Listener Q&R #3 – Buying a Practice, Warren Buffett, Overhead Insurance – Episode #430

You’re coming out of dental school and thinking of buying a practice? What factors should you consider before making such a big decision? And, Warren Buffett has much of his portfolio in T-bills. What does that mean for your investments? On this listener Q&R (Question and Response) episode of the Dentist Money™ Show, Ryan and Matt answer financial questions from our loyal listeners.

 

 

 

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Podcast Transcript

Ryan Isaac:
Hello, everybody. Welcome back to another episode of the Dentist Money Show, brought to you by Dentist Advisors, a no commission fiduciary, comprehensive financial advisors, just for dentists, only for dentists all over the country. Check us out at dentistadvisors.com. Today on the show, Matt and I are responding, not answering, responding. We don’t claim to have all the answers, to some questions that have been submitted. We have questions about treasuries and what Warren Buffett is doing with cash and treasuries right now. We have a question about a early career dentist and associate on where they should go, what they should do with practice ownership. And we have a question about a business disability overhead, whether they should carry it or not. Thanks for submitting these questions. These questions can be submitted for the show at the Dentist Money Facebook group. You can email us, you can DM us. We love answering these. And if you have any feedback from these questions, you want to add anything to us, let us know. We love hearing your feedback and responding to it where we can. So thanks to Matt. Thanks to all of you for submitting questions. And if you have more questions for us, or you want to talk directly to an advisor, go to dentistadvisors.com. We’re happy to have a chat with you anytime. Thanks for being here. Enjoy the show.

Announcer:
Consult an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money Show, where we help dentists make smart financial decisions. I am Ryan, and I’m here with Matt. Thanks for joining us. Matt, what’s happening?

Matt Mulcock:
Yo Ryan, I’m in studio. You are not. I am sitting in the basement studio of the office. Wishing you were here. Here we are.

Ryan Isaac:
I know. We will be in studio again soon. I like that. We were just having a conversation about scale in corporate takeovers and consolidation in businesses, your experience in the veterinarian industry. And that would be a fun topic for another time. It’s on my mind though.

Matt Mulcock:
I was gonna say we should probably dive into that.

Ryan Isaac:
Let’s just go, let’s just talk about our personal feelings on corporate consolidation and mergers and acquisitions.

Matt Mulcock:
The only thing I will say, for those of you that don’t know any dentists out there. I think those are the main listeners of our show, I’m gonna guess. The consolidation and things that are happening with DSOs on the dental side is also happening on the veterinarian side quite a bit.

Ryan Isaac:
Yeah. All over the place. Yeah.

Matt Mulcock:
And…

Ryan Isaac:
It’s in our industry.

Matt Mulcock:
Oh, Yeah. Oh, it’s happening with us. It’s happening in our industry.

Ryan Isaac:
Yeah. It’s in our industry. It’s like all over the place. Just there’s lots of money sitting out there and people are trying to gobble up all the stuff in the world.

Matt Mulcock:
You just gobble it all up.

Ryan Isaac:
Gobble it up. And that’s the end of my opinion for right now.

Matt Mulcock:
Yes. We’ll save it for later. We’re gonna tease it for later. We’ve got lots of opinions on that.

Ryan Isaac:
It’s gonna make a funny cliche meme podcast joke, but I won’t. All right. Today on the show, we have a Q and R, which for those of you that might be new to the acronym it stands for a question and response. Why is it Q and R and not Q and A? ’cause we don’t claim to have all the answers. We just claim to have responses.

Matt Mulcock:
It only took us about eight years for us to change this.

Ryan Isaac:
Eight years.

Matt Mulcock:
For us to be like, it’s a bit hubris maybe to say the answers.

Ryan Isaac:
With all the answers to say answers. Yeah. We’ve got some responses for you. So, just a little plug and a shout out. Some of these questions came directly from listeners and clients. One of these was submitted to our Facebook group, the Dentist Money Facebook Group. If you don’t belong to that, I don’t know what you’re doing.

Matt Mulcock:
You should…

Ryan Isaac:
You should belong to it.

Matt Mulcock:
Yeah, you should.

Ryan Isaac:
But it’s a cool community. Post questions, we answer there directly. And then a lot of times we use this, for podcast material. So, okay. Here’s the topics today. We have a question from a new dentist early in career wondering like, what’s the path I should take? Matt, you have like, their direct question. You can read that.

Matt Mulcock:
Yep.

Ryan Isaac:
I thought it was…

Matt Mulcock:
Oh I better, I better get ready with that.

Ryan Isaac:
You better get ready.

Matt Mulcock:
I better pull that up.

Ryan Isaac:
Just find that. I’ve got a question from a client, that was asking questions about owning Treasuries and Warren Buffett in the same question.

Matt Mulcock:
Ooh, all right.

Ryan Isaac:
So like, I like this one. Yeah.

Matt Mulcock:
I love the Warren Buffett questions.

Ryan Isaac:
Yep. And then the… Another one that came from a listener, it might be a client, not a client of mine, so I don’t know, but posted in the Dentist Money Facebook group about business overhead insurance in the practice.

Matt Mulcock:
Love it.

Ryan Isaac:
Which was a really good common question. So without further ado.

Matt Mulcock:
Ado.

Ryan Isaac:
As they say in Scotland.

Matt Mulcock:
We change the country every time.

Ryan Isaac:
No, they don’t.

Matt Mulcock:
As they say in Bangladesh.

Ryan Isaac:
In Bangladesh. Do you wanna do yours first?

Matt Mulcock:
Yes.

Ryan Isaac:
Do you have the, question that was posed to our advisor shout out? Victoria, this question came in. Take it away, Matt.

Matt Mulcock:
Yes. Here we are. Okay. Forgive me, it’s in a spreadsheet, so I’ve gotta like scroll so I might stumble and struggle with reading sometimes. Okay. I’m a fourth year dental student graduating in the summer of 2024 and would like to own a practice within 12 months of graduation. I’m seeking advice on where to acquire a practice and what to look for in order to be as financially secure as possible. Scrolling. I’m also looking to invest in order to attain financial freedom sooner rather than later. I’m looking forward. And then this, so this person was setting up a consultation with us. But this question I thought was really interesting and something that, or this, I guess if you wanna call it a question, just kind of like, what’s on this person’s mind I thought was interesting.

