Dentists: With the New Year, it’s Time to Assess Your Financial Plan

The Transcript

Art Wiederman, CPA: Hello, everyone, and welcome to another edition of the Art of Dental Finance and Management with Art Wiederman, CPA. I'm your host of this podcast. My name is Art Wiederman. I've been a dental CPA for 37 years, it will 38 years in September of twenty twenty two, and I'm very, very proud to have worked with the dental profession for as long as I have, which has pretty much been my whole career.

I am a dental division director at the CPA firm of Eide Bailly. I'm located, for those of you who have not listened to my podcast before, I'm located in Southern California. Our offices are in the city of Tustin.

And we are, if you can believe it, we are at the beginning of another year. Now we all know that since March of 2020, life is just not what it was before March of 2020. We don't need to go through what the last almost two years now has been with the COVID 19 pandemic. We don't need to get into that. But folks, life goes on and we are hopeful that although people are still getting the COVID 19 virus, that life has to be, for the most part, we hope, return to normal.

And what that means in my world is that means that we have to help people with their finances, and that's what this show is about tonight. I want to give you a really good start to 2022, and it's just going to be us tonight. And I want to just again remind everybody about what you should be doing to start looking at your financial plan now, should you be looking at your financial plan every week? No, every month. You don't have to do that, but once a year you need to sit down. If you're single, you do it by yourself. If you have a spouse or significant other, you need to do it with your spouse or significant other. And take a look and see, are you headed towards your financial goals?

That is the legacy that I have is to help people get there. And I'm going to help you tonight to basically take inventory. I want you to take inventory of where you are and what do we want to get done for twenty two? For example, do you have estate planning documents? Well, if I can get one of you out there to make a phone call tomorrow morning after you listen to this podcast to an estate planning attorney to start the process of getting your estate documents in order. I've done my job. If I can get one of you to start thinking about setting up a retirement plan in your dental practice, or to maybe look at working more on your practice so you can make more money to do that, or if I can get you to start saving money for your children's college education.

I put two children through private university. It's not fun if you don't save money. So that's what we're going to talk about tonight is it's twenty twenty two. Let's get going. If you have made a plan, let's review it. If you haven't made a plan, let's make a plan. But before we do this, I want to give you some updates on the government programs and also ask you to take a look at our wonderful partner Decisions in Dentistry website www.DecisionsinDentistry.com. Again, wonderful, wonderful articles. Clinical content. Fantastic. You know, a who's who of clinicians in the world and over 140 continuing education classes that you can purchase at a very, very reasonable price. That's www.DecisionsinDentistry.com.

If you're not working with a dental specific CPA, you should be. And we have over the last almost two years, I've talked to a couple of our friends at the Academy of Dental CPAs, www.ADCPA.org. We are, I was one of the founding members of this group are. We're all tired, folks. I won't. You are too, we're all tired, but you know, we've had to go through all the tax law changes and helping doctors, as we call it, saving the world one dentist at a time. That's what we've been doing. And we've helped a lot of people.

I've been I've been so honored that all the emails that I've gotten for the work that I've done and for the work that the Academy Dental CPAs has done all across the United States, helping thousands and thousands of dentists weather this pandemic, so you know, be nice to your CPA year, even in 2022, because now we're going to talk to you a little bit about the HHS Provider Relief Fund. The government hits just keep on coming. So if you're not working with a dental CPA, we at Eide Bailly work with almost a thousand dentists. In our office in Tustin, we work with about 300 dentists. My wonderful partner is Pam Chamberlain and Don Watson are just incredible. And if we can help you, let us know.

OK, so we've talked in the past about the employee retention tax credit real quick. For those of you who have a greater than 50 percent reduction in your gross receipts comparing quarter two of 2020 to quarter two of 2019, we are still filing amended payroll returns and getting tens of thousands of dollars of free government money for our clients and for many non clients. For many listeners of this podcast, but for twenty twenty one, it's much more robust. If you had a greater than 20 percent reduction in your gross receipts either for the fourth quarter of 2020 versus the fourth quarter of 2019, if you had that, we can use that in look back rules to take the credit in the first quarter of 2021 or in 2021. If you had a 20 percent reduction in either the first, second or third quarter compared to the first, second or third quarter of 2019. The credit is incredibly robust. It's $7,000 maximum per employee per quarter.

So let's just do some simple math. You have a large practice, you have 30 employees and they're all well paid and they each make seven thousand. They make $10,000 a quarter. If you qualify with a 20 percent reduction for the first quarter of 2021, you take 30 employees times 10,000 maximum. If that's what you paid them is $300,000 times 70 percent is the credit. You get a federal income tax credit of $210,000. That's not $2,100 folks, that's not two hundred and ten dollars, it's two hundred and ten thousand dollars and we have been getting some amazing credits for 2021 for some of our clients. Email me if you have any interest in that awiederman@eidebailly.com. My phone number at our office in Tustin six five seven two seven nine three two four three.

Now the HHS Provider Relief Fund. I want you to write this date down. We are doing a webinar on January 21st from nine to 11 a.m. Pacific. So interpolate that out. That would be noon to two in the East and 10 to what would that be? 10 to 12 in the Mountain Times and in the Central Time zone, 11 to one on January 21st. We are going to go through this portal. If you received more than 10,000 dollars from the HHS Provider Relief Fund between July one and December 31, which the majority of you did. You all, for the most part, got two percent of your gross receipts in July, August, September. If you got that money and you got the phase three money, you need to file with the Department of Health and Human Services HRSA. There is a portal. Go to www.HHS.gov and look up Provider Relief Fund. There's a whole bunch of information frequently asked questions and there is a workbook.

