Bogleheads® on Investing Podcast 003 – Jonathan Clements, host Rick Ferri (audio only)

00:00:00.000 | >> Welcome, everyone, to the third episode of "Bogleheads on Investing."

00:00:16.000 | In this episode, we'll be speaking with Jonathan Clements, founder and editor of Humble Dollar.

00:00:23.960 | He's also the author of several investing books and a former Wall Street Journal personal

00:00:28.760 | financial columnist.

00:00:34.800 | Hi, everyone.

00:00:40.880 | My name is Rick Ferry, and I'm the host of "Bogleheads on Investing."

00:00:44.460 | This program is brought to you by the John C. Bogle Center for Financial Literacy, a

00:00:49.400 | 501(c)(3) corporation.

00:00:51.400 | Today, my special guest is Jonathan Clements, the founder and editor of Humble Dollar.

00:00:58.480 | He's also the author of eight personal finance books, including "How to Think About Money"

00:01:04.320 | and his newest book, "From Here to Financial Happiness."

00:01:08.440 | Jonathan also sits on the advisory board and investment committee of Creative Planning,

00:01:14.440 | one of the country's largest independent financial advisors.

00:01:18.600 | Jonathan was born in London, England and graduated from Cambridge University before coming to

00:01:23.760 | New York in 1986.

00:01:26.520 | His first job was covering mutual funds for Forbes magazine, and then he went to work

00:01:30.680 | for the Wall Street Journal.

00:01:32.920 | He worked at the Journal for almost 20 years, wrote over 1,000 columns for the Journal and

00:01:38.760 | the Wall Street Journal Sunday edition.

00:01:40.960 | He also worked for six years at Citigroup, where he was the director of financial education

00:01:45.440 | for city personal wealth management, before returning to the Journal for an additional

00:01:49.680 | 15-month stint as a columnist.

00:01:51.960 | Today, I'll be talking with Jonathan about his career and his new book, "From Here to

00:01:58.480 | Financial Happiness," plus a lot of other interesting topics that we'll get into right

00:02:03.880 | now.

00:02:05.760 | Let me introduce Jonathan Clements.

00:02:09.120 | Welcome Jonathan.

00:02:10.120 | Rick, thanks so much for having me on your show.

00:02:12.240 | I really appreciate it.

00:02:13.640 | Jonathan, you've got an interesting background.

00:02:16.080 | You've worked at some of the big financial media companies, including Forbes and the

00:02:24.120 | Wall Street Journal for 20 years.

00:02:26.700 | It didn't take you long, it doesn't seem, that you immediately started looking at what

00:02:32.280 | makes performance of mutual funds tick and what makes the performance of accounts tick.

00:02:40.240 | It seemed like you caught on right away in your writing to this idea that the bogleheads

00:02:46.960 | believe in low fees and indexing.

00:02:50.820 | Can you talk about when you first started as a financial writer, what that process was

00:02:57.360 | that got you to that point so quickly?

00:02:59.240 | As you can probably tell from the funny accent, Rick, I wasn't born in the U.S., I was born

00:03:05.640 | in England, and I had most of my education there, and when I got out of university, I

00:03:11.520 | started working in the U.K., and I very quickly discovered that the standard of living for

00:03:16.720 | financial journalists, particularly young financial journalists in London, totally sucked.

00:03:22.840 | And so I decided that I wanted an upgrade, so I moved to New York, and I got a job as

00:03:31.080 | a fact-checker at Forbes magazine, which was the lowest form of life.

00:03:35.600 | And the goal of the fact-checker was to get yourself promoted, and the way I got myself

00:03:39.480 | promoted was to start writing about mutual funds, and after almost two years at Forbes,

00:03:44.480 | I was promoted to a staff writer and given the job of writing for every issue about mutual

00:03:49.480 | funds.

00:03:50.840 | And the standard way at Forbes to write about funds was to do these fund manager profiles.

00:03:56.160 | Fly to Boston, fly out to Los Angeles, sit down with a money manager, have him or her

00:04:02.640 | describe their investment philosophy, and usually they'd give you three or four or five

00:04:07.320 | stock picks that you would describe in that particular article.

00:04:11.040 | And what quickly became apparent to me was that, you know, most of these guys who I considered

00:04:16.960 | to be top fund managers, because that's why I was interviewing them, more often than not,

00:04:23.640 | their moment of glory faded.

00:04:25.600 | The past performance was definitely no guide to future results.

00:04:29.880 | I got hired away by the Wall Street Journal in early 1990 to write about mutual funds

00:04:34.600 | for them, and I continue to see the same phenomenon.

00:04:38.200 | So you went there and you actually met with these top money managers, these top mutual

00:04:44.800 | fund managers, and you were looking at the performance and having this discussion, and

00:04:50.760 | you were realizing then, very soon after that, that it was then their performance started

00:04:55.880 | to go down.

00:04:57.760 | You said their glory faded.

00:05:00.400 | In the years afterwards, these fund managers who had been at the top of their game when

00:05:06.720 | I spoke to them, often the reason I was interviewing them was because they had been identified

00:05:12.440 | as being top managers and what was called the Forbes Honor Roll, you know, they had

00:05:16.840 | good performance in up markets and down markets, they seemed like consistent winners.

00:05:21.720 | More often than not, you know, that hot performance didn't last, and we know that, right?

00:05:28.200 | We know past performance is no guide to future results, and so the question arises, well,

00:05:33.420 | what is a guide to future results?

00:05:36.160 | And the research has clearly shown, the best predictor of future performance isn't past

00:05:40.800 | performance, the best predictor of future performance is low cost.

00:05:44.400 | If you want a manager who's really brilliant, you want to find the manager who is smart

00:05:48.400 | enough to get hired by a fund company with low annual expenses, because that's what's

00:05:52.920 | going to give them a performance edge.

00:05:54.960 | I want to go back though to that one point about their glory faded.

00:05:59.280 | So you're seeing this time and time again where the glory faded of the top managers

00:06:02.740 | that you went out to interview.

00:06:04.320 | You must, at some point in your mind, did you come up with reasons why the glory faded?

00:06:11.600 | I mean, what was it that you found that caused the outperforming managers to underperform

00:06:21.180 | going forward?

00:06:22.180 | Was there something about just the dynamics of the mutual fund industry as a whole?

00:06:28.680 | Well, I think a couple of things go on.

00:06:31.440 | Obviously, we have this issue with successful managers tend to attract assets, and the more

00:06:36.720 | assets a manager is overseeing, the harder it is for him or her to continue the good

00:06:41.560 | performance.

00:06:42.560 | But also, the reason that managers tend to stand out is because they are, in a sense,

00:06:50.400 | cheating within their style box.

