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Why a 10% Savings Rate Won’t Cut it for a Dentist – Episode 219


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Your savings rate is what indicates if you’re on the path to financial security.

On this episode of the Dentist Money™ Show, Reese and Ryan put Savings Rate (Sr) under the Elements® microscope. And they dive deep into the many reasons why it’s so closely tied to both your debt and your ability to invest throughout your career. 

Savings Rate is the key indicator of whether you’re moving your own net worth needle forward, and Reese and Ryan clarify why that’s true. Plus, they have a few tricks that can help you start accumulating more savings faster.


Podcast Transcript

Ryan Isaac:
Hey Dentist Money Show listeners, thanks for tuning in to another episode. Thanks for joining me and Reese on the show. Today we’re going to start talking about a question that people ask all the time which is, hey guys, what’s the most important thing I can do today, to set up my financial future? What can I do to ensure that the future’s going to be okay, that I’ll have enough money, that I’ll have enough wealth, that I’ll have enough net worth, what do I do today so I can retire? That’s the question people want to know. Today we are going to give you a simple piece of advice that you might’ve heard before, but we’re going to tell you why it’s so important to do it and not deviate. Thanks for tuning in. You have any questions you want to ask us on the show, you want to hear a response, go to DentistAdvisors.com/group. Post a question in the Facebook group and we will do our best to answer it on the show.

Ryan Isaac:
We love the question, we love the feedback. Thanks for tuning in, thanks for listening. 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 is your host, Reese Harper.

Reese Harper:
Welcome, to the Dentist Money Show, where we help dentists make smart financial decisions. I’m your host, Reese Harper. Here with my trustee old cohost, Sir Ryan Isaac.

Ryan Isaac:
How you holding up in the biggest snowstorm of 2020 in Utah today?

Reese Harper:
Well-

Ryan Isaac:
You okay?

Reese Harper:
… I’ve got my peach yerba in hand. And its been a wild morning. We’ve had a couple of solid feet.

Ryan Isaac:
Couple of solid feet. Like a millipede.

Reese Harper:
I’ve had the four-wheelers been out this morning and had to plow. Several of my kids and shovels. School was canceled for two hours-

Ryan Isaac:
Was it?

Reese Harper:
… while they cleared the roads, and then-

Ryan Isaac:
And then sent them?

Reese Harper:
… and then they sent them after two hours. And we took our kids over there after plowing everything, and uncovering ourselves, and there was no one at school. It was like two kids. They walked in and then they called me back-

Ryan Isaac:
They’re so mad.

Reese Harper:
… and they’re like-

Ryan Isaac:
Like Dad-

Reese Harper:
… they actually called Barbie back, and they were like, “Hey Mom, no one’s here. And school is on, but no one’s here.”

Ryan Isaac:
So, come get me. This is lame. I want to go sledding.

Reese Harper:
Uh-huh.

Ryan Isaac:
That’s solid.

Reese Harper:
Anyway.

Ryan Isaac:
Well, today we have a … We’ve got a tried and true principle to discuss, maybe it’s similar to a good base three feet of snow. Maybe there’s a good lesson here somewhere between what we’re going to talk about today, which is savings, and a good base layer of snow. I don’t know. Maybe if you think of something along the way, you give us a shout. But I got a story actually. So, I don’t know if you ever heard about this, this is kind of funny. Actually, it’s not funny. This is tragic, but it’s kind of ironic. So, I found this story of this lady, and when I first read it I put it in my little notes file. I have this stories page, where I-

Reese Harper:
Okay.

Ryan Isaac:
… write down all the weird stories I ever come across. There’s a few hundred in there. And when I read this one, I was like, “You know, I’m going to file this under obvious things that should seem really obvious, but probably should pay attention to.” So, this is in 2018, this is up in Portland. That’s one of your favorite places, I think. Right?

Reese Harper:
I like that place.

Ryan Isaac:
That’s your jam.

Reese Harper:
They have some cool trees up there, some great beaches-

Ryan Isaac:
There’s a few cool trees, yeah. So, up in Portland, 2018, there’s this 68-year-old lady named Nancy Crampton-Brophy.

Reese Harper:
Okay.

Ryan Isaac:
And she was charged with murder of her 63-year-old husband how was like a chef at a culinary institute up there. So, the ironic part of this thing is, this lady was an author and not too long before all this happened, she actually wrote what became a pretty well-known blog post that was titled How to Murder Your Husband.

Reese Harper:
Oh, wow.

