Howard: It is just a huge honor for me today to be podcast interviewing Dr. Tim McNeely the CEO of the Life Stone Companies who has a passion for working with successful dentists in order to help them take care of the ones they love and support the causes they care about it all began when he married a dentist Dr. Dana Yeoman DDS whose dad was also a dentist whose dad was friends with one of my classmates Dr. Chip Castine what a small world we live in Bakersfield California. Over a decade later Tim has been involved in numerous books and research projects a study the super-rich manager financial firms. Due to his expertise on the super-rich he was invited to write the foreword to becoming seriously wealthy how to harness the strategies of the super-rich and ultra wealthy business owners. Tim is a contributing author to leading business journals a frequent speaker at mastermind and CEO group south california and he's here to show how you can accelerate your success by following in the path of the super-rich no matter your net worth. Thanks for coming on the show today.
Tim: Hey I am excited as can be to be here with you today and share some strategies from the super rich and help don't bring those down to everyone.
Howard: and I want to tell you that in all honesty you're lucky to come on the show because I'd never accept these types of people because I can't vouch for them and me having them come on the show it's like an implied endorsement it's like can you imagine some guy like this nefarious and takes all the years someone's money says well I only heard of them on Howard's show but vetting you you held your married a dentist so now I mean you can't vet yourself more than marrying a dentist but so are dentists different than other groups I mean is financial planning financial planning is there anything unique because we're dentists versus plumbers teachers carpenters and mechanics?
Tim: Yeah absolutely it couldn't be more different Howard when you when you think about it, I don't know too many teachers that start their life with the million dollars debt now he's pretty common with a new dentist getting out of school and so the debt load right away right off the charts and the other thing is so often dentists are business owners it takes special planning to really get in there and build optimal financial world very different than just being an employee or a teacher or an engineer in working for someone else there are so many other skills other than dentistry that you've got to possess.
Howard: So you're right I mean if you were gonna become a teacher electrical engineer an architect you wouldn't you wouldn't have the student loans or investing in a big practice so that is I know on dentaltown one of the first things they struggle with is okay well obviously I'm not gonna start my retirement planning well I got student loan debt than other people like no you got it you got to start your retirement while you pay down your student loans and that seems kind of confusing why am I saving a dollar in the bank for my retirement when I could have paid down debt for a dollar?
Tim: Well right this is one of those things that I go back and forth on it and it really you know we want to talk about the super rich and we'll get there and one of the things the super rich do better than anyone else is they work with advisors who really understand debt and you know some people as they're paying off their student loans they may say you know what I just want to sleep really well at night I don't care that I'm gonna have an extra million or two million dollars in retirement I want to feel good now knowing I've paid off every bit of debt and I don't have to worry about that other people say you know what I'm really comfortable with that and since my student loans are a low interest rate my my business that for my practice I'm comfortable how all that works and right now I want to maximize my tax savings and I want to stop stuff as much money away for retirement because maximizing my net worth is the most important thing and so you know I hate to tell answer that question a roundabout way but so much of it depends on the individual and there's really no right or wrong answer to these questions.
Howard: It's for me it's tough to even wrap my mind around financial planning because I'm okay so first of all my introductory to that was the first book I fell in love with on this was The Millionaire Next Door and just an amazing book shows you the simple spending habits and saving habits to lead to more cash to the bank so when when people talk about financial planning I always think okay well don't get married so you won't get divorced don't have any kids and just save your money and then these kids they become dentists and they they get married in dental school a lot of them out here there's two dental schools my backyard will start having a kid or two in dental school and then they come out and both the dad the man and the woman's parents living in the valley and I said well just live with your parents in their basement I don't know they go buy a house and it's not even a normal house it's always a bigger house they get a car it's never a normal car it's always bigger they go on vacation it's never fishing at the lake with a dollar it's always to Hawaii it's it's like I look at dentists and I just say to him I say this name me one area where you live below your your the median and if physicians dentists lawyers and that's what The Millionaire Next Door taught me is that you know who has a million dollars saved at the end teachers more than doctors because when you're a teacher you don't think you should live in a mansion in Beverly Hills you think you should live and a teacher house.
Tim: Well at the same time though you know not enjoying everything that we worked so hard for that's kind of boring too and you know tomorrow's not guaranteed so there to me there's always a balancing act right being responsible being good stewards of the wealth we create and also being able to enjoy it right money is a funny funny thing is when you think about if there's a point of diminishing returns with money so right take hotels for example my Hilton's they're a little bit nicer than the motel six right you start stepping up but then you get to the ritz-carlton and now you're into buying that's right there's a point where that diminishing returns really creeps in and you don't get a whole lot more for your money and it's you know you want to find those points where you're comfortable and that your income can actually support it because as you just mentioned income creep and lifestyle creep is massive within a lot of these professional communities people start spending way more than what they really need to spend to have a good quality of life.
Howard: I love how you on you said I'm in income spending creep
Tim: Lifestyle creep
Howard: Lifestyle creep that's yeah
Tim: Where they just start spending more money.
Howard: and again I just don't see I can't name any dentists that I think or live within their means they just have it an exorbitant or crazy to lawyers dentists and physicians I think they're plagued by that where do you think that comes from?
Tim: I think it comes from the fact that when they do start getting out of school you know the income wraps up pretty quickly and it's not too hard to make a lot of money in dentistry and money comes easy it's easy to spend too and so instead of really having that discipline and being able to look forward and say well well what's the end right what's the end game that I'm playing for we start spending everything we make now and we lose that that side of the future so I would argue just kind of poor planning and right not the right mindset and mindset is really everything right what's the game we're playing what are the results we're trying to achieve.
Howard: Okay so what would are you what what are you doing right now what would what are you doing for dentists well what is your wheelhouse your business model at life stone its life stone Co www.lifestonecompany.com Timothy J McNeely what are you doing for my homies?
TIm: Well it really is that spectrum for the younger dentists who are straight a school who need help with budgeting and planning I tell them go take a Dave Ramsey's course I love Dave no one does this better than Dave in terms of talking about how to get a plan in place how to do the budgeting how to do your spending how to set categories he's fantastic at that.