00:06:52.680 | If you have a good period for growth stocks, the value managers that look good are those

00:06:59.080 | who sneak a few growth stocks into their portfolio.

00:07:02.680 | So you have this value manager that's done well in a period for growth stocks.

00:07:06.720 | You say, "Okay, this is a guy who really knows his stuff.

00:07:10.080 | He's been able to pick superior stocks and shine in a period when his investment style

00:07:15.280 | is out of favor."

00:07:16.280 | But of course, what happens when styles rotate and when value stocks come into favor, the

00:07:22.240 | guy who's been cheating, who's been sneaking some growth stocks into his portfolio suddenly

00:07:27.080 | finds it hard to keep up with the other value managers because he's not a true value investor.

00:07:33.560 | I saw that repeatedly in the managers that I looked at.

00:07:37.080 | I'd be trying to benchmark funds and compare them to their peers, and a particular fund

00:07:42.120 | would look good even if his or her style was out of favor.

00:07:46.440 | But then when the style returned to favor, they were out of step because they owned the

00:07:51.080 | wrong sort of portfolios.

00:07:52.440 | I think a lot of that cheating goes on, and that's a lot of the reason why we think managers

00:07:58.000 | are good, and it just turns out they weren't true to their mandate.

00:08:02.880 | So at some point, you came to the epiphany or the "aha" moment that, "Gee, maybe forget

00:08:07.960 | about active management and we're just going to use index funds."

00:08:10.840 | When did that occur?

00:08:11.840 | It would have been in the early 1990s.

00:08:14.360 | At that point, there weren't a whole lot of index funds out there, but those that were

00:08:20.480 | out there were regularly performing better than the typical actively managed fund that

00:08:27.360 | they were competing against.

00:08:28.360 | It wasn't just that I started writing about this stuff, it was also that I started investing

00:08:34.320 | my money in these funds.

00:08:36.080 | I became a big believer in indexing, particularly in index funds that were offered by Vanguard.

00:08:43.280 | The good performance of those funds, coupled with me personally benefiting, was what helped

00:08:47.960 | to cement my view that purchasing actively managed funds and trying to actively manage

00:08:52.600 | a portfolio is really a fool's errand.

00:08:54.560 | In the early '90s, you went to the Wall Street Journal and you picked up the "Getting Going"

00:09:01.120 | column.

00:09:02.120 | In 1994, the Wall Street Journal, which at the time had no columnists outside of the

00:09:07.840 | editorial page, the managing editor announced that he was willing to experiment with columns

00:09:14.200 | within the news pages, and being an uppity 31-year-old, raised my hand and said, "A column,

00:09:24.480 | I'd like to have one of those."

00:09:26.840 | Shockingly, really, the journal gave me a column at H31, so in 1994, towards the end

00:09:32.080 | of the year, I started writing this column that was dubbed "Getting Going," and I did

00:09:37.640 | it for another 13 and a half years, writing that column both for the regular Wall Street

00:09:44.000 | Journal and also once it was launched for Wall Street Journal Sunday.

00:09:47.320 | >>STEVE: The first time you actually wrote about index funds in the "Getting Going" column,

00:09:52.000 | do you remember approximately what year that was?

00:09:54.720 | >>RICK: It was part of the "Getting Going" philosophy from the start.

00:09:58.440 | I would have been writing about index funds even before the "Getting Going" column was

00:10:01.880 | launched in 1994, but precisely when, I couldn't tell you, Rick.

00:10:07.240 | >>STEVE: Did you get any blowback from the journal?

00:10:11.320 | Because after all, there's a lot of advertisers in the journal, I mean, these mutual fund

00:10:15.200 | companies advertise in the Wall Street Journal, and when you start talking about indexing

00:10:20.520 | and low fees and how that is the reason why index funds outperform most active managers,

00:10:27.520 | and you started talking about active managers, did you get a talking-to by anyone, or were

00:10:31.760 | you allowed to pretty much say what you wanted?

00:10:33.680 | >>RICK: I got to tell you, Rick, back in the 1990s, and indeed throughout my period of

00:10:40.560 | the journal, from a point of view of advertisers being allowed to influence the copy that appeared

00:10:47.120 | in the newspages, it was verboten.

00:10:50.520 | In fact, advertising reps for the Wall Street Journal could be fired for calling up a reporter.

00:10:57.040 | On a few occasions, I was called by one of the advertising guys and asked to speak at

00:11:03.840 | some particular event, and whenever they called, they only called after they'd cleared with

00:11:07.880 | their boss, and they called very tentatively.

00:11:10.800 | It was really, it was a magnificent organization from that point of view.

00:11:13.520 | I can't swear that it's like that today, but back then, there was a church and state separation

00:11:19.080 | between the news department and the advertising department.

00:11:21.760 | >>STEVE: But I know that I've spoken with a lot of other journalists over my time, and

00:11:26.280 | it's not that way at a lot of publications.

00:11:29.920 | That Chinese wall, if you will, has got a lot of holes in it at a lot of companies.

00:11:35.080 | >>RICK: Yeah, I can believe that, and there were occasions when executives would come

00:11:40.280 | in and complain about my coverage.

00:11:42.360 | I remember one particular meeting, there were some guy who came in from Merrill Lynch to

00:11:49.280 | complain about my commentary on actually managed funds, and there was a big meeting in the

00:11:59.480 | main news conference room on the ninth floor of the journal building, and I was down there,

00:12:04.540 | and some other people were down there, and the managing editor was down there.

00:12:08.600 | The guy from Merrill Lynch spoke his piece, and then I responded, and as we walked out

00:12:13.680 | after the meeting, the managing editor sidled up to me, and he whispered in my ear, "He

00:12:18.120 | didn't lay a punch on you."

00:12:22.560 | That was pretty much the attitude of the journal.

00:12:24.760 | They were going to, unless you were making factual errors, they were going to defend

00:12:28.880 | you to the hilt, but again, I can't swear that it's that way today.

00:12:32.080 | >>STEVE: I understand.

00:12:33.080 | Thank you.

00:12:34.080 | It wasn't only mutual funds, the way I met you, where you were taking investment advisors

00:12:38.800 | to task as well, and that's how you and I first talked, I think it was in 2001, because

00:12:45.160 | I had started the company and I was charging low advisory fees, and I think you were really

00:12:51.500 | onto this idea of what is that 1% AUM fee buying you, and she caught onto that very

00:12:58.800 | quickly as well.

00:12:59.800 | >>GREGORY: Well, generally, I would say that the world of investing has become much friendlier

00:13:06.320 | to the average investor over the course of my career.

00:13:10.800 | You think about all the things that have happened.

