Why Dentists Underestimate Their Income, and Why that Matters – Episode 252

It fuels your entire life—so why do so many dentists not know what their income is?  

“How much money do I even make?” It’s one of the most common questions dentists ask their financial advisors. On this episode of the Dentist Money™ Show, Ryan and Matt examine why understanding dental income is so complex—and explain why knowing the right number for your income is central to making good financial decisions.

All financial tracking starts with income. You can’t set firm goals or make action plans or strategies unless you know how much money is coming in.

 

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Podcast Transcript

Ryan Isaac:
Hey, Dentist Money Show listeners. Welcome to another episode. Today, Matt and I talk about one of the biggest questions dentists have, which is how much money do I even make? And we talk about a few reasons why understanding that number specifically will help you make better financial decisions in the future. Thanks for tuning in. If you have any questions, go to dentistadvisors.com, click on Book Free Consultation, Chat with one of our friendly advisors today. 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’m a guy named Ryan Isaac, joined here in studio with another guy-

Matt Mulcock:
Another guy.

Ryan Isaac:
… named Matt Mulcock. Matt, what’s up, man?

Matt Mulcock:
Hello.

Ryan Isaac:
How are you doing?

Matt Mulcock:
Good. How are you?

Ryan Isaac:
We were just joking about this, but you are number one in my book.

Matt Mulcock:
That’s amazing.

Ryan Isaac:
Photos to follow.

Matt Mulcock:
Yes, we have the proof.

Ryan Isaac:
Follow me on Instagram. It’s coming. Anyway-

Matt Mulcock:
That was a ploy to get new or more Instagram followers.

Ryan Isaac:
Yeah, I just want followers. Sir Ryan Isaac on Instagram.

Matt Mulcock:
That’s good. It’s creative.

Ryan Isaac:
Get me over the 300 mark.

Matt Mulcock:
Yeah.

Ryan Isaac:
That’s really-

Matt Mulcock:
You’re an influencer at this point.

Ryan Isaac:
I am an influencer of something or somebody. But anyway, we got us a good one here today. Pretty common question that dentists have all the time actually, now that I they think about it. I’m curious what your input is from clients in interacting with dentists all these years. But a lot of dentists wonder, “How much money do I even make? What is my actual income?” That’s a question here.

Ryan Isaac:
I’m curious, Matt, just real quick, your perspective. Do you think dentists overestimate or underestimate their actual income? The number they throw out like, “Oh, I think I made 300.” Do you think that’s usually low or high compared to what the actual gross cashflow income they get?

Matt Mulcock:
I think it’s under, in most cases.

Ryan Isaac:
Yeah. I would say. Would you throw a percentage of that or no?

Matt Mulcock:
I would just be guessing.

Ryan Isaac:
Want to make on up?

Matt Mulcock:
Let’s make one up.

Ryan Isaac:
I’m just kidding.

Matt Mulcock:
Yeah. Yes, studies show-

Ryan Isaac:
Matt’s studies show that…

Matt Mulcock:
Studies show… I have no idea, but I would say 9 times out of 10, that’s a number, there you go. Nine times, that’s 90%.

Ryan Isaac:
I like how you’re like, “I don’t want to throw out any statistics here that aren’t proven, but 9 times out of 10.

Matt Mulcock:
Yeah. 9 times out of 10.

Ryan Isaac:
I’m not big on throwing out unproven statistics, but 92% of the time.

Matt Mulcock:
Yeah, I don’t like labels, but as a millennial, I’m going to go ahead and just go… Yeah. No, I would say most of the time they are underestimating-

Ryan Isaac:
Yeah, underestimating.

Matt Mulcock:
… Their income pretty significantly at times, sometimes.

Ryan Isaac:
I think so too. If I had to just throw a random number out there and then fight about it in the comments, I would say it can be up to 25% low in some cases.

Matt Mulcock:
Yeah. I feel like we’re causing a lot of fights in the comments. We’re egging that on a little bit.

Ryan Isaac:
I’m encouraging it, but no one actually does fight in the comments. We’re a very civil group and here’s what we’re talking about, is Dentistadvisors.com/group. That’s our Facebook group and it’s full of really great people.

Matt Mulcock:
It is. And we-

Ryan Isaac:
A couple thousand. I don’t know how many is in there. 1500 people.

Matt Mulcock:
I just check today. We’re almost at 1500.

Ryan Isaac:
Okay, there’s 1500 very nice people in that group, probably a pretty diverse group of people around the country but-

Matt Mulcock:
All over the country.

Ryan Isaac:
… Man, it’s a nice group. We don’t fight in the comments-

Matt Mulcock:
No.

Ryan Isaac:
… but we like discussions. If you have any questions, by the way, you can go there and post in that group and we’ll answer them. We’re going to talk about it today. Why do dentists not know how to, or just know how to calculate their income? Know where go? Why do they underestimate it? And more importantly, why does it matter? I’m wondering to myself out loud, well to you out loud, because you’re sitting next to me. I’m wondering out loud to you, why do you think it’s important for a dentist to want to know how much money they make in your experience? What do you think drives a dentist to go, “How much money do I make?” There’s probably a few reasons.

