03 August 2020

On today’s show, I talk with Jonathan Clements, the author of How to Think About Money, and runs the website.  Prior to that, he wrote the Personal Finance column in the Wall Street Journal for many years.

In this episode, we explore the role money plays in the Good Life



  • The three things money can do for us when it comes to happiness
  • How our instincts often work against us when it comes to managing money
  • Why investing in “friends and family” might be the best investment we ever make
  • Why we should spend our money on experiences over possessions
  • Why gratitude enhances happiness
  • Why striving for our goals is more important than relaxing
  • Why we should pursue money in our 20s and our passion in our 50s


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Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Sean Murray  0:03  

Welcome to The Good Life! I’m your host, Sean Murray. Today’s guest is Jonathan Clements, the author of How to Think About Money. He also runs the HumbleDollar website. Before that, he wrote the Personal Finance column in the Wall Street Journal for many years.

In this episode, we explore the role money plays in the good life. We’ve learned about the three things money can do for us when it comes to happiness; how our instincts often work against us when it comes to managing money; why investing in friends and family might be the best investment we ever make; and why we should spend our money on experiences over possessions. I hope you enjoy my conversation with Jonathan as much as I did. My friends, I bring you Jonathan Clements.

Intro  0:49  

You’re listening to The Good Life by The Investor’s Podcast Network, where we explore the ideas, principles, and values that help you live a meaningful, purposeful life. Join your host, Sean Murray, on a journey for the life well-lived.

Sean Murray  1:13  

Jonathan, welcome to The Good Life!

Jonathan Clements  1:16  

Thanks for having me on, Sean. It’s a real pleasure.

Sean Murray  1:19  

Well, it’s great to have you here. I’d like to start by talking about the role that money plays in the good life. We all know intuitively that it plays some role, but it’s more complicated than the straightforward calculation. The more money we have, the closer we are to the good life. We also know if we had no money at all, it would be challenging to find a flourishing life. We’d be consumed with pulling ourselves out of poverty. So, it plays some role. How should we think about money in happiness and flourishing?

Jonathan Clements  1:50  

This is a basic question that people always ask: Does money buy happiness? The answer most people give is, “Duh, of course it buys happiness.” Yet the statistics tell us a different story. In the US, in the past half-century, there was something called the General Social Survey, which was first conducted in the early 1970s and has been conducted every couple of years since then.

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As part of that General Social Survey, they ask Americans about their level of happiness. You go back to the early 1970s, and about 30% of Americans said they are very happy. Go to the latest survey, and about 30% of Americans say they’re very happy. In the meantime, our inflation-adjusted standard of living has more than doubled. We are living more than twice as well as we were living 50 years ago. And yet, our recorded level of happiness has not risen. That raises this big question: Why? Why is it that money has not bought happiness?

Sean Murray  2:57  

It seems intuitive that the more of money, the more happiness, the more opportunity to flourish. But as you point out in the book, it’s really a lot more complicated than that. You have to start peeling the onion to get at it. Money impacts how we spend time, how we think about freedom, autonomy, perhaps relieve some stress from thinking about money. Although it seems like some of my friends have more money than I do, they seem more stressed out about money. I’d love to go a little deeper. What are some of the keys to figuring out how to use money wisely to have the good life?

Jonathan Clements  3:33  

When I talk about money and happiness, I argue that money can essentially do three things for us. And one of the things it can do for us is it can help us not to worry about money so much. If we don’t worry about money so much, we will be happier. As I say to people, money is sort of like health. It’s only when you’re sick that you realize how good it is to feel healthy. Suddenly, it’s only when you’re broke that you realize how good it is to be in sound financial shape. So, if you’re smart about money, if you have money, you’ll worry less about money. That’s one of the three major benefits of having money. You simply don’t have to worry about stuff. That’s a huge plus.

Unfortunately, for many Americans, they never get there. There’s this basic trade-off that we can all make, where we can decide, “All right, should I spend a little bit less today so I have some money for tomorrow? Or should I just go and blow the whole wad right away?” Many Americans spend their entire lives spending everything they have right away, and the consequence is they never get that sense of serenity that comes from something as simple as having a few thousand dollars in the bank.

