Advice on Life and Money from Jonathan Clements

What would you do if you found out you had 12 months to live? Jason Zweig recently wrote in The Wall Street Journal how the legendary personal finance writer, Jonathan Clements, actually answered the question when he received such a prognosis. His answer was to help other people get going financially. 

No one has taught me more about money and life than Jonathan. He wrote 1,006 columns for the Journal and continues to write on his Humble Dollar website and other media. I try to use his wisdom and style with my clients. A new book entitled The Best of Jonathan Clements: Timeless Advice for a Financial Life Well Lived delivers these lessons with the signature style of charm, humor, and empathy for which he is so famous. As is Jonathan’s selfless wish, all proceeds of the book will go toward a charitable endeavor to help young adults from lower-income families begin investing for their long-term financial futures. 

Your Brain Can Be Your Biggest Enemy

Long before many people even heard the term behavioral economics, Jonathan wrote about our “lizard brains” causing us to make emotional mistakes. More than a decade later, the late Nobel Laureate Daniel Kahneman explored the concept in his book Thinking Fast and Slow, where he referred to our fast-thinking lizard brain as our System 1 brain. Jonathan offers practical advice on how to control our behavior, and let our System 2 (logical) brain take the driver’s seat. I especially liked his 10 tips to save more and his discussion of how financial markets alter our psychology. 

Lists Help. There is a whole section of practical checklists on various money topics. One of my favorite lists is 41 signs you have become a savvy investor and smart saver. Some of the items are:

• You get excited when stock prices fall.
• You remember your investment mistakes and they still make you shudder. 
• You are richer than your neighbors and they haven’t a clue.
• You still haven’t figured out how to beat the market but you are a whiz at cutting investment costs and tax bills. 
• You view personal finance columnists with suspicion.

There are other lists such as 30 New Year’s resolutions. I particularly loved “annoy the credit card company by paying off your balance every month.” And “make sure your ex-spouse is no longer listed as the beneficiary of your insurance policies.” I’ve had people come to me who still have an ex-spouse listed as beneficiary of IRAs and 401(k)s. This is important because the listed beneficiary on those accounts generally supersedes any estate planning documents.

A Little Bit of Math Can Be Fun

Jonathan teaches the power of compounding with the example of 10+10=21 as a simple way to illustrate that two years of 10% returns results in a 21% gain (1.1^2-1). For those less mathematically inclined, he explains the rule of 72 where you divide your annual return into 72 to get a rough estimate of how many years it takes for your money to double. He explains why “if you don’t know your math, you’ll end up taking a bath.”

One column I remember the most is: “Maybe Investors Aren’t Stupid After All: Oft-Cited Performance Study is Revised.” It was about the famous Dalbar study that showed investors only earned 2.6 percent annually during the 19 years ended in 2002 versus the S&P 500, which gained 12% annually. I had shown various versions of this study hundreds of times. I took great comfort in knowing that avoiding behavioral mistakes could be so profitable. Jonathan meticulously went through the math and methodology Dalbar used to correctly show that the gap was greatly exaggerated. His logic was sound (as always) and the gap was much smaller. 

Jonathan removed one of my two investment “security blankets” that one could profit so much by going against the herd. An editor’s note in that chapter discusses the much better research in the Morningstar Mind The Gap study where the 2024 data demonstrated investors lost out on about 15% of the return their funds generated. Interestingly, Jonathan’s recommended successor at The Wall Street Journal, Jason Zweig, took away my second security blanket by disproving the conclusion in Jeremy Seigel’s “Stocks for the Long Run” that stocks always best bonds in the long-run. But it’s much better to know the truth than cling to a false and potentially costly security blanket.

Your Money, Your Well-Being. The relationship between money and happiness is the single topic I find the most fascinating. It’s also the area I’m working hardest on improving and still have a long way to go. Jonathan writes that the most valuable thing money can buy isn’t the big house or fancy car. It’s the time and autonomy to live the life you want. You don’t have to be rich to be wealthy. 

We aren’t built to be happy, he notes. Rather, we are built to survive and reproduce. What we have is never enough, and I’m a living example. If I only got this promotion, I would be so happy, I remember thinking. In my experience, the happiness that came from attaining the promotion or the many other “if onlys” has proven to be predictably short-lived. Jonathan notes how quickly we adapt to our new lives and take the improvements for granted. 

The book is filled with inspiration and wisdom that is so much fun to read. It’s not just what he writes – it’s also his relatable and engaging style. It covers everything from money topics and math to touchy-feely subjects such as happiness at any stage of life. People who are engaged live longer and happier than those who sit on the porch and rock or who play endless games of golf.

The Book’s Mission. I am one of the editors along with Christine Benz, Willaim Bernstein, and Jason Zweig. I also wrote the afterword. While one purpose of the book is to create better relationships with money, the second is to fulfill Jonathan’s request to help others get going financially. As mentioned, all royalties from the book will help young adults from lower-income families participating in a youth-employment program in Boston. Some will be offered $1,000 grants to kick-start their Roth IRAs for long-term savings.Researchers will then follow the recipients (and a control group) over time to determine whether the grants help instill a habit of regular, long-term saving as well as which educational and training materials work best to encourage these young people to keep investing. The initiative is described here. “Will it lead some of these young adults to become regular savers and investors?” Jonathan Clement asked in a column titled  “Do It for the Kids” on his Humble Dollar web site. “If it does, lives will have been transformed. How cool is that?”