How to Think About Time: A Humble Legacy | Jonathan Clements | 081 - Catching Up to FI

Episode Transcript
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(00:02):
Hey, Jackie, we're back a littlebit off schedule here with a pop up
episode because we've had somethinghappened in our community that we
felt the need to talk about, right?
Yeah.
And whenever there is something thatwe believe is kind of time sensitive,
we like to kind of discuss it.
And that's a good thing aboutdoing the podcast with you.
We're friends and we have a lot offriends in the five community and

(00:24):
the personal finance community.
And our topic today is about oneof those friends that we did not
get Very good news from this week.
Yeah, Jonathan Clements my friendand yours actually yesterday
released a blog on his blog,Humble Dollar, called The C Word.
When this came across My desk ormy desktop as would be certainly a

(00:45):
catchy title and I don't read everyblog But I definitely clicked in on
this one and it was not about whatI wanted to read about It was about
Jonathan Clements divulging the factthat he'd been diagnosed with terminal
metastatic lung cancer He's 61 years old.
This was a shock to me andthe way he wrote about it

(01:06):
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 touchedso many people, but you know
him personally and he's been aclose personal friend of yours.
And I remember the first time we've beenfriends for years, you and I, and I just
remember the first time I learned aboutyour whole story was on humble dollar.

(01:32):
And so that's when I knew you guys hada connection and you were close friends
beyond just professional acquaintances.
So I thought it was great thathis platform was where you
first shared your story and youbared it all and it was great.
So yeah, this news was kind of hardand I'm sure it's been hard for
him and he's been processing it.

(01:52):
But he has an awesome community ofpeople that love him like we do.
And we just wanted to talk aboutit a little bit because I think
there's some bigger implicationsand some takeaways that we wanted
to share with our community.
Yeah.
I mean, Jonathan was a guest on theearly days of the show when we launched
it and it was after, as you said, mycoming out party where I decided to say
to the world, I am catching up late.

(02:14):
I'm a physician.
I've made all the mistakes in theworld and I've got to catch up.
And his blog was the platformon which that came out.
And that came out shortly beforethe 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 wasjust on the podcast a few months ago.
I think it was the end of 2023.

(02:36):
So I'm thinking it was like November,December, something like that.
He was on Episode 40.
I looked it up the otherday and in that episode.
We talked about his book that I'veread how to think about money.
And, for him, the conversation was.
Much larger than money.
It was more about happiness and thesearch for it, how to find it, how to

(02:57):
use money as a tool to help you find yourown individual happiness his messaging
and philosophy transcends our generation.
Yeah.
And Bill, he so eloquently wrote aboutthe C word on his blog, humble dollar.
And it was, it just shows histrue gift, and that is writing.

(03:19):
And I think that he had a lot tosay, even in this post, I'm sure
it's very difficult to write.
And, I feel like we're all puton this earth to do something.
And I think his purpose was thebody of work that he put out.
And with all the books that hehas, and Humble Dollar and all the
content he creates there, not tomention all his other accolades

(03:40):
and the work that he's done.
I think we were so lucky to have allthis and to still have it, really.
But I know the way that he wroteit, it may have been the best outlet
for him because that's what he does.
And it was just so deep and heartfelt.

(04:01):
That it made me thinkabout, what have I built?
What's my legacy?
And if I were to leave this earthtomorrow, 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 thethings that I've put out in this world,
and I would love our audience to thinkabout that for themselves, aside from the

(04:23):
monetary things, What have you built foryour 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, Icouldn't have said the same thing.

(04:45):
you grow your family, you leave alegacy of a loving wife, two kids, a
job in emergency medicine that allowsyou the privilege of saving lives
occasionally and redirecting lives mostof the time down the path that they
need to take with their own health.
The Catching Up to Fi movement, theFi movement has redirected my life.
It's changed my life dramatically.

(05:07):
People like Jonathan, peoplelike yourself, people like Becky,
our previous co host and all thefriends 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 intothe clean or more rarefied air.
And that's where Jonathan lives.

(05:29):
And I wrote a letter to him thatI'd like to read on the show.
And I'd encourage folks to goread his blog, the C word on June
15th yesterday on humble dollar
Yeah, Bill, I think thatpost I just looked at it.
It's been up for about a day andit's got nearly 300 comments which
shows how the community feels abouthim and I was going to ask you if

(05:50):
you didn't mind reading that letter.
I know it's a personal thing becauseyou had that connection with him.
So I think our audience will benefitfrom you sharing what you wrote.
Yeah,
on the blog, but I wrote it to him inan email as well, and he responded, so.
I said, Jonathan, your clarity, poise,and courage in the face of your recent

(06:12):
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 seethe worst day of people's lives.
They come in with seeminglyinnocuous symptoms and leave
with a terminal diagnosis.
Telling people that I diagnosed withmetastatic cancer that they are dying
is one of the hardest parts of my job.

(06:33):
I can imagine what that daymust have been like for you.
As a friend, I consider myselfincredibly lucky to know you and that
our lives collided because of ourmutual interest in financial literacy.
We broke bread and shared a good bottleof wine after your marvelous talk at
Jim Dalley, the White Coat Investorsfirst conference in Park City, Utah.
We recently saw each other again atlast year's Bogleheads conference and

(06:55):
chatted with Bill Bernstein and AlanRoth about the merits of small cap value.
Also important, you are oneof my heroes and you've had an
immeasurable impact on my life.
As a fellow creator, I'm in awe ofthe body of your work and the timeless
legacy it leaves in our world.
I have read all your books and have beena reader of your blog since the beginning.

(07:18):
I cherish the signed copiesof your books that I have.
You generously helped me come out as alate 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 myfledgling podcast, catching up to fi
where we talked about how to thinkabout money, I am so grateful for

(07:42):
the time we have shared together.
You've shown us how to live.
And our wonderful mentor, you havegotten it right with life and have
enticed us how to value our mostprecious resources of time and
freedom in face of a premature death.
You recognize that you are not dead yetand still have so much more to give.
I hope to emulate your example.

(08:04):
I wish you a peacefuljourney warmest regards bill.
Jonathan responded just a few hourslater 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 worstnews you can ever get thinking
about everybody else, a trueTestament to the person that he is.

(08:26):
that was beautiful.
I know it must have been very hardfor you to write that letter, but so
many wonderful uplifting things thatyou said that I'm sure means a lot
to him as all of the messages that hegot on his blog after he shared that.
So I think that's awesome.
And I know that he,appreciated your words.

(08:48):
You're a pretty good writer yourself.
Yeah, well, I've writtena few blogs, not too many.
And, I leave the writing to people likeDonathan 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.

(09:09):
leaving a legacy personaland publicly is a cool thing.
It's what helps you come to grips with.
when your time is marked, when your timeis numbered, and I look forward to seeing
what Jonathan does with his time left.
I think he has so much to give, andhe recognizes that, and he's going to
work furiously to not only empty hisbucket list, probably, but to continue

(09:34):
doing what he has already created.
I don't know that he would change hisday very much from what he's living now.
Yeah.
And Bill with that, shallwe replay his episode?
So that everybody can getreacquainted with Jonathan Clements.
You can watch it on YouTube or you canlisten to it via podcast or whatever way

(09:56):
you prefer to listen to our audio version.
But I think it's definitely worth reairing because our hearts are so warm.
I'm thinking about him and we wantto send him all the love and support
that he deserves for putting outsuch amazing content and actually
making us all a little bit better.
Yeah.
Jackie, I think that's a fantastic idea.

