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THE OLDER WE GET, the easier it is to see the progress we’ve made, both as individuals and as a society. But I’m not just thinking about personal wealth, higher standards of living, better health care and extraordinary technological advances.
As I look back, I also see impressive progress in our financial thinking. Here are eight notions that were conventional wisdom half a century ago—but which today aren’t universally accepted and, in my estimation, ought to be discarded.
1. Wall Street sells wisdom. Remember John Houseman in those old Smith Barney ads? “They make money the old-fashioned way. They earn it.” Today, the notion strikes me and many others as laughable.
Wall Street doesn’t sell wisdom. Rather, it sells whatever it can get folks to buy—and that’ll also make a heap of money for the Street. What about making money for customers? That, it seems, falls into the category of “happy accidents.”
2. The goal is to beat the market—and, with hard work, we can do it. The reality: Millions of investors have tried to beat the stock market averages and failed, which is why today there’s more money invested in index-mutual funds and exchange-traded index funds than in actively managed funds.
But this massive vote in favor of index funds doesn’t just reflect the realization that beating the market is unlikely. It’s also dawned on many investors that outperforming the market is unnecessary. Instead, by saving diligently, settling on a sensible stock-bond mix, and simply collecting the financial markets’ returns while incurring minimal costs, we should have a great shot at achieving our financial goals.
3. The rich and famous have better lives. The myth: They live in a magical world that we mere mortals can only dream about. This belief was fed by Hollywood publicists and the fawning celebrity journalists of decades ago.
But celebrity journalism isn’t nearly so fawning today. As we’re reminded by the media on a daily basis, the lives of the rich and famous aren’t nearly as wonderful as we imagine. Surprised? Maybe we shouldn’t be. Like you and me, the rich and famous have sleepless nights, indigestion, self-absorbed teenage children, constipation, quarrels with their spouse, and all the other struggles that come with being human—things for which money and fame are not magic antidotes.
4. You can tell who’s rich. As a child, I remember assuming that those who appeared rich—with big houses and fancy cars—were rich. The bestselling book The Millionaire Next Door burst that bubble, pointing out that folks with a seven-figure net worth were often the quiet couple down the street who lived in a modest home, drove older cars and didn’t sport designer clothes. Their thrift, of course, meant they could save great gobs of money.
Indeed, if you listen carefully to what your supposedly wealthier acquaintances say, you can often pick up clues about the true state of their finances. Do they still have a mortgage? Are their cars leased? Are they limiting their children’s college choices? While there might be sound reasons for doing such things, these could also be signs of financial stress—and your purportedly wealthy friends might not be nearly as wealthy as they pretend.
Some years ago, I met an older man through his middle-aged daughter. He was full of bravado and appeared quite wealthy. Still, not all seemed quite right.
When he described the investments that he owned and what drove his trading choices, it was hard to imagine his results were all that great. And when he mentioned that there was still a mortgage on the huge house that he owned, I grew even more suspicious. Even though I gathered he had a five-figure monthly pension, it didn’t appear to be enough to support his lavish lifestyle.
I never learned the true state of his finances. But when his daughter was struggling to cope, financially and otherwise, his response wasn’t to write a check. Instead, his daughter told me, he made a special visit—to help her develop a budgeting spreadsheet.
5. Money buys happiness. A half-century ago, most of us simply assumed that money bought happiness. Today, most folks—including me—still think that’s true. But thanks to some fascinating research, our view is now much more nuanced.
For instance, there are many other factors that affect happiness—friends, faith, divorce, unemployment, age—including the biggest factor of all, which is our innate happiness “set point.” Moreover, much depends on what we buy with our money. Do we use it to create special times with friends and family, to pursue meaningful activities, to favor experiences over things, and to be generous with the causes and people we care about? Research suggests such spending is more likely to boost happiness.
6. More is better. When I say “more,” I don’t just mean more money. Folks spend their lifetime pursuing more of many things, including more career successes and more possessions. But this pursuit can leave us running fast on the hedonic treadmill, sure that the next item will bring greater happiness, only to find we’re running in place. What to do? I’d suggest that each of us should figure out what we’d consider enough, including both enough money and enough worldly success.
7. Employers care. My parents worked for a paternalistic employer, and I certainly thought of my initial employers in those terms. But how many folks today believe that, if they work hard, their employer will return that loyalty and that their job is truly safe? The evisceration of that social contract has, I believe, left us all worse off, both workers and their employers.
8. Time to relax is the big reward. Amassing enough to live without a paycheck is our life’s great financial task. But with many folks reaching retirement in good health, and with potentially many decades ahead of them, retirement from the workforce is no longer about retiring from life.
