Dave Ramsey Isn’t Talking to You – Episode 301

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Dave Ramsey, the well-known author and personal finance guru, wants people to get out of debt as fast as possible. Is that the right message for a dentist like you? On this episode of the Dentist Money™ Show, Ryan and Matt go through each of Dave Ramsey’s 7 Baby Steps. They compare his advice against Dentist Advisors’ more dentist-specific guidance and discuss where and why there are differences.

 

 

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Podcast Transcript

Ryan Isaac:
Hello, everybody. Welcome back to another beautiful episode of the Dentist Money Show. Sponsored by Dentist Advisors, a no-commission, fiduciary, comprehensive financial advisor, just for dentists all over the country. Check us out at dentistadvisors.com. Today on the show, Matt and I are going to talk about Dave Ramsey, his philosophies, his principles, his advice, and do they or do they not apply to a dentist? Hot take alert coming your way, folks.

Ryan Isaac:
If you have any questions, go to dentistadvisors.com. Click on the book free consultation link and schedule a chat with one of our advisors today, or go to our Facebook page, we love it when you do this, post a question, anything. Go post any question about anything you want. We’ll answer it immediately. Dentist Advisors Discussion Group on Facebook. Thank you for being here. Thank you for supporting the show. 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 and avoid the bad ones along the way. I am Ryan Isaac and I’m here partially sick, partially recovered with my good friend, Matt, the Hollywood Mountain Mulcock. Matty, what’s happening?

Matt Mulcock:
Yo, Ryan, good to see you on this Friday. I’m sorry you’re still feeling the remnants of this cold/maybe COVID. We’re not sure.

Ryan Isaac:
Who knows? We don’t know. I still cough all day long, but I feel fantastic, and I don’t sound good.

Matt Mulcock:
Yeah. That is, again, the worst part. This literally could last another few weeks.

Ryan Isaac:
It’s fine.

Matt Mulcock:
I’ve had this before where you’re recovered for sometimes a month and you still have this residual cough.

Ryan Isaac:
Yeah. I still just have the sniffles and a scratchy deep baritone voice and I cough all day long.

Matt Mulcock:
Yeah. Which in 2021, post-COVID, it’s awesome to have a cough. It’s really fun in public.

Ryan Isaac:
It is.

Matt Mulcock:
I’ve never been more self-conscious in my life than when you-

Ryan Isaac:
It is the worst.

Matt Mulcock:
… you’re in line at a gas station or grocery store and you have to cough and it’s the most … I start sweating. It’s the most nerve-racking thing in the world.

Ryan Isaac:
There’s nothing worse. It’s better to hold back having to go to the bathroom. It’s better to hold back a sneeze. It feels so terrible to hold a cough, because you’re a going to burst. You’re just going to burst.

Matt Mulcock:
I know. When you do cough and you start looking around, you’re getting the eyes from everyone, like, “Did you just cough?”

Ryan Isaac:
Yeah. I run out of places, so anyway-

Matt Mulcock:
Yeah. Sprinting out of the store to go cough.

Ryan Isaac:
Thanks for being here with us on the my health updates. Today we’re going to talk about a hot-button issue.

Matt Mulcock:
Hot, hot, hot.

Ryan Isaac:
Couldn’t be hotter.

Matt Mulcock:
We’re bringing the people in on this one. They’re going to get the title and they’re coming in.

Ryan Isaac:
Yeah. The working title, I don’t know what it’ll be by the time this gets named, but we’re talking some Dave Ramsey today.

Matt Mulcock:
My guy.

Ryan Isaac:
I’m going to start with a story about Dave Ramsey, my personal experience, before we go into anything. I’m going to take us all back like 18 years, newly married. It’s ’06. We bought a house we shouldn’t have bought after being in an all-commission job for like-

Matt Mulcock:
You were probably the only one at that point. Yeah. You’re-

Ryan Isaac:
We bought a house we shouldn’t have bought. I was three weeks into an all-commission job. My wife just quit her job to stay home with the second baby on the way.

Matt Mulcock:
Making money moves. Making money moves.

Ryan Isaac:
Total smart financial decisions. I was panicking a little bit. I needed some financial peace. Where do you go when you need financial peace? You go to Financial Peace University. That’s actually what it’s called.

Matt Mulcock:
I mean, you go the school. Yeah.

Ryan Isaac:
You go to the school of financial peace. All kidding aside, it was a fantastic experience. We were all in. I’m live at the E Center. I remember walking out on cloud nine. I was so stoked. I was so empowered. He was awesome live. He had his team, some family members. He told stories, his presentation-

Matt Mulcock:
You were running through walls.

Ryan Isaac:
Dude. Honestly, it was like Tony Robbins for budgeting. I was so pumped and the momentum carried and I got my emergency fund. I sold stuff in this new house that we shouldn’t have bought. We also bought furniture we shouldn’t have bought on probably credit cards we shouldn’t have had. I sold my plasma TV and I sold my couches and I raised money and I paid off debt and I-

Matt Mulcock:
You brought in some lawn chairs-

Ryan Isaac:
I did.

Matt Mulcock:
… in the living room. That was it.

