fun talking to you and Becky.
So thank you for having me on.
I really appreciate it.
We'd like to wrap up with a few basic questions that I think our audiences
love and we want to know from you, other than your material to increase
their knowledge, what other resources would you recommend for them to avail
themselves of to learn how to do this?
I get this question a reasonable amount.
I don't have sort of, one or two key books that I point people to.
What I think You need in order to be a knowledgeable investor and a Vester
who, confronts the financial world with confidence is to read widely.
I'd be particularly early on, read anything you get your hands on just so
that you have some sense of the, for the financial world, you don't have
to act on any of it, but just to read it, to start to understand, what is.
The truth and what is nonsense.
I mean, I would almost encourage people to turn on CNBC just to laugh at the
predictions that are being made from people have no clue what the future holds.
They talk with such confidence and yet tomorrow they'll be
telling a different story.
I'm actually a big fan of Twitter.
I get a lot of my news and financial information from Twitter.
There are a lot of people on Twitter who are worth following,
who can give you some Interesting insights on the financial world.
But again, to be a confident manager of your own money, you need not just
experience, but you also need to read widely, read everything, not necessarily
act, but just have that confidence that comes from having read around the
financial world and started to grasp what is sensible and what's nonsense.
Yeah, I would refer our audience actually for a couple of reasons to our website.
You mentioned earlier charity and the happiness it gives.
We don't monetize this podcast, but we have listed many charities on
our website that we would encourage people to donate to if they want to
support the podcast, that's number one.
Number two, you mentioned a plethora of resources and we have that on our website
with books, podcasts, blogs that we would point everybody to, find your space.
Find the method that works for you, whether it be videos,
books, blogs, or podcasts.
I mean, I have this big, huge library.
I've read a bunch of books.
I got into analysis paralysis from it.
It only takes a couple to get you started.
And your books are certainly one of them.
I've read many of them.
I would certainly direct people towards them.
Tell us where people can reach you if they want to reach out.
And learn more from your resources.
The number one thing I spend my days doing, way too much of my day, in fact,
is running this website, HumbleDollar.
com.
I've been running it since year end 2016.
I'm putting up one or two new articles every day.
HumbleDollar is a community of people.
who are
heavily focused on retirement, either near retirement or in retirement.
And what we try to do is talk about the financial world with a
heavy dose of personal experience.
So a lot of the people who write for.
Humble dollar are not financial advisors.
They wouldn't be considered financial experts, but they do have stories to tell.
As I say to my writers all the time, you may not be an expert on
the financial world, but you are an expert on your own financial life.
And so if you talk about things that have happened to you personally, you
can talk about them with authority.
And so a lot of the articles on Humble Dollar are people talking
about their own financial experiences and what they learned from them.
Yeah, we
actually do the same thing on our website, believe it or not.
I learned that from you.
We encourage folks in our communities, send us guest blogs.
It gives them both...
The chance to process their mistakes and tell people about what they're doing about
them so that people don't feel alone.
They learn from each other.
It is a community effort and your resources were immensely helpful to me
and we hope we're helping our audience.
Jonathan, it's been a pleasure talking to you today.
Thank you for spending your time with us.
I think you provided immense value to our audience and I look forward
to seeing you at the Bogleheads conference this fall in October.
I'll see you there, Bill.
And I enjoyed talking to you, Becky.
So thank you for your time.
Thank you.
Enjoyed
it.