Howard: Out of Chattanooga Tennessee?
Tim: Yeah yeah good old Dave Ramsey's and Financial Peace University I've recommended that force to two more people that I can tell you it's like...
Howard: What's the name of the course financial what?
Tim: Financial PeaceUniversity and it's I think like a six or eight week course and it really just covers the basics of money management and what's nice about my wife and I have done it a couple of times and what enjoy about it is all of a sudden were forced to sit through a class right we're driving there we're driving back and it's focused time focused attention on wait where are we spending our money on what are we trying to achieve where are we headed and so often in life we're reactionary we're not proactive in doing forces for me and a lot of people I recommend them to appreciate it because it forces them to take time and actually spend time and effort thinking about these things. So for the younger to do this I say get a budget in place figure out what you're spending looks like figure out what your lifestyle looks like get those pieces of the puzzle in place. I typically work more at the other end of the market people who are about 5, 15 years off from retirement who have accumulated significant wealth and I find there's five key concerns they have number one is manage my investments well I don't want to lose some money I already have second biggest concern I see is wealth enhancement I've never met anyone who wants to pay more than their fair share in taxes they want to pay what they owe and not a penny more the third key concern is wealth transfers how I get my money how do I get my assets of the next generation how do I take care of my kids how do I take care of the people that matter fourth biggest concern is what I call wealth protection how do you protect everything you've worked so hard for from being unjustly taken either from lawsuit divorce or some other unjust means and then lastly about a third of the people I work with very cherub link line they have causes that they absolutely care about but they don't have a well-thought-out plan for protecting in passing on money to those charities. So those are really kind of five key areas that I work with and like I said more towards the other end of the spectrum, the people who are about five or ten years off because I find that's where I can add some very significant value and help.
Howard: Okay so just saying the five areas that you focus on one would be?
Tim: I call it at us with consulting it's how do you manage the investment portfolio in an efficient way.
Howard: and is that so how do you investment consulting is what you're calling that.
TIm: That's where the the registered investment advisor that I'm associated with right now wear a different hat when I do that and that's that's regulated type business and it's really putting the money together how do you manage that portfolio and the dirty little secret of my industry that not a lot of financial and wealth managers talk about is that piece of the business it's pretty commoditized now it's not to say that it's easy to do it certainly takes some skills to manage your portfolio well but once you reach a certain level everyone has the same portfolio essentially and not a lot of people like to talk about that it's a liking dentistry once you reach a certain level an elite this his crowns gonna be just as good as another elite dentist it's real hard to add value by just doing crowns saying in the investment.
Howard: So the investment consulting is being that's the first core and it's being commoditized?
Tim: Highly commoditized now there's certain people you never want to let them touch your money because they're just bad but once you reach a certain level everyone's got the same sauce.
Howard: Okay
Tim: That's why I really focus on where can we hide out you mean in that second area wealth enhancement huge right mitigation of taxes um to get an example of how this plays in oh yeah I was just working with the doctor he's worth about ten million dollars he's been a great saver no kids has this practice doing about a million something a year and his wife works as an employee.
Howard: Dentistry
Tim: No no lifestyle healthcare services company
Howard: Okay
Tim: He w2 employees the dentist and we started really doing a deep dive into their their plans and once again he didn't want to pay more than his fair share in taxes and I approached him with the idea of layering on something called the defined benefit plan to his practice this is where we can get massive contributions to this retirement plan he says Tim I thought about that before but I don't like the idea of having to commit to doing contributions but by looking at his portfolio by reallocating some of the assets we're going to be able to generate more than enough income from his taxable investment portfolio so we can give him ongoing contributions from his business and probably over the next five years say them over forty million dollars in taxes just by just by figuring out where we're gonna pull the money from and by properly structuring some of those wealth enhancement ideas for a million the savings that's massive what kind of return so I have to get on a portfolio to give them an extra forty million that's a lot harder the tax planning big difference we can really move the needle for someone doing that.
Howard: and what would be so what that was the first five core areas first investment consulting second wealth enhancement what's third?
Tim: Third is the wealth transfer we all have people that we care about we want to get our assets to that next generation maybe it's helping kids through school maybe it's taking care of aging parents maybe it's just that estate planning piece how do we do that in an efficient manner, once again example with the client zone they're worth about six million dollars great practice and they've got some younger kids one special needs child ones in college and they said Tim what we're really worried right if we were to pass away today right if we got get by the proverbial bus what's gonna happen to our assets they said we don't want our 23 year old son getting these assets he would destroy himself right if I got 6 million bucks at 23 that would be a big mistake now I'm a little bit older a little bit wiser and you know you and I would know what to do with that money you know we make good choices younger we're not quite sure so we're working with the estate planning attorney to put some things in place to make sure the son is protected if something happens so that's that wealth transfer piece right how do you get the money in the assets of the next generation in a way that makes sense.
Howard: All right and what's four?
Tim: and number four is wealth protection we want to protect everything we work so hard for from being unjustly taking divorce is a killer lawsuits are a killer or even here in California in other parts of the country right how would protect everything from the natural disasters that we have do we have the right insurance coverage in place, do we have gaps that we need to be looking at.
Howard: So it's mostly in your experience is mostly divorce what was and you said natural disaster what was the other one?
Tim: Divorce, lawsuits, natural disasters
Howard: Yeah and well I mean I don't know but it seems like divorce is is a huge one and for me it's so funny cuz I just it's just so funny when you see it happened to women get us all the time now and the plot against I mean yours here the same thing my husband he decided he wanted to quit his job so no time with the kids at one year and one day he files for divorce and him and his attorney planned it and he's a stay-home he didn't have income and it just grinds her gears thinking every month she's got to write him a check for $8,000 for the next decade so yeah so whether what's the fifth one?
Tim: and then the fifth one is about a third people I work with they have charitable causes that the absolutely passionate about and they want to support those causes and they really want to have an impact not only with the money they give but the time they give and they want to make sure that when they do give they do it in a tax efficient manner so they get the most bang for their buck they want to magnify those shareable gifts.