Ryan Isaac:
I took on second jobs. I legitimately took on side work like he suggests. I didn’t deliver pizzas, but I learned how to build websites. I built websites for like 10 people. 10 small companies that I just knew.

Matt Mulcock:
Very cool.

Ryan Isaac:
I built websites. I made-

Matt Mulcock:
I didn’t know that part.

Ryan Isaac:
Yeah. I paid off medical debt. I did it, man. I did Dave Ramsey, and that’s my disclaimer, is that as a young person with a W-2 job, with some credit card debt and no direction, it was a fantastic program that I was really grateful for. It was cool. I never got through pay off all your debt, pay off your house, invest in growth stock mutual funds. I didn’t get there yet.

Matt Mulcock:
Yeah. You didn’t get to the baby step-

Ryan Isaac:
No.

Matt Mulcock:
… six and seven?

Ryan Isaac:
No. We are in a different scenario when we’re talking to dentists obviously. It is a completely different thing. Matt, what did you call this when we were talking about this episode? You said-

Matt Mulcock:
For the title?

Ryan Isaac:
Yes.

Matt Mulcock:
I said Dave Ramsey isn’t talking to you.

Ryan Isaac:
Yes. Explain that. Why is that the title you came up with? Dave Ramsey is not talking to you.

Matt Mulcock:
Yeah. I mean-

Ryan Isaac:
Which is provocative by the way. It’s provocative.

Matt Mulcock:
It is provocative. That’s why I said it.

Ryan Isaac:
Yes.

Matt Mulcock:
Just in the years now, years and years of working with hundreds of dentists now all over the country and having more conversations than just that, it’s like you said, I think your story paints it perfectly. He’s speaking to a very specific demographic. I’m not saying he’s even giving bad advice to that demographic. You just hit it on the head. I mean, you had an incredible experience.

Matt Mulcock:
I would guess you would say … And tell me if I’m wrong here. I would guess that you’re saying that one of the reasons you’re here and you got out of that situation was because of Dave Ramsey, right?

Ryan Isaac:
For sure.

Matt Mulcock:
Yeah. I mean-

Ryan Isaac:
Yeah. I mean, it was a total stepping stone that I absolutely needed and it totally worked.

Matt Mulcock:
I think for a certain demographic of people, I think he’s speaking directly to them and I think he’s helped millions of people all over the country reshift their mindset and get out of bad situations. I just don’t think that person or that demographic is dentists. I know this specifically because I actually watched one of his videos … I’ve watched a lot of his videos, and I watched one where he’s talking to a dentist.

Matt Mulcock:
A dentist calls in and talks about his debt. You know how Dave Ramsey, his brand is being … How do I say this nicely? A jerk. He is. He’s really aggressive. He’s like, “You’re an idiot.” I’ve heard him say that multiple times on the show.

Ryan Isaac:
Oh, yeah. Oh, I used to listen to the radio. I used to listen to the show religiously. It was totally-

Matt Mulcock:
I think people enjoy that. He’s very forward. He’s very aggressive.

Ryan Isaac:
It’s good marketing. It’s good marketing, for sure.

Matt Mulcock:
It’s a good marketing. He’s built a brand and it’s working, but he’s talking to this dentist and this dentist … And I think actually it was a dentist that … or it was someone going into dental school and he’s talking about how he’s taking on this amount of debt. It was somewhere in the range of 300,000. Dave Ramsey just lays into him, just reams him like, “That is the dumbest decision you’ll ever make in your life. Don’t ever do that.”

Matt Mulcock:
He also goes off like, “There’s no way it costs that much. There’s no way school costs that much.” Anyway it just made me think, I’m like “Okay. First of all, Dave Ramsey is really … He’s very informed in certain areas and talking to a certain group of people. He’s very uninformed in talking to a specific group, like speaking to dentists specifically.”

Matt Mulcock:
One of the main reasons being the use of debt in their life, where he takes a very dogmatic rigid view. I don’t think dentists can take that view when it comes to debt in their life.

Ryan Isaac:
Yep. We’ll jump into this. I love your title. I love where those thoughts led. It just reminded when we said the word provocative, I don’t know if anyone was a fan of the Will Ferrell show, Blades of Glory.

Matt Mulcock:
Oh my gosh. Yes.

Ryan Isaac:
This quote also ended up in a Jay Z song, but it was when he’s talking about the Black Eyed Peas song and he’s like, “No one knows what it means, but it’s provocative.”

Matt Mulcock:
Provocative.

Ryan Isaac:
It gets the people going.

Matt Mulcock:
No it’s not. It’s gross.

Ryan Isaac:
It gets the people going.

Matt Mulcock:
Gets the people going.

Ryan Isaac:
That’s what we’re trying to do here, folks. Okay. Let’s get into this. I have the list of the baby steps and we’re going to go through and talk about what they suggest and how they … Just they’re different for a dentist and what we would suggest instead. All right. Baby step number one, according to Dave Ramsey is to start an emergency fund. $1,000 to start an emergency fund. Here’s where I think we’re similar. The numbers are just going to be different.

Matt Mulcock:
I was just going to say, we love this step. The numbers are off.

Ryan Isaac:
Yeah. The numbers are different. I want to go tell you guys really fast. We did a podcast on … We called it the Laws of Liquidity. Is that what we called it?