00:13:12.800 | We've seen the collapse of brokerage commissions.

00:13:16.000 | We've seen tighter bid-ask spreads.

00:13:18.560 | We've seen this proliferation of low-cost index funds, and we've seen a total change

00:13:27.240 | in the advisory model so that while there are still financial advisors out there who

00:13:31.800 | are charging 1% and simply giving you a bunch of expensive mutual funds, that is less and

00:13:37.920 | less the case.

00:13:38.920 | If people are paying 1%, they're often getting a very low-cost portfolio, and they're getting

00:13:44.920 | help with their broader financial life, so they're getting help not just with the choice

00:13:49.200 | of stocks and bonds and which particular funds they're going to buy and so on, but they're

00:13:53.920 | also getting help with a financial plan, they're getting help with their estate plan, help

00:13:58.160 | with tax management, help with insurance.

00:14:00.920 | Today, for that 1%, if you're with the right fee-only financial advisor, you're getting

00:14:07.280 | much more than you would have got 20 years ago, and of course, as we know, if all you

00:14:12.320 | want is portfolio management, you can go out and you can get portfolio management for 25

00:14:18.240 | basis points these days, and you'll get a portfolio for that 25 basis points that is

00:14:22.480 | as good as the portfolio you would have got 20 years ago, probably better, in fact, and

00:14:26.960 | be paying 1% back then.

00:14:28.560 | >> And there are a lot of other models that have come out, too, like flat-fee portfolio

00:14:34.840 | models, subscription-based organizations like XY Planning, and then hourly-fee advisors

00:14:43.640 | as well, so it seems like it's a much more diverse way in which you can pay for this

00:14:48.480 | advice rather than just AUM.

00:14:52.000 | And I think one of the benefits of this is that, you know, you go back 20 years, and

00:14:57.920 | people really believe that, you know, if you went to Merrill Lynch, if you went to Morgan

00:15:03.240 | Stanley, you were somehow investing with the best and the brightest.

00:15:08.360 | I think the message has got through that going to the big wirehouses, these big brokerage

00:15:12.560 | firms, is actually bad for your financial health, and you're far better off, you know,

00:15:18.400 | looking elsewhere to some of these smaller financial planning outfits, looking to the

00:15:23.120 | robo-advisors, trying out an hourly planner, and the stranglehold that the big brokerage

00:15:29.360 | firms had on the way, you know, advised clients manage their money is over.

00:15:37.680 | And that is definitely a plus.

00:15:40.280 | >> So let's talk about the brokerage firms and such, because both of us worked for Citigroup

00:15:44.760 | for a while.

00:15:46.080 | You changed jobs, and you actually went over to what I call the dark side.

00:15:51.160 | I was on the dark side, so I'm just saying that facetiously.

00:15:54.080 | You went to work for Citigroup, and it almost at the time when you did that, there was some

00:15:59.280 | of us who had been following you were kind of questioning, scratching our heads, saying

00:16:04.120 | you wrote about these companies for years, and now you're going to work for one.

00:16:08.760 | I mean, was that an experiment, or could you tell us about that?

00:16:12.320 | >> Sure.

00:16:13.560 | Well, back in 2008, I was pretty burned out on writing the column.

00:16:18.440 | I'd been doing it for 13 and a half years, and I was casting around for something new

00:16:24.040 | to do.

00:16:25.400 | And I didn't want to become an editor of the journal.

00:16:28.000 | I didn't really want to start writing about something else, so I wanted a total change.

00:16:33.760 | And I was approached by Citigroup to be involved in a financial startup that they were working

00:16:40.120 | on.

00:16:41.120 | And the financial startup was this.

00:16:42.120 | Their plan was to create an advisory service to everyday Americans that would deliver financial

00:16:48.480 | advice in return for a flat monthly fee.

00:16:52.400 | And so I joined Citi in April of 2008, and that's indeed what we worked on.

00:17:00.000 | We were working on this flat fee advisory program.

00:17:06.240 | We actually launched a pilot version of it in January 2009.

00:17:12.200 | If you remember what things were like in January 2009, there was a worse time to launch a new

00:17:19.800 | financial advisory service.

00:17:21.600 | I'm not sure when it would have been.

00:17:22.840 | I mean, January 2009 probably wasn't quite as bad as 1932, but we were at the height

00:17:27.920 | of the financial crisis, and this thing went nowhere.

00:17:32.400 | In the months that followed, Citigroup was in turmoil.

00:17:35.880 | Smith Barney was sold off.

00:17:38.600 | This startup I was working on fell apart, and Citigroup had to make a call.

00:17:44.760 | They needed some sort of advisory offering for regular retail investors.

00:17:51.520 | With Smith Barney gone, what they decided was they were going to take this startup that

00:17:56.400 | I was involved in at the time, which was called MyFi, and then what was left, which was the

00:18:02.080 | bank-based brokers, they threw us together and said, "Figure out what you want to do."

00:18:08.360 | They brought in a woman called Debbie McQuitty, who had been at Schwab and had overseen their

00:18:12.640 | RIA business, and Debbie announced that what she wanted was all these bank-based brokers

00:18:19.760 | to become the only financial advisors, and this innovative group of people who were part

00:18:27.360 | of this startup were put in charge of this group of bank-based brokers, and as you might

00:18:33.400 | imagine, it was complete turmoil.

00:18:38.320 | That is indeed what happened, and that's how I ended up going from being part of this startup

00:18:43.040 | to being, as I like to put it, in the mainstream of Citibank.

00:18:49.160 | I stayed on because they were having this experiment trying to turn these bank-based

00:18:54.320 | brokers into the only financial advisors, and it worked to a degree, but just purely

00:19:01.160 | from an economics point of view, and you'll probably appreciate this, Rick, to go from

00:19:06.480 | charging commissions every time you buy and sell, you might be getting a 4% or 5% commission

00:19:12.800 | on a product sale, to charging 1% a year, what you effectively do is you give up right

00:19:18.080 | away three-quarters of your annual revenue, and so this business went from being profitable

00:19:24.560 | to being extremely unprofitable, so after a year or so of this, there was yet another

00:19:30.000 | U-turn, and they moved towards a fee-commissioned model, but they still continued to try to

00:19:37.320 | favor the fee-based business, so I hung on there.

00:19:42.080 | I actually ended up spending six years at Citigroup.

00:19:48.200 | Towards the end, I had got to the point where I had enough money that I didn't, the salary

00:19:53.360 | I was earning there, and I decided I was sick of dealing with lawyers and sick of dealing

00:19:58.520 | with compliance people, so I quit.

00:20:01.040 | And you went back to the Wall Street Journal for a little while.

