Mark: Today on PowerTips Unscripted. We talked to Jay Wheeler, president of Wheeler Financial. While Jay provides traditional financial planning and investment, he believes the best value he provides his clients is helping manage their behavior when it comes to money. There is a lot that goes into the decisions we make around our finances, and many of them are very emotional.

Mark: Jay is here to tell us all about the behavioral finance in just a minute.

Victoria: Hi, this is Victoria Downing and welcome to PowerTips Unscripted. We talk about tips, tactics and techniques to help you build a strong, profitable remodeling company. And I’m here with my co-host, Mark Harari.

Mark: Good morning.

Victoria: Hi. How are you, Mark?

Mark: Yeah.

Victoria: But doesn’t sound too enthusiastic. What are you thinking about? Your finances and getting all wrapped up emotionally.

Mark: Yeah, I’m pretty emotional today. Just the thought of this is making me emotional. Now I’m actually pretty good. It’s a beautiful day out, and, I’m excited about this.

Victoria: Good, good. Well, I am, too, because, you know, I am a security minded person. I like to know that, as I’ve often said, I will not be eating cat food when I retire. So, you know, I love this stuff, so I’m excited to jump into it. So shall we?

Mark: Yes. Jump away.

Victoria: All right. Jay Wheeler, as Mark said, is president of Wheeler Financial, based in Wilmington, Delaware. His firm’s motto is life’s an adventure. Plan accordingly. The company helps our clients plan for the good and the not so good adventures that life can bring. Jay’s been acting as a quarterback of his client’s financial lives for over ten years, and his services clients in 23 states.

Victoria: Hey. Welcome aboard Jay and Victoria.

Jay: Mark. Thank you so much for having me. I’m excited for this.

Victoria: Yeah this is great. So behavioral finance’s let me give us a little bit of a definition of that.

Jay: Yeah. So you know in traditional finance I think we all kind of know what that is. When you go to a financial advisor they’re taking a look at your investment in your financial planning under a variety of circumstances. But behavioral finance takes into consideration the emotions around money. So, you know, the way I look at it is it’s it’s not about the money.

Jay: It’s about the feelings that the money can bring. You know, you talk about, Victoria not liking to lose money. You know, that’s that’s something that that, you know, as I hear that as a financial advisor, I want to know more about that. You know that that can come from either your. You know, the way you were, you grew up or, or just, you know, I think we need to understand whether we want to challenge you on that little bit or whether we would want to, honor it or a little bit of both.

Jay: So, there’s a lot around emotion that gets gets into money. And, we see people get in their own way and we’re behavioral finance. We kind of keep them out of our own way.

Victoria: So what are some of the most common things that you see when you’re looking at how people behave around money?

Jay: Yeah, there are a lot of directions we can go in that I’ll give you one example is, I think for, for people whose parents were a product of, say, the Great Depression. You know, I heard a couple, once and, it goes the price of security is insecurity. And so, you know, people became safe with their money by always being worried about not being safe.

Jay: And so they were taught that. And so what I wind up seeing is an advisor. People make it to retirement by not spending a penny, and then they get to retirement and they still can’t spend a penny. And so what I do is I coach them to model different scenarios. One client in particular, I, I say in their financial plan, I have a scenario where I say, you can basically burn $30,000 a year over what you normally spend, and you’ll be just fine.

Jay: Wow. So sometimes it takes industry rating, extreme scenarios, a group of people. Then you know what? I can have security. And I can also go, well. So and then we we coach on the other side of things where, you know, financial management is just a big balancing act. So you need to know whether you can have fun now, but also be in a position to have fun, later on.

Jay: Right. So sometimes I have to support people aside and say, you know, like, beach House would be awesome, but it would affect your overall retirement age, 65. So maybe we can find a little bit of a balance. Maybe you’re okay for timing 67 or 68 and get the beach house, and then just challenge them to think through the different tradeoffs, and then they can make the decision based on whatever is consistent with their values.

Victoria: Know are you doing that really like based on factual numbers, that sort of information?

Jay: Yeah, that’s a great question. I always say that, in the absence of good data, emotion takes over your financial decision making. So, so we can work with emotion, but by looking at the data. So, so we always, you know, we’re, we use cash flow based financial planning software, and we’re always looking at, the cash flow.

Jay: Right. So the different decisions that people are making, therefore they can see, okay, it is, you know, what is that feeling worth to me? Is it okay to not have some, you know, have a little bit of additional financial risk, to have whatever I want to have now and we can quantify that which I know, I know IRA is big on numbers and we are too.

