Here’s How to Control Your Spending Without Budgeting – Episode 203

What do Hurricane Iniki, wild chicken, and your spending have in common? 

A recent trip has Ryan pondering hurricanes, wild chicken, and how he spent his vacation money. And, on this episode of the Dentist Money™ Show, he and Reese talk about why, once people get used to spending, they just can’t seem to cut back.

Controlling your spending may be the least sexy part of financial planning, but Reese and Ryan have the secret sauce to help you increase your net worth without pinching pennies.

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Podcast Transcript

Ryan Isaac: Hey Dentist Money Show listeners. This is Ryan Isaac. We’ve got a great show for you today. Today we are talking about one of the least fun topics that anyone ever wants to talk about, but one of the most important things for your current and financial future, which is your personal spending. We’re going to start out with a little story about the history of the chicken on the beautiful and mighty Island of Kauai and what that has to do with your own personal spending. We’ll give you a few tips on how to keep it in control, how to reverse budget in your life, and the best categories to use when creating a budget in your house. Again, thanks for joining us it’s going to be a great episode. Really important stuff here. Enjoy the show.

Announcer: Consultant 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 or Registered Investment Advisor. This is Dentist Money. Now here’s 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 trusty old cohost, Sir Ryan Issac.

Ryan Isaac: Oh, right on time. Right on cue. That’s me.

Reese Harper: Yeah. That Jeez-

Ryan Isaac: That’s [crosstalk 00:01:12]

Reese Harper: [inaudible 00:01:12] muted.

Ryan Isaac: Good. That was me. That’s my cue. I’m here. I’m here with the story.

Reese Harper: That’s a story time bell. I’d like you to hear you give it to us.

Ryan Isaac: Well, here I’m going to give a little plug first. Today’s story has to do with the topic that we reported on for our clients this month and the plug is, we have a webinar coming up this month on that.

Reese Harper: Yeah.

Ryan Isaac: Now, if you listen to this episode a year from now, this webinar will not be going on exactly as stated, but there will be webinars going on, so go to dentistadvisors.com/events and check out our monthly webinars.

Reese Harper: You’re going to love him.

Ryan Isaac: What are we doing on these webinars?

Reese Harper: We’re reviewing the data… Well, let’s see. We’re helping you get something done that you could probably not do on your own, without the advice that we’re going to give you.

Ryan Isaac: Awesome. That’s a teaser.

Reese Harper: We organized all of our financial planning subjects into this thing called elements a decade ago. And we assign an element to each month of the year, and during that month we do a lot of work on it. That is helps your overall financial health. We’re a financial health company and we help people get healthier with their money. So during one month a year, we are going to focus on a topic. It happens to be personal spending. We’re going to be covering-

Ryan Isaac: Yes.

Reese Harper: … it’s work that we did last month, but our webinars actually, what we do, is we wait until the month’s over that we’ve done all the work to learn all that we can-

Ryan Isaac: [inaudible 00:02:43] data.

Reese Harper: … and as we learn new things.

Ryan Isaac: Yeah.

Reese Harper: Like for example, a personal spending might be how much does the average person spend on their mortgage payment? Or what’s the average person’s spending overall for lifestyle on a monthly basis to keep up with the Joneses?

Ryan Isaac: Yeah.

Reese Harper: And then you can compare that to maybe your situation and get a sense for how you’re doing. And I’ll warn you, don’t pat yourself on the back too much, and don’t beat yourself up too much.

Ryan Isaac: Should be right in the middle.

Reese Harper: I mean just let-

Ryan Isaac: Half self love, half self hate.

Reese Harper: … just accept your life, like wherever you’re at-

Ryan Isaac: And then take the next step and move on.

Reese Harper: … and take a little step forward.

Ryan Isaac: So join us whenever you’re listening to this. We’re doing these every month dentistadvisors.com/events.

Reese Harper: This month we’ll learn how to track spending, organized spending, aggregated. We have a couple of tools we use. We’ll recommend how we categorize spending, how not to create too many categories, but have a limited set that like is actually meaningful. Like, we have categories that are kind of interesting names like that you won’t see in mint.com or you won’t see them on Quicken. Because in those pieces of software they are really focused on accounting words, and we’re focused on like human words-

Ryan Isaac: Human words.

Reese Harper: … so like-

Ryan Isaac: Like tacos.

Reese Harper: Okay. Like if we have a category called fun and we only have like nine budget categories right now.

Ryan Isaac: Yeah.

Reese Harper: So, if it’s something that’s fun that you liked and you did because it was fun, it might go in the fun bucket.

Ryan Isaac: Okay.

Reese Harper: But we don’t want you to break down fun into like-

Ryan Isaac: Thirty subcategories.

Reese Harper: … dining out in the city, dining out-

Ryan Isaac: Horseback riding on the beach.

Reese Harper: … versus fast food. Fast food is different than dining out. Restaurants are different than fast food. You get my point?

Ryan Isaac: Yeah.

Reese Harper: Sometimes the budgeting software-

Ryan Isaac: It’s a little detailed.

Reese Harper: … it’s a little granular. So we’ll help you kind of understand that kind of stuff. So anyway, shout out to the monthly webinars. That’s the goal. Just know that wherever you’re at listening to this podcast, there’s probably a month of webinar on a topic-

Ryan Isaac: Coming up-

Reese Harper: … just tune in.

Ryan Isaac: … to a computer near you.

Reese Harper: Join in.

Ryan Isaac: It’s [crosstalk 00:04:45], yeah.

Reese Harper: So Ryan Isaac’s actually dedicating-

Ryan Isaac: My life.

