What Dentists Want to Know — Listener Q&A #18 – Episode 259

This year has underscored the need for emergency cash. But how much is enough? How much is too much?

On this listener Q&A episode of the Dentist Money™ Show, Ryan and Matt provide a formula for how to measure the amount that’s really needed for emergency funds.

The need for “ready cash” has recently been pushed to the forefront—and as a practice owner, you are sure to face a few more emergencies in your career. While a lump sum can sound good, how do you make sure it’s enough, but not too much? Plus, an older dentist wonders how long he should be paying disability insurance premiums.

 

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Podcast Transcript

Ryan Isaac:
Hey everybody. Welcome back to another episode of the Dentist Money Show. Today, we are giving our thanks to our listeners for all the years of support. We’re coming up on five years and that’s pretty awesome for us and we’re very, very grateful and excited to have the support over the years. Thanks for tuning in and thanks for listening.

Ryan Isaac:
Today, Matt and I are talking about things dentists want to know, specifically how much liquidity to keep around in the business, especially in the post-COVID era, which is a sentence, it’s lame to say, but post-COVID era liquidity, and at what point in my career can I drop my disability policy? A couple of great questions from listeners. If you have any questions you want to ask us to answer on the show, go to the Dentist Advisors Facebook discussion group on Facebook, or just ask a question to one of our friendly advisors by going to dentistadvisor.com. Click on the Free Consultation button and we’ll have a chat soon. Thanks for tuning in. Seriously, thanks for all the support over the years. We really appreciate it. Enjoy the show.

Announcer:
Consultant 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 all of the smart decisions. My name is Ryan Isaac. Thanks for joining me. I’m here with the mighty Hollywood, Matt Mulcock, the mountain, power lifter, extraordinaire, advisor genius. What’s up, man. How you doing?

Matt Mulcock:
Holy cow. That was the best one so far.

Ryan Isaac:
My goal is to just keep adding names to your nickname as time goes on.

Matt Mulcock:
I have a very, very long, very long nickname.

Ryan Isaac:
It’s a very long nickname. We are going to start the show off by saying to all of our listeners, first, thank you for being a listener. And second, that the Dentist Money Show is brought to you by Dentist Advisors. As you know, Dentist Advisors is a comprehensive, fee only, financial planning firm, just for dentists all across the country. Check them out. Dentist Advisors.com. All right, Matt, this is-

Matt Mulcock:
I thought you were going to throw something out like… You were going to throw a wild card out for a second. I could see it in your eyes like Cheez-Its or something.

Ryan Isaac:
It always depends on how much caffeine I drink.

Matt Mulcock:
Diet Dr. Pepper.

Ryan Isaac:
Yeah. It’s how much caffeine do I drink during these sessions that determines how many random things my brain thinks of when we’re talking in the moment.

Matt Mulcock:
Yeah. What are you drinking right now?

Ryan Isaac:
Well, I just finished myself the Monster. It’s the-

Matt Mulcock:
The white Monster? Yeah.

Ryan Isaac:
Yeah, the white Monster.

Matt Mulcock:
It’s classic.

Ryan Isaac:
Sugar-free, classic Monster, if you will. This is the Thanksgiving episode in which we give thanks. And so, the first thing that I’m just going to say besides thanks, because that’s what we do on Thanksgiving, is that the Dentist Money Show started in 2016. I think the spring of 2016. We’re creeping up on five years, which is insane. I remember coming up on-

Matt Mulcock:
So crazy.

Ryan Isaac:
… a hundred episodes thinking, “There’s no way we’ll keep going. I don’t even know what we’re going to keep talking about.”

Matt Mulcock:
I think you may have said that on that episode.

Ryan Isaac:
I did. Yeah, I was just in my head, in the 90’s. I was like, “90s episodes,” I was like, “What are we going to keep saying?” First of all, I mean, this is just a highly satisfying part of my job. It’s fun to be able to teach and give away content. This is our product, what’s in our brains and what do other dentists do and how do we help them make smart financial decisions as their personal advisors? And so, it’s a cool way. It’s been awesome to be able to give back and teach and educate and help as much as we can to this awesome community. That’s what I just think is awesome looking back and thanks to everyone for listening and downloading and sharing it with your friends and leaving reviews and all that stuff. Its been awesome.

Matt Mulcock:
It sounds like you’re saying goodbye, but I know you’re really not.

Ryan Isaac:
I’m just saying, “Hello.” We’re just getting started.

