[Editor's Note: The following email was sent to me by a retired dentist who wishes to remain anonymous but who desires to show younger docs what the “other end of the spectrum” can be like when you follow good principles of investing. Success like his is what the mission of WCI is all about. I couldn't be more happy for this doc and echo his desire to want to spread the good word of financial literacy to the rest of the community.]
Dear Dr. Dahle,
I attended your seminar on personal finance at the recent AAE meeting in Denver. You might possibly remember me because I was by far the oldest person in the room. I was there with my son, a budding endodontist. I have been advising him about investing for years, but I was hoping that he would hear sound financial advice from somebody other than his father, which would help it sink in. I was definitely not disappointed. You gave an excellent overview of a very important, but usually overlooked aspect of a professional’s career.
I am the end result of faithfully following the financial concepts you are promoting. About 40 years ago, when my dental career was just beginning, I finally had a few extra bucks to invest so I foolishly “gave” it to some young advisor at a major investment firm. After a year or so of watching him frequently buy and sell stocks with my money – always with a commission, of course – I determined that I could do just as well on my own. Like you, I studied the process and then forged ahead.
Some items I learned early on and they have helped me stay the course:
Pay Yourself First
Develop a mindset that you will stash this money and pretend like it never was part of your pay. Set up automatic withdrawals from wherever your paycheck goes – checking account, savings. Start with as much as you can tolerate – 10% to start – and increase that percentage as your income increases. In my last several years of work I was putting in 20% or more of my gross income every month.
Set up several “baskets” to put this money in:
1) A basket for emergencies
Should be one of the first you fill. Get it to at least 6 months of living expenses and hold it there.
2) A basket for retirement
The more you can put in this account early on, the better off you’ll be when you get to my stage. One of my favorite quotes is from Albert Einstein:
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t pays it.” (Good old Al knew more than just quantum physics.)
3) A “car basket”
I fill this one until I can pay cash for my next vehicle. I have never financed a car. Think of how much I’ve saved on just that over the last 40+ years.
4) A vacation basket
You can set up as many baskets as you want – the more, the better.
Track Your Finances
Early in your career try to track your finances a while. My wife and I kept track of every penny we spent for about the first five years of our marriage. That’s probably a little anal – but I think most health care professionals are a little anal anyway! Even just a rough tally gives you a great idea of where all that money is going and highlights waste and areas in which you can cut back.
Be Proactive About Your Office Retirement Plan
One of the many things I learned was to continuously keep up with financial concepts related to office retirement plans. I practiced with a partner and an associate – we were an S-Corp with ten staff members. Several years ago I read about age-weighted defined benefit plans and realized that since I was at least ten years older than everyone else in the practice this would be very beneficial to me, so I convinced my partner that we should set one up. It’s not easy, and they are expensive to set up and maintain, but in the latter years of my career, I was able to stash away over $100,000 per year in this tax-deferred account.
I suspect you emphasize those concepts more, and go into more detail about them, in your book and website, but just thought I’d reinforce how important they were for me to get to where I am now.
Flying First Class
I have been a fairly aggressive investor over the years, and still am relative to my age – 73 years old and about 60/40 stocks over bonds & cash. In the late 90’s I could see the “dot-com” bubble approaching the bursting point, so I cashed out a chunk of my holdings and purchased my dream waterfront property and built my “Doc House”. About a decade later I held on through the housing/banking crash and almost cried when one of my good dentist friends related how he was “fed up” with the process and directed his advisor to sell all his holdings. I retired from private practice in 2012 and my wife and I have been thoroughly enjoying our life of leisure and travel.
An interesting sidelight – shortly before I retired, a branch office of Fidelity, with whom I have about 30% of my holdings, opened in our city and an adviser contacted me and invited me to come in for a free evaluation of my portfolio. I brought my package in and he perused it. He noted my low 8 figure net worth and asked me what we were planning to do during retirement. I said that my wife and I love to travel and would be doing a lot of it in the future. He looked me in the eye and said: “You should fly First Class.”
We are now living on a retirement “budget” of about $400K per year. That breaks down to about $100K for taxes, $100K for travel all over the world – and “First Class” all the way, $100K we give away to our kids (we call that “inheritance on the installment plan”) as well as to charity, and the rest is for “everything else”. I have been retired for six years now and even at that spending level, our retirement fund is more than $500K higher now than it was when I first retired.
Hope this isn’t too verbose, but I wanted to let you hear from someone on the other end of the spectrum who, by following the same concepts you are putting across, has made it to the final stage in fine shape. Thanks again, I hope the AAE has you back every year and I’m going to promote your book to all the young docs I can get to listen to me!
Have you been living WCI principles throughout your career? How has it paid off for you? Were the sacrifices of living like a resident, paying cash for cars and holding off on the big doctor house worth it? Comment below!