If you got this money, you have between January 1st and we're here, folks. It's about January 1st, right? It's January 1st. We're here and March 31 of 2022. You have to register on the portal, which you should have done already. And if you haven't, do it in December and then you have to fill out all the information and there is a workbook that is on the HHS website. Don't go on to the website and try and fill out all the information before you've gathered the information using HHS workbook. So once you do that, you fill it in. And if you've spent the amount of money that you received either on having lost revenues, which most of you will qualify under, or expenses used to prepare for and prevent COVID 19, then you will get to keep this money.

Please, if you don't hear me say anything else tonight, please hear this. If you don't file on their portal by March 31 and you can't, by the way, start the process of filing until January one, one January one is here. And again, we're here for you. You can go on and start filing. If you don't, they will lock you out and they will send you a letter saying, Dear Doctor, you didn't file on time. Please send us back whatever money you got. We don't want that to happen.

So that's the HHS Provider Relief Fund so January 21 from nine to 11 Pacific Time. Ashley Brandt-Duda and Tyler Bernier, the two partners at Eide Bailly who have lived and breathed this nightmare and myself are going to go through page by page, slide by slide, whatever you want to call it, of the Provider Relief Fund. And we're going to help you get through this so that you don't have to give this money back. So very, very important to remember that.

OK, folks. So let's get into our topic tonight, and our topic is it's twenty twenty two. Where are you on your financial plan? And you know, I've always said in this podcast, there are six or seven areas of financial planning that people always look at, and that is the first one is budgeting and cash flow management. Now I'm not going to tell you on this program, on any program, how much money to spend on your cable bill, how much money to spend on a vacation, how much money to spend on a car, how much how many times are we going to eat out? We're not going to waste our time with that. You know, we're all adults here, and some like to do that, but we're going to talk a little bit about that.

We talk about taxes, we talk about investments, we talk about insurance, we talk about retirement planning, college education, planning for your children and estate planning. Those are the areas of financial planning. So when you go to a financial planner, whether it be someone at a brokerage firm or someone at a fee based financial planning for someone and we're a fee based financial planner, we have a whole group that does that at Eide Bailly.

Whoever you go to, they're going to basically have you fill out a whole bunch information. What are your goals? What do you have? Where do you want to be when you're 65? How many children do you have? How much insurance do you need? Go through all that we're going to talk about this and what I want you to get out of this podcast tonight is that if you haven't started planning for some of this stuff and I get this, I get this from the clients, right? Oh, I'm 55 and I'm just I'm just going to have to work until I die and I get that. Unfortunately, I get that more often than I can tell you. It's shocking and I don't want you to do that.

The younger you are, the more time that you have, and the more you should be working on this because doctors let me tell you something, OK? I started in accounting when I was 12 and I was 16. I got my first accounting job and then I went to work for Deloitte, and then I had my own business. When I was 20, I started working for the Private Institute, the Pacific Institute when I was 24, and I owned the business when I was 30 and I had all the energy and all the enthusiasm in the world. And then you go through and you raise a family and you buy your first house and then the kids start wanting to be in soccer and this money goes out the door like nobody's business.

And then all these other things just kind of go by the wayside and then you get into your 50s and you say, you know, I've been doing this thing. I still like dentistry, but you know, the body is what you do is very physically demanding, and the body starts saying, Hmm, I don't know if I can go this hard, much longer, maybe another five or 10 years, and I haven't really started. So I want you to start thinking about these. If you are a little older, there's no better time than today. If you're younger, there's definitely no better time than today.

So what we what we find is that psychologically, when you get older, people burn out. I get that again. Remember, I'm talking to dentists every single day of my professional life. I hear burnout. I hear, Oh, I don't want to manage the staff anymore. I don't want to deal with the vendors anymore. I these insurance companies are driving me crazy and you know, you do something that's banging your head against the wall, sometimes for 20, 25 years, psychologically and physiologically. That's a big word for me. Physiologically, physiologically, that's like six. That might be a record for the Art of Dental Finance and Management, six syllables. But anyway, you get tired, folks. That's what happens. You don't have the energy. I talk to my doctors in their 50s and 60s. I go, We need new patients. Well, I don't really have. I don't have the energy to go out and do the marketing and learn the social media and go get involved in the community. I don't want to do that anymore. I'm tired.

Physical issues. I mean, you know, we're not, you know, unless you're Jack Lalanne and for you, younger people, Jack Lalanne was a guy that was he had an exercise show, a syndicated exercise show, and he lived well into his 90s. And the guy was doing unbelievable things. Unless you're big, you know, big exercise person, body starts to break down a little bit. And that happens. You buy a bigger home. Your kids are in college. If you haven't saved money again, I put two kids through private university, folks, it's not going to get less expensive, it's going to get more expensive.

You know, you have to always think about retooling your dental office, you know, new chairs and new computers and new units and new hand pieces that never ends. And one out of every four of us is going to help an elderly parent or our children in some way, shape or form that is going to happen. That's the statistics, and it's probably even higher than that. So that's why it's so important.

So I just want to go over a couple of things that I've gone over with folks. Let's start off with the big picture. My life is a math problem. That's what I always tell you, right? So I've used this before, but you can't hear it enough, OK? And if anybody who listens to my podcast is going to get mad at me because I'm repeating myself, so be it. But I'm going to do it here.

I have my sixty five, twenty five, ten rule. You know, let's say you make $200,000 a year. You live on 65 percent of it. That's one hundred thirty thousand. You're probably going to pay about 50,000 in taxes. And what do you do with the other 10 percent? You save it. For those of you who don't follow that rule, hopefully you're not following the ninety, twenty five, minus 15 rule, which means you spend more than you make. You struggle to pay your taxes and you add to credit card debt, which is the devil. And I've said that before, and we're not going to go into that tonight.