Reese Harper: … a significant portion of his life to these webinars.

Ryan Isaac: Yeah, I’m just going to stream 24-7 and when people join, we’ll talk.

Reese Harper: Yeah.

Ryan Isaac: When you’re on the events page, we are in different cities pretty frequently these days, and we’d love seeing people’s faces. Normally, we just talked to people over the phone. So-

Reese Harper: Send us advisers.com/events [crosstalk 00:05:06] come on up. We got Illinois, we’ve got Philadelphia, we just had new Orleans.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: So-

Ryan Isaac: Couple of events in Salt Lake city.

Reese Harper: … just in Nashville. Just barely.

Ryan Isaac: We’ve got Scottsdale coming up.

Reese Harper: We’ve got California, San Diego, Orange County-

Ryan Isaac: Come visit us.

Reese Harper: Just come see.

Ryan Isaac: See if we got any T-shirts at the booth. They’re going to be mad at me saying that. We’re not a T-shirt company, but we do have some.

Reese Harper: Yes.

Ryan Isaac: Okay. I’m going to start a story about chickens. Reese, have you ever been to the Island of Kauai?

Reese Harper: Oh yeah.

Ryan Isaac: You have?

Reese Harper: No.

Ryan Isaac: Not Kauai?

Reese Harper: I thought you said Hawaii.

Ryan Isaac: Yeah, Hawaii.

Reese Harper: Because I’m like-

Ryan Isaac: The state of Hawaii, the Island of Kauai.

Reese Harper: Nope. I’ve only been to the big Island and I’ve only been to O‘ahu.

Ryan Isaac: I was in Kauai for seven days, so I’m an expert now.

Reese Harper: Okay.

Ryan Isaac: I’m going to tell you everything you need to know.

Reese Harper: Okay.

Ryan Isaac: Because I’m a local.

Reese Harper: Okay.

Ryan Isaac: Actually, for anyone that’s been there before, you’ll know what I’m talking about. So I went there with my wife a couple of weeks ago, and I mean one of the most beautiful place on earth, like just insanely, beautifully, crazy. And it’s like this jungle on an Island, right? It’s like mountains, in 2018 was the wettest place on earth, like the most rain, like hundreds and hundreds of inches.

Reese Harper: It’s the wettest land.

Ryan Isaac: Thousands. No I’m giving you [crosstalk 00:06:21] don’t quote me on that.

Reese Harper: That’s the wettest place on land.

Ryan Isaac: Wet.

Reese Harper: That’s the wettest place on earth, that’s land.

Ryan Isaac: Yeah, well the wettest place would be the ocean. It gets the most rainfall in 2018 the mountains of Kauai. Anyway, don’t quote me on these stats, okay?

Reese Harper: I’m just [crosstalk 00:06:35].

Ryan Isaac: I just barely became a local, I don’t really know.

Reese Harper: Don’t hassle me, I’m local.

Ryan Isaac: Don’t hassle me… Yeah, don’t bug me I’m local. Look, when I showed up, it kind of conjures up images of like this rain forest jungle. Like you would expect there to be snakes and tigers and monkeys.

Reese Harper: Yeah, yeah, yeah.

Ryan Isaac: It’s crazy. It’s so beautiful. But there’s almost like no wildlife. Some mountain goats and then farm animals and that. But one thing, one type of animal that is all over the Island, like weirdly, strangely, everywhere you look is the chicken. The chicken-

Reese Harper: The North American chicken.

Ryan Isaac: Maybe, I would assume so.

Reese Harper: Got transplanted.

Ryan Isaac: So, yeah. Long time ago, chickens were brought over to the Island, obviously, they didn’t swim. So here’s this crazy like, you’ll get off the plane in airports, like it’s smaller airport, so it’s outdoors. I mean they’re at the airport. They’re the car rental place. They’re by your hotel. They’re walking the beaches. They’re outside the restaurants. You can go on a hike like in the middle of the Island, on a mountain top in a waterfall, like eight hours in, and there’s chickens everywhere. And I was wondering what on earth was the deal with these chickens? Any guesses? Any clue? Why there’s chickens like all over the Island? Not monkeys, not lizards, no snakes, no bats, no alligator, swamp life. There’s chickens everywhere.

Reese Harper: Dude. I got a lot of guesses, but I think they’re going to all be wrong. I mean, I’m assuming something about the climate is probably good for them.

Ryan Isaac: Yeah, I mean it’s like the greenest farmland you’ve ever seen.

Reese Harper: So like it probably has plenty of worms and protein source in the ground, but like Hawaii was there so many chickens?

Ryan Isaac: Yeah.

Reese Harper: Like maybe people eat more eggs?

Ryan Isaac: Yeah. I wondered this, yeah.

Reese Harper: Maybe there’s more…. Are they a big exporter of chicken thighs? Does Costco sell all their chicken from Hawaii?

Ryan Isaac: Yes. It’s like the… I know, you wonder.

Reese Harper: These are the thoughts of an [crosstalk 00:08:37].

Ryan Isaac: I have a wandering brain about chickens. So, it turns out, on September 11th, 1992 there was a massive hurricane. Hurricane Iniki, which in Hawaiian apparently means sharp piercing winds.

Reese Harper: Okay.

Ryan Isaac: It was like last major hurricane that hit the Island, but massive destruction, killed six people, almost $2 billion in damage. Thousand people injured like just destroyed the place.

Reese Harper: Okay.

Ryan Isaac: One of the consequences as it turns out though, is it spread the chickens that were localized as farms all over the Island. The hurricane blew chickens all over the place.

Reese Harper: Oh, interesting.

