in: Career & Wealth, Podcast, Wealth

• Last updated: July 2, 2023

Podcast #321: How to Think About Money

Personal finance can seem intimidating, but the reality is it’s pretty basic — save more than you spend, find ways to earn more, invest for the long-term, and protect your assets. But if personal finance is so easy, why do so many people screw it up?

My guest today has spent his career exploring this topic. His name is Jonathan Clements and he’s been The Wall Street Journal’s personal finance columnist for years. During his writing career, he’s also published several of the best personal finance books including The Little Book of Main Street MoneyIn his latest book, How to Think About Money, Jonathan distills decades of personal finance experience into punchy, insightful, and action-oriented advice.

Today on the show, Jonathan and I discuss the most common money mistakes people make and the psychological biases that cause us to make them. Jonathan then shares research-backed advice on how money can buy you happiness…and also misery. Just depends on how you use it. He then delves into brass tacks tips on how to save for retirement no matter how old you are, how to overcome your psychological biases so you don’t make stupid money mistakes, and why focusing on not losing money will help you have more money in the long run. Lots of actionable advice to enhance your finances in this episode.

Show Highlights

  • Why do people get so confused when it comes to personal finance?
  • How our brain hurts us in the realm of money
  • The 3 instincts we have that hurt our finances
  • How to rewire our brains and overcome those instincts
  • Investment strategies for those who don’t have much time or know-how
  • How your investing strategy should change as you age
  • What are annuities? How they can help as you get closer to retirement?
  • How the fact of people living longer changes investments and retirement
  • How money actually can buy happiness
  • The value of experiences over stuff
  • How small purchases can you make you happier over time
  • The financial importance of enjoying your life and what you do
  • Winning in investments by not losing
  • What you need to know about insurance

Resources/People/Articles Mentioned in Podcast

How to think about money, book cover By Jonathan Clements.

If you’re looking for a no-nonsense guide to personal finances, How to Think About Money is the book for you. My favorite chapter was the one on how to use your money so that it actually makes you happy rather than miserable.

Connect With Jonathan

Jonathan on Twitter

Humble Dollar — Jonathan’s website

Jonathan on Facebook

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Read the Transcript

Brett McKay: Welcome to another edition of The Art of Manliness podcast. Well personal finance can seem intimidating, but the reality, it’s pretty basic. Save more than you spend, find ways to earn more, invest for the long run, and protect your assets. But if personal finance is so easy, why do so many people screw it up?

My guest today has spent his career exploring this topic. His name is Jonathan Clements. He’s been the Wall Street Journal’s personal finance columnist for several years. During his writing career, he’s also published several popular personal finance books, including The Little Book of Main Street Money. In his latest book, How to Think About Money, Jonathan distills decades of personal finance experience to punchy, insightful, and action-oriented advice.

Today on the show, Jonathan and I discuss the most common money mistakes people make and psychological biases that causes us to make these mistakes. Then he shares researched-back advice on how money can buy you happiness, and also misery, too. Depends on how you use it. He then delves into brass-tack tips on how to save for retirement no matter how old you are, how to overcome your psychological biases so you don’t make stupid money mistakes, and why focuses on not losing money will help you save more money in the long run. Lots of actual advice to enhance your finances in this episode. After it’s over, check out the show notes at That’s C-L-E-M-E-N-T-S.

Jonathan Clements, welcome to the show.

Clements: Thanks for having me on, Brett.

Brett McKay: So, you wrote a book that I just read, really enjoyed, How to Think About Money. Before we get to the content of your book, what makes you an expert on, you’re telling people how they should think about money. What’s your background?

Clements: I’ve spent 32 years kicking around Wall Street. Most of that time as a financial journalist. I spent almost 20 years at the Wall Street Journal where I was the newspaper’s personal finance columnist. I was at Citigroup for six years as director of financial education for the US Wealth and Management Business. I’ve written a bunch of books, but maybe more than anything else, I’ve had the chance not only to talk to thousands of everyday investors, but I’ve also spoken to many of the smartest people on Wall Street, and that’s been my education. I’ve had the great opportunity to learn from others.