Ryan Isaac:
Yeah, yeah. I like where the direction our group, so every week we have an advisor mastermind and we talk about questions we’re getting from clients or new dentists we’re meeting. And, which by the way, if you want to chat with us and you have questions, dentistadvisors.com, you can just book a free chat with one of us and we’d love to talk to you. So that’s where this one came from. The direction this started in was Victoria asked, a really good open question, which is, do we have a general consensus on what we think a young dentist, a new dentist in the field just graduating should do? So I like that because, man, everyone is so different, right? When they come out of school and what they want. I think implicit in this question, this person is saying, I wanna own a practice, here’s my timeframe. Right? Didn’t they say like, I wanna own a practice in the next 12 months. And want to know where to buy it?

Matt Mulcock:
Yeah. So they say they’re a D4, they’re a D4 graduating in the next summer and would like to own a practice within 12 months of graduation. So they graduate next year. And then within a year they’d like to own a practice is their goal. And they… And then they said, where should I own a practice? Which I thought was interesting.

Ryan Isaac:
Yeah. Yeah. So I mean, that’s how Victoria opened this question up to our advisor group was what kind of advice would you give this person? You know, do you tell them to like, pump the brakes a little bit? Go a little bit slow, be an associate for a while? Do you tell them to like, yeah, settle down, buy it wherever you can find it. I just thought that was a really interesting discussion and we ended up talking about the different paths that people can take and how they end up. But how did you hear this question though, Matt? Like when you saw this, what were you thinking about? When you think about this young, soon to graduate dentist with…

Matt Mulcock:
This young buck, this young buck?

Ryan Isaac:
Did they? We won’t disclose it, but they put the amount of student loan debt they have in there too, right?

Matt Mulcock:
Oh, I’m sure they did. That was not…

Ryan Isaac:
I thought it was a pretty high number.

Matt Mulcock:

Yeah, that was not…

Ryan Isaac:
Maybe that was a different question.

Matt Mulcock:
That was a different question. I think that’s what…

Ryan Isaac:
That was a different question, wasn’t it? Okay.

Matt Mulcock:
Separate question.

Ryan Isaac:
Yeah. Okay. Yeah. Which, that’s a whole other thing. Like, that was a high number for a GP coming out of school.

Matt Mulcock:
Yeah. That was a separate question that Lauren asked. Shout out to Lauren, that we could also address at some point. That was actually a really valid question that she brought up too.

Ryan Isaac:
We’ll throw that on the next Q and R.

Matt Mulcock:
Q and R. Yeah so…

Ryan Isaac:
Q and R Sponsored by Pirates next time.

Matt Mulcock:
We are so lame. We are both so, such dads it’s insane…

Ryan Isaac:
We’re Dads. This is what happens when you come here.

Matt Mulcock:
I’m a sucker for dad jokes too.

Ryan Isaac:
Yeah. Dad Jokes are good. Yeah.

Matt Mulcock:
Okay. So how I read this, I thought it was, first of all not unique that they’re saying they want to own a practice within 12 months of graduating. I think we hear that quite a bit. I think maybe getting a little bit less and less, just with like, corporate dentistry and how the landscape has changed. But I still think it’s a pretty, at least over 50% of dentists from our experience are saying, I want to own a practice, and pretty soon after I graduate. The first thing that stood out to me that I thought was interesting that I think is probably worth discussing is, he said, I want to know where I should own a practice. Which I thought was interesting. And this kind of brings up, this is what we talked about in our mastermind yesterday when we were going over this, is there’s a difference in like, what is motivating the actual move to ownership and you, I think you brought this up, where it was like, what’s driving you? Is it where can I find the best practice that’s gonna generate the most possible money for me? And they kind of allude to this at the end of their question like I want to get to financial freedom as soon as possible. Yeah. So then I’m like, okay, are you willing to live in like, the most rural part of the country where you probably have like no social life? That could…

Ryan Isaac:
Maybe, yeah. Maybe they love that.

Matt Mulcock:
Maybe they love that. And, and maybe you’re far away from family and friends and maybe you’re okay with that. Or are you wanting to flip that and say, look, I’ll find a practice in an area that I can be close to family and friends, or a certain city I really like. So to your point, there’s no right or wrong answer here, but I think that’s probably the first thing that needs to be explored is that particular part of that question in my opinion, which is he says, where should I own a practice? Yeah. So I thought it was interesting.

Ryan Isaac:
I’ll start with this. Do you think that owning a practice is still the like, if you’re gonna maximize for something in your career, like you can maximize for flexibility or freedom or autonomy, or money, income, wealth. If you’re gonna maximize for wealth creation as a dentist, do you still believe that practice ownership is the maximum way to do that? Compared to not owning a practice? Do you think that?

Matt Mulcock:
Easy easy answer. Yes.

Ryan Isaac:
Yeah. Me too.

Matt Mulcock:
Easy answer. And I genuinely don’t know if that will ever change.

Ryan Isaac:
Yeah. I mean, it’s business, private business ownership.

Matt Mulcock:
That’s what I was gonna say.

Ryan Isaac:
Yeah.

Matt Mulcock:
It’s like you own a business and owning a business and having equity in a business, right? Yeah. Having ownership in a business, whether it’s dentistry or you’re shipping things across the country like you’re a shipping company. I don’t know why I thought of that.

Ryan Isaac:

You’re a shipper.

Matt Mulcock:
You’re a shipper of some kind.

Ryan Isaac:
You’re a shipper. Yeah.

Matt Mulcock:
But the…

Ryan Isaac:
You ship ships.

Matt Mulcock:
You ship, maybe you…

Ryan Isaac:
Maybe you actually ship ships.

Matt Mulcock:
Maybe you ship model ships.

Ryan Isaac:
Model ships.