(10:17):
Why don't we push play, right now?
Now.
Hello, and welcome backto Catching Up to FI.
I'm Bill Yount with my co hostBecky Heptig, and we're so
excited about our guest today.
But first, let's find outabout what Becky's up to.
How are you doing, Becky?
I'm doing great, Bill.
Steven and I just got back fromseveral days over in Crested

(10:39):
Butte, where it's just beautiful.
And we e biked, not for thefirst time, but second time.
And it was the first time on ane bike that had a throttle on it.
So that was an interesting experience.
But it was
fun.
Well, you were visiting with MarkTroutman, one of our co hosts and
a frequent visitor on the podcast.
Isn't that right?
Yes, we were.
Mark and his daughter, Katie, wehung out with them and enjoyed

(11:03):
the beauty in Crested Butte.
Well, we're excited also to headthis week to Podcast Movement.
Becky and I will be first timers there.
And we're looking forward to meetingup 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.

(11:24):
We have today JonathanClements with us on the show.
Jonathan is a once wimpyEnglish school boy who became
a prolific runner and cyclist.
He's the founder and editor of thepersonal finance website, Humble Dollar.
He also sits on the advisory board ofcreative planning, one of the country's
largest independent financial advisors.
And is the author of ninepersonal finance books.

(11:46):
Earlier in his career, Jonathan spentalmost 20 years at the Wall Street
Journal, where he was the newspaper'spersonal finance columnist, and six years
at Citigroup, where he was the directorof financial education for the bank's U.
S.
wealth management arm.
Born in England and educated at CambridgeUniversity, Jonathan now lives in
Philadelphia, just a few blocks fromhis daughter, son in law, and grandson.

(12:08):
I met Jonathan at the inauguralWhite Coat Investor Conference
in Park City, Utah in 2019.
We went out to dinner after his excellenttalk and shared a lovely bottle of wine.
We have stayed in touchvirtually over the years.
When I was finally ready to come outof the closet with my Catching Up to
FI late starter story, he generouslyoffered to publish a blog I wrote called

(12:28):
Saving Our Retirement on his website.
I am looking forward to seeing himagain at the Bogleheads Conference
this October in Rockville, Maryland.
Today we are interested in speaking withJonathan about topics he covers in two of
his books, How to Think About Money, andhis most recent book, My Money Journey,
How 30 People Found Financial Freedom.
And you can too.

(12:49):
Please note that one of the journeys inthis book is that of a person who makes a,
quote, comeback in midlife, just like us.
It's with great pleasure that wewelcome 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.

(13:10):
Well, let's jump right in.
In My Money Journey, you tell your story.
To give us a little context, canyou take us through your story
a bit through the lens of money?
So, as I explain in the book My MoneyJourney My financial life is really
divided in two with the dividing linefalling around age 45 and the first half

(13:31):
of my financial journey followed a ratherpredictable course to the extent that
I did what a lot of people who achievefire did, which is I lived way below
my means, saved huge amounts of money.
Stashed every dollar I could intostock index funds while at the same
time paying down debt and the resultwas that by age 45 or so, I had pretty

(13:57):
close to a seven figure portfolio.
The years since have beenmuch more unpredictable.
I refer to it as my second childhoodwhere 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 inthe early years, but in many ways
that period of exploration hasbeen a more fun part of my life.

(14:19):
I've tried my hand at a lot of differentthings including launching the website
that you mentioned, Bill HumbleDollar.
com, which is what I spendmost of my days doing now.
Okay, well, your section of the bookin which your story is described
is that of fierce frugality.
Do you feel like, given that you didthat early on in your career, that

(14:42):
you suffered from any deprivation?
I would say
that in retrospect,
I should have cut myself a littlebit 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 theinevitable result of the financial

(15:07):
uncertainty that we live in.
So we look ahead and we justdon't know what sort of financial
hand we're going to be dealt.
We don't know whether we'regoing to end up getting divorced.
We don't know whether we were going to endup with no children or multiple children.
We don't know whether one of thosechildren is going to have special needs.
And we don't know what sort ofhealth needs we're going to have.
We don't know what's going tohappen with our job situation.

(15:29):
So faced with an uncertain future.
It's almost rational to save toomuch early on, but some of us.
overdo it.
And I would say that I'm definitelyin the camp who over did it, that I
saved too much in the early years.
One example of that is that I livedin this same house for 20 years
that I basically didn't really likethe, it was an inexpensive house.

(15:54):
I paid off the mortgage quickly.
my property taxes were relatively low forsomebody living in the northeast and this
allowed me to save great gulps of money.
It was a wonderful move froma financial point of view.
Whether it was a good move from the pointof view of happiness, that's debatable.
There are a lot of folks in theFI community that I believe have

(16:16):
shifted over the last few years.
The mindset has sort of shifted from theextreme frugality to the we need to enjoy
our life as we go along the journey.
And I know that you made a commenton a podcast when you were speaking
with the folks over at the Longviewthat our children watch what

(16:36):
we are doing and that maybe youactually taught your son too well.
About the frugality.
I thought that was an interesting comment.
Yeah.
When we think about teaching ourkids about money, we think that, the
lectures that we deliver to them are thethings that are going to change their
attitude towards money, but it's not thething that will change their attitude
towards money is the way we behave.

(16:58):
They will model our behavior.
And if they see us being extremelycareful with money, they too are
likely to be extremely careful withmoney 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.

(17:19):
I don't have to worryabout them financially.
But, come back to whatI was saying earlier.
Is that a prescription fora happier financial life?
I don't think the money necessarily buyshappiness, but putting ourselves in too
tight of financial constraint and worryingtoo much about how much we're spending.

(17:41):
Yeah, that can be, that can causeunhappiness just as spending
too much can cause unhappiness.
I'm
interested to know what about your earliermoney scripts led you to do things right?
Like a lot of folks that are, asyou advocate, start early, start
strong, get free in 20 years and moveon to your second financial life.

(18:04):
What about your upbringinggot you to that mindset?
So one of the things that I grewup with was the great family story.
And the story was about my great, great.
who, when he died in the 1880s wasdescribed in the newspaper as being

(18:25):
one of the richest men in England.
He had made a fortuneprincipally selling cigarettes.
And that fortune passed to my greatgrandmother, and she lived the sort
of life that you see on Downton Abbey.
And then she bequeathed her fortune to herfive children, including my grandfather.

(18:49):
And that money disappeared in short order.
My grandfather's siblings wastedit on wine, women, and song.
And my grandfather wastedit on gentleman farming.
He started out with a big farm, didn'tmake a profit, traded down to a smaller
farm, as a way to free up capital.
And it just kept going until the farmsgot so small that he had to retire.

(19:13):
And that was the great familystory that I grew up with how the
family fortune had been squandered.
And so if you look at me and you look atthe behavior of my three siblings, all
of us are extremely careful with money.
We're also very different people.
Otherwise, we are allextremely careful with money.
And I attribute it.

(19:33):
To this great family story that we grewup with and it's the reason why even
though I grew up in a comfortable middleclass household, I was pretty careful
with money almost from the get go Andthe other thing that contributed to my
frugality was the fact that I was notvery good at family planning So I got
out of college and within two years.

