Your Personal Financial Future

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Your Personal Financial Future

The Straight Path to Wealth

Accumulation, Presented by a Dentist Who was Able to Retire

Early on His Own Terms

Douglas Carlsen, DDS

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Table of Contents

I. Preface, page 6 Part I Personal Finance II. Dentists and Money, page 9 III. Early Retirees---What Can We Learn?, page 11 IV. The Average 52 Year Old Dentist: A Plan to Accelerate Retirement, page 14 V. Interview with a Dentist Worth Over $5 Million at Age 55, page 17 VI. Savings and Debt, page 20 VII. Where Should I Go For Help?, page 29 VIII. Annuities, page 33 IX. Risk, page 39 X. Asset Allocation, page 50 XI. Self Help, page 53 XII. Interview with MoneyWatch and Wall Street Journal contributor, Charles Farrell, page 57 Part II Practice Finance XIII. Practice Attitude and a Future Plan, page 63 XIV. Too Many Employees, page 77 XV. More Practice Tips, page 80 XVI. The 5 Minute Practice Financial Monitor, page 86 Addenda, page 91

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© 2011 by Douglas, Carlsen, DDS All rights reserved Printed in the United States of America Published by Mogul Press Denver, CO This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice. If legal advice or other expert professional assistance is required, the services of a competent professional person to assist with your personal specific circumstances should be sought.

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Course Objectives After completion, you will have:

• knowledge of how retired financially-free dentists really created wealth.

• a plan to accelerate savings and reduce debt.

• methods to evaluate financial advisers.

• an understanding of investment risk and asset allocation.

• knowledge of several unethical and expensive investments.

• knowledge of who to avoid for advice.

• a plan for physical office , scheduling, and procedure changes.

• a method to evaluate doctor/staff interactions.

• a vision statement for the practice.

• a plan of action to increase patient experience and productivity in the office over the coming months.

• a new way to interview employees.

• an easy way to evaluate practice productivity in five minutes a month.

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Preface This book offers information that differs wildly from most of the information dentists are exposed to these days. It’s written by a dentist that has been through a 25-year career and 6 years of retirement. I don’t mince words. Many of you will find it refreshingly candid and be happy to hear your intuitions about money management are correct. Others will be disappointed that their lifestyle may not bring them the contentment they wish to have later on in life. The information provided is taken from interviews with dentists that acquired real wealth, between $2 million and $10 million, by their early 50’s. The total does not include their primary residence. Most retired early, with a lifestyle at or exceedingly that they had while practicing. A few choose to still work in their practices. I don’t have any financial connections with any company or individual, and as such am free to voice my opinion about any company or individual. And you can bet I will! Both debt and insurance companies are favorite targets. I often say, “My retirement does not depend on you spending money for my materials or services.” I’m on a quest to deliver to dentists the truth about saving and spending. A little about me: I retired from active practice in January 2004. I never produced a million dollars. My investing strategy was very conservative, relying almost totally on after-tax investments in bonds. That strategy is not as prudent today, as bond yields are at a historic low. An equally conservative strategy today might be a mix of 40% stocks and 60% bonds. But I’m getting ahead. My investments are holding up well after six years of retirement. I did find after selling my practice that I had made many decisions about my practice and personal finances not taught in dental management courses. Are the management courses leading dentists in the wrong direction? Sadly, many are. In any case, my vision is to share the philosophy of wealth building and prudent spending to as many as will listen. To summarize the book, for those of you looking for quick answers---- There is one main obstacle to obtaining true personal wealth---too much house. There is one main obstacle to obtaining high net income in your practice---too many employees.

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Large and numerous loans and too many employees create chaos in one’s life. Clear out the clutter in your life and not only will your life have more meaning, your financial fortune will improve immensely.

