Building wealth is not the result of making more or having a financial whiz on your team. It is the result of spending more of your time to reach your financial goals. If your most important goal is to pay off the mortgage, or save for retirement, how much effort are you putting in to reach it? Perhaps you feel you do not have the financial expertise or you are caught up in the daily energy draining whirlwind of treating patients, with precious little time left to work on your financial plan. As the result, many dentists transfer the responsibility for their finances to someone else.
Here is a prescription of building wealth:
- Make time. Set aside a couple of hours each week and stick to it.
- Set goals. Make a list of the important goals you want to achieve within 1 year, within 5 years and within 10 years. The goals are very specific, e.g. pay off the mortgage in 5 years. Write them down to give yourself a visual reinforcement of what you want to accomplish. You dramatically increase the chances of attaining your goals.
- Project cash flow. Start by preparing personal cash flow projections for the next 12 months. They include your expected practice income, personal and living expenses, income taxes, etc. Also prepare a summary of your assets and liabilities, called the Net Worth Statement. The net worth and cash flow statements should be updated every quarter.
- Execute your plan. Working with your financial advisor, identify the important strategies, such as making the maximum lump sum payment on the next anniversary date of the mortgage.
- Keep score. Each month review your financial progress to ensure you are on target. Perhaps each quarter have a meeting with your advisor to review the portfolio.
- Become more financially literate. I suggest you subscribe to a couple of investment newsletters. This will help you make more educated decisions and a more productive relationship with your advisor. You are gaining confidence which gives a sense of greater control over your financial destiny.
What’s worse than running out of money, is running out of time to earn enough money. A common fear in our society is the possibility of being destitute in old age. Having money means freedom and flexibility to do what you always wanted to do, but never had the time to do in your active practice life. When you sit on dock of the bay watching the tide roll in, just like Otis Redding did, it should be because you want to, and not because you can’t afford to do anything else.