Brett McKay: So, in your time writing, talking, researching about money, I’m sure you’ve seen that a lot of people are confused about it. That’s why there’s so many books about it, so many magazine articles about it. Why do you think people are so confused about money?

Clements: You’re absolutely right. Managing money is simple. You spend less than you earn. You save that money for the future. You put into a diversified portfolio. You keep costs low. You worry about taxes. You give it time, and good things will happen. And yet, as simple as this is, we sure don’t find it easy. People mess up again and again. When I think about it, there are really a whole bunch of things that kick in, but probably the biggest problem is our own hard-wired instincts. We are prone to self-destruct when it comes to managing money.

When you think about the brain, there are two parts of the brain. There’s the instinctual part, and then there’s the more contemporative rational part, and much of the time, what we do is driven by the instinctual part of our brain and in many situations, it’s great. If you’re in the street and a car’s coming towards you, your instincts will tell you to get out of the way and that’s why you survive. But when you go to the shopping mall, your instincts say, “If you buy X, Y, and Z. You’re gonna be so much happier.” So, you buy X, Y, and Z, you go home, you’re not all that much happier, but you have this huge credit card bill and suddenly you’ve got financial problems. Our instinct’s to spend now and not save for the future. Our instinct’s to be overly self-confident when we invest. These instincts tend to derail our financial future.

Brett McKay: Besides those, are there any other psychological biases that we’re sort of hard-wired to that also derail our financial future?

Clements: There are all kinds of hard-wired instincts that hurt us. I think the big three, though, are one, our tendency to consume right now and not save for the future. Two, we tend to be overly self-confident. We all think that we’re better than average driver, smarter than most, better looking, and smarter than most when it comes to investing. And third, we tend to have an instinct known as loss aversion. When the markets go down we feel this sense of panic, like our entire lives are gonna be ripped away from us, and for certain people, that can cause them to panic and sell at the worst possible time.

When you think about these instincts, you’ve probably wondered, “Why do we have them?” Well, they come from our hunter-gatherer ancestors. These are the instincts that helped our nomadic ancestors survive in the primitive world, and they were enormously useful. Our hunter-gatherer ancestors were able to survive and reproduce because they were terrified of losing. They were supremely self-confident. They thought that they could actually get ahead and maybe most important, they were hard-wired to consume whenever they could because tomorrow there might be no food. Consuming everything in sight was actually a great survival side 20 or 30,000 years ago. It’s just not a great survival strategy today.

Brett McKay: Well, so then, how do we rewire our brain for financial success? If these are hard-wired to us, is there something we can do, actions we can take so that we are more rational about our finances?

Clements: Probably the most important thing to do is to hit the pause button. So, remember, a lot of the reasons we go astray is because of our instincts, instinct to consume whenever we can, instinct that we are smarter than average, this instinct to panic when the market goes down. If we can hit the pause button and let the rational part of our brain kick in and look at the situation, then there’s a greater chance of success. So, if you see something that you want to buy and it’s hugely expensive, but you’re thinking, “Wow, my life is gonna be so much better if I buy this,” maybe you hit the pause button, wait a week or two before you make the purchase, you can start to contemplate whether this is really going to be as life-transforming as you imagine and maybe, just maybe you’ll discover that it’s not going to be all that life-transforming and you’ll save yourself from a huge financial mistake.

Brett McKay: What about overcoming that tendency to sell when the market is crashing?

Clements: That’s a tough one. The best defense is to make sure that you have the right portfolio to begin with. When you talk to a financial advisor, they talk about knowing what your risk tolerance is. The problem is, our risk tolerance changes over time. We all know this. When the market’s going up, we all feel brave and confident and we’re sure that we can take a lot of risk and it’s all gonna be fine. But then, as soon as the market turns down, we become scaredy-cats, and we’re inclined to panic and sell. So, one of the things that I talk about in my book is trying to get a sense of the market’s underlying value, to have some sense that when you trade stocks, you’re not just trading pieces of paper or trading numbers on an account statement. What you’re doing is investing in real companies with fundamental value.