That’s it, dental warriors. You are done! Anything else beyond is just explanations. But since you’ve paid for this experience, you might as well proceed. The first bolded statement above is well documented by Charles Farrell, who is interviewed later, economists, and top financial planners and tax attorneys. The second bolded statement above is documented by Dr. Bill Blatchford, owner of Blatchford Solutions, in his two books, Playing Your “A” Game and Blatchford Blueprints, both available at Amazon. Other top consultants agree the key to overhead control and net income increase is keeping a small, efficient staff. The first section of this course concerning the early retirees is truly amazing----these people are financial warriors and show a way to wealth 99% of consultants hide or are unaware of. No, I’m not promoting a Spartan lifestyle, but the early retirees show that many of the promotions made by so-called experts are misleading at best. Next, I provide tips for the normal dentist with much less savings, already in his or her 50s. What can one do to accelerate retirement savings? The interview with the early retiree is fun. These people will absolutely not give out their names or voices! No matter how hard I try! They value their privacy and families above all else. I do have a transcript with valuable information I’ll impart. The mortgage, savings, and debt ratios are important to young dentists in particular, yet even those in a mature practice should be aware of their progress. I hope the financial section is interesting and provides some sense of who to go to and especially who to stay away from. Can you say brokers and insurance salesmen? The practice financial section provides easy lessons to recharge the dynamo of your personal wealth. So many of us, including me at one point, see the office as a place of stress and toil, not the engine of our soul. Those that are energetic and have fun at the practice are the ones that produce and net the most

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income. My goal is to both feed your soul and keep a good portion of that net in a safe place, not at Mercedes or Saks. And please take note of some of the references given. If you didn’t do anything else after reading this book, I’d recommend reading The Millionaire Next Door. It is eye-popping and an easy read. Also, there is a very important section on spoiling adult children, a major problem for dentists today.

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Part I Personal Finance Dentists and Money

I’ve had many questions on what the prudent dentist may do in this interesting financial climate. Since October 2008, everything has been both frightening and confusing to all Americans. By now we all know what got us into the mess and the measures that will lead us out. Instead of consuming with no end in sight, knowing that our home equity would always bail us out, we now know that there is no such thing as free money. Yes, it was phantom money we charged against in many cases. And we were led along by some of the worst scoundrels of all time.

As Bob Herbert reflected in the New York Times on December 28, 2008, “The buy, buy, buy mentality of the last 25 years is somehow a bygone luxury. And better values have now emerged. We need to get past the nauseating idea that the essence of our culture and the be-all and end-all of the American economy is the limitless consumption of trashy consumer goods. It’s time to stop being stupid.” In this course, I will provide information gleaned from wealthy dental practitioners, dental consultants, financial advisers, and economists. No one has all the answers, yet I have a healthy respect for the information provided by dentists who have been able to enjoy financial freedom on their own terms. Many of them have not followed the conventional wisdom brought forth by dental financial consultants. In fact, much of what they have to say is the opposite. As was written in The Millionaire Next Door, the truly wealthy in America don’t live in lavish homes, buy luxury autos, spend much on clothes, or fly first class. In fact, if you would attend a cocktail party populated with one half non-dentists having savings of over $10 million and the other half comprising private practice dentists with an average dental income and savings, it would be very easy to discern the dentists. Sure they’d have less hair. But that’s not the point. The dentists would dress a bit smarter, have more expensive watches, and definitely have newer shoes. Why is this? As doctors, we are placed on a little bit higher pedestal than the average Joe. This has its positives, of course. Yet, both the public and we ourselves feel that it’s appropriate for us to live in a bit nicer neighborhood, have a little larger home, drive more upscale autos, send our kids to better schools, and clothe ourselves nicely. How often have you been out in your flip-flops, shorts, and a dirty tee shirt at the market and seen several of your patients? For most of us, not often, I reckon. We at least put on a designer tee when out in

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public. Yet the plumber living a mile away with a net worth of $20 million could care less what he looks like or in what condition his ’95 Jeep is in. He has six of the darn things. Yet when the roof leaks or he gets tired of a car, he buys a new one with cash. It’s not really our fault that we expect and feel the need to project a cleaner, more upscale image. Yet it definitely makes it more difficult to achieve financial freedom and real savings. I’ll talk about a special group to begin, the early retirees. They are a very special breed and account for less than 1% of the dental pool. According to Amy Morgan and Michael Gerber, the average boomer dentist is 52 years old with $225,000 in savings---way less than the early retirees saved. Yet these supersavers have great information to share---information that I feel is extremely valuable to all of us, no matter what our financial condition.