Ryan Isaac: In 1992, so fast forward like 30 years later, and they are federally protected animals that wander the Island. Beautiful roosters. Like you’ll sit down for a snow cone, and they’ll be like couple of hands and then these huge roosters just like staring at you.

Reese Harper: They do cock fighting over there or not?

Ryan Isaac: That’s actually one of the big reasons why that existed too. If I remember, there were like an agricultural gift, like hundreds of years ago, to the people on the Island, but cockfighting was huge.

Reese Harper: Okay.

Ryan Isaac: And that’s where the roosters came from. So, there were like these big underground rings of fighting roosters in the hurricane in 1992 blue roosters and chickens all over the Island. And now, seriously, like we hiked ours out of civilization into the mountains to a waterfall and I have a picture, I’m standing in a waterfall, like we’re swimming in this thing. It’s like everything you want Hawaii to be. And I look up on the rocks and there’s this rooster, just watching me swim, in his waterfall, like I own this place.

Reese Harper: He’s like, “I’m going to come in, peck your eyes out.”

Ryan Isaac: “I hope you brought me food.” Yeah. And I actually, asked some people about it. So they’re federally protected, because I thought, “Well that’s kind of cool. There’s like unlimited supply of chicken so you can just always have fresh chicken, but you can’t do anything to them.” I’m sure they lay eggs somewhere but people say they’re kind of like garbage eaters though too.

Reese Harper: Okay.

Ryan Isaac: So like the meat’s not any good anyway [inaudible 00:10:35] anyway.

Reese Harper: That was fighting words.

Ryan Isaac: So I was at a Kauai couple of weeks ago, and learning the history of why chickens are all over [crosstalk 00:10:42].

Reese Harper: So I got the last question for you before you go to your point.

Ryan Isaac: Yeah. I hope [inaudible 00:10:45].

Reese Harper: Have you ever killed a chicken with your bare hands and had to chop its head off?

Ryan Isaac: I’ve never done that.

Reese Harper: Because I did many a season.

Ryan Isaac: That was your childhood?

Reese Harper: That was a significant portion of my work life balance as a child.

Ryan Isaac: When I was there…

Reese Harper: Like my grandma taught me how to kill a chicken with an ax.

Ryan Isaac: Really?

Reese Harper: Like right in front of me. And I had to do it.

Ryan Isaac: Grandma just did it?

Reese Harper: And then, I had to pluck the chickens and skin them [crosstalk 00:11:12].

Ryan Isaac: I thought what other people would be that doing, they’re like, “Oh, we’re going to do a chicken dinner in a couple days. Go grab one of the ones that we’ve seen run around the driveway,” because there’s just hundreds everywhere. But no, you can’t do that. But you learn, that’s how you grow.

Reese Harper: I’m just saying that’s an important, since I’d never been to Kauai, and I felt a little bit on the outside, I wanted to say something that you hadn’t done to equalize the playing field.

Ryan Isaac: That’s fair. I’ve never done that.

Reese Harper: To hand kill the chicken.

Ryan Isaac: No, but I do wonder when I eat, my store bought a chicken breast. Like why are they probably five times larger than naturally occurring? And why?

Reese Harper: Yeah, I remember him being pretty small, like and now they’re just bigger.

Ryan Isaac: Yeah. I mean they’re the size of my head. It’s like 12 [inaudible 00:11:52] chicken.

Reese Harper: Not the ones I eat. Like my household there’s-

Ryan Isaac: Farm fresh.

Reese Harper: Organic, grass fed and organic. Non-hormone chicken. I have to spend five times as much to feed my family-

Ryan Isaac: To get the chicken.

Reese Harper: Yeah.

Ryan Isaac: We’ll see where it lands us in 70 years. So-

Reese Harper: It’s a good starter. So where are we going with this?

Ryan Isaac: Where I’m going with this is, I remember sitting on an inner tube. It was one of the cool things we do. Like tube, this old plantation and there’s chickens up on the banks like watching us, you know? And I remember thinking as I heard the story, everything I see reminds me of a podcast so I read it all down. But this reminded me of spending. How does this remind me of spending? It reminds me of how once spending starts growing to a certain point. I mean, once you’ve committed and you’re used to spending certain dollars every month and you just kind of repeat it and you grow a little bit, you spend a little bit more, as the years go on, you can’t get them back. And as I heard the story about the chickens, like they tried, you know? The hurricane came in and destroyed tons of stuff and it ruined on the farms that blew this livestock everywhere and chickens were everywhere. There was an attempt to restore things back to normal buildings, farm land, coastlines, chickens, but you couldn’t get it back.

Reese Harper: It’s like, “Hey chickens, go back to your dang pens.”

Ryan Isaac: Will you just go back to where you were? It turns out they don’t listen. Chickens, they don’t respond to commands unlike some dogs will respond to commands.

Reese Harper: Yeah.

Ryan Isaac: So as I heard the story, I thought, “That just reminds me so much of how spending feels,” because once you are used to spending something, you can’t go back. When you let the chickens out, they’re out. When the chickens are on the Island, they’re on the Island, they’re running wherever they want. Like you used to spend five grand a month in college? Cool. You spend 12 now, or 15, or 20. And try to cut that back. Where would you cut back? A massive chunk of it’s going to be housing. You’re probably used to driving some pretty nice cars. Your vacations are better, you eat better, there’s more groceries. Your kids are in better activities, you dress better. What do you cut back once your chickens are out, what do you do?

Reese Harper: Yeah.

Ryan Isaac: You always go like, you know when you do that, you get into like the budget rage and you’re like-

Reese Harper: We’re going to cut.