00:20:04.160 | I went back to the Wall Street Journal, and I have to say, even though I can't claim that

00:20:08.800 | I didn't much good when I was on the dark side, I'm sort of glad I did it.

00:20:13.520 | I learned a lot about the business that I never would have learned purely being on the

00:20:21.120 | outside.

00:20:22.120 | I mean, as you know yourself, Rick, once you've been on the inside, you see how it works.

00:20:29.520 | You understand much better the culture of these institutions and why they do the screwed-up

00:20:36.640 | things that they do.

00:20:37.640 | >>Corey: For the benefit of the shareholders.

00:20:40.280 | >>Steven: Whatever it is, it isn't for the benefit of the everyday investor who walks

00:20:46.400 | into the bank branch.

00:20:47.400 | >>Corey: No, not for that.

00:20:49.000 | I haven't heard that one yet, but that's what they might say to me, but that's not what

00:20:53.000 | I saw.

00:20:54.000 | Anyway, so you went to the Wall Street Journal, and you were there for about a year and a

00:20:58.600 | half, and then you decided to go out on your own and start your own business, the Humble

00:21:06.560 | Dollar, in 2017, which is a great blog and a lot of good advice there.

00:21:14.480 | You continue to author books.

00:21:16.600 | In fact, you wrote How to Think About Money, and also your latest book, From Here to Financial

00:21:24.000 | Happiness.

00:21:25.000 | Can you talk about the transition to starting your own business and going from a paycheck,

00:21:30.400 | if you will, to starting from scratch and seeing how it goes?

00:21:35.920 | >>Steven: I wouldn't claim that I'm the most courageous person in the world, at least not

00:21:40.080 | courageous financially, so I wouldn't have ended up in the position I am now if I depended

00:21:46.640 | on the income I earned today in order to cover the bills.

00:21:50.720 | Essentially, this is my retirement job.

00:21:53.480 | It just happens that I'm working harder than ever.

00:21:55.960 | >>Corey: I know how that goes.

00:21:58.920 | >>Steven: If the books don't sell and the website doesn't make any money, it's okay.

00:22:05.880 | Nobody's going to starve tonight.

00:22:08.200 | I do this more than anything at this point.

00:22:10.400 | I have a sense of public service.

00:22:13.200 | I know this stuff backwards and forwards.

00:22:14.960 | I love writing about it, and I love being part of the conversation.

00:22:19.280 | That's what the books and the website allow me to do.

00:22:22.080 | >>Corey: Well, I read From Here to Financial Happiness recently.

00:22:26.880 | Thank you for sending me the copy.

00:22:28.920 | I appreciate that.

00:22:29.920 | In typical Boglehead fashion, if I can get a free book, of course I'll get one for free,

00:22:34.160 | and I did here, so thank you.

00:22:37.560 | I started reading the book a few weeks ago.

00:22:45.120 | The subtitle is Enrich Your Life in Just 77 Days.

00:22:51.880 | It occurred to me as I was reading the book.

00:22:55.440 | I need much longer than 77 days to enrich my life.

00:23:01.120 | The book is only ... Let me see how many pages it is.

00:23:06.040 | It's got 77 chapters.

00:23:08.560 | It's 240 pages roughly, but as I began to work through the book, and it's not just a

00:23:18.000 | book.

00:23:19.000 | It's a workbook and a book.

00:23:22.320 | Reading day one, day two, day three, day four, there are some of these days where I was reading

00:23:30.440 | about where, my God, I had to put the book down.

00:23:36.160 | I literally had to say, "I really have to think about that.

00:23:40.200 | That's going to take a long time for me to process what you just wrote."

00:23:44.480 | Now, some of the days went by pretty easy, but some of them were much more difficult.

00:23:50.080 | In fact, I found it aggravating in some ways to have to think about some of the things

00:23:56.840 | you wrote about in the book, but as I kept on going through it, I realized it was a method

00:24:00.480 | to the madness.

00:24:01.480 | Then I read about why you did it this way, why you wrote the book this way.

00:24:07.240 | Could you talk about that?

00:24:09.120 | You're thinking of how you put this book together as opposed to all your other books.

00:24:16.160 | The book grew out of a couple of different things I've been thinking about.

00:24:22.520 | One of the ways I've described the book to people is that I like to think of it as the

00:24:27.300 | conversation that you should be having with a really good financial advisor.

00:24:33.960 | A really good financial advisor isn't going to be purely concerned with making sure that

00:24:40.080 | you end up with the right seven mutual funds.

00:24:43.840 | A really good financial advisor should be trying to figure out what it is that you really

00:24:50.580 | want from your financial life.

00:24:52.960 | What's going to improve it today?

00:24:54.280 | What's going to make you happy in the future?

00:24:56.680 | What are the goals that you truly care about?

00:24:59.160 | Not simply that you want to retire, but what sort of retirement do you want?

00:25:02.880 | What is it that you're going to do with this last 20 or 30 years of your life?

00:25:06.920 | A good financial advisor is going to figure out that stuff, and then he or she is going

00:25:13.440 | to help you figure out how to get there.

00:25:16.160 | It's not just about building the right portfolio.

00:25:19.240 | There's so much more to managing money than having those six or seven mutual funds.

00:25:26.280 | You need to figure out your estate planning.

00:25:28.080 | You need to figure out whether you should be paying down your debt faster than is required.

00:25:33.760 | You need to be figuring out insurance.

00:25:35.080 | You need to be figuring out what sort of house you can afford to buy, what you should be

00:25:40.240 | doing with your cars.

00:25:42.240 | All of this stuff is part of building a robust financial life, and that's what the 77 days

00:25:48.120 | are about.

00:25:49.120 | It's about figuring out where you stand, what you want, and how you're going to get there.

00:25:56.740 | The premise is that you can do it with these 77 steps, and the 77 steps are a mix.

00:26:01.960 | Some days it is about information gathering.

00:26:04.560 | Some days it's about teasing out what you want.

00:26:07.800 | Some days it's giving you a brief financial lesson about some topics that I think is crucial

00:26:12.380 | to understanding money, and some days it's setting up specific steps that you ought to

00:26:19.200 | take.

00:26:20.200 | The book gets deep into behavioral finance without calling it behavioral finance.

00:26:28.200 | What I find is that you're able to describe things in layman terms without having to put

00:26:33.040 | 100 footnotes in there and references to behavioral finance studies and such, but you're able

00:26:39.600 | to take a lot of the biases and behavioral finance things that we know in academia and

00:26:47.520 | you're able to very efficiently and very cleanly use it to describe what people should do or

00:26:56.800 | shouldn't do, or at least get people to think about their behavior and how their behavior

00:27:03.960 | affects their finances.