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Early Retirees---What We Can Learn From Them Dr. Charles Howe, of San Diego, retired at the ripe old age of 43 and is now savoring his growing family in the splendor of financial safety. This is not his real name, as he wishes to remain anonymous. Retirement before age 50? In high-priced California? How can that be? Could there be more dentists that opted-out early? Yes, indeed. There is a very small and very quiet group of dentists that amass wealth early, then fall off the radar before the rest of us notice. They don’t feel their careers are important, certainly not flashy. Yet they are the ones that were able to work, or not work, on their terms. Dr. Howe graduated from UOP Dental School and had additional training in a GP residency. His office was unpretentious, with only two employees--- a front desk administrator and an assistant. The practice, purchased for $150,000, was paid off in 3 ½ years. Dr. Howe referred out few procedures, and did his own gold castings. He provided all the office cleanings. His annual production was $500,000; net income was $350,000, overhead being only 35%. In addition to routine general dentistry, he did many oral surgery and periodontal sedation cases--- lucrative, and with low overhead. He saved $120,000+ per year. Dr. Howe never hopped on the “new” bandwagon. He therefore spent little, if any time with dental supply sales people. A few business pearls: “Don’t be a sucker for technology sold to you by someone seeking a high commission. Wait several years, until you have positive and negative information, especially in regard to return on investment, before purchasing anything new. You may even consider buying used at a substantial discount. ” Practice overhead: he kept employee salaries, including all benefits well below 20%, kept supplies less than 3%, lab less than 10%, and was quite diligent with rent payments, keeping less than 5%. A practice with less than a 50% overhead is very achievable with some effort. “Any decision to spend capital is a decision to work longer to pay for that decision. Your retirement age will be extended accordingly. Don’t get caught in the sizzle of the moment,” adds Dr. Howe. “People are using shopping as a recreational activity. They become addicted to the next big ‘thrill’ purchase.” The above examples illustrate another key to wealth building---debt structuring, or more simply put, debt avoidance. A corollary to the above involves lifestyle ---- actually purchase-style. Last fall I wrote of the results of research on actual multimillionaire lifestyles from The Millionaire Next Door. Of this group, only 6% had an American Express account,

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yet more than 50% used MC, Visa, and Sears cards. The most popular vehicles were the Ford Explorer and the Ford F-150. The most ever spent on a suit was $600, the most on a watch was $350, shoes: $200. These people thrived in middle class neighborhoods. Their average wealth, not counting their house, was $4,500,000. The secret: they lived well below their means. To accomplish this, at least one of the spouses was a meticulous saver. Dr. Howe paid off his personal residence in 6 ½ years. “Do not buy a home with investment in mind – you buy it because you need a place to live,” adds Howe. Sales fees, lack of liquidity, and today’s high property taxes and maintenance costs normally preclude personal residences from offering wealth for retirement. Howe made any large purchase, such as auto, stocks, or home improvement, with great care and research, and always at a price lower than the prevailing rate. Whenever others were excited and buying certain products, Howe waited until the “sizzle” was over. Dr. Howe’s mantra: “The ability to discipline, to delay gratification in the short term, in order to enjoy greater rewards in the long term, is the indispensable prerequisite for financial success. Those greater rewards provide less stress with the ability to purchase items for cash that one only dreamed about in dental school, without worrying about financing or credit.” Howe strongly recommends writing your financial goals down on paper and reviewing them at least annually to monitor progress. Dr. Howe’s personal philosophy followed the paths of Dr. Arthur Dugoni, Dean of the University of Pacific Dental School for many years, and Warren Buffett. Dugoni’s humanistic and patient-centered philosophy of finding value in relationships harmonized well with Buffett’s view of finding value in finance. Howe’s pearls for new graduates: “Be a massive saver. In investing, start with no-load index funds. If you wish to expand your investment opportunities, spend a significant time in education, then carefully assess each move. Always seek value.” Dr. Howe notes “There are no market timers in the Forbes 400 Most Wealthy List. In searching for a practice to purchase, do not rush the process. Spend time researching the area you desire; spend several years networking, if needed. Look for a unique opportunity to arise from someone who genuinely wishes to leave a practice. Watch out for those merely wishing to take advantage of a young graduate financially. Be able to say no often! Your opportunity will eventually come and pay off if in ways you could not imagine beforehand.” What is Dr. Howe doing in retirement besides most anything he desires? He is monitoring, researching, and financially advising others using the tenets of Warren Buffett.

