Raising Rates

Jonathan Clements  |  October 3, 2015

IT’S ONE OF THOSE INDELIBLE teenage memories: visiting the Bank of Baltimore in suburban Washington, DC, in the late 1970s.  I would hand over my babysitting or lawn-mowing money to the bank clerk, who would slide my green bank book into some magic typewriter. After a joyous clatter of keys, my bank book would be returned, and there would be recorded not just my deposit, but also the latest quarterly interest payment.
My children and stepchildren—ages 10 to 27—all have bank accounts.

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What Tax Losses?

Jonathan Clements  |  September 30, 2015

AFTER A TURBULENT few months for stock prices and with 2015 winding down, talk will soon turn to tax-loss harvesting. The notion: You sell losing stocks in your taxable account, and then use the realized capital losses to offset realized capital gains and up to $3,000 in ordinary income, thus trimming your 2015 tax bill.
Sound like a smart strategy? If you trade individual stocks actively or you’re a really bad investor, tax-loss harvesting might make sense.

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31 Rules of the Road

Jonathan Clements  |  September 21, 2015

SOMETHING HAD TO GO. The final chapter of the Jonathan Clements Money Guide 2015 was devoted to 31 rules for the financial road ahead. For the Money Guide 2016, I’m replacing that chapter with a new final chapter, which details how to create your own financial plan in 18 easy steps.
But even as I axed the 31 rules from the manuscript, I figured they deserved a permanent home.

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Without Distinction

Jonathan Clements  |  September 17, 2015

IF WE WORK like dogs for 40 years, we’ll get our reward, which is the chance to sit around and do nothing for 20 or 30 years. That’s the definition of a successful life, according to conventional financial wisdom. But it doesn’t sound like a whole lot of fun, does it?
My contention: It’s time to rethink the crazy distinction between work and retirement and, in the process, redefine what counts as a successful life.

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Toil and Trouble

Jonathan Clements  |  September 11, 2015

AS I WATCH the recent market turmoil, three thoughts come to mind—and one great hope. First, I feel like a shopper waiting for the next sale. As of yesterday’s market close, the S&P 500 was down a relatively modest 8% from its May high. If this drags on, without any further decline, I’ll eventually do a little buying and selling, to bring my holdings back into line with my target portfolio percentages. But to get enthusiastic about stocks,

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Why It’s Different

Jonathan Clements  |  September 5, 2015

CHRONOLOGICALLY, retirement may be our final financial goal, but we should always put it first. Partly, that’s because retirement is so much more expensive than, say, buying a house or putting the kids through college, so it takes many decades of saving and investing to amass enough for a comfortable retirement. But among financial goals, retirement is also unique in two other ways: It isn’t optional—and we can’t pay for it out of current income.

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Twice the Fun

Jonathan Clements  |  August 25, 2015

AS THE SOUND OF SUMMER CRICKETS gives way to the din of investors wailing, I’ve had two relevant articles appear. I helped Bottom Line/Personal put together a piece on “7 lies investors tell themselves.” The article was wrapped up weeks ago, but it seems timely in the wake of the recent market turmoil.
Meanwhile, I am now writing occasionally for Financial Planning, a publication geared to financial advisors. Check out the article posted this morning on five strategies for staying calm in the face of market mayhem.

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Mild Indigestion

Jonathan Clements  |  August 22, 2015

WHAT SHOULD investors make of the stock market’s decline? Start with three ideas. First, the S&P 500 has fallen a mere 7.5% from its all-time high, set in May, so the “global market rout” looks more like a mild case of market indigestion.
Second, while the S&P 500 declined 5.8% last week, we can be confident that the underlying, fundamental value of these 500 corporations didn’t deteriorate 5.8%. As usual, investors are trying to figure out the future,

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Binge Writing

Jonathan Clements  |  August 17, 2015

THE PUBLISHERS of my 2003 and 2009 books wanted the manuscripts quickly, so I wrote both books in roughly four months. My strategy: Bang out 1,000 words a day for the first 30 days or so, without paying much attention to the quality of the writing. I then spent the next three months checking facts and polishing the manuscript. In both cases, I was working a fulltime job while writing the books, so by the end of the four months I was pretty much wrecked.

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Save Yourself

Jonathan Clements  |  August 11, 2015

THE GREAT RECESSION may have been a financial wakeup call for American families. But many have since drifted back to sleep.
The official savings rate averaged 10.6% in the 1950s, 11.1% in the 1960s and 11.8% in the 1970s. From there, it started to slide, averaging 9.3% in the 1980s, 6.7% in the 1990s and just 4.3% in the 2000s. Panicked by the Great Recession, many Americans made a fleeting return to frugality: During the first five calendar years of the current decade,

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Silly Headline Alert

Jonathan Clements  |  July 29, 2015

INFLATION ROSE just 0.1% over the 12 months through June, as measured by CPI-U, the most popular inflation measure. But that tiny increase is a bad guide to the future, because it’s held down by the 15% plunge in energy prices over the past year.
So what should we expect? A better guide is CPI-U with food and energy excluded, which rose 1.8% over the past 12 months. Better still, take your cues from the Treasury market.

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Truly Taxing

Jonathan Clements  |  July 16, 2015

THE FEDERAL TAX system punishes the middle class, who have earned income and fund retirement accounts. Meanwhile, it favors the wealthy, who are more likely to have substantial sums in taxable accounts and then bequeath those assets.
Okay, now I need to explain myself.
First, there’s the question of earned versus unearned income. Tax rates on wages are higher than those on long-term capital gains and qualified dividends, plus workers also have to pay Social Security payroll taxes.

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Feels Right, Goes Wrong

Jonathan Clements  |  July 5, 2015

MEIR STATMAN, a finance professor at California’s Santa Clara University, argues that financial decisions—like everyday consumer purchases—have three benefits: utilitarian (what it does for me), expressive (what it says about me) and emotional (how it makes me feel).
As we manage our finances, we insist our goal is strictly utilitarian, and that all we want to do is make money. But in truth, we often make decisions for expressive or emotional reasons—and these other motivations can hurt our stated goal of greater wealth,

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Genius+High Expenses=Mediocrity

Jonathan Clements  |  July 1, 2015

MEB FABER’S “GLOBAL ASSET ALLOCATION,” available free this week through if you buy the e-book, offers a look at the historical performance of a fistful of portfolios, such as those recommended by Rob Arnott, Harry Browne and Ray Dalio. It’s a quick read, with just 129 pages, much of it consumed by charts.
The book’s biggest surprise? How unsurprising the results are. “As long as you have some of the main ingredients—stocks, bonds,

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Buying Happiness

Jonathan Clements  |  June 16, 2015

“MONEY IS an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don’t,” write Elizabeth Dunn, Daniel Gilbert and Timothy Wilson in an article in the Journal of Consumer Psychology that appeared April 2011—and which, needless to say, I only just got around to reading. It’s arguably the best academic article on money and happiness for the general public,

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