Matt Mulcock:
Yeah. I think for me, the initial answer leads to everything else. It’s like, all the things that you’re tracking start with-

Ryan Isaac:
How much money comes in?

Matt Mulcock:
… Income. Yeah. For you to be able to build any plan strategy, build your life, financial goals, I think you have to start with, “How much money do I even make?” I think that’s the first question, and then you could start looking forward and trying to guess and how it will grow and all that. But the first is just, “How much am I making this year?”

Ryan Isaac:
Yeah, it drives everything. I think it’s probably human nature. I know I do this. That’s the measure of, is this all worth it?

Matt Mulcock:
Definitely.

Ryan Isaac:
Which is funny because sometimes we have arbitrary income numbers in our heads that are the targets of what’s worth it or not. Let’s say you’re doing your job as a dentist and you’re making 250 grand. Maybe in your head, you’re thinking, “Well, 400 would make this job worth it,” and maybe that’s true. But all the question then is, why?

Matt Mulcock:
Yeah, why that number?

Ryan Isaac:
What’s the calculation behind 400 making it worth it?

Matt Mulcock:
I think a lot of people do that. We talked about this in another-

Ryan Isaac:
Human nature, yeah.

Matt Mulcock:
Another episode. We’re just like, once I get to this level.

Ryan Isaac:
We all do that.

Matt Mulcock:
It’s just this random, usually arbitrary number.

Ryan Isaac:
And it never ends.

Matt Mulcock:
Nope. If you go off of that, if your goal is a arbitrary number, it will never end.

Ryan Isaac:
Yeah. You just keep setting it higher.

Matt Mulcock:
You just move the goalpost. Yeah.

Ryan Isaac:
You and I are big fans of fitness and health, and we talk about that probably a little too much.

Matt Mulcock:
I’m a fan of it, you’re more of a participant in it at this point.

Ryan Isaac:
A doer?

Matt Mulcock:
You’re more of a doer.

Ryan Isaac:
I think we’re both doers of fitness and health.

Matt Mulcock:
I’m a fan of it, like I’m a fan of football, but I don’t really do either one anymore.

Ryan Isaac:
But you don’t do football.

Matt Mulcock:
Yeah.

Ryan Isaac:
Yeah, I don’t do football either. I’m a big fan.

Matt Mulcock:
But I am a fan, you’re right.

Ryan Isaac:
Yeah. So in regards to this concept of income, we’ll get into why this matters so much. I’ve been, I’ve long been fascinated by food and fitness and specifically, how food fuels the type of goals you’re trying to get of it. So if you’re an athlete, for example, the goal of food for you as fuel for all of your energy systems, or whatever type of sport you’re doing. And it plays a massive [inaudible 00:06:12] if your goals are aesthetics or looks.

Matt Mulcock:
You’d eat differently.

Ryan Isaac:
Yeah. The input is different. Anyway, I listen to a lot of podcasts and this is a fascinating subject for me, but one theme I keep coming back to, I hear all the time is that if it’s the place you begin, and this is your point about income, the place you begin is what comes into your body in the first place, what food is even, what’s the input to begin with. You can’t really set firm goals, and you definitely can’t start setting action plans and strategies until you actually know, what am I even doing right now? How many calories am I eating? What’s the macro breakdown of that? What is it doing for my aesthetics or my energy systems?

Matt Mulcock:
Yeah. So until you have that, you don’t even know what adjustments you have to make.

Ryan Isaac:
Actually, I was listening to a podcast this morning about this subject, and there’s this guy I listen to, this really smart health and fitness guy. He was saying the number of people who say this diet or this workout plan didn’t work for me, those are the same people who aren’t tracking it. And he says, those people aren’t being scientific about their approach in what’s even be starting, the food coming into their approach.

Matt Mulcock:
They’re just throwing something at the wall, seeing what sticks.

Ryan Isaac:
And you’re just seeing. So let’s talk about that in relation to a dentist’s income. We’ve established, and this is pretty common, most dentists underestimate the amount of money they make, which it should be good news.

Matt Mulcock:
Yeah.

Ryan Isaac:
It should be good news. And we’re going to talk about three situations today that where knowing the exact income number is going to be very helpful to make some pretty strategic decisions and ease some burdens and some stress in your life. So we’ll hit those. Let’s take a quick break to calculate the food you’re going to eat after the show. We’ll break that down together.

Matt Mulcock:
I’m putting it in my app right now.

Ryan Isaac:
We’ll talk about the food you’re going to eat, and then we’ll come back. We’ll start hitting these points.

Ryan Isaac:
As you’ve listened to our podcast, maybe there’s a question about your finances you’ve wanted to ask. It’s easy to get an answer. All you do is just pick up that phone, give us a call at 833-DDS-PLAN to set up a consultation. Or if you don’t want to call us, you can just go to the website at dentistadvisors.com, click the Book Free Consultation button, and set it up. It’s free. Do it today.

Ryan Isaac:
You’re set, your meal plan is ready for later.

Matt Mulcock:
I’m feeling good.

Ryan Isaac:
We know the input. We’re being scientific about it. Okay.