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In interviewing other early retirees, common traits emerge quite strongly. No, these are not old-timers with old-time views. They are current baby boomers that have all retired within the last five years. Below are their shared attributes: Practice:

• Few had more than two employees. • Few employed a hygienist. • None had a high tech office. • Specialist referrals were rare. • All had practice overhead at 60% or less. • All practiced in one location. • None had superstar employees. • None had significant practice debt for more than a few years.

Personal:

• All bought one home and stayed in it until retirement. • All were massive savers, 25%+ of net income per year. • All paid cash for cars, and kept for over five years, usually for 8-10 years. • All paid off any credit cards monthly. • Investing: All did it differently, some with active management advisers,

some by themselves, yet all saved consistently every year. Final Thoughts: None of the early retirees had what I call “sequel” loans. They only had one home loan, one practice loan, and always paid cash for cars. Any new home or anything expensive was always purchased with cash the second and subsequent times. This was true before and after their retirement.

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The Average 52 Year-Old Dentist: A Plan to Accelerate Retirement We all can’t live and spend with the frugality of Dr. Howe. And I don’t expect it. What I do wish to point out, though, is that real wealth is seldom obtained by dentists with large offices, large houses, and too often large numbers of ex’s. Simple savings skills make all the difference. Let’s look at the previously mentioned average 52 year-old boomer dentist with $225,000 in savings who wants to retire by age 65. What can he or she do to accelerate savings and eliminate debt? Budget: I know even thinking of this hurts, yet all retirees are on a budget and you will not escape the process. Better to start early than late. Mint and Quicken have easy software design these days and can be set up in a couple of hours. The programs will download all your credit card purchases and checks automatically and reconcile monthly. Also, budget categories are monitored automatically. You only need to check your software once a month for spurious entries. Also, you can easily monitor all spending categories. Below are some red spending flags that are most troublesome for dentists. Averages are for a family with net income of $250,000 per year.

• Family Vacations: Average monthly spending for dentists is $1,000 to $2,000 per month. Anything more needs a net income of over $350K per year.

• Entertainment: This includes concerts, sports events. Average is $300 per

month. If you are above $500, then cut back on any season tickets. Buy individual tickets only in the future. You miss many of the season events anyway!

• Hobbies: Average is $300-$500 per month. This includes golf and skiing,

docs! Often docs spend well over $2,000 per month on country clubs. If you earn $250K and are paying over $500 per month for hobbies, quit the club and pay as you go!

• Private School: Average is zero for dentists. This is affordable only for

those that can also fully fund for college, retirement. If you can put away at least 15% for your retirement and fully fund your kids’ college, then anything left can go towards private K-12 school. Normally, a dentist needs to be in the $450K+ range to afford.

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• Boats and Planes: Don’t go there! Anything left during retirement is where

these are funded. And there are early retirees that have boats and planes. If all your retirement goals are fully funded, not just for the current year, but in total for retirement and your kids’ educations are secure, then it’s fine to purchase boats and planes, with cash.

• Nannies: Only if retirement, college, future weddings, and all other

necessities are funded. This normally requires a net of over $750K.

• Assistance to Adult Children: Over age 25 or when grad school is finished is the normal cutoff point. Do not endanger your retirement to help your kids. You aren’t doing them a favor. Exceptions: Yes, it’s OK to help with a first home down payment. And yes, they can live at home for up to a year if not working. If working, living at home is not appropriate, even if paying rent.

