With Jonathan Clements, Founder and Editor of humbledollar.com, Author of From Here to Financial Happiness: Enrich Your Life in Just 77 Days
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Jonathan Clements is the Founder and Editor of Humble Dollar, a site dedicated to educating investors on financial planning and wealth creation. In conversation with Steve Pomeranz, Jonathan discusses his latest book, From Here to Financial Happiness, Enrich Your Life in Just 77 Days.
In the book’s title, 77 days refers to the 77 steps required to take back control of one’s financial life. Everyone knows that sound finances involve saving diligently, diversifying, buying the right insurance, not taking on too much debt, etc. However, most people have a hard time following through on these financial planning basics.
Dream A Little, Make A List
In his book, From Here to Financial Happiness, Jonathan attempts to change people’s economic behavior by playing financial adviser. Steve likens this to telling clients to “dream a little” about what they’d like to accomplish and how they’d like their lives to be in retirement and then work at making it happen.
Echoing what Steve has touched on several times, Jonathan notes that buying new things delivers temporary joy, but spending money on experiences gives us memories that last a lifetime.
He wants readers to make written lists of their goals, dreams, and desires. After doing that, you can set priorities and go about accomplishing them.
In From Here to Financial Happiness, Jonathan speaks of twin-wins, two things you can do right away to increase the probability of financial success. The first is to put enough in your 401(k) to get your employer’s full matching contribution. The second is to pay off your credit card debt right away and maintain a zero outstanding balance.
By contributing to a 401(k), you’re building up assets. By paying down your credit card, you’re removing a very expensive liability. These alone are excellent steps toward financial success.
Everything’s A Tradeoff
If you spend money today, you can’t save it for the future. If you put your savings toward a house down payment, that’s less money that’s available for retirement. We make financial tradeoffs all the time, but we don’t think them through.
This is especially true with impulse purchases. Such purchases are driven by in-the-moment desires that drive out all thoughts of the financial tradeoffs involved with that impulse purchase.
So the trick is to not give in to impulses. Walk out of the store or wander around the block. If something is really expensive, give yourself a few days to sleep on it.
Simply pausing for ten minutes is enough to make impulses go away, which can lead to smarter financial and consumption decisions.
Be An Owner
In From Here to Financial Happiness, Jonathan Clements strongly recommends ownership, be it a home, a car, or a stock. He’d rather you own than rent or lease. With stocks, for instance, you are buying a piece of the company. This is very different from purchasing bonds, where you are lending money to someone else.
Ownership is all the more beneficial if you plan to hold the asset for a long time.
Steve adds that another, more direct, form of ownership is building your own business. If you work for someone else and earn a salary, your employer accrues the benefits of business ownership. Should the business succeed, the owner stands to realize a greater value for that asset in the future, which can lead to tremendous financial success.
Moreover, the psychic income from running your own business is leaps and bounds greater than what you enjoy as an employee. Surveys show that people who are self-employed tend to be happier than people who work for others.
In closing, Steve notes that Jonathan Clements’ book, From Here to Financial Happiness, Enrich Your Life in Just 77 Days, is an easy read offering simple steps we all can take toward a brighter financial future.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: Jonathan Clements is the founder and editor of Humble Dollar. That’s a website that you should go to, Humble Dollar. He spent almost two decades at the Wall Street Journal where he was a personal finance columnist. And we’re here to talk about his latest book, From Here to Financial Happiness: Enrich Your Life in Just 77 Days.
Hey, Jonathan, welcome back.
Jonathan Clements: Hey, Steve, thanks for having me on the show again. I really appreciate it.
Steve Pomeranz: So I understand the book just came out and give me a little background as to why you wrote it and where you came up with 77 days.
Jonathan Clements: Yeah, people always ask about the 77 days, like was that cooked up out of thin air?
And the answer is, of course, it was.
Steve Pomeranz: [LAUGH] You ran out of ideas basically, is that it?
Jonathan Clements: I started to list all the various steps that I thought somebody should go through and try to get their arms around their financial life. And I came to the end of the list, and I was at 78.