00:27:05.480 | That's what I found very interesting about the book is most of the time when you read

00:27:10.480 | a book like this, you're constantly seeing footnote, footnote, footnote, footnote, footnote.

00:27:15.120 | This study, that study, this study, that study.

00:27:16.800 | You've avoided all of that in the book, and I commend you for that.

00:27:19.720 | I think that's great.

00:27:21.000 | But this is a very well-researched and very well-written book that encompasses just so

00:27:28.960 | much, and I think you really hit what you were trying to do here with this book.

00:27:34.920 | Well, in many ways, Rick, and thank you for your kind words, but in many ways, you know,

00:27:40.040 | the book is a product of the decades I've spent, you know, thinking about money, and

00:27:47.600 | one of the challenges of writing regularly about money is that the basics are indeed

00:27:55.520 | pretty basic.

00:27:56.520 | You know, the basics of putting together a portfolio, of figuring out how much insurance

00:28:01.000 | you need, what you need to do in terms of estate planning, you know, paying down debt,

00:28:06.320 | and so on.

00:28:07.320 | This stuff is really not that complicated, and if you're going to survive as a financial

00:28:13.280 | writer, you need to have some intellectual curiosity and start to delve into other areas

00:28:18.360 | of finance, and I've been the beneficiary, at least in terms of my longevity as a financial

00:28:23.860 | writer, of some of the great research that has come out of academia, the research on

00:28:29.600 | behavioral finance, on neuroeconomics, on evolutionary psychology, on money and happiness,

00:28:36.920 | all of these four areas have produced incredible insights that are so useful to us as managers

00:28:42.600 | of our own money, and I've had really the pleasure of swimming in this research for

00:28:49.880 | the past 20-plus years, and so while the book reflects that research, it's not like I sat

00:28:58.120 | down and read it all over, you know, in the year running up to the book's publication.

00:29:02.440 | I have been absorbing this for years and years, and it's sort of become part of the way I

00:29:07.640 | think about money. I'm not an original thinker, but, you know, I am pretty good at synthesizing

00:29:12.840 | what's out there, and that's what the book represents.

00:29:17.080 | There's a few things you wrote in here, which caught my attention very quickly. You have

00:29:21.880 | these great little quotes at the end of every chapter, but it's not, "This is what you've

00:29:26.600 | learned in this chapter." It's a saying, or it's something that you put together, and

00:29:31.280 | I want to read you one of them, because I found it very interesting. It's actually from

00:29:35.800 | day 44. You said, "If our net worth was displayed on our foreheads for all to see, libraries

00:29:43.200 | would be mobbed, and used cars would be status symbols." And it took me a second to think

00:29:48.960 | about that, saying, "Libraries would be mobbed, and used cars would be status symbols." Well,

00:29:54.520 | of course, yeah, I started thinking about it, saying, "Sure, you wouldn't buy a book.

00:29:58.160 | You'd go to the library and get one for free, and you wouldn't buy a new car. You'd go out

00:30:02.560 | and buy a used car, and that would be a status symbol, because what would be on your forehead

00:30:06.640 | is a big number."

00:30:07.640 | You know, probably one of the most influential books I think that any of us have read over

00:30:12.920 | the past 20 years is "The Millionaire Next Door," and this notion that it's not the money

00:30:18.800 | that you see, it's the money that you don't see, right? It's the millionaire next door

00:30:24.560 | living in the modest home, wearing clothes from J.C. Penney, and driving the second-hand

00:30:29.320 | car. That's the millionaire. The millionaire isn't, you know, the big house with his or

00:30:35.160 | her European sedan and the beautifully landscaped lawn. That's not money. That's money that

00:30:40.680 | is gone. That's money that is spent. And yet, the money that is still there often isn't

00:30:48.360 | visible. You see this on the Bogleheads Forum. The Bogleheads Forum isn't just about low-cost

00:30:54.600 | investing. It's about having sensible habits when it comes to spending money. I think this

00:31:02.600 | is one of the reasons why you see so much overlap between the Bogleheads and what's

00:31:07.760 | become a very hot topic in recent months, which is the FIRE movement, you know, Financial

00:31:11.880 | Independence Retire Early, that frugality cuts not just across investing, but across

00:31:18.280 | our entire financial lives. And being frugal about how we handle our money is the key to

00:31:24.680 | wealth. And that's why, you know, I came up with that. If we all knew how much everybody

00:31:28.880 | was worth, and you saw somebody driving a BMW with a negative net worth, you would just

00:31:33.960 | laugh out loud.

00:31:34.960 | >>STEVE: I get it. Yeah, that's true.

00:31:36.720 | >>JOHN: But because we don't see the net worth on their forehead, we don't get the chance

00:31:41.680 | to laugh at them.

00:31:42.680 | >>STEVE: Great. Yeah, that's perfect. That's great. And you, in fact, you followed up with

00:31:46.480 | that. And another day, Day 52, you talked about want to hurt your happiness, buy a big

00:31:52.440 | house involving lots of upkeep and a long commute. I think a lot of us are guilty of

00:32:00.000 | that. You know, as soon as you buy the big house, now you've got big bills to keep it

00:32:04.760 | up. And it might be nice to show off for a while, but after a while, people stop coming

00:32:09.400 | and you just have bigger bills.

00:32:11.120 | >>STEVE: You had one more thing in here I want to talk about. And that is something

00:32:15.920 | you wrote on Day 70, which talked about limiting yourself to one financial advisor, one bank,

00:32:25.440 | and one brokerage firm or mutual fund family. And I want to talk about that because it always

00:32:32.360 | comes up on the Bogleheads where people say, "Oh, I have three or four banks because I

00:32:35.840 | want to diversify. I have two or three different advisors because I want to diversify. I don't

00:32:40.960 | want to keep all my money at one particular firm, call it Vanguard or Schwab or TD or

00:32:46.440 | wherever. I want to diversify because what happens if one of those companies go under?"

00:32:51.680 | You're actually saying, "No, don't worry about that here."

