Why One Big Mistake Can Ruin Your Retirement – Episode #422

“The first rule of an investment is don’t lose money. And the second rule of an investment is don’t forget the first rule. And that’s all the rules there are.” That might be Warren Buffett’s most famous quote and on this episode of the Dentist Money Show™, Ryan and Matt look at mistakes that can lead to serious loss. Learn why minimizing money missteps is what making good decisions is all about.

 

 

 

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Podcast Transcript

Ryan Isaac:
Hello and welcome back to another episode of the Dentist Money Show brought to you by Dentist Advisors, a no commission fee, only fiduciary comprehensive financial advisor, just for dentists all over the country. Check us out at dentistadvisors.com. Today on the show, Matt and I were in the studio together, rare occurrence, beautiful occurrence, and we were sharing a story about a giant mistake a poor janitor made one night alone in a research facility and how one big mistake wiped out decades worth of progress and how does this relate to your money and your financial decision making. Matt has all the goods in today’s episode. If you have any questions for us, go to dentistadvisors.com, click the Book free consultation button. We’d love to chat with you. Thanks for being here. Enjoy the show.

Announcer:
Consult an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money Show where we help dentists make smart financial decisions. I’m in the studio, which makes me feel so much better with Matt. I’m Ryan. What’s happening, Matt?

Matt Mulcock:
Ryan, it’s the best.

Ryan Isaac:
Ah, yes.

Matt Mulcock:
I’ve seen you more in the last, like physically…

Ryan Isaac:
I know.

Matt Mulcock:
I’ve been in your presence.

Ryan Isaac:
It’s amazing.

Matt Mulcock:
I can smell your musk. I have had that more…

Ryan Isaac:
Edit.

Matt Mulcock:
In the last… I had that more in the last, what month?

Ryan Isaac:
Yeah.

Matt Mulcock:
We just spent a weekend in California together.

Ryan Isaac:
We did. We got another weekend in California coming up.

Matt Mulcock:
We have another one coming up, which is amazing.

Ryan Isaac:
I know. Yeah, it’s gonna be really familiar.

Matt Mulcock:
Sounds so giddy.

Ryan Isaac:
Let’s shout out to, so we spent last weekend with the amazing crew sponsored by Glidewell Laboratories, the Guiding Leaders.

Matt Mulcock:
Yep.

Ryan Isaac:
Crew sponsored by Glidewell.

Matt Mulcock:
Love Guiding Leaders. Yeah.

Ryan Isaac:
How do they, how do… Do people apply to be in the Guiding? So it’s a group of 25 women chosen. You have to apply. They’re applicants chosen from around the country in this elite group. They spend five months?

Matt Mulcock:
I think it’s like nine months.

Ryan Isaac:
Oh, okay, so it’s so all…

Matt Mulcock:
I think something like that.

Ryan Isaac:
Okay.

Matt Mulcock:
I don’t know the exact time but…

Ryan Isaac:
It’s a long time. And they fly in from all over the country to the lab home base in California, Irvine. And then…

Matt Mulcock:
Which is massive, by the way.

Ryan Isaac:
Oh, it’s insane.

Matt Mulcock:
Glidewell is huge.

Ryan Isaac:
It’s beautiful. And they feed them and they go on yachts and they do… But then they come and do courses over the course of six to nine months or whatever.

Matt Mulcock:
Yeah. So yeah, once a month. That is, yeah, maybe it’s six and I actually don’t know. Something in that range. Once a month, they come in. They get together for a weekend and they do workshops. So they actually invited us out.

Ryan Isaac:
So cool.

Matt Mulcock:
We were honored to be invited. This is our second year. They invited us out to do a two-day basically financial planning investing workshop. It was amazing.

Ryan Isaac:
Yeah. It was cool.

Matt Mulcock:
It was really cool. Super engaged women and they were… They’re awesome. They are definitely guiding some leaders there.

Ryan Isaac:
I mean did we guide leaders? They are leaders and we tried to be guides, so that’s fair.

Matt Mulcock:
Yeah. We try tried to be guides. Exactly.

Ryan Isaac:
So, I mean, if any women dentists are listening and looking for a mastermind group, I actually don’t know how you become a part of that group, but I do know how impactful it is and how great it is. They form a lot of good networking and friendships. And I mean, it’s a long time they spend together. So that was fun. That was really cool.

Matt Mulcock:
It was awesome.

Ryan Isaac:
Thanks, Guiding Leaders. Okay. I have a story. I’ve got a story. I’ve always got a story. Basically, you know how I do this. I just go on Reddit.

Matt Mulcock:
You are a storyteller, I’d say.

Ryan Isaac:
I just like stories, dude.

Matt Mulcock:
The teller of stories.

Ryan Isaac:
I go on Reddit and then I just look for really ridiculous stuff. And then I save it in a folder…

Matt Mulcock:
And it works.

Ryan Isaac:
And I think, how can we relate this to our podcast?

Matt Mulcock:
This is how we’ve been doing our podcast for seven years and never run out of content.

Ryan Isaac:
Oh, so we figured out last night, oh yeah, last night, we figured out that this November, I think November 5th will be eight years.

Matt Mulcock:
Whoo.

Ryan Isaac:
Can you believe that?

Matt Mulcock:
That is really cool.

Ryan Isaac:
Eight years ago, this November 2023, eight years ago, so 2015, the first episode called Are You Spending Like a Competitive Eater?

Matt Mulcock:
Yeah. That’s awesome.

Ryan Isaac:
And me, me and Reese we had a teleprompter from Justin, a time clock. Every word we said was scripted and we were standing face-to-face in the studio like standing… We were doing like standing…

Matt Mulcock:
And you were reading a teleprompter.

Ryan Isaac:
Reading a teleprompter but facing each other. It was the most awkward thing I’ve ever done up to that point in my life.

Matt Mulcock:
It could not be more different. Like we are literally on the exact other end of the spectrum. Now it’s like…

Ryan Isaac:
Complete.

Matt Mulcock:
Text message, Ryan.

Ryan Isaac:
Do you want to record?

Matt Mulcock:
Hey, bro. Wanna record today? This is what I’m thinking. I’m like, yeah, this is an idea I had too. Cool. Let’s go up in the studio and go talk about it. Let’s just get after it. We don’t know if it’s better, but here we are.

Ryan Isaac:
It’s still going.

Matt Mulcock:
It’s still going.

Ryan Isaac:
People are still listening so thank you for still listening. There is a research facility in upstate New York. This is one of the articles I found on CNN. I don’t want to say the title. I will later, but I don’t want to give it away yet. Came out in June. Research facility. There was a janitor in this research facility that was doing his janitorial services one night and he hears an annoying beeping alarm and he’s like, “Jeez, that’s an annoying alarm. I’m going to go see what’s up.” So he goes over and it’s like by this group of freezers in the middle of the night and he can’t turn off the alarm.

Matt Mulcock:
I know what’s coming in.

Ryan Isaac:
It’s bothering him. I’m gonna fast forward to a part in the story. This freezer is important. I won’t say like why. Yeah.

Matt Mulcock:
It’s freezing something.

Ryan Isaac:
It’s freezing something which is the role of a freezer. And the people who set up this freezer had, they were worried about the contents of this freezer. They had locks on it around like the socket of where it plugs in. Locks on the freezer itself. Locks to the control. And a note on this freezer that said…

[laughter]

Matt Mulcock:
It’s going to be good.