Howard: So in Dentaltown you know it's a message board so all the information is stored and I carved and easily found but under finance you know as accounting bookkeeping dental stocks equipment acquisition practice expansion patient finance plans personal finance taxes and real estate investments so are you more personal finance or taxes or is or would that be inclusive category where would this be?
Tim: Yeah it really is an inclusive way it's the personal financial planning but also with a focus on time in the business with it too, once again you asked about those differences that the dentist had versus everyone else most of the time there's that business ownership and so it's tying both of those pieces together I put it under comprehensive financial planning and really and we'll talk about this a little bit more, it's more of a virtual family office and we'll talk about family offices and how that's a strategy super-rich use and we'll talk about how to assemble the right team members here coming up.
Howard: Well let's go I'm what so what are the strategies of the super-rich are those worth what do you say 500 million or more?
Tim: Yes very privileged so I've been able to partner with some of the best of the best out there and do some cutting energy research on the super-rich those exceptional families were 500 million or more I don't know how many clients like that I don't want any clients like that but I certainly want to learn from the richest out there and how do they manage their affairs and they once again how can we bring that down to everyone regardless of their their net worth and there are certain lessons that we start seeing that the first and biggest one is that results matter the super-rich are very focused on getting the results they want and they don't let other people drive the agenda for it and they are very focused on on achieving certain things and then they'll assemble that team of individuals around them who truly understand me this is something I called the human element that's really come through in the research and we start looking at the difference between normal wealth planning versus elite wealth planning it's that human element that comes out across all spectrums right all sorts of planners right if you're playing at the top of your game you're gonna have technical expertise in at what you're doing but then we start diving when we say well what what's the main focus a good wealth planner they're gonna have that technical expertise but the focus is gonna be what are the legal strategies what are the legal products what what are the things we put in place to achieve those results when we get to the elite wealth planning the difference that we find is once again technically dot planners but the focus is the human element what are the results that the client action wants how do we get them the results as opposed to what strategies and products we put in close it's really what comes first and that's the first lesson we learned from the super rich, they're very good at focusing on the results they want and not letting someone else drive the ship for them.
Howard: So then what is this virtual family office?
Tim: Yeah so so this actually ties right back into the human element that we're talking about if you and I were sued for agent we sold our companies for five hundred million or more we would go out we would actually assemble a team of individuals to serve just our family we would have some of the best of the best accountants and CPAs and attorneys real estate brokers private aviation specialists concierge professionals business coaches we would have a full team of professionals at our disposal working just for us now the problem with that is most individuals don't have a massive payroll to run that but the reason the super-rich put these sandals off the structures in place is they want control they want to work with individuals who really understand them and once again really get them so that's why this family office structure is so important is it allows them to pull together the best the best individuals to simply serve that family.
Howard: Well you know I always thought that I'm my whole life ever since I watched my dad open up restaurants at one of the neatest things about owning your own business is that you have this virtual this family at you're talking about like I am I have my own controller I have my own bookkeepers I have my own I got employees a lawyer I had you know you have all that there and a lot of times when people think about well what's your extra you're gonna sell like it offers everybody that owns a dental office is getting offers by dsos to buy them and it's like man one of the things why I would never want to sell my businesses because of this virtual family that I mean I don't even get the nice post office doesn't even know where I live at all comes to work I don't want to open my mail why would I want to open my mail when I when I have a whole team that would know it better.
Tim: Yeah right you've been able to assemble not just what I call the wealth management side but a lot of the administration services to where bill paid bookkeeping where it's scheduling all those all those administrative things that take away a lot of our time and effort from actually focusing on what weren't truly good at okay and that's exactly what a family office structure does.
Howard: Yeah so yeah so that is on so true so what else what else again continue on.
Tim: Yeah so so listen one like I said really that that human element piece then it's putting that family office structure in place and in we do that today I knew that for my clients and select professionals I work with I assembly what I call a virtual family office so I've got a team of about 50 different individuals some of the best the best out there in all these different specialties that we can bring in on an as-needed basis as opposed to having them on payroll the entire time the other lesson that we really learned in I call it the virtuous cycle this is what comes through in the research the super-rich they don't get to where they get to by accident they get there with with purposeful intent and actually even tying back to some of your things about you know lifestyle creeping and spending continuing to go up and up and up right those are things that happen because we're not paying attention the super-rich they're really good at paying attention to things and when we get into the virtuous cycle and we actually pull this out by studying the family offices and looking at what are the one of the processes that these family offices follow we really find once again there's a kind of a six step process that they go through it all starts with profiling understanding the client right what are they actually trying to achieve and you know even going back to some of your first statements right you know it's kind of scary when you're on Facebook today because everyone's a consultant I don't know if you've seen the proliferation of all these ads and all these experts out there but I think my dog has a consulting company now right everyone's a consultant and that's a little staring because we've got a lot of what I call pretenders out there and pretenders are very well-meaning individuals they actually I don't you have the clients best interests at heart but they don't have the technical skills and expertise to truly help serve that client well so they're good people they don't want to harm anyone but they don't have the technical skills to do it. That profiling is so important right this is the more you understand the client the more you can understand your goals and objectives the clearer you can communicate to that team of professionals around you so and I'll start to look profile once you got the profile done you reach out to your professional support network right your virtual family office and you work with this team professionals to do what I call scenario thinking and scenario thinking is really nothing more than asking a whole bunch of what-if questions what if my kids want to start World War three after I pass away what do we do can prevent that what happens if I had become disabled it's going to happen to my dental practice what how is that gonna pass along what happens if I want to leave money to a lover and I don't want my spouse and kids to know right really personal personal things this is the scenario thinking that we want to go through its its planning and its actually testing testing on the last concept that I'll leave with you called stress testing but this this scenario thinking is where you're running through different scenarios and simply I'm asking what if then that team of professionals is going to come back they're gonna frame the recommendations they're gonna actually present them in a way that makes sense once again this is something that's so common we see it all the time we actually see it in the data reflected when we look at a state plan people will go to their estate planning attorneys they will pay to have the work done and then we ask them well have you actually followed up an implemented your estate plan turns out about 75% of them haven't implemented their estate plan the reason they don't implement it is they have no idea what they actually agreed to with it in the attorney's office so we need to frame those recommendations in a way that actually makes sense to the client from there it becomes just a technical aspect of implementing those recommendations we've identified the hurdles put the plan in place then we go to ongoing monitoring refining right we always want to be updating our plans and we need to be responding to regulatory changes tax planning changes right political changes what are the ongoing monitoring or goal changes right maybe there's a birth of a child or maybe we have that divorce or maybe there is that disability how do we refine that plan and it's really by following that virtuous cycle that's how the super-rich are able to get the results that they get that's by having the process in place.
