How To Think About Money
b"With Jonathan Clements, award winning financial writer and author of How to Think About Money
Rewiring our brains is difficult no matter what the focus, but since we homo-sapiens have been hardwired from our hunter-gather ancestors to fail at money management, saving and investing for our financial future is particularly challenging. So says Jonathan Clements, longtime personal finance columnist for The Wall Street Journal and author of the new book How to Think About Money.
We\\u2019ve been told to work like crazy for several, maybe four decades, of our lives, saving as much as we can along the way, doing all the right things, before retiring and then spending the next 25 to 30 years on golden pond living off the fruits of all that past labor.
Jonathan\\u2019s position turns this conventional retirement \\u201cwisdom\\u201d upside down. For a number of reasons, this old way of thinking just doesn\\u2019t work in today\\u2019s culture: not only does it lead to boredom and lack of purpose, but since we can expect longer lifespans, we may not have enough money to see us through to the rest of our lives.
At least half of all males who are age 65 today have a life expectancy of 84 and for females that number is age 88. In fact, life insurance companies are now running illustrations out to age 115, which gives you some idea of the projected rise in mortality.
Throwing in the towel at the traditional age 65 increases the vulnerability of outliving your money, especially factoring in an unexpected low-return financial environment or perhaps cuts in Social Security. Adjusting to such uncertainties would be hard and, even though one can cut back on expenses such as travel and entertainment, it could also be devastating to your financial security. According to Jonathan, moving the retirement age up to 70 is a partial solution to this problem.
But the better way is to envision a gradual retirement phase whereby you pursue a passionate existence without a paycheck being the goal. \\u201cDoing something productive with our retirement years,\\u201d says Jonathan, \\u201ccould actually make for a more meaningful retirement. Maybe we start to engage in part-time work.\\xa0 We continue to get some money.\\xa0 We continue to contribute towards society.\\xa0 Thanks to that, we also find it much easier to pay for retirement because we're not starting to run down our retirements, maybe even starting in our early 60s.\\u201d
Jonathan also has an against-the-grain idea of how young people should proceed toward the future. The current trend seems to be you follow your passion in your 20s\\u2014whether that be as a rock musician, a poet, or as a planter of organic seeds in fertile farm land\\u2014before getting on to the serious part of earning a living. Jonathan says, \\u201cI actually think that that's total nonsense, and, in fact, the total opposite is true.\\xa0 Psychologists make this distinction between extrinsic and intrinsic motivation, or external and internal motivation.\\xa0 People, when they're in their 20s, are greatly motivated by external rewards.\\xa0 They want the promotions and the pay raises.\\xa0 By the time you get to your 40s and 50s, those are less important.\\xa0 Instead, you're more focused on doing things that you personally think are important. In your 20s is the time to learn the rules of the work world; you're highly motivated by those external rewards.\\xa0 Once you get into your 40s and 50s,"