Matt Mulcock:
Maybe you ship…

Ryan Isaac:
You ship, ship on ships. You do. It’s possible.

Matt Mulcock:
We are…

Ryan Isaac:
It’s real.

Matt Mulcock:
What, what’s today? It feels like it’s Friday when we talk like this. Yeah. So, but I share this with people all the time. Like when dentists bring up the concerns around what’s happening with consolidation or any concerns, right? When it comes to like, is dentistry still viable. I’m like, look, you run a business. Get your mind wrapped around this idea that like, you are a business owner, you are an entrepreneur. There’s a huge difference in having that mindset versus you are just a highly compensated professional. And there’s no question, all else being equal, business ownership, I don’t care if it’s in dentistry or shipping ships on ships. Like business ownership is always going to lead to a higher likelihood of building wealth faster and at a high, and it gives you a higher capacity for wealth. Always.

Ryan Isaac:
Always. And I totally agree with that. I think even in the DSO corporate landscape, I still think it’s a huge viable opportunity. And the crazy thing that’s always interested me about the field or the career of dentistry that does make it unique from either, from even other medical careers, is that the margins are really high in a dental practice, if you’re running well, like shockingly high compared to so many other businesses. And the availability of funding, which is, that’s, I mean, you look at companies like ours in our industry. In order to get funding to grow like meaningful funding, you have to raise money from private investors. I mean, that’s like how… Or you bootstrap it along the way. I mean, you can be graduated and on day number one as a dentist, some of these giant banks will give you like seven figures of money in two weeks. And usually, I mean, right now it’s a little tough for rates, but usually the rates are really competitive, really low fixed rates. I mean, it’s…

Matt Mulcock:
Still, even today they’re really low.

Ryan Isaac:
It’s still good compared to where mortgages are. Totally, man. So it’s just like the availability of capital, the margins, and now more than ever I think that there is more freedom and flexibility in the career of dentistry just with the different business models out there. Partnerships and associates and the creative ways you can structure it. So yeah, I think we’re in agreeance. And this person obviously has this opinion that, they want ownership and it’s probably the most viable way to maximize wealth creation. I totally believe that. Yep. The thing I wouldn’t know, we wouldn’t know ’cause we’re not dentists is how do you, as a young dentist, this would be a fun interview to ask someone, how do you pick like what your clinical style is or what environment you want to practice in? How do you actually land on that and know that you’re gonna be in a good spot? These are things we just wouldn’t know from experience. Like the way a practice runs and systems and management and ordering and supplies and the way that you are prefer… Maybe you don’t even have preferences yet in yourself, in your own clinical skillset and experience. So there’s gonna be an aspect of like, where do you wanna buy this practice? Well, what’s the environment? What’s the business type? Do you want a partner? Do you want an associate.

Matt Mulcock:
What type of dentistry do you want to do?

Ryan Isaac:
What type of dentistry you wanna do? Do you wanna do it solo? The thing that you were mentioning that I brought up, this is just my personal experience, is I think for some people, there’s a big push and a pull between the job and the career and the income and then where you actually live. In my life, I’ve experienced times when I’ve lived in a place where I didn’t love living for whatever, like, hobbies, weather, like, whatever.

Matt Mulcock:
You can just say it. You can just say it. Ryan, go ahead.

Ryan Isaac:
I didn’t like living in cold Utah. Okay. I’m sorry everybody.

Matt Mulcock:
Yeah. No, it’s fine. It’s fine.

Ryan Isaac:
It’s a beautiful place, but it wasn’t my spot.

Matt Mulcock:
It’s a lovely place.

Ryan Isaac:
I felt like I had more career stability at those early years, living there. But I didn’t love where I lived. Fast forward today…

Matt Mulcock:
And you did it for years. You did it for years.

Ryan Isaac:
I did it forever. Yeah. I’d always wanted to leave. And then, now I live in a place where I really, really love like my environment, but it puts other pressures, on me that I didn’t have before living somewhere else. So my feedback was, someone doesn’t really know yet, if they’ll just take a job anywhere because the job is the most important thing or they’ll just take whatever the highest paying opportunity’s gonna be ’cause that’s the most important thing. Or if they’re willing to sacrifice something in the job or the income to be in an environment or place, town, city, state, whatever, that will mean more to them in their value set, in their life and the experiences they’re trying to get out of life. We don’t know that. It’s kind of trial and error. So for this young person, we were also saying like, Hey, you know, don’t be afraid to bounce around a little bit. Test it out. Work in a big city, work rural, work close to family, away from home.

Matt Mulcock:
Now’s the time to do that, right?

Ryan Isaac:
Now’s the time to do that. It’ll be easier. I’m assuming this, yeah, this person’s gonna be younger and it’s gonna just be easier than it will later in life. So that was my feedback. Like, you just don’t know what things really drive you. Is it really money and career in the business? Or is it like your environment and where you live? That’s a big driver for some people. So that was kind of my feedback on it too.

Matt Mulcock:
Well, I think that’s a great point. And also, I mean, they kind of give evidence to this of where they or what they… Like, what their mindset is as of right now in the last part of that, which is they want to get to financial freedom as quickly as possible. Like they say that.

Ryan Isaac:
Yeah, wealth creation.

Matt Mulcock:
Right? Wealth creation.

Ryan Isaac:
Maximizing wealth creation.

Matt Mulcock:
Maximizing wealth. And they want to get, they mentioned getting to financial freedom sooner rather than later. So I obviously think immediately of like the FIRE generation, right? Financial Independence, Retire Early. Like if that’s your mindset right now, to your point, Ryan, that’s gonna definitely change. And it’s definitely gonna dictate how you approach these decisions. ‘Cause again, you might say, I just wanna be financially independent as fast as possible. So I’m gonna move to rural town America, I don’t care where it is ’cause that’s gonna be the highest likelihood of me maximizing that wealth. But at the same time, one, and I don’t want to sound like some old dude that’s like, listen, young skipper, you don’t even know what you want.

Ryan Isaac:
Young skipper.