Now, that fundamental value is hard to assess. Even professional investors have a tough time figuring out what any individual company is worth, but there are a couple different tricks that you can use. For instance, one of the things that I tell people is to think about the stock market in the same way that you think about going to the shopping mall. When you go to the shopping mall and prices have dropped, you’re excited. That’s the time when you want to buy. Well, guess what? When prices drop in the stock market, it’s exactly the same thing. If the market is down 20% from it’s all-time high, you should be more enthusiastic, not less so.

Another trick that I talk to people about is thinking about the stock market as a line rising steadily into the future, and my best guess is the market’s gonna gain about 6% a year in the decades ahead. If we have a year when the stock market is doing better than that 6%, you want to be a little bit more cautious, because there’s a good chance that prices are gonna come down from current levels. On the other hand, if we have a bad year and we’re below that 6% trend line, that means actually, things are looking more attractive and you should be more enthusiastic about buying stocks.

Brett McKay: Thinking of investment strategies, what’s your take for investment strategies for the average person who doesn’t have a lot of time to do the research to figure out value of a company? Do you recommend passive investing with index funds?

Clements: Right. I’m a huge, huge fan of indexing. When you think about investing, a lot of us imagine that we can succeed where other people fail. When I think about investing, I think about being put into the line up for a professional basketball time, or finding myself on the other side of the court from Serena Williams. Or pulling my old bike out of the garage and joining the starting line of the Tour de France. In other words, when I invest, I know that I am competing against some of the brightest and smartest people in the world.

Today, 98 or 99% of the trading in the stock market is done by professional investors. These people devote their entire lives to trying to find stocks that are undervalued. If there are bargains to be had, they don’t hang around for very long. The chances that I, Joe Investor, sitting at home, doing a little bit of research on the Internet is gonna find bargain stocks when these other folks haven’t, the odds are so small as to be not even worth considering.

So, rather than trying to beat the market, I advise people to try and match the market at the lowest possible past, and the way you do that is with index funds. You could buy an index fund that tracks the US stock market, an index fund that tracks foreign markets and an index fund that tracks the bond market. You take those three funds, you put them together, and you can have a world class, broadly diversified portfolio that will do better than 80 or 90% of the investors out there, and you can do it at a tiny cost. I mean, today, you could buy that portfolio and match the broad market and you pay an expense ratio of 0.1%. So, what does that 0.1% mean? That means that for every $100 you invest, you’re only paying something like 10 cents a year in investment costs.

Brett McKay: Right. And those investment costs can really eat up your gain. Even if you go with an actively managed fund that has stellar gains, you’re often paying expenses out the wazoo that actually cuts down on how much money you actually make.

Clements: No doubt about it. Earlier I was talking about how the long run return on the stock market might be six percent a year. If you go and you buy the typical actually managed fund, that fund may have annual expenses over one percent a year. It might rack up another one percent in trading costs, that’s two percent a year. So, essentially you’re lining up for this race against other investors, but instead of being at the starting line, you’re 20 yards back because you are being dragged down by this two percent in a market that’s only gonna deliver six. You’ve already given away a third of your return, so unless you picked funds that performed exceptionally well, you’re gonna end up as a loser.

And moreover, the key way that people pick funds they think are gonna do well in the future are by looking for funds that have done well in the past, and reams of research tell us that that is a losing proposition. Imagine that you go back and you buy the best performing funds, the funds that are in the top 25% over the past five years. Studies show that if you pick the top 25% of funds in any particular category for the past five years, over the next five years, less than a quarter of those top performing funds will remain among the top 25%.

In other words, you actually hurt your chances of being a winner by picking one of those top performers.

Brett McKay: Very interesting. Well, on the topic of investing, so we’re gonna lean towards passive investing with index funds. How should your strategy change? Say if you’re in your 20s and 30s, what should your retirement or your investing strategy for retirement be and then how should that change as you enter your 40s and your 50s?