Victoria: You know, I just read I like to read like the, you know, the Ann Landers type advice columns sort of thing in the post, The Washington Post. And so I was reading one the other day and it was a husband, wife, been married a long time, super frugal. She was not involved in the finances at all. Super frugal to the point that he would not allow them to go and visit family or anything because they just couldn’t afford it.

Victoria: And then he died. She found out. She finds out that he had millions. They had millions saved. What would you do? What would your advice have been to them earlier? I mean, what could you have done to have changed that is extreme emotional behavior to me.

Jay: Yeah, I actually just I write a weekly blog and I wrote about financial management among couples. Just a couple of weeks ago. And, I think one of the things is, is the, I would want to find out why why this person, wouldn’t spend, you know, understand what what it is that made them not spend and, and also, realize that or help them to realize that different people bring different things to the table.

Jay: And I’ll give you an example from my personal life, is my wife likes to spend more money than I do. But I respect that. That’s really cool because she has brought things into our life by spending money that I wouldn’t have got on my own. And, and you know what? My, you know, me being a little more tight with money has probably, you know, that balance, I think, is one of the best things we have, grown for us is that we sort of challenge each other.

Jay: To say, you know, she’ll say, I think we should buy this. And I’ll say, well, then, okay, that’s cool. But what are, you know, what do we want to trade for that we’d love to have a beach house one day. And so everything that we do extra, we love remodeling projects. Everything we do extra to the house means it’s a little bit later that the beach house comes along.

Jay: So, so respect each other and it’s, it’s, you know, it’s a balance. And I’d say I’d encourage those people to think that way.

Mark: You j how do you actually engage with your clients from this side? It seems like a sensitive it’s easy to, to just talk dollars and cents and say, okay, you need to put this much away. You need to do this. Let’s do this with your phone. Okay. Let’s do that. But if you’re talking about this behavioral stuff like what’s that kind of look like, you’re almost a therapist at some degree and it’s got to be some sensitive topics.

Mark: You hit.

Jay: Yeah, it’s it’s amazing though, Mark, how willing people are to share these things. I think, when you approach it this way, gets people permission to talk about it. And it’s, you know, in ways at times it almost can be like couples therapy, like, you know, because they’re able to talk about. So, you know, money is a big challenge in relationships.

Jay: And so, you know, people don’t have a lot of outlets to, to talk about that so they can talk to their financial advisor about it. I, you know, I try to be the one of our core values is we take a lighthearted approach to a serious subject. So, Mark, I think, you know, we we try to make it.

Jay: I think people are nervous when they walk into the financial advisors office. And, we try to make it really easy for them to open up. I don’t judge the person who’s spending too much, and I don’t judge the person who’s spending too little. What I what I would challenge, though, is if I saw somebody who was doing something that that was inconsistent with their values, and, so, but yeah, to your point, people, do, people open up pretty quickly if you give them permissions.

Jay: That makes sense.

Mark: Yeah. Yeah, absolutely.

Victoria: Now how important is it now. You know we work with business owners, small business owners all over the country. You us Canada. And we get to see all their financials. So we can see when people when on occasion a business owner might be taking more out of the business. And the business is really earning you know, making it go into the negative retained earnings and that sort of thing.

Victoria: And a lot of times, sometimes we run across well, my spouse has a certain living style that they want to maintain. So this is what I have to do. How do you coach that?

Jay: Yeah. That is, that’s I think again, it’s if we go to the trade off conversation, which is, you know, the, the well could run dry if you, if you continue on the path that you’re on. And, you know, as far as business planning goes, I would want to make sure, you know, I’ll answer your whole question in a second.

Jay: But, you know, I think, as far as that goes, I would start in business planning with a really nice emergency fund, both business and personal. You know, and the emergency fund is where it needs to be, and, which is probably not in the case that you’re laying out then, you know, I would say, you know, take, take from the business, but if you’re, if you don’t have the emergency fund that you need to have and you’re hurting future operations, then you’re not doing the proper trade off, because if the business if the business is done, you have no income to fund these things.

Jay: But on the on the topic back to emergency funds real quick. Your emergency fund goes from being your least favorite investment immediately to being your very favorite investment, you know, and and I would imagine that you work with your clients, to, to talk about money that they have in reserve. And, you know, I think about last spring at this time when things were really, really ugly, I could look back, I looked at our business and I said, well, you know what?

Jay: Not not only are we, not able to pay our people for a very long time, if things go bad and say bad, we can also be opportunistic and we can go out and acquire businesses that potentially didn’t plan for this. And, you know, looking at other assets to acquire. So, not not really the answer to your question there, but a good opportunity.