There are surveys of financial well-being, and what they find is that people who have $250 or less in the bank are at the bottom in terms of their sense of financial well-being. But if you can get that bank account up to $5,000, suddenly you feel extremely high, in terms of the sense of financial well being. So, if we can just get people to spend a little bit less today and put it away into the future, we could measurably increase people’s sense of financial happiness. We sort of know that, just thinking about what’s happened in recent months with the Coronavirus and this economic dislocation, many people have been put into a financial panic because they simply weren’t financially prepared to the dislocation that we’ve seen. And if these folks had just put away a little bit of money for the future, they would have gotten through the past few months in much better mental shape.

Sean Murray  5:42  

Absolutely. And you point out in the book that, unfortunately, our instincts, how humans have evolved, and our ancestry has kind of led us to a state where we’re challenged. We want to spend today. We want to avoid loss. And so, therefore, we’re sort of challenged to make the right decision financially.

Jonathan Clements  6:04  

It’s always worth to keep in mind that we are the great, great, great great, great children of our hunter-gatherer ancestors. It’s also worthwhile thinking about what the instincts were that helped our hunter-gatherer ancestors survive. Our hunter-gatherer ancestors did not spend their lives soaking away money in 401(k) plans so they could retire four decades from now. Instead, our hunter-gatherer ancestors survived by consuming as much as they could whenever there was food available. That is how many of us continue to behave. 

If we have a chance to consume, we will do it now. That isn’t the right way to behave in the modern financial world. But the fact is our hunter-gatherer ancestors behaved that way. They were kicking around only 10,000 years ago. We simply have not evolved enough in order to overcome those instincts.

And so, one of the misfortunes of modern financial life is we have to spend our days constantly fighting these instincts that are telling us to do the wrong thing financially. One of those key instincts is this instinct to spend everything right away.

Sean Murray  7:14  

It takes some willpower, but, as you say, even if we have as little as $5,000 in the bank, we start to have a greater sense of security. Maybe that opens up a possibility to start seeking out something greater than just scrambling for the next paycheck or paying the bills. So, if we do have some money in the bank, and we get to a point where we’re feeling a little more secure, how might we spend money to gain happiness?

Jonathan Clements  7:41  

I mentioned that the first big benefit of money, in terms of happiness, is that we can have the sense of serenity about money. One of the second big benefits of money is that we can spend special times with friends and family. One of the things that we know from the research is that having a robust network of friends and family is a huge boost to happiness. 

It is also, incidentally, a huge boost to longevity. If you have a robust network of friends and family, you will more than likely live longer than average. Having a strong network of friends is a huge bonus, and one of the things that we should do with our money is to try to use it to invest in friendship. It could be going out to dinner with friends. It could be flying across the country to see the grandchildren. Investing in friendship doesn’t necessarily have to involve spending money per se. We want to just go for a hike with our friends and spend some time talking and being out in nature. That is a great way to invest in friendship, and we will likely be happier as a consequence of that. So, if you’re going to spend your dollars on anything, spend it on investing in friends and family.

One of the things that you’ll immediately realize when we talk about investing in friends and family is that what we’re talking about are experiences. I think that if there’s one insight that is probably most recognized from the happiness research, it’s this notion that we get greater happiness from experiences rather than possessions. 

If you’re going to spend your money on anything and you want maximum happiness from your dollars, spend it on experiences. It can be counterintuitive, because when you think about purchasing a possession, like a car, and you say, this car is going to be around for five or 10 years, but that vacation or that experience is going to be over in an hour or two, or maybe a vacation will be two or three weeks.

Sean Murray  9:36  

So what’s going on there that weighs the experience that gives us such a lasting pleasure?

Jonathan Clements  9:43  

When we think about the spending of money, you can think about three phases. There is the period before. The longer the period before, the better. This is the period of anticipation, and whether you’re going to spend it on an experience or you’re going to spend it on buying a position, the longer you can make that period of anticipation, the better it’s going to be. Then, maybe the best part of the purchase is just looking forward to getting the car from the dealership or taking the family to Paris. That anticipation, when we can imagine the wonderful time that we’re going to have, can be the best part of the expenditure of those dollars.

Then, there’s the actual moment when you go on vacation or you pick up the car from the dealership. Normally, there is a thrill involved. We are very excited to pick up the car. We’re happy to be in Paris. We’re going around or seeing the Eiffel Tower, going to the museums, and all the rest of it.