• Ongoing monthly financial assistance to adult children can ruin your

future financial state. Read The Millionaire Next Door.

• Clothes: Average is $500-$600 per month per family, including kids. Anything above requires additional income.

Other Financial Tips: Emergency Fund: Have in liquid form, such as a money market account, of at least $50,000. Why? I personally know three doctors, in their 40’s and 50’s, who suffered a ski injury, a stroke, and cancer, which caused 3-6 months of disability. Even though they had friends that stepped in to “save the practice,” volunteering a half-day each for several months, disability policies paid little and they lost a huge chunk of income: on average, more than half a year’s worth. This can be devastating to one’s savings plans. Have good medical, disability, office overhead, and liability policies. More dentists have financial trouble due to family medical problems than any other source. Pay off all loans except on home and practice. Make sure your home loan will be paid off in full by the time you retire. Pay off credit card debt first. Next, pay off all auto loans and leases. Yes, you will be paying cash for all cars in the future. Do Not Finance Again. Repeat, Do Not Finance! For anything. Ever. Pay cash. For those under age 45-50, financing may have worth; by age 52, you should

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owe little on anything. Use a budget for any large practice purchase each year---keep to a reasonable amount---well under 5% of your net income. Do Not Move---home or practice. Practice relocations, even when leasing, often cost over $400,000. A gorgeous remodel, paid by cash (remember, Do Not Finance), can be done for a fraction of relocation’s cost.

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Tips From a Dentist Worth Over $5 Million at Age 55 I next introduce Dr. Heather Lindsey, of the Los Angeles area. She too prefers to remain anonymous. I tried for a live interview, yet she knows many people near her practice and feels they would recognize her and bug her! Dr. Lindsey graduated from UCLA Dental School in the early 80’s and associated for four years. She had no dream of her own office, yet was so dismayed at the “mill” operation of clinics and the associateships available, that she took the plunge into a space-sharing solo practice. There she stayed until retirement. What was your practice vision? Dr. Lindsey exclaimed, “Nothing!” Upon further probing she relented with, “To enjoy people and save money.” Who was Lindsey’s guru for practice and personal advice? “My husband and my kids.” What was your practice like? No high tech, no high production, no glitz. I had two employees, with no hygienist. I rarely referred to specialists, and then primarily for ortho. If anything, I under-treated rather than over-treated; I never felt pressure to produce. The pride of my practice was that I had several four-generation families. My practice was geared toward relationships, honesty, and loyalty. I employed simple practice systems. All finance (including billing and payroll) was done in-office, with a CPA monitoring once a year. My employees weren’t overachievers, rather the opposite. A big plus was that they were not highly paid. What was the smartest financial move you made in your career? The smartest financial move was taking a low salary per month for my entire private practice career. [My comment: she kept at the level she had as an associate her entire career.] It limited spending: ie. you don't know what you have made until the end of the year. At the end of the year after paying all taxes (all monthly expenses were paid in full each month), I would bonus out the corporation. I would first fund each kid’s college account with a designated amount-usually 5-10 thousand/per year/per child and invest it in zero coupon treasuries so we made sure the money would be there at age 18. Our investment advisor figured out a projection of college costs for four years at any university in the U.S. and we saved enough accordingly for each. Now we have a 529 plan for our youngest son, which they didn't have years ago.

