10 Mistakes That Could Cost You $10K or More – Part 2 – Episode #538

“Some of us learn from other people’s mistakes and the rest of us have to be other people.” So said Zig Zigler. While mistakes are part of being human, and it’s important to learn from your own, it is much better when you can learn from others. On this episode of the Dentist Money Show, Matt and Victoria add five more ways dentists typically lose money to complete their 10 mistakes-to-avoid list.

 

 

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Podcast Transcript

Matt Mulcock:
Victoria, welcome back to part two. I, part two of two. I kind of love doing series or multiple episodes, like parts of episodes. I think it’s kind of fun.

Victoria Ferguson:
Matt, thank you. Part two of two.

Matt Mulcock:
So we did part one of the 10 mistakes that could cost you at least $10 ,000 is I think what we called it, right? We did a webinar. We had such a good response on the webinar. So many comments, so many questions, so many people hanging around, against just so much engagement. And so we.

Victoria Ferguson:
Yeah, are people like admitting like, yep, I’ve done this and like, listen to this.

Matt Mulcock:
Totally. Yeah. I think that’s what’s cool about these things is that to that point is we all are making mistakes all the time and we’re all wishing we could go back and we’ve all learned from things. And so that’s what we’re hoping from these discussions, people can feel, A, we can normalize some of this stuff and exactly not be embarrassed. And we can all learn together and people can learn from other people’s mistakes. What’s the whole Warren Buffett thing? Learn from your mistakes is great, but it’s better to learn from others. Yeah. So that’s kind of the hope here.

Victoria Ferguson:
Learn from other people’s. Yeah, yeah, yeah. That’s true. Yeah, I like this. Normalizing mistakes. We’ve seen some of the worst. But yeah, it’s not. I like the idea of kind of normalizing this, learning from other, like just learning about the most common ones so that you hopefully don’t do them.

Matt Mulcock:
So just a quick recap again, part one already came out, but for those of you tuning in that maybe didn’t listen to that one or just want a quick recap, we’re just going to, we’re going to hit six through 10 here, but let’s just hit one through five really fast. So number one, and these are in no particular order, by the way, these weren’t like order of importance. We just to keep things organized, we just keep them in order. so number one, mindless spending. Number two, we hit lack of liquidity. Number three was mismanaging debt. Number four, waiting to invest and the number five, trying to time the market. So those are the first five mistakes we covered. And now we are into part do. yeah, go ahead.

Victoria Ferguson:
What I was gonna say, like I should also say the fixes to those, unless we would just wanna say go back and listen.

Matt Mulcock:
Yes. Okay. No, you’re perfect. Okay. So number one, mindless spending was the mistake. What would you say was the fix?

Victoria Ferguson:
Track your spending and create a system.

Matt Mulcock:Matt (02:37.852)
Love it. Number two, lack of liquidity. What was the fix?

Victoria Ferguson:
Personal and business emergency fund. And then, do you want me to, you go, sorry. Three, create a debt strategy plan. Four, start investing regularly. And five, stay in your seat.

Matt Mulcock:
Perfect. Love that. You’re always, you’re always bringing it back. You’re always like, Hey, should we maybe pump the brakes and maybe give a definition or maybe you should slow down and we should like give people some value here. I like this. You’re keeping me in check.

Victoria Ferguson:
I just liked people to feel included. It can be scary. So, you know, just always trying to level set, bring everybody in the room. Want everybody to have a seat at the table, you know?

Matt Mulcock:
Yes. Yes. You know what’s funny? You’re rubbing off on me a little bit here because I did a two cents with Robbie and Will last week. and Robbie was talking about GDP numbers and just kept saying GDP, GDP. And we were talking about all this stuff. And I would, and my inner Victoria came out and I was like, Hey, just to take a step back. I was like, take a step back just for, to like level set. So people know you may already know, but just as a refresher, GDP, and I described it all. I was like, my gosh, she’s, this is you’re in my head.

Victoria Ferguson:
I’m in your head.

Matt Mulcock:
Living rent free. okay. So as the kids say, okay, so let’s go, we’ll go six through 10 and same thing. We’ll talk about the mistake and then we’ll talk about, kind of give some context to that. And then we will get, we will go through the, what we think the fix or just things to consider when it comes to the fix. So, okay. Number six mistake that could cost you $10 ,000 or more is getting distracted by shiny objects. Victoria?

Victoria Ferguson:
I don’t know if they’re any good, but here we go. You know, sometimes I have thoughts that cross my mind, Matt. It might not seem like it, but sometimes, every now and then, I have a thought. No.

Matt Mulcock:
Okay, really quick. Have you seen those memes of like the couple laying in bed and it’s the woman who’s like, she’s all angry and it’d be like, you know, just this overthinking, like, I wonder why he said that and what is he thinking right now? Like, yeah, exactly. And then the guy’s like, it’s like a fish with a rod or something, or he’s like thinking about like the football score, just like something really simple. Anyway, it just reminded me of that. Yeah, I look at that fly.

Victoria Ferguson:
Yeah, yeah, like, there’s a fly on the wall. I wonder how he got there.