Ryan Isaac:
So, she writes this blog post, and she’s this author and she writes these crime novels. So, she writes this blog post called How to Murder Your Husband. And she details out how to do it, how to murder your spouse instead of getting a divorce, how to get the money afterwards, how to cover your tracks, how to premeditate everything. And then, not too long after that, her husband was murdered. And of course, it was her. And she got caught and everything. So anyway, when I read that story I kind of filed this mentally under the obvious category, like the lady who murdered her husband wrote How to Murder Your Husband. And that seems like kind of an obvious thing. Obvious connection. And it makes me think a lot about our topic today, which is savings rate.

Ryan Isaac:
And I feel like every time a client, or a dentist in general asks, “Hey, what are your tips for … How do we get wealthy one day?” Or, “How do I make sure I get to retirement and I’m okay? How do you make sure I have enough money in the end?” And the answer to me, it always feels like grandma’s old advice, and it feels so obvious that it’s almost dumb to repeat. And people want something more complicated than this, but it’s like, just save enough money along the way. Save enough money for 25 years, and you’re going to be wealthy. It’s as obvious as the lady who killed her husband wrote a blog post called How to Kill Your Husband. That’s what it feels like to me. So, we’re going to talk about savings rate to me, and why such an obvious thing that everyone already knows, and grandma’s been telling us for years.

Ryan Isaac:
I don’t know, did your grandma tell you that? Tell you to save your pennies?

Reese Harper:
Pennies-

Ryan Isaac:
I wouldn’t say that’s grandma’s advice, but I don’t … My grandma never told me that.

Reese Harper:
Yeah, she gave me a little cardboard savings bank. And it said, “A penny saved is a penny earned.”

Ryan Isaac:
Did she really do that? That’s pretty cool.

Reese Harper:
Yeah. Yeah. Yeah.

Ryan Isaac:
You always say that as like grandma’s advice, but my grandma didn’t give me that advice. But that’s grandma’s advice.

Reese Harper:
Your grandma give you advice of like spend it while you got it, son.

Ryan Isaac:
Spend it while you got it, life’s short and it really sucks.

Reese Harper:
Life’s too short. Don’t burn out-

Ryan Isaac:
Go hard yellow. Yeah. That’s what my grandma said.

Reese Harper:
Go hard.

Ryan Isaac:
Go hard yellow. That’s my grandma. Anyway, so let’s kick this off today. So, February is the month where we report to all of our clients in our elements process, which by the way, if you’re curious about the things we’re talking about, every month for our clients we kind of dive into one specific subject of financial planning and report on it, benchmark it, track progress, and talk about it when there’s kind of issues to talk about it. February is savings month. And you can see that on DentistAdvisors.com and just go to the elements page. So, in this month we’re going to be reporting and looking at everyone’s savings rates, and we’re just seeing comparative gross income, how much money did you save, and savings can be … We’ll talk about all the different ways. But I’ve got some questions just to kind of kick this off here.

Ryan Isaac:
So, one of my first questions Reese, is being an obvious piece of financial advice that everyone’s heard forever, why do we focus on savings rates so much? Why is that such an important thing as a tool to building wealth?

Reese Harper:
I’m always surprised at how difficult it is for people to do this, and I think the reason we focus on it so much is because as people continue to earn more money, especially our target customer, we work with all of the higher income earning dentists throughout the country. As people make more money, I feel like it is so difficult for them to not increase their lifestyle to the point to where they just don’t burn up the money that they make. They go from making 60, to 80, to 100, to 150, to 200, to 250 plus throughout their careers and-

Ryan Isaac:
There’s still no money left over.

Reese Harper:
… there’s still no money left over. And I just think that as humans, we have a tendency to … If we get a little bit of a cushion, or we get a little bit of … Some breathing room, financially, and we don’t feel any financial anxiety, I think we tend to just have fun with our money. We want to do fun things with it. And want to buy a new car because we haven’t had one in a while, and we want to go on a better vacation, because the old vacation’s kind of not as fun anymore. And we want to be able to eat out in the places that we want to eat out, and we don’t want to have to be like, “No, tonight we’re not eating out.” Or, “No, tonight we’re not going to go to our favorite restaurant, we’re going to look for a Groupon.” When you make more money-

Ryan Isaac:
Oh man. You stop Grouponing.

Reese Harper:
Yeah. When you make more money, you don’t think about that stuff as much as you should. And it’s amazing how easy it is to all of a sudden find yourself in a spot where you’re making twice as much money as you used to be making, and you’re not in any better financial position than you were.