00:32:54.440 | >>TOM: So in terms of what I call naive diversification, multiple financial advisors, multiple banks,

00:33:00.520 | multiple mutual fund companies, multiple brokerage firms, yeah, I don't see that there is much

00:33:06.120 | benefit to this with one narrow exception. I do appreciate that there is this FDIC limit

00:33:12.680 | of $250,000. And if you have a ton of money in the bank, in order to make sure that you're

00:33:19.000 | covered by that $250,000, you may need to use multiple banks. But other than that, why

00:33:25.200 | would you use two financial advisors? What you're going to end up probably is two portfolios

00:33:30.760 | that have massive amounts of overlap, for which you're paying excessive cost. You're

00:33:37.040 | not getting any added value. If you can't find one financial advisor who's doing the

00:33:41.640 | job for you, you've got a big problem. Similarly, if you go to a brokerage firm, you're getting

00:33:48.080 | diversification not from the brokerage firm, but from the investments that you buy. If

00:33:52.440 | you have 10 different ETFs, that's your diversification. The fact that they're all held at one brokerage

00:33:58.600 | firm is of no import. It's not like the brokerage firm is going to go under and suddenly all

00:34:05.440 | your assets are gone. Those assets are held by a separate custodian. You should have no

00:34:10.040 | reason to worry about that. Ditto for using multiple mutual fund companies. I don't see

00:34:15.080 | any point in that. You can have all your mutual funds at one company. Each fund is a separate

00:34:21.040 | company. Each of those investments is held by the outside custodian. There should be

00:34:27.000 | no extra risk involved.

00:34:30.000 | It's true. It is that way. Some people still have this belief that they need to be diversified

00:34:35.640 | amongst where they keep their money. I'm glad you wrote that in the book because it's just

00:34:39.320 | not true. I personally have all my money at Vanguard. I don't have any reason to put it

00:34:45.860 | anywhere else. Even if I wanted to buy an exchange-traded fund that was traded by iShares,

00:34:52.400 | I could buy it through Vanguard. I don't need to have multiple custodians.

00:34:57.720 | Now, if somebody has a 401(k), of course, they have to have the money in that 401(k),

00:35:03.400 | but once they retire, they can roll that into an IRA account at the one custodian that they

00:35:10.560 | choose. I'm not saying Vanguard's the place. It could be Schwab. It could be wherever,

00:35:14.520 | but why complicate it? Why have a number of accounts at a number of custodians? Not only

00:35:20.360 | does it make it complicated for you, the investor, but if you should happen to pass away, it

00:35:25.640 | becomes 10 times more complicated for the person who has to pick all this up.

00:35:30.480 | Yeah, no, absolutely. I mean, I do as you do, Rick. I have all of my investment dollars

00:35:36.200 | at Vanguard. In fact, this may surprise people, I don't own any ETS. I own purely mutual funds,

00:35:45.200 | and the goal is simplicity here. When I pass away, my kids should be able to settle my

00:35:50.560 | estate in a couple of hours.

00:35:53.040 | Yeah, I think that that's the whole idea of simplicity is the next phase of what's going

00:35:59.920 | on with financial writers. I know personally me, I just launched a new website, Core4Investing,

00:36:08.560 | and it's all about being simple and simplicity. I think that the next phase, at least baby

00:36:14.840 | boomers like me, need to make things much more simple, need to make their portfolios

00:36:19.880 | simpler, need to make their estate simpler, need not to have five different IRA rollover

00:36:25.960 | accounts. If you're not going to go back to work, put them all together into one. There's

00:36:29.240 | no reason to have five anymore. If you have 401ks all over the place from different jobs,

00:36:34.440 | you don't need that. Bring them all together into one IRA, make it simple.

00:36:38.480 | I think simplicity and how we manage our money is important, not just for us, but for the

00:36:43.800 | future generations.

00:36:45.840 | And I would just add the corollary to that, which is that Wall Street battles this notion

00:36:50.920 | fiercely. They want investors to believe that there is some correlation between sophistication,

00:36:59.040 | complexity, and investment returns, and it simply isn't the case. I know so many high

00:37:03.920 | net worth individuals who end up in complicated investment products because they think they're

00:37:08.480 | getting something special, and they aren't. What they're getting is a complicated investment

00:37:13.160 | product as an excuse for charging high fees. If you want to be truly sophisticated, you

00:37:18.520 | should have a simple portfolio.

00:37:21.200 | Very well put. Let's get back to one more item before I come to questions by the Bogleheads

00:37:26.320 | Forum. You talked about FIRE, Financial Independent Retire Early. This is getting to be quite

00:37:33.000 | a phenomenon, especially among millennials. First of all, could you elaborate a little

00:37:39.040 | bit more on what FIRE is, and then talk more about your viewpoint of these different facets

00:37:45.560 | of FIRE?

00:37:46.560 | So the Financial Independence Retire Early movement is really about being extremely frugal

00:37:53.760 | early in your career, quickly buying yourself some financial freedom so that you can potentially

00:38:00.560 | retire at a relatively early age. Now, let's unpack that a little bit. When we talk about

00:38:07.600 | retirement, it's really not about retiring in the sense of you're going to go and live

00:38:13.680 | in Florida and spend all your days doing nothing. It's really about buying yourself the freedom

00:38:18.640 | to spend your days doing what you love. Of course, for many people, this idea of being

00:38:25.360 | frugal, buying yourself financial freedom quickly, and then using that freedom to spend

00:38:31.160 | your days doing what you love, that notion has been around for many decades. That certainly

00:38:35.240 | drove a lot of my financial behavior. I was a prodigious saver when I was in my 20s and

00:38:40.440 | 30s, and that's what allows me today not to worry about earning a paycheck.

00:38:45.960 | What the Financial Independence Retire Early movement, the FIRE movement, has done is it's

00:38:51.840 | conceptualized it in this single word, FIRE, and it's become a rallying cry for a certain

00:38:59.960 | group of devotees, but it's not that different from anything that we've known before. It's

00:39:06.840 | simply that it has coalesced around this one phrase and it has become something of a movement.

00:39:11.480 | I think it's to be applauded. In a country where far too many people save way too little,

00:39:17.280 | the idea that we're celebrating people who are being smart about their money and saving

00:39:22.200 | diligently, what's wrong with that?

00:39:25.160 | Not a thing. Parlaying that, there are big companies out there that are being formed

00:39:31.240 | and have been around now for a while, companies like Betterment, where they're teaching young

00:39:35.660 | people right from the beginning, use low-cost index funds. Don't try to beat the market.

00:39:41.040 | Just put a simple portfolio together of low-cost index funds. Granted, they're using ETFs because

00:39:46.080 | they're custodying the assets at a brokerage firm, but I always applauded companies like

00:39:52.760 | Wealthfront and Betterment and other robo-advisors because they're teaching young people right

00:39:58.840 | from the beginning, and don't bother trying to beat the market. Just have a consistent

00:40:03.960 | investment strategy, a consistent saving strategy. Just put the money away. It's all part of

00:40:08.600 | the same movement, and I think it's all very good.

00:40:10.960 | Yeah, I think anything that focuses on holding down costs, whether it's the costs in your

00:40:18.200 | day-to-day living, the costs in your investment portfolio, the costs of your insurance, the

00:40:23.120 | cost of putting together your estate plan, as long as you're being smart in the choices

00:40:28.440 | you make, what's wrong with that? The less money that goes to these financial service

00:40:33.800 | providers, the more money that ends up in your pocket.

