How To Think About Money: A Review

By Jimmy Turner, MD
The Physician Philosopher

“[Index fund investing] may not seem terribly exciting. But investing isn’t meant to be exciting. It’s meant to be profitable.” Jonathan Clements, How To Think About Money

Good looking cover for a good book to read.

Most financial books spend time giving you specific directions on how to make the best portfolio or give ten steps on how to beat the market. However, few financial books give a bigger picture on what it is that we are actually trying to accomplish with our money and how we should view it. Are we good at determining how to spend our money? What are the major difficulties that make a simple solution to making money difficult? Why are we our own worst enemy? In a book I recently purchased (authored by Jonathan Clement’s) called How To Think About Money these questions, and much more, are answered. Today, I’ll tell you what I think about the book (the short of it is that I highly recommend you read it).

My overall impression

Overall, I think that this book really hammers home some of the same concepts that I try to impress on this website. There are only five chapters and here are my takeaways from them.

Chapter One

In the first chapter, Clements talks about the purpose of money: To bring us happiness. However, this book takes an interesting turn as it points out that money is not directly linked to our happiness. Clements gives an overview of several studies looking at our happiness and does a pretty good job of showing a few things: 1) Money and happiness do not have a direct correlation, 2) We are not very good at figuring out what makes us happy, and 3) He feels that experiences are likely to make us happier than things (cars, homes, etc).

I think this chapter was actually the most profound to me. In point two above (we aren’t good at figuring out what makes us happy) Clements lays out the fact that we, as humans, adapt. It’s what we do. So, when you buy the new car or the new house, recognize that you are going to adapt and those things will just become a car and a house. They likely won’t make you as happy as you thought that they would. Additionally, if that nice car sits next to a nicer car (or nice house next to a nicer house), you are likely to be disappointed. As I like to point out: Life is about expectations and reality, after all, right?

Chapter 2

In chapter 2, Clements focuses on an interesting idea that can be summed up pretty quickly: We all save (little) and spend (lots) because of our Hunter-Gatherer ancestors that taught us to expect to live a short life, but with each generation we live longer and longer. Therefore, you should make your financial decisions with that long life in mind. Take your social security as late as possible. Consider investing in long-term care insurance. When you prepare for retirement, you need to think about what you’ll actually do. Giving up everything and sitting on the couch isn’t exactly fulfilling.

Chapter 3

This may be my second favorite chapter. It takes aim at our greatest financial enemy, ourselves. By nature we are made to make financial mistakes. It’s essentially genetic. The author discusses 22 mental mistakes we often make that lead to financial ruin. My favorites include listening to anecdotes rather than statistics and the fact that we focus more on losses than wins. As a college goalkeeper in soccer, I can certainly attest to that truth! Even ten years later, I definitely remember my mistakes that cost my team games much more vividly than my great saves. Finances are no different. We hate to lose and, therefore, this gives us less tolerance and mental fortitude to stick to the plan than we need. I’ll let you read the book for the rest of the mistakes.

It’s worth the read. Oh, and invest in index funds and avoid actively managed funds. You’ve heard that before, though.

Chapter 4

The older we get the more valuable our portfolio is as the closer we get to retirement. While we are young, our “human capital,” his term for our money making capacity, is really what is most valuable. The more secure our money and our job, the more risk tolerant we should be. The less secure or closer to retirement we are, the less risk tolerant we should be. The great part of this chapter is pointing to the idea that retirement is not the golden age we get to where we get to kick back, relax, and do nothing. Retirement (at any age!) should allow us to pursue what we are passionate about and to not have to worry about the financial aspect, because we’ve “made it.”

Chapter 5

The final chapter goes into two different ways we lose: Fast and Slow. A fast loss is a financial catastrophe that ruins our financial stability (disability, death, lack of liability insurance). He suggests sage advice: buy insurance to protect yourself from the fast loss. The slow loss involves getting nickled and dimed by expense ratios, financial advising costs, etc. How to prevent this loss? Knowledge and common sense: Low cost index investing, diversified portfolio, avoid individual stocks. Good common sense advice. It’s usually the best kind.