Clements: When I talk to college kids or folks who are just out of school, and often these kids will have credit card debt. Typically they’ll have something like $30,000 of college debt. What I say to them is they are rich. And of course, that always gets me a few puzzled looks, but they are indeed rich, because they have this enormously valuable asset, which is their human capital, their income earning ability. If you graduated college, estimates are that the typical college graduate will have lifetime earnings figured in today’s dollars of something like $2.4 million. If you’re a high school graduate, the number is more like $1.4 million. You go to professional schools, you’ve got a [inaudible 00:14:52] or you get an MBA, it’s over $4 million.

Ahead of you is this enormously valuable stream of paychecks, and collecting those paychecks is sort of like collecting interest from a bond. You get steady income month after month, year after year. And as anybody who’s done any sort of rudimentary study of investing knows, if you have a large position in bonds, the way you diversify it is to invest in stocks. So, when you’re young and you have this enormously valuable asset, this bond like stream of income that’s gonna be coming at you for the next 40 years, the smart thing to do is to invest heavily in stocks to diversify that. But as you approach retirement, as you get older and you know that your paycheck is gonna go away, then you want to start shifting your investment portfolio towards bonds while still keeping a significant portion in stocks.

So, what does that look like? Well, maybe if you’re in your 20s, you have 90% of your portfolio in stocks and maybe 10% in bonds. As you head towards your mid-60s and retirement, maybe it’s more like 50/50 between stocks and bonds.

Brett McKay: Gotcha. I do know that like Vanguard has funds that are target date retirement funds, so they’ll make those just for you as you age, right? So, when you’re young, it’s gonna be primarily a stock index and when you get into your 40s and 50s, it’ll start shifting more towards bonds.

Clements: And a target date fund is a great investment. I actually recently argued that we could all make our lives a whole lot simpler and we’d probably be a whole lot more successful as investors if we simply gave up trying to pick individual stocks, gave up trying to pick all these different mutual funds, and instead bought a single mutual fund. You could, for instance, go to the Vanguard group and buy one of their target date retirement funds. You get a globally diversified portfolio in a single package, and in the case of those Vanguard funds, the annual expenses you’re paying are typically something like 0.15% or less each year. That’s like 15 cents for every $100 you’ve got invested.

If you have a 401k plan, they may not necessarily have that Vanguard fund in there, but a lot of 401k plans these days have those target date retirement funds. If one of those funds is in there, it’s very likely your best choice.

Brett McKay: So, you also talk about for individuals who are getting close to retirement to think about annuities. I know there’s a lot of podcast listeners who are at that age, maybe they’re in their late 50s, 60s and they’re getting to that point where they’re thinking about retirement. Can you walk us through what an annuity is and why that might be an option that they might consider?

Clements: This is tricky terrain, Brett, because the word annuity covers a whole slew of different investment products, and most of them you want to avoid at all costs. So, for instance, there’s things called variable annuities and things called equity index annuities, and I do not recommend them. So, straight out, don’t buy an equity index annuity. Don’t buy a variable annuity.

But there is a very simple product called an immediate fixed annuity, and with an immediate fixed annuity, all you do is you send off 25, 50, $100,000 to an insurance company and thereafter, the insurance company will cut you a check every month for the rest of your life no matter how long you live. This is a very efficient way of squeezing income out of your retirement savings. Now, the best annuity available is actually social security. If you are heading towards retirement and you’re thinking about social security, you want a maximum lifetime income from social security, most people are gonna want to delay social security until age 70, especially if you’re married and you’re the couple’s main breadwinner, because when you die, your social security benefit will continue for your spouse assuming he or she lives on after you.

So, by delaying social security and having that larger benefit, you help not only yourself but also your spouse. But if that is not enough lifetime income for you, another way to supplement that is to buy one of these immediate fixed annuities. So, for that one type of annuity, I’m a huge fan.

Brett McKay: Another big point you make in the book is that people really need to start thinking more about living longer when they’re planning for retirement, because thanks to technology and all of these advances, people, you know, retirement was like you retire at 65 and the idea was you maybe live another 10 years after that. Right? But now people are living well into their 90s and you could possibly even have a second career even after you retire.