Matt Mulcock:
It sounded like that was a farewell, but I just want everyone to know that Ryan’s not going anywhere.

Ryan Isaac:
I’m not going anywhere and-

Matt Mulcock:
This is not a goodbye.

Ryan Isaac:
No.

Matt Mulcock:
We’re thankful for Ryan.

Ryan Isaac:
And you know what? Hey, while we’re doing the thanks, let’s give a shout out to the HAAS, the capital letters, all of them, the HASS.

Matt Mulcock:
The HASS.

Ryan Isaac:
Reese, freaking Harper, who-

Matt Mulcock:
He’s got the best nickname, by the way. He deserves the best nickname.

Ryan Isaac:
Yeah, he got the best one. They call me, “Sir,” and he got HAAS and HASS is cooler. But shout out to Reese for just being the mastermind behind all of the madness and he’s our resident-

Matt Mulcock:
The mad scientist genius

Ryan Isaac:
… mad scientist. Yeah, and we got to let them… We’ve had to let him move on to his other creations as he continues to improve Dentist Advisors and the elements and everything, but just shout out to Reese. A lot of thanks going on here. As such, today’s episode is going to be what dentists want to know. We’re going to answer your questions. Matt, where do we field these questions from? Where do these questions hail from, if you will?

Matt Mulcock:
I mean, they hail from really, anywhere will where people want to-

Ryan Isaac:
Anywhere you can find us, yeah.

Matt Mulcock:
… send them. Yeah, anywhere you can find us. If you see me on the street, you see Ryan on the street, or maybe-

Ryan Isaac:
That’s all the time.

Matt Mulcock:
… driving his nice, cool van, and you want to wave him down [crosstalk 00:05:04] and ask him, that’s great. But most people are putting these in our Facebook group, which that can be found at dentistadvisors.com/group.

Ryan Isaac:
Yep. Yeah, Dentist Advisors discussion group, if you search for it on Facebook. One of the questions today is going to come from that. I call it illustrious as it’s come to be known.

Matt Mulcock:
It’s illustrious. It really is.

Ryan Isaac:
It’s illustrious. And one of the questions today is going to come from there. Another one comes from just a direct email. Someone emailed and said, “Hey, got a question for you.” And so, we’re going to cover that. But if you have questions and you want to ask them in front of a great audience of dentists and our advisory team, go to that Facebook group, join it, post a question. We answer them on here. We’ll answer them directly and we do Facebook Lives where we answer them. We’ll probably do one of those today too. Without further ado, as they say-

Matt Mulcock:
Ado-

Ryan Isaac:
… in the business, let’s get into this first question. It comes from the Dentist Advisors discussion group. It has a timely component to this because it’s 2020 COVID-related. But the application of this answer is going to apply to many times during your life as a dentist. This is a question that you will ask yourself over the course of your career owning a business.

Matt Mulcock:
Does it start with what’s going to happen to the market when?

Ryan Isaac:
Yeah, it did. No, this is not a market question. The question here is, “How much extra liquidity are people leaving in the business account during the COVID area?” We can answer that specifically, but I also want to make this relevant for someone down the road listening to this. Just replace COVID with any fill in the blank, uncertainty, stressful time. It could be anything and it could be economically-specific, some big economic thing. It could be a worldwide thing. It could be very town-specific. Maybe you live in a disaster area. There’s a tornado, a flood, an earthquake. It could be because you had some competition move in down the street and they’re just crushing you and marketing and stealing patients.

Matt Mulcock:
You got sick. You got hurt. You can’t practice.

Ryan Isaac:
Yeah, you got a disability. You got embezzled. Fill in the blank with whatever unknown uncertainty or disaster that could possibly befall you, were holding on to cash is helpful. Let’s start with that question. How much-

Matt Mulcock:
The emergency fund for your business, right? Emergency could be anything.

Ryan Isaac:
Yeah, how much cash are people keeping on? Matt, let’s talk about when times are good. When the good times are rolling… I just feel like there’s a good classic rock song in there.

Matt Mulcock:
I feel like you were just about to start singing it and I was waiting for it.

Ryan Isaac:
Isn’t that… I know there’s Good Times Rolling. I feel like that was the theme of every 70s, classic, rock song. It’s just let Good Times Roll.

Matt Mulcock:
I feel the Eagles song… I want to say Eagles maybe.

Ryan Isaac:
One of our producers [crosstalk 00:07:44]-

Matt Mulcock:
Boston?

