A review of Jonathan Clements’ “The Little Book of Main Street Money”


Wiley’s Little Book series is a wee bit confusing in that there’s The Little Book That Beats the Market*, which is a stock-picking book. Then, in the same series there’s John Bogle’s The Little Book of Common Sense Investing*, a book essentially about indexing or passive investing. So, you read one book and say, “That makes sense,” only to have that opinion challenged by the very next book in the series. If it’s confusing to me I can only imagine how confusing it might be to someone who might be new to investing and financial planning.

That’s why I was pleasantly surprised when received a copy of Jonathan’s The Little Book of Main Street Money*, which is much more of a book on the basics of financial planning and the bigger picture rather than just another book touting a particular investment strategy.

For those of you who may not be familiar with Jonathan. He was the author of the Getting Going column, which ran in the Wall Street Journal for something like 17 years. I interviewed Jonathan a couple of years ago (Part 1 and 2).

I asked Jonathan about his book and he said, “I’m biased, of course, but I think it’s easily my best book. The “Little Book” format really suited my writing style. It was like penning a series of columns, except—because it’s a book—I was able to draw tight connections between the different topics.” He also added, “Most personal-finance books are about money and only money. But as we all know, there’s a whole lot more to life than dollars and cents, and I endeavored to make that clear with my Little Book. Money is just a facilitator, a means to an end, and we need to think long and hard about how we save, spend and invest if we want a truly happy financial life.”

In The Little Book of Main Street Money* you’ll find 21 truths about money expressed in a no-nonsense, easy-to-read manner. Truths like:

• We can’t have it all – a basic law of economics that people tend to forget.

• No investment is risk-free

• Markets may be rational, but we aren’t

• Paying off debts could be our best bond investment.

Because it is a “Little Book,” each chapter is short. The entire book can almost be read in one sitting (unless you’re a slow reader like I am). The concepts in the book aren’t new but have clearly been ignored by lots of people as you can tell by watching the news or reading the newspaper. It’s time to get back to the basics and that is what Jonathan’s book is all about.

I think that’s why this is my favorite of the “Little Book” series so far.

Jonathan Clements on the Credit Crisis and Current Economy

In early December I received an email from an AFM reader. This is what he said:

Dear JLP,

I have wondered for some time now whether Clements, who I consider the most calm and reassuring voice around, could be persuaded to comment in public about our current economy. You mentioned recently he had sent you some survey or such. Am I missing something he has recently written? I’d love that comfort of someone *still* telling me everything he used to write about in WSJ is still true. I’m sure it is, but I’m human and like to hear the obvious (or un-obvious?) repeated occasionally.

Thanks very much,

Brier, WA

I forwarded BK’s email to Jonathan. It took him awhile to get back with me because he had to first check with his employer to make sure it was okay to make a public comment. Anyway, this afternoon I did get a response from Jonathan and I’m happy to pass it along to my AFM readers. Here ’tis word-for-word:


Hope all’s well and that you enjoyed the holidays. You asked for my thoughts on the markets. Sorry to be so slow to get back to you. As you know, I left The Wall Street Journal last year and now work as Director of Financial Guidance at myFi (www.myfi.com), a division of Citigroup Global Markets, Inc. Still, these are my thoughts—not necessarily those of Citi or the other folks who work here.

Over the years, readers have told me they think my investment philosophy is pretty conservative, presumably because I advocate keeping costs low, trading infrequently and diversifying as broadly as possible. Yet, in truth, I believe in taking risk—but taking it prudently. Over the long haul, this prudent risk-taking should be rewarded.

But it certainly wasn’t rewarded in 2008. There was no place to hide in the stock market, traditional safe havens like gold stocks and commodities got crushed and even supposedly safe investments—such as municipals and high-quality corporates—got roughed up.

Thanks to all that carnage, I’m as enthused about my portfolio as I’ve ever been, for three reasons. First, the financial terror today surpasses anything I can recall, including the howls of anguish in October 1987 and October 2002. It may be a foolish knee-jerk reaction but, with so many convinced the world is about to end, I feel duty-bound to point out that the sun keeps rising. The bottom line: If you’re a contrarian, you’ve got to love this market.