So very simple. If you have enough money to pay your bills, that's fine. But we need more money to save for college. We need more money to save for retirement. We want to think about paying that house off somewhere before, you know, at the time you retire. This is why the first thing you need to do is to do kind of a cash flow analysis. How much money does my practice make in one year? How much do I pay in taxes? So let's go back here.

If I have two hundred thousand of income and I pay and I spend, you know, one hundred and fifty thousand living expenses and my taxes are 50,000. How much do I have to do these other things? Zero. OK. Is that a problem? No, you can go every single year and spend what you make and you'll be fine. Not. You won't be fine because we're not saving for retirement and we're not saving for college. So, the first thing I want you to figure out is how much money every year can you save? And once we figure out that, then we can decide what do we want to do. So when you sit down and do your financial plan, we'll talk a little bit about debt.

You know, let's say that in 2022, it looks like you're going to have a really good year. Maybe you've taken some advanced cosmetic courses and maybe you have some really big full mouth cases that you know are coming up. They're going to be 50, 75, $100,000, maybe. And this year, you know, and again, we don't control what we don't control. But this year, it looks like it's going to be really good. And I think maybe we can save $75,000. OK. So what are we going to do with it? If you have credit card debt, I would encourage you to get rid of it first before we do anything else. Credit card debt is the devil. Credit card debt is going to accumulate at anywhere between 10 and 25 percent interest. You're never going to see it. But most of my clients, as long as they can make the minimum payments, that's fine.

Well, that's not fine with me. So I want you to get rid. I want you to be. I want one of your goals for this year to be. Maybe we don't get rid of all of it, depending on how much there is. But if you've got 20 or $30000 of credit card debt, I would make your number one priority to get rid of that credit card debt. Tear up the credit cards you don't use have one credit card that has a limit. Maybe that limit is $10,000 or $15,000. Why so low? Because I want you to pay that credit card off every single month. I have an automatic payment in my bank account that on the 21st of the month, they take money from my checking account and they pay my credit card bill and my wife's credit card bill.

I will cut off my left arm before I'll have credit card debt. I absolutely refuse to do that. I've done that for, Oh my god, I don't know. How do you? 20 years, 25 years? I have never, ever had credit card debt. I never will. And I'm not bragging, folks. I promise. I'm not bragging. I want to help you it. It is so much more difficult to build wealth if you have credit card debt than if you don't. So I would make that a number one priority.

And again, work with a financial planner. Could be us. It could be somebody else who's going to sit down and run the numbers and lay out a plan. OK, we've got 60,000 credit card debt. Well, we need to pay for college. Well, we need to put a down payment on a house. OK. So the goal for 2022 could be we're going to try and pay down $20,000 of that $60,000 debt. But more importantly, we're not going to add to it. We're going to pay our credit cards off every month and we're going to make monthly payments of maybe $1500 towards that debt or 2000. You have to make more than 20,000 because you are going to have interest that's going to accrue if you want to get it down.

So you want to think about putting some of your excess money. If you have an extra 75 grand maybe you're going to put 20,000 towards paying down your debt. If you're going to put 40, you're going to put the whole, you know, 60,000 that you owe towards that. I don't know. We have to sit down and see. Two ways to improve your personal cash flow, folks. Cut your expenses or increase your practice income. We're not going to get into that. We do that every week. We have some amazing consultants coming up on this podcast in 2022 that are going to help you with all of that. We've had amazing podcasts.

And by the way, folks, we've recorded, we're now into our fourth year of this podcast. Go on to your podcast app and you can download every single podcast from day one. Some of them are time sensitive. In fact, a lot of them are during the pandemic, so you don't necessarily need to listen to them. But we have had experts in every single field of financial and dental practice management known to the human race and go back and listen. It's a great library with some great information. I would encourage you to do so.

So can you cut expenses? All right. How can we cut expenses. If you sit down either on your own or with your significant other or your spouse, I would be surprised if you couldn't cut 10 to 20 percent out of your personal spending that it wouldn't change your life. OK. So, you know, there are some things that are not negotiable. If driving to work every day, you want to spend $7 to get yourself or $5 to get yourself a latte or a cappuccino. And that makes you feel good. You work hard enough that you should be able to do that, and that's not going to be make a difference in your financial plan.

But if there are, you know, if there are memberships, companies are amazing. The way companies make money is, they get you to sign for membership. Example, given Amazon. Who is a member listening here of Amazon Prime? Oh my goodness. Think about the billions of dollars they make off of you being a member. Or what if you're a member of a gym that you never go to? Or what if you're paying for cable channels that you never look at? Look at that kind of stuff. I bet you could save hundreds, if not thousands of dollars by just reviewing that.

OK. So cut your expenses. Do what you can to increase your practice income. Now, let's talk about the next subject. And let's assume we have some money. OK, if you don't have money to save or you're in the hole, you need to work on your practice and you need to work on cutting your personal expenses until your practice does better. This may be the year that you hire a dental coach. I had a client that we've been working with him very, very closely for years. We meet quarterly. We had a quarterly meeting recently and one of their goals in their practice is to get more organized. So they're going to basically bring in some systems with their coach and make the systems more solid so that we can be more efficient and effective and hopefully produce more dentistry in the practice.

Those are the types of things that you need to do, and we've had conversations about leadership and what you need to do there. So we're not going there tonight. So if I can find some money that I think I'm going to save, I would like to encourage you every month. If you make more money in your practice, then you need to pay your office bills and to pay your personal bills and to pay your taxes. And by the way, you must be current on your taxes or I will come and find you. I will come and hunt you down. I will be that that little six foot two inch birdie on your shoulder saying you need to pay your taxes. You never want to get behind paying your taxes. You need to do that.

