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WHEN HANNAH AND HENRY were children, I talked a lot about money. This was partly self-preservation: It would have been embarrassing if the kids of a personal-finance columnist grew up to be financial ne’er-do-wells.
Fortunately, they didn’t. Hannah and Henry are now in their 30s. Both have good financial habits, and today I typically don’t talk to them about money except when they have questions. Still, given my cancer diagnosis, perhaps a few final reminders are in order—13, to be precise:
1. Be an optimist. When you buy bonds, you rent out your money and get interest in return. But when you purchase stocks, you become an owner—and owning is the road to wealth. Sure, if the global economy collapses, you’ll end up broke. But so will everybody else, including those conservative folks who spent their life cowering in bonds and cash investments. Think of owning stocks as “heads I win, tails everybody loses.”
Moreover, over the long haul, losing strikes me as unlikely. Every morning, billions of people around the world wake up, trying to figure out how they can make their life better. Buying stocks is a way to profit from that energy and dynamism.
2. Don’t pay too much attention. By this, I mean don’t look at your portfolio too often, don’t listen to market pundits and don’t fiddle with your investment mix. If I’d done that from the get-go, I would have saved myself a lot of time—and you’d be inheriting a lot more money.
3. Own the world. Buy Vanguard Total World Stock Index Fund (symbols: VTWAX and VT), which owns every stock of any consequence, and then let your money ride. Which will shine, U.S. or foreign stocks, growth or value, large or small? With a total world fund, there’s no need to guess. As long as the global economy keeps growing, so will your portfolio.
4. Use your superpower. Are the talking heads prattling on about a possible market crash? That might be unnerving if you plan to spend all your savings in the next few years. Otherwise, ignore such nonsense. Instead, think and act like a truly long-term investor—something even most professional money managers fail to do, because they’re worried about their year-end bonus and about losing clients. The ability to play the long game is the everyday investor’s superpower, but one that’s used all too rarely, alas.
5. Buy more when stocks drop sharply. Whenever the stock market tumbles, folks offer reasons the decline will get even worse. They’ll point to high valuations, or geopolitical concerns, or a potentially vicious economic contraction. But we’ve seen this movie numerous times.
Over my investing career, whenever stocks have plunged, I’ve instinctively bought more, backed by my confidence that the world economy will keep growing and that my globally diversified stock portfolio will benefit from the eventual recovery. This has been one of the biggest contributors to my portfolio’s growth, along with indexing and a voracious savings habit.
6. Unburden yourself. There’s plenty of debate over whether it’s smart to pay off mortgages and other borrowed money faster than required, and yet I’ve never heard anyone say, “I wish I wasn’t debt-free.” Paying off debt earns you a guaranteed return equal to the loan’s interest rate—and that rate is typically higher than you could earn by buying bonds and cash investments.
7. Play soft defense. Insurers and their salespeople will happily sell you blanket coverage—but that’s an expensive proposition. What to do? Favor policies with high deductibles and long elimination periods. Ditch those that become superfluous, such as life and disability insurance after you’ve amassed enough for retirement. Also, for your emergency fund, aim for three months of living expenses, rather than the recommended six. You don’t want to leave too much of your wealth languishing in cash.
8. Have each other’s back. None of us wants to ask family members for money if we find ourselves out of work or facing unexpectedly large bills. But it’s good to know that last resort exists. Be each other’s safety net, making it clear you stand ready to help if things get rough.
9. Great happiness comes from the money you don’t spend. I’m not saying you shouldn’t treat yourself occasionally to dinners out, coveted possessions and special vacations. But if you want to buy long-term happiness, also strive for the sense of financial security that comes from a plump portfolio. It’s the one purchase you’ll never regret.
10. Travel lightly. We end up amassing countless possessions that quickly lose their allure. Do yourself a favor: Ruthlessly shed items you don’t need and don’t care about. I’ve dumped all manner of possessions over the past dozen years, and not once have I hankered to have any of them back.
11. Humans are hardwired to worry. Blame this on our loss aversion, which isn’t just about money. Everywhere we turn, we see the possibility that we’ll be on life’s losing end, and yet most of the time things turn out fine. My advice: Be aware of risk—but don’t go into full-worry mode unless it’s truly warranted.
For instance, I’ve read that 10% of folks have no problem afflicting harm on others, while the other 90% aim to do good. I have no idea whether these estimates are accurate, but they seem reasonable. You should, of course, be alert for the malicious 10%. But I’d encourage you to assume most folks—colleagues, neighbors, chance acquaintances—have good intentions.
To that end, don’t read too much into texts and emails, especially those from colleagues. Most people aren’t artful in their use of language, so their intent may be muddied, and things will likely be even worse if you try to read between the lines. Instead, until people prove themselves untrustworthy, give them the benefit of the doubt. That attitude will make the world seem like a more pleasant place, and you’ll spend far less time fretting unnecessarily.
12. Aim for a sense of accomplishment. Want to feel content? Strive to achieve one or two key goals each day, and you’ll likely reach evening feeling tired but fulfilled.
13. Pay it forward. Make sure your children grow up with sound financial values. Push them to get good educations. Help Martin, Teddy and any future children to launch their financial life. Guide their money choices. Don’t just talk the talk—also model good financial behavior.
Granny and Grandpa did that for me, and I’ve endeavored to do that for you. We aren’t a wealthy family. But we can strive to lift up each generation that follows, so our family remains financially resilient—and doesn’t suffer the suffocating money stress that afflicts so many.
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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Maybe of interest: Jonathan Clements & the parable of the bathroom reno
This article is just brimming with wisdom. I just emailed a copy of it to myself 10 years in the future to share with my now 2-year-old son. Hoping I’ll still be around to discuss it with him. Thank you, Jonathan!