John Rothmann – I’m John Rothmann and you are listening to the Retire With More show. I want to remind you that to contact us directly, all you have to do is go to www.Rebalance-IRA.com or, if you prefer, you can pick up the phone and call 877-IRA-4IRA (877-472-4472). We want to tell you that because, as Paul is leading us through his … analysis … we wanted to give you the opportunity to check with us. Remember, that consultation is free. We welcome your calls and your emails. But now, let’s pick up where we left off because Paul, I can’t wait to hear about those sweaty palms.

Paul Sullivan – You’re causing more stress.

Mitch Tuchman – When we were last talking, right before the break, Paul you were all hooked up with transducers. They were measuring your sweaty palms, your heart rate and everything and they’re asking you a lot about money and you asked them, how did I do in answering the questions? And they said, we didn’t care about the questions.

Paul Sullivan – Man, I feel bad for your listener whose just sort of come on here with me talking about sweaty palms and my racing heart-rate.

Mitch Tuchman – Well, this is a financial show everyone, so don’t be surprised.

Paul Sullivan – So, as I was saying, I was out at Kansas State at their financial therapy clinic. They had hooked me up to all of these ways to measure how my body was reacting to the questions I was being asked. And, as I said, I was trying to answer the questions really honestly, really think about them, and they weren’t terribly hard questions. They were the type of questions that any financial advisor would ask his or her clients.

And I thought I had aced this test. And I turned to the woman who had been watching me and said, how’d I do? And she said, well, how do you feel? And I said, well, I’m a little cold but, other than that, I think I did great. And she said, you had one of the highest stress levels of anybody we’ve ever tested. And I said, what are you talking about? How is this possible? I knew all of the answers. And she said no, you were focused on the answers, but your body was responding in a different way. It was a classic fight-or-flight response. My fingertips were so cold because all of my blood was going to my core to keep the vital organs going. My palms were sweaty because I was nervous.

And she’s fascinated by this, while I’m horrified by this. This is one of those big hurdles that every advisor needs to get over because talking about money, even if you think you know all the answers, even if you think you’re financially secure, is difficult because it’s so personal. And as I say in the book, these days we can talk about the most horrible disease we have or somebody else has and not worry about it. We can talk about sex with friends, acquaintances, and not worry about it. But we cannot talk about money openly. I mean have you ever gone to any of your friends or neighbors and said, “Hey, how much do you make a year or, hey, how much do you have saved in your 401(k), or how much did you put in that 529 for your kid’s college fund?” We would never, ever do that. It’s taboo. But there are so many other things that are important and essential to our lives, just as money is, that we’re willing to talk very openly about.

John Rothmann – Why? Why is that? Why are people reluctant to talk about money?

Paul Sullivan – Because money is no longer what it should be. Money is a means of exchange. If you have more money you can buy more things. If you have less money you can’t buy as many things. It’s that simple. As this trip out to Kansas State and a lot of the other research in my book showed, money has become attached with all of these psychological values. Money is equal to your self-worth. Or the classic keeping up with the Joneses. Or you want money to stand in for something it can never stand in for — love. You want to show more love or you want to make up for love you didn’t receive.

Money is a means of exchange. And money can buy you freedom. If you have a bit more money you can get away, take a nice vacation. I don’t necessarily subscribe to “money doesn’t buy you happiness.” Money can buy you escapes. When money becomes more than just the ability to buy things you need or buy things you want, that’s when it becomes very difficult for people and that’s when people clam up and they don’t want to share how much they have or how little they have because they don’t want to be judged or they don’t want to seem like they’re prying if they’re the person with more money asking the person with less.

Mitch Tuchman – And yet in my business at Rebalance as a financial advisor, usually when we begin a conversation with a client it’s because something got triggered. Maybe they’re out of a job and they’re between jobs and now they’ve got to deal with their money and that’s always hard. But usually it’s forced by something that happens in your life. They also say that when people turn 39, 49, 59, right before turning a decade, that’s a trigger. But these triggers happen and they call us up and when they find somebody who wants to talk about their money, in our case an advisor, and they get to open up about it — you can’t stop them. It’s like a relief for so many people to lay it out and get an opinion because they can’t do it socially or in other environments. So it’s very interesting from our standpoint how this all works. Sure, socially, no one will talk about it but on the other side of this, people are desperate to talk about it, we’re finding at Rebalance.

John Rothmann – I’m curious about tips you got from those who spend a lot of money but aren’t broke. How do you do that? I really want the answer to that one Paul, before I send you my bills.

Paul Sullivan – This is a fun chapter I have. I start off the chapter with a football player, guy named Paul Posluszny, who is a linebacker, he’s a really great linebacker. And I started off with him because, man, football players, they get beaten up all the time for the bad choices they make with money. And Posluszny is different. By the end of his playing days, if he doesn’t get another contract, after taxes, after his agencies, he’s still going to be worth about $20 million. That’s how much he’ll get, after tax, after agencies.