Jay: I get all you got about, emergency fund. Yeah.

Victoria: Me too. No. How much do you feel? Personally, a couple should have set aside for emergency fund. I mean, I’ve got a pretty good grip on which, say, between 4 and 6 months overhead for the business. But what about personally?

Jay: And I normally say, I’m going to give you a long answer to a short question. So the short answer is typically, we say 3 to 6 months, but when we look at behavior and we look at our relationship with risk, for some people it could be, it could be 9 or 12 months. I mean, I have I have clients, who have, $3 million in investment assets and $500,000 in cash.

Jay: Wow. I don’t think that’s, necessarily appropriate, but, I think what one of my, one of the ways I challenge that thought process is I ask people, what is the cost of whatever feeling you’re getting out of this? So, you know, we’ll look at we’ll look at the emergency fund and let’s say of the 500,000 that they have, maybe 300,000 probably should be invested elsewhere.

Jay: Okay. I will show them the rate of return that they may have gotten by having that invested, maybe in a portfolio stock and bonds and say, I actually did this for somebody one time. And we were able to just show that over that period of time, that feeling of extra security cost. So $123,000.

Victoria: Yikes.

Jay: So, so they but, you know, it’s interesting they said, thanks for the heads up. And now we go. But we still want to have it that way. And there were, there were, there were things in these people’s background that made them, you know, they went through some, some really tough things. And so they said, this will never happen again.

Jay: But at least that’s your point. Earlier we were making a data driven decision. And and so for some people it’s more but for base, you know, base case 3 to 6 months of your expenses is good. But you should also make sure that you’ve got disability insurance in place because there’s, you know, there’s a higher likelihood of you becoming disabled and not being able to run your business and, and diet and disability insurance.

Jay: Frankly, this is not that great. You know, you look at the benefit you can get versus premium, but you really should. It’s really smart to have some of that in place.

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Mark: Jay, does this approach of yours affect the actual investments that you choose? Does it sway, recommendations in such.

Jay: Yeah, yeah. So, the there’s the way that we choose to invest, we do the financial plan and then it generates an amount of money that either you have left over at the end of the year or if you’re in retirement, and the amount of money that you need, to come up with to meet your expenses.

Jay: So, so what I the way we invest is we use something called a bond matter in order to help generate the income that folks need in retirement. So, so let’s say you need, let’s say you’re retired and you need $30,000 a year. And let’s say you get dividends and interest of $10,000 a year, but you still need to come up with 20,000 from somewhere.

Jay: That you can’t you can’t depend on stocks to come up with that. Because look at last year, you know, if the market is down, you’d have to sell assets that are valued in order to, generate. Yeah. So, I’m going to explain to your listeners, a lot of them, how do we know how bonds work? But I’m going to pretend that nobody does for this exercise.

Jay: So, you know, with a mortgage, you know, we know how a mortgage works. You’re borrowing money from a bank, and so you pay it back, you pay them interest or with a bond. There’s either, a corporation or a municipality that wants to also wants to raise money that they don’t have. So they put out a bond issue and they agreed to pay interest until a set date when the bond mature.

Jay: So, so in this case, let’s say that this person needed, the $20,000 for 2026, they would buy a bond that would mature in 2026. And until then they get paid interest. So the latter part comes in where we buy bonds that mature each year, going out depending on their risk tolerance, about ten years. So, so Mark, when the, when the market was down last year, the behavioral coaching I’m doing with my clients is okay.

Jay: Your statement is okay. I told you that was going to happen from time to time because markets can be volatile. It’s still safe. I understand, but you have enough. You have a bond ladder that’s going to cover the next ten years of your, retirement income. Now, bonds don’t have zero risk. No investment has zero risk. But we use high credit quality bonds for that, and they’re less risky.

Jay: And sa, but I said last spring, I said, hang in there. If this if this thing goes on for ten years, then we might have to sell some stock. But that’s extremely rare. So, my job at that time is to just keep people in the market. We’ve already done the planning, and it’s just to stick, you know, stick to the plan.

Jay: Just as, you know, when your, production folks for remodeling companies have contingencies that will pop up, you know, you need to just stick to the plan and, and, and stick to your processes. And that’s what we do in that case, even though emotions run high.

Victoria: Now, Jay, one of the things that we talk about is that, you know, when we’re talking about business with the owners, they say remodeling companies, that their business is a tool to get them what they want out of life. But we need to know what they want out of life and what those goals are before we can manipulate in a good way, the business to deliver.