Ryan Isaac:
This freezer is beeping as it is under repair. Please do not move or unplug it. No cleaning required in this area. You can press the alarm test mute button for five to ten seconds if you would like to mute the sound. A pretty clear note.

Matt Mulcock:
Pretty straightforward.

Ryan Isaac:
This…

Matt Mulcock:
Don’t touch this.

Ryan Isaac:
This intuitive janitor maybe didn’t see the note, didn’t like the note, didn’t understand the note. I don’t know. I don’t know the context of why the note and all these locks didn’t work. The janitor bypassed all of this and just shut off the breakers to the room.

Matt Mulcock:
Makes sense. He thought you didn’t say anything about breakers.

Ryan Isaac:
He shut off the breakers to the room.

Matt Mulcock:
Shuts it all down, the whole power, everything.

Ryan Isaac:
Shuts it all down, then powers it back up, and then the beeping stopped, which is cool.

Matt Mulcock:
Yeah.

Ryan Isaac:
The researchers came in the next day, found that this freezer was well above acceptable temperatures for the stuff inside. It turns out this freezer had contained samples of studies that went back 20 years.

Matt Mulcock:
Oh my gosh.

Ryan Isaac:
So it was 20 years of research…

Matt Mulcock:
Gone.

Ryan Isaac:
That was gone, dead. It ruined the whole freezer worth of samples, 20 years of progress. 20…

Matt Mulcock:
I bet it was nothing important like cancer research or anything like that.

Ryan Isaac:
Dude. I mean, so the… I read this, and so the article, if you want, it’s… I don’t know if everyone’s gonna go to CNN, janitor heard annoying alarms and turned off freezer ruining 20 years of school research worth $1 million lawsuit says.

Matt Mulcock:
Oh my gosh. So they sued the guy. They sued the…

Ryan Isaac:
No, they sued the school, the janitorial company.

Matt Mulcock:
‘Cause they’re not just gonna sue the janitor, like what are they gonna do?

Ryan Isaac:
They didn’t sue him. Yeah, they didn’t sue him directly.

Matt Mulcock:
Yeah.

Ryan Isaac:
Didn’t find fault with him or whatever. Anyway, thought that was crazy. But I’ll ask you this question. Have you ever seen with dentists someone ruin 20 years worth of progress with one financial mistake?

Matt Mulcock:
Oh, yeah.

Ryan Isaac:
Throwing the breaker on one.

Matt Mulcock:
Oh, yeah.

Ryan Isaac:
Do you wanna… Anything come to mind? Of course, not specifically to anybody.

Matt Mulcock:
Yeah.

Ryan Isaac:
But any categories, any common themes come to mind.

Matt Mulcock:
Yes.

Ryan Isaac:
One big mistake can ruin 20 years of progress, that’s scary. And it’s true though.

Matt Mulcock:
It is true, and it is very scary. And we’ve talked about this before, this whole idea, this is… We talk about this where success in anything is not really about making one good decision or even a few good decisions. It’s actually about minimizing the big bad mistakes.

Ryan Isaac:
Yeah.

Matt Mulcock:
It’s about making minimal steps forward and then just avoiding…

Ryan Isaac:
Something big.

Matt Mulcock:
The big bad mistakes. And I guess I’d say this, I guess I’ll backtrack a little.

Ryan Isaac:
Okay.

Matt Mulcock:
It is about making good decisions. It’s like those critical times in your life when you’re, one… Again, that one big mistake because progress is so slow and destruction can be so fast.

Ryan Isaac:
So fast.

Matt Mulcock:
So swift.

Ryan Isaac:
Yeah.

Matt Mulcock:
Even think about it in terms of…

Ryan Isaac:
It’s depressing.

Matt Mulcock:
Think of it in terms of something completely different from money, building a skyscraper. Think about how long it takes to build a skyscraper. I can only imagine, I’m not…

Ryan Isaac:
Yeah. I don’t know.

Matt Mulcock:
I’m not an engineer.

Ryan Isaac:
Let’s say it’s a year.

Matt Mulcock:
Let’s say it’s a year.

Ryan Isaac:
Let’s say it’s five years.

Matt Mulcock:
Even, let’s say it’s even… Yeah.

Ryan Isaac:
Yeah.

Matt Mulcock:
Probably a couple of years. Right.

Ryan Isaac:
I think, probably.

Matt Mulcock:
That thing could be taken down…

Ryan Isaac:
Instantaneously.

Matt Mulcock:
In a matter of minutes.

Ryan Isaac:
Yeah.

Matt Mulcock:
Right? An earthquake or whatever it is.

Ryan Isaac:
Yeah.

Matt Mulcock:
So, there’s endless amounts of examples of how slow progress is to build something and how quickly it can be destroyed.

Ryan Isaac:
How fast man.

Matt Mulcock:
And yeah. I’ve, so the example I would give, I won’t give any obviously specifics of a person, but the category is investing. That’s a really common one.

Ryan Isaac:
Yeah.

Matt Mulcock:
I have a really…

Ryan Isaac:
And it’s, and we’re not talking about investing in the practice usually.

Matt Mulcock:
No. It’s always outside the practice.

Ryan Isaac:
We’re not talking about investing in a diversified portfolio.

Matt Mulcock:
No.

Ryan Isaac:
You might be talking about investing in single company stocks.

Matt Mulcock:
In this particular case it was options.

Ryan Isaac:
Okay.

Matt Mulcock:
Yeah. It was an options…

Ryan Isaac:
Strategy.

Matt Mulcock:
Getting enamored with what I’d say is it was getting… And this is probably where a lot of these mistakes come from, just generally speaking, it’s like getting enamored with faster progress or getting enamored with shortcuts. That’s what this was. It happened twice to the same person.

Ryan Isaac:
Oh.

Matt Mulcock:
Long story short, they built up, they are a fantastic dentist. They were able to build up quite a bit of wealth, like liquidity. They were on the right track. And this person also had some experience with investing. He was very savvy and specifically in another life before dentistry into options, trading and things. Takes all this money he had built, taken him years to build up a bunch of liquidity and loses it, and I’m not exaggerating, in a matter of months, goes to zero. Then he’s like, okay, I’m gonna reset. Do… You know?

Ryan Isaac:
Yeah.

Matt Mulcock:
I’m gonna get back to dentistry doing what I do. Years later, builds up again.

Ryan Isaac:
Did it again.

Matt Mulcock:
Even more money and does it again.

Ryan Isaac:
I can think just in options alone, I can think of, granted, this isn’t like a lot. I can think of three people without even trying who lost significant six figures in options tradings, strategies.

Matt Mulcock:
Yeah. This was seven figures twice.

Ryan Isaac:
Seven figures?

Matt Mulcock:
Seven figures twice. Yeah.

Ryan Isaac:
Oh my gosh.

Matt Mulcock:
Yeah.

Ryan Isaac:
That’s wild.

Matt Mulcock:
It’s honestly the craziest story, example of this that I’ve ever heard.

Ryan Isaac:
Whoa.

Matt Mulcock:
So it’s extreme, but it happened. It was real.

Ryan Isaac:
Yeah.

Matt Mulcock:
We talked…

Ryan Isaac:
And it just wiped out. How long did it take to save up seven figures of dentistry?

Matt Mulcock:
Oh, the first time it was… I don’t know the exact timeframes, but the first time it was 10, probably a decade.

Ryan Isaac:
Yeah.

Matt Mulcock:
Right. Then he did it again. ‘Cause he started when he was really young and he had money from pre… Before dentistry. Again he’d been investing, doing things. The first time was probably 10 years. The second time he did it probably wasn’t a full seven figures but it was multiple six figures, took him another…

Ryan Isaac:
Gosh, man, that hurts.