Howard: Nice and what are these these steps that you're talking about profile scenario thinking you said it was defined what?
Tim: I call it the virtuous cycle and I'm actually happy to send your any of the listeners who want this all cinnamon article on earth they just email me at Tim@lifestoneco.com I'll shoot them a copy.
Howard: Actually what we do on dentaltown is everybody gets their own thread I wish you would post on dentaltown because it's the more archival that way when they hear this podcast and what's weird about podcasts is people listen to shows year or two three years later I mean they're they're they're kind of a timeless but uh yeah it'd be easier just to post it on dentaltown then everybody could see it but it's you're calling it the virtuous cycle?
Tim: Correct yeah and once again we call that virtuous cycle because it's a process that they use to get the results they want once again super rich they're very intentional right if they don't get there by accident they get there because of focus.
Howard: Okay so then what else what's next?
Tim: Well from there we really move on to well I don't see its the biggest lesson of all and that's the stress test and this is a true story in 1979 there is an airplane that took off for a sightseeing trip from New Zealand they were heading up to Antarctica with say 259 people on board and the pilots didn't know that when they took off that plane the navigation system was off by two degrees and the pilots and the plane got over Antarctica and they descended through the clouds to do the sightseeing and they didn't realize that that navigation system by being off by two degrees that actually placed them in the path of an active volcano now they weren't able to see that volcano because the ground and the volcano will both covered with snow and by the time the warning alarms on the plane Saturn said pull up pull up pull up it was too late and the plane slammed into the side of the mountain and all 259 passengers on board lost their lives it was a an absolutely tragic tragic accident and it could have been avoided by realizing the plane was off course and interestingly enough 90% of the time when a plane is flying it's actually not heading towards its intended destination it's off because of wind because of turbulence because of other factors it's not actually heading towards its intended destination it's always course correcting it's always making corrections so that it can end up on a course or another way to think about it how long you can be a back and forth from your studio to your home Howard?
Howard: 30 minutes depending on traffic.
Tim: Okay so so if you got in your car and you just press down on the accelerator pedal and you didn't do any course correction with your steering wheel what's the likely that you get home?
Howard: Yeah zero
Howard: Not gonna happen and the same is true with our financial lives with your listeners financial lives we're all heading towards a future financial destination and it's by stress test and it's by a course correcting that we're actually going to end up at that intended destination and this is really probably the most important lesson that comes down to is from the super rich it's stress testing our existing wealth plans so important because a lot of times our planning has been done incrementally maybe we met with an investment advisor get some investments planning then we met with an insurance person and did some insurance planning and then so a state plan and then maybe we did a little business plan and it's all they've done piecemeal it's been done over time but it's never been looked at comprehensively we've never done that stress testing to help catch and correct those errors.
Howard: So on Finance is it's one of the busiest sections of the dentaltown message boards I mean because money's the answer what's the question, this guy posts under finance a young dentist here he spent the last year and a half working for a DSO and was firing about three weeks ago due to agreements whatever whatever gross income for the first eight months of the year three hundred twenty thousand the company enrolled me a 401 K and March out to my one year anniversary and treat him nice out was saying if you were in my situation what would you do to minimize taxes?
Tim: Yeah so in his case right there's a Safety's a w-2 employee or is he an independent contractor?
Howard: Well let's talk about that because I'm ok when you're working for an associate you're an employee and a lot of the big boys they're gonna do it legally because they're they you know they got lawyers they got this what what did you call their staff the I loved it would you say?
Tim: The virtual family
Howard: Yeah the virtual families I mean I mean I'm Lori's been my president for twenty years Don my office manager 20 years Stacy my counselor 20 years can my you know I got all these people here 20 years it is a family and they take care of yours truly and I just couldn't do without it but when you go play for a big company they got a management team that keeps them out of legal trouble you can never be an independent contractor because oh yes you're the associate the dentist's up the street some hillbilly friend of yours wants to do it for whatever stupid reasons but if you didn't pay your taxes and then all the sudden the IRS found out that you and paid your taxes or five years and you don't have any money and you were paid as an independent contractor which weren't they're gonna take that dentist to court and in 32 years I've seen this happen several times and and you're just gonna go in from the IRS judge and there's no jury there's no fancy jury you're not trying to spend some crazy people in the jury box it's you and the IRS judge and the IRS judge says who set the hours of the owner whose equipment was it the owner who owned the land and building the owner how was this guy in independent and independent contractors when I'm building a house I don't know anything about plumbing and I contract that with a plumber and a roofer and electrician and the judge says yeah that you weren't a plumber this wasn't your electrical company you you you were a contractor and these were independent contractors and well and we'll deal that you're not they're not independent contractors that they have a laundry list of 20 questions you fail every one of them and then as a present you say well you know your associate that you paid as an independent contractor well he didn't pay taxes for eight years here's how much he owes plus taxes plus penalties plus legal fees write me a check right now. So I don't know I could ran on that but do you agree with that or disagree?
Tim: Oh I do I think the misclassification of independent contractors is one of the biggest dangers out there because people think well I'm really not in control but like you said they pass or they fail to pass all the questions that are the test of an independent contractor so that to me becomes an area of true stress testing right ask the question what if what if someone comes back and says well those people that you thought are independent contractors aren't and that's something I would argue the owners of these practices if you're employing independent contractors you need to be asking that question what if they're really not.