Rather, it’s about starting new adventures, whether those adventures involve hobbies, travel, volunteering, further education or second act careers. Forget sitting at home in an easy chair with the cat and the TV. Perhaps our retirement might end that way. But many folks embarking on retirement today are looking for much more from life’s final chapter.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles.
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Jonathan, my favorite quote, MONEY DOESN’T BUY HAPPINESS, IT BUYS FREEDOM
Nice article, Jonathan. It is great to see our human’s knowledge, including finance, keeps evolving. Thank you for sharing this.
#7. I agree the employer/employee relationship has deteriorated, but it seems to me that the employee side of the relationship is at least 50% to blame. I’ve employed a range of workers including tradesmen, professionals, clerical and laborers, and surprisingly few workers under 50 years old have the same work ethic as the over 60 year old group.
In the age of globalization, the CEO’s primary responsibility is to serve the interests of the shareholders, not the employees. The employees are an expandable resource to a company.
#8 really resonates with me. I’m that “millionaire next door” who earned it the old fashioned way – saving and investing. I retired 10 years ago at age 57 and thoroughly enjoy doing whatever I want whenever I want. Although my wife and I enjoy traveling often, what gives me the most satisfaction is working in my yard and gardens at my leisure.
Jonathan, I have been listening to your podcast interviews and reading your articles for close to 10 years. Your wisdom and sensible thinking as made a big impact on me and how I try to help others. Thank your for continuing to share with us as you go through this most recent change and you and your family are in our prayers. Your openness in this time is a great example.
#1 The obligatory DIY dig at “Wall Street”. I have been a Financial Advisor for 18 years and I have many clients that tell me they are thankful for me, they appreciate all I have done to help them reach their goals. I am proud to be an honest Advisor that receives referrals from happy clients. Am I wrong Jonathan, that took “Wall Street” money when it suited you, when you worked at Citigroup?? I wish you the best with your health situation.
I was in the industry for 27 years and then spent the 15 as an academic, training CFPs, ChFCs, CLUs, RICPs and others pursuing certifications in financial services.
While it is true that there are reputable, honest, ethical advisors, most are that way despite the firm’s they work for, rather than because of the firms they work for.
Wall Street care about one thing and one thing only…themselves…period. If they can make a dollar ore by being dishonest vs. honest, they have proven time and again, they will. Wall Street and Wall Street firms, like a fish, rot from the head.
Lastly, although he doesn’t need me speaking his behalf, your attempt to throw shade on Jonathan, by referring to his time with Citicorp says more about your lack of integrity then most of the rest of your post.
Were you to spend an hour or two reading the forums at Bogleheads, you would encounter a number of people who have realized that they or a loved one are being royally fleeced by their “advisors”. Advisors recommended by friends, or by relatives, or met at church. The horror expressed by the industry at the notion that they should operate in the best interests of their clients rather than themselves speaks for itself.
My wife has worked in law for many years. So many people fleeced by terrible contractors, people injured or who have died because of malpractice by physicians. You find good and bad in every profession. We’ve all had or our kids have experienced bad teachers or coaches AND thankfully throughout life, great Dr’s , contractors, teachers , coaches too!!!!
The negative sells in the good ‘ol USA., but I’m careful not to paint every one with same broad brush.
Jonathan Clements asked you if you are a fee-only advisor who is held to a fiduciary standard. Is there a reason why you haven’t answered him?
At Citi, I was director of financial education for the U.S. wealth management business. Can we assume you’re in favor of educating clients? Can we also assume you’re a fee-only advisor who is held to a fiduciary standard?
For #6, “enough” vs. “more” is true wisdom. I learned that the hard way. But I now know “more” isn’t always better. And #8 is spot-on. Retirement hasn’t meant idleness for me. If anything, I have never been more active. And, when I want to, it’s wonderful to be idle any time and for as long as I like. By the way, thank you, Jonathan! I have been reading your work for decades and I have internalized many of your lessons. Thanks to you, I am on a better path than I would have otherwise been.
#7- When viewed in our country’s historical work context (slavery, indentured servitude, sweatshops, child labor), the period of paternalistic employment looks like an anomaly. I can’t help but wonder if the paternalistic social contract may have simply been the most profitable form of employment for companies during the middle of the 20th century.
That was when companies were supposed to have some form of social conscience and concern for the communities where they were located. That was destroyed by the mantra of “shareholders first” and the tyranny of quarterly reports to Wall Street. I can remember when we had five year plans….