Matt Mulcock:
Several years to build that back up and then lost it all again.

Ryan Isaac:
And you don’t even wanna think about the compounding effect of what that would have done in the future…

Matt Mulcock:
Over a 30-year period.

Ryan Isaac:
Had it been saved.

Matt Mulcock:
Yeah.

Ryan Isaac:
And not let’s just say it wasn’t even invested much better anywhere. It was, it got a medium interest rate somewhere. [chuckle]

Matt Mulcock:
Yeah.

Ryan Isaac:
It got a 6% return or something.

Matt Mulcock:
Exactly.

Ryan Isaac:
If you just didn’t lose it.

Matt Mulcock:
You just don’t… Warren Buffett says the first rule of investing is don’t lose money.

Ryan Isaac:
Don’t lose money.

Matt Mulcock:
The second rule is don’t forget rule number one.

Ryan Isaac:
I think about this in dentists, like watching dentists for a long time. I think about this a lot where for most dentists, I mean, even just average dentist, it only takes avoiding mistakes to make it to a good retirement.

Matt Mulcock:
That’s it.

Ryan Isaac:
It doesn’t require any stroke of genius. You don’t have to have anything super above average in any aspect of your life.

Matt Mulcock:
No.

Ryan Isaac:
You don’t need above average returns in any asset class. Your real estate, your stocks, your practice. You just have to do dentistry for a career.

Matt Mulcock:
Yeah.

Ryan Isaac:
And then you should have enough money if you just, just don’t mess it up.

Matt Mulcock:
100%. There’s one thing I would say you do need to be above average in. I will, like honestly.

Ryan Isaac:
No, I like this. Yeah.

Matt Mulcock:
The one thing you need to be above average in my opinion, is time. Meaning how much time.

Ryan Isaac:
Oh, okay.

Matt Mulcock:
You’re sticking with it.

Ryan Isaac:
Yeah. Yeah, yeah.

Matt Mulcock:
Average for sticking with something…

Ryan Isaac:
Okay. You’re right.

Matt Mulcock:
When it comes to investing is…

Ryan Isaac:
Be above average and how long you’re gonna stick to something.

Matt Mulcock:
Be above average and how long you stick to something. But it’s not about…

Ryan Isaac:
Secret to success.

Matt Mulcock:
And it really is. It’s not about the returns. It’s about how long you’re willing…

Ryan Isaac:
You’re gonna do it.

Matt Mulcock:
To accept those returns.

Ryan Isaac:
Yeah.

Matt Mulcock:
That are “average”.

Ryan Isaac:
Yeah.

Matt Mulcock:
But average returns for an uncommon amount of time leads to…

Ryan Isaac:
A lot of money.

Matt Mulcock:
A lot of money.

Ryan Isaac:
Yeah.

Matt Mulcock:
Extraordinary results.

Ryan Isaac:
Yes. And we did this on an episode not too long ago where we took average savings from a dentist and compounded over like, you know, a career at like 7% or something.

Matt Mulcock:
Yeah. Oh.

Ryan Isaac:
And it’s enough money to retire.

Matt Mulcock:
Six million dollars.

Ryan Isaac:
Yeah. It’s enough money to retire.

Matt Mulcock:
Yeah.

Ryan Isaac:
Okay.

Matt Mulcock:
So above average patients is enough.

Ryan Isaac:
Oh, okay. So the only above average thing you have to do over a career is the amount of time you stick to something.

Matt Mulcock:
Yes.

Ryan Isaac:
Do that above average.

Matt Mulcock:
Yeah.

Ryan Isaac:
Meaning the average human just doesn’t stick to things long.

Matt Mulcock:
They really don’t.

Ryan Isaac:
Health, fitness, business stuff, investing, we just don’t, that’s…

Matt Mulcock:
In particular, investing.

Ryan Isaac:
Yeah. For sure. I think that’s really true. Yeah. Our tagline, what is it? Even Dentists Money Show help. Where we help dentists makes smart financial decisions, but we sometimes say and avoid bad ones along the way.

Matt Mulcock:
Yeah.

Ryan Isaac:
I think that’s just so crucial. And we’ll get into this here, but I think it’s easier than you think to avoid bad mistakes. And I’ve found, and we talked about this too, most dentists, like when they call and they’re like, I have this big decision, I find that most people know what they should do.

Matt Mulcock:
Oh, almost every time.

Ryan Isaac:
Like, people know in themselves what they, what the right answer is on things.

Matt Mulcock:
They just wanna reflect back.

Ryan Isaac:
You just need to walk through it with somebody because you’re in your own head, you’re emotional, you’re panicked, you’re excited, you’re scared, like whatever it is, walking through it with another person. If they are trained enough or if you fielded thousands of questions from a dentist in your career, then like, you know how to walk somebody through the investigation phase of like, should I do this thing or not?

Matt Mulcock:
Yeah. Yeah.

Ryan Isaac:
And people know what they should do if you just give them some time to talk to somebody.

Matt Mulcock:
Yeah.

Ryan Isaac:
And so that’s funny. It’s like, what’s the secret to avoiding big mistakes? It’s like, talk to somebody.

Matt Mulcock:
Yeah.

Ryan Isaac:
Talk to someone.

Matt Mulcock:
I think that is honest like…

Ryan Isaac:
Hire a money therapist.

Matt Mulcock:
Hire a money therapist, have a hopefully an objective third party in some way. It could be a friend. It could be a partner. You know, we did this recently. We did a… I don’t know where… It was during the workshop. We were doing some research and found like, where do most people get their financial advice from?

Ryan Isaac:
Oh yeah.

Matt Mulcock:
Right. And I can’t remember all the categories, but you know, there was quite a spread, but over 20% of the survey said no one.

Ryan Isaac:
Yeah.

Matt Mulcock:
They get no help from anyone.

Ryan Isaac:
And then like another it was like, yeah, there were like three big categories that made up like 80% of the results.

Matt Mulcock:
Yeah.

Ryan Isaac:
A huge one was no one, a huge one was social media.

Matt Mulcock:
Social media, partner was another one. I think advisor was also big.

Ryan Isaac:
Good. This is from Investopedia. You can google this. This is a top article they wrote last year called The Top 10 Most Common Financial Mistakes. I was interested in this because I wondered how Investopedia is a just a general finance blog website. I wondered how relatable this would be to dentists. So when I heard the janitor freezer story, I thought about…

Matt Mulcock:
A good, it’s a good lead in.

Ryan Isaac:
I thought like, well, let’s talk about some of these mistakes. There’s 10 and so let’s just kind of go through and see like how much do they relate? And I don’t know if they’re ranked in order of…

Matt Mulcock:
Importance.

Ryan Isaac:
But they might be because number one is excessive and frivolous spending.

Matt Mulcock:
Yeah.

Ryan Isaac:
Now this audience is going to relate to frivolous spending to the tune of like a Netflix subscription.

Matt Mulcock:
The audience you’re saying they’re writing to.

Ryan Isaac:
Yeah. The Investopedia.

Matt Mulcock:
The example they gave is like just $25 per week spent on dining out costs you $1300 a year. So it’s a different audience.

Ryan Isaac:
It’s a different scale.

Matt Mulcock:
Different scale.

Ryan Isaac:
But excessive and frivolous spending. So our average spending according to last year’s numbers from dentists was like 15,600 per month.

Matt Mulcock:
I think it was just over 16,000.