Matt Mulcock:
Exactly. How long’s that fly been there? Yeah. Yeah.

Victoria Ferguson:
I wonder where that other missing sock went.

Matt Mulcock:
Yeah, exactly. That is so true. Okay. Thoughts about this specific mistake.

Victoria Ferguson:
I do have thoughts. We see this a lot. It is very common to, I don’t know, get bored. And I get it, right? Because we’ve talked about time and time again through social media webinars, this space, investing in the stock market for a really long time has proven to show positive results. But that’s, you know. It’s not very sexy opening an account, having an automatic draft go in there, watching the green and red arrows go up and down. And it’s kind of like watching your garden grow, which I mean, I do that on the weekends. I look at my tomatoes grow, but I mean, I get it, right? You’re like, is this working? Is it not? Just because it takes such a long time. So then picture this that you something falls on your lap, an opportunity, something that sounds really exciting, it’s usually framed in such a way that makes it sound like you can get wealthy faster. And so when you hear that and that opportunity comes, of course you’re gonna be intrigued by it or at least want to explore it, right? This can be in the form of a private investment, Bitcoin, GameStop, just these kinda exciting things that come along because of course, like if I could just make my garden grow immediately in a day and it worked and there was no risk to it, why wouldn’t you do it? so, you know, it sounds really nice, but most of the time those same opportunities that, you know, promised you so much success and get rich faster are the ones that often take it the way, take it away the fastest.

Matt Mulcock:
So true. Yeah. Great points. I too love gardening. So when you said it’s like watching my plants girl, I’m like, I kind of love that. I love sitting in my yard and watching. I have the garden. Yeah. no, everything you just said, I’m, I’m, I totally agree. I think this is probably one of the, like, this is like this general concept is kind of like one of the most catastrophic mistakes we see dentists make in the sense of like, it can cost you the most money and it can wipe years of progress, right? And there’s this whole idea in life in general that progress is slow and destruction is fast, right? Like you can create, it takes you forever to build up a portfolio, build up a practice, build up a business, like any type of business, whatever. And it can be destroyed overnight. And wealth is no…

Victoria Ferguson:
Yes, it can wipe years of years and years of progress.

Matt (08:08.06)
We’ve seen this so sadly that a dentist takes, you know, decades to build up a portfolio or build up a level of wealth. And then one mistake of, of chasing the shiny object, can, can really destroy it. So I guess I’ll take a step back on this really quick and say, I get it. Like, I completely understand the desire and to believe the lies for the most part, their lies that you can fast track this in some way. that’s with health and fitness. That’s with wealth. That’s with literally anything. I understand it. I totally get the desire to be lied to and want to believe the lies. And there’s a lot of people telling the lies. So.

Victoria Ferguson:
Yeah, they’re the ones making all the money at the end of the day.

Matt Mulcock:
Yes. Yes. I also understand that it’s really hard to hear the truth, which is, Hey, this just takes a long time. Like it really sucks for, for people to hear that. Sometimes it sucks for me to hear that. Like you want to get fit. Okay. Here’s what it’s going to take. It’s pretty simple inputs, but it’s going to take a long time. And I understand that that can be really hard sometimes.

Victoria Ferguson:
Yeah, especially in this, in this day and age. and I don’t know when this is getting released, but I know that you’re going to be talking about this at the summit. it’s, it’s even harder nowadays to stay in your seat and stay grounded in a world where things are so much faster. and you have social media and the ability to show like videos of your progress that took years cut down to a 10 second video. And so psychologically you’re like, like I can do that too. Or that that’s really quick. Or you can just see scenarios in which it did work out for one person and they just got lucky and you kind of think subconsciously like I can do that too. So I wholeheartedly agree. It’s already, you know, baseline really difficult to do something for a really long time. And then we have this world where external factors of social media, just way more visibility than we had in the past, kind of having that pressure of like, I need to do this faster, or I can, but really you can’t.

Matt Mulcock:
Yeah, we’re comparing to the point of social media or comparing. It’s like, we’ve never lived in an environment where we compare ourselves, not just to our neighbor, but to some random person across the world. And so again, it every to your point and the, yes, I will be talking about this at the summit of like, it’s never been harder. It’s never been harder to focus on the things that matter. Truly it really has not. And so I, we have a lot of empathy for people to say like, we get it. It’s really, really hard. there’s a quote I love. Weird. I love quotes. there’s a quote by Napoleon quote master. I don’t know about that. I just, there you go. There you go. So, Napoleon said something to the effect of the true sign of genius is the person that can do nothing while everyone else is freaking out or everyone else is losing their minds.

Victoria Ferguson:
Quote master. Maybe that’s for you and I’m study buddy and you should be quote master.

Matt Mulcock:
He was referring to like military genius, but I think it applies to life. Like the person that can sit and do nothing or stick to their plan, I should say the person that can stick to their plan, stay on their seat and be patient and let compounding do its work. That to me is, is really the sign of like, I guess, if you want to use the word like genius, it’s that’s the best way to the most effective way to build wealth. The truest most proven way to build wealth is to just let time do its work. So the least amount of risk. Exactly right. So why is this so critical? I mean, it really is. We say this all the time. Compound, the only way compounding works is to the secret to that is time. And, as Charlie Munger says, you know, the first rule of compounding is to never interrupt it unnecessarily. The definition of interrupting it unnecessarily is chasing shiny objects and bouncing from one thing to the next, to the next, the next. And again, if you never let time do its thing, it’s going to be really, really difficult to build the wealth that you’re trying to build.