Ryan Isaac:
… is going to kill me for not knowing what this is, but he’ll know and he’s going to send me a documentary on this exact song.

Matt Mulcock:
Oh, for sure. Oh, wait, The Cars.

Ryan Isaac:
Hold on. We’re just getting breaking news. I got [crosstalk 00:07:56].

Matt Mulcock:
We’re getting breaking news from our producer..

Ryan Isaac:
The producer’s telling me The Cars have a song that-

Matt Mulcock:
But I’ve never even heard of The Cars. I’m sorry.

Ryan Isaac:
… [crosstalk 00:08:03] Good Times Rolling. Matt, what-

Matt Mulcock:
I’m going to get crushed.

Ryan Isaac:
… do people do when the good times are rolling with business cash? What’s normal to keep on hand? What’s normal to keep around from the history that you’ve seen?

Matt Mulcock:
Yeah. I’d say just on the personal side, I’d give a range, right? I think on the bottom end of that range would be minimum 1.25 months worth of spending would be the low end, upwards of three months spending business overhead in cash somewhere. I know that’s a pretty broad range but that’s about what I have seen generally or just to make it easier, one to three months business overhead in cash.

Ryan Isaac:
I think that’s true. I think people have been probably closer to that one to one and a half months of expenses than anything else over time. It’s a pretty common number.

Matt Mulcock:
Prior to COVID, especially.

Ryan Isaac:
What’s been funny about that is sometimes it’s not even a quantified number in terms of how many months worth of expenses. Sometimes it’s always been like, “What’s a round number that feels good?” And we’re talking about an average [crosstalk 00:09:12].

Matt Mulcock:
I was just going to say that. Yep.

Ryan Isaac:
You’ll get a lot of 75,000s, 100,000s-

Matt Mulcock:
100,000.

Ryan Isaac:
125,000s and 150,000s.

Matt Mulcock:
150, 200.

Ryan Isaac:
200’s. I don’t know, 125. And you’re like, “Why?”

Matt Mulcock:
It just feels good.

Ryan Isaac:
Yeah, I like it. That helps my OCD brain. I think of things like that too.

Matt Mulcock:
Yeah. And no, I get that. I do that in my own personal, financial situation.

Ryan Isaac:
Yeah, I think that’s normal. And then COVID happened and everyone got shut down, spring of 2020, if you’re listening in the future. First of all, I’m glad there was a future in which you’re listening.

Matt Mulcock:
Yes. I’m glad you’re all here. You’re alive.

Ryan Isaac:
We still exist.

Matt Mulcock:
You’re alive listening to this. We may not be. Who knows?

Ryan Isaac:
Yeah, I don’t know what mark-

Matt Mulcock:
You never know.

Ryan Isaac:
… I left on the world if I’m not here anymore, but make sure they scatter my ashes in the ocean somewhere during a nice sunset [crosstalk 00:00:09:58].

Matt Mulcock:
Southern California. We all know. I got you.

Ryan Isaac:
Yeah, and then COVID hit in 2020 in the spring, everyone got shut down. And then all of a sudden, how much cash you had was everything. Before, we had certainty from government loans and what we knew was going to be helped to business owners. I mean, that just became the issue, was personal business emergency fund. Since then, I would say, and a big factor of this has to do with the fact that the government just gave dentists a ton of money and they got to just hold onto it. Most people were in November of 2020, and a lot of clients I talked to are still sitting on six figures of government money.

Matt Mulcock:
Yeah. Can I just on that topic, I’ve actually talked to several clients relatively recent, that are in a better cash position now than they were pre-COVID because of PPP, because of HHS, some loans. SBA loans were getting turned off.

Ryan Isaac:
Don’t forget the EIDL.

Matt Mulcock:
Idol. Yeah. Yeah, come on. EIDL.

Ryan Isaac:
You EIDL worshiper.

Matt Mulcock:
Student loan payments were getting turned off. Honestly, I just talked to a few last week that are in a better cash position now. We didn’t think this in March when it all happened, but now the dust has settled and they’re actually in a better cash position now than they maybe ever have been.

Ryan Isaac:
Crazy. Yeah. It’s very true, man. Luckily, it’s worked out that way. What’s been interesting is where the comfort level for most people has settled into. Maybe it’s just purely a product. We won’t know until we have hindsight. Maybe it’s purely just a product of that’s how much money people happen to just be given and is sitting in the bank account. But now, where I would have said the average dental office is holding one to one and a half months worth of expenses, or just some random round number, a hundred grand, 75 grand, 120. Now it’s closer to three months plus and I think it’s completely rational right now.