And I was like, 78 is just not a great number. How about we get it down to 77 ‘cause it sounds so much better. So yes.
Steve Pomeranz: Okay.
Jonathan Clements: It is completely manufactured, but not, maybe, not totally out of thin air.
Steve Pomeranz: Well, I mean, there’s some precedence behind it because you see books about dieting and lose weight in less than three months or whatever it is.
And you’re at 11 weeks on this. I think you calculated the 77 days, so we’re talking just less than three months, you can get your financial act together. So you wrote that the world doesn’t need another book that explains investing or home buying, estate planning, insurance and so on.
But you wrote one anyway. So why is this book different?
Jonathan Clements: One of the things that has struck me more and more over the years—I’ve been writing about this stuff for more than 30 years—is that figuring out what to do with your money isn’t terribly difficult.
So, you save diligently, you diversify broadly, you buy the right insurance, you don’t go crazy with debt, so we know all of that stuff. The real problem is getting ourselves to do it, is the behavior change element. And this is why hiring a good financial adviser could be such a smart thing to do.
The financial adviser will help to impart knowledge to you, but more than that, the financial adviser will help you to change behavior. And that’s the really tough part here. Managing money is simple, but it’s not easy.
Steve Pomeranz: Yes.
Jonathan Clements: My book in a sense is an attempt to play financial adviser for readers.
The goal is to help them to get their arms around their financial life. Figure out the steps they should take and then push them to act. Now that is the reason for the 77 days.
Steve Pomeranz: I noticed some correlation with the kind of work that I do here in my practice in the sense that one thing we ask our clients to do is to really kind of dream a little.
Think about your future. Take a quiet moment and think about the things that you would like to accomplish or experiences you would like to have in this one life that we only get. We don’t get another chance at this. So why not try to get everything in that you can, and your day three is dream a little.
Tell us about that.
Jonathan Clements: So, yeah, that’s exactly right. And the reason for that is most of us are actually not very good at figuring out what we want. We grow up with certain conceptions that we want the big house. We want the fast car. We want to be ridiculously rich.
And then we go out, and we get those things. And it doesn’t turn out to be a source of great happiness. So the people, to get the most out of their money, they’re ready to think hard about what they want and that starts by dreaming a little. By sitting down with a piece of paper and writing out what you want out of your life and out of your financial life.
And not only does that help you to focus on the things that are important to you. But it also gets you to visualize the things that your future self might enjoy. We’re very good at taking care of our current selves. We’re very good at eating a lot of food right now.
Deciding that maybe we’re too lazy to go to the gym today, that maybe we want to go on a shopping spree. Really bad looking after our future self because we’re just bad at imagining and feeling compassion for that person. So by dreaming a little, by writing down our goals, we raise up the things that we want to do in the future.
And once those things are there in our heads and we can truly visualize them, then we’re willing to make the necessary short-term sacrifices in order to achieve them.
Steve Pomeranz: Yeah, so basically it’s just get it in your head where you want to go, so you can start the journey toward that destination.
If you don’t know where you want to go, like I guess, Yogi Berra said, you’re going to end up there. So something like.
Jonathan Clements: Exactly. And you know what-
Steve Pomeranz: There’s easy ways to do that and there’s hard ways to do that. And what I like about your book is that a lot of the advice is pretty easy.
And I want to bring attention to day five which is twin-wins—two things that you can do right away to increase the probability of financial success. You want to take it or should I?
Jonathan Clements: Sure, I’ll take it. So, if you go to a good financial adviser. They’re going to create a customized financial plan for your specific situation.
And that’s great. But you could be absolutely sure that if you go to a good financial adviser, they’re going to tell you to do two things, tell everybody to do two things. One is you should be putting enough money into your company’s 401K plan in order to get the full matching contribution.
And two, if you’ve got credit card debt, pay it off. So those are the twin-wins. Whatever else you do, the first two things you should do is make sure you signed up for that 401K plan so you’re contributing at least enough to get the match. And two, start paying off that credit card debt.