And then you come back, and now we’re in the period after the purchase of the possession or the enjoyment of the experience. This is where experiences and possessions diverge. What happens with that new car? After you drive it around, pretty soon, it won’t be that special. It’s just another way to get around town. In about three months in, you get the first scratch. Then in about two years after that, you have the first fender bender. Then about three or four years after that, the darn thing won’t start in the morning. And suddenly, this huge purchase that had been the source of such pride and such joy is sitting in your driveway taunting you.

Now the thing about the trip to Paris. So, you go to the trip to Paris. You come home, and yeah, maybe there were problems, like the flight was delayed, the hotel room wasn’t everything you thought it was going to be. But what we do is we tend to airbrush our memories. 

We start to forget about all those little annoyances, and instead we remember the overall event. We may sanitize our memory to the extent that it was actually a better experience than it was in the moment. And so, what we find with memories is that they tend to get fonder over time.

So, three or four years after the trip to Paris, you’ll still have this warm feeling about it. For four years after you bought the new car, you’re sitting there grinding your teeth wondering why the heck you spent $40,000 on this hunk of aluminum that’s wrecking your life.

Sean Murray  12:17  

Your misery might be compounded if you’re still paying for it as it’s depreciating, right?

Jonathan Clements  12:22  

But people are looking for a useful tip. One of the things that we know from the research is that expressing gratitude can boost happiness. So yeah, the car didn’t turn out to be everything that you wanted it to be, but if you want to squeeze a little bit more happiness out of it, pause for a moment, look at the car and say, “Wow, that’s a real marvel of German engineering. I am so fortunate to have that car.” 

If you do that, you’re able to squeeze a little bit more happiness out of the dollars that you spent. You can do that with anything. You can think about how lucky you are to have the family that you have, to live in the beautiful house that you live in, to have the friends you have, to whatever you want to think about. It’s so important, in terms of happiness, what we focus on. If you focus on the positive, if you focus on things you’re grateful for, it’ll boost your happiness. Focus on the bad aspects of your life, guess what? Wour life is going to suck.

Sean Murray  13:18  

What’s the third aspect of how we should think about money?

Jonathan Clements  13:23  

We talked about how money can eliminate our financial worries, and that’s a big plus; and you could use money to create special times with friends and family, and that could boost happiness.

The third thing that money can do is it can allow us to spend our days doing what we love. We all have this notion. It’s really a trick of the brain. What we really want is more time to relax. A lot of people discovered during the pandemic when they haven’t had that much going on that relaxation is really overrated. We go from being relaxed to being bored out of our brains very, very quickly. What we really enjoy is working hard at things that we care deeply about, that we’re passionate about, that we feel that we’re good at, that we find challenging.

Again, you can think back to our hunter-gatherer ancestors. Our hunter-gatherer ancestors were able to survive and reproduce, not because they sat around and binge-watched Netflix, but because they were relentless in their pursuit of survival. They did not give up. 

There may have been other cavemen who threw rocks and sat on the lounge chair and got a good tent, and they did not survive. Our hunter-gatherer ancestors never stopped. They worked constantly, and we carry those instincts within us. That is why we’re always striving to get ahead. We are happiest when we are pursuing goals. And once we reach those goals, it’s often a bit of a letdown, but striving towards those goals is a huge source of happiness. 

It’s a trick our instincts planted in us, but it’s not a terrible instinct. So, I would say to people, if you’re in the workforce, figure out what it is you really enjoy doing with your spare time. Make sure that you do stuff in the weekend you find challenging, that you think is important, and that you feel that you’re good at. It might be hobbies. It might be sports. It might be volunteering. These things are going to enhance your life in a way that relaxation will not. 

Of course, if you’re a good saver and you pay money for retirement on a regular basis, what you may discover is that you get to enjoy the ultimate and financial freedom, which is you can spend your days doing what you love every day. When you think ahead to retirement and what’s going to make for a fulfilling retirement, what you should think about is not going to play golf every day nor going to go sit on a beach. 

What you should be thinking about is what is it that you’re going to do each day in retirement that’s going to give a sense of purpose that you’re going to find fulfilling, and that is going to make your hunter-gatherer instincts happy by having you strive toward goals.

Sean Murray  16:11  

That’s something that, really, I can relate to. You talk about this idea of flow from Mihaly Csikszentmihalyi. As I look across my life, I look at the activities that really bring me joy. There are activities where I find myself in that flow state. For me, in the wintertime, it’s skiing. Sometimes, in the summer, it’s more of running or even playing a little guitar on the side. If I’m playing the guitar and I’m in that flow state, there’s some real joy there.