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 evening 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, right? So, it’s going to be some component of your financial life, we’re going to dive a little bit deeper than we would like on the Dentist Money Show, right? We’re going to draw pictures, there’s live polls, you can ask questions.

Ryan Isaac:
Yeah, it’s a great time.

Ryan Isaac:
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.

Reese Harper:
So, I think savings, the reason we focus on it so much is that it really is a critical part in making sure that people are actually progressing forward with their … That their net worth is moving in a positive direction, not flat lining. And they’re preparing themselves for … To be stronger financially in the future, more than they were in the past.

Ryan Isaac:
Yeah, which-

Reese Harper:
It’s just a critical factor.

Ryan Isaac:
Well, we’ll talk about that. I would call those the side effects of having a good savings rate. Before we get there, so if you Google different ways to become wealthier, or just get yourself in a better financial position, you’ll typically find, I would think, like three, maybe three or four main schools of thought on what you’ll hear out there and financial advice. As opposed to increasing your savings. One would be earn more money. You go find a lot of blogs that are like, “You want to know the real secret to wealth? You got to have side gigs, you got to earn more income.” Other people will say-

Reese Harper:
Side hustle.

Ryan Isaac:
Side hustle, shout out. Other people would say it’s all debt reduction. That’s the focus, that’s how wealthy people get wealthy. You got to get rid of all your debt. Other people, it’s all budgeting. You got to just slash your expenses, live … I don’t know. What’s the phrase? Well, you just got to live-

Reese Harper:
Live like no one else so that you can live like no one else.

Ryan Isaac:
I mean, all these things are good advice. I think another, a fourth one that’s prominent would be it’s a focus on returns. You have to invest money and get the highest possible returns of your money. And kind of be obsessed about returns. So, out of those four things, we’re kind of focusing a little bit on the reverse as a starting point instead of those other things as a starting point. Any thoughts on your experience, or why you think that is, or why that’s helpful in that you’ve seen, and with clients?

Reese Harper:
Well, I think that’s really good insight, actually. I feel like those are stereotypes that I see in people, like when they’re struggling, or they’re stressed, or they’re worried about their finances, they turn to one of those things.

Ryan Isaac:
Yeah, fallbacks. Yeah, that’s so true. You ever done the emergency all right honey, time to slash the budget meetings? This month, all right, what are we canceling? Kids are getting out of piano-

Reese Harper:
Or alternatively, the high returns you see people going, “Okay, well, I just read Cashflow Quadrants from Robert Kiyosaki again, so I know the reason I’m not getting ahead is because I just haven’t implemented a free cashflow and passive income properly.” Right?

Ryan Isaac:
Right, yeah. [crosstalk 00:12:37]

Reese Harper:
And so, I’ve got to like-

Ryan Isaac:
Duh. Why don’t you just-

Reese Harper:
… I’ve got to go find-

Ryan Isaac:
… just get some cashflow.

Reese Harper:
… got to find passive income. Got to find some passive income.

Ryan Isaac:
Come on.

Reese Harper:
And then, it’s like … I mean, it’s tough. I agree that all of those things though can make sense.

Ryan Isaac:
Well, the obvious thing I was going to point out, if you go to our elements calendar on the website, you’ll see that all those things are things that we track. We’re tracking spending, we’re tracking debt, we’re tracking income, we’re tracking returns and investment types, and … I mean, they’re all a piece. But they’re not really the driver, right?

Reese Harper:
Everybody needs some form of savings in their life, I think, in order for them to have the optimal financial picture. It might differ based on what you’re trying to accomplish with your overall net worth and how big you want it to become. But man, the more you start being content with your job and the level of pressure you’re feeling, and you like the level of stress that you have, and the level of pressure that you have, and you feel like it’s adequate and you’re kind of not wanting to push further, than I think man, savings becomes your most powerful tool. And it becomes your biggest advocate.

Ryan Isaac:
So, would you agree with this statement that given two people, like similar situations, one of them has no debt. Let’s say they’re both in their mid-40s. They spent most of their early career paying off all debt. So, one couple has no debt, but also subsequently no liquidity, no savings, right? Versus another client whose got … They still have debt, but they’ve also, over the last 15 years, been building liquidity in savings, in retirement plans, brokerage accounts, whatever. In your just kind of anecdotal experience, what have you noticed between those two types of people? Because you’ve met a lot of them, as I have too, you’ve seen those two examples play out. In terms of like, you’re talking about flexibility, stress levels, that’s kind of fascinating to me. Opportunities, ability to make decisions under less pressure.