Ryan Isaac:
The reason why I think that has nothing to do with what might happen to the stock market. It is totally independent of the stock market. The reason why I think it’s rational is because of what we’ve seen in recent history with the shutdown compared to what we knew about the virus and the number of cases and testing and hospitalizations, all that stuff. And currently, we’re seeing a rise in the numbers again and we don’t know. Could they shut down offices again? Maybe. I have a hard time seeing that one, but you never know.

Matt Mulcock:
Yeah, I can’t see that happening but-

Ryan Isaac:
Could enough people get sick enough in big enough groups that dental spending slows down? That’s possible. Could people get worried again about going out? That’s totally possible. Could there be a combination of reasons that just slow dental spending, especially elective dental spending? Yeah. I mean, those things are totally possible. Maybe other industries get shut down and people are holding on to cash. They’re short on cash again. And so, they don’t come back and start their treatment plans or their braces or whatever. I think-

Matt Mulcock:
Could a producer gets sick and they’re out for a bit. There’s so many-

Ryan Isaac:
So many things.

Matt Mulcock:
… different things. Yeah.

Ryan Isaac:
To answer that question, how many, since the shutdown and the pandemic, most people are carrying three months plus. Again, I don’t think that was a conscious thing. It’s just ended up that way as people got PPP and EIDL money and other grants that just ended up that way, but that’s where a lot of people are sitting. I think it’s completely rational to continue to hold this. Here’s the question, Matt, is do you think moving forward after having lived through this, having lived through 2008, you’re going to be more conscious of the way you get into debt for real estate or what loans are out there available in the market, now you’ll be more aware of cash sitting in a business that could be needed during certain periods of time? Do you think this trend will continue of holding this much cash in the future? I mean, is this burned in our memory? Are we now like, “Oh yeah, we lived through the COVID pandemic so now we just behave differently financially?”

Matt Mulcock:
Yeah. I think we could see that, for sure, on the cash side of again, on that spectrum. I totally agree with you. If you look at that spectrum before COVID, people were more on the short side of that. Again, one, one and a half, and now they’re upwards of three plus. I think you could see that trend for a while post-COVID, whether it’s fully rational to maintain that level moving forward, I don’t know. I see both sides. On one hand, I’m sitting here thinking… My first response is, “It’s so rational.” Yes, this is something that should be a trend. We should be shifting up on that spectrum to two to three months of overhead in cash, as opposed to that one, one and a half, because of this. Maybe it’s recency bias. Whatever. On the other hand, I’m sitting here thinking, “Something like COVID happened. It’s once in a generation type pandemic and the governor came-

Ryan Isaac:
You better hope. I hope you didn’t just call that shot and jinx us forever.

Matt Mulcock:
I know, man. I called the election shot.

Ryan Isaac:
Because this will be a replay.

Matt Mulcock:
I called the election shot. I called the election shot-

Ryan Isaac:
You did call your shot on that [crosstalk 00:15:13].

Matt Mulcock:
… so I’m feeling confident.

Ryan Isaac:
Roll with it. Let the good times roll.

Matt Mulcock:
I’m feeling very confident. Yeah, I’m overconfident here maybe. You can call it what it is, but I’m calling my shot that it’s once in a lifetime, people. I hope. Again, this once in a lifetime pandemic comes and the government comes in and again, what we just highlighted, now a lot of practices are in a better cash position post-pandemic than prior to the pandemic. I guess I highlighted that just to say, “If it’s bad enough and it affects enough people, the government is now proving that they’re going to be bailing people out.”

Ryan Isaac:
That’s true.

Matt Mulcock:
The short answer is I do think, yes, this will most likely, just in the conversations I’m having, I do think there’ll be a lasting effect of pushing people on the higher end of that cash spectrum in the business and I would actually advocate for that, I think, moving forward.

Ryan Isaac:
Yeah, I think so. There’s always this funny exception to the cash and the business rule and I found this to be when the business is big, when a month worth of expenses, is half a million dollars-

Matt Mulcock:
Seven figures, yeah.

Ryan Isaac:
Yeah, and all of a sudden you’re like, “I’ve got one,” because I know people who have one and a half or $2 million sitting in business checking because that’s literally a month and a half of spending or two months of spending. And there’s this other psychological thing too, where it’s on the other side of the spectrum. It’s a psychological thing to say a hundred grand is where you need to be, regardless of how many months it covers. It just feels right. Where a million and a half or $2 million, no matter how many months that covers starts to feel wrong.