Ryan Isaac: … “All right, this is it. I’m tired of this crap. We are cutting.” And so what goes Netflix, Audible like 15 bucks here and there, you know? But like-

Reese Harper: All right, we’re going to stop eating out.

Ryan Isaac: It’s like,

Reese Harper: “Okay, well.” Then that lasts about tell two days later, and you’re like, “Are we cooking again?”

Ryan Isaac: There’s so much [inaudible 00:14:18] can we just go to our favorite place and I’ll just go make more money.

Reese Harper: Look, we can spend the two hours tonight to just make our dinner. The way we know it was back in when Hawaii was started before chickens.

Ryan Isaac: Chicken free. So personal spending, like you just said, it’s an element or a subject that we’d spend a whole month on every year. It’s like the underpinning of all financial projections and your future retirement and how far your net worth is going to last you. It’s the least sexy, least marketable piece of financial planning, because no one really wants to think about it. Talk about it, hear about it. None of us really want to look at the numbers.

Reese Harper: I think, everyone kind of wants to, I think they-

Ryan Isaac: Okay.

Reese Harper: I think everyone wants to.

Ryan Isaac: You’d like to have a handle on it?

Reese Harper: Yeah. You want to kind of know what do I actually spend? Where is it going?

Ryan Isaac: But its [crosstalk 00:15:15] but you don’t also want.

Reese Harper: But you don’t want to actually do it.

Ryan Isaac: It’s kind of like if you knew you’re carrying a few extra pounds, you’d love to know like, “All right, what do I really weigh and what am I really eating and what should it be?” You’d want to, but then you also don’t want to know.

Reese Harper: You’re like, “How the hell that ends?”

Ryan Isaac: I’ll get there.

Reese Harper: I know it’s going to work its way out.

Ryan Isaac: Yeah. So I mean it’s a subject we spent an entire month on every year we’ve got a webinar coming up on it.

Reese Harper: When you say that, what do you even mean? “We spend an entire month on it?”

Ryan Isaac: Because you’re saying earlier, for any of you listening, who are maybe newer to the show or to Dentist Advisors, our proprietary financial planning process we built just for dentists, there’s something called the elements. Go to dentistadvisors.com/elements, but you can just click on elements when you get there. You’ll see a table, it looks like a periodic table. There’s 12 boxes. Those 12 boxes, I would describe them as a really, really important pieces of a dentist’s financial life. That not only should be just looked at once a year to make sure nothing’s crazy or too off base, but there are 12 things that also are always changing.

Reese Harper: Yeah. So when you manage personal spending, what’s that?

Ryan Isaac: So the element of personal spending that is the number that’ll tell us how big your net worth has to be before your work life is optional. Before you don’t have to go back and produce anymore, that your personal spending number will dictate how much money you got to have save? What your real estate and your business has to be worth? How much cash you’ve got.

Reese Harper: It also tells us how big your business probably needs to be, in order for you to be able to support the kind of life that you want.

Ryan Isaac: Well, I don’t know if there’s this podcast or another one we recorded where you were saying, how spending’s finally like where it needs to be, but your income grew to make that true.

Reese Harper: Yeah. It’s like, well now I know I’m able…

Ryan Isaac: That’s a good point.

Reese Harper: I think that’s typically, that’s how it just naturally happens in life. Anything arbitrary… I’m a big fan of people that want to try and budget and I like applaud them.

Ryan Isaac: That’s one of the more noble financial practices but the hardest one either.

Reese Harper: But I don’t like it either. Like in the way it’s traditionally done. Like if you go through those of you who are like big in depth Mint subscribers or you’re a Quicken subscriber or you’re a YNAB a subscriber or like, any you name the budgeting software. Like there’s a point where budgeting is really essential and I think that most of the audience on this podcast though, you wouldn’t be able to pay them enough to go and budget in a granular way.

Ryan Isaac: Sure.

Reese Harper: Most of them are just going to be like, “That is not part of me. I don’t have time for that.” And so, the challenge is, if we know that budgeting actively and watching and budgeting like… What I mean by budgeting is, if you go online right now and you say, free financial planning software, you’re going to find two things. You’re going to find budgeting software, or you’re going to find investment software.

Ryan Isaac: Yeah.

Reese Harper: So you go either to like invest money or you can budget.

Ryan Isaac: Or track your spending.

Reese Harper: Those are like your two main things that everyone thinks are financial planning.

Ryan Isaac: And there’s a few more than that.

Reese Harper: There are a couple more, but they’re just-

Ryan Isaac: It should exist.

Reese Harper: … can’t be easily fixed with software. And so, there’s no software. The easy ones can be fixed with software. So if you’re going to budget, some people would say, “Well, that means like pick this category, establish what-

Ryan Isaac: Put a cap ceiling on it.

Reese Harper: … a cap I’m getting, and then track what I spend to that cap and hopefully there’s a surplus-

Ryan Isaac: There’s a stop amount.

Reese Harper: … or a stop amount.

Ryan Isaac: When you get there, just stop.

Reese Harper: And it’s just not that.

Ryan Isaac: When you get to the [inaudible 00:19:03].

Reese Harper: That’s a good exercise. I think there’s like something really healthy about that.

Ryan Isaac: Well you should track yeah.

Reese Harper: At certain stages of your life-

Ryan Isaac: Yes.

Reese Harper: … you have to have like a point where your category, you’re like I got to wait three days.

Ryan Isaac: Yes.

Reese Harper: Like I have to wait three days.

Ryan Isaac: Yeah.

Reese Harper: But there is a point in today’s world where like, once someone’s making enough money to where they don’t have to do that anymore, they will stop doing.

Ryan Isaac: Yeah, yeah.