Nice collection, but I’m not entirely on board with #8. If you have retired from a white collar job with a good nest egg, and, crucially, good health, sure you may be planning an active retirement. But many people are not in that fortunate situation, and some of those who are may still want to kick back and take it easy. They shouldn’t feel pressured into being more active.
Agree. Freedom to what you want is the best thing for me. No need to feel compelled to be travel, etc. Do nothing if you want, after a working life of schedules and having things that needed to be done
The piece doesn’t say retirees should travel, though obviously many do. But I’ve never met retirees who “do nothing.” They may not travel, but often they’re very active at home or in their community. We shouldn’t view that as doing nothing.
My point about doing nothing simply means if you want to relax, then just do it. Do not feel compelled to always be active. It also means to do what you enjoy at home or in the community, even if you sit in your backyard and enjoy nature. You misinterpreted my meaning. Maybe I should have worded it differently.
Your statement that retirement from the workforce is no longer about retiring from life implies that used to be the case which I think is doubtful. All four of my grandparents were socially active and never seemed to be lonely. Both sets of grandparentss also enjoyed tending to their large gardens.
If someone is not active in the community (specifically, your part of it), and is not related to you, how would you meet them?
With regards to # 7, the book Leadership BS, by Jeffrey Pfeffer, a Stanford Bus School professor specializing in organizational behavior, specifically power in organizations, is a great read on the topic of toxic leadership. Bottom line, workers must look out for themselves, be skeptical of their leaders, and never expect loyalty to be reciprocated. The book is a must read for anyone heading into the corporate working world.
Well said Jonathan. I remember Buffett said ( paraphrased) that many people with money want the “best” of everything, and are accustomed to shelling out dough to get it. Yet, the best advice for investing is out there, free for anyone to follow. These same folks are skeptical that the best advice is free, and they are susceptible to those who will sell them expensive advice to beat the market.
Regarding #1, all I could think of was Fred Schwed’s book “Where are the Customers Yachts?” which was written over 80 years ago. As far as I’m concerned, this should be a “must read” for all investors.
I love it. I remember that phrase from a book I read in the 1990’s. Can’t remember the book, but I remember the phrase.
#1 – Scene: a crowded, noisy place. “Well, my broker is E.F. Hutton and E.F. Hutton says……….” (cue the crickets). Quite a story on how this firm started and evolved over (and over) time.
After spending a couple awkward years in financial services, I couldn’t agree with #1 more. What a racket.
Excellent article. No. 8 is so true. Retirment is so much about having control of your time and being able to do things you enjoy without time constrants, not to mention being able to travel during shoulder seasons!
Agree that money doesn’t buy happiness but for me it sure gives me peace of mind.
Another one that is becoming outdated is that a four year college degree is worth the financial investment. There are more viable options now for achieving career success without obtaining a traditional 4 year college degree.
Chris…I couldn’t agree more!
As I approached retirement, I read 30 books on it, if I read one. The one thing that I had issues with was the drumbeat about having to “have a purpose” in retirement.
I retired in January 2024. I remember sometime with the first 45-60 days of retiring awaking one day and experiencing a feeling I did not ever remember feeling before in my lifetime. It was the feeling that all the world’s burdens had been lifted off of my shoulders, and I was “FREE! I had no more classes to teach…text books to author/edit…no more student emails to respond to (24/7, 365)…no more committee meetings…no more meaningless DEI trainings to endure…no more racist/misandrist “leadership, with zero real world experience in financial services, hiring their toadies and destroying 100 years of financial services excellence in education to put up with.
And most important…no one telling me I have to do anything I don’t personally want to do.
Someone mentioned adding the fact that 4 year degrees are not what they use to be. I agree 100%. When I speak to younger folks I tell them all to learn a trade or a set of skills that can’t be done by a machine or a person in a foreign country for 1/4 of your wages in the US. The trades, one of the medical fields, something that you can train for in 1-2 years and then build your skills and eventually own your own business.
Liberal Arts, the Humanities, Social Sciences, “Women’s Studies,” and 4-5 associated “fields of study” are a complete waste of time, unless you plan to be an academic, and God help you if you are dumb enough to buy that load of garbage. Talk about malpractice… thousands of PhD’s graduating annually with zero hope of ever gaining a full time position in academia, but 100’s of colleges willing to pump them out for the right price.
But I digress.
Will I eventually look for ways to “give back?” Certainly, and I will most likely do it by serving the needs of fellow seniors and veterans, on a pro bono basis, using my 54 years or eduction and experience to help others about whom I care.