You mentioned that we shouldn’t put off enjoying the flow state today for some future retirement where we can devote ourselves entirely to doing what we love. You encourage us, the reader, in the book to find a way to build that into your life today. Don’t just put all your chips in retirement.

Jonathan Clements  16:59  

One of the things that I talk about in the book, which is a little bit controversial, but we’ll go for it again, is the piece of advice that we always give to people in their 20s. It’s that you should pursue your passions. When you’re young, you don’t yet have a family nor a mortgage. You should do whatever makes you happy. You should pursue your passions. I don’t know where we came up with this notion. People in their 20s don’t need to pursue their passions. 

It’s people in the 50s who need to pursue their passions. For people in their 20s, the work world is new and exciting. They can actually go and sit in a meeting and enjoy it because it’s novel and exciting. If you’re in your 50s, like me, sitting in a meeting is excruciating, like having your fingernails pulled out. 

Once you get your 50s and you have a really good idea of what you want to do with your life, that’s when you want to be pursuing your passions. When you’re in your 20s and you really don’t know anything and you’re trying to figure out what it is, what’s important at that point is to forget pursuing your passions. Pursue dollars. Go out and get a high-paying job. Stock away as much as you can, and then you will buy yourself financial freedom in the future.

If I were to sketch out an ideal career path for somebody, I’d say, “In your 20s and 30s, find some boring job in a corporation. Go to a lot of meetings. Earn a lot of money. Save as much as you can. Once you get to your 40s and 50s and you realize what a hellhole the corporate world is, then you will have the money to start to pursue the sort of life that you really will enjoy. And by then, you will know what it is.” 

And so, in your 40s and 50s, if you’ve done a good job of saving, you can then decide to maybe switch to a career that is less lucrative, which you may find more fulfilling. Maybe you’ll work part time, so you can spend the rest of the time pursuing this vocation that is so important to you, whether it’s playing guitar or volunteering or being a docent to a museum or whatever it is.

Buy yourself some financial freedom by earning money early in life and saving as much as you can. I’m sure a lot of listeners have heard the Financial Independence, Retire Early (FIRE) movement. In many ways, what I’m saying fits with that. 

The FIRE movement is about saving as much as you can early in your life, so that you can buy yourself some financial freedom very quickly. And then, you don’t use that financial freedom to sit around doing nothing. You use that financial freedom to spend your days doing what you find most fulfilling, that you’re most passionate about.

Sean Murray  19:42  

And isn’t that what Maslow calls self-actualization in his hierarchy of needs? We’re starting with food and shelter at the bottom, then safety, then moving upwards towards belonging and love and self-actualization. It’s this idea that we are doing what we were meant to do. What is adding value to society and gives us the most sense of accomplishment?

Jonathan Clements  20:05  

I would say that is indeed the case, Sean. I’ll give you myself as an example. I am 57, and I could not work at all at this juncture in my life. Instead, I am working harder than ever running this unprofitable website called, that, in many ways, I think of as a public service. I’m just trying to educate the public about how to manage money and how to think about money. 

I do it with no expectation that I’m ever going to make a lot of money off this website. I do it because it’s my way of giving back and doing work that I think is important that I find fulfilling, that I’m passionate about. That’s why I roll out of bed at five in the morning. 

I check that all the updates on the website went okay. I spend the day writing and editing, and 10 hours later, I call it quits. But I’ve spent 10 hours working hard, virtually for no money, because I’m passionate about it. That, I think, is what we should all think about as we look to later in life at the financial freedom that comes with good saving and investing habits.

Sean Murray  21:17  

You tie that same concept to the self-determination theory by Deci and Ryan. Could you talk about that? Because I think that’s helpful too.

Jonathan Clements  21:27  

Self-determination theory says that there are three great human needs. There’s autonomy, competence, and relatedness. That parallels what I was talking about before. Autonomy is freedom from financial worries. Relatedness is about having those strong social connections, that robust network of friends and families that surrounds you. And then, competence is about spending your days doing work that you think you’re good at. If you have those three things, then according to the self-determination theory, you have a fulfilling life.

Sean Murray  22:10  

Let’s shift gears a little bit to the financial levers that we might pull or the financial decisions we might make, personally, to get there. What advice might you have for someone just entering the workforce? You talked about getting a job that earns money and saving. What should we be doing in our 20s, 30s, 40s to have a fulfilling life in our 50s, 60s, 70s?