Reese Harper: The majority of people will not do that once they have enough money to not do that.

Ryan Isaac: That’s the [crosstalk 00:19:35] podcast. Yeah. That’s the-

Reese Harper: Because you’re being forced to do that. That’s why you do it, right? Like the only people that really budget are in a position-

Ryan Isaac: Because the house is [crosstalk 00:19:43].

Reese Harper: … in their life, where they need to have that kind of austerity.

Ryan Isaac: Till the income kicks up, and then there’s a huge false sense of security.

Reese Harper: And when that income kicks out-

Ryan Isaac: It’s another episode.

Reese Harper: It’s like there we go.

Ryan Isaac: Dangerous of high income. Yeah, that’s true.

Reese Harper: So, I’m just saying the right kind of budgeting for someone whose income has already kicked up a little bit. We would consider it more like monitoring. Like it goes from budgeting to monitoring.

Ryan Isaac: Admitting.

Reese Harper: Yeah, admitting, like-

Ryan Isaac: Recording.

Reese Harper: … being honest about what you’re spending.

Ryan Isaac: I would have said 12 grand a month. Turns out it’s 15 when you add in vacations and stuff that’s happening every year. Okay, fine.

Reese Harper: Yeah. And that seems to be the pattern that I will probably follow throughout my life, and it’s going to be different for each person based on their past, right?

Ryan Isaac: But I think most dentists are going to fall in that category. So here’s what we’ll do. We’ll take a break. You and I both need to check our budgets really quick, before we go out tonight to our top golf event with a 25 fabulous dentists here in Salt Lake city.

Ryan Isaac: When we come back from checking our budgets, we’re going to talk about what are our average client spend? And then a few tips, on what you can do to maybe reshape the way you think about budgeting and spending, and hopefully improve in the future.

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: We’re talking about personal spending like this thing that needs to be managed. Like it’s the fun part about working.

Reese Harper: Yes.

Ryan Isaac: It’s why I work.

Reese Harper: Yes, exactly.

Ryan Isaac: So like don’t like, I would rather see you work longer and enjoy the money you made, then like work less and be like austerity and you I think more repeat and a lot of people will agree with that too. I mean you never know what the future holds and what health is going to be like, what circumstances would be. You got to enjoy some of that now. I think a lot of people resonate.

Reese Harper: You can’t make that trade off. At some point-

Ryan Isaac: But I’d be realistic in the things you’re admitting are happening.

Reese Harper: Yeah. A lot of people, I just don’t think they’ve established their goals clearly enough to say, “Oh, that’s the consequence of the…” If you tell me my spending is $11,412 a month, and we’ve tracked that for two years and we see it cycling. And we know that, that’s your spending. And you say, “I want to retire at 50,” and you’re worth $2.1 million today, and I can mathematically say, you only need 2 million more and your savings rate is 30% I’d be like, “Oh, you’re right on track.”

Reese Harper: But that same person, if your spending was 14,400 per month, or 16,800 per month, I’d be like, you got to reset your expectations.

Ryan Isaac: Yeah.

Reese Harper: Because mathematically this does not compute. It does not compute.

Ryan Isaac: Does not compute.

Reese Harper: Does not compute.

Ryan Isaac: Yeah. You know that.

Reese Harper: Yeah.

Ryan Isaac: Okay. So let’s jump to our awesome team. Shout out to the Eagle’s nest,

Reese Harper: the nest.

Ryan Isaac: Too many names and name, names these days. But we pulled some data. It’s spending months. So we pulled some spending data out from our client base. I want to make two caveats though, or like just two disclaimers. When we give some of this data.

Reese Harper: Okay.

Ryan Isaac: The people who tend to hire us… Now, when we go from hundreds of clients to thousands of clients, this will become more average, I think across the board. But when you’re hundreds of clients, then people who tend to hire you tend to be higher net worth, higher income earning people. Well, in our service consciously, we’ve targeted the… Financial planning is the most painful for the wealthiest people. By painful, I mean they have more jobs that they’ve got to get done, and they have –

Reese Harper: They’ve got businesses.

Ryan Isaac: … and less time.

Reese Harper: Yeah, less time.

Ryan Isaac: And they do not want to deal with this. So I’ll just like, they want to go on a vacation, they don’t want to do this.

Reese Harper: Yeah. They’re consciously saying, “I will pay for a premium service to offload all this stuff on someone else’s plate that’ll just handle it completely and I’ll deal with my own stuff.”

Ryan Isaac: Yeah. So I would say our first 10 years of operating, our clientele is probably in the top 10% of the dental industry. Top 15% of successful dentists.

Reese Harper: Yeah.

Ryan Isaac: Right.

Reese Harper: Yeah, that’s totally and you know, give us another 10 years and move from hundreds of clients and thousands-

Ryan Isaac: We’ll still probably be at the medium.

Reese Harper: Above average.

Ryan Isaac: Yeah.

Reese Harper: But more average, the more people you get.

Ryan Isaac: Well and we did launch a new pricing model that you might’ve seen on our website,

Reese Harper: More inclusive these days.

Ryan Isaac: That gives opportunity for people to have a slightly lower level of service at a price they can afford. But you know, we have a model for associates now that we didn’t have before.

Reese Harper: Yeah, it didn’t exist before. Anyway.

Ryan Isaac: Okay. Those are disclaimers [inaudible 00:24:48].

Reese Harper: Trying to help you is what I’m saying?

Ryan Isaac: Yeah.

Reese Harper: Okay.