Howard: So I guess the real question this young mind is asking is if you're an employee if you're young out of dental school and you're an employee for DSO do you have do you feel they have less tax advantages than if they own their own business?
Tim: Yeah the absolute they that I would argue they're two disadvantage because the the primary saving tool they're gonna have is that 401 K right whatever kind of qualified plan is in place but aside from that there's not a whole lot of tax engineering you can do you know you can deal with some unreimbursed business expenses but it's much better to have your own corporation because then you can legitimately write off this expenses.
Howard: So if you were talking to a bunch of dental graduates say the theater they're seniors in dental school I mean you look at the big macroeconomic numbers and you see that the average dentist who owns his own practice Nets a hundred thousand more than a dentist who's an employee besides that macro how would you coach a young kid of the pros and cons of being a dentist owner verses a dentist employee because the pros are gonna be I don't have to wear any of those hats I'm just gonna rollerskate into work at eight leave at five and I'm not gonna think any of that but the cons are we do know macro economically that the owner operators on average make a hundred thousand dollars a year more or net.
Tim: Well not only that but the end result they've got an asset that's worth something that they can sell someday to so the numbers absolutely work out better practice ownership but numbers not the only thing to try this right you get on it too, its quality of life some people are not wired as business owners I come across them all the time they're just not wired for it they're they're not entrepreneurial they don't want those headaches and you can maybe pay him a five hundred thousand more per year and their like I just don't know that I want that right they're not the money doesn't matter for them it's that quality of life so once again I'm gonna go back to that human element and I'm gonna say figure out who you are right do you like working in a business do you think you want to do those things or do you sort of show up and go home and not have any of those headaches is that worth a hundred grand a year to you maybe it is maybe it isn't but you got to get to know yourself and what kind of environment you're gonna work in best.
Howard: Another kid is asking actually this is a five or six different threads asking this question there you know Stockmar like I was lucky I graduated high school in 1980 which is the worst I've seen anything and then I got a school in 87 and by the time I got my dental office opened in a hundred and thirty three days from May 11 to September 21st it was 28 days before the Black Monday where the market fell a quarter and then you had the y2k plummet then you had the Lehman's brother and so a lot of people are on dentaltown they're talking every day it's been a decade since Lehman's brother why should I get out of the market and it's they know they just feel the cycles coming what do you think about that you've obviously been hearing that talk.
Tim: No, right you know when you look at the world today right socially politically economically there's uncertainty everywhere we look we just have no idea of what the future it looks like and the investments right once again that's it that's a different hat I wear I wear that as a registered investment advisor when I'm dealing with that so I'm just going to talk some some generalities here but you know I always liken it to a rollercoaster right if you know what that rollercoaster is gonna be thinking you get on that top of the first cell and you start getting down and you go oh my gosh this roller coasters awful I want off and start taking off those safety restraints and you hop off the roller coaster ride you're gonna get hurt right you're gonna get hurt pretty badly and you're probably gonna die gives you try and find off this roller coaster well it's heading straight down but if you close your eyes you say okay you know what I knew this is going to be awful and you it's going to be terrible but it's gonna be over in two minutes you're gonna most likely come to the end of that roller coaster ride and you just fine and the same is very true with the markets in general if you've structured your portfolio from where you are in life and you've done the risk analysis and you're comfortable with the roller coaster riding you've done the analytics you're gonna be just fine no matter what the market does because you've prepared for it now I would never tell you know someone who's five or ten years off from retirement to be in a hundred percent equities that's just a little too risky but you know for the younger dentist just let that volatility let the roller-coaster work for you because time and time again all the data shows you can't tie in the market it just doesn't work maybe you get it right once or twice or three times but over the long haul there there's no real data to suggest that you can figure out when the tops and bottoms are.
Howard: and I just want to be very clear on this remember you know Einsteins work that's been confirmed for a century that there is no such thing as time you only live in the present you can't go outside and look in the sky to see where the Big Bang was and when people sit there and say what's gonna happen a year from now it's like okay you know there's no such thing as the future anymore than the past I mean if there is if there is a past then come on I'll hold my hand and whatever you do we're gonna turn the earth counterclockwise I mean you know we can't go back to yesterday any more than we go back tomorrow so when someone says well I think next year the markets gonna do this I first just got a sudden say okay now you know next year doesn't exist just like we can't go to last year then only time is in the present by the way Chandler Arizona has this big satellite company right by my office and they do a lot of the GPS stuff and when they put up those GPS II gotta go back to 87 when I start opening up I mean I can remember several people over the course of six months ago oh my god you know when we put up those satellites we couldn't we we all thought it was us we thought that we were sinking it wrong it was always a sub the IT people always in trouble but they finally they that government built to gazillion-dollar atomic clocks they flew off in jets the opposite way around the earth and came back and sure enough they had different times and they had to start going back to uncle Albert's math and that as these satellites get away from the gravity of the mass time slows down so there's no there's there's no tomorrow so when anybody is predicting the future there is no future it doesn't exist just like there's no past so market timing would mean that you think you have a great understanding of the future which you do you have the great understanding of something that doesn't exist so you have zero I just want to review some more macroeconomic numbers real quick and this from the ADA and I like the way we could check you know am he I love the way does samples is everything about the guy is a class act he says average dental specialist makes 320 so if you're if you're still in dental school think about this the average specialist makes 320 a verge general dentist makes 197 so you can make a hundred thousand more being one of the ten specialists than being a general dentist dentists who own their own practice make 244 dentists your employees make 147 so you make another 100 grand a year obviously blood and guts is the most money oral maxillofacial surgeons 448 pareo 330 endo 307 pediatric dentists 304 ortho to nine prost two and nine so the amount of blood dropping prosthodontist to at the lowest 219 239 and but you said something that hit me over the head and you some dentists don't want to be an owner i'm pediatric dentists make three hundred and four thousand i'd rather go to hell in a handbasket then work on kids all day and so if you don't want to own your practice i don't want to be a pediatric dentist so we're each different what would other advice would you give kids in dental kindergarten school they're in dental school they're gonna they're gonna come out on average according to the American Dental Education Association the average 2017 debt was 287 two hundred eighty seven thousand dollars per dental student average costs are raising a child and from birth to seventeen not including colleges 233 so they come out of dental school they've already completely paid for a kid and they don't have the kid.