Second, valuations appear attractive. It’s tough to get a handle on price-earnings multiples, because the slowing economy is wreaking havoc with corporate profits, so consider dividends instead. Today, the Standard & Poor’s 500-stock index is yielding more than 3%. The last time yields were this high was in the early 1990s. In fact, the S&P 500-stock index is now yielding more than 30-year Treasurys, which I find astonishing.

Third, optimism is, I believe, the only rational choice. If the economy recovers, stocks should fare well. What if, instead, we’re headed for economic apocalypse? In that scenario, even conservative investments may fail, which means cautious investors could suffer along with those who are more aggressive. In other words, the upside belongs to stock investors and the downside may belong to everyone, so wagering on optimism would seem to be the more logical choice.


Jonathan Clements

I sure do miss Jonathan’s weekly columns in the Wall Street Journal! I bet you guys do too!

Thanks, Jonathan, for taking the time to share your thoughts.


An Interview with Jonathan Clements (Part 1 and Part 2).

Some Interesting Findings From a myFi Survey

Jonathan Clements, former columnist for the Wall Street Journal and now the Director of Financial Guidance at myFi.com, sent me a copy of the press release for a recent survey that was conducted for his firm.

Here are some of the findings:

If the current financial crisis were a baseball game, the typical American thinks we’re at the end of the fifth inning, according to a recent survey of 5,000 people conducted for myFism, short for “my financial life,” a new financial service from Citi. myFi is part of Citigroup Global Markets Inc. (member SIPC).

In the study, Americans seem to blame the crisis partly on excessive consumer spending—and many are looking to cut back:

• 63% say they’ll spend less on holiday gifts this year.
• 61% plan to reduce spending on major purchases over the next 12 months.
• 56% are looking to spend less on travel and vacations.
• 61% say they will eat out less.

Who’s to blame for the credit crisis?

This, too, is interesting:

Who’s responsible for the current mess? There’s plenty of blame to go around. Among those surveyed, 72% blame the financial crisis on excessive spending by American consumers, 64% blame Wall Street, 62% blame excessive borrowing by homeowners and 59% blame the federal government.

This must have been one of those “choose all that apply” types of questions. I am surprised that nearly 60% of those surveyed blame the government!

Finally, the last thing I want to point out is that only 32% of those surveyed thought now was a good time to buy stocks. This is surprising to me because stocks are down so much this year. How much further would they have to drop in order to be considered a good buy? I have a sneaky suspicion that in the minds of most people, the more stocks drop the less of a bargain they become—even though the opposite is true.

You can read the rest of the press release here. If you have any questions, leave a comment and I’ll see if I can get Jonathan to answer them for you.

Sad News: Jonathan Clement’s LAST Column for the Wall Street Journal

My Wednesday morning ritual is coming to an end. Every Wednesday for the past 11 or years, I have made it a point to check out what Jonathan Clements had to say in his Getting Going column. I opened today’s paper to find out that this morning’s column titled, Parting Shot: What I Learned From Writing 1,008 Columns (free) will be his last.

Over the years I have grown to like and respect Jonathan for his honesty. I even interviewed him a couple years ago (Part 1 and Part 2). No, I didn’t always agree with what he had to say, but for the most part I thought he was right on the money.

Jonathan didn’t mention in his column why he’s leaving the Wall Street Journal. Whatever it is, I wish him the best. Now I’ll have to come up with a different Wednesday morning ritual.

Who Makes the Investment Decisions in Your Household?

Here’s today’s Question of the Day:

Who makes the investment decisions in your household?

I got the idea for this question from Jonathan Clement’s Getting Going column titled He Invests, She Invests: Who Gets the Better Returns? (free), in today’s Wall Street Journal. The column looked at the differences in the investment style of men and women. The main points:

1. Men typically take more risk and trade more often.

2. Women typically take less risk and trade less often.

According to the article, which sites a 2001 study, men turn over their portfolio 45% more each year than women. They attribute this turnover to men’s overconfidence. I’m not so sure about that. I would think it could be attributed to insecurity. In other words, men are looking for something better. I would think buying and holding would exemplify overconfidence. I guess it could go either way.