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For retirement, we set up a defined benefit pension and a profit sharing plan starting about 18-20 years ago. The rest was put into after-tax savings. Time was on our side for growth. For a 55 year-old dentist with little savings, a mortgage that still has 20 years to go, and a kid in college, what steps would you recommend to get on course to retire by age 65-70? Have the kid work a little in college and maybe see if low interest loans are available, refinance house to lowest rate, but continue to make same payments to pay off the house in less then 20 years. Get rid of excess insurance plans with high premiums. Form a budget and save. Don't pay for anything on time. If you can't afford cash, don't buy it or do it! Save on unnecessary office expenses-accounting fees, billing fees, etc. Diversify your portfolio. Should the dentist pay for the kid's grad school? It's not necessary, but if the kid has worked in college to help and the parents can afford it -sure. In our situation both girls, now in grad school, have worked all through college and grad school and they had money left in the accounts saved from undergrad. Also, soon we have to start gifting money from our trust due to inheritance tax issues, so the children may use that money for grad school. With our oldest daughter, we took out some low interest loans so she could get a grant. She's doing some work-study and we are augmenting the rest from the original college savings account. Any loans are paid off before graduation, if possible, to avoid interest. Also, in their fields, if both daughters end up working in needy areas, the loans will be forgiven. How did you transition your practice and why? I packed up my bags and left. I had been subleasing space and equipment in a solo group practice for 24 years. The space was owned by my associate. I didn't want the sale of my practice to be dependent on my associate’s decision as to whether he could get along with the buyer or not. Too much negotiating. I didn't need the money for the headache involved in the sale. Also, I was in such a high tax bracket, it wouldn't have made enough money to change my lifestyle. I spoke with several attorneys, my malpractice carrier, the local dental societies, and my accountant. I sent out a formal letter to the last three years of patients (legal requirement) explaining my leaving (health and family reasons, relocation) and notified the three local dental societies that I was referring my patients to them for the type of referral they requested (male/female, age, specialty etc.) I made copies of charts and x-rays for any

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patients requesting them for a nominal fee. I took all records with me and I am shredding them as they reach the appropriate age. I continued to do billing myself and collected 100% of my outstanding collections as of one year, five months. My associate ended up retiring three months after I left and sold his practice. We are both very happy to be retired and our relationship is still fantastic, especially since we didn't have to do any negotiating!!!! Do you have specific advice for young dental grads? Get out of and stay out of debt. Pay off student loans as soon as possible, so it's not hanging over your head. Start fresh. Don't begin with your own practice, a new house, and loan debt all at once. Start a pension plan or IRA, even with minimum savings and contribute every year. Try not to get caught up in jealousy with friends who may already be in a house. Don't do it until you're ready. Don't buy anything other than a house on time---too much interest expense. Invest in your career experiences---take continuing ed and find a mentor. Other dentists are usually willing to help new grads learn techniques. Solo group practices allow individuality of practice, without all of the expenses paid by you. And patients don't know whom the equipment belongs to anyway. You can start up your own practice, without making large initial investments. And it's nice to cover for each other. It allows your practice to grow quicker if the other dentist's patients like you. They are good referral sources. Try to do minor repairs, accounting, billing etc in office to save on expenses.

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Savings and Debt Your Home:

Let us examine a representative example:

Jim and Dottie bought a home! Amount

Purchase price, Fullerton, CA, 1960 $35,000

5.75% interest, $163/ month payments for 30 years $58,680

Subtract savings on interest deduction ($30,824 X .25) $7,706

Total Mortgage payments $50,974

Total Property taxes ($40/month), minus tax deduction $16,575

Maintenance, upgrades (1.25%/year) $20,125

Insurance (0.5%/year) $ 6,900

Down payment $ 7,000

Total Paid in 1960 dollars $101,574

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Same House sold in 2006 Amount Sale Amount, 2006 $920,000 Received after all expenses paid $810,000 From $35,000 to $810,000, a 6.8% per year gain? Not really… 1960 dollars for $810,000 $118,250 Per year gain on investment in real dollars 0.3% Many realtors and people involved in the media call your personal residence your most important investment. Nothing can be further from the truth. Please never consider your home an investment unless you plan to sell it later and move to a less expensive home. I still haven’t encountered a dentist that has moved to a less expensive home in retirement, other than a continuing-care complex late in life. Many downsize, yet the home always costs at least as much as the one they have sold. Many people made money “flipping” homes during the housing bubble. Yet for every housing multimillionaire I come across there are three people that own out-of-state rentals with vacancies and are under water, owing more on the unit than it is currently worth. Yes, all are either near or in bankruptcy. I bring up housing first as it is the main obstacle to dentists’ savings and path to true wealth. I gripe about fancy cars, clothes, and exotic trips, yet the home is the biggest block to retirement. Typically, a dentist will buy a “starter” home in his or her early 30’s, then purchase the trophy home in one’s 40’s, then a nice retirement home near or at a resort near the time of retirement. The second home is the one that destroys the ability to save. Just as the dentist has paid off the first practice loan and the kids are not yet in college, there is a time when there is an abundance of cash flow. Many couples opt to use that money for a GPS house. The wise ones stay put and save. Let’s look more closely at housing. If you are a young dentist, how much can you really afford? First, let’s go to a book released in 2010 written by an attorney/Certified Financial Planner: it’s called Your Money Ratios: Simple Tools for Financial Security, from Charles Farrell, J.D., LL.M.1 Mr. Farrell provides various ratios that people can compare to income at a given age to gauge whether they are on course to retire at a given age. The next page displays the Mortgage chart.