In the mean time, I am loving “doing nothing,” but learning how to cook with my air fryer, fostering our 14th-20th kittens over the past 8 months, and providing a new home to a stay dog who has been hanging around for the past 3 days, living in my garage at night, until I can get her to a vet tomorrow, after this long weekend.
Just what I need…another woman in my life for whom I will provide and protect!
Unfortunately many companies still will not even interview a prospective employees who doesn’t have a college education. They may look at that as a maturing process as well as an educational one.
A recent Pew Research Center article concluded that even though Americans increasingly doubt the value of a college education, the gap in earnings between young adults with and without a college education has not narrowed.
After decades of falling wages, young U.S. workers (ages 25 to 34) without a bachelor’s degree have seen their earnings increase over the past 10 years. Their overall wealth has gone up too, and fewer are living in poverty today.
Things have also improved for young college graduates over this period. As a result, the gap in earnings between young adults with and without a college degree has not narrowed.
https://www.pewresearch.org/social-trends/2024/05/23/is-college-worth-it-2/
I’ve read that due to shortages tradesmen are now making 100K plus, but not how much of that is due to overtime.
Yep. And wages for everyone in the trades will just keep going up until more of those jobs are filled.
In Oregon, an electrical apprentice will make $24.20 an hour on day one. By the end of their apprenticeship, they will be making $51.43 an hour. And the prevailing wage for a Journeyman electrician is $60.50 an hour (in addition to a bunch of fabulous benefits).
Electricians are clearly in demand and it can be a rewarding career. However, anyone thinking about entering a skilled trade should seriously consider if they are okay with the physical demands.
Electricians work indoors and outdoors at homes, businesses, factories, and construction sites. Because electricians must travel to different worksites, local or long-distance commuting is often required.
On the jobsite, they occasionally work in cramped spaces. The long periods of standing and kneeling can be tiring. Electricians may be exposed to dirt, dust, debris, or fumes. Those working outside may be exposed to hot or cold temperatures and inclement weather. Those who work in factories are often subject to noisy machinery.
Electricians may be required to work at great heights, such as when working on construction sites, inside buildings, or on renewable energy projects.
https://www.bls.gov/ooh/construction-and-extraction/electricians.htm#tab-3
I’m pretty sure most folks who decide to pursue careers in the trades are aware of the physical requirements of that type of work. All of the people I know who work in the trades do so because of the physical nature of the work. They aren’t the type of person who would be happy sitting in front of a computer all day.
Thanks Kristine! I had a fellow add Level 2 charging to my garage. He had just passed his Master Electricians test and now when he has a job that needs digging, he requests an apprentice to ‘train’. ha!
Jonathan, thanks for another “eye-opening” article of astute financial insight.
Items number 5 and 7 especially resonated with me.
5- Money buys Happiness-I completely agree with the nuanced version that WHAT we buy and HOW we spend our money is what truly brings Happiness. Using our money to have and share experiences with our adult daughters their spouses and our grandchildren is what really brings happiness to us. Family vacations, time spent together doing activities (including bike riding, playing sports, and hanging out at the beach) and sending our grandkids to camps to have great experiences are much more satisfying than buying more stuff! My mantra learned from the book “Die with Zero”.
7-Employers care- I worked the last 34 years of my career for the same employer who showed loyalty to their employees (and expected the same from us) in the form of job security, good pay and benefits including a defined benefit pension which I just retired with a year ago (in addition to a very generous 401k match). These benefits are still offered to new employees starting at the company today.
These benefits made working my career knowing I had a steady and secure job and would have a secure future retirement much easier and less stressful than most of my friends and and certainly than my kids and their peers have today.
Job security just doesn’t exist anymore and the shift of the retirement burden to employees with 401k plans vs pension plans makes for a more uncertain future.
I’m sure there are even more notions that can be challenged today. Thanks for the reminders.
The myth: They live in a magical world that we mere mortals can only dream about. This belief was fed by Hollywood publicists.
It appears that the modern version of publicists is social media posts/influencers. They all seem to have the perfect stress free life.
Don’t believe it.
These are all great, Jonathan. The ones that resonated with me as I recall my very early days of investing under my father’s guidance are 1,2,and 8. He had me subscribing to Barron’s so I could become proficient at picking winners; and Fidelity’s Peter Lynch (of Magellan mutual fund fame) was everyone’s guru. Ha!
Another one that he used to drill into my sibs and me was that nobody ever gets rich being a corporate executive, which is what he was for his career. The way to make real money was to be an entrepreneur. While he wasn’t wrong about that, those who are fortunate enough to make it even some way up the corporate ladder and hang on long enough to retire come out financially very well, so that’s also changed a lot.