Reese Harper:
I have a hard time saying that there’s a consistent pattern, because when I look at people that choose to pay off debt versus people that choose to save money and keep debt, if you chose to keep a mortgage or you chose to keep a practice loan, and you alternatively saved a lot more money and had a lot more liquidity, some people that works really well for. And I see the people that choose to invest earlier and save earlier, and build up liquidity, and build up retirement accounts, and not pay off debt as quickly, and not accelerate their mortgage payoff as quickly. Some people in that scenario I’m just like, “Man, they’re wiser, they’re more experience. They have more time investing. They’ve been exposed to the emotions of investing in the market longer. And that person’s just a more seasoned financial individual because they have more experiences than the person who just paid off debt really quickly.”

Reese Harper:
But some people literally don’t have the emotional bandwidth to do that. Their stress level is so high with debt, but I’m just like, “Man, they can’t … This person doesn’t function very well.” And either way, their savings rate could be very high. It’s just a choice of what you’re choosing to do with that.

Ryan Isaac:
Yeah, excess debt payments, we would count as savings.

Reese Harper:
Yeah.

Ryan Isaac:
It’s just like where it goes. They’re different outcomes.

Reese Harper:
I mean, I think you’re trying to get at something that I’m probably not getting you what-

Ryan Isaac:
No, I think that’s interesting.

Reese Harper:
… I want to hear your thought of what are you thinking when you’re asking that?

Ryan Isaac:
Well, I just, I’ve seen both sides of that and I hear that argument a lot. My personal, clearly limited experience compared to what the whole world experiences. But what I’ve seen with clients is that if you have those two scenarios, stress levels are lower with people who have liquidity, even if they do carry debt, than people who have wiped out all debt but don’t have liquidity. I can think of a lot of examples in my head from clients and experience I’ve had talking to a lot of different people that put all their money into getting rid of debt first but had no liquidity. And they still carried really high amounts of stress, and they made decisions under a lot more pressure, and more rushed, and emergencies or opportunities, they were just, they were just more consequential or more stressful as they came along.

Ryan Isaac:
As opposed to people who found themselves in their 40s still carrying debt, but with a multiple six-figure balance in different accounts. That just feels different. But I think it’s true, what you just said and you were saying earlier with just matching up where your extra money goes with your goals, because if you are a personality that just cannot function while you carry debt, than that’s probably a pretty important goal that you need to put money towards. But it’s just important to kind of have some guidance along the … Like how to do it in the most efficient way, kind of give yourself some balance, and some bit of liquidity along the way. But also, I’ve met a lot of people who they don’t really care of they carry debt. That’s not their personality, but they just did it anyway. They got rid of their debt really fast anyway, at the expense of growing a business, or building liquidity just because they thought that was the way to do it.

Reese Harper:
Yeah.

Ryan Isaac:
Kind of felt like-

Reese Harper:
Well, the last 10 years, if I look at financial outcomes of clients who have chosen to take their savings and build up investment account assets and liquidity, it’s been a better decision to have invested money than paying off debt in the last 10 years, financially.

Ryan Isaac:
Why do you say that?

Reese Harper:
Well, just because the stock market growth has been at average levels, or above average levels, people would’ve increased their returns much higher than they would have had they just eliminated the interest rates that are at historic lows, right? During that same period of time. So, mathematically, in almost every scenario when you look at that, you’d say, “People with a high savings rate that are choosing to deploy that towards investments, over time that will be a wiser decision.” And mathematically and financially, you will have a higher expected return. But emotionally, there’s a real reason that people call into Dave Ramsey and scream, “I’m debt free”, and, “I finally paid off all my debt.” And that they really celebrate that. I know how tempting that feeling has been for me throughout my life, to pull all of my money from my investment accounts and pay off my mortgage, or to pull out all my money from my investments and pay down my student loan sooner than I did.

Reese Harper:
And it’s a hard thing. That’s not an easy … It’s just such a concrete big financial achievement that everyone hopes to achieve by the time they’re approaching retirement. No one wants to go into retirement with a lot of debt. And so, the tendency that people have wanting to do that earlier, I think it’s pretty understandable. But it’s interesting how savings is so tied to debt, and it’s so tied to investing. Your savings rate, the percentage that you actually utilize, really, it’s independent, in our view, as much as I think it’s important for us to get into the kind of way that we look at this-

Ryan Isaac:
Yeah, [crosstalk 00:20:27]

Reese Harper:
But it’s independent from … Your savings rate, or the percentage of your gross income that you choose to either save or invest, or pay down debt with, right? Or spend, it needs to be high, it needs to be high in order for you to have flexibility, in any case, whatever you choose to do. Grow your business, pay down your debt, or save money in liquid assets. But the question you’re asking about, I think is really it has more to do with an individual choice that people are really-

Ryan Isaac:
Where it goes.