(19:54):
I was a father having to supporta family On a junior reporter's
salary in the New York area.
So I had to get financiallysmart super, super quickly.
And so that, too, led me to be.
almost overly frugal.
Why did you become apersonal finance journalist?

(20:16):
Is it the same thing thatyou learned earlier in life?
Did that lead you to want to helpfolks find the path that you found?
Well, it was actuallyCouple of different reasons.
One is I was I was alwaysinterested in economics.
Two, I was always sort of morespecifically interested in
money and how money worked.
But then in terms of being a journalist,my father had actually been a journalist

(20:39):
for the first 10 years of his life.
I don't have a recollectionof that period.
He exited journalism whenI was three years old.
Nonetheless, out of college in England,he worked for the Financial Times.
He had worked for the DailyTelegraph as a financial journalist.
And so In my mind, being a journalistwas at least a possibility.
It was...

(20:59):
It was something that seemed likesomething I could do, whereas say,
Bill, being a doctor did not seemlike something that I could do.
Well,
that was a defined path for mebecause 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 doctorbad financial moves, which I think

(21:21):
we've talked about on the show before.
We've also talked with folks like.
Paul Merriman, JL Collins, RobBerger, and Alan Roth on the show.
Now, each expert agrees on many of theprinciples of portfolio construction,
but there are a few differences.
You have your thoughts aboutportfolio construction,
complexity, and diversification.
How have they changed over the years?

(21:44):
As I've grown older, my preferenceHas 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 theVanguard total world stock index fund,

(22:06):
or it will be eventually even as of now,it's my largest single fund holding.
And what I get with that is the ultimatein stock market diversification.
Every company in the world weightedaccording to its market capitalization.
If anything good is happeningin the global stock market,
I will be the beneficiary.
Of course, if anything bad ishappening in the global stock market,
I will also suffer the consequences.

(22:28):
But, if you're an optimist, as Itend to be, and assume that the
world will continue to grow andthings will get better over time,
as an owner of the Vanguard TotalWorld Stock Index Fund, I know that
I will be the beneficiary of that.
world prosperity.
And then I counterbalance thatwith two short term bond funds

(22:49):
again, both from Vanguard.
One's a short term conventionalgovernment bond fund, and the other is
a short term inflation index bond fund.
And that is the money that I haveset aside if I have a financial
emergency, or once I decide to...
Retire where I'll go for my spendingmoney each year, but the vast majority

(23:09):
of my money isn't stocks And right nowmy biggest single holding and eventually
I hope my only holding will be thevanguard total world stock index fund
Now that's fascinating because that'sthe 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 anyinternational diversification.

(23:30):
John Bogle did the same thing.
And on the other side, Alan Rothand Paul Merriman, Rick Ferry.
All have international interests,anywhere from, 20 to 40 percent and
in your case, potentially more whydo you stick with the international
diversification and why do you think otherfolks, recommend actually against it for

(23:53):
simplicity in a word, Japan, I think thatthe collapse of the Japanese stock market
since year end 1989 is in many ways thelesson for investors to look at today.
The fact that the market that was thebiggest stock market in the world at

(24:17):
the end of 1989, the most celebratedmarket in the world, for those who,
who don't remember the 1980s, wewere all being told that we needed
to learn how to speak Japanese.
We were told that the way that ourcompanies were run was mistaken and that,
we needed to learn from the Japanese.
I mean, at the time, the U.

(24:38):
S.
was seen as a country that wasslipping and the Japan was dominant.
Now, Obviously, history has told usthat'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 theend of 1989 and the way it was viewed and

(25:02):
ask yourself, what if you are wrong...
what if you are wrong...
Because as investors, what we needto 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 US only stock market portfolio, what

(25:24):
are the consequences if the U S turnsout to be the next Japan, I think the
chances of it happening are de minimis.
I do think there's a significantchance the U S market will
underperform the rest of the worldin 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.

(25:46):
Consider the possibility thatyou are displaying massive home
bias in favoring only the U.
S.
market.
Consider the consequences ifyou are wrong and whether it
wouldn't be prudent to diversify.
So
Jonathan, what is your opinionabout other alternative investments?

(26:07):
Such as REITs or gold or Bitcoinor other things that people invest
in, but they also tend to makeyour portfolio more complicated.
I see no reason to own this stuff.
At one point, I did haveREITs in my portfolio.
I no longer do.
At one point, I did have a littlebit of gold stocks in my portfolio.

(26:27):
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 thesealternative assets.
One of the problems with so manyof these alternative investments,
this is not necessarily true ofgold stocks, it's not necessarily
true of REITs, but many alternativeinvestments involve active management.

(26:52):
And we know When you haveactive management, you
have high investment costs.
And when you have high investmentcosts, there is a great chance that
you will end up with mediocre returns.
So why not just keep itsimple, diversify globally.
With your stocks and then keep itsuper simple and super safe with
your bonds to offset the risk of yourstock, your stock market holdings.

(27:15):
And the way you do that is withshort term high quality bonds.
Now you actually
split it between tips andshort term treasuries.
Why do you do that?
As a bond holder, the biggestrisk is inflation, at least a
holder of high quality bonds.
And we're not talking about, lowquality bonds, junk bonds, but

(27:35):
in terms of high quality bonds,the number one risk is inflation.
So why not have part of it, hedgedagainst inflation by favoring tips.
So that's why I split mymoney between the two.
And then you also have a particularinterest in paying down a mortgage,
which is counterintuitive,sort of the popular thought.

(27:57):
Tell us about your thought of themortgage as a bond versus, acquiring
more bonds in your portfolio.
So when I bought my first home in1992, and in fact it was the only
house I ever bought where I took out amortgage, I remember getting that first
mortgage payment slip and they had alittle line to add extra principal.
And I remember adding 10 to it andthinking, hmm, this is interesting,

(28:20):
I can pay off this loan more quickly.
By adding a little bit ofextra principle every month.
As I thought about it more, I came torealize that paying down a mortgage is
like buying a bond, except at the time, mymortgage rate was Close to eight percent
and the yield on bonds was below thatSo in other words, I could earn a higher

(28:43):
return by paying down my mortgage than Icould by buying bonds So if i'm inclined
to buy bonds, why not pay down my mortgageinstead 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.

(29:03):
And the simple reason is this, alot of people at this point have
mortgages where they've lockedin rates of 3 percent or less.
And if you have a mortgage that's inwhich you're paying 3% or less, and
you can go out and you can buy bondspaying five right now, I wouldn't be
inclined to pay down that 3% mortgage.

(29:23):
Instead, I would, buy those 5% bonds,preferably in a retirement account where
you, you won't have to pay tax eachyear on the interest that you earn.
So the advice that I followed backin the 1990s and the early two
thousands is not necessarily the,the advice you should follow today.
Let's jump

(29:44):
into your book, how to think aboutmoney and one of the I'd kind of
like to park for a few moments onwhat you talked about in chapter
one, which is money and happiness.
And this book is, is truly more ofa money psychology kind of book.

(30:04):
And one of the quotes at thebeginning of the book is from William
Bernstein's mother that says moneydoesn't buy you happiness, but at
least you can suffer and comfort.
And you make the comment thatshe didn't get it quite right.
That money can buy happiness, butonly if you first save like mad,
then spend those savings with care.

(30:27):
So tell us
about that.
So, Becky, that is from the forward to thebook, which was written by Bill Bernstein.
But I do agree with Bill.
there are essentiallysort of three things.
The money can do for us.
And this goes the sort of definition ofwhat financial independence is all about.