Matt Mulcock:
Yeah. Laws … I think, yeah.

Ryan Isaac:
Episode number … Do you remember what number it was here?

Matt Mulcock:
I don’t.

Ryan Isaac:
It’s like 280 … I’m going to get it right now. I’m just on the website, if you go to dentistadvisors.com, you can find it on any platform. Just find Laws of Liquidity. Oh, 280. Laws of Liquidity, 280.

Matt Mulcock:
Oh, there you go, 280.

Ryan Isaac:
We walk through our own baby steps here on what to do with cash. I mean, this is like, “What should I do with cash?” This is it. This is where we differ. Check out episode 280. Dave Ramsey says, “Start with an emergency fund of a thousand dollars.” We’re going to say start with an emergency fund, but much, much bigger.

Matt Mulcock:
Yeah. I’m sorry. A thousand bucks. I love the idea, but give me a break. A thousand dollars is not an emergency fund.

Ryan Isaac:
To be fair, I haven’t listened to Ramsey for a long time. Maybe he’s updated that. I don’t know. For the average person though, it’s probably still about the same. Like I remember listening to his show and people would call in who have like $85,000 mortgages. I was like, “I don’t even know how to relate to that.” I mean, it’s just, where do you buy a house that’s that cheap? The scale is different. We will tell people, “Yes, emergency fund, step one, please.”

Ryan Isaac:
The emergency fund is your business. Protect the practice at all costs, first and foremost, if you’re an owner. We’ve talked about this a lot before. Post-COVID now, all the scare that we all went through, keeping up to three months of cash in the business is pretty normal. It wasn’t deliberate. It’s kind of funny.

Ryan Isaac:
People didn’t end up with three months of cash on average because that’s what we’re seeing now, because they deliberately did that on purpose after COVID. Everyone just got government money.

Matt Mulcock:
I was going to say, it was the government. Yep.

Ryan Isaac:
That ended up being about three months of spending in the business and then people just held onto it, I think it’s rational. Definitely after COVID people are holding more cash in their business than there used to be. I think it’s fine. More than that though, we got to let go of a little bit of fear and we got to do something with the money. That’s emergency fund number one. Emergency fund number two, which he does this later.

Ryan Isaac:
This is his step three, so we’ll get to that, but after the practice emergency fund, have a personal emergency fund of three to six months. That’s step number one. What do you want to comment about that, Matt?

Matt Mulcock:
Yeah. Again, I like the idea. We would align on his number one step. I just don’t … A thousand bucks is just … Again, different demographic for dentists, it’s just not going to cut it. That’s not an emergency fund.

Ryan Isaac:
You need like thousand dollars in the drawer up front in the practice.

Matt Mulcock:
I was going to say, you have a thousand bucks maybe in cash at home, but you need a bigger-

Ryan Isaac:
To run to Costco for the office.

Matt Mulcock:
Yeah. Exactly. You need a bigger emergency fund. One nuance to this that we’ve talked about, and I talk to a lot of my clients about, if you go to that three months or larger emergency fund on the larger scale at the business … And I’ve heard this from people where they say, “Hey, Matt, if I keep a larger sum of money in my business, let’s say three months, does that mean I could probably in the lower end of the scale on the personal side?” And I think that’s reasonable.

Matt Mulcock:
Meaning, if you have three months in the business that you can access no matter what if you had to, as opposed to like six months at home, could I have three months? Yeah. I think, again, that’s a reasonable thing to think about because it’s all your money, right?

Ryan Isaac:
Yeah. [crosstalk 00:12:24].

Matt Mulcock:
Now, from a mental accounting perspective, a behavioral perspective, I like the idea of just you delineating between business and personal. There’s some nuance there, but bottom line is a thousand bucks just isn’t enough.

Ryan Isaac:
Yeah. Episode 280 talks about this because also there’s some nuance in that, because as people save money for long periods of time in after-tax brokerage accounts, which most of our clients do, all of them.

Matt Mulcock:
Yeah. They should. Yeah.

Ryan Isaac:
That also becomes a giant emergency fund. The need for cash when you’ve got seven figures in an after-tax brokerage account with a good mix of stocks, bonds, mutual funds, all that stuff, the need, just you have other places for it. The need for tons of cash just gets less and less. Number one, check the box. I wish post-production we make a little ding noise.

Ryan Isaac:
Number one, ding, we’re good. We agree with Dave, just a different number of. Number two, this is where it comes off the rails. Number two, pay off-

Matt Mulcock:
The train crashes here.

Ryan Isaac:
Number two baby step, Dave Ramsey, pay off all debt using the debt snowball.

Matt Mulcock:
No dog.

Ryan Isaac:
That’s a no for me, dog

Matt Mulcock:
It’s a not for me, dog.

Ryan Isaac:
Yeah. This isn’t a full debt episode. We have plenty of those at dentistadvisors.com. Dentists are just going … They are going to need to focus on other things besides full debt reduction right out of the gate. There is just so many higher priorities for a dentist than getting rid of all of their debt first. I know … We’re not anti-debt.

Matt Mulcock:
No.