Reese Harper:
Yeah, going to have to make, and that is a really hard decision.

Ryan Isaac:
Yeah. That’s like [crosstalk 00:21:05]

Reese Harper:
But one that I had to … I just think it’s the default shouldn’t be one or the other. The default for everyone’s probably some … There is an optimal mix that probably makes sense.

Ryan Isaac:
Yeah, and I think that’s maybe what I’m getting at too, is a lot of advice out there on what to do, and going back to the question, why do we focus so much on savings, right? Because if anyone asked me what’s the key to being okay in the future, I would just say, “Always maintain a high savings rate.” That number to what you’re saying is independent though, of where it goes after you’ve maintained a high number. That’s a whole other discussion. Which should probably be done with another human being who has insight and context, and not selling you something. Because the outcome of where you put that savings rate, it changes a lot. It could be the difference between a big business and a small one. Or debt free and not debt free, or tons of liquidity, or none. Or low taxes out of a retirement plan contribution, or higher taxes.

Ryan Isaac:
I mean, the outcomes are all really different and there’s a lot of levers to pull. But let’s get into the numbers of it then. You can kind of finish your thought on that. How we’re calculating it, what we’re calling income, what we’re calling savings. And then, I’ve got our stats, this was 2019 stats, our 2020 stats aren’t done yet. But I’ve got our 2019 stats on average savings rates. And I was looking today actually, at the average … Do you know what the average is of our country? Just a little Q&A? Little trivia?

Reese Harper:
No.

Ryan Isaac:
What would you guess? Average savings rate in the United States.

Reese Harper:
I would’ve still thought it was sub five.

Ryan Isaac:
Okay. Yeah. Only the 2018 data is out from the … What is it? Like the bureau of labor statistics? 8.8%. As of 2018.

Reese Harper:
That’s probably pretty high for people to hear.

Ryan Isaac:
Historically. Yeah. Historically, that’s above historic averages by quite a bit. The peak in the last several decades was 12%, and that was 2012, which is kind of interesting. Before that, the peak was 1970. 13.2%.

Reese Harper:
That’s interesting.

Ryan Isaac:
So, yeah, kind of interesting. And I was just curious what the national average is, and … So, you know how you hear the old advice, just save 10% of your income. Do you think that cuts it anymore? Is that real? Is that enough?

Reese Harper:
For me, I think that’s a good start for a lot of people. It can be enough for the average person, but it’s generally definitely not enough for most dentists. Most dentists are … Because their spending level and their income level is so much higher than the average person, they get used to living on a lot better lifestyle. And that lifestyle takes more … You can save 10% of your income if most of your retirement income’s going to come from social security anyway. Right? And if you’re making what the average American earns, and you get to retirement, social security makes up a pretty big percentage of your retirement income. But as a dentist, you’re … The gap between what you want to spend and what social security will give you is so much larger that you actually have to save a lot more than 10% in order for that to materially change. Or just have a windfall growth in your business, or get really lucky on a big investment that you made.

Reese Harper:
But for most of you, if you’re going to save your way towards retirement, which I think’s still a great concept. You should-

Ryan Isaac:
Yeah, I do too.

Reese Harper:
… pause on that about … Everyone’s always like, “You can’t save your way towards wealth. And you can’t save your way towards-

Ryan Isaac:
I Googled that. I Googled that, and that’s like the total consensus. But again, I think that’s different for the general population versus like a high-

Reese Harper:
It is.

Ryan Isaac:
… income earning dentist. I think it’s very different.

Reese Harper:
I bet someone whose already invested, someone whose income is significantly higher than the average person can save their way towards financial security. And I think that’s a really important thing to remember. Because it’s actually the least stressful way to get there. I mean-

Ryan Isaac:
Out of like chasing the best investment returns, or building the biggest business.

Reese Harper:
It’s a much less stressful way to get to financial security at a pretty early age. I just don’t think you can discount that path for most people. Especially most dentists that don’t want to go through the pressure and pain of all these other things, like that would be required for them to have more money. And so, I don’t know. I like that. I just think the point that we’re making is if somebody’s earning … Let’s say someone’s earning $200,000 a year, and is listening, if between your house, if between your personal spending and your minimum debt payments, and your taxes, you only have 20,000 left over from your 200, that would be a 10% savings rate. Right? If after your minimum debt payments and after your personal living expenses and your taxes, you have $20,000 per year of your 200 that you can work with, that’s a 10% savings rate.