Victoria: So I say to people, if you do not have a personal financial plan, you should get one immediately. How do you feel about that? Why do people not get personal financial plans? I mean, I’ve had one for the last 27 years. I think.

Jay: Yeah, I think I think there are a few reasons. One is, it’s some people are not, people value planning in different ways, I think, I think some people are just not naturally drawn to planning, and they think they’re going to, you know, the they’re going to go into the office and get told what to do.

Jay: And, and, and so that’s, that’s one of the reasons people don’t go. Another one is getting enough to gather a fair amount of documentation to meet with the planner. And I’d say that’s one of the reasons why people don’t do it. And and it’s, it’s it can be uncomfortable. You know, I think probably the number one reason is that people are afraid you’re going to hear things they don’t want to hear.

Victoria: That’s right. That’s what I think.

Jay: Two reason that, a person might put off, get physical, you know, because maybe they’ve been drinking more than they think they’re supposed to, and they don’t want the doctor to tell them to cut back.

Victoria: There you go. So especially in Covid.

Jay: Oh. Yeah. So.

Victoria: Yeah. Really. All right. This is a great actually.

Mark: You know, it’s funny because, I was listening to another podcast, a couple of days ago, and, and he had this segment called asking for a friend. And I thought it was really, really cool. So I’m going to I’m going to I’m going to steal that right now or borrow it. I’m going to say, and this is asking for a friend.

Mark: What is your opinion on buying from your fro and K?

Jay: I think you should do it as a last resort. Okay. You know, the, your, you know, you’re not participating in the market. Those investments are participating in the market. And with interest rates as low as they are right now and that, you know, there are other places to to look to borrow first. So, you know, like getting a home equity line of credit, interest rates are really low.

Jay: Take out a home equity, home equity line of credit that that money, you know, is used for a remodeling project, which everybody should do. Right. That that, interest is tax deductible on that. It’s used for your home. So, I would I think there are, other places to look first. Right. But if you know, if, if it is, I wouldn’t say never.

Jay: I don’t say never too much. But I’d say I look at other options for cool.

Mark: Well, this has been great. I think it’s time that we, we look inside your head and ask you some lightning round questions. What do you think?

Jay: So? Oh, and now here’s the reminders. Advantage lightning round. It’s a dry.

Mark: All right, we’re putting 60s on the clock. Here we go. What’s your favorite business book and why?

Jay: And, delivering happiness. And I just love the Zappos way. And, the customer service success that they have is phenomenal. And I also love how one of their core values is you go a little weird and, and, you know, in behavioral finance, our approach is a little bit nontraditional. We love you guys with people.

Jay: You know, they may come to us for the financial management, but we think they stay for the behavior.

Mark: If you weren’t a financial planner, what do you think you’d be doing a teacher?

Jay: No brainer.

Mark: What are you not very good at?

Jay: This might be too long for the lightning round guys. Spend a lot of time trying to take a look at what, I’m not good at and only do things that I am good at. And a little quick plug for the kind of work that you do. And working with another consultant in my industry, they got me to try and spend all of my time, only doing the things that I love doing that I’m really good at.

Jay: So I’m fortunate enough to have, people around me who are really good at the operational details, and I’m not that passionate about, so I can spend time as a thought leader and with clients.

Mark: In your room, your desk or your car, which would you clean first?

Jay: Car.

Mark: Name a movie you seen more than ten times.

Jay: And Ferris Bueller’s Day Off.

Mark: If you could have a theme song, what would it be? Oh.

Jay: And, you know, first thing that pops into my mind is I’m a huge show. Sports fan, so I’m going around.

Mark: Of course you are.

Victoria: Yeah. Really? It was just just been awesome. Really, really interesting. You know, I’m I love this the whole concept of financial planning, both in your business and in your personal life begins, I said, because I’m such a security nut, I, I don’t want to have to worry. So that’s I’m really excited about what you what you share with us today.

Victoria: Now, first of all, how do people find you if they want to learn more.

Jay: About our website is We Are Financial llc.com. You can email me j y dot miller at Raymond james.com and, look me up on LinkedIn. I have a blog that, that I post on LinkedIn and Facebook, every week. And you can, you can follow that.

Victoria: All right. Great. Perfect. And lastly, before I let you go, and while we appreciate this greatly, I want you to share with us your five words of wisdom and why they resonate with you.

Jay: I heard this at a conference once, and it went like this. Emotion puts money in motion. And, you can look at it in a million different ways. But I, you know, get past the dollars and start looking at the feelings around, that around your body. And I think your business owners probably do this too.