Ryan Isaac: Well when you hear the numbers, and you’re like, “Holy crap.” So yeah, that’s the point. Our average client tends to have a higher net worth and a higher income than the average dentists in the country right now. So having said that, our average client is spending $224,000 a year or 18,000 a month. Here’s what’s interesting.

Reese Harper: It’s going up.

Ryan Isaac: It went up. It used to be 16 a few years ago when we ran this.

Reese Harper: Man.

Ryan Isaac: It used to be 16. Now, I think, this is a trend that skews towards maybe the higher net worth, higher income because the more income, the more that you’ll spend. So I think we’re just getting bigger spending.

Reese Harper: Tell me what that includes, Ryan.

Ryan Isaac: Okay.

Reese Harper: What is that 18,000 we’ll say per month includes?

Ryan Isaac: When we say total personal spending, we’re saying everything you have to cover at home from your mortgage to your utilities, your groceries, your vacations, your student loan payments. Like anything personally you’re paying at home, personal insurance. And I mean, we’re taking this from checking accounts, credit cards. Here’s the other thing that we do that’s a little bit different though too, this is what’s different about having unemotionally involved third party human to give accountability, versus like yourself or just an app.

Reese Harper: Yeah.

Ryan Isaac: Because if I check my spending on an app, and I look at it over 12 months and I go, “Hmm, 120 grand? Okay. Well, 20 of that really probably was like some, one-off things. I had a little landscaping, and we had that car thing and then we had that Oh, you know, she got sick or whatever.” Those don’t typically happen. I’ll discount that myself. But when it’s us doing it for other people as a third party, we’re not emotionally involved in these decisions, just numbers to us. So we’ll say, “You spent $224,000 last year.” And they’d be like, “Well, there were some one-off things,” but then we can go, “Yeah, but those one off things are happening every year.” They might be different categories, maybe it goes from landscaping to vacation to medical, but it’s like-

Reese Harper: Well, and see our motivation, our incentive, like think about it. What we’re trying to do, is we’re trying to actually make sure that the magic number, we’re building your wealth too is the right number.

Ryan Isaac: Yeah.

Reese Harper: You know the magic number that you get to retire on? We need to actually have a high degree of confidence that that number is enough.

Ryan Isaac: Yeah. Our motivation is not to undershoot.

Reese Harper: Because when we tell you that work is optional, we don’t want to be like coming back to you at age 81 and being like,-

Ryan Isaac: “Oh, well, we didn’t know you like to vacation.”

Reese Harper: “We didn’t know that you liked food.”

Ryan Isaac: Yeah. Sorry about that guys.

Reese Harper: I’m just going to tell you the typical financial planning process goes like this, “Hey Dr. Jones, how much do you think you’d like to have in retirement to be a comfortable lifestyle?” And you’re like “Shoot, I don’t know.”

Ryan Isaac: It’s always 10.

Reese Harper: Ten.

Ryan Isaac: Always 10.

Reese Harper: Like 10 grand a month.

Ryan Isaac: Always 10.

Reese Harper: Everyone just throws out a number.

Ryan Isaac: Always 10.

Reese Harper: And then all the financial planning software that people have built… Like 85% of financial[crosstalk 00:27:41] advisors, they have two financial planning software that they use. Like, there’s these two big pieces of software that run the whole industry. And you basically, just put in the number that people spend, and it spits out like what? And you put what investment return.

Ryan Isaac: And you saying… Yeah.

Reese Harper: You think you’re going to have, and then it spits this number out. And most financial planners are scared to tell their client, that they need so much, right? Because they don’t want to be-

Ryan Isaac: Oh crap, $7 million.

Reese Harper: … scaring them. They’ll be like, “You going to get me better returns man.”

Ryan Isaac: “Well, let’s just juice up, the average the turns to 60.

Reese Harper: “Well, let’s just juice this up and see where we end up. Oh, it looks like you don’t need to save a dime.”

Ryan Isaac: “You’re going to make it.”

Reese Harper: “What you have right now is fine.” It’s like all of these like forecasts are just lies, okay? They’re just lies. The conservative outlook is, whatever you are spending today, okay? It probably won’t change a lot until you’re in your 70s-

Ryan Isaac: We’re going to get in. I got some cool days.

Reese Harper: All right? So anyway, I won’t get into that.

Ryan Isaac: That’s fine.

Reese Harper: But I just feel like… We have an incentive, I was going to say, let’s be realistic.

Ryan Isaac: [inaudible 00:28:49].

Reese Harper: Where you have the client generally has an incentive, they don’t want to be embarrassed.

Ryan Isaac: We all do that to ourselves. If you look at your last month spending-

Reese Harper: Like I won’t spend that much.

Ryan Isaac: … you’re trying to feel good about it. You’re just like-

Reese Harper: Yeah. Like the last-

Ryan Isaac: … “It’s just 15 but it’s normally 12, so I’ll just forget those 15 was there.”

Reese Harper: Yeah. Am I embarrassed that every time I go to Salt Lake international Airport I have to buy a new bows set of over your headphones?

Ryan Isaac: You lose those like,

Reese Harper: I’m like, “Yes,” like we’re talking, I own like eight pairs.

Ryan Isaac: You have a Bose budget of like five grand a year.

Reese Harper: It’s like that investment is worth it to me. Why? Because I’m sitting on a plane for dozens of hours a month, and then I have to put those headphones on so I can work. I like to work on a plane.

Ryan Isaac: [crosstalk 00:29:39] I need my Bose noise canceling [inaudible 00:29:40].

Reese Harper: It’s like, “Okay. So I lose them,” why? Because it’s complicated to keep them. I mean, that’s not like they’re easy to keep track of.

Ryan Isaac: Someone argue that they’re pretty easy.