Victoria Ferguson:
And I think also like, this isn’t just, we’re not speaking to the people who like have a plan and then deviate. there’s also lots of folks that just don’t even have one and they’re like, like I heard my friends do this. I’ve seen that a lot. Like, my other, you know, dental friends are doing this. We, they did this, they’re flipping houses. I guess I should do that. And so I think a lot of it too, can come from just a lack of awareness and education. So I think it might be helpful to just give a framework of like, okay, then what should my plan be? Like what are some things I should focus on? So usually, let’s get to the fix. So usually, you know, this is like typically how we’ll talk through this with folks, but your practice is your best asset, investing in that thing, getting it to be like a well -oiled machine, optimizing as best you can without sacrificing yourself and the lifestyle and the, you know, ensure and trying to incorporate your own happiness along the way and not putting that off to your 60, 65 year old self, right? So practice first and then from there, making sure you have enough liquidity. This is huge. And I know we say this all the time. I feel like we say this on every third podcast, like, please have enough liquidity. And what we mean by that is on, you know, personal side of things. And I think we covered this in part one. So I don’t, won’t go into too much detail, but three months of your average living expenses. And then for the business, like one and a half to two times your operating expenses, right? Your break even. And then your retirement plan. So that’s your 401k and your IRAs, maxing that out to the best, like to their limits. And then from there, the amazing real estate that we get very antsy to get involved in before a lot of this. Yeah.

Matt Mulcock:
I love that. We’re just saying, make sure you have a plan. Make sure you’re investing in the right order. Don’t rush the process. I love what you said, the practice, or if you’re, if you’re not a practice owner, you’re an associate and maybe you’re a career associate. That’s okay. You, your skillset. Basically we’re saying like invest in your human capital first, maximize and optimize that potential you have. Get to a place. Like again, if you’re going to put any money for the first 10 years of your career, most likely it’s somewhere in that range. The practice should always take precedent or your skillset should take precedent. And then like you said, going from there. So I love that. So the fix is from, kind of, the, you know, getting distracted. I think the fix is have a plan, invest in the right order. again, easier said than done, but I think hopefully that that helps. So.

Victoria Ferguson:
Well, and then when you do get opportunities, because that will happen to pretty much everyone who listens, you’ll hear something, something will come across your desk, then go back, then you have a plan. And then if it helps with that, then maybe you incorporate it, but at least you have a framework you can ground yourself in.

Matt Mulcock:
Yeah, I love this. And then we can move on. Cause if we take this much time on all of them, we’re going to be here for two hours, but I do, I love this. And I think it does bear. this one does probably require more time because it’s so critical and it’s something we see happen so much to dentists. But I love what you just said, like have rules, have rules for yourself. So, if you, if you want to kind of scratch the edge of like private investing or day trading or whatever that may be. Great. Do it, but have rules around it I’m only going to put X percentage of my portfolio in X, Y, or Z thing. And if you don’t have the money to do it at that point, if you’re like, don’t break your own rules, I think that would be a huge thing as well. So, okay. Moving on number seven.

Victoria Ferguson:
Number seven, having a not me mindset. Hit it. Yeah. yeah, Matt, do you have a thought? Do you have any thoughts?

Matt Mulcock:
And what is, do you want me to hit that? Do I have thoughts? Is that what you’re asking? I tend to have thoughts. the other day you guys were asking me about something, you and our, a girl’s duty. And I was like, I don’t really have an, I don’t really have an opinion on that. And you, both of you were like, what? Yeah, you do. Just tell us.

Victoria Ferguson:
No, we both were like, yeah, you do. Just give it a second. And then you’re like, no, no. And then two seconds later, you’re like, OK, well.

Matt Mulcock:
Well, I think I said, okay, I have an opinion coming in coming here. It comes. there it is. okay. So I do have opinions on a lot of things, but I will say I try to be fluid, flexible and unfixed. So that’s, that’s the goal that I have. I got it from my former colleague who used to work with us. shout out Deweyce, fluid, flexible and unfixed. So you can have tons of opinions and I think you should just remain fluid, flexible and unfixed. So that’s what I try to do either way, the not me mindset. this is also critical. This speaks to a lot of risk management, which is like financial planning is not sexy. We all know this and risk management, AKA like insurance and estate planning is the least sexy of the least sexy topic. So we get this one kind of makes people shutter, but the not mean nobody wants to talk about it, but the not me mindset is basically like just this idea. Again, it’s pretty self -explanatory that you think it’s not gonna happen to you. You hear some crazy story, you see the stats, whatever, and you just even subconsciously think, even if you don’t say it, you’re thinking, that’s not gonna happen to me.