Matt Mulcock:
I know. It does, right, because I’ve talked to people like that. I remember talking to a guy-

Ryan Isaac:
Rationally, it’s like, “Well that’s a month and a half of expenses, man.” That’s totally-

Matt Mulcock:
I mean, you’re running [crosstalk 00:17:02] a $10 million practice. The numbers are just bigger. But you’re right, it does start to feel uncomfortable when you start to see seven figures in cash and you’re like, “Man, it just feels wrong.”

Ryan Isaac:
Yeah, and that’s probably a whole other discussion of where that much cash could be better used in different places. If you have questions about that again, hit up the Facebook discussion group. But more importantly, I mean, to get better answers, just give us a call, go to the website, Dentistadvisors.com.

Matt Mulcock:
Call Ryan.

Ryan Isaac:
Call me, okay? If you have my cell phone, do it. I’m going to give it out here.

Matt Mulcock:
We’ll post his number. We’ll post his number in the show notes.

Ryan Isaac:
A lot of people have my cell phone, man. It’s all right. I like that. Yeah. Give us a call. Go to the dentistadvisors.com website. Click on the Book Free Consultation, chat with an advisor. And this is a big discussion because not only is the question about, “How much should I hold,” but “When it does become too much, then what do I do with it? Where does it go?” And that is not a one and done question. “What do I do with money,” is a question that comes up in little ways, half a dozen times a year, and in very big ways, maybe once a year, once every other year. But those big ones, man, get them wrong a few times and you can wipe out years of progress. Do it right. Do it with accountability. Do it with data. It’s better with a buddy, as we say, here in the Dentist Money.

Matt Mulcock:
Do it right.

Ryan Isaac:
… Show studios.

Matt Mulcock:
I feel that’s maybe another T-shirt idea. Just do it right.

Ryan Isaac:
I have so many T-shirt ideas. I’ve got nothing but T-shirt ideas, basically, which is another T-shirt. And-

Matt Mulcock:
Is that why you were giving a farewell speech at the beginning of this because you’re trying to tell us you’re leaving to start a T-shirt company?

Ryan Isaac:
If I could make enough money in that, it’d be the coolest thing ever.

Matt Mulcock:
I’ll be your secretary.

Ryan Isaac:
We will take a break here and we will come back with our next question. Stay with us. We’ll be right back. 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. And we’re back from our break. That was a very refreshing break. Matt took a few sips of a frothy cold beverage. Not frothy though actually. It’s a juice so it-

Matt Mulcock:
I’m trying to milk it.

Ryan Isaac:
… shouldn’t be frothy. I’m a sipper.

Matt Mulcock:
I’m more of… Hey, are you a sipper?

Ryan Isaac:
I’m a sipper.

Matt Mulcock:
I think you are, right?

Ryan Isaac:
I’m not a guzzler. We have this conversation a lot. I’m an absolute sipper. And as long as it’s cold, man, I could sip something for hours.

Matt Mulcock:
Yeah. See, I’m a total sipper. What about your wife? She a sipper or is she a chugger?

Ryan Isaac:
The wife is like, “Give me the strongest shot of caffeine in the smallest possible dose immediately. I don’t want to drink a big thing the whole time.” Shout out to Cody Murray, financial advisor extraordinaire with the Dentist Advisors team. He’s also a guzzler. He’s not a-

Matt Mulcock:
Southern gentleman.

Ryan Isaac:
Yeah, the Southern gentleman, if you know him. If you know, you know.

Matt Mulcock:
Hess nicer than all of us.,

Ryan Isaac:
He’s not a sipper. He’s a guzzler. He’s not even a guzzler. He’s just a shotter.

Matt Mulcock:
Yeah. Quick side note. My wife’s a massive juggler. She’s [crosstalk 00:19:45] a massive chugger. And so, sharing drinks with her is-

Ryan Isaac:
It’s not good.

Matt Mulcock:
… my nightmare.

Ryan Isaac:
Its not good.

Matt Mulcock:
It’s impossible. Anyway.

Ryan Isaac:
Oh, well on that note, I’m just going to call my shot too and just say way before COVID happened, I don’t like sharing drinks. I think it’s gross and I also think handshakes are gross.

Matt Mulcock:
Oh, you’re a germ…. I know this.

Ryan Isaac:
I’m might be on the scale of germophobe, but this new thing of elbow and fist bumps, I’ve been doing that for years because I think shaking people’s hands is disgusting. I think it’s the grossest thing ever.