Tim: Yeah right you've got the debt and in my best advice is he's get a plan right figure out your budgeting and don't let that lifestyle creep come in right you're gonna be looking at your loan saying well you know I use just maybe 15 grand this month I've only got a pay you know three thousand dollars on my loan that's awesome no people can't get out seriously you ready you if you're gonna sleep well at night knowing that you've attached your debt and you're getting rid of it and then get rid of it if you decide that you know wealth maximization is the most important thing then save as much as you can and pay those minimums only mom's right take that risk but get really clear on what the results you want are and then go toward and chase them as hard as you can don't know though figure out what you want and then go after it.
Howard: When I was starting to talk about the stock market timing you know a lot of people on dentaltown on under the on the finance forums a wooden to get out of the market and run so then of course a lot of people are saying well where are you gonna run to and their best idea is real estate so how when you're looking at financial planning where does real estate fit in because a lot of these Dessay own their own house a lot of it on their own dental office word how do you see real estate in this big picture?
Tim: Yeah real estate is really nothing more than just an additional asset class that you can know and I love real estate I encourage doctors to buy the real estate to buy their buildings when they can because it produces that passive income for them down the road plus it's a really nice taxes only real estate also you get to appreciate that asset and write it off over time so so I'm a big fan of real estate it adding that to your portfolio so I'm not against it at all in fact I encourage it now so going back to the stock market timing so I I sit through a lot of presentations every year and the best presentation that I've seen in probably the last 18 months was someone going back through the history of the markets and not just the history of the market but also the headlines of the market and they pull out magazine after magazine and headline after headline about what was about to happen to the market how often do you think they got it right they didn't we didn't see a headline oh my gosh the market is about to crash and then twelve months later it was higher we did see a headline the markets are about to take off and do better than they've ever done and it's time to get in and in the market threw down 50% a and they went through up a hundred years of this headline after headline after headline all of them wrong and so right we just we don't know what the teachers gonna bring we have no idea.
Howard: Yeah you have no idea cause it doesn't exist I mean it was if someone said to you you think the market is gonna crash I said I'll just say well do you think there's three pink hippos living on a planet tripped on flying around on a butter I mean it doesn't exist no it does exist and I found another amazing article by the Harvard Business Review and remember the one thing I want to keep reminding you I grew up in Catholic school and in Kelly school if you want to read a book you first had to do an author search so if you want to go check out a book in library when I was in grammar school they say what are you reading and I said it's a book on Mars well who wrote it if he didn't know she'd stop me and say well what what if this is the craziest person ever what if this person is talking about a Mars candy bar who you know you always get the author search first then you allow information in and so most of the stuff you read is junk because it's on the internet and it's flying around and people are sharing it you already got research that they don't even open it's like it's something like 88 percent of everything shared on the internet was not even clicked open one time but in Harvard Business Review which is a good search you don't have to do an author search when you're reading a Harvard Business Review or The Economist or something yeah but he said all this stuff about Millennials and Millennials want this at work and Millennials so they did an exhaustive mega analysis study in the end what find out they could not find out any definitive things that the Millennials versus the baby boomers had but they but they did find that the variance within the baby boomers was bigger than the variance versus the Millennials the variant you know so so here's people thinking well I'm gonna do all this because you know I'm getting older and the staffs getting younger and I need to adapt to Millennials and it's like dude there's there's no there's no difference I mean if the scientists can't find it and measure it again it's just storytelling and and when you look at humans at the end of the day what what they are better than anything is their master storytellers and half of it is disconnected from reality I'm gonna go back to one more one more thing with the with the finance again there's so many threads I wish you'd get on there and ask them these questions yet there's so many threads saying pay off student loans or contribute to retirement accounts I mean they they keep asking that question every month.
Tim: Well right the way what's the goal that you're trying to achieve right right what are they trying to achieve right if it's wealth maximization if they want to be more the absolute top dollar when they retire and they're okay with the risks right because these are all risk reward trade-offs right you can pay the minimum on your student loans and hope you make up that difference in the market there's a good chance you a little bit you might not right if you're okay with that rest thing stack away more money for retirement and painting the minimums on your student loans if you say you know what it's really more important for me to sleep really really well at night and pay those things off and know that I'm not going to owe anyone anything then you should pay the student loans off right you you can come to the mathematical best answer but mathematically that's not necessarily the best answer for someone because it really going back to our first one it's the human element because there's different ways to get to time of the same result and so it really is a deep understanding of what's important to the person because if we can pull that out of there if we can figure out what they're asking what they're trying to achieve then the right answer really easy but it's helping them figure out what's important to him first.
Howard: So a lot of these threads are a lot of young kids so they're they're all working at dsos for four or five six seven years before they get into their own place so is the best thing they can do as an employee just a Roth IRA?
Tim: Well yeah the Roth they're not gonna get much of a write-off for right it goes back to what their goals are they trying to minimize their tax plan if so they should be trying to max out that 401k and then paying down the loans right creating that financial stability is what they're trying to do that's what they need to do yes they right but I would argue you know getting the getting the budget in place some of the lifestyle creep doesn't come in so that they actually live within their means now that's probably the most important thing they can do is get that budget and don't spend everything you make figure out what you're gonna spend on.
Howard: So when you were when we were talking about your the five core areas let's go by investment consulting wealth enhancement well transfer wealth protection well let's focus on that divorce lawsuits and natural disasters so you know you know people who don't get married don't get divorce ask Bill Maher how did you have the money to go give this guy running for almost a million dollars and goes because I never got married I never got divorced I never had any kids he goes all my a super rich friends and so what is your wealth protection advice for divorce lawsuits and natural disasters?