Ryan Isaac:
Oh, it was over. It was like maybe 16.5.

Matt Mulcock:
Yeah. Yeah.

Ryan Isaac:
It used to be 19. We’ve been working with younger and younger people who haven’t quite hit the excessive spending mark yet.

Matt Mulcock:
Yeah.

Ryan Isaac:
Dentists tend to spend a lot of money. I guess we were already just referencing the first episode we ever recorded on this podcast eight years ago was about spending. And there’s a lot of factors why dentists tend to spend a lot of money, but I would, I mean, and it has to be one of like the most annoying things to talk about in a financial plan, but it’s got to be one of the biggest problems that we all face.

Matt Mulcock:
Yes.

Ryan Isaac:
We all face this stuff. We’re doing a webinar this week with Victoria on spending. You can go to dentistadvisors.com, check out the webinar. So this is, what are we in July of 2023?

Matt Mulcock:
By the time this comes out it will already have been out.

Ryan Isaac:
So it’ll be on the website, but we’re doing a full webinar on spending and we have tons of content on this, but I mean, agree or disagree. I agree that this is totally relatable to dentists’ excessive and frivolous spending. If we’re gonna give a tip on how to help this, we always talk about reverse budgeting.

Matt Mulcock:
Yeah.

Ryan Isaac:
So you can triage your budget for like a month or two, like really dive in, that’s helpful every once in a while, I think. But the real way to do it is to automatically remove money from your business checking account before it ever comes home and goes somewhere else before you have a chance to spend it.

Matt Mulcock:
Yeah.

Ryan Isaac:
And so we do that. We help control our client spending through automated savings and by being an annoying financial therapist who checks in throughout the year.

Matt Mulcock:
Which we now are, ’cause we just said.

Ryan Isaac:
I’m now I’m self-titling. I’m rebranding, dude.

Matt Mulcock:
Financial therapist, money therapist.

Ryan Isaac:
I’m personally rebranding.

Matt Mulcock:
Yeah, let’s do it.

Ryan Isaac:
I’m midlife dude. So I’m like…

Matt Mulcock:
Do whatever you want.

Ryan Isaac:
I’m leaning into that.

Matt Mulcock:
Yeah.

Ryan Isaac:
Like I’m leaning in. I’m a financial therapist. There’s actually a designation.

Matt Mulcock:
There is.

Ryan Isaac:
I think I’m gonna go get it.

Matt Mulcock:
Victoria is working on it.

Ryan Isaac:
I’m gonna go get it. Okay. We as annoying advisors, check in a lot with our clients throughout the year and make sure, one of the subjects we talk about a lot is, what are you saving? What’s your savings rate? And that’s a way to combat this spending problem. So, I agree, I think it’s relatable to dentists. Anything you wanna say about that at all?

Matt Mulcock:
Yeah. I mean, you were talking about how important this is. It is important. But most people when you bring this up, they roll their eyes or they avert eye contact ’cause…

Ryan Isaac:
It sucks.

Matt Mulcock:
It sucks. And they think…

Ryan Isaac:
It’s lame.

Matt Mulcock:
We’re gonna talk about budgeting and we’re not. We don’t believe in budgets as a long-term strategy. But if you really think about it, this is why I’m glad it’s number one. All this is meaning this being financial planning, everything to do with your money, planning for the future, planning for right now, all of it is just spending.

Ryan Isaac:
Yeah.

Matt Mulcock:
Planning, spending. Whether…

Ryan Isaac:
How much, how much do you need? Well…

Matt Mulcock:
Well, and think about it. All of this, because even if you talk about savings, all… What is savings? It is just investing for future spending.

Ryan Isaac:
Spending. Yeah. Yeah. Totally.

Matt Mulcock:
So this is like the foundation when it comes to like the technical part of your financial plan…

Ryan Isaac:
So true.

Matt Mulcock:
Is spending. So by avoiding the conversation, by avoiding even thinking about it, by avoiding tracking it, what you’re do… Like how do you even have a plan or a strategy if you don’t even know what you’re spending is or how it’s trending.

Ryan Isaac:
How it’s trending or what it looks like?

Matt Mulcock:
Or… And I like that you, I mean they use the word frivolous. What I’d say, what we tell people all the time on this is mindless. We don’t care about, like, when they say… I’d say excessive and mindless spending.

Ryan Isaac:
Mindless spending. Yeah.

Matt Mulcock:
Intentional spending. But the only way you know if it’s intentional versus mindless is by having a plan. Having a strategy, being organized. Tracking. And you can actually categorize this, what’s [0:19:50.6] ____.

Ryan Isaac:
I was just gonna ask? You did this in the workshop or someone did in the workshop over the weekend with Guiding Leaders about who cares if it’s maybe it is, maybe it is frivolous, but it actually makes your life so much better that you waste your money on this thing.

Matt Mulcock:
Exactly.

Ryan Isaac:
But you have to… You got to go through that.

Matt Mulcock:
You gotta know what that is like if it’s excessive or not, that’s the key. Is it excessive or not?

Ryan Isaac:
Excessive, mindless.

Matt Mulcock:
That’s like a quantitative measure. Excessive or not. Frivolous or mindless or frivolous or whatever to your point. It could be frivolous or like you spend money on something that I think may be frivolous and…

Ryan Isaac:
Who cares.

Matt Mulcock:
Vice versa who cares.

Ryan Isaac:
But if it adds to me and I’m doing it not mindlessly. I’m doing it very intentionally that’s a different story.

Matt Mulcock:
Intention is the key there.

Ryan Isaac:
Yeah. Someone at the workshop, I don’t remember who it was, when she said that she did that exercise with her budget. But she went through and she’s like, “Okay, I love this category and I’ll blow money here all day long. I don’t care. I will spend money all day long.” But these other categories, I don’t care, but I’m mindlessly spending here, so I’m gonna cut this one out, keep this one and it makes me happy. All right. Number two…

Matt Mulcock:
We gotta speed this up if we’re gonna get through all 10.

Ryan Isaac:
Oh my gosh.

Matt Mulcock:
Where are we at?

Ryan Isaac:
We might, we’re 20 minutes. We might…

Matt Mulcock:
Let’s roll.

Ryan Isaac:
We’ll probably do some editing. I think the point here is yay or nay this apply to dentists. And is there something, a tip we can give about it?

Matt Mulcock:
So tip there, get organized, be aware of your spending and then the biggest thing there is don’t rely on discipline, rely on a system. Reverse budgeting.

Ryan Isaac:
Oh yeah, boo yeah.

Matt Mulcock:
Oh yeah, boo yeah.

Ryan Isaac:
Number two, never ending payments. Now I think a dentist might hear this and this is different than the average American consumer where never ending payments might be like an installment plan on a TV or cars and credit cards, and a dentist might hear this though and be like, yeah, practice loans, equipment loans, build out loans, student loans, never ending payments, this sucks. We would say, no, that’s the cost to you being in the top earning career in the whole country.

Matt Mulcock:
It’s a pay to play right there.

Ryan Isaac:
That’s just what it takes. That money is an investment into the stuff you’re doing. However, I would say where… This is what I would add. One area where dentists can get in trouble with debt it’s just structuring their debt the wrong way. So there’s an eagerness to get rid of it. So you’ll see a dentist get a huge practice loan or a build out loan and put it on too short of a schedule because that just feels like what they should do to get rid of it faster and the payment is so high, it just chokes them every month and they can’t get ahead of things. So, one tip would be like, don’t be afraid of your business debt. Put it on long schedules. Keep your payments low. You can always have flexibility to pay higher, pay more later. Keep your payments as low as possible especially in the early years. That’s where I would say dentists get in trouble with this never ending payments thing. It’s not the fact that you have never ending payments. We have extremely wealthy clients who retire with a very high net worth that’ll sustain their spending forever and they retire still with debt.