Reese Harper:
Now, what you choose to do with that is your decision. You can pay down debt, you can invest it back in your practice, you can put it in longterm savings. Either way, you have 20,000 left over. Well, the person that has 20,000 left over is not going to be in as strong of a position as the person that has 40,000 left over. Right? The person with 40,000 left over has a 20% savings rate and the person with only 20,000 left over has a 10% savings rate. And the person with the higher savings rate has much more control over how their net worth is going to grow, and what’s going to happen in their future.

Ryan Isaac:
We wanted to take a break for just a second and remind you how easy it is to book a free consultation-

Reese Harper:
Yep.

Ryan Isaac:
… with one of our dental specific advisors. What you do, is you go to DentistAdvisors.com and you’ll see a big green button that says, “Book free consultation.”

Reese Harper:
Can’t miss it.

Ryan Isaac:
Click that button and book a time that works for you, or you could just call us at 833-DDS-PLAN. Let’s start a conversation about how we can help you with your finances.

Reese Harper:
I think the key of, the one thing we want you to remember from this discussion, is each of you has a savings rate. And that savings rate is something that’s very critical because it will tell you if you’re on a path towards financial security, or if you’re going to be in a spot in your 60s where you’re still working and you just have under-accumulated substantially. And you’re feeling added financial pressure at that point.

Ryan Isaac:
Yeah. So, I love that. The one takeaway. I also like the takeaway line that you just said, what I would want people to take from this is as a dentist, this does not apply to the general public that Bureau of Labor Statistics is measuring, but as a dentist you can save your way to wealth. And I mean, the more dentists I meet, you and I were just talking about this the other week, the more I’m convinced this is true. I’m meeting people who are in their 60s, they’re calling in, they’re asking us questions, they’re at the tail end of a career, had like pretty normal size practices. They’re collecting a million a year, slightly over that. They live normal houses, normal towns, normal family sizes, and they literally saved millions of dollars, like saved it.

Ryan Isaac:
And the more time goes on, I’m just convinced that a dentist can save their way to wealth. I think that’s true.

Reese Harper:
Yeah, there’s something about it though, that I don’t … A lot of people don’t … I don’t know. They just feel like there’s got to be a better way. And it’s kind of interesting because I don’t think there is a better way for everyone, and most people that is the most predictable way, and the easiest way, and the least complicated way to get there.

Ryan Isaac:
Yeah. So, just some statistics then. We talked about national averages, but among dentists. See, I’d be really curious to know, we only have the data that our clients save, right? We, right now, we have our savings rate averages broken up into four benchmarks, and they’re just kind of income categories. So, it’s like up to 500 grand, 500 to 750, 750 to a million, and a million plus. And those categories respectively. So, 500 and under, the average savings rate is 22%. Now, our average client, I don’t think, makes too much less than somewhere in the threes. Like our average, so we don’t have a lot of people making like 120, or 150 at this point. Right?

Reese Harper:
Yeah.

Ryan Isaac:
So, it’s probably less when you start getting under 350, or 300, 250, somewhere in the two’s, savings rate’s going to be tough to push past 15% in a lot of cases. Or 10 in some. But under 500 grand’s 22% on average. 500 to 750 is 23%. Kind of funny, 750 to a million, the average is 22%, so it’s kind of holds steady. Which goes to your point which you make more money, you just spend more money. It’s taxes and spending. The million plus category is 34%. So, these numbers tell me that there is kind of a tipping point where you can have high taxes and have a big business, and spend a lot of money, but then there’s just a certain income tipping point where it’s like there’s just so much money. That you can spend a lot and save a lot. You kind of get the best of both worlds. Have your cake.

Reese Harper:
Yeah, I think it’s interesting though to see some of those people in the high end income group just, I have a lot of people in that group that have similar spending habits as people that are in the 200 and to 250 income group. And they live similarly, and-

Ryan Isaac:
Exactly.

