WE’RE OFTEN encouraged to follow our instincts. But if we did that, many of us would sit on the couch drinking margaritas, eating Cheez Doodles and cruising online shopping sites, when we should be eating less, saving more and heading to the gym. Often, the key to a better life—financially and otherwise—is to get ourselves to take action we instinctively resist.
This is obvious advice if we’re overweight, rarely exercise, panic when the stock market declines and find our credit-card balances balloon with every passing month.
IF YOU DROVE drunk but got home unscathed, you wouldn’t wake up the next morning and think, “I guess it’s okay to get behind the wheel after 13 beers.” Yet, when handling our finances, we do that all the time.
“Markets generate a lot of data, but they don’t generate a lot of clear feedback,” writes academic Terrance Odean in his foreword to Michael Ervolini’s thoughtful book, Managing Equity Portfolios. “Outcomes are noisy.
MY HOPE: THE DISTINCTION between work and retirement–between being productive and suddenly being unproductive–gets a whole lot murkier. I make that argument in How to Think About Money and also in a new Money magazine article, which was posted online this morning. Want a happier retirement? Forget days of endless relaxation, and instead think about what will give a sense of purpose to your final decades. You might find that sense of purpose in part-time work,
“PRACTICAL MEN, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist,” wrote John Maynard Keynes in his 1936 classic, The General Theory of Employment, Interest and Money.
The same can be said of U.S. investors. We grow up repeatedly hearing the same standard financial advice—and often we never question it. Yet, as I argue in How to Think About Money,
TWO MORE REVIEWS of my new book appeared last week: “How to Let Your Money Buy You Happiness” by MarketWatch’s Paul Merriman and “Money and Happiness” by the Chicago Tribune’s Elliot Raphaelson. Not in a mood to read? Instead, try watching “Insurance is a great invention, but is it a great investment?” This is a two-minute video I made for Creative Planning, where I sit on the advisory board.
WE’RE IN A WORLD of low investment returns. Bond yields are tiny—and bond investors can’t reasonably expect to earn anything more than those yields. Money market funds, savings accounts and other cash investments are even worse.
Meanwhile, economic growth is muted and stock valuations are rich, suggesting lackluster stock returns. My best guess: Over the next decade, a globally diversified stock portfolio might return 5% to 6% a year and a mix of high-quality corporate and government bonds could clock 2% to 2½%,
RISING LIFE EXPECTANCIES, coupled with slower population growth, have a huge impact on how we should manage our money. Indeed, I devote an entire chapter to the topic in my new book. Here are seven key financial implications of today’s momentous demographic shift:
1. Economic growth will be slower. Over the past 50 years, half of the economy’s 2.9% annual growth has come from increasing the number of workers and half from increasing the productivity of all workers.
MONEY MAGAZINE just posted an excerpt from How to Think About Money to its website. Also check out the accompanying video, which is located halfway down the article. Meanwhile, Vanguard Group has a Q&A with me on its website.
MANY OF US ENGAGE in mental accounting, thinking of our mortgage as separate from our savings account and our job as unrelated to our portfolio. But these are all pieces of our sprawling financial life—and, as I discuss in my new book, it’s important to understand how everything fits together. Here are 12 examples:
1. If you have plenty of cash in the bank, you can probably raise the deductibles on your auto and homeowner’s insurance.
HOW SHOULD YOU think about money? Check out three articles that have appeared in the wake of my new book’s publication. StableInvestor.com ran an extensive Q&A with me. NextAvenue.com reviewed How to Think About Money. The review also appeared on Forbes.com. Finally, MarketWatch.com picked up the main article from my latest newsletter.
MANY PARTS of our financial life look like bonds, with their steady stream of income. For instance, you can think of receiving a regular paycheck as similar to collecting interest from a bond portfolio. Ditto for the income you might collect from Social Security, a traditional pension plan or an immediate fixed annuity. If you receive a lot of income from these bond lookalikes, that can free you up to invest more heavily in stocks.
LOOKING TO GET MORE HAPPINESS from your dollars? That’s a subject I tackle in my new book, How to Think About Money. Here are nine super-simple strategies that you can put into practice today:
1. Buy a gift for somebody else. Research says we get more pleasure from spending on others than spending on ourselves. Want extra credit? Give a gift when it isn’t expected. The recipient will be especially happy—which means you’ll be,
TODAY MARKS the launch of my new book, How to Think About Money. It’s a small book—just 41,000 words—but I like to think it contains some big ideas. My hope: How to Think About Money will change the way folks view their financial life, so they worry less about money, make smarter financial choices and squeeze more happiness out of the dollars that they have.
I’m anxious for the book to garner a large readership and have priced it accordingly.
MY NEW BOOK is now on sale—and my latest newsletter was just published. The newsletter, which is free and appears bimonthly, includes nine ways to think differently about money, plus five key insights from happiness research.
Those articles are drawn from ideas in my new book, How to Think About Money. Folks who have read it say it’s the best thing I have ever written (though that may reflect their dim view of my earlier writing).
WE’RE SPENDING the final two weeks before Labor Day on Cape Cod, staying with my in-laws. Everywhere we turn, there’s another delightful home with a wonderful water view. “Wouldn’t it be great to live there?” my wife and I muse, as we imagine how much happier we’d be if we lived in this place of apparently permanent vacation.
We are, of course, completely delusional.
Being in a beautiful spot can be a great joy for a week or two.