- Clements, J. (2016) How to Think About Money. Author.
- Category: Money
- Recommended Financial Literacy Level: [Novice]
- Recommended Audience:
- A great entry-level book for those just getting started on their journey toward financial independence.
“First and foremost, money buys time and autonomy. Secondarily, it buys experiences. Last, and least, it buys stuff, and more often than not, the stuff we buy makes us miserable.”
I really enjoyed Clements candor and insights regarding money. It really is quite fascinating that, in most cases, all it takes to become wealthy is a paradigm shift of our financial priorities. We just have to adapt and learn to think about the problem differently. The following is the table of contents of his book, including a brief description I wrote for each “step”:
- Foreword by William J. Bernstein
- Step No. 1: Buy More Happiness
- Discusses how people fail at getting the most out of their money, because we aren’t very good at knowing what will us happy. Includes a series of reflective questions as an activity to really get you thinking about what brings value and happiness to your life.
- Step No. 2: Bet on a Long Life
- Although we are often times part of the “YOLO” (you only live once) or “I won’t be young forever” culture, most of us will live longer than we realize and need to adequately prepare for it.
- Step No. 3: Rewire Your Brain
- The meat of this chapter contains a list of 22 financial mistakes people often make, the consequences of those mistakes, and how to avoid/rectify those mistakes moving forward.
- Step No. 4: Think (Really, Really) Big
- Don’t underestimate your income-earning ability over the long-term; furthermore don’t forget to consider spending, health/fitness, and family.
- Step No. 5: To Win, Don’t Lose
- “If we want to add to our wealth, we should minimize the subtractions.” Includes tips on how to think about risks and debts that are generally overlooked.
- Final Thoughts
- About the Author
Jack’s Biggest Takeaways:
- I had never considered thinking about debt as “negative bonds” canceling out the bond/fixed portion of a retirement portfolio, and in many cases, leading to a riskier asset allocation overall. As renters we do not currently have any debt, but when we do purchase a home or even rental property in the future I will definitely have to rethink how that affects my overall asset and risk allocation.
- “If you have saved enough to lead the life you want, you have won the game. There is no logical reason to continue to play and risk throwing away financial security.” This statement really resonated with me. I know a lot of people in the FI community advocate for not only having extremely risky portfolios (100% stocks as an example) building toward FI, but maintaining high risk allocations through retirement. We haven’t won the game, but we certainly don’t need to go, or stay, all in to do so.
If you’re reasonably financially literate already, you probably won’t learn anything mind-blowingly new by reading Clements book; however, I bet you’ll still enjoy it! To close, I’ll share one more quote from his book:
“For 10 years after we are gone, most of us will be forgotten — except by family and close friends. We will live on in their memories. That’s the closest any of us will ever get to immortaility, at least on this earth. My advice: Make sure the memories are good.”
Have you read How to Think About Money? What are your thoughts, likes/dislikes, and biggest takeaways?