Matt Mulcock:
With debt. Exactly.

Ryan Isaac:
Like millions of dollars of debt sometimes. It’s not about your debt, it’s about your net worth when it’s all subtracted.

Matt Mulcock:
Totally.

Ryan Isaac:
So that’s what I would say.

Matt Mulcock:
The only other thing on this too it’s always good to review your P&L for multiple reasons. But if you think about this right here on Investopedia is talking about… Again, it’s a different audience. They’re talking about subscription services or payments or whatever within your personal life, Netflix or whatever. That’s always good to review. Again, it kind of correlates to the first topic, but even in your business, someone mentioned this over the weekend at this workshop of just doing a review of subscription services for marketing or softwares you have or just things that you’re doing in the business. I do think those are the never ending payments. I think it’s also referring to is not only on the personal side, but that’s happening a lot more on the business side. And it’s like, are you actually… I think it’s just good…

Ryan Isaac:
Do you need the stuff.

Matt Mulcock:
Maybe once a year, twice a year. Just review what have you signed up for at an event or something and you need to reevaluate that.

Ryan Isaac:
Is that CEE helpful?

Matt Mulcock:
With the a CEE, exactly.

Ryan Isaac:
Or the subscription is helpful.

Matt Mulcock:
Exactly.

Ryan Isaac:
And not like dentists don’t get buried with boat payments and car payments.

Matt Mulcock:
Oh totally.

Ryan Isaac:
And vacation home payments. That happens too. Number three is living our borrowed money. I think it relates to number two, the never ending payments. This seems a little different for me. This is referring to people who are literally paying their monthly expenses on debt.

Matt Mulcock:
Credit cards.

Ryan Isaac:
Credit cards and loans.

Matt Mulcock:
Yeah. And it mentions that.

Ryan Isaac:
So…

Matt Mulcock:
I don’t see many dentists doing that.

Ryan Isaac:
No. That is not common. However, that does happen with dentists. And that is where emergency lights are going off. If you are a dentist…

Matt Mulcock:
Rolling credit card debt.

Ryan Isaac:
Rolling credit card debt to pay for basic living expenses or like lines of credit to do this, you’ve hit an emergency situation and you have to evaluate everything critically immediately now. And mostly in the… Start with the practice and the cash flow in your P&L and what is going on in your business, why there’s no money which might have all kinds of answers, but I don’t think this applies as much. Dentists typically aren’t living expense money on borrowed money.

Matt Mulcock:
And again, like you said, if you are big red flags…

Ryan Isaac:
Emergency time.

Matt Mulcock:
You got to figure that out.

Ryan Isaac:
Number four is buying a new car. This audience, this general Investopedia audience probably. New cars are things. I don’t think cars bury dentists.

Matt Mulcock:
I don’t see it too often. At least with our clients, we get a lot of questions on this. Like, should I finance a car versus pay cash?

Ryan Isaac:
I’m gonna say nay on this one.

Matt Mulcock:
I’m gonna say nay. I don’t think it’s a big deal for dentists as much.

Ryan Isaac:
Yeah, and you probably get those discussions like, “I’m gonna get a car, should I pay cash or loans?” I’m like, honestly, cars are not deal breakers for dentists.

Matt Mulcock:
Usually not.

Ryan Isaac:
Usually not. Every once in a while someone is really into it and they have thousands and thousands of dollars of payments in cars and that’s so rare though. So I’m like, I don’t really care. Get a loan for your, get a car payment, it’s not…

Matt Mulcock:
I think, make sure it fits your cash flow, but cars nowadays, like, yeah, you can go overboard for sure, but we just don’t see this too often where it’s gonna break a dentist…

Ryan Isaac:
No.

Matt Mulcock:
With the incomes that they have. I’ll say this, it could be a mistake. I don’t see a car usually being a deal breaking mistake.

Ryan Isaac:
Especially if you’re a later career. If you’re brand new in your career and everything is… Like your income is low and everything is expensive, if you’re a brand new associate. Yeah. Maybe the expensive car, just wait a little while. You can get nice cars as a dentist…

Matt Mulcock:
Of course.

Ryan Isaac:
If that’s your thing.

Matt Mulcock:
Yeah.

Ryan Isaac:
The next one though, ’cause this is the one that came to mind for me. Number five.

Matt Mulcock:
It’s a big one.

Ryan Isaac:
Spending too much on your house.

Matt Mulcock:
Oh yeah.

Ryan Isaac:
So… I think it’s just a human thing. We talk about this a lot. Real estate has to be the most emotional asset class and purchase that exists, period.

Matt Mulcock:
Yeah.

Ryan Isaac:
That’s why we get feed… Like, you’ll hear people talk about real estate and in really unrealistic things like the tax breaks are so much bigger and more magical than you think. The returns are higher and it’s so wonderful. And it’s because it’s such an emotional asset class.

Matt Mulcock:
Absolutely it is.

Ryan Isaac:
And it’s not just a dentist thing. I mean, most of us…

Matt Mulcock:
Humans.

Ryan Isaac:
We’ll dip into our emergency funds for the down payment.

Matt Mulcock:
We’ll justify.

Ryan Isaac:
Yeah. We go house shopping with a budget and then what do we do? You know, we always go…

Matt Mulcock:
Pull it out of the water.

Ryan Isaac:
We’re always above budget. Like, all right. I think I’m gonna make a little more next year. So like, let’s just get a little more house.

Matt Mulcock:
Yes. Here is the two things that happen with houses almost every time, especially with building or remodeling or I guess buying a new one. Either any of those three categories. Here’s what I hear almost every time. Some iteration of this. Number one, I’m doing it for the kids.

Ryan Isaac:
Okay. Yeah.

Matt Mulcock:
Something like that.

Ryan Isaac:
Some memory-related, nostalgia-related.

Matt Mulcock:
Sure.

Ryan Isaac:
Yeah. Yeah.

Matt Mulcock:
Here’s my take.

Ryan Isaac:
Emotion-related thing. Yeah.

Matt Mulcock:
Dare I say maybe a hot take.

Ryan Isaac:
Because It’s hot. All right.

Matt Mulcock:
Your, like, we talk about memories. Your kids and you, your family can make memories, will make memories anywhere.

Ryan Isaac:
With a small backyard?

Matt Mulcock:
With a small backyard.

Ryan Isaac:
Okay.

Matt Mulcock:
With a big backyard.

Ryan Isaac:
A small living room?

Matt Mulcock:
A small living room.

Ryan Isaac:
A big kitchen.

Matt Mulcock:
A big kitchen.

Ryan Isaac:
A small kitchen.

Matt Mulcock:
With backsplash. No backsplash. With nice furniture, crappy furniture.

Ryan Isaac:
Bowling alley in the basement.

Matt Mulcock:
Bowling alley.

Ryan Isaac:
Or not.

Matt Mulcock:
Maybe.

Ryan Isaac:
Yeah.

Matt Mulcock:
Yeah. Could be bowling alley in the basement.

Ryan Isaac:
A movie theater?

Matt Mulcock:
Could also just be going to the bowling alley.

Ryan Isaac:
Could be going to the bowling alley. Yeah.

Matt Mulcock:
Right?

Ryan Isaac:
Yeah.