Matt Mulcock:
I mean, I think it’s highlighting… COVID has highlighted that-

Ryan Isaac:
I think it’s so gross.

Matt Mulcock:
… for a lot of people. I bet there’s a lot more germophobes. Talk about trends that will continue. I think they’ll be a lot more germophobes-

Ryan Isaac:
Yeah, more aware of that stuff.

Matt Mulcock:
… post-COVID than…. Yeah.

Ryan Isaac:
I’ve been opening public door handles with the bottom of my shirt for years, just by the way. Okay? That just what I do is. Just grab my shirt-

Matt Mulcock:
Dude, you are legit, germophobe, OCD a little bit.

Ryan Isaac:
Yeah, I think its gross.

Matt Mulcock:
I didn’t know this.

Ryan Isaac:
Don’t tell me I’m being a trendy fist bumper in 2020, okay? I don’t like shaking hands.

Matt Mulcock:
No, I… Yeah.

Ryan Isaac:
On to the next. This other question, this was a direct question from a long-time fan and listener and this is a cool one actually. I-

Matt Mulcock:
Long time fan, first time caller or-

Ryan Isaac:
Yeah, basically, and it’s a cool question because you don’t see this a lot. Well, here I’ll just do the question first. This person is early 60s, 62 63. Not quite mid-60s and they have a lot of… Dentists do disability policies. This person specifically said there’s covers through age 67. If anything happens between now and 67, they’ll pay, but at age 67, payments are gone. The question has been, and I know some context about this person’s financial situation, but without it-

Matt Mulcock:
You’re cheating. You’re cheating.

Ryan Isaac:
… Yeah, I’m cheating. Generally speaking though, is there a point… Here’s the question they’re asking. “Is there a point where you’re close enough to the end date that they would pay anyway, where you’re like, “I’m going to just cancel my disability policy because this thing will stop paying at 65 or 67?” A lot of them are 65 though, folks, if you’re listening. A lot of yours are going to be 65. Is there a point where you hit within a few years and you’re like, “Let’s just cancel this because I’m going to pay more in premiums. I mean, there’s probably an exact mathematic formula of premiums that you’ll continue to pay versus what a payout could be in those remaining years. But let’s stop there. I mean, what do you think about that, Matt? Canceling a disability policy before it’s done as you approach the last few years of it. I haven’t done this for someone, by the way. I’ve never done this. Usually people just retire and then they close it but-

Matt Mulcock:
Yeah, and we don’t… Yeah, we don’t see this tons just because I think our client base happens to just be on the younger side. We haven’t faced this yet.

Ryan Isaac:
It’s rare though that either someone retires well before that and then they just close it anyway or they work through it and then it just expires or, I mean, there’s so many nuances to how that could happen. But anyway, go ahead.

Matt Mulcock:
Yeah. I mean my short answer, my first response to this would be, yes. I think there would be a situation and could be several situations where to me, it’d be ideal. It’d be ideal if you didn’t need it. It’d be ideal to get to a place where you’re self-insured across the board, at least with life and disability. Liabilities may be a different story, but yeah, that’s my first response is, yes, I think there are situations depending on his net worth position, his practice position, like you just said, his timing to retirement. Yes, I think it could make sense.

Ryan Isaac:
Yeah. That’s the interesting thing is if you’re self-insured, which to do that math, you’d have to add up your net worth. Be very honest about what everything’s worth, have a good, clean record of it all, all of your debts. Subtract them and that’s your net worth and then understand what your spending is per month, which by the way, if you’re not tracking it with software, you’re underestimating it. You’re underestimating by a quarter or 30%.

Matt Mulcock:
I mean, we can say that with Study Barnes and also anecdotally, that you were underestimating by-

Ryan Isaac:
Study Barns has spoken.

Matt Mulcock:
You’re underestimating by 20 to 40%, if you’re just guessing.

Ryan Isaac:
Yeah.

Matt Mulcock:
That’s been-

Ryan Isaac:
I feel there’s a lot of good quotes over the years. One of them, Reese Harper would always say is, “Guesses make messes,” which, man, with personal spending, that’s a big one. But what’s the one you always-

Matt Mulcock:
T-shirt.

Ryan Isaac:
… use about spending and tracking or you don’t have to… You just have to track-

Matt Mulcock:
Oh, I think I stole this from HAAS as well. Shout out.