Anyway, I definitely take on more risk but I wouldn’t say that I trade often. I’m pretty much a buy and hold sort of guy. My wife could pretty much care less about investing. So, I would say that I make the investment decisions in our household. It works beautifully.

How about you? Who makes the investment decisions in your house? Do you both make them? If so, do you have obviously different investment styles and do these differences cause problems?

12 Ways to Make Your Kids Financially Savvy (Advice From Jonathan Clements)

Jonathan Clements wrote a great article in yesterday’s WSJ titled 12 Ways to Make Your Kids Financially Savvy ($). I have highlighted Jonathan’s “12 Ways” and added my thoughts to each one. Jonathan does state at the beginning of his article that not everyone will agree with his methods, so keep that in mind when you read the following.

1. Waiting Until Later – Kids have to learn self-control and figure out that they simply can’t have everything NOW. I taught my boys this (my daughter’s still too young to grasp the concept) in the bookstore. My oldest son wanted to buy a book at Barnes & Noble. He was going to have to pay full cover price plus tax. I told him that we could go home and order the same book off the internet for nearly half the price that he would pay at Barnes & Noble. He didn’t like the idea at first but I talked him into it. He ended up ordering two books from BooksAMillion.com for about the same price as one book from Barnes & Noble. He did have to wait for the books to be shipped but it gave him something to look forward to (what kid doesn’t like getting a package in the mail?).

That experience stressed the benefits of waiting until later.

2. Asking Themselves – Instead of your kids asking you for everything, start giving them an allowance so that when they want something, they have to ask themselves. Almost magically they learn the power of making choices – but ONLY if parents don’t give in and bail out their kids when they make a dumb choice.

3. Talking the Talk – Jonathan recommends talking to your kids about what life was like when you were “poor.” Kids need to understand that they money won’t just magically appear in their lives once they become adults. They need to understand that struggling financially is a way of life (although they can make it a lot easier on themselves if they make good choices).

4. Scoffing at Wealth – Not scoffing at wealth but the appearance of wealth. Lots of people can look wealthy. I think about this every time I see a “young” person driving a $40,000 + car.

5. Compounding for Decades – Jonathan actually purchased low-cost variable annuities for his kids when they were young. They grow tax-deferred and have decades to compound.

6. Growing Free – As soon as your kids have jobs, consider helping them fund a Roth IRA, which has the potential to grow tax free over their careers. All those years of compounding can really make a difference!

7. Heading Home – Jonathan states that he has set aside money to help his kids come up with a down payment on a house. While I don’t think think it is necessary for parents to help out like this, I did think it was kind of cool that he used target date funds to meet these goals.

8. Keeping Score – If your kids are trustworthy, consider adding them as a joint account holder to your credit card account. Doing so will help them build a credit history. Just be sure they are TRUSTWORTHY!

9. Vowing to Help – I agree 150% with Jonathan that is crazy for families to spend $20,000 – $30,000 on a wedding! I say spend less and help the newlyweds out in other ways.

10. Lending a Hand – Whether or not parents foot the bill for a college education is between them and their kids. That said, it’s important for the kids to know at what point the parental financial aid ends. In other words, you don’t want to support a career college student.

11. Setting Expectations – Kids need to know what will be expected of them. Talking with them about finances is a great way to set those expectations. They need to know where and when mom and dad’s financial support ends.

12. Getting Educated – Teach your kids how to build a low-cost index fund portfolio. If they can manage this without hiring a financial advisor, they’ll save thousands of dollars each year in management fees and expenses.

After going through and looking at each of these points, I think a better title for the article would have been, “12 Ways to Give Your Kids a Financial Headstart in Life.” Clearly if Jonathan follows-through on all his financial committments to his kids, financially-speaking they will be lightyears ahead of their peers.

I will add that all the points mentioned above that require a financial committment should only come from parents who have their own financial house in order. In other words, make sure your retirement plan is in order before you go above and beyond for your kids.