Victoria Ferguson:
Well, like real world application, whenever I get in my car, I’m not like, I might get into an accident. But like that thought never crosses my mind, but statistically speaking, I turned, well, I put on my speeding playlist and then I fly at least 10 miles.

Matt Mulcock:
What do you do before that? Hopefully when you first get in your car, what are you putting on? Like across your body, maybe. Hopefully. Okay. I’m trying to like lead the witness here. I’m just saying like, even though you’re not thinking about getting in an accident, you’re still putting your seatbelt on. Yeah. Took it took us, took us a while, but we got there. I love that your response was I’m putting on my speeding playlist. It’s like very personal because of some recent experiences that happened to some clients. But also if you just look at the stats, this always kind of surprises people when they hear this. But according to the data, this is legit data. I believe from, I can’t see it’s too small, but did we get this from the ADA? Anyway, either wvay, one in four, I’ve seen this from various sources. One in four adults will become disabled in some form or fashion or utilize a disability policy before reaching retirement age. That’s pretty wild. Yes, that is wild. So again, you could look at that and say, well, I still have a 75 % chance of not, but 25 % is not small. That is a significant chance or probability that there’d be an issue with the average long -term disability claim lasting about three years.

Victoria Ferguson:
Yeah. Well, in other stats, just because we were talking about car accidents, you’re more, I think you’re more likely to become disabled and unable to work than you are to get in a car accident or no, that feel devastated. nevermind. Nevermind. That’s on the next one. I totally. No. Yeah.

Matt Mulcock:
Well, jump to it, let’s get to it. The stats that you’re reading. I think you’re saying, so from a disability perspective, so what you’re saying is of specifically the disability, right? so they’ve done this study surveys and they’re saying they surveyed and said the percentage indicated they would feel devastated in a potential situation. So in this case, let’s say we’ll use the example again of the car accident. Only half said they would, but 88 % of people have car insurance. It should be more because it’s illegal to not have, but whatever, either way. Almost sure. Almost 90 % have it. So compare that to disability. 78 % of people surveyed said that they would feel devastated if they had a potential situation  of disability, but only 10 % at the time. This is a little bit of an old data a little bit. but I think it still bears true. Like only 10 % actually have disability insurance in place. That’s probably, that’s probably a little low for Dennis. but I will say just anecdotally and Victoria, you see this too. Chances of them, of a dentist not having some level of insurance, disability is always the first one. Like they’ll have life insurance of some kind, cause they got sold it in dental school probably, or they had a kid and like, yeah, I’ll throw a term policy in there or whatever. They have to have malpractice. They have to have general liability for their loans or whatever. But if they’re not going to have one, it’s usually disability.

Which is crazy because the odds of actually using it, there’s a reason why disability is more expensive than life insurance by quite a bit because they’ve run the risk assessment as the insurance company. The chance that you actually needing disability is pretty high. We just had this, this is why I say it’s personal. we had this, about six months ago, dear friend and client had a really bad accident, snowmobiling and is still having issues with his hand.  Luckily had an insurance policy in place, but it was such a reminder of how critical this is to have, to have, to have these policies in place. So we’re saying a mistake that could cost you big time is having a not me mindset. The fix, I think pretty straightforward here. We’re saying have a proper risk management plan.

Victoria Ferguson:
Well, and what that really means is don’t put yourself in a position where you could lose the progress that you have made currently and your future progress too. Right. That’s all it really is at the end of the day. And then everything from there, you know, life insurance, disability, heck, an emergency fund, right? Like all part of it, but that’s really the fix is, you know, protect what you have made. So you kind of like save your place in your journey to financial freedom or whatever, like you bookmark that so you can’t lose all of this. And to some level you want to protect like future growth too.

Matt Mulcock:
Totally. It’s so true. It’s to your point, limit the chance in life that you’d have to make a decision out of desperation. So if you really expand that definition of proper risk management to that, it’s not only insurance, it’s not only estate planning. To your point, it’s having proper emergency fund, proper liquidity, both personal and business. It’s having a flexible budget. So cashflow, having not spending more than you make or you know, living paycheck to paycheck, quote unquote, it’s having a flexible timeline. Meaning that’s, that’s an underrated part of this is not, not saying I have to retire at this date or I have to have this amount of money to retire. Like being flexible is also part of proper risk management in my opinion.

Victoria Ferguson:
Yeah, and also I guess to the full extent of the definition, like a good investment plan too, like risky investments. I guess that kind of ties back to like shiny objects.

Matt Mulcock:
Proper diversification. Love it. Okay. We feel good about that one. I feel great about it. Okay. Number eight, not knowing your numbers. What say ye?

Victoria Ferguson:
Yeah, I think if you don’t know where you are at, how are you supposed to make a path to where you want to go? I really don’t think it is. And I get it. Like a lot of people who are in this position and they don’t know their numbers, I feel like oftentimes they just think it’s a lot worse than it really is. So they just like put it off, like if I just don’t look at it, like it’s fine, like I still get my W2, I got some business distribution, you know, but there’s way more to it, right? So I think a lot of fear can play into this, like, I just, I don’t wanna look at it, that’s really scary to me, I feel like it’s a lot worse than it is. Oftentimes that’s not the case, like more times than not, I will say people are better off than they think they are. But if that’s not you, even just knowing where you’re at there’s a lot of relief that I just even see through Zoom. Like, okay, like it’s not where I wanna be, but at least I now know. I just think like the more you delay it, the more the snowballs, the more stressed you are, you’re not making as fast growth as you want because you don’t really know your numbers. And so yeah, I think through this too, you could be losing a significant amount of money if you don’t know your numbers in so many different places.