                                                                                                               1  Charles Farrell, J.D., LL.M., Your Money Ratios: 8 Simple Tools for Financial Security. New York, NY: Avery, 2010.  

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Assumptions are that distributions at retirement will be 5% of portfolio value per year, Social Security will constitute at least 20% of pre-retirement income at 65, and real rate of return on investments will be 4.5% per year.

Source : Charles J. Farrell, copyright 2010 all rights reserved. A quick note for those following on CD: For a dentist wishing to retire at age 65, he will need to have a mortgage no higher than the following multiples of his net practice income: Age 25, 2.0; age 30, 2.0; age 40, 1.8; age 50, 1.5; age 55, 1.2; age 60 0.7; age 65, 0. For example, a 50 year-old dentist that wishes to retire at age 65 and has an income of $250,000 should not have more than 1.5 times, or $375,000 left on his primary home mortgage. If he does, it will inhibit his chances to save enough to retire by age 65. Note the maximum amount of mortgage debt should never be more than twice your net income. This is an old standby measure used by many until the boomers became house-hungry in the 1980’s. With more lenient mortgage terms, many of us could qualify for a much higher mortgage. The banks didn’t care if we didn’t ever save. They made much more from mortgages than they ever did with savings and checking accounts. Of course, now we realize what fools they took us for!

Mortgage to income ratio, retirement at 65

Age Ratio 25 2.0 30 2.0 35 1.9 40 1.8 45 1.7 50 1.5 55 1.2 60 0.7 65 0

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When you take on any debt, it should never inhibit your ability to save. Mr. Farrell goes on to inform us that a home allows you a place of safety, comfort, and facilitates your ability to work each day. That is its primary function. It is not to be purchased for the tax deduction or to fund your retirement. And yes, you should have your home paid off by the time you retire. Carrying a mortgage into retirement is an onerous burden. Having no rent or mortgage in retirement frees up cash for the things you are looking forward to. Having too high a mortgage after age 50 can restrict high savings that normally occurs during your prime earning years.

In looking back to the early retirees, all had no debt other than a mortgage by age 45.

Let’s take a look at vacation, or second homes. According to Brett Arends in a Wall Street Journal Sunday article titled “Ten Money Moves That Always Pay Off,” published August 22, 2010, the finances for owning a second home don’t work out.

The math is terrible unless you buy something for less than $100,000 or frequent most weekends.

Example: If you purchase a $300,000 home, you can count on at least 3% annual payments for property tax, insurance, maintenance, and upgrades, according to Farrell. This amounts to $9,000 per year. A luxury resort at $250 per night will provide 36 nights per year for your $9,000. That’s 18 weekends---a rarity for docs to spend at a second home. Also, realize that your $300,000 will keep up with inflation, but normally won’t provide real growth. Investing that $300K in a diversified fund will average at least 3% yield above inflation over the years, bringing in another $9,000.

Bottom line: If you will be using your second home less than 60 days per year, it doesn’t make financial sense to own.

Renting out your second home may provide some financial relief, yet if you use your property more than 14 days per year or more than 10% of the days rented, many rental tax advantages disappear. In most cases, frequent renting will cover taxes, insurance, maintenance, upgrades, and professional rental management fees, yet you still will not see real growth of your investment over time.