(30:47):
So the number one thing that money cando for us is that it can allow us to
control how we use our time, right?
And that is when we have totalcontrol over our time that
that is financial independence.
And so, if you start saving earlyin life and you reach that point
where you no longer have to work.

(31:09):
That is what Bill is alluding to there.
Second, by saving diligently earlyin life, we can allow ourselves
to have special experiences,especially with friends and family.
But the third thing thatmoney can do for us.
And again, this sort of goes to not onlywhat Bill is talking about, but also what

(31:30):
Bill's mother is talking about is one ofthe attributes of having enough money is
that you don't have to worry about money.
And I know it sounds like an Anodd notion, but this is a crucial
part of financial happiness.
Simply not having to worry about money.
the parallel I alwayssuggest is with health.

(31:51):
It's only when you're sick that yourealize how great it is to feel healthy.
Similarly, it's only whenyou don't have money.
that you realize how great itis to have money in the bank.
The Consumer Financial Protection Bureaudid this study of well being in America,
and what they found was the number onedriver of people's sense of well being Is

(32:18):
there access to so called liquid assets?
What we're talking about ismoney sitting in the bank.
And if people had less than 250in the bank, they were miserable.
And if they managed toamass 5, 000 or more.
In the bank, they weresignificantly happier, had a
far greater sense of well being.

(32:40):
So in terms of happiness andwhat money can buy, simply having
money buys happiness because wedon't have to worry about it.
People talk a lot
about income and a level of incomeat which you realize happiness.
Back in the day, it was 75, 000.
Today, it might be 90, 000.

(33:03):
Is that really the way to think of it?
And what is the number today?
But is it better to think of itin 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 10years ago, has since been revisited

(33:24):
and that cap of 75, 000, which, asyou suggest, might be 100, 000 today
in the new research disappears.
It seems that happiness...
typically right, continues to rise withincome level, but not at the same rate.
So it takes more and moremoney to boost your happiness.
But on average, it does tendto rise along with income.

(33:47):
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 thanspending money you can't afford
to spend and then sitting aroundworrying about, how you're going to
pay the credit card bill or the loanor whatever it is you, you borrowed

(34:09):
in order to Buy this, this good.
So sitting on your luxury lot oryacht worrying about how you're
going to pay the loan on the yacht isnot 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 bothBecky and I have a boat story.

(34:33):
The very first episode of our showis a boat called YOLO, and I actually
had a boat about seven, eight yearsago that was named YOLO and that
embodied my philosophy on money.
And shortly thereafter, we turnedit around, sold the boat, downsized
the house and downsized our life.

(34:53):
Becky, what was your boat story?
Remind us a little bit, please.
Well,
my boat story actuallyis different than yours.
We, we truly, truly enjoyed our boat.
It was a big part of who we were andin 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 justsomething that we love to do.

(35:15):
And I wish I could go back and doit 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 questionthat I wanted to ask you Jonathan.
I mean, I think most of us the firstthought that comes to us is, well, of

(35:37):
course, if we had more money, we would behappier, but it doesn't always turn out
that way because sometimes we, we reallycan'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 amongpsychologists saying that we miss want,

(35:59):
we imagine that we want something andthen, 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, theremay be some initial thrill, but then,

(36:22):
the thrill fades all too quickly.
This is this notion of hedonicadaptation or the hedonic treadmill.
So yes, before we go out and we spendour dollars or we devote our time to
pursuing something that we think isgoing to make us happy, it's really
worth thinking hard about whetherthis is something that we truly want.
Now, truth be told, wemay still get it wrong.

(36:46):
But it's one of the reasons that Iencourage people to create wishlists,
create a wishlist of all the thingsthat you would like to do, or you
would like to buy, you would like toachieve with your life, put it up on
the refrigerator and then reflect on it.
And with the reflection, you maydiscover that something you truly
wanted is not necessarily somethingthat's going to make you happy.

(37:09):
But yeah, I think people spendtheir entire lives pursuing things
they think are going to make themhappy 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 abouthappiness, quote, we have twice as
much to spend as we had 42 years ago.

(37:30):
But our reported level of happiness isno 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

(37:54):
University of Southern California andDick actually sort of Discovered what's
now known as the Eastland Paradox backin 1974, he saw that, income in America
and elsewhere in the world had risendramatically and yet reported levels
of happiness had not increased, we hadmore money and yet we Felt no better.

(38:17):
And the reason that Dick identifiedis that we care not so much about
our absolute standard of living, butabout how we compare to other people.
And of course, what has happenedover time, even as, the typical
person earns more, is there are otherpeople who are earning even more.
And so our relative situationhas not necessarily changed.

(38:40):
And even that actually raises this issue,which is when you ask people whether
they're happy and go back to that studyabout income and happiness and how people
with more income tend to say they'rehappier, 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 economiccircumstances and we think about how

(39:00):
we're doing relative to Those around us.
And if we're doing relativelywell, it prompts us to say
we're happy, but it doesn'tnecessarily mean that we are happy.
It's just in that moment whenwe 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?

(39:21):
Well, there are a few thingsthat have been identified.
One of the things we've alreadytalked about, having this sense of
financial security, having enough.
So that we don't worry about howwe're going to pay the bills.
That can be a huge source of happiness.
As many people have now heard, we tendto be happy when we spend our money
on experiences rather than things.

(39:42):
if you want to get, more happinessout of your dollars, don't
go and buy the fancy new car.
Instead, take the family to Paris.
That, the research tells uswill tend to make us happy.
And then the third, talking about takingthe family somewhere, is having a robust
network of friends and family tends tobe associated not only with improved

(40:04):
health, but also with greater happiness.
So, yeah, if you want a playbook forhappiness, one, work on your network of
friends, two, spend on experiences ratherthan on possessions, and three, make sure
you manage your money in a way that youhave a sense of financial security and
don't have to worry about money too much.

(40:27):
Yeah,
it's nice to combine those.
We're now planning inanticipation of a big trip.
My wife turns 60 next year.
And one of our life goals was to gowith friends and family to Israel
and Jordan and experience that withfriends so you can combine these
things and I think there's actually acompounding involved there where you can,

(40:49):
exponentially increase your happinessby spending money intentionally on
those things that involve other peopleand 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.

(41:12):
And the anticipation of it makes us happy.
And I think
that's actually hit on a keyconcept, which is anticipation.
So, when we think about, thetrips that we're going to take
we think about a lot of trips.
we go on YouTube and, lookat videos of different places

(41:32):
that we might go and visit.
We have a list of placesthat we want to consider.
And the consequences is...
That before we spend a singledime, we've gone on all kinds of
trips in our head and, they aretotally free and hugely enjoyable.
And you don't even have to worryabout taking your passport with you.
Eventually, of course you dosettle on where you're going to go.

(41:54):
And when you settle on it, you shouldtry to settle on it months ahead of time.
So you have months of eager anticipation.
And in many cases, thatanticipation will turn out to
be better than the actual trip.
I mean, because, you could imagine allkinds of wonderful things about this
trip, but once you actually start on thetrip, there'll be things will go wrong.

(42:17):
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'tdo it, but you may discover in
retrospect that the anticipationwas the best part of the trip.
Jonathan, you say a couple ofthings in your book that really
intrigued me that and talking aboutwhat we should spend our money on.