Matt Mulcock:
You’re so right. And this is one that’s almost more subtle. So this is kind of like, if the shiny object one is devastating, can lead to like, we’ve seen devastation and it happened overnight. This is the one that’s like death by a thousand cuts type of thing. Yep.

Victoria Ferguson:
Yes. Yes, like a little hole in the bucket. And so you can’t really grow. Yes, that’s exactly right.

Matt Mulcock:
Yeah, this one is, this one is big where again, it’s the silent killer. It’s, it’s, it’s the one that you don’t, you know, it’s, it’s the, the, the, the kind of health equivalent of saying. You don’t even know you’ve got some health issue that like high cholesterol or high blood pressure or like something that eventually could get you, because you’re not even tracking those numbers. I say this, this one hits home to me because I rarely go to the doctor and get checkups. Probably need to work on that as I get older. But again, this really is, is that it’s something that it’s like, and to your point, we see this so much and data does back this up with study after study that shows in a lot of cases, when it comes to this ignorance is actually not bliss. So people aren’t scared. You know, how many times do we show someone as we onboard them? You know, they have a negative net worth. Perhaps, or maybe, maybe not a negative net worth, but they have a smallish net worth, right? And no matter what it looks like almost every time.

Matt Mulcock:
People, like you said, take a deep breath. They say, okay, now I know, like now I know, like now we can start working. Now we have a baseline to work off of as opposed to shooting in the dark.

Victoria Ferguson:
Right. It answers a lot of questions that people have. Cause I mean, we get random questions like, like how much should I save for retirement? It’s like, well, where are you at right now? Like, I, I, yeah, like, I, I don’t know. There isn’t cookie cutter advice for something like that. And so if you don’t know your numbers, I can’t tell you how much to save for retirement. I don’t know if you’re spending in a healthy way. I don’t know if like, your debt’s out of whack. And so you really have to know and also ensure that, you know, you’re not bleeding in certain places in the business or in the worst way or the worst case scenario that you’re being stolen from. Like, you know, we’ve seen this, we’ve helped catch it and it happens way more often than people think, unfortunately. Or if your CPA is doing a bad job, like I’ve seen that too. Or your bookkeeping’s bad. But if you don’t, fix it it’s only going to get worse and it’s never ever too late to get involved in the numbers.

Matt Mulcock:
Totally true. And the reality is it’s never really been easier from a tool standpoint. It’s like, we have so many great tools. You know, I think of this, I was just thinking as we were going through this, I’m like, what’s an example of this? It’s like, well, it, a meaning of like not knowing your numbers. It’s like trying to go on a road trip and not having a map. Right. And then I’m thinking, or like, you’re trying to get somewhere with no map. Like, how do you do that? If you don’t, like you said, you don’t even know where you’re starting. You don’t know where you’re going. It’s like this whole idea of like the Peter Drucker quote. It’s like what gets measured gets improved. You got to start measuring it. So I’m sitting here thinking, back of the day, you may not remember this Victoria, but there was a thing called, you might know map quest. You ever heard of map quest? I don’t know. Okay. So we did this prior to that. Yeah. So prior to that, as a kid, I remember legitimate maps, rolling out a map going on these road trips, right? Yes. So yes. Yeah.

Victoria Ferguson:
MapQuest? Yeah, I know what MapQuest is. I used to print it out for my parents. Like, put the MapQuest. Did you forget the MapQuest? Yeah, yeah, the big one, like covered the dashboard and so you’re like swerving around like, honey, move the map. Yeah. Yeah, not me.

Matt Mulcock:
So exactly. You’re like going to crash. not me. but so not me, but so I use this example to say it like getting or having tools to measure progress and know your numbers. It’s like now, like we used to use maps and now we have Google maps. Like it’s so easy to just plug something in. It’s very similar. Like it’s not that difficult to have access to software and things to be able to track this, it does take some work on the front end and it’s going to take some regular, some regular maintenance and a cadence of, of review. So, so I guess to that point, we’ll get to the fix. One fix here to, of knowing your numbers would be to review your P and L regularly. And I guess before that is make sure you’ve got a proper P and L and chart of accounts that is well organized, that is organized intuitively and with some intention. So you are able to track data that actually means something. If I see one more P and L that’s alphabetical, I’m going to freak out. Red flag. I’m.

Victoria Ferguson:
Yes. Red flag, you heard it here first folks. If your PNL is an alphabetical order, good side, like good indicator that it might be time to switch CPAs.