Ryan Isaac:
Yeah, Reese Harper has all the quotes

Matt Mulcock:
We got to give him credit. He’s getting all the quotes credit. It’s just that something along the lines of budgeting is not required, but tracking is.

Ryan Isaac:
There you go. Yeah. You got to know it. You got to be honest about it. I mean, I just had this conversation with a client this morning where we’re trying to nail down monthly expenses. And after you go through all of your actual monthly expenses, which are not too hard to figure out, the trick is being honest and accounting for all the non-recurring spending events over the course of a year in your life. And they come in the form of the vacation-

Matt Mulcock:
Those don’t happen, Ryan. Those don’t happen.

Ryan Isaac::
The vacation that went a little overboard that you swear you’ll never do again. When Christmas was a little bigger than normal, but that’s [crosstalk 00:24:59].

Matt Mulcock:
Oh my gosh, it always is. It always is.

Ryan Isaac:
Or the landscaping project that was going to cost 20 grand, but it now costs 120 grand. You just have to account for those things and then average those backs. You’re like, “I only spend 10 grand a month.” But if you average in all the other one-time events throughout the whole year, “Oh, I’m spending 15 a month now. Whoa. Because there’s 60 grand of other expenses throughout the year that I made.”

Matt Mulcock:
Yeah, it’s like people are mainly only factoring in there every month things that they know are happening, but every third month, every fourth month, they’re not annualizing those things.

Ryan Isaac:
I mean, to answer this question though, and this is what I responded to the person, because it’s not a client, is that man, I would just have to know so much more about your situation to answer this correctly-

Matt Mulcock:
Oh, definitely. Yeah.

Ryan Isaac:
… because it’s going to involve calculating your net worth. It’s going to involve calculating what you’re spending on a monthly basis accurately, honestly, and evaluating how much I’m going to pay in premiums versus what could I get in benefits and-

Matt Mulcock:
Well, that’s what I was going to say, what are the premium costs is-

Ryan Isaac:
What are the premium costs, yeah.

Matt Mulcock:
… number one question.

Ryan Isaac:
Yeah, what does it cost in your premiums? What are the maximum amount of benefits I could even get from now until the expiration of this policy? Let’s say I’m totally self-insured. My net worth is big enough to sustain my spending without working that’s being self-insured. If that’s the case, would you be glad that your policy’s gone? Let’s say you’re self-insured. You got five years left. You’re 62. Your policy goes to 67. You’re like, “My net worth is big enough. I’m going to cancel my policy.” Then you get hurt the next day. You can’t work anymore. Is there a part of you that’s like, “Dang it.”

Matt Mulcock:
Oh yeah, I-

Ryan Isaac:
Would have been nice. Would have been nice.

Matt Mulcock:
Yeah. No, totally. I think there’s… Even as I was giving my answer of, because my answer still stands, in my opinion, of yes, there are scenarios where I think it could make sense, but you’re highlighting perfectly there’s so many details you have to know before you’d say to a specific person, “Yes, it makes sense for you,” or “No, it doesn’t.” As I was giving my answer, I was sitting here thinking, questioning myself. Maybe this is just my brain being like, “No, you’re an idiot. Come on, figure it out.” But on the other end of the spectrum, I’m thinking again, depending on the premiums, depending on your liquid net worth and all these different things, maybe it just makes sense if you’re still saving significant sums of money-

Ryan Isaac:
Yeah, its not killing you.

Matt Mulcock:
… and still working towards… It’s just an extra bonus of risk mitigation.

Ryan Isaac:
It is.

Matt Mulcock:
Yeah, there’s definitely two sides of it.

Ryan Isaac:
Let’s say you’re spending 15 grand a month and your net worth is big enough to sustain that if you were done working today. Your total terms above 30. You’re technically, mathematically, financially independent.

Matt Mulcock:
You could retire tomorrow.

Ryan Isaac:
You could be done right now and you’re just choosing to continue working. If you got hurt and sick and you still had five years till you’re age 67 when your policy would expire, your net worth is going to kick off your 15 grand a month that you need. You’re fine. But if that policy would kick off another 10 in addition to that, I mean, you’re like, “Yeah, that’d be nice.” That’d be nice. But that’s the thing about insurance though. That’s why it’s insurance.

Matt Mulcock:
It’s so true.

Ryan Isaac:
You hate it until you need it and then as soon as you need it, if you don’t have it, you’re like, “I wish I had insurance.”

Matt Mulcock:
Of course.