Ryan Isaac:
Someone will say that. They’ll be like, “You love debt.” No I don’t. I hate debt. It stresses me out, okay? Just like the next person, but most of the debt dentists carry, it was just the cost of doing business. It was the cost of being able to be in a business that has a 50% freaking profit margin and has unlimited funding from any bank in the world and that you can work at until you’re 70. The cost of doing business in a fantastic business, in a great industry [crosstalk 00:14:30].

Matt Mulcock:
That’s going to allow you to build massive amounts of wealth.

Ryan Isaac:
Massive amounts of wealth compared to anyone else basically. Pay off all your debt. No. We teach our clients and really help them achieve a lot of balance. Early years, man, focus on the practice if you’re a practice owner, or if you’re a career … or just career, if you’re an associate. Really try get to the point where your income is peaking as soon as you can make it peak in your life, because that income from the practice, that’s your wealth builder.

Ryan Isaac:
Really starting to invest money and pile up has so many advantages besides the obvious of just the compounding over time. Everyone’s seen the charts, if you start saving at 20, you can stop at 40. If you start at 40, then you got to go till you’re 80 or something. The compounding, besides that, the mental and emotional effects of learning investing skills, like the skill set of investing, not day trading stocks back and forth all day long or crypto, whatever your thing is. The skill set of-

Matt Mulcock:
NFTs.

Ryan Isaac:
Yeah. The skill set. Man, I can’t even emphasize enough how big of a skill set and how long it takes to develop the skill set of just building a rational, low-cost diversified portfolio and rebalancing it frequently and saving into it and then just leaving it alone. I feel like I’m talking to one of my little kids. Like, “Just stop it. Just leave it alone. What’s wrong? Just stop messing with it.”

Matt Mulcock:
Just stop, people. Stop tinkering.

Ryan Isaac:
Stop messing with your sister.

Matt Mulcock:
Stop tinkering.

Ryan Isaac:
Just leave her alone. Why are you … Like for the 10th time, just stop it, leave it alone. That is such a skill. It’s so awesome to develop that skill when you’re saving 500 bucks a month or a thousand bucks a month, as opposed to this idea that people have like, “I’ll pay off all my debt and then when I’m 45, I’ll have 20 grand a month, 25 grand a month and then I’ll invest it.” I’m like, “No way you would do that.”

Matt Mulcock:
Sure. Can I-

Ryan Isaac:
Yeah. Please.

Matt Mulcock:
Can I get vulnerable here for a second?

Ryan Isaac:
Yeah. Yeah. Yes.

Matt Mulcock:
I’m going to get vulnerable.

Ryan Isaac:
Okay.

Matt Mulcock:
Yeah. I’m going to get personal. You told a personal story about Dave Ramsey.

Ryan Isaac:
Okay. Let’s do it.

Matt Mulcock:
I’ll tell a personal story. This is recent. My wife went to grad school three years ago, not dental school so she didn’t rack up this amount of debt as an average dentist, but six figures of private school PA school debt. I’m an advisor. I advise people all the time to, generally speaking, look at … Well, I always give them the two sides of the coin here, the emotional side of debt and then the spreadsheet answer. Right?

Matt Mulcock:
You’d think as a coldly rational advisor, I would be favoring the spreadsheet answer, right? Of this approach, of getting her debt paid off.

Ryan Isaac:
Explain what you mean by that, because the spreadsheet answer, stone cold, no feelings, robot emotions, mathematics only, what’s do you mean by the spreadsheet answer?

Matt Mulcock:
Yeah. The spreadsheet answer is with rates where they’re at right now, you could argue that when I say the spreadsheet answer, just being like from a purely wealth optimization. I don’t know you. You are a faceless person and you come to me and you and I show … or you just show me on paper what you can get for … or where your rates are for your multiple six figures of debt, whether it be a mortgage or your student loans or your building, whatever.

Matt Mulcock:
You show me that and then you show me your cash flow, and I see how much money you could put either towards your debt or towards investing over the next 20/30 years. The spreadsheet answer right now, wealth optimization answer, is you invest that every time, because you look at what your rate of return is on your debt.

Matt Mulcock:
Meaning whatever that interest rate is, let’s say it’s 3%, two and a half percent, whatever, rates are so low right now, versus what you’re going to get on those same dollars over the next 20/30 years in investing. You’re talking 8, 9, 10%, most likely in the next 20/30 years. The difference there is that opportunity cost. The wealth optimization answer almost every time with rates being this low now, is invest your money. Do not pay off your debt aggressively, right?

Ryan Isaac:
Yeah.

Matt Mulcock:
I know this, I talk to people all the time. I’m always running the numbers like, “I know this answer.” Well, guess what we did? We just paid off all of her debt. It’s been three years since school and six figures of debt gone.

Ryan Isaac:
Dude.

Matt Mulcock:
The reason we did this, people are probably thinking like, “Well, what the heck, Matt? You’re a hypocrite.” My wife played more of the … It was more of an emotional thing for her. She really, really wanted to get the debt paid off as we have two kids now. She just kept saying, “Hey, once we have another, I want to go part-time or maybe not work. My vision is having my debt gone.” We compromised and we did it.