Matt Mulcock:
I don’t know.

Ryan Isaac:
I was… I thought you were gonna say whippersnapper but…

Matt Mulcock:
Whippersnapper. Yeah. But I will say that.

Ryan Isaac:
Rapscallion. It’s okay.

Matt Mulcock:
What? I’ve never heard that one.

Ryan Isaac:
Rapscallion.

Matt Mulcock:
Rapscallion.

Ryan Isaac:
It’s classic.

Matt Mulcock:
At the risk of sounding like that, I will say that there’s been so many times that I’ve heard this kind of mindset from a younger person of saying like, I don’t care about anything else. I just want to get out of it. Especially from dentists, I feel like and maybe I’m just biased ’cause we only work with dentists, but I… And Ryan, I’m interested to know if you feel the same way, but I feel like this mindset from a young dentist is pretty common of like, I just wanna get out of this as soon as possible. I just wanna get financially independent as fast as I can. I don’t care about anything else. Yeah. And I’m like, give this a couple of years and see if you really still feel like that because longevity, the ability to have longevity in a great career is like, I think the biggest appeal to dentistry in my opinion. Like to your point, there’s so many different ways you can take this now without even being chairside. There’s so many, there’s so much variety, so many things you can do now. I have a hard time thinking this mindset will continue for this person or anybody of saying like, I just want to get out as fast as possible.

Ryan Isaac:
Yeah, totally. And then we’re reading between the lines, like maybe they are thinking that like, in which case, if you’re still in school and you’re already like, how do I get out of dentistry and be… There’s some other questions probably to be asking…

Matt Mulcock:
A lot of questions. A lot of questions.

Ryan Isaac:
But to your point, man, now more than ever, I mean even like, our business started 15 years ago, but even compared to five to seven years ago, the field of dentistry and like the potential…

Matt Mulcock:
It’s so different.

Ryan Isaac:
Yeah. The potential business models you can be involved in are so different, the career paths you can take. And because it is so lucrative, so profitable, so sustainable into a later age, there’s probably just no greater wealth creation power that you’ll have, especially after you’ve gone through the schooling, you’ve paid, you’ve got the loans and everything. Then how can I be involved in the field of dentistry as long as humanly possible without burning myself out? And yeah. And maybe you just don’t know. I mean sometimes, I mean, we just don’t know where we’re headed. You don’t know what you don’t know. You haven’t experienced certain things. So maybe you take a job in the big city and you’re like, I do wish I was rural with less competition with cheaper housing and lower cost of living and way more margin and I could maximize wealth creation. So this young person…

Matt Mulcock:
I was gonna say some advice to this person.

Ryan Isaac:
Yeah. Sounds like you know you want to be in ownership. So the only thing I would say is like, once you’re bought in, that’s a little harder to get out of than if you’re just an associate. So, if that’s your goal, it sounds like you’re pretty clear on that. That’s great. I would just try to like, ask myself a lot of questions about where that’s gonna be. And in this person’s question, they’re asking us where should they go, which sounds like I just wanna make the most money possible. In which case, you just got to interview around, and probably talk to a broker, look at these practices you can buy into or start up, look at their P&Ls, look at their profit margins. And if, like you said, man, if it’s like, I just want, where can I buy that’s gonna make the most amount of money? It’s probably gonna be rural, small town somewhere with less competition, low cost of living. ‘Cause that’s really the other side of it is like, you can make a lot, but if you have to spend a lot to live there, it’s not gonna matter as much. So low cost of living, less expensive housing, less competition, higher margins, lower payroll, lower overhead. And that’s how you’d maximize that if that’s the plan.

Matt Mulcock:
Totally. He asks about investing there at the end as well. And I would say there’s like, to your point, ownership seems like they’re pretty set on, which is great. We love that. Keeping your options open, I think for the first six to 12 months, just picking whatever, whatever area you’re looking at, try to keep your options open. From an investing standpoint, if you’re trying to get into ownership, it’s very, very clear what you should be doing right now over the next 12 months, which is putting every dollar you have into cash, every single dollar. Liquidity is the biggest thing right now if you’re trying to get into ownership and your greatest asset, your greatest investment that’s gonna drive all of your wealth moving forward over the course of your life is going to be you, your skillset and your practice.

Matt Mulcock:
So the best investment you can make right now is maximizing the potential for getting the best term, the best terms on a loan, and I can guarantee you top of the list of what a bank’s gonna look at is how much liquidity do you have? And so every dollar you have right now should be going into cash and hey, good news with what’s happening right now, and who knows if this continues by the time you graduate, but with rates where they’re at, you can actually, it’s a benefit. You can put money into a high yield savings account, you’re gonna get four and a half, 5% on that money. And…

Ryan Isaac:
What are general startup loans right now that you, have you seen some recently some startup loans or acquisition loans?

Matt Mulcock:
Somewhere in that range. About five, five and a half.

Ryan Isaac:
Five. Which is crazy when you think of like where mortgages are right now.

Matt Mulcock:
It’s take a point and a half to two points lower right now in dental space.

Ryan Isaac:
So you could grow your money at like four and change before you get a loan, your dental loan at like five and change. That’s kind of, that’s not bad, that’s not bad. I like that.

Matt Mulcock:
But to me, that’s a, again, pretty easy answer. Hopefully gives you some clarity of like, should I be investing in X, Y, or Z thing. No, you should be investing in cash and putting money there to get yourself ready to buy a practice. That, and if you’re sitting already on a bunch of cash, congratulations, then we…

Ryan Isaac:
It’s good.

Matt Mulcock:
It’s more specific, but my guess is coming out of school, every dollar you have should be going into cash.

Ryan Isaac:
All right. So I got a question from a client, came in, for this question at various times of the economy. The question was pretty simple. Had two interesting parts to me. One was hey, should I be buying treasuries right now? And then the other part of the question, it was more of an observation was, recent articles say that Warren Buffett’s holding a lot of money in treasuries right now.

Matt Mulcock:
I just heard this. I just heard this.

Ryan Isaac:
You heard the same thing too. Someone just mentioned.