So, with that in mind, knowing that we’re gonna live longer, how should that change people’s approach to retirement?

Clements: First of all, let’s just back up a little bit, Brett, because people get very confused about life expectancy. So, there are a bunch of different life expectancy numbers and I hear readers quote these numbers to me and they often get it wrong. So, when we think about life expectancy as of retirement, you don’t want to be thinking about life expectancy as of birth. When people who are reaching 65 today were born, the life expectancy was somewhere in their 70s. But once you reach age 65, the average life expectancy rises because all those unfortunate people who died before they reached retirement are dropping off the statistics.

So, if you’re age 65 and you’re a man, the life expectancy table suggests that you’ll live under 84, 85. If you’re a woman, on average, you’ll live until age 87. Again, those are the averages. Those include all the people who smoke, drink too much, and never exercise. If you’re somebody who’s paying attention to their personal finances, I would be good money that you’re probably also paying attention to what you’re eating, you probably don’t smoke, you probably don’t drink too much. You probably exercise with some regularity. If you’re among that group, your life expectancy is gonna be considerably longer. There’s a very good chance you will live until your early 90s these days. So, think about that.

You’re retiring at age 65, your life expectancy might be your early 90s and that’s on average, and of course around that average, there’s a spread, so maybe you’ll be one of those who lives until their late 90s, maybe even lives to 100. So, suddenly at age 65, you’re looking to 30 or 35 year life expectancy. So, what’s that tell you? Well, one, having that lifetime stream of income from social security and perhaps immediate fixed annuity is super valuable, but two is you still have plenty of time to invest in the stock market.

You shouldn’t be reaching retirement age 65 and saying, “Hey, it’s almost all over. Sell the stocks, put it all in bonds, and I’ll just live off the interest.” That ain’t gonna work over a 30 or 35 year life expectancy. Your standard of living is gonna be destroyed by inflation. So what you want to do is continue to keep some of your money in stocks so you have a shot at earning long run, healthy, inflation-beating gains.

Brett McKay: Gotcha. And if you’re young, knowing that you’re gonna live a long time, that’ s probably all the more reason to start investing as soon as you can.

Clements: It’s a craziness that we have here. You think about it, you’re 25. You might live to 95. You have a 70 year life expectancy, a 70 year time horizon. Why in the world would you care what happens in the stock market tomorrow? It simply is immaterial. Why would you be worried whether the stock market is high or low when you invest your $100 this month? It doesn’t matter. We really need to find some way to drag our attention away from these short term market movements and look at the long term.

One of the things that I mention in my book is that you see these stories periodically, some old geezer dies in his 90s and everybody thought that he was just some local guy, lower middle class, and it turns out he’s got millions and millions of dollars and he leaves it all to the local animal shelter or the library or the church or whatever it is. And people are like, “He must have been an investment genius.” No. He wasn’t an investment genius. He just happened to live a phenomenally long term. He got invested in the stock market and just let the money ride, and if you do that, you’re gonna end up rich. If you have good savings habits, a long time horizon, and a willingness to invest in a diversified portfolio of stocks, very good things will happen.

Brett McKay: So, one of the more interesting sections of the book that I found just fascinating was this idea, your exploration of money and happiness. Because we are often told that money can’t buy happiness. We’re told that all the time. “Yeah, money can’t buy you happiness.” But you argue that’s not necessarily true, that money can buy us happiness if we use it right. So, how can money bring us happiness and not misery?

Clements: So, first of all, let’s think about why money doesn’t buy us happiness. There’s this phenomenon amongst psychologists called the hedonic treadmill or hedonic adaptation and the notion is this: We imagine that if we get that next promotion or that next pay raise, we buy the bigger house or the fancy new car, it’s all gonna be better. And sure enough, when we get the pay raise, we take delivery of the new car, we are indeed thrilled. But, you know, within a month or two, the paycheck is just another paycheck. We’ve forgotten all about the increase that we got and we’re accustomed to the new money. Pretty soon, the car is just another way to get around town and in fact can go from being a source of happiness to a source of unhappiness as we get it scratched, we have a fender bender, the darn thing won’t start in the morning.