(42:40):
And you say that spending money on others,along with the experiences that you just
mentioned, to sometimes delivers greaterhappiness than spending it on ourselves.
And then the second point.
Was we're often happier when we haveless choice not more choice and both
of those things seem counterintuitiveBut I know i've experienced,

(43:02):
the joy of spending money on
others Yeah, no, it certainly iscounterintuitive becky, but it is true.
I mean if you sit down and youDonate to a charity right after you
finish listening to this podcast.
I can almost guarantee that youwill feel the glow of having made

(43:24):
that donation for days to come.
Whereas if you took that same amountof money and you went on line and you
bought something for yourself, youwouldn't feel nearly as great a glow.
It's just being generous with others.
gives us a kick in a way that spendingon money on ourselves does not.

(43:44):
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, butbecause you will make yourself happier.
And then second, yes.
Less choice can make us happier.
If you have too much choice, thenyou're faced with great uncertainty.

(44:07):
You just don't know.
Should I pick this color for thebedroom or that color for the bedroom?
One of the things that you can dois to narrow your choice so that.
there is less to agonize over one ofthe ways I restrict choice for myself
is I only buy funds from Vanguard.

(44:27):
if I sat there and said, I can buyany stock I want, I can buy any mutual
fund I want, any exchange traded fundI 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 onlygoing to buy funds from Vanguard.
In fact, I'm only going tobuy index funds from Vanguard.

(44:48):
And I thereby limit my choice andsuddenly 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, 20samples on the walls for months.

(45:09):
It was driving me crazy.
And as you mentioned, it is importantto limit choice because when I
initially went down the rabbit hole ofinvesting, I made it very complicated.
I didn't know to make it simpleand the thousands of choices
that you have are overwhelming.
It leads to analysis paralysis.
And I too use just Vanguard.

(45:30):
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'mthe CFO of our family and my wife
has the big picture, but she's notas 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.

(45:52):
Otherwise you haven't taken care.
Of your future and your futureself and the future self of
your spouse or your partner.
So when we think about managing money, weall immediately think about investments
and our investment portfolio and so on.
But in fact, this is the thing that weshould spend the least amount of time on.

(46:13):
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 finda couple of simple funds, settle on
them, and then move on because thereare three other areas of our financial
life where we can spend time and geta much higher return for our money.

(46:34):
So when I think about thefinancial world, there's.
One, investing, then two, there's allthese 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 planningdocuments you should have?
These are areas of the financialworld that never get covered on

(46:56):
CNBC, the need for The people don'ttend to think about because they are
so distracted by the whiny demandsof the financial markets each day.
And yet, these are areas are financiallife where we can add enormous
amounts of value by spending time.
So that's the second areaof your financial life.
First is investing.

(47:16):
Then there's sort of All theseareas of personal finance.
Then there's this whole area of money andmeaning, how can we get, greater happiness
out of the dollars that we spend?
How can we structure our lifeso that we're more satisfied?
What do we mean by terms likeenough, the sort of stuff that
we've been talking about today inthe podcast, and then the fourth.

(47:39):
Area that we need to focuson is behavior change change.
How do we get ourselves to do thethings that we know are right?
I mean, we all know that we should, eatless exercise more, save more, trade less.
These are all things thatwe know are good for us.
And yet.
Every fiber of our being issaying, Oh, let's do another trade.

(48:02):
Oh, let's have another hamburger.
Oh, let's stay in bed ratherthan 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 spectrumof things, investing Broader
personal finance, money inmeaning and then behavior change.

(48:23):
And you say, where shouldyou focus your attention?
The first one, investing yourportfolio, whether you should add
a little bit of gold, whether youshould have 2 percent more or less
in stocks, forget all of that.
You're just wasting your time andyou're probably going to get it wrong.
So get a simple portfolio and thentake the time that you free up and
either go and do something fun withyour life or focus on these other

(48:45):
three areas of your financial lifewhere you really can add value.
I love that.
I love that.
And in fact, just recently Bill and I weretalking about having some future episodes
where we address the second part thatyou were talking about, the insurance,
the estate documents, all those things,because we spend our lifetime amassing our

(49:08):
wealth for our future, but yet sometimeswe ignore all these other pieces that
what I like to call the safety net.
these are the things that are going toprotect the wealth that we've created.
And, and I think thosethings are very important.
And then that last one abouthow to change our behavior.

(49:28):
So tell me, have you got some suggestionsabout how we change that behavior?
Behavior change is really tough.
I think one of the most effectivethings 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?

(49:50):
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 isthat you're going to lose 10 pounds,
suddenly you're on the hook becauseif you don't lose those 10 pounds,
you're going to feel awfully sheepish.
And the same thing goes for otherparts of your financial life.

(50:12):
No, if you've got a lot of creditcard debt, tell people, I've got 20,
000 in credit card debt and my goal.
A year from now is to tell youthat I've got this paid off.
And if you do that, you aremuch more likely to act.
So, yeah, I think the makingpublic commitments is a huge
deal and is very, very effective.

(50:34):
Actually, that's one of the thingsthat 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 ofinteraction in that regard.
And people find it very encouragingto watch other people's success.
So in your second chapter, let'smove on a little bit so we can

(50:56):
get a little bit down the road.
You talk about living a long life.
Talk us through some of thefinancial impacts of living a long
life, please.
Well, there are the obvious things, Billif you're going to live a long life,
then you should be open to things likedelaying social security, should be open

(51:16):
to things like annuitizing part of yourmoney, 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 fewways where you can get better than stock
inflation returns over the long haul.
But, it also goes the way weconduct the rest of our life.

(51:39):
one of the things that many folksdiscover is that they will need
more than one career in order toget through their working years.
And so, you want to build someflexibility into your financial life.
So that perhaps in your forties, whenyou hit that midlife crisis and you
realize that you are Sick of livingin a cubicle and you want to go off

(52:03):
and do something else that you havethe financial flexibility to do that.
So a long life and the prospect ofspending decades and decades in the
workforce leads to have a whole bunchof implications, not just about what to
do once you reach retirement, but alsowhat you do on the way to retirement.

(52:25):
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 canalso have the, we have the possibility
of spending decades in retirement.
And so, I mean, the planning for thatis something that is really important.

(52:45):
And in fact, in last week'sepisode with Mark Troutman, we
talked about some different.
Processes that you cango through for that.
And, I like your idea about reallythinking about when you're going to take
Social Security and whether or not youwant to annuitize part of your assets,
because that is, that's like buying andmy understanding, if I'm correct, that's

(53:08):
like almost buying another pension,because most people these days don't have
a pension and So if you annuitize some ofyour 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 arefull of benches that no one ever sits on.

(53:31):
We are distant relatives orhunter gatherer ancestors.
And you talk a lot about this andthe mindset that leads us down the
road of biases and how we handleour finances, but we are not built
for leisure or built to relax.
We talk a lot about how do you spendthe last two or three decades of your
life after you become financiallyfree, the soft sides of retirement.

(53:51):
We talked about with Fritz Gilbert,then the retirement manifesto.
So tell me a little bit about yourfocus on the hunter gatherer ancestors
and how they play a role in our
financial lives.
So let me, let me takethis in two parts, Bill.
So just to come back to retirement andour restlessness As we prepare financially

(54:17):
for retirement, and a propo of what Beckywas saying, we think about things like
delaying social security, and we thinkabout things like annuitizing, so we
prepare financially for retirement, wealso need to think about what it is that
we're going to do with all this time.
Because if you retire, And your notionis that, you're going to sit around and
relax for the final decades of your life.