00:40:38.000 | In the last part of the interview today, I'm going to go to the Bogleheads forum. I asked

00:40:44.160 | the Bogleheads on bogleheads.org to come up with some questions for you. A lot of people

00:40:51.700 | had a lot of great comments for you saying how they followed you for years and gave you

00:40:56.360 | a lot of kudos, but there were a few questions. I'm going to go through a few of those questions

00:41:02.240 | now and sort of wrap them off, one, two, three, four.

00:41:05.520 | Here was the first question, and this was by Rosemary 11. Actually, she asked you three

00:41:12.960 | questions, so I'll do one, two, three, and then you can put them all together if you'd

00:41:16.080 | like. I am in retirement. What is an acceptable asset allocation in retirement? That was her

00:41:23.600 | first question. What is an acceptable asset allocation in retirement? Her second one was,

00:41:28.680 | what international allocation, I think she's talking about stocks, as a percentage of the

00:41:34.160 | asset allocation? Thirdly, what is a safe withdrawal rate in retirement? Some three

00:41:40.100 | broad general questions. One, two, three, if you can hit them.

00:41:43.880 | In terms of the right asset allocation, that's going to vary from one person to the next.

00:41:50.040 | Much depends on how much of your expenses are going to be covered by Social Security.

00:41:55.400 | It's going to depend on whether you have a traditional employer pension. It also might

00:42:02.160 | depend on whether you have anything else that's generating income, for instance, rental real

00:42:06.280 | estate. As a rule of thumb, 50 to 60 percent in stocks is probably a reasonable target.

00:42:15.080 | What I would say as an upper limit on that is, you should know exactly where you're going

00:42:24.640 | to get your next five years of portfolio withdrawals from, and that money, at a minimum, should

00:42:31.880 | be invested in something conservative. CDs, short-term bonds, high-yield savings accounts,

00:42:38.640 | something like that. To get to your third question, Rick, if you're using the four percent

00:42:43.880 | withdrawal rate, which I think is a fine number, at a bare minimum, you should have at least

00:42:49.040 | 20 percent of your portfolio in cash or near-cash investments so that you can cover the next

00:42:56.160 | five years of portfolio withdrawals. Now, that suggests that potentially you could have

00:42:59.880 | 20 percent in stocks. I think that's way too much. I would probably go, as I said, for

00:43:03.640 | 50 or 60 percent in stocks. At a minimum, you want that 20 percent for five years of

00:43:09.160 | four percent withdrawal rates stacked in cash or cash-like investments so that you're covered

00:43:14.920 | in case the market goes down steeply. In terms of the second question about international

00:43:21.040 | allocation on a stock portfolio, my view on this has shifted over the years. Personally,

00:43:27.160 | I now have a market-weighted portfolio when it comes to stocks, which means, effectively,

00:43:33.920 | that I have half my money in U.S. stocks and half of my money in foreign stocks. I've done

00:43:41.400 | that for one simple reason, which is, who am I to think that I know better than all

00:43:48.120 | other investors collectively? If all other investors worldwide collectively believe that

00:43:53.280 | half of global stock market value is in the U.S. and half is outside the U.S., shouldn't

00:43:58.960 | I, as a hardcore indexer, replicate those percentages? The caveat in that is, of course,

00:44:07.600 | you are introducing a fair amount of currency risk into a portfolio. If you're uncomfortable

00:44:16.480 | with the degree of currency risk, I would say either hold less in international stocks

00:44:22.400 | or potentially seek out a fund that hedges its currency exposure. But as things stand,

00:44:29.240 | I'm not sure of a fund that would give you low-cost foreign stock exposure with a currency

00:44:35.920 | hedge.

00:44:36.920 | Well, thank you, John. That was a good answer. Let me go to another question, which is something

00:44:41.360 | to do with what you just talked about, so we can hit this one too. This is from CW Radio,

00:44:47.560 | who asks, "As a safety-first investor that is in retirement, what investment should I

00:44:53.080 | put my safe money in?" And I think you already touched on this with the 20%, but I think

00:45:00.720 | he's looking for SPIA, which is a single premium insurance annuity, a bond ladder, tips, and

00:45:08.480 | so forth. He's asking if these are also acceptable places to put safe money.

00:45:16.320 | I think all of those are acceptable places to put safe money. If you're going to buy

00:45:22.760 | an immediate fixed annuity, I would buy from more than one insurance company, and I would

00:45:28.800 | buy from insurance companies with a high rating for financial strength. An immediate fixed

00:45:33.920 | annuity is a great way to hedge longevity risk and ensure that you have a stable stream

00:45:39.960 | of monthly income. You just don't want to get it derailed because you buy from a single

00:45:45.000 | shaky insurance company and the insurance company goes under.

00:45:49.160 | In terms of the bond portfolio, I've always favored taking risk on the stock side of the

00:45:54.880 | portfolio and playing it safe with bonds. In my own portfolio, I own pretty much a 50/50

00:46:01.600 | split for the bond portfolio between inflation index, treasury of bonds, and high-quality

00:46:06.560 | short-term corporates. But if you want to go for added safety, you might add in a mix

00:46:13.640 | of high-quality short-term treasuries as well rather than taking the credit risk that comes

00:46:18.560 | even with high-quality corporates.

00:46:21.760 | This is from a poster by the name of Beanie. It says, "Jonathan Clements used to recommend

00:46:26.660 | putting 15% to 20% of one's stock allocation in diversifiers such as merger arbitrage funds,

00:46:34.840 | commodity funds, gold funds, and REITs." I haven't seen him talking about this in a long

00:46:39.760 | time, maybe 10 years or more. Have his views changed? If so, why?

00:46:46.760 | I never recommend as much as 20%. I do remember writing a column for the Wall Street Journal

00:46:51.640 | when people were all hot and bothered about alternative investments, and this was a question

00:46:57.840 | I was getting a lot. I did indeed say that if you really want alternative exposure in

00:47:06.240 | your portfolio, I could see allocating 10% of a portfolio and no more to alternative

00:47:13.480 | investments. In terms of alternative investments, it was the list that you recommended -- real

00:47:19.840 | estate investment trusts, gold stocks, commodity funds, and precious metals funds.

00:47:27.720 | I still think that's a reasonable allocation. I have to say, I don't particularly like merger

00:47:34.520 | arbitrage funds because they involve active management, and I have soured on commodities

00:47:41.480 | funds. Those have become more actually traded. It's gone from being a market where companies

00:47:49.160 | and farmers hedge to being a market dominated by investors. The historic, impressive returns

00:47:56.760 | from the commodity indexes hasn't been replicated and, in all likelihood, will not be replicated.