Jonathan Clements  22:33  

I think, Sean, that it’s maybe too much to expect people to fully understand what they want from their life in their 20s. There’s a great word that is used by academic psychologists. We miswant. We think there are things that we want, and then, when we get them, we discover that they really aren’t that important to us. 

If you don’t believe me, go down to your basement. Basements are badly curated museums dedicated to the stuff that we thought we wanted and that we thought would make us endlessly happy. Instead, we simply can’t bring ourselves to trash because they cost us so much money. Basements are where all of our regrets sit. Not all of them, but many of them.

And so, you will spend many years making mistakes. That’s the nature of making it through life. One of the things that a lot of people imagine early in adult life is that they want all of these possessions, and that this is going to make a huge difference to them. The sooner that you can unlearn that, the better but I think the best teacher is experience, and the experience of making bad mistakes. After thousands and thousands of purchases do not make you happy, you may start to realize this is not the way you should be spending your money. 

Then, you will start to appreciate that maybe experiences are the better way to go. So, you have to learn about spending and what to spend money on. You need to learn to save. It’s obviously difficult not because there’s anything complicated about saving, but because it does mean you have to fight your instinct.

Also, you have to learn how to invest. Investing, again, is one of those things that our hunter-gatherer ancestors are not helpful with. You mentioned, Sean, about our fear of losses. This is a huge issue when it comes to managing money. We’ve seen it this year in 2020. A lot of people panic during the stock market decline earlier this year when we saw the S&P 500 drop 34% from peak to trough. Many of the other market indexes fell even more. 

A lot of people made the classic investment mistake. They sold at the bottom. They locked in their losses, and then they missed the incredible rebound that we had seen since. There’s a reason that people did that. It’s because of these hunter-gathering instincts that we have, say that losses are a terrible, terrible thing and that when you experience them, you’ve got to do everything possible to put a stop to them right away. The way we put a stop to them in the stock market is to sell.

So, early in life, you need to learn how to spend, you need to learn how to save, and you need to learn how to invest, and the earlier you can learn to do those things in a prudent manner, the more financially successful you’re going to be.

Sean Murray  25:31  

You make a great case in the book for owning stocks over bonds for the long-term. That to own a slice of a company and enjoy the equity and the upside of the ownership and the compounding effect that ownership over time is going to be financially beneficial in the long run. What do you recommend? How do we get started doing that? Many of us like to speculate with buying an individual stock here or there. What do you have to say to that?

Jonathan Clements  26:00  

A lot of people do indeed like to trade individual stocks. What I would say is: If you want to do that, it’s probably better than going to Vegas. It will probably turn out to be cheaper than gold. But just do it with a fraction of your portfolio. Take 3% or 4% of your money, and say, “This is going to be my fund money account.” You can go to Robinhood, trade stocks, and all the crazy things that you’d like to do; then take the other 96% or 97% of your money, and put it in a low-cost globally-diversified portfolio index fund. Just let it ride. We have seen over the decades that individual companies come and go. We have seen entire national stock markets suffer long periods when they make no money. 

Some of them, in fact, dissipate entirely early in the 20th century. But a globally-versified portfolio has made it through every crisis and then climbed back again to new highs. If you are globally diversified, you should have utter confidence that you will make decent money over time, that any losses that you suffer will prove to be temporary. 

How can we be so confident? As long as you believe the global economy is going to keep growing, that you believe that people are going to wake up in the morning and be determined to make their lives better, then world will continue to move forward, the economy will continue to grow, and a globally-diversified stock portfolio will be the beneficiary. So yeah, speculate if you want. But as for the bulk of your money, just by that globally-diversified portfolio of index funds.

Sean Murray  27:51  

It sounds like the solution is to earn more than you spend, take some of that savings, stock it away every month in an index fund, and let it ride.

One thing about that solution is it frees up the rest of your day to get some of that flow activity or to strive towards some other goal in your life that’s going to bring you happiness and allow you to flourish, as opposed to either worrying about money or trying to figure out the next hot stock.

Jonathan Clements  28:22  

The craziness about the financial conversations that we have, Sean, is that 90% or more of the conversations that we have are about investing. It’s about which stocks to buy, where the market is going, what’s happening to interest rates. All these investment discussions, and you know what? Our ability to add value beyond what you can get by buying a simple index fund is de minimis. 