Matt Mulcock:
Yeah. From my brother. From my brother.

Ryan Isaac:
So I wanna do this in reverse. Just put in Google “Warren Buffett holding cash” or “Warren Buffett buying treasuries” and then here’s the funny thing. There’s like, I think it’s under tools in the Google search, you can put a time range of… I was doing this last night. You can put in a time range of like years you wanna search for articles from, and you can do this decades back. The point being Warren Buffett holding cash, Warren Buffett buying treasuries is something that you’ll see in the news and in articles for years and years and years and decades and decades and decades. Why does he do it? I mean, he’s a different class of human and it’s [0:23:49.2] ____…

Matt Mulcock:
He’s worth a hundred billion dollars. Like he’s just doing his thing.

Ryan Isaac:
Well, when you are Warren Buffett and you’re gonna buy something, it’s different than when we, the average human or even the average dentist, which I think we’re below dentists. So we’re like an average human, dentist are above us, and then there’s Warren Buffett, like way above everybody in terms of like wealth.

Matt Mulcock:
Barely. Barely. How dare you, sir?

Ryan Isaac:
When a dentist is gonna buy something, let’s say it’s some real estate, you’ll hold a little bit of cash, right, for a down payment. But if a dentist is buying stocks or shares of companies, they just buy them. You just buy them in your portfolio in a mutual fund. When Warren Buffet buys something, he literally buys the company. He spends like two years visiting sites with his team and his board and they literally buy the facilities and the production facilities and the buildings and the people and the systems and the products and the inventory and the majority shareholder. And they’re on the board. He’ll sit, I’m just, he’ll sit on billions and billions of dollars in the cash to prepare for whatever his purchases are gonna be. His methods are gonna be a little bit different in terms of his cash upfront needs to acquire a share of a company ’cause he’s actually just buying the whole company. Whereas normal people, if you want to buy a share of a company, you just buy it in your brokerage account or your 401k.

Matt Mulcock:
Put $500 in a brokerage account.

Ryan Isaac:
Boom. You got some. So why is Warren sitting on there? Well, pick any article you want from the last like 50 years and someone will have an opinion on why Warren is sitting on there. Does it signal something you should be doing? Okay. Let’s go back to the first part of the question. Should I be buying treasuries? Does this Warren thing have anything to do with what I should do? Actually, let me pause. What do you say about this? When you hear that Warren Buffett’s doing X, Y, and Z, what’s your thought?

Matt Mulcock:
What say ye? What say ye?

Ryan Isaac:
What say ye, Matt?

Matt Mulcock:
I mean, I don’t think we share a different opinion here. That sounded weird how do I said that. I don’t think we disagree. I don’t think we disagree here.

Ryan Isaac:
Don’t think we share a different opinion.

Matt Mulcock:
I don’t think we share a different opinion here. I…

Ryan Isaac:
We share? Can you share a different opinion?

Matt Mulcock:
Can you share a different opinion? I don’t know.

Ryan Isaac:
I don’t think so.

Matt Mulcock:
I don’t think you can. That was a very weird way to say that, so I apologize. Moving on. Maybe edit. Who knows?

Ryan Isaac:
No edits.

Matt Mulcock:
No edits. So again, I don’t think we disagree here in this sense of, I hear this so much. I’ve been in this industry for over 10 years and I hear this all the time, this idea of, well, Warren Buffet’s doing this. And it usually comes down to what you’re saying.

Ryan Isaac:
Which seems logical though. I mean, if you’re, he is the tippy top of the tippy top. And so it’s like whatever he’s doing probably makes some sense.

Matt Mulcock:
Totally. But I kind of feel the same way I do when I hear people talk about, and it’s usually insurance salesmen and in their tactics they use this like what they’ll call like the Rockefeller strategy. Why are you doing the normal thing? You should be doing what John D. Rockefeller did. In the sense of, I get it. I get what you’re saying. And it’s usually again, to sell some insurance product or something. But my response to that, and I don’t say this mockingly, we need to be careful with that ’cause we’ve been questioned on this that maybe we mock too much. I genuinely don’t mean this mockingly, but my response genuinely is, you are not John D. Rockefeller and you’re also not Warren Buffett, neither am I, neither is Ryan. We’re not even close to that. And so I think you gotta look at that. To your point, Ryan, there’s so many different reasons. There’s endless reasons why Warren Buffett might be sitting on a bunch of cash right now.

Ryan Isaac:
That we couldn’t even comprehend because nothing in our lives, businesses, incomes, careers, investment strategy is even remotely close to what someone like that is gonna get.

Matt Mulcock:
He’s literally managing something in the range of like a hundred billion dollars. It’s like his business is worth a hundred billion dollars. So why is he holding a bunch of cash or in treasuries? Like again, I have no idea. But to make this spurious correlation or this indirect correlation to be like, well that must mean that the economy’s something’s happening and he knows.

Ryan Isaac:
Something’s coming or he knows something.

Matt Mulcock:
To your point, I think you make a great point. Go back in time over the last 10 years and see how many times Warren Buffet held cash.

Ryan Isaac:
How many articles can you find? And it’s… Well look… And so, okay. I mean, my client didn’t tell me where, why he was asking. He probably just saw something like a lot of us do, and he’s like Hey, that seems interesting. Maybe this is fairly relatable though. If Warren Buffett’s holding cash, it’s because he’s probably gonna buy something and he needs some cash to buy it. Right. That’s probably a fair assumption. And does that relate to us? Actually, yeah. In some way that kind of relates to us meaning… Okay. So I was on a client call yesterday. There’s a client, he’s just doing so well and saving tons of money and is gonna build a dream house on this big property, and it’s gonna be gorgeous and beautiful.