Reese Harper:
… they just have so much more liquidity to work with. But the point is, here, is like you … There’s actually a limit to the amount of discretionary amount of income that you have every year to do something with. It might be 5%, it might be 10%, it might be 15, it might be 20, it might be 25, could be 30%. There’s a limit to what you have, and you have to be very thoughtful and very cautious about what you’re going to do with that money. Because you work an entire year and you’re going to have a certain amount of money to show for that left over. And you’ve got to really be thoughtful about how you put that money to work. And you can’t just be cavalier about it. And if you miss two or three years out of 20 to poor decisions, or making some mistakes, or getting some of your money in a spot that doesn’t grow, it really isn’t good for you over time. You’ve got to make sure you put it to work and make sure that you are productive with how you grow it.

Ryan Isaac:
Yeah, I was going to end this with if you can kind of think of maybe some tips for people on how they can improve their savings rate, or get started with one, or … That was one of them on my list was I wrote it down as put another human in the middle of your decisions here. Because I think when you put an unbiased human being in between you and the destination of your money, and that your decision making, you’re more likely to keep that savings rate higher, and make better decisions as to where it should go. Like what types of buckets it should go to, and what kind of assets it should go to. And pre-tax, after tax, liquid, not liquid. So, that was one of the tips I came up with.

Ryan Isaac:
I got a few here, but are there any that you would want to share? Like someone’s just-

Reese Harper:
We’ll see if some of mine maybe fall into yours. That you had.

Ryan Isaac:
Let’s see what kind of tips tricks you got. T’s and T’s.

Reese Harper:
I think-

Ryan Isaac:
Section. That should be a section of the podcast. Don’t you think? We should have the-

Reese Harper:
Tips and tricks?

Ryan Isaac:
… it’s now time for the T’s and T’s, the Dentist Money Show T’s and T’s.

Reese Harper:
So, the second tip and trick of the day is people who automate their savings, and automate their withdrawals, always will be farther ahead than people who randomly save money. But it is interesting how the bigger you get and the more income you have, and the greater your wealth grows, you’re not going to get to a spot where you have plenty of money leftover unless you really automate your savings and withdraw it from your accounts, and put it away in a place that’s not the same place that you spend, sounds so simple, like you said at the beginning with that first story. It sounds so easy-

Ryan Isaac:
So obvious. Yeah.

Reese Harper:
So obvious.

Ryan Isaac:
Duh.

Reese Harper:
But man, it’s just, it’s really hard to do.

Ryan Isaac:
It is.

Reese Harper:
Really hard to do. And the human accountability that you said, the first thing … Man, if you just get a human in between you and your money, and you automate-

Ryan Isaac:
A fiduciary human. Let’s qualify that statement. A fiduciary-

Reese Harper:
Let’s get a fiduciary-

Ryan Isaac:
… human-

Reese Harper:
… fee only-

Ryan Isaac:
… human.

Reese Harper:
… guy. From Dentist Advisors, preferably.

Ryan Isaac:
Yeah.

Reese Harper:
Shameless plug.

Ryan Isaac:
We’d prefer it.

Reese Harper:
It just will make a huge difference. So, the human plus the automation, it’s worth just that. I mean, the cost of you having that separation and that savings rate is so palpably higher probability for many of you. The likelihood of your success is so much more with those two things involved, than you trying to self navigate your way towards accumulating enough money. It is, it’s really important.

Ryan Isaac:
Like finally just getting yourself to do it. I think a couple that I was going to add, I think just go into the put a human in the middle, better with a buddy, was just starting now. We talk to a lot of dentists who are just like opening practices or buying one for the first time, and they’re like, “Well, ideally my target’s 20% and it’s 100 grand of year of savings, but I think I can only do like two grand a month right now. Because I don’t know, cash flow’s new and I just got this practice.” And every single time, I’m like, “Well then, just do that. Let’s just automate two grand a month knowing that our goal is 10, but just start that.”

Reese Harper:
Totally.

Ryan Isaac:
And if you have a human though, you’re more likely to start it. And then my other tip was going to be to have a process to consider increasing that every single year. Increasing the amount of money, under the assumption that just in basic inflation that your income will increase a little bit over time, too.

Reese Harper:
Yeah.

Ryan Isaac:
And so, again, if there is a human there and things are automated, you’re more likely to start, and you’re more likely to have a process to increase a little bit over time. But that’s just advice I tell people all the time. If it’s not ideal, it doesn’t matter. Just begin, because that habit, just feeling what it feels like to have to spend money, a little less money than you used to have in your checking account, is just, it’s good.

Reese Harper:
Yeah.

Ryan Isaac:
It’s good.