That’s the process of hedonic adaptation. So, how can we get away from that process and squeeze more happiness out of the dollars that we have? Well, there are a variety of strategies out there. One of the most important is to think about spending your money on experiences rather than possessions. Think about experiences.

When you have an experience, not only do you get to experience it, you get … say you’re gonna go on vacation in six months. You get six months to dream about how great that vacation is gonna be. So, there’s that valuable period of anticipation. Then you get to go on the vacation. Hopefully that’ll be fun. But even after the vacation is over, you still have all those fond memories. You can put photographs up around the house, you look at them. You remember how fun it was to go hiking, go to Paris, whatever it is you did. So, you squeeze even more happiness out of that vacation.

By contrast, if you buy the new car, as I mentioned, what do you get in the future? Well, you get used to the new car. You get it scratched up. It breaks down, and you have all the hassles associated with it. So, we tend to get more happiness from experiences rather than things. Another insight from the happiness research is that we tend to be happier if we have a robust network of friends and family.

In fact, not only do friends and family provide a big boost to happiness, but they could also help us to live longer. One study found that having a robust network of friends and family gave a boost to longevity equal in impact to that of not smoking. So, friends and family not only helps happiness, but it also helps our health, and this is actually an additional reason why experiences tend to deliver more happiness than possessions. With experiences, we tend to enjoy them with other people. So, when we go for that hike, or we go on vacation, or we go to the theater, we go to the concert, we tend to do it with other people, so not only do we get to anticipate it with our companions, but also we get to reminisce about it afterwards, about how fun the hike was, how fun it was to go to the concert, whatever it is.

Brett McKay: Yeah. The other interesting insight that you talk about that I think you highlight from Daniel Gilbert’s research was instead of, if you’re gonna, when you’re buying stuff, instead of buying big things like a vacation home or a brand new car, because as you said, you will adapt to that quickly. So, you’re better off spending on little things that improve your day, like a candy bar. Something as simple as that. And if you do that more frequently, you’re more likely to experience happiness over a long run.

Clements: Yeah. The notion is this, if you go out and you spend, take your example. You buy a vacation home for $200,000, the boost to your happiness is not gonna be proportional to the amount of dollars you spent. So, if instead of spending $200,000 on the vacation home, you spent $100 with some frequency going out to dinner with your spouse or partner, you’re probably gonna get a whole lot more happiness out of those restaurant meals than you are out of the vacation home.

Another important way to squeeze greater happiness out of your dollars is to try to design a life for yourself where you get to spend your days doing what you love. This is really important. We tend to, early in our adult life, we tend to go into the work force and we have some career in mind and we may be attracted to it because it’s gonna be high pay or it fits with whatever we studied at college. We think it’s gonna be a good career, but pretty quickly, we tend to tire whatever it is. And the reason is this, our orientation through life tends to change.

When we’re in our 20s and even into our 30s, we tend to be very focused on extrinsic rewards, and what I mean by that is we want to prove ourselves in the work world. We want to get those promotions. We want to get those pay raises. We want to end up as CEO. That really strikes us as being significant. But we may not end up as CEO, but we get those promotions, we get those pay raises, and we discover that actually, our life isn’t a whole lot better. In fact, we may be no happier than we were when we were penniless undergraduates at college.

This starts to sink in and people’s orientation shifts. They become less concerned with those extrinsic rewards, and they become more intrinsically motivated. They become more motivated to spend their days devoted to activities that they think are important, they find challenging, that they’re passionate about. And this point tends to hit during our 40s. This is the classic mid-life crisis. Suddenly we realize we spent 20 years at this stupid corporate job. We made plenty of money, we got promotions, but it just didn’t amount to a hill of beans and now we want to do what we love. Spending our days doing what we love can be a huge, huge source of happiness. There’s a notion in the psychology literature called flow. It was developed by a psychology professor called Mihaly Csikszentmihalyi.