Ryan Isaac:
They’re so excited. And it’s a 3-year time horizon. He’s saving lots of money. He is maxing out a retirement plan. He is got lots of liquidity in a brokerage account, but he is also saving a lot of money for this project. So it’s gonna cost a lot out of pocket. The time horizon is three years. Yesterday he’s asking me, should I just pump a lot of this into stocks and pull it out in three years? Or like knowing I’m gonna need like every penny and I, here’s the amount I know I need. And my answer was like, no, no. Like, no, no. Do not put this in your accounts. You know you’re gonna need this money in three years. You’re preparing to lay out a lot of cash for a project. So you keep it in something liquid that doesn’t have the volatility the stocks are gonna have in a short period of time like that.

Ryan Isaac:
Warren’s gonna do the same thing. It’s just gonna be on the scale that we can’t even comprehend but to my client or anyone listening, like I guess you can still take that principle and say, if you have a short term need for money, let’s say in the next like zero to three years, maybe four years, well it’s a down payment for a building, the dream house, the vacation house, you’re gonna pay off something. You know you have to have a finite set amount of money ready. Maybe it’s a kid’s college or something or a wedding. It’s a defined number or amount of money…

Matt Mulcock:
And a defined timeframe.

Ryan Isaac:
And defined timeframe, and it’s short, then you should do what Warren’s doing and you should hold some cash. And right now, the whole treasuries thing, treasuries just have a good yield right now, and so do high yield money market accounts. They just have good yields ’cause rates are high. Yield curve is a thing. Blah, blah, blah, blah, rates are high.

Matt Mulcock:
Blah, blah, blah.

Ryan Isaac:
Blah, blah, blah, blubbaty, blubbaty, blah. Rates are high. Okay. You can get a good yield on some low volatility things that aren’t gonna last very long. So if you have a project and you know you have a set timeframe and a set amount of money, and it’s a short timeframe, zero to three or four years, then hold some cash and hold them in treasuries or hold them in money market high yield savings accounts. Fantastic idea. Get ready for your purchase, your down payment, your wedding, whatever. That’s a great strategy. If the money is long-term, there’s still no debate mathematically or otherwise that a treasury bond or high yield money market accounts are not gonna be a better answer than long-term investing in your practice in real estate or in stocks.

Ryan Isaac:
I mean, it’s not even debatable. It’s not mathematically debatable. If it’s long-term money, it goes somewhere long-term. If it’s short term money, sure, treasuries could be a great place for them right now. But that has more to do with a life decision that you know is coming up that’s like quantifiable and definable than some commentary on what’s gonna happen in the economy, like some prediction ’cause that never turns out, it just doesn’t matter, it’s not relevant. We don’t know. It doesn’t say anything about where anything’s headed. If you have a definable moment in your life, set amount of money, set time, short period of time. Don’t expose it to volatility and save it in some cash, money markets, or treasury. Sure. Great plan.

Matt Mulcock:
That is it, like that right there. We can just, let’s mic drop that, let’s walk away. Honestly, what you just said is what we say all the time is like, what game are you playing here?

Ryan Isaac:
Yeah. What do you mean?

Matt Mulcock:
Right? What game are you playing on a what timeframe? And then ask, are you playing the same game as Warren Buffett or as your buddy down the street who said he’s doing this X, Y, or Z thing with his money. Such a good point, man. I was sitting there just like, the wisdom coming off of you is I was just like, oh my gosh, like I’m having this, the clouds are opening.

Ryan Isaac:
It’s emanating.

Matt Mulcock:
It’s emanating.

Ryan Isaac:
Like body odor.

Matt Mulcock:
Like body odor. Incredible. The musk. But stop. Stop. Okay. But seriously, the reason matters. And, so when we ever get this, we get this question so many times. Ryan, how many times did you say we get some version of this question throughout a year from clients?

Ryan Isaac:
Yeah. It’s a lot.

Matt Mulcock:
It’s a lot. And it might, it’s…

Ryan Isaac:
Really common. Understandably.

Matt Mulcock:
It always comes down to what… It is a totally understandable question, but I think what’s implied here is Warren Buffet’s holding a lot of cash. So should I be holding a lot of cash? And the next question is, well, why? Why would you want to be holding cash. To your point, if you’re wanting to hold cash for a specific lifestyle change or decision, absolutely. Let’s talk about it. If you’re thinking you’re gonna hold cash to time something or say this must mean the market is doing something here. If you’re that game, and I will say this, you will lose that game every time. Every single time.

Ryan Isaac:
Every time, yeah, you’ll lose it. Yeah. You will kick yourself, you will kick yourself later for having played the market timing game. Yes. You just will. It’s just not gonna work. And yes, so that is a hundred percent true.

Matt Mulcock:
Honestly. Just stop thinking you can win that game. We can’t win that game. You can’t win the game. Rabih Dimachki, CFA level three, invests all our money for us, manages all our portfolios.

Ryan Isaac:
He doesn’t play the game.

Matt Mulcock:
Smartest dude on the planet. Okay. Smartest dude I’ve ever met in my life in real life. And he’s not playing this game. We just went to this DFA conference, right? Triple PhD, Nobel Laureates on their staff, talked to multiple PhDs there, literally rocket scientists managing portfolios there. They’re not playing this game.

Ryan Isaac:
They’re not playing this game. It’s funny you said Rabih. I sent him the same question that my client said. I said Hey, what would you, how would you respond to someone who said, should I buy treasuries, Warren Buffet?

Matt Mulcock:
I love this. I wanna hear what he says.

Ryan Isaac:
Rabih said, he’s just really concise, said, what’s the holding period? If it’s less than three years, there’s no harm. If it’s longer holding period. And then he gave some basic S&P data of how it’s like out earned and will out earn any treasury or bond or money market. So same answer. So it’s kind of funny. We started this by saying, you’re not Warren Buffett, we’re not Warren Buffet, but Warren Buffett might be holding cash to buy something. And if you gotta buy something, then there’s your plan. Fantastic.

Matt Mulcock:
Totally. Emergency fund and upcoming project with a defined time period and a defined value…

Ryan Isaac:
Hold that cash.

Matt Mulcock:
Are the two reasons to hold cash. Outside of that, you should not be holding cash. It’s like, it’s really that straightforward.

Ryan Isaac:
It is that straightforward.

Matt Mulcock:
Emergency fund and a known timeframe and amount on a project. That’s it.