Reese Harper: Some say they’re large and they come with a case and you invested a lot of money in them so you keep track.

Ryan Isaac: They’re on your neck.

Reese Harper: Yeah-

Ryan Isaac: But I mean, whatever.

Reese Harper: My experience has not been-

Ryan Isaac: Potatoes, potatoes.

Reese Harper: That’s not been my experience. So my point is you will have something in your life that you probably you’re going to discount that.

Ryan Isaac: Yeah. You’ll be like, “Well, I won’t do that in retirement.”

Reese Harper: See Ryan Isaac, see when he does my retirement plan, he’s going to be like, “Dude, [crosstalk 00:30:18] you ever going to not want to work when you’re on an airplane, even in retirement?”

Ryan Isaac: Haven’t seen you watching TV.

Reese Harper: I’m like, “I don’t know.” Maybe I’ll really want to turn on the paramount pictures. Reruns of Yellowstone with Kevin Costner.

Ryan Isaac: Yellowstone is that a Kevin Costner movie?

Reese Harper: No, its like my favorite show.

Ryan Isaac: Okay.

Reese Harper: It just came out like last year. Shout out to anyone who’s seen it.

Ryan Isaac: All right. I didn’t know that. Sounds like an old one.

Reese Harper: Montana wilderness at its best.

Ryan Isaac: Kevin Costner? Okay. So average is 224 and it’s actually almost split pretty evenly. Like sub 200,000… Here’s what I want to do. I want to give a little context because some people might be like 18 grand a month.

Reese Harper: Like that’s crazy.

Ryan Isaac: How do you even spend that much? So for some context, 45% of our spenders earn less than 200 a year.

Reese Harper: Yeah.

Ryan Isaac: So-

Reese Harper: So less than 200 year is close to 15 to 16.

Ryan Isaac: Yeah, yeah. Which was kind of always usually the average. I think we’ve just picked up some big spenders over the last year. Honestly, we’ve got some big spenders, big income earners. I mean it’s all proportional. What’s crazy is when we send out this report, and we benchmark our clients anonymously against their own peer group, which changes depending on the thing we’re tracking. So this one spending, we benchmark people against similar income earners. And so, when your income is like an average dental income, it’s a pretty high percentage of your spending. When your income is like in the $2 million plus club, then it’s like 12% of spending, but it’s like 60 grand a month.

Reese Harper: Yeah, yeah.

Ryan Isaac: It’s crazy. So yeah, like 45% is under 200.

Reese Harper: So don’t make fun of people for… Like, here’s the thing, if somebody’s spending way more than you, there’s a chance that they actually might have a higher savings rate, and be financially much healthier.

Ryan Isaac: There’s a chance, if they’re clients of Dentist Advisors. I’m going to say traditionally across America, if your neighbor is outspending you, they’re probably pretty close to broke.

Reese Harper: Yeah. On average that is the case.

Ryan Isaac: But if you meet one of our clients and they’re spending 60K a month-

Reese Harper: It’s probably because they’re saving[inaudible 00:32:18]

Ryan Isaac: … they’ are saving a lot of money and they make a lot, okay?

Reese Harper: We would have a conversation in as they would have made some adjustments.

Ryan Isaac: Okay. So here’s what I want to go to, you’re just about to talk about this. Tip number one is, don’t do retirement planning with some future in mind that spending just going to drop magically.

Reese Harper: Okay.

Ryan Isaac: I’ve got some really kind of interesting studies here from bunch of different banks that track this stuff over thousands of clients. But that’s like mistake number one. You were just saying this in retirement planning people at 40 go, you haven’t spent it a lot, but like you know, mortgage will be gone. Kids will be out of the house. We’ll probably cut back. People think they’re going to cut their expenses by like 50% in retirement, you know?

Reese Harper: Yeah.

Ryan Isaac: So for example, one study wall street journal did this big study with a bunch of people and they sat everyone down. They said, “What percentage of your current spending do you think you’ll spend in retirement?” And everyone, it was like the consensus of like 70% no rhyme or reason. It just sounds reasonable, 70%.

Reese Harper: Yeah.

Ryan Isaac: Then they went back with everybody and then they split it into categories. And they said like, “Okay, here’s all the categories you will spend on, and here’s reasonable costs plus inflation,” You know what everything actually costs, and it ended up being 130% of what they’re currently spending.

Reese Harper: Mm-hmm (affirmative).

Ryan Isaac: And the one of the points that they made in the Wall Street Journal was really interesting is when part of the reason we don’t spend right now is, because you’re at work all day. Like we’re busy all day. But if you work to eight, 10 hours a day and then all of a sudden you don’t and you’re just home, it’s like being on, it’s like Saturday every day and you’ve got all this time on your hands and you’re like, “Let’s buy some stuff. Let’s go to home Depot. Let’s get that that new Trager.”

Ryan Isaac: So JP Morgan says, if you want any of this stuff, any of these links, just go to our Facebook group and message me, dentistadvisors.com/group if you’re not in and ask for this stuff. I’ll also post a picture of a waterfall chicken. When this episode comes out, someone remind me.

Reese Harper: Okay.

Ryan Isaac: So J P Morgan, they have this cool graph, they have thousands and thousands of people they study on this stuff and the graph is kind of like there’s a surge and this is also what fidelity found. And Forbes actually too, there’s this surge like you are in your mid to late 40s, early 50s that’s peak spending. It’s usually probably because teenagers peak career earnings. It’s when you’ll just spend the most money, but it peaks in your late 40s, early 50s and then levels out.