OK, so we have this money. What are we going to do with it? Let's start off by talking about retirement. That is my number one thing for people. I mean, we had a couple of clients that were in recently and they were both at the very same stage of life. They were in their 40s. And I said to both of them, I said, my legacy is to push you to put away as much money as you can. So let's take a mathematical example. OK, let's say Dr. Wiederman is 35 years old. My pretax income that I want for retirement. OK, before taxes, I want one hundred and fifty thousand dollars a year. Twelve thousand five hundred dollars a month. I'm thirty five. I've saved $100,000. Not an untypical situation. All right. I can save $2500 a month after I did this whole analysis. That's 30,000 a year. Let's say my tax rate is twenty six percent federal and state. I want to retire when I'm 65, that doesn't mean I'm going to. I just want to have the financial ability to do so. My life expectancy is age 90 and folks, people are living longer and longer every single year, life expectancy goes up with better quality medicines and health care and everything.

Let's assume a very conservative, realistic investment return of four percent. You say, wait a minute, Art. That's a terrible investment return. And I'm going to say great. If you make six percent, it's going to be a lot better. But let's plan on four percent, OK? Four percent is boring, but it works. The stock market is way up there, folks. It needs to adjust. We've had Jim Davenport on, we've had Brian Connors on. We've had, you know, financial gurus and we'll have them back again in 2022 to talk about where the markets are going, but use a conservative number.

Inflation use three percent. Now you're going to say Art, you don't have you. Hey, Art, have you been not like not watching the news? They raised Social Security by five point nine percent. The inflation rate in the United States is going to be five to six percent. That's correct. That's for this year. That's in large part because we have a supply chain problem and people can't get goods. And when there's a shortage of goods and people have money and they want to buy those goods, it's supply and demand and the prices go up, that goes up. That happens with everything in life. Everything I've seen and read says that this supply chain issue is going to continue for another year. Maybe two. We'll see. Not going to get into that discussion tonight.

But the average inflation rate in this country over the last 100 years has been in the neighborhood of two to three percent. If we have five percent six percent inflation every year for the next 10 years, we might want to go hide under a rock somewhere in the Maldives because it's going to get really ugly financially.

So with that scenario, I saved my twenty five hundred a month. I'm thirty five. How much money am I going to have? I will have two million four hundred and seventy thousand dollars. That means I have 100,000 today. I'm going to save $2500 a month for 30 years, earning four percent. That means I have to. I will have two point forty seven million dollars. How much do I need? Because remember, inflation is going to go up that $3 I don't even know what a loaf of bread goes for. That $3 loaf of bread. If you multiply that by, you know, Rule of 72, right? You know, in twenty four years at three percent inflation that doubles so that three percent $3 a loaf of bread is going to be six dollars. So with all of that and inflation, you need five million four hundred twenty thousand dollars.

Now. Let's count that we're going to get other income or Social Security of maybe $3000 a month, don't now, we hope. Then you only need three million six hundred seventy thousand dollars. Now what about the same set of facts, folks? Except instead of saving twenty five hundred a month, you save thirty five hundred a month. That's not even one additional crown in most places per month. I'm talking fee for service, not what the insurance company wants to pay.

OK, so at age 65, you know, if you are, I'm sorry. Same facts. Save 3500 a month, you will then only need three million six hundred seventy thousand and you will have 3.3 million. So you're saving more. OK, I'm sorry. Yeah, that's right. You're going to have $3.3 million. And at that point, if I have some additional income, including Social Security, I'm going to need 3.6 or we're getting close. So maybe that number is thirty five hundred. The whole point of this. Oh, one more. If you're forty five and you save 3,500 a month per month at age 65, you would have $1.7 million and you would need three million, six seven. The bottom line is you need to run a retirement analysis. OK, if you are 35 years old, you've got time.

If you're 55 years old and you have $100,000 in the bank, we got to get going here. It means you might have to work longer. It means you might be able to live on less when you retire. But if I can encourage everybody to start saving money today. Let's talk about real quickly the types of retirement plan. The best way you can save for retirement, folks is to do and set up a retirement plan in your practice? Baby Bear, Mama Bear, Papa Bear. Those are the three plans. OK, let's make it real easy. If you've never saved for retirement, if you've only done IRAs or have done nothing at all, you can set up a Simple IRA. Simple, and it is very simple. You don't need any professional administrators. You could literally walk into your bank or financial institution and set up a Simple IRA.

You can do a deferral, that's similar to a 401k, which most of you have heard of. You can defer thirteen thousand five hundred dollars a year. If you're under 50, you can defer sixteen thousand five hundred a year. Your spouse is on the payroll. That's another 13 five or 16 five. And then you contribute three percent of the employee's wages for those people who qualify. It's one hundred percent of what they defer, up to three percent of compensation. And for most of you, you're going to be able to put away if you're over 50, about $33,000 a year for yourself, plus the match. So maybe thirty five, thirty six thousand and maybe another, you know, one to five thousand for your employees. If you have 40,000 or less and that's what you have, the Simple IRA probably works for you. There's no administrative fees.

If you have 40 to 100 thousand dollars to save, then we want to set up a profit sharing plan with a 401K component. You can put away as much as the neighborhood of about fifty seven thousand dollars $63,000 if you are over the age of 50 with a 401K. You put your spouse on there. Your spouse can put away twenty six thousand, twenty six thousand five hundred dollars into the retirement plan. And the next thing you know you and your spouse are putting away 90,000, and it may cost you ten to fifteen thousand to put away for your employees and a couple of thousand dollars a year in administration fees. That is what most of my clients have. That is what I would encourage you to do.