Ryan Isaac:
Love it. Love it, love it. Last question. Dr. James from the Dentist Money Facebook group submitted this, this was fantastic.

Matt Mulcock:
Thank you, Dr. James.

Ryan Isaac:
Thank you, Dr. James. I’m just gonna read this. I don’t know if he’s a client. ’cause I don’t work with him, but maybe one of our advisors does.

Matt Mulcock:
Was this recent, because I haven’t looked at the last couple days?

Ryan Isaac:
This was in August. That’s in August. You saw this one.

Matt Mulcock:
Oh, did I?

Ryan Isaac:
Yeah. You saw this one.

Matt Mulcock:
I need to get on there more often.

Ryan Isaac:
So thanks for submitting this Dr. James. I’m just gonna read this. He said, just curious, people’s opinion on having overhead business insurance in your practice.

Matt Mulcock:
Oh yeah.

Ryan Isaac:
Yeah. So here’s his situation. And this is pretty common. Both my wife and I are dentists in the same office. No associates. I keep about three months of break even expenses in my business checking ’cause it’s still a good idea to have overhead insurance if something happens to one of us, even though theoretically the other could step up and write it out for however long is needed. We’re both well covered in personal disability policies. Just wanna know the consensus on this. Okay, take it away.

Matt Mulcock:
So can we just break down…

Ryan Isaac:
What’s he saying? Yes.

Matt Mulcock:
Let me just break down first, like what is overhead insurance versus person disability. I think that gets confused sometimes. Personal disability is you as an individual, you buy a personal policy, right? If you were to become disabled by their definition, this is key here. You should always own in what’s called an own occupation, own-occupation policy that is truly own occupation. So spoiler alert, stay away from Northwestern Mutual. That’s on the personal, the personal disability side, right. Where if you become disabled, you get paid out. Business overhead insurance is literally the same thing, but for the business. So they, and so what I bring this up is, and I love that he said he is got three months of overhead in the business because there’s what’s called a there’s a, like a blackout period basically where your, if you become disabled, you do not immediately start taking that money. There’s usually… You’re usually, there’s a period of time where you’re not gonna get paid and the standard is 90 days. And here is the kicker. What most people think is, oh, I’ve got a 90-day period where before it kicks in. It’s very common. However, it doesn’t start until the following month. So it’s actually 120 days if you have a 90-day policy or 90-day blackout period.

Ryan Isaac:
And I’ll just say from the little bit of experience I’ve seen from clients going on claim on any form of disability policies. Insurance companies are rich and own those big buildings in every downtown city for a reason.

Matt Mulcock:
For a reason. Yes.

Ryan Isaac:
They Will try, they’ll try anything they legally can and may…

Matt Mulcock:
Oh yeah.

Ryan Isaac:
Whatever legally can to like postpone, delay, push it off, really double check if they owe you any money or not. And if they do, I mean, so what I’m saying is it’s not uncommon for the application process to kind of go back and forth and even have some debate and send us these documents and we don’t know. And if it is in your favor, they’ll back pay anything if they did delay it. But they can, and I’ve seen they’ve got lot of money. They will, they, and they’ll delay. So even after you hit your three- or four-month waiting period, it could still be months after that, before they actually send you money because they can keep asking for information, double check things, push back against you, use their fine print. So you never know.

Matt Mulcock:
This is obviously an extreme example, but we have an advisor here who works with the Dentist, who has tried to go on claim, tried to claim disability on her personal policy. It’s been two years. She’s been battling them for two years. So again…

Ryan Isaac:
Whoa.

Matt Mulcock:
That is an extreme example, but it is…

Ryan Isaac:
I’ve seen that too.

Matt Mulcock:
You’ve seen it. I’ve seen it. We’re going through it right now.

Ryan Isaac:
I have a friend who is a dentist, not a client, has cancer. Shout out, beat it. He’s beat it. It’s awesome.

Matt Mulcock:
Heck yeah.

Ryan Isaac:
Stoked for him. But he had cancer…

Matt Mulcock:
Really quick for a second. When you said he had cancer, and then you said shout out, before you said he beat it, I was like, bro, you’re giving someone a shout out for having cancer. Like, no. How morbid are you?

Ryan Isaac:
No. He won. He won.

Matt Mulcock:
He beat it.

Ryan Isaac:
What was crazy though is his disability payment, and this was, we won’t name it, but it was the top of the line disability company with the most lenient flexible fine print in terms, took them one year to pay him. He had cancer. He could not work for 12 months and it still took them one year to pay him money. I mean, you can’t think of a more clear, Hey, this is a pretty straightforward diagnosis.

Matt Mulcock:
Yeah, shout out.

Ryan Isaac:
He took, he awesome. Stoked for him. But it, same thing though. You say it was like a really extreme example.

Matt Mulcock:
Maybe it’s not.

Ryan Isaac:
I don’t know, this probably happens a lot. They drag their feet so, [0:39:38.9] ____.

Matt Mulcock:
Well this is why it’s so critical to make sure you’re diving deep into your policies and going with reputable companies. Right. A Guardian, a MassMutual. Like not just trying to find the cheapest policy possible. With some podunk insurance company that again, they will happily accept your premium and they will unhappily and very begrudgingly pay out anything. So anyway, we got off topic a little bit, sort of, but I just wanted to make sure that was clear that, it’s the same thing. So the business overhead, again, the same thing as disability, it’s just on the business side. If you cannot produce for a period of time they will, the company hopefully will pay out to cover your overhead, right? So there’s a key here. And so I’ll stop there, Ryan, and then throw it back to you if you want me to keep going. I totally can.

Ryan Isaac:
Yeah. No. So Yep. I’m glad you brought that up. Like what’s the definition, what does this even mean? My gut reaction to the answer to this, this is my client asking me this question. We have business cash. We have another provider in the practice…

Matt Mulcock:
That’s key.

Ryan Isaac:
Who is currently producing. I don’t care if it’s a partner, spouse, or associate. Someone’s in there. Or you tell me you belong to a group of a very well organized local group of dentists that will and has…

Matt Mulcock:
Cover each other.