In fact, it’s negative. We have all these discussions about investing that overall will actually detract from our investment returns. Meanwhile, the other 10% where we could actually add serious value by making sure that we buy the right-sized home, that we save enough, that we have the right insurance, that we pay down high-cost debt, that we have the right sort of mortgage, that we are getting plenty of happiness out of the dollars that we spend, the money is making a meaningful contribution to our life. 

This other 10% that we devote so little time to is the area where we could add enormous value. It’s a source of great frustration to me. Stuff that they talk about on CNBC and on Fox Business is garbage. That’s not helping anybody, but talking about things like saving enough, getting happiness out of your dollars, having the right insurance, having the right estate planning documents, buying the right-sized home, –all this stuff is in the area where we can add enormous value.

Sean Murray  29:53  

The home issue is a really interesting one. I can speak personally to that. When my wife and I bought our starter home about 20 years ago, I’m 49 years old, and we outgrew it. We had two kids. We needed a little bigger home. Instead of moving out to the suburbs, we were kind of on right in the middle. I’d say between the suburbs and the city. 

We moved towards the city, so we didn’t have to commute, but we paid a little bit more for the home. And it was a smaller home. We still live in it today, and it’s forced us to share bathrooms and things like that. But when I look back on the fact I could walk to work, and I could walk to a store and quickly buy some food for dinner, all of these things add up over time and lead to happiness. But it was more expensive though. We had to pay more to buy closer.

Jonathan Clements  30:43  

Yeah, but in many ways what you did, whether knowingly or not, is exactly what an expert on happiness research would say you should have done. We know that commuting is one of the worst things, in terms of people’s happiness. Commuting is a different kind of hell every day. As humans, we’d like to be in control of our lives. If you’re driving to work, if you’re taking public transport to work, your daily life is not in your control. Commuting is a terrible thing to do. So, moving closer to work so that you could actually walk is a very smart thing to do.

Secondly, by being close to stores, being able to walk out and be part of that community, that again, is great for happiness. Having that regular interaction with others, even if it’s just the clerk at the store, even if it’s just the barista at Starbucks, that human interaction is great for happiness.

Thirdly, by buying a smaller home, what you’re doing is you’re setting yourself up for less home maintenance. One of the things about possessions that can really hurt the pleasure that we get from them is the fact that there’s often so much more repairs and maintenance involved. We talked about the car and how that deteriorated. Same thing happens with homes. We look at a home and we say, “Oh, I’m going to get this big home. I’m going to get a big yard for the kids to play in.” 

Then, what happens next is you spend the entire weekend mowing the lawn, fixing things are breaking in the house. No! No, you don’t want a big house. You don’t want a big yard. You want a small yard, which you don’t have to mow the lawn, and you want a house that’s small so there isn’t that much to repair. You’re still going to live in an apartment building, and are able to go to public parks. That’s even better for your happiness. That brings us to a fantasy that a lot of people have, which is wanting a second home. 

So now, you’ve doubled down on the home repairs. You’ve doubled down on the maintenance. You’ve doubled down on the amount of cleaning you have to do. Second homes are just taking the mistake of the big house and doubling up on it. It’s an absurd thing to do. You never want to buy a second house.

Sean Murray  32:58  

It’s interesting that you mentioned that because, for many years, in my mind, I’ve had this idea that to really make it, to really be happy, I need that second home. I don’t know where that idea came from exactly, but you had a great line in the book, which is just: Think about the maintenance. Instead of thinking about the second home as another possession that’s going to bring you happiness, think about the maintenance, and the cost, and the time it’s going to take to upkeep it, and the money trying to do the things you want to do.

Jonathan Clements  33:29  

Whenever you purchase possession, think about the upkeep that’s going to be involved. The less upkeep that’s involved in the possession, the happier you’re going to be with it. Here’s another tip when it comes to spending money. I really try to build this into my own life. We do know that when you buy possessions, there is that anticipation, and there is that thrill when you make the purchase, and there’s that small tail of pleasure subsequently, and then you adapt to it. It’s this notion of hedonic adaptation. 

And then the thing breaks, and it turns into a disappointment. If you’re going to spend money, maybe what you should do is focus less on buying one big thing that’s going to give you one big initial thrill that’s going to fade away. Instead, buy a whole bunch of little things, and get regular small thrills. You’ll probably still end up in the same place, which is disappointment, because the darn thing broke and you have to toss it out, but at least you get those little thrills along the way. 