Matt Mulcock:
I tell you that, so the second part of this though, is we did this in bigger chunks, obviously. It’s been over three years or just about three years and we paid off six figures-ish of debt. We just finished our last big chunk just pretty recently. I can tell you, I feel worse now, financially. I do. Genuinely.

Ryan Isaac:
Wow.

Matt Mulcock:
I feel worse now. I feel more stressed out now than when we had the debt and we had more liquidity.

Ryan Isaac:
I’m glad you told it that way because when I think … I was asking you to explain what you mean by the spreadsheet answer, and actually I thought you were going to say the opposite thing because here’s what I have in my head. From 14 years ago, when I started in this career, interest rates were 7, 8, 9%. Student loans were … Well, actually student loans were like 1%, which is funny.

Ryan Isaac:
One and two, but all the practice and real estate loans were like 7 and 8% easily. I remember refinancing people at seven and feeling like we got it-

Matt Mulcock:
Feeling good. Yeah.

Ryan Isaac:
I mean, think about that. Think about how crazy that is. We were helping people refinance to seven, six and feeling like “Oh, this is a great deal. You know?” I was thinking on the spreadsheet answer, I still have in my memory from that long ago, people running spreadsheets that told the opposite story. The math would have said high interest rates for a lot of cases and so much of this is assumption, right? On a spreadsheet, interest rates and that kind of stuff people.

Matt Mulcock:
Sure.

Ryan Isaac:
People would run their own personal spreadsheets with higher interest rates, higher mortgage rates, higher practice loan rates, and come out with the answer that mathematically they should pay off their debt first, then take the 25 grand a month that’s finally leftover 15 years from now, and then invest that as much as they possibly can. Either way the conclusion ends up the same.

Ryan Isaac:
I saw people do it early in my career, and they ended up exactly the same way that your story ended, which is I’ve met plenty of people who took that route. They ended up … The debt pay route, by the way, it always takes longer than you think. Same with savings. Stuff happens in life that you do not expect that will disrupt your ability to follow your spreadsheet every time because plans aren’t spreadsheets.

Ryan Isaac:
The spreadsheet would say you’re debt-free by 42 and then you’re investing. It would be 47 by the time, right? It’s five years off. It’s like-

Matt Mulcock:
Because things always knock you off track.

Ryan Isaac:
Always. It’s years off. The people ended up in the … And I have their faces and their names in my head still, which I’m not going to say, obviously. I’m just saying I remember that.

Matt Mulcock:
Just describe their faces. That’s it. Just describe them.

Ryan Isaac:
Lovely people but they felt the same way your story ended, which is you followed the same thing they did, even though your spreadsheet told you a different story. They ended up with no debt, way less cash. A lot of these people underinvested in their businesses along the way. Imagine if you and your wife also had a business you had to run and support with cash flow and you also ignored that at the expense of paying off debt? You know?

Matt Mulcock:
Yep.

Ryan Isaac:
You didn’t mark it, you didn’t grow, you didn’t increase technology. You didn’t train. You didn’t do your CE. All kinds of things. They all ended up in that same spot. What was hard is, yes, they ended up in a place where now in their mid to late 40s, they had tens of thousands leftover per month to save and they were paralyzed in being able to save it. They could not get themselves … After not saving any money.

Ryan Isaac:
It’s one thing to pay off a debt because you can physically see the balance going down so it feels so good. You like, “This is physically making a difference. I can prove it right there.” When you invest in a portfolio, you got to have a little bit of faith because it’s a long-term thing, right? You have to believe that the world’s going to still be around and companies will still exist and they’ll still have incentives to make money and be profitable and grow.

Matt Mulcock:
It’s a whole different mindset.

Ryan Isaac:
You have to believe that. I watched quite a few people get to that point and have tens of thousands of dollars and be paralyzed, and they could not do it. They couldn’t invest it and so they just keep piling up cash, and trying to get them to invest, go from zero investing to 25 grand a month in their late 40s was really hard. Matt, it’s time.

Matt Mulcock:
Time for what, Ryan?

Ryan Isaac:
It’s time to book a free consultation at dentistadvisors.com. Just click on the big book free consultation button on the homepage, and talk to one of our friendly advisors today. Step three, three to six months expenses in savings. We said this in number one. We agree with Dave on this, but we put it in step one.

Matt Mulcock:
Just put it in that first slot.

Ryan Isaac:
Yeah. Step four, invest 15% of household income into Roth IRAs and pre-tax retirement. Matt, break down that sentence.

Matt Mulcock:
Oh, yeah.

Ryan Isaac:
I’ll say it again. Invest 15% of household income into Roth IRAs and pre-tax retirement.

Matt Mulcock:
Yeah. I agree with the premise of the savings aspect and having a baseline or rule around the percentage and having a system around that. I think it’s great. I don’t know if I’d necessarily agree that it has to be in Roth IRAs and pre-tax accounts solely. I also would say that at this point, we would say … Again, talking to a different demographic, talking to dentists, we would actually say that savings rate has to be higher than 15%.

Ryan Isaac:
Yeah. If you go to dentistadvisors.com, type in savings rate or savings into the search bar or in the education library, which we abbreviate to-

Matt Mulcock:
The edu.

Ryan Isaac:
… edu library, because we’re cool. No, we’re not.

Matt Mulcock:
We are cool. No.