Ryan Isaac:
Cover each other, and you’ve seen it happen in other practices. If you tell me those things are in place and you have personal disability and you have cashflow and liquidity somewhere else also outside of your situation. For me, the key is the provider and the practice. That’s everything. So if this is my client asking me, my gut reaction would be, I don’t think you need it right now.

Ryan Isaac:
If for some reason we’re a little down the road and we know we’re maxing out our retirement plans, we’re being as tax efficient as we possibly can with our investing, we’re building liquidity outside of our retirement plans. You have a good, you’re comfortable with your debt pay down, you have liquidity anywhere else in the business, you have your spending a check, everything’s fine. And you still feel like you want a little bit of coverage. I’ve heard this, I’m just relaying what I’ve heard from some disability insurance experts that in a situation like where you have another provider, you could probably get away with carrying like 60 to 70% of your overhead in a policy, in a business overhead policy if you’ve got another provider.

Ryan Isaac:
I still think that might be even a little overkill. I would just like, there would be other financial priorities ahead of a business overhead policy that I’d rather pay for. If the list of all those things is in place, like this person is saying but also business overhead worth mentioning is a lot cheaper than personal disability because it only usually lasts 12 to 24 months. It wouldn’t, you’re once on a claim. So my gut reaction would be, I don’t think you need it right now. And the key for me is having the provider in the practice, like an experienced provider that can and will step up.

Matt Mulcock:
Yep. Nothing else to say. That’s exactly what I would say too. If you have another provider that’s vastly different than being a single owner or a single doc in a practice with no backup plan, that’s different. This, in this case, like even though it wouldn’t be ideal, maybe, but you… Yeah, it wouldn’t, the risk is not there for me.

Ryan Isaac:
The risk is lower.

Matt Mulcock:
The risk is much lower to justify you paying premiums on that. Save your money.

Ryan Isaac:
If you’ve got other financial priorities like max out a couple of backdoor Roth’s or give some money to the kids, for the kids’ college or something before that.

Matt Mulcock:
Or by the way, put it into a brokerage account. Right. Put it into a brokerage account. Build out liquidity and build every single… I was gonna say, every single month you’re putting money into a brokerage account and building liquidity, you are lowering your risk even more because you’re literally building your own policy to say.

Ryan Isaac:
It’s funny you say… Yeah.

Matt Mulcock:
To say that if you, if something happens, you have even that much more margin of safety.

Ryan Isaac:
I was just thinking, I’ve had a client do that before. And I mean, this is a whole other discussion, but that really, that’s really how insurance planning should be. And that’s kind of a funny term because it’s usually just insurance sales. The reason why there’s not a lot of planning around insurance is because the incentives around insurance are all commissions. So there’s not like a lot of incentive for long-term planning, but insurance planning should revolve around the increase and decrease, hopefully eventual decrease of insurance coverage over time because you become, especially as a dentist, hopefully self-insured through your own net worth. Another topic for another day, but glad you brought that up. All right. Any more dad jokes, old sayings, or embarrassing things you want to bring up before we close this thing out?

Matt Mulcock:
I mean, dude, I got dad jokes for days, but I will spare the people. I will spare them.

Ryan Isaac:
They’re so good. My oldest daughter just got on Instagram. She’s 18. It took a long time for her to get that. That’s a discussion for… That’s a parenting discussion.

Matt Mulcock:
That’s a whole other discussion.

Ryan Isaac:
But now I’m so excited ’cause I just send her videos and memes all day long. I’m so excited.

Matt Mulcock:
Is that your minimum, that once they turn 18, you’re like…

Ryan Isaac:
I don’t know. Here’s the funny thing. It is just my personal experience in parenting and I don’t know what on earth I’m doing. My kids will need therapy for sure because of me. What I’ve noticed so far is what I allow my 18 year old to do. I’m like, my youngest, four kids down, 12-year-old, like my 12-year-old is watching shows that my oldest wasn’t watching until like 16. And now we’re kind of just like…

Matt Mulcock:
Whatever. You’re tired. You’re tired.

Ryan Isaac:
It’s just fine. It’s not that big of a deal. So I don’t know what I’m doing. Someone out there let me know what I should do.

Matt Mulcock:
I mean, no one does. I don’t think. Any parent.

Ryan Isaac:
We don’t know.

Matt Mulcock:
You know what? You’re a good parent when you admit you don’t know what you’re doing. In my opinion.

Ryan Isaac:
We don’t know. We don’t know. I’m just already like educating my kids on the power of therapy while they’re still in high school. Like, Hey, I’m screwing you up, so this will help you later.

Matt Mulcock:
You know, my mantra for parenting, right? Like one sentence that can sum it all up.

Ryan Isaac:
What?

Matt Mulcock:
I could have handled that better. That is literally my entire life with kids. It’s like, I could have handled that better.

Ryan Isaac:
Could have done that better.

Matt Mulcock:
And then they grow up. That’s pretty much it.

Ryan Isaac:
They’ll live their lives. So anyway, I don’t even know how we got on that subject whatsoever. Memes, jokes.

Matt Mulcock:
Everyone’s already logged off by now. It doesn’t matter. They’ve all turned it off.

Ryan Isaac:
We’re done. Matt, thanks for doing this again.

Matt Mulcock:
Thanks Ryan.

Ryan Isaac:
Thank you all for submitting these questions to us. The Dentist Money Facebook group. You can DM us, email us if you have questions. We love talking about these. Thank you for asking them. If you have any feedback or input too on the way that we’re delivering our responses or you want to add something to them, please do let us know.

Matt Mulcock:
We love feedback. Maybe we’ll even read it on the podcast and respond.

Ryan Isaac:
We might even, we like that. If you have any questions for us, dentistadvisors.com, you can have a direct chat with one of us, we’re happy to help answer your money questions, point you in the right direction. Matt, have a good day. Thanks everyone for being here. Catch you next time on another episode of the Dentist Money Show. Bye-bye.

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