About the author: Jonathan Clements is the founder of personal finance website HumbleDollar. He was a personal finance columnist for the Wall Street Journal for almost 20 years and spent six years at Citigroup as director of financial education for the bank’s U.S. wealth management division. Read this section taken from My Money Journey: How 30 People Found Financial Freedom—And You Can Too with permission of Harriman House.
At the end of 2007, I was approaching the age of 45. I was in an unhappy relationship and didn’t have the courage to end it. I’m in charge of the Wall Street Journal’s 1,000th column. I wondered how long I could go on before my article fell into a repetitive whine. My amateur running career, once the pride of a wimpy British schoolboy, was wrecked when a bone spur aggravated my Achilles tendon.
After years of savings, I owned a mortgage-free home and a portfolio worth $976,000. But my great joy was only my two children. Hannah was in college at the time, and Henry was in high school.
I am not mentioning this to argue that money often cannot buy happiness, but I believe it to be true. Rather, I refer to the end of 2007 to draw a line on my life’s calendar. The years that followed brought events, both good and bad, that disrupted the predictable rhythm of my life. But it was the early dull years that set me on the path to financial independence. Along the way, I learned 10 important financial lessons. I can’t say I’m a thrifty person by nature. I spent my college years and first year in the workforce racking up credit card debt and sometimes overdrafting my checking account.
In August 1986, after working in London for a year, I moved to the New York area and settled with my PhD student fiancée. Her salary was modest, so I was the main breadwinner, initially earning a dismal $20,000 a year at Forbes. I needed to grow financially and I needed to do it fast.
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We called these “low seasons”. Friday night pizza takeout was a treat. Car repair was in jeopardy. Cockroaches and rats lingered in my Brooklyn apartment. I ate in restaurants occasionally, but I had to add up the bill every time I ordered food, which was not very digestible.
The situation gradually improved. My salary increased and his wife got a job as an academic. In 1992 we moved from Brooklyn to a house we purchased in suburban New Jersey. The house was priced at $165,000, and with three bedrooms and one bathroom, it just felt affordable. I will live there for 20 years.
Separation in 1998 and subsequent divorce were the only major financial hits in the last 20 years. It wasn’t a big hit because there wasn’t much to divide. It wasn’t until later that I came to understand the lining of that light, after the divorce, I had to decide for myself all the money I made.
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Journalism was never a high-paying profession back then, and it’s even worse now. Yet I had a knack for taking the rather boring subject of personal finance and making it understandable. By 1994 he was 31 and I was a personal finance columnist for the Journal.
I scrambled to make up for my salary. I wrote a second column each week for The Wall Street Journal on Sunday and received extra compensation for that. I wrote his three books in his ten years, each making his low six-figure profits.
where did you hide this money? Much of it was invested in equity index funds. This reminds me of one of the first financial lessons I learned. If you want to outperform most other investors, simply aim to match the market average. Among my colleagues and readers, I have become known and perhaps infamous for my penchant for stock-focused portfolios constructed using broad market index funds. I made many mistakes, but I got one right.
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I used to see equity index funds as growth capital, but I saw additional mortgage payments as an alternative to bonds. Now let’s move on to the second introductory lesson. Why would he buy real bonds at 4% or 5% when he could have effectively gotten over 7% (the mortgage interest rate at the time) by paying off the mortgage?2005 By then, I had my mortgage forgiven. It was the best bond investment I have ever made.
A third important early lesson is the importance of a low fixed cost of living. Combined with the increase in income, it has allowed me to save a lot of money each month. My humble home was the biggest factor. But the truth is, I was reluctant to spend money on almost anything. I didn’t eat out much. I had the same used car for years. I took my kids on fun vacations, but always kept a close eye on costs. This was a great strategy for accumulating wealth. I don’t know if that’s a great strategy for enjoying life.
I didn’t count pennies and I wasn’t the type to budget. But I kept my money constraints short. I didn’t really like the house I lived in for 20 years. An occasional indulgence or less self-inflicted work stress would have eased some of the pain in my march towards seven figures.