Matt Mulcock:
So all I’m saying is the memories you make with your family have nothing to do with how nice your countertops are.

Ryan Isaac:
Yeah.

Matt Mulcock:
Zero Impact.

Ryan Isaac:
And they probably have everything to do with how much stress you’re under as a parent.

Matt Mulcock:
Absolutely.

Ryan Isaac:
Yeah. Like if you’re buried under stress, career work, financial stress, like you probably won’t enjoy the big backyard and the pool anyway.

Matt Mulcock:
Yeah. If those things own you, meaning emotionally ’cause you think you have to create this life that you have envisioned and you’re more stressful because of it, chances are you’re actually hindering those memory create, like those, that memory creation.

Ryan Isaac:
Yeah. You will.

Matt Mulcock:
‘Cause your kids want your attention. They don’t give a crap about your money. So I just thought that had to be said.

Ryan Isaac:
I don’t think that’s a hard take. I think that’s really good. What would you… Okay. So given the fact though that we as humans are still going to do what we do with real estate, which is buy more than we can handle most of the time. And every time someone builds a house or remodels a house as a client, they’re like a year later, are they over budget? Like every time. Right?

Matt Mulcock:
If they’re building?

Ryan Isaac:
Yeah.

Matt Mulcock:
Every single time.

Ryan Isaac:
Building or remodeling something big. Every time they’re over-budget.

Matt Mulcock:
I’ve never ever… So my best friend…

Ryan Isaac:
There’s no such thing as a budget.

Matt Mulcock:
My best friend and my brother, my best friend for the 30… For literally 30 years, and then my brother, both home builders, custom-home builders in Utah. Never once, never once in the countless homes they’ve both built and the experiences we’ve had with clients I have never once seen anyone go under-budget.

Ryan Isaac:
No.

Matt Mulcock:
It just doesn’t happen.

Ryan Isaac:
Or even hit it.

Matt Mulcock:
No, no. I always tell people, okay, show me your budget. We’re going through these conversations and I’m like, all right, add 30%.

Ryan Isaac:
Yeah.

Matt Mulcock:
‘Cause that’s what it is.

Ryan Isaac:
Yes. I mean I did a small remodel in a house we bought two years ago.

Matt Mulcock:
Did you go under budget?

Ryan Isaac:
No, man. I mean, it was like, it was like full kitchen stuff and we were all, we were about 40% over.

Matt Mulcock:
Yeah. That’s… Yeah. That’s probably close to average, and the things that people always forget about that it just happened to me with a client. Went through the whole thing. I said, cool. What are you doing for furniture? It’s a brand new build.

Ryan Isaac:
Oh.

Matt Mulcock:
Oh.

Ryan Isaac:
How much is furniture?

Matt Mulcock:
A lot, dude. And then we went through it again.

Ryan Isaac:
Stupid furniture.

Matt Mulcock:
And I went through their budget or their whole breakdown and I was like, oh, what about landscaping? I don’t see landscaping now.

Ryan Isaac:
Are plants expensive?

Matt Mulcock:
Yeah. And they’re like, “Oh, landscaping.”

Ryan Isaac:
I was shocked once in my life at how expensive plants are. I don’t get it.

Matt Mulcock:
It is. I’m very into plants.

Ryan Isaac:
You are, you know.

Matt Mulcock:
Very much.

Ryan Isaac:
You know.

Matt Mulcock:
And it’s expensive.

Ryan Isaac:
It blew my mind. I had no idea.

Matt Mulcock:
Huge.

Ryan Isaac:
I ended up buying tiny baby ugly plants that never grew and they look sparse and terrible. So…

Matt Mulcock:
Here is one more. Sorry. I’m gonna tell you. The other thing that I hear.

Ryan Isaac:
Oh yeah.

Matt Mulcock:
It’s the kids thing. Number two is the financial justification for a lifestyle upgrade, right? Meaning how many times have you heard this, I’m gonna build this house, remodel it or buy this new house, but it’s gonna be worth so much more.

Ryan Isaac:
It’ll be fine and I’m gonna be making more money later. And I’ll be glad that we went bigger instead of like, yeah.

Matt Mulcock:
That’s actually, I think pretty fair. Like if it meaning that part…

Ryan Isaac:
You think that’s fine if someone is expecting their income to grow and they have a reliable, logical way of assuming that, you think that’s fine.

Matt Mulcock:
Yes. I actually think that justification or that’s a reality. Right?

Ryan Isaac:
Okay.

Matt Mulcock:
So if you’re 5 years into dentistry or maybe you’re just buying a practice, meaning I still think the numbers matter like, we’re gonna look at your debt to income ratio on that and make sure that there’s not too much. But…

Ryan Isaac:
But if you’re like, it’s a struggle for a couple years, but you’re as… And you know where your career is headed…

Matt Mulcock:
You know where your boundary is.

Ryan Isaac:
So yes, we’re fine.

Matt Mulcock:
Yes. ‘Cause…

Ryan Isaac:
Okay.

Matt Mulcock:
The career progression and income progression for a dentist is actually pretty inevitable…

Ryan Isaac:
Yes.

Matt Mulcock:
If you’re doing the right things.

Ryan Isaac:
And predictable.

Matt Mulcock:
And very predictable. So I actually would be fine. So just for real numbers here, we tend to say to be conservative or ideally you’d want to have a 20% debt income ratio on your house or housing payments. Meaning 20% of your gross income is going towards housing costs. Right? You might be hearing that and saying, I make, okay, I make $10,000 a month. These are low, but only $2,000 can be going towards my house. Well, we’d push that. If you knew a dentist, we’d say, oh no, you can actually push to let’s say 30%. Because we know that your income is only going up. But what I was saying with the justification of like, I’m gonna go overboard from a, I’m gonna lose all my liquidity, or I’m gonna extend myself with debt to the point that’s going off the charts but hey, on the back end of this, the house is gonna be so worth so much more.

Ryan Isaac:
Oh.

Matt Mulcock:
And it’s like…

Ryan Isaac:
Assuming the value is gonna make up for all that difference.

Matt Mulcock:
Yeah. And well, not only that, but I’m like, my answer or my question every time is, are you gonna sell the house?

Ryan Isaac:
Yeah.

Matt Mulcock:
And the answer is no. So I’m like, then what do you care?

Ryan Isaac:
What does the value matter?

Matt Mulcock:
What does it matter? You’re making a lifestyle choice, which by the way is totally fine.

Ryan Isaac:
Yeah. Great.

Matt Mulcock:
Totally fine.

Ryan Isaac:
It’s conscious.

Matt Mulcock:
Just don’t justify it with the financial rationalization.

Ryan Isaac:
Number six is using home equity like a piggy bank. I don’t think dentists deal with this at all, almost never.

Matt Mulcock:
I don’t see this much.

Ryan Isaac:
This goes back to living on credit for your living expenses. If you are paying living expenses about out of home equity, we are an emergency territory. And we have… We have to look at things as drastic as maybe you should not be an owner right now. Maybe you just need a really good job and like cut back a whole bunch of stuff for a few years. Drastic situation if you’re in that one. Number seven, living paycheck to paycheck. Yes.

Matt Mulcock:
Yeah. I see that all the time.

Ryan Isaac:
Yeah. This is happening. I would say again, just averages. The average dentist does not even have to be in that situation at all. By the time you hit like mid-career…

Matt Mulcock:
Oh no, shouldn’t be.

Ryan Isaac:
As an average dentist. There should be cashflow.