Matt Mulcock:
You probably need to, or just, it just have a conversation and see if we can get organized and have some benchmarks and have some organization around. Really? There’s only about six or seven or really seven, probably categories that you need to be tracking as far as like general overhead. But there’s some, some really basic things you can do to make sure that your chart of accounts is consistent. It’s intentional. It actually has some meaning. But reviewing this on a regular basis, again, the Peter Drucker quote, like what is, what you’re measuring will improve. So if you’re tracking profitability or your profit margin, it will improve because you’re going to actually be aware of it. So this is a big one. Like I said, it’s death by a thousand cuts, but I think it’s, I think it’s a big one. Any other thoughts you have on, on that? I just word vomited with my opinions. that’s what it is. Okay. Okay. I’m figuring it out after.

Victoria Ferguson:
No, I agree wholeheartedly. Well, that’s that’s called a podcast, Matt. I know you’ve been doing it for a few years, but…

Matt Mulcock:
For a few years. Okay, still getting used to it. Okay, got him. Hit it, number nine.

Victoria Ferguson:
Got him. Number nine, misunderstanding taxes. I think you’re up.

Matt Mulcock:
Boo. Yeah. Am I okay? I’m up. yes, this one is also big. And this, this, this relates a little bit to the shiny object syndrome or the shiny getting distracted because one of the main ways that dentists get distracted is by being sold the lie that some specific magical tool or product or investment strategy is going to allow them to like make a ton of money and never pay taxes. And so the lot of tax mistakes made or people getting sold crappy products just come down to basic misunderstanding of the tax code or misunderstanding taxes in general. So if you take nothing else away from this portion of it other than this, if you believe you can make the amount of money that a lot of our clients and a lot of dentists out there make without paying taxes year to year, you are being lied to or sold something. It’s just not possible. Now, with that said, we hate taxes just as much as you do. It’s not like we’re sitting here saying we love paying taxes. No one likes paying taxes, but we also wanna just be thoughtful and realistic and honest about this. Like there are definitely things you can do and definitely things we think you should do to avoid taxes. But beyond that, like again, a ton of strategies you can, you can employ.

Victoria Ferguson:
You can’t like tax deduct your way out of your tax bill. Not me.

Matt Mulcock:
Never, you’re not going to the, not me that I tell this to people sometimes jokingly, but it’s real. You, you want to make, you want to pay less taxes at a certain point. Once you’ve employed all the strategies and things that we talk about all the time, make less money or make no money. Like if you want to make no money, great. You, you won’t, you won’t pay taxes, but stop it with this lie that people, sometimes people are trying to sell you that you can make multiple six, maybe even up to the seven figure mark or above and not pay taxes. It’s not going to happen without some, I’ll say this without some level of massive trade -off. I guess that’s the caveat I’ll say huge trade -offs. So yeah, can you put all your money into some crappy project and lose it all and write it all off? Sure. But that’s, that’s, that’s not a net positive to you. So I will, I will take a breath and kick it over to you in the studio.

Victoria Ferguson:
No, I, I really agree with this. And I think something, maybe this is mean of me to say, but something that honestly surprises me, is how many dentists don’t know how like the traditional Amer – or the American tax system just works. I’ve been in presentations where, you know, I’m speaking to, you know, several dentists in the room and they’re like, I didn’t know that or I didn’t realize that’s how it worked. And so I guess we can explain it really quickly. I don’t.

 

Matt Mulcock:
What are you referring to about the basics of how the American tax system works? Because I know what you’re saying, and I have the same thing, but there’s some fundamental things that are misunderstood. So what are you referring to?

Victoria Ferguson:
Tax brackets. And I think this all comes from the misconception that if you make more money and you jump into another tax bracket, it’s like a net negative to you. Moves to that. Yeah, because I think people know what tax brackets are. That’s kind of where that ends in high school education. There are these things called tax brackets and that’s all you’re ever going to learn about it.

Matt Mulcock:
Yeah, like your entire income moves to that. Yeah. Yep.

Victoria Ferguson:
But yeah, so folks know that there are these tax brackets, but what’s commonly misunderstood is that I am charged at one rate. So at the one, like 22 % or 32%, like all of my money is charged into that one bucket. And so from that misconception leads to another, which is, I don’t want to make more money because that’s going to be a net negative to me. And that is costing you money if you are purposely trying to lower your income so you don’t quote unquote get taxed more, like more. I mean, you do get taxed more, but making more.

Matt Mulcock:
Or that you think, yeah, you think it’s a net negative to you. You think if I make more money, I’m going to like lose more than I actually take home, which is just not true.

Victoria Ferguson:
Right. Right. Right. And this isn’t just dentists. Like so many people think this, you know, just as American citizens and it’s, it’s not true. so making more money is always a net positive to you. A tax deduction is always a net negative to you. so that’s, I wanted to clear that up. so really quickly how the American tax system works, if, this is a little hazy for you. it is more we like to explain it with the bucketing approach. So think of all of the tax brackets as individual buckets. So there’s the little 10 % bucket all the way up to the big 37 % bucket. And all year long, you’re making it rain, right? You’re bringing in that dough. Like you’re filling your home bucket with all, like I said, you’re making it rain. And then at the end of the year, when you’re filing taxes, you take your big bucket of water that you’ve collected and then you start filling it into the buckets, i .e. the tax brackets. So you start filling up the little 10 % bucket and then once you fill that, you still hope probably made more money than that little bucket. Then that gets filled into the next tax bracket bucket and then the next and the next and the next. And so each of these buckets have, you know, a certain amount of water and they’re charged at that specific price. So the 10 % bucket, whatever water is in there is going to get charged 10%, whatever water is in the 12 % bucket is going to get charged at that. So then cumulatively, you may touch the 32 % bucket, but maybe a little bit of water went in there. So the money that’s sitting in there, yes, we’ll get charged at that, but not the entire, bucket of water that you’ve, collected over the last year. So then, you know, your actual tax rate is not 32%. It’s like a cumulative of all of those.