Ryan Isaac:
The answer to this question, if this was a client, then I would… I mean, I’m not sure this is a scenario you can give a definitive yes or no answer like “Yeah. No question, do it.” I think mathematically, it would be safe if someone’s total term was high enough to say, “Yes, you can afford not to have insurance.” That’s a technical, mathematical answer you can answer, right?

Matt Mulcock:
Yep.

Ryan Isaac:
But is it best? That’s only in hindsight if you end up getting disabled between now and expiration date of your policy anyway. If you don’t, then you’re like, “Yeah, we wasted money on premiums.” And if you do, you’ll be glad you had that extra pop every month.

Matt Mulcock:
Yep. Exactly.

Ryan Isaac:
I guess the answer to this question is don’t try to answer this purely based on, “I’m just tired of paying premiums and I’m just going to chance it for the next five years.” Don’t do that. The answer is, talk to your advisor about taking a comprehensive look at your net worth and your spending and your liquidity and all those things and if you don’t have an advisor or your advisor is not a comprehensive advisor that knows about this stuff or spends time with you talking about this stuff-

Matt Mulcock:
Where could they find one?

Ryan Isaac:
I don’t know. Just kidding. I know.

Matt Mulcock:
Weird.

Ryan Isaac:
You should get one. You should get one because these are the types of questions that come up all throughout entire career in, look, dentists will work maybe 30 years tops, maybe a little bit longer, but you still have these questions coming up for decades after-

Matt Mulcock:
A little bit longer. People right now who are listening, they’re like, “Longer than 30 years?” Come on.

Ryan Isaac:
I mean, but basically-

Matt Mulcock:
They’re like, “No, I want to work 20, 12.”

Ryan Isaac:
… these things though, whether you’re working or not, these are the questions that will continually come up one way or another for probably 50, 60 years of your life. And so, having someone who knows your data, has been tracking you, has some accountability, is just going to be better than trying to take a stab at these questions. My fear is what someone would do in this situation is they would just go, “It’d be nice to just stop paying premiums and I’m pretty close anyway. Let’s just stop.” And mathematically, they might not be though.

Matt Mulcock:
That might be the answer. Yeah. That might be the right answer, but we-

Ryan Isaac:
Might be. It might not be.

Matt Mulcock:
Yeah. Yeah. But if you’re just, again, like you’ve said so many times, random acts of finance. You might get to the same answer, but you want to make sure you’re following the right process to get there.

Ryan Isaac:
Yes. Don’t judge just the result. Judge the process, which is another T-shirt, judge the process, because sometimes the results are completely random and you just got lucky. Sometimes the results aren’t favorable, but the process was solid. It’s like every time a coach decides to go for it on fourth down and it works. Everyone’s like, “Oh, that was a genius. Genius movie.” And then every time it doesn’t work they’re like, “What is he doing? This stupid move.” It’s like, “No. No, judge the process. Not always the outcome.”

Matt Mulcock:
Yep, not the outcome.

Ryan Isaac:
All right, Matt. Well, I think that is a very thankful version of our, what dentists want to know Q&A style, Dentist Money Show podcast.

Matt Mulcock:
We’re thankful for the questions.

Ryan Isaac:
We are thankful for the questions.

Matt Mulcock:
For the listeners.

Ryan Isaac:
This is a cool opportunity to share some of the knowledge we have and the experience and context we have from working with your peers and many of you over the years. And so, thanks for listening. Thanks for tuning in. If you have any questions again, go to the Dentist Advisors discussion group on Facebook and post a question, join it. We’ll answer it. We’ll do Facebook Lives and answer it. If you want to chat with one of us and if you’re lucky, if you hit the Advisor Roulette, you might get Matt.

Matt Mulcock:
Don’t you dare.

Ryan Isaac:
You might get Cody, Will or Jake. There’s a whole crew of advisors that you would-

Matt Mulcock:
And the, ultimate, ultimate jackpot obviously, is Sir Ryan.

Ryan Isaac:
Yeah, and if you do, then-

Matt Mulcock:
That’s the mega… What do they call the big one?

Ryan Isaac:
The mega lottery or something.

Matt Mulcock:
Mega lottery jackpot.

Ryan Isaac:
It might be. Look-

Matt Mulcock:
I don’t know.

Ryan Isaac:
… just go to dentistadvisors.com, click Book Free Consultation, click the green button, and book yourself a nice, friendly chat with one of our dental-specific advisors today and we’re happy to answer your questions. Thanks for tuning in. Thanks for listening. We’ll catch you next time. Carry on.

Liquidity