For many of you who have maybe purchased practices in the last 10 years, if your loan is coming up and is going to be paid off. Do not spend that money on goodies or cars or vacations well you can take a vacation. You have my permission to do that. Take that payment. We've done that with many clients. You have a payment of 7,000 a month going to the bank for your purchase of your practice that you bought 10 years ago. It's paid off now. Let's take that 7,000 and you have very little tax deduction from it because the majority of it towards the end of the loan is going to be interest. I'm sorry, is principal and the interest is negligible and you've already written off the principal by depreciation of your equipment and goodwill and all that years ago, probably.

So we want, we now have 7,000 dollars a month that's going out the door in the ninth and 10th year of the practice loan that's getting me no tax benefit. It's after tax money to me right now. So we want to take that money and instead of writing the check to the bank, we want to write a check to Charles Schwab, TD Waterhouse, whomever the custodian is for the investments. And we want to put that money away. We want to put it away every month. So you were writing a check to the bank. Now you're going to be writing a check to Schwab, except it's all going to go in your pocket and 100 percent of that money will be tax deductible and the earnings will be tax deferred until you pull the money out at retirement.

The third type of a plan that we have is a defined benefit pension plan, and that's for the big hitters here, the Papa Bear plan. If you are really killing it in your practice, OK, and you're just making a ton of money if you are anywhere over the age of, I mean, I'm going to go as low as 35, but realistically, 40, 45 years old, there is a vehicle out there called a Cash Balance Defined Benefit Plan and we have people putting away 150, 200, 300 thousand dollars a year in this plan, fully tax deductible. I will encourage you to do that if you can afford to do that.

Those of you who are able to do that, you can do pretty much whatever you want to do in life. And there's nothing that says that you can't spend money, I mean, if you're making three quarters of a million dollars in your dental practice, there's nothing that says you can't drive a nice car, there's nothing that says you can't take a vacation and even fly first class, although you should look at the rates for first class. I was going to fly first class when I took my trip in September, October, and it's just, I mean, even I could write that check for the amount they want for first class, but maybe a fly business class or maybe a fly, you know, upgraded economy plus, which is kind of nice. We did that going over to Europe, and it wasn't that much more expensive. Treat yourself. If you work hard and you make a lot of money, treat yourself. You've earned it. But let's save money for retirement.

So if you have again the ability to save more than $100,000 a year, I would strongly encourage you to look at a Defined Benefit Pension Plan because you will be able to save a whole bunch of money for retirement. And it is. Again, I'm a broken record, folks. I am. I'm obsessive about trying to save money because I see people making hundreds and hundreds of thousands of dollars. I mean, if you make $200,000 a year, $250,000 a year over a 30 year career, you're going to earn seven and a half million dollars. And there's people that can't save money off of that.

And, you know, do you need to own a $150,000 car? I don't know, although this is a great story. I do have a client who bought a one who can afford to do all this, who bought a $180,000 car because they needed a write off and they wanted to do this. And he comes to me in the tax session this year and he says, So I have a problem. Said what's your problem? He says, I got somebody who wants to pay me three hundred thousand dollars for this $180,000 car. What should I do? I said, Why are you asking me this? Someone's going to pay you one hundred twenty thousand dollars more for a car than you paid for it? Right? I said, if you don't want to sell the car, give me the car. I will sell it and keep the $300,000. So that's just a very silly but true example.

So save money for retirement. Promise me, promise me. Promise me that if you haven't started a retirement plan, that you will start one this year. If you can't afford to do it, maybe you're a couple of years away. Maybe you got a big loan payment, start an IRA, start something. Get in the habit of saving money because once you get in habits, folks, habits are hard to break and we want good habits, not bad habits. I was at the driving range today, working on my good habits of keeping my left arm straight and not bending it and making sure that I keep my head down through the shot. And guess what, once you get into good habits, that ball starts going further and that ball starts going straighter and the game of golf gets to be fun. It's the same thing with your finances. Once you start seeing your accounts build, it starts to create some enthusiasm for you and you'll continue to do it. Find ways to add more.

And that's my legacy, folks. I want all of you to have the financial ability to retire at the date and time that you want. Again, what you do is very physically demanding, and I don't want your body to control when you retire. I want your finances to control that. I would encourage you if you have the ability to purchase your dental office or your dental suite to do that, that is the cornerstone of any retirement plan. Maybe your practice is doing really, really well this year and we can find a facility that works that's not ridiculously priced because we're paying rent and landlords and no offense to any of you that are landlords, but landlords are tough and you think rents are going up or are they going down? They're going up.

So if you could be paying yourself rent from your corporation to an LLC, we want you paying yourself rent, because at the end of the day when you sell your practice, most of my doctors who own their real estate are not selling their real estate, they're keeping it, and they're collecting rent that goes up every year by inflation. It's a great thing to do if there's any way.

Now if your practice is in West Los Angeles, California, if your practice is in Manhattan, in New York City, if your real estate, if your practice is in San Francisco, California, it's probably going to be hard for you to buy real estate unless you hit the lottery or the Powerball, and I will never do that because I don't play the lottery, the Powerball. So I would encourage you to look at that for 2022. Is this the year that we buy the real estate? Maybe it is. Maybe it isn't.

What about your home? I mean, obviously everybody wants to live in a nice home and we want you to live in a nice home. Trust me, I do. But what's the plan? Are we in the house that is going to be the house that we're going to retire in? Are we in the house that we're going to raise the kids? I mean, you know, when we bought our first house, my wife Lynne and I've told this story before, I got the down payment when she went on the TV show, The Price is Right and won $10,000 in 1986. She picked the licorice that was under a dollar fifty and she got $10,000 and I almost fell off my chair. And you know, not all of you were going to do that, but maybe you're looking at buying your first house.