Matt Mulcock:
I wish I was as scientific about my food intake as you are, then I would look like you. Well, no, that’s not true.

Ryan Isaac:
You’ll still have better hair.

Matt Mulcock:Well, yeah.

Ryan Isaac:
Food is not going to hair line.

Matt Mulcock:
Yeah. Food doesn’t change that, but let’s be real. I wouldn’t look like you, but I would feel like I’d get closer.

Ryan Isaac:
In all seriousness, it’s pretty fascinating how much control you have, that we all have over that kind of stuff, for, and not only just looks and aesthetics, but just how you feel. It’s pretty amazing how it affects the way you sleep, how you feel throughout the day. It is pretty fascinating.

Matt Mulcock:
So true.

Ryan Isaac:
It’s a great parallel subject. I wanted to hit this really fast, before we jump in. Why do you think it’s hard for dentists to calculate their income? And if you’re listening to this, this is not judgment.

Matt Mulcock:
No.

Ryan Isaac:
We are the no judgment bros.

Matt Mulcock:
Judgment free zone.

Ryan Isaac:
Okay. That should be on our t-shirt right now.

Matt Mulcock:
I was just going to say, “Can we get a t-shirt?”

Ryan Isaac:
No judgment bros. This isn’t a judgment. This is saying, most dentists feel that way. Most dentists severely, yeah, they severely underestimate the amount of income they earn or the cashflow. Why is it hard for a dentist to calculate it in the first place?

Matt Mulcock:
So, yeah I’d say one distinction I would make would be, we’re talking about generally practice owners, right?

Ryan Isaac:
Yeah, for sure. A little easier an associate [crosstalk 00:09:48].

Matt Mulcock:
I feel like an associate is going to pretty much know almost every time.

Ryan Isaac:
No, I think the associate on 10-99 with their own entity will fall into what you’re about to say.

Matt Mulcock:
Different. Yes, exactly. I think probably the main reason why people underestimate is you’re usually getting income from two different sources or multiple different sources in your business. So usually I think what they’re usually going to look at is like what they’re paying themselves, maybe from their W-2, again as a practice owner, and they’re just not… So that to them is salient, they know what’s coming in every month. Like, oh yeah, I’m paying myself $10,000 a month. And then I think the other part of it being their business income is almost like a guess. They’re just not, because they don’t see it every month.

Ryan Isaac:
It’s fluid.

Matt Mulcock:
It’s fluid, it can go up and down. Exactly. So they’re more guessing because that’s not a structured, like knowable input that they see every single month on that W-2.

Ryan Isaac:
Yeah. I think that’s true. And I think most people just go to their personal tax returns to get this number.

Matt Mulcock:
Yeah, for sure.

Ryan Isaac:
When you look at a personal tax return, the number you’re seeing on there has already been reduced by your 401k or simple IRA contributions. It’s been reduced by depreciation and amortization you took on the business return, and it’s already reduced by 1-79 expenses if you bought something.

Matt Mulcock:
Any big deductions, yep.

Ryan Isaac:
Yeah. So you might look at your personal tax return and go, oh, my gross income, it says right here, AGI, 225, which is what you can bench for 50 reps, I think.

Matt Mulcock:
50? Whoa.

Ryan Isaac:
Yeah, 50.

Matt Mulcock:
I’d be literally in the NFL right now.

Ryan Isaac:
I think I’ve done that once in my life.

Matt Mulcock:
It’s like a record for the NFL.

Ryan Isaac:
Yeah. So you might look at that and go, oh, 225, great. But the real number might be 350, because you add back what you put in a 401k, you add back the depreciation amortization 1-79. So I think that’s why it’s tricky. So if you’re listening to this, that’s why it’s the problem. This is just another reason why dentists are interesting financial creatures.

Matt Mulcock:
Yeah. And I think we’re highlighting, like you said, no judgment here. it’s complicated.

Ryan Isaac:
It’s very complex.

Matt Mulcock:
It’s not a simple answer, most of the time.

Ryan Isaac:
It’s a little messy.

Matt Mulcock:
Yeah.

Ryan Isaac:
A little messy. And if you’ve got multiple entities, and man heaven forbid, we’re talking about like a pass through S-corp type entity, right?

Matt Mulcock:
Yep.

Ryan Isaac:
What if you’ve got like a C-corp or like a non-pass through entity where, that’s a whole other beast.

Matt Mulcock:
Yeah, or they’re multiple businesses, multiple locations.

Ryan Isaac:
And it’s flowing from business to business before it even comes to you, or you have certain business entities that allow for different deductions that are personal deductions, like a C-corp sometimes. And man, it gets tough.

Ryan Isaac:
So let’s talk about, all right, situation number one. Going through this right now with two or three clients, and this is becoming a lot more frequent subject, I’m sure you’ve gone through this too. This is a dentist brings to you a DSO offer.

Matt Mulcock:
Definitely seeing that more.

Ryan Isaac:
Yeah. It’s happening a lot more. What’s interesting in these is, this is a whole other topic for another time, but usually the people that these work out for the best, they’re kind of no brainers when it’s a good offer, are people who are close to being done anyway. You’re in the last five to seven years anyway, and you get the offer, you’re like, yeah, that’s pretty good. That’s a good payout. Got a buyer, health evaluation, let’s go.