Ryan Isaac:
Then that’s where you’ll find tons of stuff on savings. We do recommend that most dentists maintain a higher savings rate than that. I don’t mind, honestly, this step where it’s at in the process though, conceptually.

Matt Mulcock:
Yeah. No. I agree with that.

Ryan Isaac:
I like this, because one thing I had a problem with and I didn’t back then, because I didn’t know anything about investing. Dave would always say, “Roth IRAs.” He would always tell what accounts to put the money into, which I don’t think is inherently bad, but it’s so much more nuanced to where you should put your money and most dentists don’t qualify for Roth IRAs anyway. He’d always say, “Growth stock mutual funds.” You know?

Matt Mulcock:
Yeah.

Ryan Isaac:
I didn’t even know what that phrase meant, but I was just like, “Apparently that’s where you put money.” Yeah.

Matt Mulcock:
I don’t know if we have time to talk about his ‘investment’ advice in this episode. If we did, yeah, we’ll just say you can listen to Dave Ramsey for sure about some of this stuff, even though we’re breaking all this down. Please, please, please, please, please do not listen to any of his investment advice. It is terrible.

Ryan Isaac:
It’s not complete.

Matt Mulcock:
No.

Ryan Isaac:
Do our clients own growth stock mutual funds in their portfolios? Yes they do. Is that all they own in their portfolios? No, it’s not. I mean just saying, invest money in growth stock mutual funds, which to be fair, I don’t know if he still says that. That was all I heard for years. I don’t know if that’s still his advice.

Matt Mulcock:
Yeah. I’ve heard some relatively recent videos of him giving his investment advice.

Ryan Isaac:
It’s still pretty bad.

Matt Mulcock:
Just don’t do it. Yeah.

Ryan Isaac:
That sentence of what he’s telling people to do completely ignores risk allocation, types of accounts, diversification.

Matt Mulcock:
Your specific situation.

Ryan Isaac:
Yeah. It’s just so much, but conceptually, I like his baby step number four, invest money. Yes. Invest money. Your investment plan as a dentist is going to be so much more-

Matt Mulcock:
Yes. Save and invest.

Ryan Isaac:
Yeah. It’s going to be more complex, more nuanced. Most of our clients have like four to six different types of accounts between Roth IRAs, 401(k)s, profit sharing, brokerage accounts.

Matt Mulcock:
Brokerage accounts. Yep.

Ryan Isaac:
There’s just … There’s a lot.

Matt Mulcock:
HSA.

Ryan Isaac:
HSAs, and they’ll have different-

Matt Mulcock:
Kids accounts.

Ryan Isaac:
Yeah. Different purposes, different timelines, different risk profiles. They need to be treated as such. Even a simple investment approach is so complex across multiple accounts with different goals and time horizons and needs and liquidity and tax treatment, and not to mention the human condition of being completely unable to stick to something for any period of time longer than three months. Yeah.

Matt Mulcock:
Yes. Well, I think it gets confused as simple does not mean easy.

Ryan Isaac:
Yep.

Matt Mulcock:
Right?

Ryan Isaac:
No. Yeah. Not even close.

Matt Mulcock:
Not even close, yeah.

Ryan Isaac:
Not even close. Okay. Baby step four, invest money. I like it. It’s just the way we would express it would be different, more nuanced there. Baby step five and six. Okay. We’ll go … Number five is college funding for kids. After your emergency fund, you’re investing in your business, you’re investing for yourself, would you put … Here’s the question?

Ryan Isaac:
Would you put aggressive … As this next step for us. Would you put aggressive debt reduction or kids’ savings as the next step for you, Matt? What would you say?

Matt Mulcock:
Yeah. That’s a really good question.

Ryan Isaac:
Sorry. We’re assuming that you’ve got emergency fund, your business is healthy and you have a 20% or higher savings rate on average. What would you say? Kids are debt for you? It’s going to depend honestly.

Matt Mulcock:
Yeah. It would depend on the individual and obviously their individual goals and what their vision is because I have many clients that say, “No, my kids are … I did it on my own. They’re going to do it on their own.” Whatever, which I’m fine with. I’ve got others that their sole focus and goal after they take care of the steps we just highlighted is they want to pay for every level of education, even if they go to medical, dental or law school.

Matt Mulcock:
It is very specific to the person. I would say as a general rule though, once you get to that point, I would … This is a tough one, man. This is very, very … You can make an argument for either one. I would probably say at this point, I would favor … Yeah. I would probably favor starting to get somewhat aggressive with debt at this stage.

Ryan Isaac:
It’s personal, right?

Matt Mulcock:
Yeah.

Ryan Isaac:
I would agree. I would say the same thing, but I probably hold different beliefs about what I want or need, or even can give to my kids. I feel like my kids are going to be in positions to probably get whatever they need and I’m old and I don’t have that much more time so, you know?

Matt Mulcock:
You act like you’re 70, bro. You’re 40 years old.

Ryan Isaac:
Some days I really feel like it.

Matt Mulcock:
40 is the new 30.

Ryan Isaac:
40 is the new 30. I think 50 is the new 30 actually.

Matt Mulcock:
50 might be the new 30-

Ryan Isaac:
I got 50-year-old friends and I’m like-

Matt Mulcock:
… which means I’m like 15.