Take, for instance, this decision of spending $10,000 more for a car or instead get the cheaper car and have 100 $100 thrills. The $100 thrills likely boost your happiness more than spending the $10,000 on the more expensive car.

Sean Murray  34:56  

Absolutely, especially if some of those thrills are experiences. If you spend $100 and go sailing for the night or spend $100 and go fly fishing or spend $100 on someone else. You mentioned in the book that spending money on others actually is another way to bring happiness. It’s more beneficial than spending on ourselves.

Jonathan Clements  35:16  

Yeah, it’s another of those counterintuitive notions. It’s counterintuitive that money doesn’t necessarily buy happiness. It’s counterintuitive to us that experiences tend to deliver more happiness than possessions. Similarly, it’s counterintuitive, but it’s true that spending on all this tends to deliver more happiness than spending on ourselves. If you give money to charity, buy a surprise gift for your spouse, spend your weekend volunteering with others, you will measurably improve your happiness.

Sean Murray  35:49  

There are a couple other aspects of experience that you talked about in the book that I want to make sure we get out there because I hadn’t thought of them before, but I think they’re very powerful. One is that experience becomes a part of our identity. It’s something that we can share with others. 

Either they’ve had a similar experience or just through our communication and through our conversation, if you’ve ever sat around with a group of mountain climbers, and just listen to them talk about, “When I was hiking in the Himalayas…” or “There was the time we were in Mexico climbing the volcano…” or whatever it is, I’ve sometimes thought to myself that these must be the happiest people on earth because they have invested their time and experience, and that shared experience has created a community. I think there’s something really important about that.

The other thing you mentioned was that there will always be someone with a better car, not just a second home or third home or a fancier lifestyle, but no one can take away your experiences. Or, they may not have the experiences you have. Experiences are very unique to who we are, and so, we shouldn’t get as caught up in comparing ourselves.

Jonathan Clements  36:49  

You’re actually right on a lot there. How could somebody possibly say that their experience was better than your experience? Sure, they may have gone on a more expensive vacation, but they can’t be sure. And you can’t be sure that they actually had a better time. All of us can think about moments when we did something that cost little or nothing where we had a great, great time. You didn’t necessarily have to spend a lot of money to have a great experience. 

One of the reasons that experiences are so much better than possessions is because we do tend to do them with other people. And then, having done them, one of the fun parts of experiences is that we can then regale others with our stories of the things that we did. If you go to a dinner party, people sit around and talk about the fun experiences that they’ve had and the special things that they’ve done. Very few people sit around talking about all the great possessions that they have.

Sean Murray  36:57  

Now that would be very boring. Partly, I’d want to run for the door as quick as I could.

Jonathan Clements  37:22  

You’ve got a great quote in the book, you say, “The focus here is less on momentary pleasure, and more on what makes for a satisfying life.”

That’s a really important concept when we think about happiness. It connects to this notion of: Does money buy happiness? But one of the things that we know from the research is that people who earn more money actually seem to have less fun day to day. People who earn more money are more likely to report they’re feeling stressed, they’re feeling angry than people who earn less. Simply earning more is not going to make you happier day to day.

On the other hand, people who earn more or who have accumulated more wealth, do tend to report greater contentment with their lives. One of the things that psychologists and economists have said about this is that the latter may be what’s called a focusing illusion. 

So when I say to you: Are you happy? You do a quick mental recap of the state of your life and what’s going on and how fortunate or unfortunate you feel, and then you say, “Yeah, I’m happy.” Or “I’m not so happy.” And it tends to be a result of this reflection, this focusing on your own life. So, while it may be a little bit of a trick of the brain, this focusing illusion, you do really want to build a life where when you think about it, you say, “Hey, yeah. I have a good life.”

Sean Murray  39:40  

Could it be that we use money as a yardstick or as a barometer of our success? It’s, again, a paradox. It’s not a true measure of success or a true measure of flourishing, but for whatever reason, it’s been ingrained that money is the measuring stick and, therefore, if we’re a little higher on the money scale, we  equate that with life must be pretty good because we made it to that point.

Jonathan Clements  40:08  

And I think that is absolutely true, Sean. The pitfall here is one of the most insidious things in modern life, which is signaling. People endeavor to signal their financial success to others. They signal their success by buying the big house, by going on the lavish vacation, by buying the luxury sedans. 