(54:39):
I can almost guarantee youthat you will be miserable.
We are not built to sit on thecouch 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 arepassionate about, that you find

(55:00):
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 retirementwill be an unhappy retirement.
So everybody, even as they preparefinancially for retirement, should
be thinking about What it is thatI'm going to do in retirement.

(55:20):
That's going to get meout of bed in the morning.
And I think one of the thingsthat leads us to is the notion
that this distinction between workand retirement is sort of absurd.
the idea that we work like dogsfor 40 years and then we stop
and we do nothing for the finaldecades of our life is ridiculous.
what I hope will evolve towardsis something where people

(55:44):
ease out of the workforce.
they do things that may pay them, maynot pay them, but where they continue
to have things to do that they feelare important and that are important
to society, at least a few days eachweek, we, we can't afford to have
a huge portions of the populationsitting down around doing nothing.

(56:06):
And it's not good for them tobe sitting around doing nothing.
And, thanks to progress in technology andso 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 muchmore affordable, even as it gives them a
sense of purpose for those final decades.
So, yeah, this distinction betweenwork and retirement needs to disappear.

(56:30):
And one of the reasons is becauseof this restlessness that we have.
that we got from our hunter gathererancestors, this sense that, we're never
satisfied, we never reach the point wherewe say, I've done enough, I have enough.
we will never reach the pointwhere we say to ourselves, I've
done enough, and I have enough.
We will always, in somesense, want to have more.

(56:52):
What we want to do is be thoughtful.
In the ways that we want more, we wantmore experiences rather than possessions.
We want to continue to work more,but we want to do stuff that
is important to us and that wethink is important to the world.
Another thing you talk about inthis chapter, and we had talked
earlier with Jordan Grumet in episode22 about his book, Taking Stock.

(57:16):
You highlight a few exercises that aresimilar 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 theyare and how important they are to

(57:37):
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 thepurpose of the kinder questions, there are
three of them is to get people to thinkabout, 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.

(57:59):
You're going to be in good health.
And what was, what is it whereyou would change about your life?
If you knew that that was going to bea case, you only had five years left,
but you would be up until the end.
And then I think one of the otherquestions is, you have 24 hours to live
when you look back what it is that youwish you had done, but what you haven't
done and the goal with these variousquestions is to get you to think about

(58:22):
what it is that you're doing now.
That really is not important to youis not meaningful to you and to get
you to focus on the things that aremeaningful to you and make sure that
you focus on those through the restof your life that you don't get to
the end of your life and have regrets.
And I think that'sthat's hugely important.

(58:43):
Of course, one of the big issues iswe don't know how much time we have.
And there are all too many instancesthat I hear of people who feel
like they're in great health.
And the next day they discoverthat, time is limited.
So we need to think about it now.
About what it is that isimportant to us and what is it

(59:05):
going to be important to us.
It's going to be more than just gettingthe next promotion or next next pay raise.
And it's about thinking about whatwe're passionate about, what it is
that we would find the filling andgive our lives a sense of purpose.
And,
Jonathan one of the things that that Ihave discovered in retirement is that I

(59:28):
definitely want to have purpose and tohave 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 worldchanging big event that sometimes it's,
your purpose can be, I want to be thebest grandmother I can possibly be.

(59:50):
It could be something closer to home.
Now that doesn't mean don'tstrive for something big, but
what's right for one person maybe different for another person.
And also, just trying things.
I have discovered that I have received somuch joy from trying new things that I've
never had the opportunity to do before.

(01:00:11):
at the beginning, Imentioned riding an e bike.
Well, it took a little,it took a little practice.
I'm a little bit better at it now thatwhen I first got on it, I about crashed
and burned on, on one, U turn up the hill.
But it's something that'slike, Hey, I accomplished that
I was able to, to do that.
And there's other things I've triedthat it's like, eh, that, that

(01:00:33):
one didn't work for me, but I wantpeople to know they've got the
permission to try brand new things.
Even in retirement, even in those lateryears, because like you said, some of
us have decades to spend in retirement.
And I think it's a really importantpoint, Becky not only to, to try new
things, but also to have a long listof new things that you want to try,

(01:00:54):
because you may discover that thething that you think is going to make
your retirement fulfilling turns outto be, eh, just not the thing for you.
So to the extent that you have a long sortof wish list of potentially purposeful
activities for retirement, the betteroff you're going to be because some
of them are not going to work for you.

(01:01:16):
And one of the things that Ihad always thought that I would
love to do is teach college.
And so, in the last nine years, Iactually taught at a small private
college as an adjunct professor.
I taught personal financeI enjoy public speaking.

(01:01:36):
I, love to talk about personalfinance and I have to tell you,
it just didn't work for me.
I thought it was going tobe this great experience.
I thought that, I would just, Iwould be a natural teacher and so on.
And what I really felt more thananything else was that, I just, I
wasn't as good at this as I thought.
I didn't feel like I was making enoughof a difference in the kids lives.

(01:02:00):
And I think after, Writing aboutpersonal finance and, reaching tens
of thousands of people with any onearticle that standing up in front of
a room of 15 kids and talking aboutcompounding didn't quite cut it.
But I, unless, until I tried it.
you didn't know.
I, I would've known that.

(01:02:21):
Right.
And so I'm glad I didn't decideto, 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 notsomething that I would do again.
No.
And, and that's, that's my pointis I don't think we should look
at these things as failures.

(01:02:42):
You try something and if itdoesn't work, that's fine.
You move on to the next thing.
So, Jonathan, in chapter three youtalk about rewiring your brain.
And I don't know if this conversationwe've just been having is part
of that, but tell us what youmean by that we need to rewire
our brains.
So one of the things that weknow, thanks to all the work

(01:03:06):
on behavioral finance is that
we make tons of financial mistakes, alot of people are aware of, some of these
behavioral finance errors, we tend toengage in home bias, we, we invest too
much in our home country and companiesthat we know in our employer's stock

(01:03:27):
and so on, we tend to be loss averse.
This is the reason why, we tend to Tend toshare away from stocks is why we tend to
freak out when the stock market goes down.
There are all of these behavioralfinance mistakes that we make
and we need to understandourselves so that we don't make.

(01:03:48):
A financial mistake that willend up imploding our future
because remember, we only get oneshot at this financial journey.
We only get one chance of makingit from here to retirement.
And you don't want to make the big errorthat's going to totally derail you.
And I would say that in thinking aboutbehavioral finance and the need to rewire

(01:04:11):
our brains the number one thing thatwe need to do is to have the ability
to delay gratification to give somethought to our future self, not to be
so focused on today, coming back toour hunter gatherer brains, our hunter
gatherers did not have to fund 401k plans.
They did not have to worryabout saving for retirement.