In the Los Angeles, Orange County metropolitan area where I live, it's ridiculous. For a young person to be able to buy a house is very, very hard, but maybe you don't live in the Los Angeles or Orange County metropolitan area, maybe you live in anywhere else and houses are maybe they're a little higher, but they're affordable. Based on your income. Maybe this is the year you buy the house. Do you buy a starter house? Do you buy the house that I'm going to go to and retire it? Are you in a house now and you need to take a step up because maybe you've had two or three children and you're living in a 1500 square foot, two bedroom house and everybody is climbing all over each other. It's a math problem. Sit down and figure out, Are we good with our house?

Do we have a plan to pay our house off before or on the date of retirement? If you have a house and that house is got a $200,000 mortgage or a $400,000 mortgage, you need to run an amortization schedule to figure out how am I going to pay this house off when I'm ready to retire 60, 65? Very simple. You just run amortization and you see, Oh, that means I need to make an extra $700 a month in principal payments to pay this house off in 20 years, we're going to stay here. Or maybe I'm going to pay, you know, save money for a down payment on a bigger house. I don't know. But you need to sit down and plan for that.

You know, read the Millionaire Next Door about the house you live in. House is very personal to people. I would never tell anybody what type of a house to live in or how much to pay for it. All I'm going to say is, you know, if you can afford to live in a two or three or four million dollar house and you can meet all these other goals, power to you, but do not spend more money on a house than you can afford to and forego some of these other things.

So you also will have the value of your practice and in your long term financial plan, I would encourage you to put the value of your practice at zero. Now, does that mean that Art Wiederman is saying that there is going to be no value to a dental practice in 10, 20, 30 years? Absolutely not. That is not what I'm saying. What I'm saying is, is that the sale of your dental practice is gravy to you. OK. It should not be the be all and end all that's going to allow me to retire.

Now. It may be the difference between a comfortable retirement and a really comfortable retirement. But folks think about this on the sale of a practice. You have to sell the practice. You have a, in most cases, a 10 percent broker's fee. You have debt that you might have to pay off and you have taxes. In many cases, the amount of money that is the sales price of a practice, what trickles down to you after taxes and costs and everything, most times ends up to be 50 to 60 percent of the sales price. So if you think you're going to sell your practice for a million dollars and you're going to have a million dollars in your pocket, you need to run the numbers and see what you're really going to have.

So. Let's look at a couple of other things. OK, insurances, I do not sell insurance, I am not going to ask you to come to me so you can sell you can buy insurance from me. There are days I wish I sold insurance and annuities. So how much life insurance do you have? You're married with three or four children. You are the primary breadwinner. Your spouse is at home, not working outside the house. I made the humongous, humongous mistake at a convention one time when I was lecturing, when I was very, very young and stupid. Let me repeat, I was young and stupid, and I started saying that so your, you know, you're working and your non-working spouse, that's what I said.

I had a lady who got up in my audience. I don't remember where it was. She read me the Riot Act, and she was right. Are you saying I don't work? Are you saying that doing laundry and making meals and taking children to school and to baseball and soccer is not working? I go. Let me go crawl into a hole here and I'll come back in like 20 years. I never made that mistake again. So when we talk about a spouse, we're not talking about a non-working spouse because all spouses work, you know, we talk about it. Do we have a spouse that is not working outside of the home? That's how we refer to it so that we don't get our heads bitten off.

OK? So if you are the main breadwinner, you're 45 years old, you're making 300,000 a year. You've got a mortgage of four or five thousand dollars a month. You've got kids in private school. You've got this, you've got that, et cetera. How much money do you need for life insurance if, God forbid you die? I am not a big fan of cash value life insurance. In most cases, in some cases I would be, but in most cases I'm not. I personally bought term life insurance when I was 40. I paid $2100 a month for a million and a quarter of coverage. And my plan was to have enough saved for retirement that I, my spouse, my wife, Lynne needed it. Fortunately, we've done that and we're good to go.

OK, but for you, if you pass away, you need money to do three things. In my opinion, you need money to pay off your mortgage for your spouse who is not working outside the house. You need money to pay off a fund for your children's college education. They just raised the university that my son went to. I believe Chapman University is now 55,000 a year. The Ivy League schools are in the 70 to 80 thousand, and that does not include room and board. That's just tuition. So college is very expensive. If you have three children, you might be looking at, you know, money putting in, you know, having enough money, depending on their ages. Maybe you need three or four hundred thousand dollars there. So maybe you have a five, you know, $500,000 mortgage. Maybe you're saving four or five hundred thousand for your kid's college, depending on how many kids you have.

And then we need a pot of money for your spouse that is not working outside the home. Your working spouse who is not working outside the home, to allow your spouse that is not working outside of the home to have a pot of money to be able to pay the bills. So if you have two million dollars in that pot and that you know you pull out four or five percent a year, that's 80 to $100,000 a year. No mortgage, no college fund needed. That's why my magic number for most dentists and everybody's different starts at $3 million of life insurance. I get lots of people who say I only have 500,000, but that's a lot of money. And I go, No, it's not. It's not anywhere close.

So if you don't have enough life insurance to take care of your family, insure your family because they're the ones you love, then go out and get it. If you are in your 30s or 40s, term insurance is very, very reasonably priced. There are lots of good insurance agents out there who can help you with that. You need to have disability insurance. How much disability insurance do you need? As much as they will sell you? OK. Most companies will not sell you more than 50 to 60 percent of your net income. Your income to live on. You want to make sure you have that type of insurance. When we're sitting down looking at our financial plan. Oh, well, you know, we've just been so busy and we haven't had time to do this. And oh my goodness, it's terrible.