Matt Mulcock:
I think that’s a great explanation. And this is why you hear the terms marginal rate and then effective rate. So you might be in a marginal rate of 37%, but your effective rate is 25 % or you know, it’s going to, your effective rate will always be lower than whatever your marginal rate is. So, you can take advantage of this. This is where, like, let’s say retirement plans, there’s a huge advantage, that you can use this progressive tax system to your favor. And I’ll just give you a really quick example. When you are up in that 32, 37 percent, you know, up in that 37 % tax bracket, the highest bracket, meaning those dollars are in, you know, your next dollars earned are in those buckets, right? Because you filled up the rest. This is where like a 401k, a profit sharing, a traditional IRA possible, all come into play because what you’re doing is you are, when you put those dollars in, you’re getting the deduction at the highest possible marginal rate, right? When you’re putting those in.

Hopefully down the road when you retire, your effective income, your adjusted gross income comes way down. Again, we’re generalizing here, but then you could take that money out and or convert it to a Roth IRA at those much lower buckets. So to get technical here, we call this tax arbitrage. And anytime you have an opportunity to arbitrage your taxes, meaning take the deduction at the high rate and then pay the tax at the low rate, that’s what we’re trying to do with like a very relatively basic, like retirement planning, strategy where we’re using traditional and your highest income and income earning years, and then converting to Roth later on, or just removing it, putting into a brokerage account, whatever it is, trying to take the deduction at the high end and then pay it at the low end. So I, but to understand that, I think it was a good review, Victoria, that you’re doing of saying, here’s how it actually works. So filling up those buckets. So, yeah, go ahead.

Victoria Ferguson:
Right. And I like that you highlighted just like a strategy there because yes, like there is a limit to what you can do with, with taxes, but it doesn’t mean you shouldn’t try. So, you know, I guess the fix is, you know, have a realistic plan around taxes. Don’t try to get too cute. you know, do what you can like reasonably can. but don’t get too caught up in it because you know, the juice might not be worth the squeeze and the headache and, you know, running the risk of an audit. So this is where it’s so critical to work with a CPA and a financial advisor because the two perspectives on those oftentimes come with the best results around tax planning and tax strategy, not just like paying your taxes or trying to avoid them.

Matt Mulcock:
Very, very rarely should taxes be the number one focus for your strategy. I think when that becomes into play is where you start to make some, a lot more mistakes. It should always be a consideration, but it should very rarely, in my opinion, be the main reason you’re doing something. That’s where people tend to, again, often get in trouble. okay. Last one of our part do, number 10. Is this me? Am I, I think I’m presenting it to you. If not, we’re going to go with it. 10 making random acts of finance. What are your thoughts?

Victoria Ferguson:
Yeah, I think this ties back to a lot of the other ones and I guess we’ve kind of alluded to this too. But when you don’t have clarity around your numbers, you don’t have a framework, you don’t have something to ground in, it is all too easy to make random acts of finance. It’s kind of just like shooting with the hip and you’re more susceptible to…

Matt Mulcock:
I think it’s shooting from the hip, shooting with the hip. I don’t know how you would do that.

Victoria Ferguson:
What did I say? It’s late in the afternoon. Shooting from the hip. Thank you for correcting me there. I should know that. I was…

Matt Mulcock:
Yeah. Yes, of course. It’s still shooting with your trigger finger, but it’s from the hip.

Victoria Ferguson:
I guess, I mean, I guess if you, I guess if you bump it, I guess that’s kind of, yeah, I should know that. Yeah, I should know this. I was born, born in Texas. So shooting from the hip. yeah, I think it is all too easy to become susceptible to this because dentist lives are so complicated. high earners, high earners, high debt, running a business, a complicated tax situation, having to have a good investment strategy. There’s so much that goes into your financial journey if you want to make it to financial freedom and retire and whatnot. So if you don’t have things to ground you and keep you on the right path, it’s all too easy to be like, OK, I know I have my student loans. I should probably pay those off, right? Maybe, maybe not. So that’s just kind of one example, but even with that, like that can cost you a lot of money paying off your student loans early. It’s, it’s one of the most common mistakes I see. folks don’t realize like how expensive it is. And so I feel like this last one is kind of a culmination of like a lot of little mistakes we see by just kind of going with vibes or gut feeling.