But when I met him, we were talking about cars. He was wrestling, he’d been wrestling over….he was getting a free car when he played for the Buffalo Bills, because he signed some autographs. He really wanted to buy a BMW. This is a kid who grew up very modestly. Mom a teacher, dad a mechanic and he really wanted a BMW. Well, I talked to him a couple of years after that, when he got a second contract that really put him in this tens of millions of dollars range and he said, I remember we were talking about the car, and I said, yeah, yeah Paul, I remember that. And he said, well, I couldn’t do it. I said, what do you mean? And he said, I couldn’t buy the BMW.

The headline number in this guy’s contract is $47 million. This is the headline number. With football players those headline numbers don’t matter. It’s the guaranteed part that matters. I said, Paul, why couldn’t you buy the BMW? And he said, well I drove it, and it was great, but it just was too much money. I just couldn’t pull the trigger. He’s talking about a $90,000 7 Series BMW, and I said, well, so what did you do? And he said, well, I bought an Audi. … It’s still comfortable. It’s still that good German engineering. And it just felt better.

John Rothmann – There isn’t that much difference between and Audi and a BMW!

Paul Sullivan – Well, $90,000 to $75,000. It’s 15 grand, but in percentage terms what’s that, 18%, 19% less? It’s those little decisions, those little choices that people make throughout the course of their life that make a difference. If you could save 18% every time you made a decision and take that 18% and save it for something you might need, either for a goal — it adds up. And a guy like that is going to be OK because he has the ability to make those little decisions now and wait and see how they add up later on. And he’s not depriving himself, either.

Mitch Tuchman – It’s almost like an instinctive ability to be able to stay on the other side of the line that you’ve described, this imaginary thin green line. It’s almost like when you get too close to it, you know and you want to get away from it to stay on the upper part of it instead of cross through it. It’s almost instinctive for certain people, or is it learned?

Paul Sullivan – I believe it’s learned. And I believe that Posluszny is an interesting case. Mom a teacher, dad a mechanic. He told me stories. They talked about money at the dinner table. They had to make decisions. They were solidly middle-class people growing up in central Pennsylvania but, you know, their decisions counted. If they needed a new car, maybe it was a new Chevy, a new Ford, maybe it was a new Toyota — it was a need. The old car was not working anymore. And they had to think OK, if we buy this car, what else are we going to have to give up?

And that’s one of the things that people miss. The people that I’ve known over the years who are the best with money, who are the best-adjusted, particularly at an early age, not the client that’s coming in at age 39, 49, 59 saying help me now. Those people who are best-adjusted, have the best relationship to money in their 20s are people whose parents talked openly about the decisions they were making, whether they had a lot of money or a little money, and they were connecting their labor to what that labor created, which is money, the money that allowed them to make those decisions. And that is essential. I think the people that try to hide money from their kids or pretend their kids will never figure out how much money they’re worth when they can go on Zillow and figure out exactly how much the house costs, they’re deluding themselves.

Mitch Tuchman – And that’s such an interesting dynamic here in the Bay Area. And you mention the founder of eBay in the book. But people here in the Bay Area oftentimes find themselves with these huge windfalls, and I’ve lived in the Valley for 35 years and I’ve watched people come into lots of money, blow lots of money, and others just hold on to it and save it and grow it, and it’s just a very interesting dynamic about getting experience with having money.

John Rothmann — And isn’t the key here, because we are talking about retiring with more, that you really want to give thought at a younger age to what you’re going to need when you get older. Is that a fair statement?

Paul Sullivan – Sure. Not even when you’re 20 looking at 70. When you’re 20 and looking at 40 and you want to have a home and you want to have a couple of kids and you want to take a vacation. That’s a mental leap. That’s a big place to go from your first job to having a family.

John Rothmann – If you want to retire with more, and we have to break in another minute or so on this segment, but if you want to retire with more, what is your best advice for the people listening to our program?

Paul Sullivan – I think it’s practicing moderation with occasional moments of indulgence. Because if we tell people you need to save “X” amount every week and do that, boom, boom, boom, boom, boom, don’t have your Starbucks, don’t treat yourself, it’s going to be very difficult. If people have some sort of goal in mind, they want to have “Y” by this time, and by the end of the year they want to have “Y” more, well, that gives them to have some sort of flexibility. They can practice moderation and have occasional bits of indulgence. They can have that nice bottle of wine at dinner. They can go out with their friends. They can go on a vacation. I think that that’s a more realistic way for people to think about spending and saving their money.

John Rothmann – Speaking of indulgence, you have a story in your book about the son of Ruth’s Chris Steak House, and that is an indulgence — if my wife is listening, it’s one of her favorite restaurants — so when we come back we are going to ask you to tell us that story and a little bit more, when we come back right here on the Retire With More program. Our guest is Paul Sullivan. We will be right back.