(01:04:32):
This is for us an unnatural act.
thanks to our hunter gathererbrains, our thought is let's consume
as much as possible today becausewho the heck knows where the food
is going to be available tomorrow.
And so somehow we need to overcomeThis focus on today and to show some

(01:04:55):
care and concern for our future self.
And that's why things like automaticcontributions to a 401k plan are
so important because it helpsto overcome this behavioral bias
towards consuming everything today.
The other one that I would say we needto try to overcome is an affliction

(01:05:18):
that's it's mostly found upon amongthe male portion of the population,
but it, women can also sufferfrom it, which is overconfidence.
We tend to be way too confidentin our financial abilities and
particularly when it comes to pickinginvestments and forecasting the
markets direction and so on and so on.
There's a reason why the websitethat I launched is called

(01:05:40):
humble dollar because humility.
When faced with all the financialdecisions out there is a great virtue
and those who are too confident will, inthe end, make a financial mistake that
will badly hurt them because in theiroverconfidence, not only will they be
convinced that they are right, but theywill make a way too large investment bet.

(01:06:06):
One of the other things you talkabout that I think is important is,
and can you explain it to us, wemust 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 buymutual funds, they just seem like,
notations on the computer screen.

(01:06:27):
They're just ticker symbols.
They seem like ephemeral thingsthat just bounce up and down.
Every day, the financial markets areopen, but in truth, when we invest in
stocks, we are investing in real companiesthat produce real goods and services,
the benefit from a growing economy.
And as a consequence,they have intrinsic value.

(01:06:50):
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 themfor what they are, which is real companies
with produce real goods and services thathave a fundamental value that have an
intrinsic value, we're less likely to Lookat a market that's down 20 or 30 percent

(01:07:12):
and say, Oh my God, this is going to zero.
I've got to get out nowbefore I lose everything.
I go back to the pandemic and whathappened to the stock market, both
the drop and subsequent rebound.
And I think it's worththinking about that time.
I mean, it was, it was not a great time.

(01:07:32):
We, we were all socially isolated.
There was a lot of fear.
But the middle of that, in manyways, it was a very optimistic event,
particularly from an economic pointof view, because faced with this
disruption of the world economy,everything was turned upside down.

(01:07:52):
And yet somehow people found a wayto go on doing business restaurants,
said, okay, if people won't sitshoulder 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.

(01:08:16):
The speed with whicha 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 monthsbefore we had the first indication
that the vaccine would be created?
It was astonishing, every day.
8 billion people around the worldwake up and say, how am I going

(01:08:38):
to make my life better today?
What is it that I'm going to do to makethings 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

(01:09:00):
the financial markets and all of thisenergy and this entrepreneurship and this
innovation gets reflected in the stockmarket 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 andyou harness the energy of everybody else
and you benefit from their hard work.

(01:09:22):
That's fantastic advice again.
And the pandemic is a goodplace to talk about, resilience.
And that's one of the things,our late starter community.
Really has is resilience.
They may have experienced lifeand not paid attention to their
finances, but when they do wakeup, they find a way to get there.
It's incredible.
And our audience really does.

(01:09:43):
Becky did her story is incredible.
She started with a net worth ofzero at 50 and by 63, they were
retired with a seven figure portfolioand are living their best lives.
She is an example of the fact thatit is possible to start late and
still get where you want to gowith a comfortable financial life.
And then, with regards to thinkingbig, in chapter four, You talk

(01:10:06):
about human capital a lot.
I'd like you to describe what thatis and how human capital plays
a role in our financial lives.
So for most of us, particularly earlyin our adult life, for most of us, our
most valuable asset is our human capital.
It's our income earning ability.

(01:10:27):
And our human capital should reallydrive so much of our financial behavior.
So you think about it, you For40 years, we'll earn, a regular
or somewhat irregular paycheck.
I mean, what does that meanfor your financial life?
Well, first of all, your humancapital is your source of savings.
The goal here is to take alittle piece of every paycheck

(01:10:51):
and put it away for the future.
So at some point.
What we call retirement, you canlive without your human capital,
without your income earning ability.
Second, our human capital drivesour ability to take on debt.
it is entirely rational for peoplein their 20s and early 30s to take on
college loans and to take on big mortgagesbecause they know that they have decades

(01:11:14):
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 stayhealthy, so we need health insurance.
We need to make sure that we can stillpay for our living expenses if we become

(01:11:38):
disabled, so we need disability insurance.
We need to make sure our family isokay 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 yourfinancial life, you should put your
human capital at the center of it.
And, another key thought here is thatwhen you think about your human capital,

(01:12:03):
for most of us, our human capital isnot 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 inthe stock market during our working years.
We don't need income from our investments.

(01:12:24):
What we need is growth and the stockmarket is going to provide that.
But as we approach retirement andthe disappearance of that paycheck
from our human capital, That's thereason we need to start moving towards
bonds so that we have the interestfrom bonds to replace the paycheck we
used to get from our human capital.

(01:12:44):
One thing I think I like youtalk about in this chapter is
how to look at our paycheck.
And I did not learn topartition my first paycheck.
It was a means to an end ofspending and enjoying life.
I didn't start with my future self.

(01:13:06):
I didn't start with...
Saving first, saving 10to 20 percent early on.
It was a paycheck to paycheck lifestyle.
Do you have a particular recommendation ashow we look at partitioning our paycheck?
I think
that the thing that I would say to peopleearly on is that they should, to the

(01:13:34):
extent possible, focus on the fact that.
20 or 30 years down the road, they are notgoing to find the work world as exciting
as they are in their early twenties.
They will reach a point where they simplydon't want to do what they're doing today.

(01:13:55):
And they want to have the financialfreedom to do something else.
And if they want that financialfreedom, 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 whatyou might call retirement, but what

(01:14:16):
you're really doing is you're buyingyourself future financial freedom.
In the near term, what you're buyingis some freedom from financial worry.
But 20 or 30 years down the road, you'rebuying yourself freedom from your cubicle,
freedom to spend your time as you wish.
And so even though saving for the futureseems like an absurd thing to do in your

(01:14:42):
20s when there's so many, shiny bubblesout there that you want to buy today.
if you want that freedom downthe road, it's worth making
a little bit of a sacrifice
now.
Yeah.
You talk about in your book and Iquote, we might strive to buy a home
in our thirties and our forties.
Our focus is often switches to the kidseducation with these two goals behind us.

(01:15:04):
We finally turn our attention toretirement, but at that point we might
be in our fifties and it is too latebecause 10 to 15 years is simply not
enough time to accumulate the moneyneeded for a comfortable retirement.
Becky's story is counterintuitive to that.
Do you still feel this way?
Cause our audience wants tofeel that it's not too late.
And then as a second question,why do we wake up late?

(01:15:28):
What is it about 50?
There's been a lot of discussion here.
And then in my mind, we have catch upcontributions starting at 50, but why
aren't they earlier and why aren't they
more?
It's in terms of Becky's story, Ifyou have a high enough income, yeah,
you can reach financial independencevery quickly if you get your costs

(01:15:50):
down low enough, but most people.
Are not going to have, the abilityto get the separation between their
income on the one hand and theirexpenses on the other hand, such that
they can reach financial freedom ina decade by, by saving like crazy.
It's just, it's too, it's tooshort a period unless your income

(01:16:11):
is super, super high and yourexpenses are super, super low.
So.
If you can starting, earlyis the better way to go.
What if you are age 50 and youhaven't saved for a time today?
I would say that, the, theprescription beyond, yes, you need

(01:16:33):
to save like crazy starting today.
is to be prepared todo a couple of things.
One is delaying social security.
Age 70 makes total sense unless you'rein ill health or both you and your
spouse are in health ill health toyou should get yourself comfortable
with this notion that you're goingto annuitize more of your income,

(01:16:54):
more of your savings upon retirement.
forget this notion about, oh, Idon't want to annuitize because I
want to leave the money to the kids.
If you're starting late You wanta decent retirement with a lot of
income, you need to seriously thinkabout annuitizing a significant
part of the savings that you have.
Third, I think that working intoretirement, not necessarily doing

(01:17:17):
what you're currently doing.
But doing something that you love thatalso brings in a little bit of money that
can also make the retirement numbers work.
I don't know why we have thisnotion that people should quit
the workforce at 60 or 65 and donothing for the rest of their life.
I think it's a prescriptionfor unhappiness.