Matt Mulcock:
I think there’s another part of this, is the mental aspect of it is different than-

Ryan Isaac:
It’s different.

Matt Mulcock:
I had a client, just quick side note, 35 year old-

Ryan Isaac:
Well it’s perfect. I’m going through the same thing with somebody.

Matt Mulcock:
Oh, okay, perfect. You’re going to go through it.

Ryan Isaac:
No, no. Hit it.

Matt Mulcock:
Oh you want me to hit it?

Ryan Isaac:
Yeah. I’m just relating to you, Matt, human to human here.

Matt Mulcock:
Oh, sorry, I thought-

Ryan Isaac:
I see you and I hear you and I relate to your story.

Matt Mulcock:
I feel very heard.

Ryan Isaac:
Do you feel heard?

Matt Mulcock:
I do.

Ryan Isaac:
And seen? Are you seen?

Matt Mulcock:
I feel heard and validated. Yeah, I do. Sorry. My social cues sometimes, as you know, are questionable at best.

Ryan Isaac:
You’re all good.

Matt Mulcock:
No, so yeah. I have a 35 year old who got an offer. He’s early in his career. He’s been in it for seven years, killing it with his practice, but we reviewed the numbers and I’m like, the mental, there’s no mental, he’s not fatigued at this point. He’s going to be in it for 20 years. That’s vastly different than what you’re describing. You’re five years left in your career, you’re just done. The mental mindset there is way different.

Ryan Isaac:
So in this situation, because I’m working with someone on this right now, knowing what your income is, is such a crucial component of this, because here’s what happens. Let’s just say, keep some round numbers here. Someone gets an offer, and early in career, let’s say the 35, DSO comes to you, says, “We’re going to give you 5 million bucks plus some stock in the DSO,” whatever. That’s kind of how the structures usually work. And then you start calculating, you’re like, “Oh $5 million. That’s a lot of money.”

Matt Mulcock:
That’s a lot of money.

Ryan Isaac:
“I’d have to pay some tax, pay off my debts. And that’s a pretty good valuation for this practice compared to what it’s collecting now. That’s pretty good.” And then you’re going to sign a three-year work back, five year. I don’t know, have you ever seen longer than five years? Seven year work backs? I don’t think I’ve seen them.

Matt Mulcock:
I haven’t. I’m sure it’s out there, but I haven’t seen it.

Ryan Isaac:
Yeah. Five is really common. So now you’re sitting there and you’re doing the math and you’re going, as the owner, you’re thinking, “All right, this deal is probably 6 to 12 months in the making, to finally make it happen. Then I’ve got a five-year work back on a salary and I get this money.” And then you ask, “Is this a good deal?” And that’s the question I’m working on right now with somebody, is this a good deal? And to answer that question, you first have to answer the question, well, if you don’t do this deal, five years from now, what will you have made anyway?

Matt Mulcock:
Yeah, what’s the alternative, which is-

Ryan Isaac:
What’s the do nothing alternative?

Matt Mulcock:
Exactly.

Ryan Isaac:
Which is always one of my favorite questions when asking a financial decision, what’s the do nothing alternative, just keep doing what you’re doing. And if you don’t know how to calculate your income currently, and you don’t have a decent way to project your future income, which would be looking at trends of collections growth and then trends of profitability, and then translating that into your income, it’s going to be really tough to know, if you do nothing over the next five years, how that’s going to compare to taking the deal today, right?

Matt Mulcock:
Yep.

Ryan Isaac:
So just one thing that, this isn’t a thing everyone faces, every dentist out there, but it’s becoming more common. So number one that came to my mind was, man, to be able to properly evaluate offers and deals on your own practice, or maybe the reverse, like buying into someone’s practice, clearly understanding how to calculate income is just going to be such a crucial tool. And if you aren’t interested in the negotiation, that’s just some leverage that you have. To go back and be like, well, yeah, you guys say $5 million, but over the next five years, I’m going to earn $5 million.

Matt Mulcock:
Exactly.

Ryan Isaac:
Now, I guess you could argue, opportunity costs, getting the money now versus over the next five years, but why that’s why it’s so important. And if you don’t know that number-

Matt Mulcock:
Well I was going to say, you’re highlighting that, even to know the opportunity costs, you have to know all the inputs.

Ryan Isaac:
You’ve got to know the inputs.

Matt Mulcock:
That just reemphasizes that need to know the numbers, know the income that you’re making.

Ryan Isaac:
So anything else you want to say about a DSO offer, things you’re working with in relation to that?

Matt Mulcock:
No.

Ryan Isaac:
That cover it?

Matt Mulcock:
Yeah, I think you hit it.

Ryan Isaac:
That was the first thing that came to mind. Let’s take a quick break, got a couple more that we’ll talk about why it’s important to calculate your income, and we’ll be right back.

Ryan Isaac:
Hey Matt, what do you like to drink or snack on when we do our webinars every month?

Matt Mulcock:
Yeah, that’s a good question, I’m usually hitting a Red Bull, but it’s hard because it’s an evening webinar.

