Jonathan Clements

IN COLLEGE, I WAS the kid who swore he would never get married and never have children. A year later, I was engaged. Two years later, I was married. Three years later, I had a newborn.
And three decades later, I’m 55 years old, with a daughter who will turn 30 later this year.
I have no regrets about having children so young. Far from it. It does mean I missed out on the romancing,

I LOVE THE PRICE war among index-fund providers, because it puts pressure on all money managers to lower fees. But I don’t think investors should pay much heed to differences in annual expenses that amount to just 0.01% or 0.02% a year, equal to 1 or 2 cents for every $100 invested—and they certainly shouldn’t switch funds for those potential cost savings.
To check I wasn’t missing something, I set out to do apples-to-apples comparisons among index funds in four highly competitively segments of the indexing market: large-cap U.S.

WE CAN VIEW INVESTING as an argument between two competing opinions: What we think an investment ought to be worth—and what the market currently says. It’s an argument the market usually wins.
While we can be highly confident what, say, a certificate of deposit or a Treasury note is worth, it’s much harder to put a value on stocks, gold, high-yield junk bonds and other riskier investments (and, I’d argue, all but impossible with bitcoin).

AS I WAS PREPARING for HumbleDollar’s January 2017 launch, my web developer suggested I add a mission statement to the top of the homepage. That mission statement morphed into a daily insight, which then became a daily Tweet that also found its way onto my Facebook page. Like the family that moves from a three-bedroom house to a one-bedroom apartment, I embraced the challenge of shoehorning financial ideas into 140 characters or less.

THE ABOVE HEADLINE overpromises, I readily admit. Still, three considerations—taxes, risk and the economic cycle—point to one conclusion: Paying down debt in 2018 looks like an awfully smart move.
Debtors’ prison. Ridding yourself of debt, even mortgage debt, has long been a savvy alternative to buying bonds and certificates of deposit. But thanks to the new tax law, it looks especially savvy right now—and especially if you’re married.
How come? The new tax law took away personal exemptions but compensated by roughly doubling the size of the standard deduction.

WHAT MATTERS IS WHAT we focus on. Forget the bad that has happened. Don’t dwell on the goals that remain elusive. Instead, if we’re striving for greater happiness, we should ponder the good in our lives.
This is a great moment to do just that: Most of us are surrounded by friends and family, we have time away from work—and the abundance offered by U.S. society is, in many households, epitomized by a flabbergasting pile of presents.

IF YOU’RE WORRIED that indexing threatens the smooth functioning of the stock market, it’s helpful to spend an hour chatting over coffee with Charles Ellis—which is what I did last week when I was in New Haven, Connecticut. Ellis is one of indexing’s most eloquent advocates, including in his bestselling book Winning the Loser’s Game and in his latest tome, The Index Revolution.
Charley dismisses the idea that index funds are distorting the market—and scoffs at the idea that active management is headed for extinction.

THERE ARE CERTAIN hallmarks of financial rectitude: Never carrying a credit card balance. Maxing out the 401(k). Having an emergency fund. But do these habits deserve the sacrosanct status they’ve achieved?
You won’t find me arguing with paying off the credit cards each month or putting at least enough in a 401(k) plan to earn the full matching employer contribution. Both make ample sense. But in the past, I’ve raised questions about how much emergency money people need and how they should handle this money.

IMAGINE AN IDEALIZED chart that summarizes our finances over the course of our lives. What would the chart look like? Picture these five lines:

Our nest egg grows, slowly at first and then ever faster, hitting a peak of around 12 times our final salary when we retire.
Our portfolio in our 20s stands at perhaps 90% or even 100% stocks. We dial down our allocation in the years that follow, especially during our final decade in the workforce,

SELF-DETERMINATION theory posits that we have three basic psychological needs: the need for competence, relatedness and autonomy. When these needs are satisfied, we’re more motivated and experience a greater sense of well-being.
To this, you might reasonably respond, “What the heck are you talking about?”
As I see it, self-determination theory provides a useful framework for thinking about the connection between money and happiness. We tend to be happier and more enthused about our daily lives if we’re engaged in activities we feel we’re good at (competence),

WHAT’S A GOOD REASON to dial down your stock market exposure? A year after Donald Trump was elected president, many folks are still smarting from their decision to bail out of stocks. Clearly, we shouldn’t lighten up on shares just because we don’t like the guy in the White House.
We also shouldn’t bail out just because stocks sport high price-earnings ratios and skimpy dividend yields. No doubt about it, stocks today are expensive.

IF THERE’S ONE NUMBER that drives our financial lives, it’s our fixed living costs. We’re talking here about regularly recurring expenses that are pretty much unavoidable, such as mortgage or rent, car payments, property taxes, utilities, insurance premiums and groceries.
Why are fixed living costs so important? There are five reasons:
1. The lower our fixed living costs, the easier it is to save. I believe many Americans would love to save more, but simply can’t,

TO IMPROVE OUR behavior, we first need to realize we’re on the wrong path and then figure out the right way forward. Often, this isn’t especially difficult. If we have no savings, obviously we need to sock away some money. If we’re overweight, we should cut back on the calories. If we’re out of shape, we need to hit the gym.
Instead, the real problem is getting ourselves to act.

The contemplative side of our brain is fully aware we ought to eat and spend less,

I JUST INVESTED $1,000 on behalf of a grandchild who may never be born. This reflected two of my enduring preoccupations: figuring out the best way to use my limited wealth for my family’s benefit—and getting an early start, with an eye to squeezing maximum advantage from investment compounding.
To those ends, when I visited my daughter in Philadelphia last weekend, I helped her open a 529 college savings plan. Hannah humored her father by committing to invest $25 automatically every month.

STOCK BUYBACKS ARE here to stay. The Securities and Exchange Commission opened the door in 1982, when it ruled that companies could repurchase their own stock without triggering accusations of share price manipulation. Ever since, more and more companies have taken advantage. Indeed, in recent years, U.S. corporations have spent more money buying back their own shares than paying out dividends.
Good news? I see both plusses and minuses. Here are the plusses:

Once you figure in buybacks,