We’ve all had these moments of flow, where we become so engaged in activity that we lose all sense of time and the hours just whiz by. We look up and suddenly it’s three hours later and we don’t know what happened. When you are engaged in those moments of flow, you’re doing stuff that you love, and what you want is a life where you have those moments of flow frequently. And they can come from all kinds of different things. People can get them from exercising, from cooking, from helping others. In my case, I love to spend my days writing. I can spend all afternoon writing and I look up and realize it’s the end of the work day.

So, as you get into your 40s and you burn out on that corporate job that you really didn’t enjoy all that much, you should start to think about what it is about your days that you really enjoy, and then you might want to think about reconfiguring your life so that you can find a career where you have more of those moments of flow. Often, that is gonna mean taking a pay cut, which is one of the reasons why you want to get yourself in great financial shape as early in your adult life as possible. If you start saving for retirement as soon as you get into the workforce, you’re gonna buy yourself the financial freedom to change careers later in life when you become burned out on your current career and you are more motivated by stuff that you personally think is important.

Brett McKay: I love that. Another point you make in your book was this idea of winning by not losing. So, I think a lot of times when we think about financial success, we think about earning more income or getting a better return on our investment, but you argue in the long run, the way you win is by not losing your money. So, how do you go about making sure that you don’t lose the money that you’ve worked really hard to earn?

Clements: When we think about managing money, we imagine we have these goals. We want to beat the market. We want to be the richest family in town. We want to create this huge pile of wealth. But that’s not the goal. The goal is to have enough money to lead the life that we want. We all get just one shot at making this financial journey from here through to retirement, and we cannot afford to get it wrong. If you spend your life buying the financial equivalent of lottery tickets, eventually, your luck is gonna run out and you’re gonna fail at that journey. You’re gonna reach retirement and you’re not gonna have enough money to quit the work force.

So, what you want to do is pursue strategies that have a high likelihood of success. We’ve already talked about one of those strategies, which is buying index funds. If you buy index funds, you know that if the market goes up over a time and it’s highly likely that it will, that you will go along for the ride. If you decide to do something other than buy index funds, you purchase actually managed funds, you dabble in individual stocks, there’s a good chance that you will not go along for the ride, and if you’re really bad at it, it could be that you’ll fail totally and reach retirement without the necessary money to call it quits.

So, if you want to ensure that you make that journey successfully, indexing is one part of that strategy. But another part is making sure that you have the right insurance. You want to have all the insurance that is necessary at the lowest possible cost. So, when your kids are young, you should have life insurance so that your family’s okay if something should happen to you. You want to have disability insurance in case you have an accident and you’re not able to work or you become ill and you’re not able to work. Buying insurance can help you avoid the big losses that can set you back financially and turn your life into a financial failure.

So, thinking less about making money and more about preventing big losses is the key to financial success.

Brett McKay: I love that. Well, Jonathan, this has been a great conversation. Where can people go to learn more about your work?

Clements: I run a website called If you go there, not only will you see regular blogs written by me and others devoted to personal finance issues, but also, the backbone of the site is a huge financial guide devoted to every part of your financial life. You find stuff on estate planning, on saving for retirement, on investing, on insurance, paying for college, borrowing money, the whole gamut. So, if you go there, you can find more information than you would ever want.

Brett McKay: Fantastic. Well, Jonathan Clements, thank you so much for your time. It’s been a pleasure.

Clements: Well, thank you.

Brett McKay: My guest today was Jonathan Clements, he’s the author of the book How to Think About Money. You can find it on and bookstores everywhere. Also, check out more of his writing at the It’s a blog where he updates it regularly with some new content about personal finance. Also, check out our show notes at where you find links to resources where you can delve deeper into this topic.

Well, that wraps up another edition of the Art of Manliness podcast. For more manly tips and advice, make sure to check out The Art of Manliness website at If you enjoy this show, have gotten something out of it over the years, I’d appreciate if you gave us a review on iTunes or Stitcher. That helps us out a lot. As always, thank you for your continued support and until next time, this is Brett McKay telling you to stay manly.

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