Favorite Quotes from “How to Think About Money”

“Working hard toward our goals can bring great pleasure – but achieving our goals is often a letdown.”

“Want to get more happiness out of your dollars? Forget the flat-screen television-and instead go for the memorable vacation.”

“Even in retirement, we need a reason to get out of bed in the morning-something that will give a sense of purpose to our days-and, if it also makes us a little money, all the better.”

“Aim to keep your total fixed costs below 50% of your pretax income”

“[Index fund investing] may not seem terribly exciting. But investing isn’t meant to be exciting. It’s meant to be profitable.”

Actually quoted in the book from The Money Game, “If you don’t know who you are, this [the stock market] is an expensive place to find out.”

Take Home

It’s a great read, and I recommend it. Not so much for the financial advice (as many of you reading this and other websites geared at high-income earning financial ideas are aware of most of it). Essentially, I recommend it more for the big picture ideas in this book that really make you want to buy into the discipline required in the financial world. White Coat Investor calls this the “X-Factor.” Clements book makes it easier to stick to the plan, shows you why you should, and explains that the journey is the best part of the whole thing. So, why not continue the journey how you want and when you want when you get there in retirement.

Have you read this book? What are your thoughts? Do you think you do a good job figuring out what makes you happy? Do you spend money on experiences or things? If money was of no consequence, what would you do with your time?



  1. Gasem

    “If money was of no consequence, what would you do with your time?”

    “we focus more on losses than wins.”

    I didn’t read the book but these two quotes from your review are most salient IMHO. I’m 65, retired Anesthesiologist, retired group owner which means “C” corporation and employees to feed, pain management as a side gig, and managed 2 practices during the course of my working tenure.

    Money does not buy happiness it buys security and freedom. Work is a means of trading your time and turning that into something of value aka money. The security it buys you is a place to live, food to eat, support for your family. This is why we focus more on losses. It doesn’t have anything to do with hunter gatherer except tangentially. Losses attack security head on, and that makes us risk averse.

    America is a place which has pretty reliable rule of law and has enough freedom so you can do pretty much what you want. You can set a goal and if you’re willing to do the work you are free to achieve the goal. America is capitalistic meaning you get to taste the fruit of your labor, aka money. How do you best participate? Become an owner. Use your money to purchase ownership in the economy. People say the fruit of the tax cut (on the average $40 a week) is worthless. If you take $40 a week and invest it and it returns 6% after 30 years you have $172K. $62k in principle and $109K in interest. This ain’t nothing. If you add $10 to your weekly investment the value grows to $214K. $214K at reirement provides you with 30 years of $8K per year virtually guaranteed. If you get SS at $16K per year that $8K brings you up to $24K. If you save $50 per week for 40 years you wind up with $422K of which 25% is principal and 75% is interest. That extra 10 years of saving mixed with SS would be $31K per year in a 30 year retirement. So start at age 25 end at age 65 and you go from poor to middle class, a retirement made out of “nothing”, security made out of “nothing”.

    This is how to think about money.

    When you retire you buy back your time. It becomes 100% yours again. If you want to spend it sitting on a couch, it’s your time. Actually sitting on a couch can be very Zen. Instead of a Human Doing, you once again own the luxury to intentionally become a Human Being. It is the security of my above example that allows your conversion to becoming a “I am” instead of a “I am a “fill in the blank” “I am fill in the blank” means you are owned. “I am” is intransitive. The pleasure of owning your time and spending your time unencumbered is amazing.

    • ThePhysicianPhilosopher

      Time is certainly more valuable than money and being an owner is definitely better than being an employee!

      Compounding interest can be a wonderful friend or a dreadful foe depending on which side you are currently on.

      I look forward to the days where “I am” will be and in growing my side businesses to enjoy being an owner!


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