Ryan Isaac: JP Morgan calls this like a surge and a curve. So you can imagine kind of like surges up preretirement and then kind of comes down a little bit and levels out through your 60s and early 70s. Now it does decline. Michael kitties, he puts it in three different categories of… Oh yeah, I’m going to find this really quick. He calls it these are like three different sections of your retirement. The Go-Go years, the slow-go years and the no-go years. So the Go-Go years are like your first decade out of retirement. You’re still healthy, you still feel like being busy and traveling and those are like high spending years. The slow-go years, 70s he kind of slowed down and then the no-go years are in your 80s into your 90s and that’s like you just, you’re not as busy, you’re not traveling just physically you’re limited.

Ryan Isaac: And the data shows this. So peaks in the high, in your late forties early 50s kind of declines a little bit levels out into your 60s and 70s, and then it will drop into your 80s when people are just less mobile, which is depressing to think about. Like we’re just too sick to spend money.

Reese Harper: Well, when I hear all this, I think the most important thing, like why do you need a personal CFO/financial advisor? I’m stopping calling it financial advisor, because every time I say financial advisor lately, I feel like people tune out. They’re like,” Oh, I already got one of those.” I’m like, “[inaudible 00:36:10] what?” Personal CFO, at least to me, speaks more to the point of why you hire a person.

Ryan Isaac: Yeah.

Reese Harper: Like the CEO hires a CFO to like help consult him on financial issues.

Ryan Isaac: Financial decision making.

Reese Harper: And so, if you are hiring a personal CFO, what you’re doing is you’re like hiring someone to help consult you on decision making with your finances. One of the most important reasons why you would hire that kind of person is, because statistically the most optimal way to be to maximize your lifetime happiness with money, is going to be to neither over accumulate or under accumulate, okay?

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: Like you’re going to be able to like, not work so hard in your-

Ryan Isaac: You miss out.

Reese Harper: … early years that you miss out, and then you have a bunch of leftover money-

Ryan Isaac: That you can’t ever spend and enjoy.

Reese Harper: Yeah. Like if you happen to be one of those people that lives a balanced life but then turns into a billionaire like, because it worked out for you?

Ryan Isaac: Yeah.

Reese Harper: That’s awesome.

Ryan Isaac: Yeah, different opportunities.

Reese Harper: But I don’t think most of us would go into our careers saying, “I want to overwork in my 30s and 40s, so that I can pass away with a ton of money, that I never really got to quite use,”

Ryan Isaac: And spend 30 years later.

Reese Harper: Yeah. I never really got to use it.

Ryan Isaac: Like you want to go to Disney when your kids are tiny, and they still believe in the Magic of Disney.

Reese Harper: You want to go see Hawaii in your 50s, in your 40s-

Ryan Isaac: When you can still hike it, yeah.

Reese Harper: … not just your 70s.

Ryan Isaac: Yeah.

Reese Harper: You won’t do it then too.

Ryan Isaac: Yeah.

Reese Harper: But like you want to see it several times.

Ryan Isaac: They might not be called chicken Island by the time I’m 70.

Reese Harper: You want to see all four islands.

Ryan Isaac: Yes, you do.

Reese Harper: [inaudible 00:37:46].

Ryan Isaac: I think I’ll just keep going back there, yeah, maybe.

Reese Harper: So it’s really hard though, really hard to make all the right financial decisions, so that you can really make the most of what you have, and plan in a way that you have the optimal amount and don’t run out of money to get… Because you think about it like you’ve got these Go-Go years, the slow-go years and the no-go years. It’s like the way you invest your money affects-

Ryan Isaac: Oh yeah, the types of accounts that sit in, the taxes you pay, the way you treat your debt along the way.

Reese Harper: Spending affects your taxes, your debt structure, your profitability, like the investments you make in your practice.

Ryan Isaac: And it’s just crazy. Those are all levers that change for a dentist every year. Income, production, taxes, debt, I mean liquidity, cashflow. And every time one of those changes that changes the outcome or the you should make and the outcome of that decision and to strike that balance.

Reese Harper: Really the penalty for doing it wrong is you’re going to either overwork during your work-

Ryan Isaac: Underplay.

Reese Harper: … and underplay, or you’re going to like totally under under-

Ryan Isaac: Under save.

Reese Harper: … save and then, be like totally hating life later on.

Ryan Isaac: Yeah.

Reese Harper: Like those are the two most common outcomes, right? The most common outcomes are-

Ryan Isaac: more common to under save.

Reese Harper: Yeah. It’s more common to under save, and under to under accumulate and not plan. But then it’s also, the people that do a really good job of this, typically, don’t end up enjoying life very much either and they need help kind of being reigned in and kind of shown visibly like, “Hey, you’re going to be fine. You just have to relax.”

Ryan Isaac: It’s okay. So I guess the point is you do you, you’re going to spend what you’re going to spend. You can still get through life okay, you just got to admit that stuff and finances is always better with a buddy, okay? So a couple of invitations.

Ryan Isaac: We have a really awesome Facebook Group, a lot of good questions, discussions going on that. We take content for the podcast from there. So a dentistadvisors.com/group to join the group. To talk to one of our awesome advisors, go to dentistadvisors.com. Click on book free consultation, and schedule a time to have a chat about your spending, and how it’s affecting your future. And if you’re wanting to know if your net worth is, keeping pace with your spending and where that puts you in the future, give us a call and let’s chat. And again, thanks for listening to the podcast. If you’re just joining us, you’re listening for a long time. We really appreciate it. Leave us a review on iTunes. It helps more dentists find us and thanks for tuning in. I’ll talk to you next time.

Reese Harper: Carry on.

Ryan Isaac: Yeah!

Spending