Tell Us a Story

Jonathan Clements  |  September 1, 2018

YOU MENTION to a colleague that longtime smokers shorten their life expectancy by an average of 10 years. Your colleague responds by talking about his grandmother who smoked a pack every day until she died at age 98. We all know that the statistic should trump the anecdote. But on the conversational scoreboard, it’s one point for both sides—and, three weeks later, you can’t help but recall the grandmother’s story.

The same thing happens with personal finance all the time.

It’s often a struggle to get people to agree on how best to analyze key financial questions. What rate of return should we use when weighing whether it’s better to claim Social Security retirement benefits early or late? Should we consider the leverage provided by a mortgage—as well as the interest cost incurred—when assessing the pros and cons of homeownership? What time period should we use when judging the effectiveness of different investment strategies?

But even if we can agree on such issues, the anecdotal riposte is almost always a killer:

  • House prices have climbed 4.4% a year over the past 40 years, barely ahead of the 3.4% inflation rate. But that compelling statistic is no competition for some crazy tale of skyrocketing San Francisco home prices.
  • Most retirees fare better financially if they delay claiming Social Security, as long as they live until their early 80s. But that immediately prompts a story about Dad who dropped dead at 67.
  • Suggest to insurance agents that term insurance is a better bet for most families than a cash-value policy, and they’ll respond with poignant stories about delivering checks to grieving widows—as if that somehow settles the term vs. cash value debate.
  • Point out that most home improvements are money losers, and your in-laws will start raving about their kitchen upgrade and how they’re sure it’s been a great investment.
  • Cite statistics showing that more money hasn’t bought greater happiness, and friends will mention how thrilled they are with their new car.
  • Detail the inevitable failure of most investors to beat the market, and someone will bring up the neighbor who purportedly bought Amazon’s stock at the initial public offering and never sold. What if that doesn’t work? There’s always the favorite fallback position: Simply mention Warren Buffett’s name.

That said, it strikes me that investment discussions—as well as debates over money and happiness—tend to be a tad more thoughtful than other financial arguments. During our lifetime, each of us might own just three or four homes, and we only get to claim Social Security once. Result: We simply don’t have many data points to consider, unless we make a serious effort to research the issue.

By contrast, over our lives, we might make hundreds and perhaps thousands of investment decisions. True, we may fall into various behavioral traps, conveniently forgetting our losers, blaming our bad investments on others and assuming our winners have fared better than they really have. But often, the weight of our many mediocre investment decisions eventually sinks in—and (you were expecting me to say this) the logic of indexing proves irresistible. The $1.6 trillion flowing into U.S. stock index funds over the past decade—and the $1.3 trillion flowing out of actively managed funds—are a testament to that.

Similarly, during the course of our lives, we make thousands of consumer purchases—and the cumulative disappointments take their toll and we gradually become less convinced that money can reliably buy happiness. That’s why we tend to make smarter use of our dollars as we grow older. The young assume that the next possession will bring long-lasting happiness. The old know that the happiness from the latest shopping spree will likely prove fleeting—which is why they shun possessions and instead focus on buying experiences, especially experiences enjoyed with friends and family.


MY NEW BOOK officially goes on sale next Wednesday. From Here to Financial Happiness takes readers on a 77-day journey, helping them figure out where they stand, what they want from their money and what they ought to do next. Somedays, the book offers a brief financial lesson. Somedays, you learn about yourself. And somedays, you will need to take a few simple steps. Most day’s reading and activity should devour no more than five or 10 minutes.

I’ve made a slew of tweaks to in recent months—and I’d like to hear your thoughts. If you have a few minutes to spare, please take this 11-question survey. The survey also has a few questions that relate to another venture I’m working on.

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Jonathan’s previous articles include Bad NewsNo Place Like Home,  Low Fidelity and Try This at Home. Follow Jonathan on Twitter @ClementsMoney and on Facebook.

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