Matt Mulcock:
It comes back to…

Ryan Isaac:
It’s not that hard.

Matt Mulcock:
The number one for those…

Ryan Isaac:
It’s just…

Matt Mulcock:
Or the mindless spending, not being organized.

Ryan Isaac:
And I shouldn’t say it’s not that hard. It’s not that hard mathematically just like spreadsheet style to see how it should work pretty simply. But it is hard to keep in control. It gets out of control fast.

Matt Mulcock:
I agree. A lot of rich broke people out there.

Ryan Isaac:
Yeah, Yeah. And that’s the… Yeah, I mean there’s a lot of confusion with the word wealth and how that relates to income versus actual wealth. And high incomes is… Does not equal wealth.

Matt Mulcock:
Does not mean wealth. Yeah.

Ryan Isaac:
What did they say in a US household personal savings rate? Oh, yeah.

Matt Mulcock:
In 2021.

Ryan Isaac:
Yeah, So savings rates in. I mean, okay. This article is relating living paycheck to paycheck with a savings rate and that’s one of our biggest metrics. So when we do financial planning we break things down into metrics and analysis. And one of the biggest metrics that tells us the most important story is someone’s savings rate. What percentage of your gross income are you saving for your future self? That will tell a huge story on how well you’re living within your means. So number eight, not investing in retirement. Yes. Applicable.

Matt Mulcock:
Yes. I see it all the time.

Ryan Isaac:
If we were to say like, why does this happen often? I would say dentists sit on cash for too long, quite often. That’s a funny common mistake dentists make is sitting on too much cash.

Matt Mulcock:
Oh, we see it all the time.

Ryan Isaac:
And there’s a lot of reasons for that. Why else do you think that they don’t invest for the future?

Matt Mulcock:
I think it comes back to some of the stuff we mentioned, like they’re, the mindless spending, they’re thinking too much about, or just they’re not thinking enough about it.

Ryan Isaac:
Yeah, what about for a dentist who has the money? It’s not… They have the cash flow, but they’re just not doing something for the future. Whether it’s more business investment, it’s real estate investment, it’s stocks and bonds and mutual funds.

Matt Mulcock:
Oh, I think there’s a couple things. Number one, something around fear, they’re scared. Number two and in no particular order. So fear is part of it. I think maybe more than that would be what I’d call like paralysis by analysis. It’s like, they’re stuck. They let the desire for precision or perfection be like the enemy of them taking or making progress of them actually just taking a step. We see this all the time. They’re trying to find the “perfect strategy” and then they end up just getting distracted or not doing anything. I think that happens quite a bit actually.

Ryan Isaac:
I think that’s true. I think there’s so… There’s such a lack of education around money and finance and investing. And according to that study we were just referencing, almost half of those participants surveyed got either no financial advice from anybody, had no source or got it from social media. Almost half of the people involved. So, and then another chunk was from their like significant other, which is like, that could be okay. But that’s…

Matt Mulcock:
Who’s also getting it from social media. See.

[laughter]

Ryan Isaac:
Yeah. And who’s also emotionally wrapped up into the same financial situation. So a vast majority of people are making financial decisions without much context. I think education is the key and just being patient and learning from a trusted source can change a lot there. And then just getting started with something like momentum.

Matt Mulcock:
Yeah, just exactly. Just getting started.

Ryan Isaac:
That’s why I think that’s a thing. Like not investing, not doing something. Number nine is paying off debt with savings. I don’t think this is like an… Like a problem problem where lots and lots of dentists are doing this. However, dentists getting really emotional and antsy about the debt that they carry and then trying to pay it off too quickly ahead of other priorities is a problem.

Matt Mulcock:
Definitely a problem.

Ryan Isaac:
So before having enough liquidity just for like emergency funds. Before investing in their practice, before even buying a practice, they will get rid of a liquidity just to pay off a chunk of debt, not even pay it off. And then the bank is like, “Sorry, I can’t lend you through the purchase you want to make for your practice acquisition ’cause you have no liquidity.” Or not investing for the future. We were talking about this to the group Guiding Leaders too. I’ve met, I mean you have too, a lot of people who spent half their career paying off every shred of debt. House practice, student loans, but ended up in their 40s with no debt, but no liquidity. And then if you contrast those people who just kept their minimum payments around and built liquidity into their 40s my experience is that the people who have debt but have liquidity have way less stress than people who have no debt and no liquidity. I think liquidity is like the stress indicator of all stress indicators. Like how many years worth of like accessible funds could you get your hands on at any given moment?

Matt Mulcock:
I don’t think it’s even close. If you fast forward in those, in that scenario, more liquidity, even with more debt is a better situation than…

Ryan Isaac:
Yeah, no question.

Matt Mulcock:
No debt and no liquidity.

Ryan Isaac:
Yeah. And so it’s not like, are we like anti-paying off net? No. I’d love to see a dentist have like a big net worth of no debt and tons of investments.

Matt Mulcock:
Totally.

Ryan Isaac:
That would be ideal. And there’s a place and a time just like there’s a place and a time to have the dream house or the boat or whatever your thing is. There’s a place and a time to like get rid of debt really quickly.

Matt Mulcock:
Absolutely yes.

Ryan Isaac:
It’s not in the beginning of your career at the expense of other stuff.

Matt Mulcock:
Totally.

Ryan Isaac:
It’s just not.

Matt Mulcock:
I actually see a bigger problem on this one in particular than ’cause they’re saying using savings, like you’ve piled up all this money, you’re paying off debt. I actually think a bigger problem for dentists that we’ve seen, and it’s actually kind of the opposite of this, is if dentists are paying off debt, like extra payments to debt, they’re doing it incrementally. They’re doing it with just extra payments. And I actually would argue that’s a bigger deal. It’s a bigger problem.

Ryan Isaac:
Okay, ’cause you’re saying you’re taking an extra thousand bucks here, an extra thousand bucks there and just chucking it randomly at some debts.

Matt Mulcock:
Yes, ’cause I… So here’s what I tell people all the time. If you’re gonna pay off extra payments to debt then especially now don’t do it incrementally. Don’t do it with extra payments. It’s like the worst way you could do it. Instead take those extra payments you were gonna do.

Ryan Isaac:
Yeah.

Matt Mulcock:
Let’s say it’s 1500 bucks a month.

Ryan Isaac:
Yeah.

Matt Mulcock:
Like I’m gonna go put this towards my student loan.

Ryan Isaac:
Yeah.

Matt Mulcock:
Right. Whole other topic now with all the stuff coming up.

Ryan Isaac:
Yeah.

Matt Mulcock:
But let’s say it’s gonna go towards X debt, X loan.

Ryan Isaac:
Yeah.

Matt Mulcock:
I’m gonna, so there’s option A, you put that towards your extra payments.

Ryan Isaac:
Yeah. You send it in.

Matt Mulcock:
You just send it in.

Ryan Isaac:
You just send it in. And it’s gone.

Matt Mulcock:
It’s paid off, it’s gone.

Ryan Isaac:
Your liquidity is gone. But it didn’t change your rate, it didn’t change your payment.

Matt Mulcock:
Didn’t change…

Ryan Isaac:
The loan went down a little bit more but it was not gone.

Matt Mulcock:
Not gone.

Ryan Isaac:
Yeah.

Matt Mulcock:
Versus you take that $1,500, you put it into a savings account, a high yield.

Ryan Isaac:
A high yield, a CEE.

Matt Mulcock:
A high yield savings account. You’re making now four and a half to 5% of that money.

Ryan Isaac:
Yeah.