Matt Mulcock:
It’s so true. And what you just said is what I, with the angle I was going to take on this is like, this kind of encompasses all of the, all of the things is just these random acts of finance. We see this all the time. and we’ll just jump right to the end here of what this fixes is like, you know, the key here is being organized, outsourcing to professionals, right? That you trust building a team and then having a plan. And I’d actually rephrase this having a planning process. Not just a plan, having a planning process, having a system, having some accountability system for yourself. because otherwise, like you said, and we see this, you know, I think about a newer client that came on. I’ve mentioned this client before recently, he was working with an advisor for 20 years and just, unfortunately it was just, it was a crappy situation. The advisor wasn’t really doing a, doing a, they were doing the bare minimum, right? And this client was making a lot of random acts of finance throughout the last 20 years. And now he’s feeling it. He’s feeling it. And we’re trying to like, Get him back on track and he’s feeling behind now. But so we see this again, this kind of encompasses to your point, all of these things, we understand why it’s really difficult and why a lot of dentists end up shooting with their hips. I’m never going to let that one go. but we, we get it. It’s really difficult. Your life is more complicated than the average person.

Victoria Ferguson:
You’re never gonna let me hear the end of that. I’m gonna get crap for that.

Matt Mulcock:
So you got to accept that and utilize the resources around you get organized, stay organized, have an accountability system and hopefully an accountability, accountability, as we say, somebody in your corner that can, you know, help you stay on track, call you out when you’re maybe deviating from your plan. again, this is kind of just an ongoing process.

Victoria Ferguson:
Love that you just said that like a planning process, because I think sometimes like I misspeak and say like have a plan and stick with it. And we say this a lot, like stay in your seat. And that’s true, but that doesn’t mean that there aren’t things that happen along the way. Right. And what did you say? Fluid, flexible, unfixed. Yeah, that very much goes with this too. So there’s a balance. Like you want to do something the right thing for a really long time, but also understand that the hike has some different terrain and there’s wildlife out there and you want to be able to stay the course, but you know, kind of get around the obstacles too and, and efficient and smart way.

Matt Mulcock:
Totally love it. Okay. Let’s do a recap of the fixes. so number six, have an order of operations. Number seven, have a proper risk management plan. Number eight, review your P and L and just, I’d say personal spending and your numbers regularly. No, number nine, have a realistic tax plan. And then number 10, organize outsource and have a planning process. Any final thoughts for the good people? Schmores.

Victoria Ferguson:
No, I think there’s more than this. There’s a plethora of mistakes that you can make that can just rock the boat. It can erase lots of years of progress. And so I don’t think this was meant to scare people by any means. Like, look at all the bad. I guess this is a little preview of all the stuff we’ll talk about in the month of October with Halloween, like horror stories and everything that could go wrong. no, I mean, that’s really, hopefully not, you know, how it was received. I just think these are just some common ones that we see that hopefully these fixes don’t sound like too much of a heavy lift. And, you know, you don’t have to do all of these at once. That’s not really, and they’re not in any particular order, but if there is one that kind of spoke to you and stood out to you or that’s been on your mind for a while, then start with that. Like, you know, one step at a time rather than getting overwhelmed and not doing any of these.

 

Matt Mulcock:
So true. That’s such a good point. Don’t get overwhelmed by it. Don’t get the paralysis by analysis. yeah. And just take a, take a couple of steps, right. towards, you know, pick one, like you said, take some steps to try to correct it. this is a lifelong journey, right? That’s the whole point of this. And I think also realizing that a lot of this is simple and obvious to, I think you might hear this and be like, yeah, I told it like, duh, but that’s a lot of life. It’s simple and obvious. Doesn’t mean it’s easy. And it doesn’t mean you can, like a lot of times it’s okay that you can’t do it alone. Most of us cannot. In fact, no one can do this alone. So I love what you said there. Not a solo sport. So this was awesome. Victoria, again, any final words, anything else? Hopefully this was helpful for everyone. Hopefully it was fun. So that’s our only, only goal. So as this comes out, the summit will have already happened. Hopefully it was as incredible as.

Victoria Ferguson:
You’re right. No, it’s not a solo sport.

Matt Mulcock:
We think it’s going to be, but 2025 summits coming up. But instead of that, I want to talk really quick. If you, if you want to talk to us, we talk to probably 400 to 500 dentists every single year who just set up a call with us. we, a consultation, it can be anything from asking some questions. we can send you on your way from there, send you, give you some resources, point you in the right direction, or it can be, Hey, how do I work with you guys? Anything in between. We want to talk to you. We want to hear your story. we love talking to dentists truly and hearing their story, asking them questions, having them ask us questions. So if again, any of this resonated with you or anything we’ve ever said resonated with you and you’re sitting there like, dang it, I need to talk to them. If anything else, just to learn something and about my personal situation and get some questions answered. We’re here. We love this. We love, we would love to talk to you. So go to dentistsadvisors .com. Click on the, now it is yellow, the yellow book of free consultation and talk to one of our friendly advisors. We would love to talk to you and hear your story. Victoria, thank you so much for being here as always and sharing the good word. Everyone. Thank you for listening. Hope you guys have a great day till next time. Bye bye.

Victoria Ferguson:
Thank you.

Behavioral Finance