Ryan Isaac:
You are 15.

Matt Mulcock:
Yeah.

Ryan Isaac:
Yeah. I have a 17-year-old brain. I would argue, I think debt would probably do … Debt reduction at that point would probably go a longer way for building a dentist’s net worth, but it’s personal goals, right? I’ve met plenty of people who will sacrifice quite a bit of their own lives in order to save a lot of money for their kids. That’s where Dave puts college funding for kids.

Ryan Isaac:
I would say throw in the mix possibly considering faster debt reduction by that point as an option, or if you make the money, you can do both. Again, the higher your income goes … This is why starting early, protecting the business and investing in it and getting your income as high as it can as fast as possible will just open up more doors. You can do more things simultaneously the higher your income gets.

Matt Mulcock:
Yeah. I mean, I would argue and almost every single time that baby step number two for us is again, focusing on your skill set, your business, building that out. Your return on investment and ability to pay off debt faster actually you’re better served focusing on that business, increasing that income. I think you would actually pay your debt off faster that way than if you follow Dave Ramsey’s steps and actually just went after your debt.

Ryan Isaac:
You will. I mean, for the average dentist owner out there, or even high-earning associate, your job and your business that’s your wealthmaker. Most other things you’re going to do, most, real estate, rentals, stocks, bonds, mutual funds, those are gradual, moderately growing assets over long periods of time that will preserve and grow your wealth, for sure.

Ryan Isaac:
I mean, it’s going to grow your wealth, but I mean, it’s your practice that’s going to really push it. Baby step six, pay off home early. I mean, we’re at the point where we’re now agreeing like-

Matt Mulcock:
Not on-

Ryan Isaac:
Well, we’re saying go ahead and do some faster debt reduction, but I’m personally not like, “Hurry and pay off your house.” Especially today’s rates. Personal stories, I’m buying a house right now, which-

Matt Mulcock:
Yeah. You are.

Ryan Isaac:
… I always tend to buy houses in the tops of markets. Don’t ask me for real estate advice ever. I only literally buy houses when markets are just blowing up. I’m buying a house right now and I’m purposely choosing to leave more money in a brokerage account from the sale of my previous house.

Ryan Isaac:
I’m doing the smallest down payment I possibly can and I’m putting a much bigger chunk into a brokerage account for this exact reason, because my rate, historically, even though it’s not rock bottom anymore, it is so low and what I expect out of my investment account with this money, because I’m an aggressive investor with a long-time horizon, I expect to easily double what my interest rate on my house is going to be, maybe triple it.

Ryan Isaac:
Triple wouldn’t even be out of historical ranges. No question for me, I’m investing money over paying off my house. If I had that much extra money, it just depends where I’m at. It depends if my net worth is easily on track to being big enough in the timeframe that I want, and I still have tons of money left over, like my income is that high, which is not the case for me, but some dentists it is, I don’t know if you’re just feeling paying off the house, like go ahead, but that’s not a move I would purposely make because of like-

Matt Mulcock:
I mean, at that point for those people, like you mentioned earlier, the people that can have their cake and eat it too, and we see people like that, we work with people like that, that at that point it’s like-

Ryan Isaac:
It doesn’t matter.

Matt Mulcock:
It doesn’t matter. You’re going to-

Ryan Isaac:
What do you want to do? What do you want to do?

Matt Mulcock:
Whatever you want to do, you’re going to be successful because, again, we can’t stress this enough, you are in that position because of your business and your skill set.

Ryan Isaac:
Yep. Yeah. Because of the-

Matt Mulcock:
If you’re at that level of, you’re saving 30 grand a month or 40 grand a month and you still have money left over and you’re like, “I want to pay off my house.” Awesome. Let’s [crosstalk 00:33:18].

Ryan Isaac:
Yeah. Do all of it. Yeah.

Matt Mulcock:
For most people I’d actually argue financially … This is going to be a hot take alert.

Ryan Isaac:
I like it.

Matt Mulcock:
I would actually say, again-

Ryan Isaac:
Keep it.

Matt Mulcock:
… let’s push those people aside that we just mentioned. For the core, most people, I would argue it’s almost financially irresponsible to pay off your home at a two and a half percent interest rate aggressively. Is that too hot of a take?

Ryan Isaac:
No. I think it’s pretty backed up by math.

Matt Mulcock:
Yes. Yeah. I have math on my side. I guess we should take a quick step back on when we said, do I save … On baby step five, I think we said, do I save for kids or pay off debt aggressively? People are probably thinking, “Well, wait a second, didn’t you just say at baby step five, you probably favored aggressive debt.” I made the assumption with the clients we work with and dentists out there that you have a lot more debt outside of your house at this point. Students-

Ryan Isaac:
Other debt.

Matt Mulcock:
I’d much rather get student loan and business.

Ryan Isaac:
Get the student loan, equipment, building, whatever.

Matt Mulcock:
Exactly. Yeah.

Ryan Isaac:
Yeah. But-

Matt Mulcock:
Leave your house for the end.

Ryan Isaac:
It is but look, we’ve got a podcast on this too. Can a dentist retire fully financially independent at a great age with debt on their balance sheet?

