Nobody Told Me

Jonathan Clements

I HAVE DEVOTED MY entire adult life to learning about money. That might sound like cruel-and-unusual punishment, but I’ve mostly enjoyed it. For more than three decades, I’ve spent my days perusing the business pages, reading finance books, scanning academic studies and talking to countless folks about their finances.

Yet, despite this intense financial education, it took me a decade or more to learn many of life’s most important money lessons and, indeed, some key insights have only come to me in recent years. Here are 10 things I wish I’d been told in my 20s—or told more loudly, so I actually listened:

1. A small home is the key to a big portfolio. My first wife and I bought a modest house, because we worried that we couldn’t really afford anything bigger. I ended up living in that house for two decades.

Financially, it turned out to be one of the smartest things I’ve ever done, because it allowed me to save great gobs of money. That’s clear to me in retrospect. But I wish I’d known it was a smart move at the time, because I wouldn’t have wasted so many hours wondering whether I should have bought a larger place.

2. Debts are negative bonds. From my first month as a homeowner, I sent in extra money with my mortgage payment, so I could pay off the loan more quickly. But it was only later that I came to view my mortgage as a negative bond—one that was costing me dearly. Indeed, paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.

3. Watching the market and your portfolio doesn’t improve performance. This has been another huge time waster. It’s a bad habit I’m belatedly trying to break.

4. Thirty years from now, you’ll wish you’d invested more in stocks. Yes, over five or even 10 years, there’s some chance you’ll lose money in the stock market. But over 30 years? It’s highly likely you’ll notch handsome gains, especially if you’re broadly diversified and regularly adding new money to your portfolio in good times and bad.

Over the past decade, I’ve upped the bond position in my portfolio, so today—at age 57—I’m at 60% stocks and 40% interest-generating investments. (The latter includes the private mortgage I wrote for my daughter.) But long before then, I spent an awful lot of time debating whether to invest more in bonds. It simply wasn’t necessary.

5. Nobody knows squat about short-term investment performance. This is closely related to point No. 4. One of the downsides of following the financial news—or, worse still, working as a columnist at The Wall Street Journal—is that you hear all kinds of smart, articulate experts offering eloquent predictions of plummeting share prices and skyrocketing interest rates that—needless to say—turn out to be hopelessly, pathetically wrong. In my early days as an investor, this was, alas, the sort of garbage that would give me pause.

6. Put retirement first. When I was in my 20s, I remember a financial expert saying that, “If you don’t own a house by age 30, you’ll likely never own one.” I didn’t realize it at the time, but not only was this alarmist nonsense, but also it prioritized the wrong thing.

Buying a house shouldn’t be our top goal. Instead, retirement should be. It’s so expensive to retire that, if you don’t save at least a modest sum in your 20s, the math quickly becomes awfully tough—and you’ll need a huge savings rate to amass the nest egg you need.

7. You’ll end up treasuring almost nothing you buy. Over the years, I’ve had fleeting desires for all kinds of material goods. Sometimes, I caved in and bought. Most of the stuff I purchased has since been thrown away.

Today, I have a handful of paintings and some antique furniture that I prize, and that’s about it. This is an area where millennials seem far wiser than us baby boomers. They’re much more focused on experiences than possessions—a wise use of money, says happiness research.

8. Work is so much more enjoyable when you work for yourself. These days, I earn just a fraction of what I made during my six years on Wall Street, but I’m having so much more fun. No meetings to attend. No employee reviews. No worries about getting to the office on time or leaving too early. I’m working harder today than I ever have. But it doesn’t feel like work—because it’s my choice and it’s work I’m passionate about.

9. Will our future self approve? As we make decisions today, I think this is a hugely powerful question to ask—and yet it’s only in recent years that I’ve learned to ask it.

When we opt not to save today, we’re expecting our future self to make up the shortfall. When we take on debt, we’re expecting our future self to repay the money borrowed. When we buy things today of lasting value, we’re expecting our future self to like what we purchase.

Pondering our future self doesn’t just improve financial decisions. It can also help us to make smarter choices about eating, drinking, exercising and more. Tempted to have one more slice of pizza? Tomorrow’s self would likely prefer you didn’t.

10. Relax, things will work out. As I watch my son, daughter and son-in-law wrestle with early adult life, I glimpse some of the anxiety that I suffered in my 20s and 30s.

When you’re starting out, there’s so much uncertainty— what sort of career you’ll have, how financial markets will perform, what misfortunes will befall you. And there will be misfortunes. I’ve had my fair share.

But if you regularly take the right steps—work hard, save part of every paycheck, resist the siren song of get-rich-quick schemes—good things should happen. It isn’t guaranteed. But it’s highly likely. So, for goodness sake, fret less about the distant future, and focus more on doing the right things each and every day.

Follow Jonathan on Twitter @ClementsMoney and on Facebook. His most recent articles include Great to GoneFive Freedoms and Helping Them Along.

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