The two decades leading up to 2007 were a long road of predictable days, but the years following my 45th birthday were turbulent of all kinds. He left the Wall Street Journal in 2008 and then worked for Citigroup for six years.
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Ultimately, I focused on HumbleDollar, a website I launched at the end of 2016.
In the last 15 years, I have written eight books, moved four times, remarried, and unfortunately divorced again.
Here is the fourth lesson. This is what I learned from my research on happiness. Our satisfaction with life is U-shaped and often bottoms out in our late 40s. Want to escape the misery of middle age? Saving early in life gives you the financial flexibility to change the trajectory of your life.
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For me, the last 15 years have been the kind of experimentation and turmoil you’d expect from someone in their twenties. I was at a stage in life I had never been through as I was quickly thrust into the role of breadwinner for the family. In fact, I have come to call this period my second childhood.
How did I get through this period financially? It was a mixed bag.
When I joined Citigroup in 2008 and became Director of Financial Education for the bank’s U.S. Wealth Management Group, my financial institution was already in place. However, even if I continued to live like a newspaper reporter, my income doubled.
Working for a Wall Street company was an education. I could see the advice business from the inside. But as I neared the end of my career at City, I realized that this was the only time in my life I was only working for my paycheck. My dollar income may be great, but my mental income was not. In early 2014 I quit.
On the other hand, I have sold three homes over the past decade. One was a big success. He bought an apartment in New York City in 2011 and sold it three years later when the housing crisis was severe. But one of them, his, was an irreparable disaster that left me probably $100,000 more impoverished by him. what went wrong? Among other things, this apartment was difficult to sell due to high commissions compared to neighboring properties.
There is a fifth lesson. Almost all of us will experience a major financial hit or two in our lives, so it helps to be financially prepared, including having plenty of cash on hand. The storm did some damage, but it didn’t threaten my financial future. what about my portfolio? Like others who owned stocks, my investments were shattered by his 2007-2009 and his 2020 stock market crashes. But despite my insistence that financial markets are efficient and invincible, I see both market declines for what they are and how investors’ stock prices are no longer free of their intrinsic value. I watched the moment of overwhelming horror and bought like crazy. I took his 70% of the portfolio in stocks in late 2008. By the time the market bottomed out in March 2009, it had reached 95%.
This is the sixth important lesson I’ve learned throughout my career as an investor. Occasionally, we see momentary investor insanity, but it’s a moment that can deviate from the normal asset allocation.
Throughout the 2010s, my portfolio was entirely index funds, mostly equities. But I had a ton of index funds focused on value stocks, small business stocks, developed foreign markets, and emerging markets, all during the 2009-2020 U.S. bull market. was far behind. Lesson #7: Broad diversification can get you big winners in the stock market, but you’re also guaranteed to own failure stocks.
Yes, I would have done much better had I kept a skewed portfolio focused solely on large US caps. But I’m not going to change my strategy. There is no telling which part of the world market will shine in the next decade. So I will continue to own a little bit of everything.
In the economic triumphs and disasters of the last 15 years, this is perhaps the biggest change. I continue to spend my days writing and thinking about money, but I hardly have time to think about my money. In a world where so many people worry about how to meet their daily expenses, I have come to realize that money is not considered a great luxury. Lesson #8: Often the best way to buy happiness is to buy nothing. Instead, simply accumulate your savings and enjoy the peace of mind that comes with it.
Spending money has become easier. I have enjoyed helping her two children financially and funding her grandson 529, belatedly becoming more focused on philanthropy. This brings me to my ninth lesson. I have found that there is more happiness to spend on others than on oneself.
Not everything is right in my world. Decades of hard work to keep the forces in motion in motion have created a momentum of their own, and I find myself struggling to resist it. Partly this is due to my delusion that what I am doing is important, maybe it is, but not as important as I imagine. There you will find his tenth and final lesson. Time is more important than money management. Because time is ultimately a limited resource. You should lead a more balanced life. I know it intellectually. But I’m still trying to convince myself.
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