Ryan Isaac:
Yeah. These webinars taking place 6:30 PM, Mountain Standard Time.

Matt Mulcock:
Mountain Time.

Ryan Isaac:
Once a month.

Matt Mulcock:
Where do you find it?

Ryan Isaac:
Well, if you’d like to find the webinar or you’d like to register for it, you go to dentistadvisors.com/webinar, or just go to the website and click on webinars, under the education tab.

Matt Mulcock:
It’s a good time.

Ryan Isaac:
It’s a great time. What kind of things do we cover in our webinar, Matt?

Matt Mulcock:
So each month we’re going to hit an element, so it’s going to be some component of your financial life. We’re going to dive a little bit deeper than we would on the Dentist Money Show. We get to draw pictures, there’s live polls, you can ask questions.

Ryan Isaac:
It’s great time.

Matt Mulcock:
Yeah. It’s a good time.

Ryan Isaac:
Well, we’d love to see you in attendance at one of our fantastic webinars. Just go to dentistadvisors.com, sign up today for the next one. Thank you very much

Ryan Isaac:
How was your break?

Matt Mulcock:
It was good.

Ryan Isaac:
All right.

Matt Mulcock:
I’ve mapped out my meals for next week.

Ryan Isaac:
You’re ready to go?

Matt Mulcock:
I’m ready to go.

Ryan Isaac:
I saw you do 500 pushups.

Matt Mulcock:
You’ve inspired me.

Ryan Isaac:
Thank you. We did, wait, we did eat chicken and broccoli for lunch.

Matt Mulcock:
We did [crosstalk 00:17:49]. You came in town and all of a sudden I started eating healthier.

Ryan Isaac:
See what I’m talking about?

Matt Mulcock:
For the last couple of meals.

Ryan Isaac:
I am an influencer.

Matt Mulcock:
Yeah. I’m telling you.

Ryan Isaac:
As you said, as we started, I’m an influencer.

Matt Mulcock:
You are an influencer. Yes.

Ryan Isaac:
I’m glad I could be an influencer.

Ryan Isaac:
All right, number two, why is it important to calculate your income and understand how to do this? Here’s another question that everyone asks, and that is, do I spend too much money? Am I spending too much?

Matt Mulcock:
The answer is yes.

Ryan Isaac:
The answer statistically, according to like all studies and anecdotal experience of our advisors, yeah, You spend too much.

Matt Mulcock:
You underestimate income and you overestimate… Or, no.

Ryan Isaac:
Yeah, what a combo, under estimate income, over estimate-

Matt Mulcock:
Yeah, you overestimate your spending.

Ryan Isaac:
No, we do it both.

Matt Mulcock:
Oh yeah, you underestimate both. That’s what it is.

Ryan Isaac:
We both underestimate income, underestimate spending. That’s a deadly combo.

Matt Mulcock:
But I guess what I’m saying, yeah, I guess the income one is a positive, the underestimating of your spending is not positive, it’s negative.

Ryan Isaac:
Oftentimes they don’t cancel each other out.

Matt Mulcock:
Usually not.

Ryan Isaac:
So here’s the thing about spending. you’ve probably heard us talk about this a lot in the past. And the way that we think about spending is that, well, speaking of food, trying to be a meticulous budgeter, a rigorous budgeter, that would be a good t-shirt, rigorous budgeter.

Matt Mulcock:
Rigorous budgeter.

Ryan Isaac:
Rigorous budgeter.

Matt Mulcock:
I like that.

Ryan Isaac:
Trying to do that for a long period of time is like being on a crash diet.

Matt Mulcock:
Not sustainable for most.

Ryan Isaac:
You’ll be pumped for like two weeks, 30 days in, you probably can still hold on. But month two, it’s over.

Matt Mulcock:
Yep.

Ryan Isaac:
Budgeting is the same way, and everyone’s done it. You pulled the budget, you get the little heated with the significant other.

Matt Mulcock:
Gets usually fight here or there.

Ryan Isaac:
Like when the transaction history comes out, and you’re like, well, what was this?

Matt Mulcock:
Yeah. Where were you? You spent $7 at the gas station. What was that?

Ryan Isaac:
Why did we do this here?

Matt Mulcock:
You were buying donuts, because then the health stuff comes in.

Ryan Isaac:
It’s not the gas.

Matt Mulcock:
Yeah.

Ryan Isaac:
Everyone has gone through that. And then you get, you try to become a rigorous budgeter, which will be a t-shirt coming to a theater near you. And it just doesn’t last. So to answer this question, how this relates to income. If you wanted to push pause here and get a visual for this, this might be helpful. You can go to dentistadvisors.com, click on the element section and scroll down to the little table that looks like a periodic table of elements in chemistry. The middle row are four pieces of your financial picture that we track every year, which is your cashflow. Like where does your money go? And to really answer the question well of, do I spend too much money, we will answer that in reverse.

Ryan Isaac:
We can give you some feedback right off the bat. We know what the average dentist spends. We know what the average percentage of gross income spending should be to have a healthy financial future. We know these things, but the real way to get a good answer on this is a little bit the reverse, which is we go to something called the savings rate, which on that table, it might be blue. I think it’s baby blue.