(01:17:38):
So continue to do something purposefuland something purposeful that
comes with a little bit of money.
Why not?
That's another way for late startersto make the numbers work for them.
Fourth, if you have highexpenses and you're planning to
downsize, why not downsize now?
Why not get your expenses lower?

(01:17:59):
not, that wouldn't simplymake it easier to save.
You may actually find that youbuy yourself happiness by having
a simpler life, a smaller homewhere 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 worryingabout all this nonsense.

(01:18:21):
And so I think maybe the 4thor 5th questions, or maybe it
was your 5th question, Bill.
Was about why do we leave it so late?
I think it's partlyabout financial literacy.
But I think it's also about societalattitudes and what, we are told

(01:18:41):
is the good life as opposed towhat 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 isdriving a luxury German sedan.
if you think a good life is livingin a house where, there are three
or four empty rooms that nobody everuses, then you, you are going to end

(01:19:06):
up spending most of your paycheck.
you need to think for yourself andthink what is it that matters not to
the neighbors, not to the marketers ofluxury products, what matters to you,
and then spend the money on things thatmatter to you and toss out all the rest.
And then finally, We are wired aswe've already talked about, to live for

(01:19:31):
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 huntergatherer instincts to focus on the long

(01:19:53):
term and think about our future self.
And that If you don't do those thingsis why you went, you don't Start
thinking about retirement until age 50
in
chapter 5 you talk about to win Don'tlose and I think this is a big thing for
our more mature audience because we don'thave The decades in front of us to, to

(01:20:19):
let our investments compound, which is thesimple way to get where you want to go.
So what do we need to focuson so that we don't lose?
Because our audiences is, notonly 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,

(01:20:41):
when it comes to retirement savings,the temptation is to roll the dice.
The temptation is to make big investmentbets to try to make up for lost time.
And more often than not, that'sgoing to come back to haunt you.
you are not going to pick the next Tesla.
you are not going to discoverthe next hot cryptocurrency.

(01:21:03):
These things are not going to happen.
Yeah, you cannot at that late stageafford to take a lot of risks because
more often than not, those risksare going to come back to haunt you.
So at that point, you needto be very Cognizant of risk.
And in fact, as an investor, remember,you cannot guarantee that you're going to

(01:21:26):
get good returns, but you can manage risk.
we, as investors should be muchmore focused on managing risk
rather than pursuing returns.
And so.
If you've got a short runway toretirement I would limit risk,
which means diversify broadly.
Yes.

(01:21:46):
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 towardretirement because anything else.
Is more likely to put you furtherbehind and get you there quicker.

(01:22:07):
So much of your book is about mindset.
And I think mindset is 80%.
You talk about the math being the lastthing in some ways you want to talk about.
Because you don't want to waste yourtime being anything other than simple.
This book is pivotal for ourlate starter audience in getting
their minds wrapped around.
How do I do this?

(01:22:27):
So that I'm happy.
focus on happiness in some waysis so much more important than
a focus on the math of finance.
We need...
To shift our mindsets a little bitso that you use our finances as a
tool to reach the time freedom and behappy along the way, but also enjoy

(01:22:50):
the happiness through retirement.
I love this book.
I also loved your book, My Money Journey.
There's actually a story inthere from a late starter that I
would encourage people to read.
This book is about 30 people thatdid it in so many different ways.
Personal finance is personal, and thereare just as many ways as there are

(01:23:11):
people in our community to get this done.
Yes, there are some commonalities aboutthe methods, but, the challenges we face.
And the way to overcome those challengeswith accountability, partners,
encouragement, and tangible action steps.
You've given us both this podcastis about mindset, money, and life.

(01:23:32):
I think we've touched on all topics and Ithank 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 basicquestions that I think our audiences
love and we want to know from you,other than your material to increase

(01:23:55):
their knowledge, what other resourceswould 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 twokey books that I point people to.
What I think You need in order to bea knowledgeable investor and a Vester

(01:24:21):
who, confronts the financial worldwith confidence is to read widely.
I'd be particularly early on, readanything you get your hands on just so
that you have some sense of the, forthe financial world, you don't have
to act on any of it, but just to readit, to start to understand, what is.
The truth and what is nonsense.

(01:24:43):
I mean, I would almost encourage peopleto turn on CNBC just to laugh at the
predictions that are being made frompeople have no clue what the future holds.
They talk with such confidenceand yet tomorrow they'll be
telling a different story.
I'm actually a big fan of Twitter.
I get a lot of my news andfinancial information from Twitter.

(01:25:04):
There are a lot of people onTwitter who are worth following,
who can give you some Interestinginsights on the financial world.
But again, to be a confident managerof your own money, you need not just
experience, but you also need to readwidely, read everything, not necessarily
act, but just have that confidencethat comes from having read around the

(01:25:28):
financial world and started to graspwhat is sensible and what's nonsense.
Yeah, I would refer our audience actuallyfor a couple of reasons to our website.
You mentioned earlier charityand the happiness it gives.
We don't monetize this podcast, butwe have listed many charities on
our website that we would encouragepeople to donate to if they want to

(01:25:49):
support the podcast, that's number one.
Number two, you mentioned a plethora ofresources and we have that on our website
with books, podcasts, blogs that we wouldpoint everybody to, find your space.
Find the method that worksfor you, whether it be videos,
books, blogs, or podcasts.
I mean, I have this big, huge library.

(01:26:09):
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 directpeople towards them.
Tell us where people can reachyou if they want to reach out.
And learn more from your resources.
The number one thing I spend my daysdoing, way too much of my day, in fact,

(01:26:34):
is running this website, HumbleDollar.
com.
I've been running it since year end 2016.
I'm putting up one or twonew articles every day.
HumbleDollar is a community of people.
who are
heavily focused on retirement, eithernear retirement or in retirement.

(01:26:56):
And what we try to do is talkabout 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 financialexperts, but they do have stories to tell.
As I say to my writers all thetime, you may not be an expert on

(01:27:20):
the financial world, but you are anexpert on your own financial life.
And so if you talk about things thathave happened to you personally, you
can talk about them with authority.
And so a lot of the articles onHumble Dollar are people talking
about their own financial experiencesand what they learned from them.
Yeah, we
actually do the same thing onour website, believe it or not.

(01:27:40):
I learned that from you.
We encourage folks in ourcommunities, send us guest blogs.
It gives them both...
The chance to process their mistakes andtell 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 yourresources were immensely helpful to me

(01:28:02):
and we hope we're helping our audience.
Jonathan, it's been apleasure talking to you today.
Thank you for spending your time with us.
I think you provided immense valueto our audience and I look forward
to seeing you at the Bogleheadsconference this fall in October.
I'll see you there, Bill.
And I enjoyed talking to you, Becky.
So thank you for your time.

(01:28:22):
Thank you.
Enjoyed
it.

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