Tim: So it's gonna come down to what you're trying to do you know in the in the divorce area simple what get a prenup that's a real real easy simple asset protection strategy and not just for divorce but also protecting the spouses from litigators so an example of this is had a client they put a prenup in place they're they're still happily married to this day and they put a prenup in place and there's actually a litigation that they came up and she ended up getting sued for something then she's a business owner he's a business owner and during this this lawsuit during the or they call the mediation portion they came in and said well your husband's a dentist he has some assets right we can get to those and she said no all my assets are protected in my 401k plan and I have a prenup in place his assets are not mine you know what happened to that settlement number it came way way down because they couldn't attack his assets because of that prenup so a prenup not only you know protects in case of divorce but it can protect in case of litigation from the other sides so that's a real simple example on the the divorce one prenups work great for the for lawsuits oftentimes right just making sure you've got the right insurance coverages in place right do you have someone brought policies have you done a stress test on your insurance policies if you ask if theirs is their coverage that we should be having uninsured motorist this is a huge one that most people don't look at here in California there's a lot of people that are uninsured and imagine that and a lot of times these policy limits for the the medical side on the uninsured motorist way too low they're like $300,000 or so but if you've got five people in a car and an uninsured motorist hits you and causes some medical damages you're gonna bump against that 300,000 medical event pretty quickly those are simple things you can raise those limits doesn't cost a whole lot of extra money or something as simple as an umbrella policy to protect how much you have very simple things very easy to get very cheap to get but often overlooked.
Howard: Yeah so you know forty to fifty percent of all married couples end up getting divorced in time but I still haven't met anybody who's got a prenup the they I mean I mean I I imagine that that's just a pretty strange thing to bring up but what do you so you recommend a prenup but how they're in dental kindergarten school and a lot of these kids marry someone in their class and I think if you are ever gonna get married why not marry someone in dentistry you know the same language of everything in common so how do you how do you approach a prenup especially what they're already married.
Tim: Okay well let's take your example of going back to into dental school right I need a classmate we decided we want to get married and we're both going to go into dentistry my conversation would be we absolutely need a prenuptial agreement not not because we're planning on divorce but we've got to protect ourselves in case someone Sues you or someone Sues me we want to keep our assets separate right really really important to do will I want them to be able to get to half the pot not the whole thing.
Howard: Yeah so then so we talked about that the prenups the natural disaster the those areas there is what what other I'll just go back to questions that are financed because they have so many questions and her finances keeps going on and on and on should have dentist pay himself a salary and then a lot of complicated things like I pay myself a salary is that profit treated differently you know I own my own building do I pay myself rent is that more accounting stuff or yeah these are just enough to be dangerous soI can get to the right answers I certainly understand it all but this is this is a tie right back to the professional support network right we need a team in place of the right advisors this is so important right do again I would encourage all your listeners to go back and do this do an assessment of the team members you have in place right do some profiling up on yourself and and the profile we use it's called a total client profile all posted on dentaltown later on and create a profile of yourself and go to your professionals and say here's what I'm trying to achieve how are you gonna help me do this do an assessment of your team members because if you've if you're working with an accountant or CPA and they're not even use the advice on how to structure your corporation how to take draws right how to set things like a reasonable salary you're probably with the wrong profession right if they don't have an understanding of dentistry and they don't get your profession you need to find someone else and the only thing I would encourage don't do these things right getting really good at outsourcing things right you want to outsource things that you are not an expert at so important focus on your core competencies don't don't focus on things that you struggle with you know this is arrogance once again this is a lesson that comes to us from the super rich is when we study the super rich the things they focus on they don't focus on their weaknesses they don't try to improve the things they're not good at it why don't they do that they focus on their core competencies and the things they're really strong at because they want to get to their end of their life and they want to be really good in just a couple things instead of mediocre at a whole bunch of things. So for example I am NOT an expert in accounting and bookkeeping I don't want to do that I want to outsource it I want to let someone else do that so it's not taking up space in my brain.
Howard: and a lot of people you think about financial advice always thinking that I'm the first thing you're gonna do is refinance their student loans how how big of a package or how big of a tool is that with your dentist clients?
Tim: Oh refinance it can be absolutely huge in terms of freeing up cash flow so you know I haven't talked too much about my personal story a lot of times people ask me to see Tim you know what are you doing I tell them what I do is exceptionally boring though why I do it a lot more interesting you know I'll talk about the impact of refinancing here actually we're talking about my wife but you know my wife who's a dentist and growing out falling in love we talk about everything that was important to us right what does what does our future look like but we also spent a lot of time talking about her dental practice I mean it was a massive massive source of stress in her life and we'd be out on date night having a good time and all of a sudden the conversations Tim I got a hold back my paycheck so I can make a roll or that grumpy patient I Saturday I just know I'm going a peer review or I've got a fire someone if I don't do it right I'm gonna get sued and at that time I was really struggling with being a financial advisor I thought it was my job just to manage the investments really really well well it turned out it matter how well I could manage her little newer investment portfolio I actually wasn't able to help her and so I found myself in a job I absolutely hated unable to really take care of the person I love the most something needed to change and so that's where I really started studying what the super-rich what are the best of the best advisors do for their clients how do they move that needle and so I assemble that right team of professionals and to answer your question about how big of a difference does things like refinancing makes it makes a major difference we refinanced the loan on my wife's building and by doing that all of a sudden payroll wasn't an issue anymore right we have that that free cash flow because we reduce the cost of debt we also worked on just the bookkeeping and reducing other expenses huge thing and we got back to enjoying life and being on top of the world together but sometimes my approach is something that you're not ready for and throws you a curve ball and Dana started to have a lot of problems with her hands she couldn't even hold the forceps to do extractions anymore now it wasn't just making payroll we were worried about it's how is she gonna pay the bills how are we gonna pay our mortgage what's gonna happen if she can't practice dentistry and we're people of faith spent some time in prayer and once I had my head on straight I surged stress testing our plans right it started applying an in doing the lessons of the super rich and actually discovered that her disability policy had been set up incorrectly when she first got out of school it was set up in a way that the benefits were fully taxable work she had bought the policy from what I call a pretender right someone who really cared about her wanted to serve her well but gave her bad advice and buy those benefits being fully taxable in it we didn't have any income we were gonna need so we made a change so I paid for the policy in a way that created tax-free income and we both read the huge sigh of relief does that one change give us the income we were going to need and I'll never forget today sitting in the doctor's office waiting for him to come in and tell me and if she had no future in dentistry the reason I won't forget that day at Howard is it didn't matter what he was going to tell us when we walked in the door we had run the numbers we had done the stress testing we knew that we were gonna be ok and that's what gets me up every single day is I never want anyone to find themselves in a situation where they've got that kind of uncertainty facing them I want them to face the future unknown but I wanted to face that future with certainty knowing that they're gonna be ok because they they've taken the steps to build a strong solid financial foundation so yeah the answer your question refinancing it makes a big difference it made a big difference in our life and I see it make a big difference in students lives too.