Matt Mulcock:
It’s baby blue, yeah.

Ryan Isaac:
Matt has the elements t-shirt on right now.

Matt Mulcock:
Always.

Ryan Isaac:
Which you do have in stock.

Matt Mulcock:
Yeah.

Ryan Isaac:
In stock as if we’re a t-shirt company, which we’re not, by the way.

Matt Mulcock:
No, we basically are. We just do this so we can come up with slogans and things to put on t-shirts.

Ryan Isaac:
Yeah, honestly, that’s one of my biggest business side hustle dreams, is a t-shirt… I don’t want to say it out loud, because I think it’s actually a cool idea. One day I’ll pull it off.

Matt Mulcock:
I think it’s a great idea.

Ryan Isaac:
But I love t-shirt ideas, if you can’t tell. So if you’re looking at the elements, there’s this thing called savings rate, and the real way to measure your spending, or keep your spending in track, is to make sure that your savings rate is healthy. It’s revers budgeting, which there is actually a thing called reverse dieting, did you know that?

Matt Mulcock:
You got to tell me how to do that.

Ryan Isaac:
Well, it’s actually, it sounds pretty fun, it’s when people are like chronically under eating calories for their exercise output, and it’s messing with their lives and their hormone balance and their energy levels. And to get back on track, you’ve got to actually overeat for a little while, reverse diet. So you eat a surplus of calories.

Matt Mulcock:
So that’s what I got to do. I’m going to try that out.

Ryan Isaac:
That is also not a sustainable way to-

Matt Mulcock:
I’m going to try and reverse dieting.

Ryan Isaac:
Like forever?

Matt Mulcock:
Yeah.

Ryan Isaac:
Like, what diet are you on?

Matt Mulcock:
I feel like I’ve been reverse dieting for a while.

Ryan Isaac:
You can have reverse dieting and reverse budgeting.

Matt Mulcock:
Yeah. I love it.

Ryan Isaac:
This is reverse budgeting, but no, this is the way that we do this, is we go to your savings rate and we say, is your savings rate healthy, but here’s where the income number comes in. And this is why it’s important to know, did you make 225 or did you make 350? Because this will be a big difference, is what is your savings rate on that actual gross income number? Are you saving 12, 15, 17, 20, 25? What percentage of your actual real gross income are you saving? And if that number is healthy for your income range, then we can go back to the first question, which is, do I spend too much? And then we can answer you properly.

Matt Mulcock:
Because there’s so related.

Ryan Isaac:
So let’s give some examples. Let’s say, someone is wondering, do I spend too much money?

Matt Mulcock:
Yes.

Ryan Isaac:
Yes. And then we might ask, well, what do you save? And someone might answer to that in raw dollars, “Well I save five grand a month.”

Matt Mulcock:
Great.

Ryan Isaac:
Now in raw dollars, just with no context, that’d be cool. That’s cool. Saving five grand a month is awesome.

Matt Mulcock:
60 grand a year is awesome.

Ryan Isaac:
That’s really good, but it’s not that great if you made 750 that year.

Matt Mulcock:
That is not great.

Ryan Isaac:
You should have a little bit more than that.

Matt Mulcock:
Yes.

Ryan Isaac:
That’d be pretty awesome if you made 150 that year. So the point is, understanding your income really clearly, what it’s going to lead to is it’s going to lead you to be able to understand if you save enough money, and understanding if you save enough money, which is a whole other topic will lead you to the answer of, do you spend too much money? And that’s how you really get to that answer, but see how complex that is?

Matt Mulcock:
Yeah.

Ryan Isaac:
So what should you do if you’re listening to this, you’re like, this sounds great, but I’m not going to do that. That’s really hard. You just call us.

Matt Mulcock:
Which they’re probably thinking right now, like, man.

Ryan Isaac:
This is why our business-

Matt Mulcock:
Reverse budgeting, reverse dieting.

Ryan Isaac:
This is why we exist in the first… This is why me and Matt are sitting in chairs, talking about this, and there’s a business that exists, because we do this job all day long every day of the week. This is our full-time job. So if you’re like, I would love this to be done, but there’s no way I’m going to do this by myself, which is most people, by the way, it’s okay. Go to dentistadvisors.com click Book Free Consultation, and chat with one of our advisors.

Matt Mulcock:
You may get a t-shirt.

Ryan Isaac:
That’s aggressive, but it’s true.

Matt Mulcock:
I’m just saying it’s possible.

Ryan Isaac:
It is possible.

Matt Mulcock:
And we don’t even know what’s going to be on it.

Ryan Isaac:
We don’t even know, it might be, what was the budget?

Matt Mulcock:
Rigorous budgeter.

Ryan Isaac:
Rigorous budgeter. You might get that shirt, but book a chat with one of our advisors. And then maybe you having a financial advisor in your life is the thing to find the answer to these questions and put it to rest, and then have someone else, an emotionally un-involved third party that you pay for accountability, we’ll just measure these things and track them for your whole life. And then constantly tell you if you’re in line.