And well, this is the year to sit down. Where's the money going to come from? Well, you know, do I need $1,500 a month to buy insurance to take care of the ones I love? Well, maybe we'll drive that, you know, 10 year old car another, you know, two, three or four years. Maybe we'll work on increasing our income in our practice. You know, maybe we'll pay off that credit card debt so we don't have monthly payments every month. These are the decisions that you need to make as part of your 2022 financial plan. How am I going to save money for retirement? How am I going to save money for in insurances that I need to take care of my family? OK?

Where am I investments? I will tell you one of my biggest pet peeves that I have in my financial life, not my financial life, my professional life is what I ask doctors. Well, doctor, what is the last time you went and had a meeting with your investment advisor? Oh, it's probably been three or four years. What? Why is that? Well, you know, there's nothing I can do about the markets. Well, doctor, do you know what you're invested in? Well, not really, but I trust my person. They've been I've been with them for a long time. I trust them.

Well, I don't know about that. So folks. One of the other things that I want you to put on your to do list. So the To-Do list is figure out, do I have money to save if I have money to save, what am I going to do with it? We're going to look at retirement. We're going to look at our insurances, OK? And what we're going to do is we're going to sit down with our investment advisor and we're going to say Mr. or Mrs. Investment Advisor. We haven't met in three or four years where is my money invested? How have we done, you know, very, very simple. There are indexes out there. OK, there's the Dow Jones Industrial Average, which is only 30 stocks you don't compare if someone's done well against the Dow. You've got all of the indexes. You've got the you've got the Dow, you've got the Nasdaq, you've got the Russell, you've got the Wilshire 5000, you've got all of these indexes and see how they've done.

And you know, if your investment advisor is underperforming the market, maybe you need a new investment advisor or if your investment advisor says, Well, you know, you never called me and I never changed your investments and we just left them where they are. Well, that's not good, either. You need to understand. You don't need to learn how to pick stocks. You don't need to learn which mutual funds are the best. That's why you hire a professional. Just like I don't need to learn how to do a crown prep in my mouth because I go to a dentist who's learned how to do that. You go to an investment adviser.

But I want you to promise me, if you haven't set down your investment advisor for a year or two and your excuse is going to be oh, well COVID, I couldn't do that. Well, they have these things called telephones. They work really, really well. And they have these things called Zoom or Microsoft Teams. It was always my dream before the pandemic to do all of my client meetings on the computer. Now we do them, it's second nature that we do them. It's wonderful. We can see people 3000 miles away like they're in our living room.

So you want to go ahead and find out, is your investment advisor doing a good job? Are you invested based on your risk tolerance? In other words, if you are 65 years old and you're 90 percent in the stock market, is that where you want to be? Is that right? I don't know. Maybe it is, maybe you need to make up some of that lost time because you started late. But you know the theory in the 35,000 foot view for many people, is that the older you are, the closer to retirement you get, you want to start talking about maybe a little more conservative, maybe not taking the chances you took when you were 30 and 40 years old. Those are the things, but you get to talk to an investment advisor about that.

Promise me that you're going to look at your statements, you're going to ask questions. Why do we have 40 percent of our money in an S&P 500 fund or why are we twenty five percent in the QQQ, which is the same as S&P 500 for the S&P for Nasdaq? Why, why are we doing it? Please explain this to me. And if you don't get a good answer, then find somebody who will give you a good answer.

OK, college education. Wow. That's a whole nother program. We've had my good friend Mark Johnson on talking about saving for college and things like that. Folks, if you have young children, it's not going to get any cheaper. I mean, you know, my big joke is when my youngest son Forrest went from playing ball at San Jose State to going to play ball at Chapman, I was, yeah, I was. San Jose State is a wonderful, wonderful school. But, you know, I was happy to have him back down here closer to home and all this stuff. And it was a lot more expensive. But you know what? Your legacy is your children. And if they are willing to put the work in to become really good students and to go out and get really good careers or vocations or whatever they're going to do, you know, we want to help them. Okay.

My personal opinion and what most of my clients do is they will pay for undergrad. Whether you choose to ask your child to work and pay for a little tuition, that's a personal decision of yours. I generally don't see parents paying for graduate school masters, things like that. But I'll tell you what. You know, I put my two kids through college. I'm very proud I put my two kids through college. I chose to not have them work because I wanted to concentrate on their studies and they did that and they both are doing really, really well. You have to make your own choices. But again, folks, if you haven't started saving for that, you know, when you get to that point and you have to write that check, yeah, you can go get student loans at that point. But boy, that's really not good because you're probably in your 40s or 50s or even your 60s by the time that happens. So we need to carve out some money.

Do we save it in a 529 plan? Maybe. Do we save it in municipal bonds that we have ourselves? Maybe. Do we just put it into a diversified portfolio of stocks and bonds and say, this is our savings account? Maybe that's where you sit down with a financial planner, and that's where you go ahead and figure all this out.

So again, what I don't you don't have to do this on one day, but you need to just go down this list. OK, do I have money to save? Can I cut some expenses? Can I make some more money? You know, maybe something is coming due. Maybe a loan payments coming due. Don't say, Oh my goodness, my car payments coming due because you're going to have another car payment before you know it. All right. Maybe my house is paid off. Maybe my practice loan's paid off. So how much money you have to start with? How much money do I have? How much do I make? How much do I pay in taxes? And how much do I have left?

And then if I have money left, then we can decide, OK, we're going to put a little bit of it to debt reduction. We're going to put a little bit of it to retirement. We're going to put some of it. Maybe we'll buy some more insurance. We're short on that. We're going to put some of it to a college fund. Or maybe we're just going to focus on retirement because, you know, I have one child and that child is getting a scholarship to play quarterback at the University of Southern California. Who knows, you know, no offense to any other schools. But, you know, I just picked that one. Could be any school, could be Alabama. The Alabama quarterback did pretty well this year. He won the Heisman Trophy. So you know, what can I tell you?