Steve Pomeranz: There are benefits to both sides of the balance sheet because the trick over time is to build your assets. So what this is basically saying is that by contributing to your 401K, you’re building your assets. And then it’s to reduce your liability so you don’t want to carry credit card debt because that’s a liability, and it’s very expensive liability.
So right there, there’s two things working on your balance sheet. That if you just get that straight and you keep doing it over time, is going to lead to a lot of that success that you’re talking about. Day seven, everything’s a trade-off. What is that?
Jonathan Clements: So if you buy something today, you can’t buy something else.
If you spend the money today, you can’t save it for the future. If you put your savings towards a house down payment, that’s less money that’s available for retirement. We make these financial trade-offs all the time, the problem is we don’t think enough about them. And in particular, this occurs with impulse purchases.
We walk into the department store, we see some bright shiny object, and we grab it, go to the checkout, and buy it. We’re making this impulse purchase and we’re so greatly desiring that object that it drives out all thoughts of the financial trade-offs that we’re making in purchasing it.
So one of the tricks is if you see a bright shiny object, whether it’s a new pair of shoe or a piece of jewelry or a timeshare that’s offered to you on vacation, walk out of the room, wander around the block, take ten minutes and think about it.
Simply pausing for ten minutes can lead us to make smarter financial and consumption decisions. That brief pause can cause, can allow the contemporary side of our brain to engage with the instinctual reaction that we’re having that’s saying, I want this.
Steve Pomeranz: Yeah, it’s like if you’re a smoker, and you got to have that cigarette.
If you just stop, walk outside, start a conversation with someone, you’ll realize, hey, that impulse is gone. I made it through one cigarette that I’m not smoking. It’s kind of the same thing, it’s getting your mind off of it and getting centered back on what’s important in your life without emotion and without that feeling that you get for making a snap purchase.
Day 43 is entitled, “Be An Owner.” I have a lot to say on that myself, but why don’t you tell us about what it says in the book.
Jonathan Clements: So, with three crucial areas of our financial life, we are offered the choice to be an owner or essentially a renter.
Obviously, we make that choice with homes. We can own a home or we can rent one. But we can also do that with cars. We can either buy an automobile or we can lease it. And similarly, when it comes to investing, we could be an owner. We could go out and purchase stocks, which makes us part-owners of a corporation.
Or essentially we can rent our money to governments or to corporations by buying their bonds. If you have a long enough time horizon, whether you’re looking at cost, you’re looking at homes, or you’re looking at investing, you want to be an owner. That means you want to own cars if you have a long enough time horizon.
You want to own a home and you want to be invested in the stock market.
Steve Pomeranz: Another way to be an owner if you have the mind for it is to try to own your own business. You can work for somebody else and earn a salary, and that person may accrue the benefits of business ownership.
But if you yourself can be an owner of a business, the chances of you being able to realize a greater value for that asset that you’ve built in the future can be a very large step in a successful financial career. Would you agree with that?
Jonathan Clements: Absolutely, Steve, and I would add one point to that which is, having been an employee and now owning my own little business, the psychic income you get from running your own business is leaps and bounds greater than that that you enjoy as an employee. I mean, it is so much fun to run your own business and to see the direct results of your own labor.
I have to say that running my own business has probably proved to be one of the happiest times of my life, and the surveys bear this out. People who are self-employed tend to be happier than people who work for others.
Steve Pomeranz: I would totally agree. The book is From Here to Financial Happiness: Enrich Your Life in Just 77 Days, it’s brand new.
The author is Jonathan Clements. If you have a question about what we just discussed, ask us. Go to stevepomeranz.com. And while you’re there, sign up for our weekly update where you will receive our show in your mailbox. And you can listen to it at your convenience, and also follow our podcasts by searching for Steve Pomeranz in your podcast app.
Or as I said, go to stevepomeranz.com. Jonathan, thank you so much for joining us.
Jonathan Clements: It’s been a pleasure, Steve.