Matt Mulcock:
So you put that money away and then every, at some increment, right? Some cadence, let’s say it’s every quarter, or I’d say twice a year, you are then evaluating, you’re…

Ryan Isaac:
Oh yeah.

Matt Mulcock:
Taking a step back. You’ve seen that money pile up?

Ryan Isaac:
It is interesting. Yeah.

Matt Mulcock:
Now you’re sitting on it as opposed to…

Ryan Isaac:
That’s 20 grand.

Matt Mulcock:
1500 or whatever. Now you got 20, you got 30 grand and you’re looking at that and saying…

Ryan Isaac:
Do you wanna send that to the student loan or no?

Matt Mulcock:
: Do you wanna pay that off or hey…

Ryan Isaac:
Wanna keep it growing.

Matt Mulcock:
Maybe your situation has changed.

Ryan Isaac:
Yeah.

Matt Mulcock:
Keep your options open.

Ryan Isaac:
Yeah.

Matt Mulcock:
We’ve said this before. Liquidity and cash is the ultimate…

Ryan Isaac:
And flexibility.

Matt Mulcock:
Flexibility, is the ultimate change your mind insurance.

Ryan Isaac:
Financial flexibility.

Matt Mulcock:
That’s what it is. It’s change your mind insurance.

Ryan Isaac:
Ooh. Yeah. Yeah. Yeah.

Matt Mulcock:
So, if you put that money away, save it, pile it up, and then still with the intention of paying it off.

Ryan Isaac:
Yeah.

Matt Mulcock:
But you don’t know how your mind is gonna change…

Ryan Isaac:
In the future, I know.

Matt Mulcock:
In the future, and if you’re six months in and all of a sudden you see this money piling up, you’re like, dang.

Ryan Isaac:
The pile of money might change the way you feel about your debt.

Matt Mulcock:
Might completely change it. And guess what? That gives you the option ’cause you’re never gonna go to that student loan servicer or the car payment. Well, I guess, I mean, you could re-leverage the car, you could re-leverage the house.

Ryan Isaac:
Yeah.

Matt Mulcock:
But that’s a whole big process. But let’s say student loans specifically, you’re never gonna go back to that servicer and be able to get your money back.

Ryan Isaac:
Yeah, I know.

Matt Mulcock:
And say…

Ryan Isaac:
It’s gone, a black hole.

Matt Mulcock:
Hey, actually nevermind, something changed. I want my money back.

Ryan Isaac:
I need… Yeah. Oh yeah. Something came up. An opportunity or an emergency. I really wish I had that 1500 bucks back.

Matt Mulcock:
Exactly.

Ryan Isaac:
Yeah. I love that idea.

Matt Mulcock:
So I actually would say in this case, not only is that not a mistake, I’d actually say it’s the way to do it.

Ryan Isaac:
I like that.

Matt Mulcock:
Is pile it up in savings first and then set yourself an incremental time or you know, a frequency or a frequency to look at it…

Ryan Isaac:
To evaluate it.

Matt Mulcock:
Every quarter, every month.

Ryan Isaac:
I say question with your advisor throughout the year.

Matt Mulcock:
Yeah. Not every month, every longer than at least a few months. So every quarter or twice a year. Maybe even once a year.

Ryan Isaac:
Once a year.

Matt Mulcock:
End of the year.

Ryan Isaac:
Let it pile up.

Matt Mulcock:
Yeah.

Ryan Isaac:
And don’t put it in your checking account or your savings account. Get it like way away.

Matt Mulcock:
Away.

Ryan Isaac:
Yeah. It’s… Lock it up at a CED…

Matt Mulcock:
Set up an account. Title it your debt payoff account.

Ryan Isaac:
Yeah. Don’t touch it.

Matt Mulcock:
Put it away and then every year come back to it and look at what has happened. And yes. Okay. So someone might be thinking, well, my interest rate on it is 7% and I’m only giving 5%. I’m only getting 5% of my health savings account. Let’s say, a 2% difference.

Ryan Isaac:
Yeah.

Matt Mulcock:
I’d say great. That’s your premium for change your mind insurance.

Ryan Isaac:
Yeah.

Matt Mulcock:
You’re paying it premium.

Ryan Isaac:
What is that worth?

Matt Mulcock:
What is that worth?

Ryan Isaac:
What is flexibility worth to you?

Matt Mulcock:
Yes.

Ryan Isaac:
And that’s gonna be a different answer for anyone. I love that you said that, I’ve seen that happen. People do that strategy a lot and it’s so fascinating how often they don’t take the cash to pay off the debt. They keep it growing.

Matt Mulcock:
It happens a lot.

Ryan Isaac:
They keep it growing. They’re like actually I like this.

Matt Mulcock:
They are like oh actually, no, I’m gonna go invest this money.

Ryan Isaac:
I like how this feels, I’ll just keep paying my debt.

Matt Mulcock:
Totally.

Ryan Isaac:
And because more time usually, like we were saying earlier, it comes with increases in income and your debt is going down and you can see your net worth. And so, alright. Number 10, the last one. I love that they did this was not having a plan. The biggest mistake. And we say this is the biggest mistake dentists make. You don’t have a plan for what you’re supposed to do and it’s just a matter of, as a dentist, especially if you’re an owner, there are so many choices you have to make constantly with your money and your time, that at some point you won’t be able to evaluate those choices correctly in the right context and make the right decisions and more likely to make a mistake if you don’t have organized information in front of you and someone to talk to about with it.

Matt Mulcock:
Yeah.

Ryan Isaac:
So not having a plan. 100% yes. It is our answer when people say, what’s the biggest mistake dentists make? It’s being unorganized. Random acts of finance is what we call it. I would 100% do that and then so I mean, we do this in the group, we challenge people. Go make one change now, go make one change in not being organized. Maybe it’s just not knowing how much you spend. Maybe you haven’t looked at a P&L for a year. Maybe you just don’t, you’ve never calculated your net worth. Maybe you don’t know what all your debts are or what all the banks are. Go take one piece of information and get organized. But that’s the foundation for how we run our whole business with clients. Number one is organization before we make any decisions. And then throughout the year, everything’s based on data.

Matt Mulcock:
Yeah.

Ryan Isaac:
And that reduces back to the janitor. It reduces the likelihood of us going and just throwing a breaker without some context.

Matt Mulcock:
Even when the warning sign is literally right there in your face.

Ryan Isaac:
The warning signs of loss everywhere. Humans are gonna human, now we’re gonna throw a breaker, whatsoever.

Matt Mulcock:
We are gonna human.

[laughter]

Ryan Isaac:
All right, thanks for being with us. Matt, any closing words? Any parting comments?

Matt Mulcock:
No. That was great. No. That was great.

Ryan Isaac:
We need lunch.

Matt Mulcock:
We need some lunch.

Ryan Isaac:
Okay.

Matt Mulcock:
Go get organized.

Ryan Isaac:
Get organized. We need lunch. Don’t be that janitor. And if you’re worried about that you’re gonna be a janitor, just have a buddy. It’s better with a buddy.

Matt Mulcock:
Have a buddy.

Ryan Isaac:
Have a buddy to walk through your decisions with.

Matt Mulcock:
An accountant buddy.

Ryan Isaac:
An accountanta buddy.

Matt Mulcock:
Yeah.

Ryan Isaac:
I love that. Thanks for joining us. If you have any questions, dentistadvisors.com. We’ll catch you next time in another episode. Dentist Money Show. Bye-Bye now.

Behavioral Finance