Jay: Probably the best ones. Look at the emotion, around the projects that they have. I mean, jeez, you you guys have such a leg up on me, I might you can put on your website. I have to find stock photos. You can put pictures of all your awesome work. So there’s an emotional response that helps you build your business.

Jay: But, yeah, the the emotional piece is, is so big in money and we didn’t really talk much about cognitive bias today, which is a big part of behavioral finance. But one of the things I’m dealing with, right now is and over the past few years is helping people to keep their, political opinions from influencing their investments.

Jay: So, you know, over the, you know, from 2006 through 2020, I was doing that with Democrats, and now I’m doing it with Republicans and I it’s amazing. I send the same message, which is don’t invest based on your politics and your emotions. And it’s just it’s the same message, but to different groups of people. So, but obviously politics is very emotionally charged and it can cause people to make, bad decisions.

Mark: Okay. Yeah. That’s a that seems like that’s a real tough one to tackle.

Jay: Yeah.

Victoria: No kidding.

Jay: Yeah. It’s been a lot of hours on the phone with that. But that’s the, that’s that’s what people password.

Victoria: Yeah yeah that’s great. All right. Great. Thank you so much Jay. This has been wonderful. Appreciate you taking the time to spend with us.

Jay: Yeah. Thanks so much for jury and I appreciate the time. Have a great day. All right.

Victoria: Bye, Jay.

Mark: Thanks, Jay.

Jay: Let’s see.

Victoria: So emotions and decision making and finances. Those are three. I.

Mark: Wouldn’t want his job.

Victoria: Oh, that’s. You know, I thought it from. I thought in the past that maybe doing that would be kind of fun.

Mark: Yeah. No, but, I mean, actually, like, when you start, I mean, especially when you added at the end, they’re about trying to get people off the political edge. And every four years or eight, depending on the year, you know, having to do it with the other half of your clientele because they’re switching and flopping based on on the politics of it all.

Victoria: Yeah. I mean.

Mark: I just, you know, I mean, I hate politics, talking politics. I don’t want to get into that conversation with anybody because it’s just a bad road to go down. So that alone was, you know, but just all of it, I mean, it’s it’s tough to get into those kinds of conversations, I think. And, you know.

Victoria: You know, one of the questions I wish we would have asked him is like, out of 100 clients, how many are spending too much? What percentage are spending more than they should? And what percentage are spending less than they should? You know, because it seems to me, from what I see, that there’s far more people spending too much.

Mark: Really?

Victoria: Yeah, yeah. And that’s that’s why that story I read about, you know, the woman who found out they had all this money and her husband was such a miser. They lived a crappy life because he was such a hoarder. So afraid. Right. How horrible. But I don’t see that very.

Mark: I think anything, anything to an extreme is bad. Yeah. To the good or to the bad? Yeah. Too much of anything is too bad.

Victoria: You know? And just like you make a business plan, you make a project plan, you make a budget. You know, all this planning to me is the key to success. So how can you go through life without a financial plan? Knowing what you need to live the life you want for years to come?

Mark: And I think he nailed it. I mean, it’s just a matter of, you know, just the same reason why some people just don’t want to go see the doctor. Yeah. Or, you know, you just. I don’t it’s a hassle. I don’t want to go through it. I hope he doesn’t say something I don’t want to hear. You just want to avoid the whole thing, you know?

Victoria: Yeah. You don’t want him to say stop spending. What? That’s what you like to do. Right?

Mark: Right. Yeah. If he’s if you go and see the plan and they’re like, hey, you got 30,000 a year, you can burn it.

Victoria: Yeah. I mean burning it.

Mark: Man I yeah okay. Great.

Victoria: Yeah. You know and I love those the models now we didn’t I didn’t ask Jay about it. But he was talking about the bond ladder and knowing that certain money was going to come in at certain times. And like I’ve told you before that my financial planner did this Monte Carlo. Yeah. Simulation with me that I just found fascinating.

Mark: I had her on, a couple of years ago.

Victoria: That’s right. Sasha Millstone. Yeah. Also with Raymond James.

Mark: So you could probably look that, that one up. That’s right. She was talking about the Monte Carlo. Yeah. Thing.

Victoria: Very interesting.

Mark: Yeah. Good stuff. But we want to thank Jay Wheeler for participating today and sharing a little bit, just a fraction of all that he could have talked about, behavioral investing and finance. And of course, we want to thank you for listening week in and week out. If you don’t know it already, I’m Mark Harari.

Victoria: And I’m Victoria Downing. See you next week.