00:48:03.320 | So I'm not that crazy about commodities funds. I still have a soft spot for gold stock funds

00:48:10.680 | and I still have a soft spot for real estate investment trusts, but I probably wouldn't

00:48:15.200 | put more than a couple of cents of a portfolio in each.

00:48:19.280 | What if somebody did any of that and just bought the three-fund portfolio?

00:48:24.760 | I think the three-fund portfolio is a great portfolio to own. You and I have had this

00:48:30.320 | conversation, Rick. People tend to mess around way too much with their portfolios. I think

00:48:35.320 | I've done too much of that myself over the years. If you simply buy the three-fund portfolio

00:48:41.440 | -- total U.S. market, total international, and total bond -- I think that's a great mix.

00:48:49.480 | You may even want to consider the two-fund portfolio. You can now go to Vanguard and

00:48:54.400 | buy the total world index fund and add the total bond market fund onto that, and you

00:49:00.520 | could have an incredibly diversified portfolio with an asset allocation of your choice with

00:49:06.920 | just two mutual funds.

00:49:08.760 | Incredible. It wasn't that way years ago, though. Things have gotten so much better

00:49:12.760 | in indexing space where you can really reduce the number of holdings that you need nowadays

00:49:19.040 | to be diversified globally. It's really gotten a lot better, and the fees have come down

00:49:23.640 | so much.

00:49:24.640 | That total world index fund, I believe, has something in the range of 8,000 stocks in

00:49:32.280 | that fund. For a $3,000 investment -- or you can buy the ETF and invest even less -- you

00:49:39.520 | can buy a portfolio with 8,000 different stocks in it. Think about that. That is astonishing.

00:49:46.760 | Today, the everyday investor, with $10,000 or $20,000 to invest, can build a portfolio

00:49:55.160 | that many institutional investors two decades ago would have died to have. It would be lower

00:50:01.360 | cost and better diversified. It's astonishing what ordinary investors can do with their

00:50:07.960 | money today. Really astonishing.

00:50:10.880 | The last question has to do with buying happiness. This is from TomP10. I'm going to just paraphrase

00:50:19.760 | what he's saying. You've always talked about, and one of the things that make you unique

00:50:24.520 | is the spending side of happiness. If spending actually makes people happy. He was wondering

00:50:33.720 | about your thoughts on spending. We've talked an awful lot about investing and saving, but

00:50:41.320 | he wants to know specifically your thoughts about spending and how to spend correctly

00:50:48.080 | to make you happier.

00:50:49.960 | As I've written in numerous places, I believe that money can buy happiness in three ways.

00:50:59.040 | First, money can buy happiness simply by eliminating financial worries. So many people in America

00:51:06.840 | pursue happiness at the shopping mall, rack up their credit cards, and end up miserable

00:51:12.760 | because they leave themselves in a financially perilous state. Whatever they manage to buy

00:51:18.320 | at the mall is no solace when they're awake in the middle of the night worrying about

00:51:24.200 | what happens if they lose their job or how they're going to pay the credit card bill.

00:51:28.520 | Simply being smart about money, having a little money in the bank, saving for the future,

00:51:34.520 | avoiding debt except for mortgage debt, that alone is going to buy you substantial happiness.

00:51:41.240 | So that's the first way that money can buy happiness.

00:51:43.760 | Second, money can buy happiness if you can reach the point where you can spend your days

00:51:48.960 | doing what you love. There are a few things in life that bring greater happiness than

00:51:56.480 | working hard at something you care passionately about. So if you can get yourself to that

00:52:02.200 | point, like the fire people talk about, where you don't need a regular paycheck or you need

00:52:07.200 | a much smaller paycheck and you can spend your days doing what you love, that is the

00:52:11.320 | second way that money can buy happiness.

00:52:13.120 | The third way, and this is probably what the question is getting at, is I believe the third

00:52:17.580 | way that money can buy happiness is we can use it to create special times with friends

00:52:24.640 | and family. And there are a couple of different elements to this. First, we know that spending

00:52:30.720 | time with friends and family gives an enormous boost to happiness. Research suggests that

00:52:36.000 | that is indeed the case. In fact, the research suggests that having a robust network of friends

00:52:40.120 | and family not only makes you happier, but it also gives a boost to longevity equal in

00:52:48.000 | effect to not smoking. So having a robust network of families is not only good for your

00:52:53.120 | happiness, but it's also good for your health.

00:52:55.520 | So in terms of using money, what you want to do is spend it not on material goods, which

00:53:00.840 | are often enjoyed on your own, but on experiences. Taking the family on vacation, organizing

00:53:06.920 | the family reunion, going out to dinner with friends, going to the theater with a colleague.

00:53:13.360 | Those experiences enjoyed with friends and family can give a big boost to happiness.

00:53:20.360 | But there's another element to this, which is if you really want to get a lot of happiness

00:53:24.760 | out of your spending on experiences with friends and family, you should arrange these things

00:53:30.280 | far ahead of time so that you have a long period of eager anticipation. That way, you'll

00:53:36.720 | get a lot more happiness out of the dollars you're about to spend. And you should make

00:53:40.400 | sure that you keep mementos to remind you of the event in question. When you go on vacation,

00:53:47.560 | you should take photographs, and then you should put them up around your house so that

00:53:53.080 | the months afterwards, you can think, "Wow, that was such a great trip. I had such a good

00:53:58.360 | time. And here, every day when I walk to the living room, is that photograph that reminds

00:54:03.680 | me of what a special time in my life that was." So that, in terms of actually spending

00:54:09.480 | money, would be my number one tip.

00:54:11.840 | Well, that's great, Jonathan. I want to thank you so much. You've made us all very happy

00:54:17.040 | by being on our program today. Well, good luck with the book. And again, the name of

00:54:20.840 | your new book is From Here to Financial Happiness, Enrich Your Life in Just 77 Days. Jonathan,

00:54:26.720 | thank you so much for being our guest on Bogleheads on Investing.

00:54:29.520 | Well, thanks so much, Rick. It's been a pleasure talking to you.

00:54:34.640 | This concludes the third episode of Bogleheads on Investing. I'm your host, Rick Ferry. Join

00:54:41.040 | us each month to hear a new special guest. In the meantime, visit Bogleheads.org and

00:54:47.720 | the Bogleheads Wiki. Participate in the forum, and help others find the forum. Thanks for

00:54:53.960 | listening.

00:54:54.480 | [MUSIC PLAYING]

Bogleheads® on Investing Podcast 003 – Jonathan Clements, host Rick Ferri (audio only)

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