Matt Mulcock:
Yes.

Ryan Isaac:
Definitely. Yes.

Matt Mulcock:
Yep.

Ryan Isaac:
I mean, you can retire with practice debt, equipment debt, real estate debt just fine. It’s the net worth after the debt is subtracted that matters. You can have debt on there. It’s not imperative that it’s all gone by the time you’re … But it is imperative that you have a giant pile of money somewhere to live on when you’re done working. That is imperative. That does matter.

Ryan Isaac:
Baby step seven, build wealth and give. Got no problem with this. Just continue. I love … Honestly, one of the most powerful things that I loved from Dave Ramsey’s courses was his thoughts on giving. I loved it. I loved the way he talked about putting yourself in a good position and helping other people who are not, I loved it. I loved it, and-

Matt Mulcock:
It’s amazing.

Ryan Isaac:
… resonated with it and I-

Matt Mulcock:
Giving back to your community.

Ryan Isaac:
Totally. In a way that’s meaningful to you. I love that. Yeah. Build wealth. Give. I love it. I think that’s great. You know what’s kind of surprising to me? I thought we’d be a little bit more harsh coming through this.

Matt Mulcock:
A little spicier?

Ryan Isaac:
Yeah. It kind of just turns out that all we’re saying is like, “Look …” It’s what you said. He’s not talking to you. The numbers don’t apply, the order of things, they’re not the right order of things. The philosophies aren’t deep and detailed enough to actually address the complexities of being a dentist. We’re not as far off as I maybe would have thought we would have ended up by this part.

Matt Mulcock:
Yeah. Most of my issues with Dave Ramsey … I mean, we just highlighted obviously like the core level of what he teaches, at its core is good, right?

Ryan Isaac:
Yeah. Yeah.

Matt Mulcock:
I think he’s helped a lot of people. My issues with Dave Ramsey are generally his approach. It’s just different than the way we would approach it or how I’d approach it with a client.

Ryan Isaac:
Lack of balance.

Matt Mulcock:
The lack of balance. Let me tell you, I’ve actually had a couple of recent experiences with Dave Ramseyites or former Dave Ramseyites, the dark side of this … And again, I’ve seen this multiple times, is what can happen when the pendulum swings the other way. I’ve seen this multiple times, so I can speak to it from personal experience and they’ve attributed it to following Dave Ramsey so strictly early on in their life.

Matt Mulcock:
Then as they started to make a little bit of money … It’s kind of the idea of like I’ve been so repressed. I feel like I’ve been holding myself back so much there’s no balance in the Dave Ramsey approach that they swing completely the other way. I’ve heard this multiple times. That is the danger of this as well, of not following this mindset that we have and we stress all the time, is like balance over burnout. That doesn’t mean just your business. That doesn’t mean just your career.

Ryan Isaac:
It’s your debt reduction strategy.

Matt Mulcock:
That is also your debt reduction, your approach to money in general. You’re much better off, in our opinion, following a sustainable strategy that incorporates balance rather than this super dogmatic rigid sprint for several years, then all of a sudden you finally stop to take a breath and all of a sudden before you know, it, you’re like, “Holy cow, I’ve gone the other way completely.”

Ryan Isaac:
Yeah. You hate everything.

Matt Mulcock:
You hate everything and everyone.

Ryan Isaac:
It’s like you can’t-

Matt Mulcock:
Wow. We just got dark.

Ryan Isaac:
Yeah. You can’t treat this whole budgeting, debt payoff, investing thing like a crash diet that you know you can really do for like two weeks, but you’re going to try to do it for 12 months. You know?

Matt Mulcock:
Yep. Yep.

Ryan Isaac:
You can’t treat it like that. This was cool. I thought this was a great discussion. The invitation to everyone listening … Well, first, thank you for listening. Thanks for being here. If you’re new, welcome to the show. If you’re-

Matt Mulcock:
If you’re not new, welcome to the show.

Ryan Isaac:
Welcome to the welcome to the show, either way. We’re just really appreciative.

Matt Mulcock:
We love you.

Ryan Isaac:
We really are genuinely appreciative of you guys listening and tuning in and asking questions and giving feedback and pushback. We love it. If you’d like to chat about any of the stuff in your own situation and scenario, there’s a lot that we talked about, go to dentistadvisors.com, click the book free consultation link, and just schedule a chat with one of our advisors. We only work with dentists.

Ryan Isaac:
We’re a staff of CFPs and you can chat with a CFP, certified financial planner that only works with dentists in a business that only works with dentists about you being a dentist and we’ll be able to help. If you want to give any feedback or ask a question about this stuff kind of just in a more casual manner, go to the discussion group on Facebook. It’s called the Dentist Advisors Discussion Group on Facebook. Post a question. We’ll post a video answer, legit video answer.

Matt Mulcock:
You can see our faces.

Ryan Isaac:
Yes. We’ll answer you. Post your question. We’ll post an answer. Thanks for being here, everybody. Matt, thank you very much.

Matt Mulcock:
Thanks, Ryan.

Ryan Isaac:
Have a great weekend, sir, and we’ll catch you later. Bye-bye.

 

Dave Ramsey, CE, Debt & Financing