Reese Harper:
I go to the gym and workout with this personal trainer, in the mornings. And I have noticed how every couple of weeks … He got after me last Thursday and Friday and he’s like, “Stop talking so much during your workout, man. You got to focus on your workout and you’re not increasing the resistance on these … incline presses”, that I was just doing at that time. He’s like, “You’re lifting the same weight you were lifting 30 days ago. That shouldn’t-

Ryan Isaac:
You’re just staying.

Reese Harper:
… That shouldn’t be the case. We got to go up two and a half pounds, we got to go up five pounds.” So, he threw like … It was like way more weight than I was comfortable with.

Ryan Isaac:
As any good trainer does.

Reese Harper:
I actually don’t even remember my weights, right? Similar to probably how a lot of dentists don’t know what they’re saving. They just know that’s what Ryan said to do. And-

Ryan Isaac:
Ryan bugs me a few times a year. Can you add more?

Reese Harper:
But I remember just put … Him handing me these two dumbbells and just feeling like holy cow, are you serious? He added like 10 pounds or something, to my normal.

Ryan Isaac:
You’re like, “What do you think I am? Mat Mulcock? I can’t do this.”

Reese Harper:
Yeah, I can’t do this. Anyway, I just remember thinking as I was walking away from that exercise, just going like, “Man, it’s so similar to how it works with our advisors. They look at a client’s savings every year, they look every month. There’s deposits coming in, and they think about it.” And they’re like, “Is this person pushing it? Or is this person just coasting?” Ultimately that’s the job of an advisor. Are you pushing or are you coasting? And a good financial advisor’s trying to get you to push a little bit more than you would’ve without their advice. And I can’t tell you how many people, they start on their own doing their own financial planning, setting up a 401K, and they’ll save $1,500 a month. Their income will go up five times. But because they never had an advisor there, or-

Ryan Isaac:
Still saving $1,500 a month.

Reese Harper:
… they never had anyone pushing, they’re still saving $1,500 a month in that 401K. And you’re just kind of going like, “What? What happened between you started, and where you’re at today where you have like no money?”

Ryan Isaac:
We’re humans, that’s how we behave. That’s what we do-

Reese Harper:
Yeah, that’s what we do.

Ryan Isaac:
… because you would just keep going to the gym, and keep pressing the same amount of weight, unless there was another human being like, “Reese, come on.”

Reese Harper:
Yeah.

Ryan Isaac:
“Here’s more dumbbells.”

Reese Harper:
Reese, come on, dude.

Ryan Isaac:
Bigger dumbbells.

Reese Harper:
You’ve got to add some resistance here.

Ryan Isaac:
You’re so weak.

Reese Harper:
And it’s so important. That’s just a really important concept.

Ryan Isaac:
Yeah. We can end it on that one, because I like that too, and it’s something that … It’s funny, because no matter what the subject is that we’re reporting on, throughout the year, whether it’s one of our monthly elements, or on the quarters how we report everyone’s net worth, that’s one question I’m always … I don’t care if it’s insurance, or debt, or tax month, I’m like, “Can we save more money?” And I’m just looking at the business account that we also keep track of. We’re like, “Is that thing going up?” Is that thing just adding cash for no reason, and it is. It’s a huge question that makes a massive difference, and I like what you said earlier. It is like the most predictable, easy path that every dentist can do with a predictable outcome is just save a healthy amount over your career. Every dentist can do that.

Ryan Isaac:
And I’m impressed sometimes when I meet some older docs that have done this well over their whole careers. I’m really impressed by how much progress you can make. And then, a whole other discussion, but when that money is put to the most efficient use, and it’s invested the right ways, it’s crazy how much that can grow over 30 years. It’s kind of insane how much money someone can accumulate. And just running a normal practice, normal business. So, we can button it up there, man. Any other closing comments? Arguments? You want to approach the bench with anything? Or-

Reese Harper:
No. Thank you, man. Appreciate you dedicating some time every week to doing this.

Ryan Isaac:
Yes.

Reese Harper:
It means a lot. You’re so great at it, and I’m always happy to hear your thoughts, and all that you’re working on. It’s really cool.

Ryan Isaac:
Good times. If you’re going to murder someone, please don’t write a blog post about it. The likelihood of getting caught later is probably high. And also, if you’re not saving any money right now, and you lay there in bed and you’re just kind of like, “When am I going to start saving money?” Then just call one of our advisors, and get a plan together. Just go to DentistAdvisors.com, schedule a free consultation. Or just call us, 833-DDS-PLAN. Happy to chat with you and help you get a plan for saving. Again, thanks for tuning in, thanks for listening. We’ll catch you next time.

Reese Harper:
Carry on.

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