Howard: So financing is as a big move it's again the next tried market during a bottom are you you know that we have you know the get out of debt thread is a big deal when I really get out of a debt thread you couldn't tell I mean this thread has six thousand six point six thousand comments after I mean it's just it's just a live they get our debt but you can tell there's a big emotional element I mean this isn't a math finance question it's kind of like when you look at money it's a very emotional thing for a lot of people isn't it?
Tim: Yeah absolutely right well six point six thousand questions you say or how many?
Howard: Comment comments six thousand comments
Tim: Right and like you said it's an emotional thing in my guess is I haven't read all six thousand but a lot of those comments are it's keeping me out at night I'm really worried about this I'm just not sure how I'm going to do this right there's that uncertainty and I would argue that's what's driving it then pay that off as quick as you can because the sooner you're out of debt, the sooner you can start redirecting that money towards retirement funds. Now mathematically you're not gonna end up as well because mathematically you do better than necessarily but you know what you're probably gonna sleep a whole heck of a lot better knowing that you paid off your debt and you don't know anyone anything what's that what I would argue that's probably priceless.
Howard: So how does them I can't believe there are hour flew by that fast so how does someone contact you if they want any why do, no more?
Tim: Yeah so if they would like to do a stress test on their existing plans they can go to lifestoneco.com or find me on twitter at TimMcNeely or find me on LinkedIn so I'm on all the social channels and be happy to give anyone a copy of becoming seriously wealthy if they'd like to dive into that book and really learn some of these strategies in depth so I tried to keep everything on a high level today because it's impossible to to dive into specifics but the book certainly goes into some specific case studies for everyone
Howard: and what book is that?
Tim: It's called becoming seriously wealthy so I was invited to write the foreword to this.
Howard: Right
Tim: and they talked about what are the strategies that people are using to to build seriously serious wealth outside their business and by serious well we define that as twenty million dollars of net worth outside of their business.
Howard: and how do they get a copy of that book?
Tim: I'd be happy to send them to it free plus shipping and I can post that link in dentaltown.
Howard: Okay so on Twitter he's a Tim McNeely and which by the way Mc has to be Irish or Scottish and the first real economist was a Scot Adam Smith, the wealth of nations I lectured right across from that his statue in in Scotland and my funniest joke I you know how copper wire was invented?
Tim: How
Howard: It was to Scots fighting over a penny and the easiest dollar earned is a dollar and expenses saved the second easiest dollar earned is a dollar in taxes delayed but the hardest damn dollar you'll ever earn is doing another root canal build-up and crown on some patients so you can net a dollar and the thread that I did not want to talk about on dentaltown on this financier because it just really irritates me is you know this thread large home edition pay cash or finance at this point in my career and every old fart is saying why do you want to add a huge addition onto your home and of course you say no I got I got four kids and in one decade they're all gonna be gone and then you have this big big house and and you and then and then you know these people talking and in other threads they're stressed about root canals fillings crowns or overhead or this or that or this said I mean my gosh if you want to lower your stress just simplify your life and and like I don't want to own a boat do you think every weekend I want to go take care of a boat I didn't find ten people who own a boat all I need to do is find a case of beer and go on their boat you don't need a cabin up north I wouldn't want to take care of a cabin up north ah they're called hotels you're you know so just minimizing your lifestyle and here's another psychological thing I've noticed when people have no money they don't blink at a five-year finance on a new car but when people do have money and they would be paying cash for that car oh they keep their old car for another year or two or they it's so different to go to Lexus and hand them $100,000 cash for a new car but my god when you're out of school just to go get a five-year lease on $100,000 you never had it so you didn't lose it so basically there's only two people on earth either you're you're there's $1 and you're paying in nickels to someone else your entire life to use their dollar or that person's using your dollar and he's paying you a nickel interest. So if you're going to pay interest on other people's money your entire life you're gonna be a peasant and that's the fastest IQ test because the peasant and a dollar will always part they cannot keep it in their pocket for a minute it's like it's a hot lava rock and then there's another person who says I can entertain an idea and reject it and I'd rather just keep my dollar and because there's 8 billion people that'll pay you a nickel a month for their the nickel year for the rest of your life for your dollar so how soon are you gonna get from using other people's money paying interest to receiving interest as other people are using your money and I see this in dental school I see I see kids come out of school three four hundred thousand dollars in debt go buy a dental office in downtown San Francisco they don't buy a house they don't buy a car they don't even get an apartment they live in this new office they built their basically living there and they're they're open 7days a week and four years later there are three four hundred thousand dollars of student loans is paid off their practice is paid off and they're sitting on two three hundred thousand dollars of cash and they're not even thirty five and they'll never use other people's money again and then you meet dentist I mean I know dentist that who are 67 that just bought a new house on a 30-year mortgage it's like really you think you're gonna be working when you're 97 so it's it's all spending video just don't get married so you don't get divorced don't have kids don't add on that as I say just live below your means and you won't be stressing you live happily ever after and on that note I'm gonna go have lunch right now with one of my four boys. Thank you two boys too many and I get it I bet thank you so much for coming on the show today and I hope to see you on the boards in this finance section they have so many everything you're talking about today they're asking on on dentaltown.
Tim: Yeah we'll get on there and contribute and I'll leave you with the Dave Ramsey's quotes I wish I came up with this but he says if you live like no one else now later on you can live like no one else