It's all about planning. All right, so plan all these different things out. And are you going to solve them all on January 15th when you sit down to do this? No, but we're going to have goals. What are we going to do this year? This year, we're going to focus on debt reduction. Next year, January 23, we're going to set up a Simple IRA or we're going to set up a qualified retirement plan. Have that plan, put it in writing.

The last thing I want you to do is your estate documents, OK? And I will tell you that I've heard stories of people who have died without estate documents and they've gone through probate. Some of you have heard this story. It is a personal, true story. So my mother passed away eight years ago. She was 82. For years, you know, my mother was, I mean, you know, you look up stubborn in the dictionary, Cynthia was there. She was there. Oh my God, she was there. She had a whole page and she had a T-shirt that said, I am stubborn. Hear me roar. That's what she was right. For years and years, ma, ma, I'll go ahead. I'll pay for it for you. I will bring the notary now. No, I don't need to do that because I'm too mean to die. That was her joke, right?

Well, she retired. And then one day I get a call from her and she said, you need to come over. I'm not doing well. And we, you know, we saw that she was starting to fail. Now I didn't know how much time I had left. This was on a Monday. I had set up an appointment with a notary to notarize documents to at least get, you know, something going to say a living trust or something. I mean, we had started this, but I then had to act quickly.

We had the appointment for Friday at three o'clock for the notary to come over to notarize all the documents and get them done. I was on my way to my golf lesson on Thursday morning and we had hired a caretaker for my mom. And they called and said, Arthur, I am very, very sad to tell you your mother has passed. So I was 36 hour. I mean, I was I mean, I was 36 hours getting this done.

And we went through probate and this was not my fault. I tried. I mean, trust me, if you knew my mother, you would understand, right? And we tried and it cost about $15,000 and about a year's worth of time. And she didn't have a sophisticated estate. To get this done. Promise me, promise me. Promise me that you will take care of your estate documents. If you don't have any, send me an email. Tell me what part of the country you're in. I'll find someone for you, I promise.

Ask your CPA. Ask your contract attorney for an estate planning specialist to do a revocable living trust. You may have a special needs child. You need a special needs, all things that you need to do. It's not fun to do. It's much more fun to go on vacation. It's much more fun to go fishing or to play golf, or to go to a movie than to deal with death. But trust me, folks, when you get your estate documents in order, I just updated mine. It took a while because we had, you know, for a lot of reasons, family and all this stuff. But we got it done. It was a big, big weight off of my shoulder.

So promise me that. And that's very simple, that is making an appointment with an estate planning attorney, they'll send you a questionnaire and they will ask you a bunch of questions. You'll have to accumulate your assets, you'll have to find out how they're titled. One of the most important things that you really need to look at as part of this process is the beneficiary designations you have on your retirement accounts and your IRAs. If you don't have the right beneficiary designations, bad things can happen. We're not going to get into that today.

So I'm going to put a bow on this because my timer says I'm over an hour and I think I've I hope I haven't overstayed my welcome. I hope I have made a call to action for you with this for twenty twenty two. Let's get started on the right foot. OK, let's summarize. And then we'll wrap this up and finish the podcast for today.

Number one. Figure out what your income is, how much you pay in taxes, how much your expenses are, and do you have any money on an annual basis left over? If you do, start looking at the following. Look at insurances, do you have the proper insurances? Are we funding as much as we can reasonably fund to retirement? Are we funding money to our child's college education fund? Have we looked at our investments to make sure that we're invested in the right things based on our risk tolerance and long term goals? And have we done our estate documents?

It goes without saying, and I didn't talk about this today that you also need to plan your taxes every year. Make sure that you pay your taxes currently. Once you get behind in taxes, it's not like I can call the IRS and say, Hey, IRS. Dr. Smith here has got a problem they're behind two years. Can we just forget about taxes for a year so they can catch up? No, it doesn't work that way, folks. So. Set out a plan for 2022 sit down with a financial planner. If you don't have a financial planner, your CPA can refer you one. I can refer you one and sit down and plan. And trust me. If you, nobody likes writing insurance checks or insurance premiums, premium checks.

But I will tell you, I can't tell you how many people have said to me, Oh my goodness, I can't even begin to fathom what would have happened if I didn't have this life insurance or what would have happened if I didn't have this disability insurance. So promise me, promise me, promise me. Promise me that you're going to plan.

So let me just remind you of a couple of things again. Send me an email awiederman@EideBailly.com if you want to be signed up for the HHS Provider Relief Fund webinar on Friday, January the 21st. If you do, we'd love to have you. There's going to be a small charge for that webinar because it's taking a lot of time and effort to put it together. There's just a lot of stuff involved, so you know, we'd love to have you as part of that. Make sure make sure you email awiederman@EideBailly.com.

Go on to our website Decisions in Dentistry magazine of our partner they're wonderful, wonderful www.DecisionsinDentistry.com. Great clinical content. 140 continuing education courses for one reasonable price for a year.

And if you're not working with a dental CPA, give us a call at Eide Bailly. Give a call around the country to the Academy of Dental CPAs www.ADCPA.org.

With that said, folks, I want to thank you so, so much for the privilege of being able to speak to you every other week and for your wonderful, kind comments that you've made. Please tell your friends, write a review about the podcast it always makes my heart feel good when I see some of those.

We have thousands and thousands of people downloading our podcasts every week. I am honored and humbled that you will allow me to come into your home, or your car, or your phone, or wherever you listen to podcasts. And I hope that I have been able to bring you to a call of action on not only the subject of financial planning, but making your practice better.

So with that said, folks, thank you again. And that is it for this edition of the Art of Dental Finance and Management with Art Wiederman. CPA.