Matt Mulcock:
So my spouse doesn’t work like that?

Ryan Isaac:
Well, unemotionally involved, I mean something different.

Matt Mulcock:
Yeah.

Ryan Isaac:
If your spouse is unemotionally involved in your life, that might be a different issue to worry about.

Matt Mulcock:
You might have some… Yeah.

Ryan Isaac:
I mean I’m not emotionally tied to my client’s decisions, unless they buy a sweet beach house and they invite me, then I’m emotionally attached.

Matt Mulcock:
You are absolutely emotionally involved in that.

Ryan Isaac:
One more thing we’re going to hit today, why is it important to understand very clearly and track your income and know what’s going on? Here’s the thing that a lot of dentists start facing mid to end of career, and it’s the issue of starting to maybe get a little bit burnt out and wishing that you had more time on your hands. I think careers in general are really interesting like this, and dentistry is for sure like this, where there’s two things, you’ve got time and money, two of these precious resources. In the beginning of your career, you got all the time in the world and no money.

Matt Mulcock:
So true.

Ryan Isaac:
By the time you hit the goals that you always wanted of the money you wanted. Now you got no time.

Matt Mulcock:
Yep. I’m still waiting to get there.

Ryan Isaac:
To both? You’re like, I’m out of time and money. What do I do now?

Matt Mulcock:
Yeah, what do I do if I’m 10 years into my career and I still have neither?

Ryan Isaac:
You hire Dentist Advisors.

Matt Mulcock:
Yeah, that’s why I hired you.

Ryan Isaac:
We’ll help with both, okay. But you find yourself in this position where you’re like, oh, I’m achieving the business success, and some of the financial success that I’ve been wanting to, I’ve been working so hard at. But now I’m short on time.

Matt Mulcock:
I don’t even know my kids’ names.

Ryan Isaac:
Do I have any?

Matt Mulcock:
Do I have kids? I don’t know. Are they mine?

Ryan Isaac:
There’s people living in my house, but I leave too early in the morning to-

Matt Mulcock:
Exactly.

Ryan Isaac:
So people start wondering, okay, is it time to bring in a partner? Is it time to bring an associate? Of course, there’s other reasons people do this. Some people do it to just keep growing more, to leverage the resources and systems they built in a practice, in a business. But a lot of times it’s the question of buying back your time freedom. It’s the ability to say, man, if someone else is here, I could take that spontaneous vacation this weekend instead of having to plan it out eight weeks in advance every time.

Matt Mulcock:
I can invite Ryan to my beach house.

Ryan Isaac:
Yeah, I could’ve came to the beach house.

Matt Mulcock:
Yeah.

Ryan Isaac:
Which puts me in a pretty emotionally involved situation in that decision-making.

Matt Mulcock:
Exactly, yeah.

Ryan Isaac:
If you need-

Matt Mulcock:
It gets higher than I don’t care what your numbers say.

Ryan Isaac:
If you’re my client and you want to buy a beach house and I’m invited, we have to ask Matt, we’ve got to bring Matt in, because I’m emotionally invested all of a sudden.

Matt Mulcock:
Yeah, because I’m not invited.

Ryan Isaac:
Matt is uninvited. I’m just assuming you’re not invited.

Matt Mulcock:
So that I can give the answer. Yeah.

Ryan Isaac:
Ask Matt, he’s not invited. So you might be in a situation, or thinking about it sometime in your future, I want to bring someone in. Now, typically when you do bring in other producers, especially in an associate situation, it is not uncommon to bring that person in and see the practice collections grow, see revenue grow, because there’s another producer, but see your own income drop. At least stay stagnant even as collections grows, but sometimes drop a little bit, because in a lot of situations, especially if you’re hiring to buy back your time, you’re giving up production.

Matt Mulcock:
That’s the trade off.

Ryan Isaac:
That’s the trade-off.

Matt Mulcock:
Yeah.

Ryan Isaac:
Understanding the money that comes in, the thing that’s fueling all of your entire life, and understanding clearly if you spend enough or too much, and if you save enough, really, that will lead you to a better decision making process of understanding, when is it okay to bring in an associate? Because if you know mathematically, because Matt is your advisor and he’s told you, hey, we’ve been tracking this and calculating this and you have a high savings rate for your income, and you’re on track to reaching the goals that we’ve set for yourself in the time that you want to hit them. So if your income didn’t keep growing, or even if you made a little bit less over the next few years or permanently, because you chose to bring in someone else to take over more of your production to buy your time back, you will still be okay.

Ryan Isaac:
That is such a-

Matt Mulcock:
Doesn’t that feel good?

Ryan Isaac:
That would feel refreshing. That would feel effervescent. Effervescent decision making.

Matt Mulcock:
Yeah. It’s like you’re in Arizona in the middle of August and you just crack a nice cold-

Ryan Isaac:
Been there.

Matt Mulcock:
Fresca.