We are all wired to see those things and say, “Wow, they are indeed financially successful.” But of course, it’s a complete crock. People who spend all this money on expensive vacations and expensive cars and expensive homes, that means that they are actually less well-off. It’s an indication that they are now poorer than they could have been.

As we know from Tom Stanley’s book, The Millionaire Next Door, the people who tend to be the wealthiest, the people who live in the more modest homes, drive a Subaru with 200,000 miles on it, who don’t wear designer clothes, these are the people who tend to be rich. Yet, because of signalling, we assume that the wrong people are wealthy and successful. So, we have to change our mindset. We need to think about what it is that money can do to make our lives better.

If you’re smart about money, almost no matter what you earn, I think that you can get greater happiness from your dollars than somebody who is significantly richer or earns significantly more money. You can start to see some of the things that can help. Don’t just buy an endless series of possessions. 

Think about the great experiences that you can have. Think about how you construct your life so you can spend your days doing the things that you love the most that give you these moments of flow. Think about what it is that you can do so that you spend more time with friends and family and you get that boost. Think about how you can manage your money so you’re less stressed about money. These are things that we can all do pretty much no matter what or how much we currently have saved. If we pursue that path, I believe that we can improve our happiness.

Sean Murray  42:35  

There’s a great quote from Daniel Gilbert. He says, “We are happy when we have family. We are happy when we have friends. And almost all the other things we think make us happy are actually just ways of getting more family and friends.”

Jonathan Clements  42:50  

It is indeed a great quote. It’s important to remember that we are social creatures. So much of this research I really think about in terms of my own life. There are times when I get an invitation to go for a walk with a friend or go out to dinner, and it’s like, I’m tired. I don’t feel like doing that, but I force myself to say yes because I know it will be good for my happiness if I do, indeed, go out tonight, or I do, indeed, take that walk with a friend, and I have that social interaction. So, sometimes, you know, we need to resist our initial impulses, and push ourselves out there in order to find happiness.

Sean Murray  43:35  

You wrote something in the book that really struck me. You said, “If you do want to take that hike or that experience, make sure you bring someone along. Bring along a friend or a family member because it will be much more rewarding.” Sometimes I have this desire or need to get out. I need to go take that hike and clear my head all by myself. I think that was a good reminder that if I just take the time and the effort to invite someone, bring my son along, call a friend, schedule an experience with my daughter in some way, it’s going to be more lasting and much more richer and fulfilling.

Jonathan Clements  44:09  

I think this is something that older people are much better about than the rest of us. Maybe I’m perilously close to being one of those older people, but anyway, when I think about my parents as they got older, they were so good maintaining their network of friends and family, constantly writing notes to one another, getting together, having dinner, on the phone. Partly, it’s because they had more free time. 

They were retired, but I think, also, as you get older, you realize that friends are like gold. They’re enormously valuable. This is the stuff of life. You need to work hard to cultivate that network of friends and family. So, if you’ve got somebody whom you haven’t been in touch with for a while, pick up the phone and give them a call. Send an Email. Go out of your way to visit them. It’s worth it. Having that connection is going to boost your happiness.

I’d like to end with just maybe one final thought on a quote from your book. You say, “The goal isn’t to get rich. Rather, the goal is to have enough money to lead the life we want.”

And figuring out what the life we want takes a lifetime. It takes a while to figure out what makes us happy. We grow up picking up messages from our parents, from our friends, from the TV about what the good life is. But you need to find out what the good life is for yourself. 

You need to figure out what is the work that you’re going to find fulfilling and gives you a sense of purpose and gets you out of bed in the morning. You need to figure out what are the experiences that you enjoy. You need to work to find the friends that will really enhance your life. That is the goal. We want to lead that life that we find most fulfilling, and we can use our money to achieve that life.

Sean Murray  46:13  

Jonathan, this has been a wonderful conversation, where can people find out more about you and your writing?

Jonathan Clements  46:18  

As I mentioned, during our conversation, Sean, I run this website called I have new articles up there every day. I also put out a weekly newsletter. On top of that, I’ve done nine books, and the one that we’ve talked about most today is this book, How to Think About Money. In many ways, that book is a summation of a lot of what I learned about money through my three-plus decades of writing and thinking about financial issues.

Sean Murray  46:50  

Thank you for being on The Good Life.

Jonathan Clements  46:53  

Hey, it’s been a great pleasure, Sean. Thanks for a wonderful conversation.

Outro  46:56  

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