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Stop Sending Checks To The
IRS And
Start Building Your Personal Wealth
The Big 3 Roadblocks To Retiring
From Your Dental Practice.
Do you know a dentist
that is past what you would consider the “ideal” retirement age? Do you know why
he still works?
There are tons of
people in this situation. I had a 69 year old dentist call me the
other day because he was expanding his office.
He was about to take
on 10 years worth of debt for a practice that was not worth investing in.
How did he get to be in that situation? He hit some roadblocks.
Every Dentist Has Big 3 Roadblocks:
(1) Not enough cash to invest, (2) The wrong debt structure, (3) No plan
Did you know that
dentists are in the top 5% of ALL wage earners in the country? So if they are making so much money then why is it that at retirement age, over
90% of all dentists CANNOT retire and maintain the lifestyle they've been
accustomed to?
 They FAIL at making correct financial decisions of how to
structure their debt and where to invest.
Most dentist's debt structure and investments are probably not optimized to
create personal wealth. Over 20 years ago this is what probably happened
(or did not happen) to our 69 year old comrade.
Roadblock #1: Not enough cash to
invest.
Most dentists
work hard but do not create the free cash flow in their practice
that will allow them to invest in (1) a
qualified plan or (2) real estate.
Qualified retirement
plans and real estate are both tax deferred
investment vehicles that shield your gains from taxes until they are
harvested. So if you do not have the free cash flow to invest either one, just
where is your money being spent?
 The
1st step is to finding out where ALL of your money is going.
This means documenting
ALL of your expenses in your practice and personal life. Financials in
your practice should help. Your lifestyle expenses are more difficult to
track.
They should include your goals or the things that have to happen for your to feel really good
about the results in your life (like your personal goals). This snap shot helps you create your
blueprint of where you are right now.
Remember that your
lifestyle expenses and goals are very important to document and track.
Most banks ignore this aspect of your life when you go to them to borrow money.
Ask yourself
has any banker or accountant ever asked
you what has to happen for you to feel really good about the results you
create? Humans create goals or visions for what they want. Whether
written or thought, as we dwell upon them, they begin to appear in our lives.
Guess what?
Goals usually require money to achieve them. Surprise right? Think about what
you want to happen in your life. Can it be accomplished without money?
Sure, some
of the highest goals can like a fulfilling relationship with your family or your
God. But when Junior wants to go to college and you can’t afford the
college or the lifestyle that Junior wants, he is going to throw rocks at you.
 Same
thing with your spouse. If you envision the two of you sitting in Florida for
the winter months and sitting wherever else during the summer, you better get
that plan in place now. This dream doesn’t magically happen.
Your lifestyle
expense requirements are bigger than you think.
If you have a spouse
that spends too much money, the likelihood of you retiring with enough money is
"zip" unless you make changes now. Documenting ALL of your expenses
will force you to uncover
how much you really spend to maintain your lifestyle.
If you have this very
important part of your financial life handled, you need to congratulate yourself
because you are alone. Feel free to prove me wrong on this point. Most of the
country is writing checks to the wrong people.
Once you have ALL your
expenses documented you tackle roadblock #2.
Roadblock #2: The wrong debt
structure
Dentistry requires
reinvestment in plant and capacity. You have got to buy new stuff and you
have to maintain a quality facility.
To do this, you
borrow money. You want to maintain a certain lifestyle. Live in a nice
house, drive a decent car and basically live the American dream. For most
dentists, this means
debt.
The problem that I
see over and over is that the way you structure your debt is killing your cash
flow. Since you don’t have the cash to invest in your retirement,
you put investing on hold until you have
paid off your debt.
This million dollar
mistake is further compounded by getting into more debt as you move through
the equipment replacement & CE training cycle.
You know the cycle
where you must update this or that before year end or lose the tax benefit (per
the dental supply rep). Or you must attend an expensive CE course that
involves travel and your staff. I like CE myself and take it all of the
time, so I am I not poking fun at it, but it is expensive (or is it more
expensive not to have it?)
If you pay your debt
off rapidly and then pile on more debt later, how have you helped
yourself? You pay the bank interest which is tax deductible. You
also pay the bank principle which is NOT tax deductible. So
you are sending after tax dollars to the bank.
Follow this sequence.
You do a procedure, pay your expenses, then pay the state and federal taxes,
then send the bank their money. If you borrow $100,000 and pay it back over 5
years, you are committed to paying $20,000 per year in after tax dollars. Have
you ever thought that there must be a better way?
Interest rate is not
the number one criteria for shopping for money. Let me repeat that.
Interest rate is not the number one
criteria for shopping for money.
Before you shop for
money you need the
ideal debt structure that allows you to achieve your goals. The ideal
debt structure is a loan or loans that are structured so you can pay them back
but the payment is not so big that you do not have the available cash flow to
fund a qualified retirement plan AND at the same time support your lifestyle and
achieve your personal goals.
Never borrow money that does not allow you to achieve your goals. To help
you create the ideal debt structure you will most likely need to hire a finance
expert to walk you through the process.
The last Big Roadblock: #3, No
Plan
When
you pulled all of your goals out and determined your ideal debt structure you
also
laid out all of the things that have to happen in your life to feel really happy
about your results.
Now from an investment
perspective you should determine your risk
tolerance and lay out your investment time frame to craft the ideal asset allocation strategy to give you the best chance
of hitting your goals.
Your plan in on paper,
but you are not done yet.
 Your unique ability is caring for your patients and
leading your practice. It is not implementing financial
solutions.
Find a financial
expert to do this for you while you focus on what you do best: dentistry.
Financial experts execute your plan by working with all of the commodity providers (banks, pension
advisors, money managers) to get the best possible outcome for you. All
you have to do is review and approve.
This step alone pays
for their fees. Typically there is no way you could execute a plan on your
own for less than the fees charged for the services by the financial planners. Their execution entails countless hours of
numbing calls with third party commodity providers.
Look at it this
way. How much to you make per day? If you work 200 days per year and
produce $800,000, you are generating $4,000 per day. You could spend 10 days
implementing your program and still not
have completed it.
 Once your plan is executed,
most finance experts will monitor your results
to make sure you stay the course. The areas of critical importance include
changes to your personal goals which may change. If changes are needed, they are here to help.
Shameless plug here - Finance Geeks
has a unique proprietary process for taking dentists through these 3 big
roadblocks. It's called The Found Money Solution™.
If you'd like to read
more about how it works, click on this link. It is a 5-step program
that systematically looks at your entire financial environment, your practice,
your lifestyle, your goals and develops debt structures and a plan that is
executed while you focus on dentistry.
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The
process you just read about are the elements of
The Found Money Solution™.
It's components are The Financial Health Assessment™,
The Ideal Debt Structure™,
The Ideal Equity Solution™,
The Execution Solution™
and The Monitor Program™.
The Found Money Solution™
is an exclusive, unique service of Finance Geeks. |
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Or if you have a question about
The Found Money Solution™ or a
comment for me? Send it to
david@financegeeks.com.
Finance Geeks
provide unique wisdom and expert advice to dentists that are contemplating or
have completed large financial projects like expansions or transitions. Their
strategies help dentists create and maintain wealth. David Catalano has over 20
years experience dealing with dentists. See them on the web at
www.financegeeks.com.
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