Ryan Isaac:
Dump it over your head, and you don’t even drink it. It’s like, give me relief. Sweet mother. Okay. So it’s just such a big decision that comes up, and being able to calculate definitively not emotionally, yes, I can bring on an associate. I can afford to let my income drop or stay stagnant, maybe even indefinitely, and still know I’m going to hit my goals, is massively important for the decision-making and for peace of mind, because you can watch collections grow, income drop, someone else take your production. And all of a sudden, now you have your four-day weekend. You can take spontaneous trips with Matt and-

Matt Mulcock:
Of course.

Ryan Isaac:
But you know you’re okay.

Matt Mulcock:
Yep. You plan for it.

Ryan Isaac:
You planned for it.

Matt Mulcock:
It’s like guessing.

Ryan Isaac:
Matt told you your savings rate is 26% and that’s 5% higher than your average peer, and that’s going to put you on track to have a high enough net worth to sustain your spending indefinitely at age 59 and three quarters.

Matt Mulcock:
Yeah, of course. We’re down to the day, usually. I’m usually giving the date.

Ryan Isaac:
Yeah, it’s that specific.

Matt Mulcock:
I’m giving them a due date.

Ryan Isaac:
Time of day.

Matt Mulcock:
Yeah.

Ryan Isaac:
It’s 2:00 PM.

Matt Mulcock:
Time of day. Exactly.

Ryan Isaac:
Time of day. that’s the last one I wanted to tie in here and why it’s so important to calculate income. Is there anything else you wanted to say about these three points? I thought I might wrap it up with how someone could go about doing this, but anything you want to say about that?

Matt Mulcock:
I think you pretty much had it all. It’s been great. I think again, just one and three, the things you hit.

Ryan Isaac:
So one was?

Matt Mulcock:
well, the number one thing being a DSO offer.

Ryan Isaac:
Yeah, how to evaluate an offer.

Matt Mulcock:
Yeah.

Ryan Isaac:
Yeah.

Matt Mulcock:
And then the third one, another business decision that you’d make-

Ryan Isaac:
Bringing in an associate.

Matt Mulcock:
Bringing in a partner or associate. I think, really all this is, is just helping you make better, and actually, you know what? I’ll say all three of them.

Ryan Isaac:
Let’s go all three.

Matt Mulcock:
Number one, two, and three.

Ryan Isaac:
Don’t leave two out.

Matt Mulcock:
I’m not going to leave two out. I can’t do that.

Ryan Isaac:
Yeah, we’re all inclusive here.

Matt Mulcock:
It simply is, this just helps you make better decisions. I think of, as you were going through this, I was actually thinking of you know those maps at the mall, or wherever?

Ryan Isaac:
You are here?

Matt Mulcock:
You are here.

Ryan Isaac:
Yeah. I love those.

Matt Mulcock:
You have to orient yourself on that map before you are going to go get your new kicks at Nike.

Ryan Isaac:
You are here.

Matt Mulcock:
You have to know where you are.

Ryan Isaac:
Or go to the giant pretzel stand in the food court.

Matt Mulcock:
If all else fails, you just go there.

Ryan Isaac:
Yeah.

Matt Mulcock:
Right.

Ryan Isaac:
Yeah.

Matt Mulcock:
But that’s what I was imagining is like, this is your, you are here marker.

Ryan Isaac:
Coo, yeah. This is what’s happening.

Matt Mulcock:
To orient what decisions you’re making and the path you’re going to go on.

Ryan Isaac:
It’s perfect, man. I think that’s great. And people are probably listening. Like, okay, well, how do I do it then? we’ve covered this quite a bit on, you can go to-

Matt Mulcock:
Yeah. Thanks guys.

Ryan Isaac:
Well, you can go to Dentist Advisors.

Matt Mulcock:
Just pointing out the obvious.

Ryan Isaac:
Check out the education library on the website, dentistadvisors.com, type in income, and you’ll see webinars and podcasts. Essentially what we’re saying as a business owner, you want to look at all of your business returns. If you have one S-corp and then you file personally, this is really easy, but you’re looking at your total W-2, your total net income from the S-corp, and adding back depreciation and amortization. Someone is like, why? Those are expenses. No, those are phantom expenses that lower your taxes, but you still got the cash for that. So if you wrote off a hundred grand in depreciation this year from the big building move, you didn’t write a check for a hundred grand. The IRS just let you write it off, but you still got the cashflow.

Ryan Isaac:
So those are the sources you add up. Now, if you have multiple entities or if you’re expensing personal things deep somewhere into the P and L, that’s where you get a little bit tricky. So if you’re listening to this and you’re just wondering, man, that’s just another piece of my financial life I’m not calculating, I don’t understand. And clearly that’s going to drive my decision making in the future. Then this is why we exist. And this is why people hire a niche, dental specific financial advisor. So you can go to dentistadvisors.com, click Book Free Consultation. Let’s have a chat and see if we’re a good fit for your life to help you measure this stuff, analyze it and get it on track. But other than that, thanks for joining us, everybody. This has been a pleasant, effervescent, refreshing, organic experience.

Matt Mulcock:
I’d say refreshing, rigorous budgeting is always, talking about rigorous budgeting is as refreshing as it gets.

Ryan Isaac:
Gets the blood flowing. Yeah. It gets the blood flowing. Thanks for joining us. Thanks for the support, everyone, And we’ll catch you next time.

 

Income