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Other Financial Tools

Let’s look further at more of Mr. Farrell’s Ratios:

Capital to Income

This is for a 70% replacement income at age 65. I feel a 60% replacement is often enough, but it is always wise to be conservative.

Source: Charles J. Farrell, copyright 2010 all rights reserved. Same assumptions as previous chart.

Capital (Savings) include the current values of all tax-deferred and taxable investments, including all IRA’s, profit sharing, brokerage accounts, the fair market value of any investment real estate, and the value of your practice. This does not include the value of your home, autos, or personal possessions. If you

Age 65 retirement

Age Capital to

Income Ratio Savings Ratio

25 0.1 10%

30 0.5 10%

35 1.25 10%

40 2.0 10%

45 3.1 13%

50 4.5 13%

55 6.1 13%

60 8.1 13%

65 10.0 13%

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are sure you will downsize in retirement, you can include the difference in price as part of your savings.

Income includes both spouses’ incomes. Passive income not from capital gains, interest, or dividends may be included.

The ratios are calculated to allow an advised savings of 10% per year starting at age 25, then 13% starting at age 45. For most dentists, savings is impossible before age 30. Because of this, an average of well over the percentages given would be prudent. Later on in this presentation we find that Brian Hufford wants continual savings of 20%∗. Most dentists start to save at age 30 or later, so 15-20% seems prudent to retire at 65.

Mr. Farrell also has provided me information for retirement at age 60 with a 70% income replacement. It requires a much higher Capital to Income Ratio at retirement: 14.0. This is much higher because during the five extra years between 60 and 65, Social Security payments are not normally taken and medical care can be extremely expensive. Also, if a dentist starts saving at age 30 instead of age 25 listed above, Mr. Farrell finds that a dentist needs to save an average of 22% of income each year to retire at age 60!

Bottom line: Be on the safe side and save 20% of your income while working.

Because retirement by age 60 is much more difficult than age 65, I will use tables for the rest of the presentation assuming that the dentist will retire at age 65.

For those on CD, to retire at age 65, at age 40 you should have double your income in savings. Remember, this includes the sale of your practice and any commercial real estate, but not your personal residence. At age 50, you should have 4.5 times your income saved. At age 55, 6.1; at 60, 8.1; at 65, 10.0.

Thus, if you are age 40 and have a family income of $200,000, you should have around $400,000 saved to be on track to retire at 65. Remember, you may include the price of the sale of your practice. Many dentists at age 40 have less than their income saved, yet have a substantial amount when their practice is included. Be aware that practices these days and in the next ten years will not have the value they have had in the last ten years. Still, sales will probably be near the 50% of production range. This will normally bring in over $300,000.

At age 50, a dentist with a family income of $200,000 should have around a million dollars saved. In other words, he or she should have been saving at a reasonable rate for the last ten to fifteen years.

                                                                                                               Brian C. Hufford, CPA, CFP, “Dealing with Dollars: Maximize Your Wealth Improving Upon the Reality of Your Finances,” AGD Impact, February 2010

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Debt to Income

Now, let’s look at debt. This is the area that gives most dentists trouble, especially in the last few years. With easy credit, many of us are well beyond the parameters listed below.

Mr. Farrell, in his new book, splits debt into several categories including Mortgage discussed earlier. In an article in the Journal of Financial Planning∗, Mr. Farrell looked at total debt, which for our purposes, works well.2

Below are Mr. Farrell’s ratios from the article. Please note that Mr. Farrell assumes all debt, including your home, will be paid off by the time you retire.

Debt to income

Age Debt to income

30 1.70

35 1.50

40 1.25

45 1.00

50 0.75

55 0.50

60 0.20

65 0.00

Source: Charles J. Farrell, copyright 2006 all rights reserved. Assumptions same as previous charts except real rate of return estimated at 5% per year.

Debt includes all mortgage, auto loans and leases, student loans, and consumer debt. According to Mr. Farrell, practice debt need not be included, assuming that you eventually will profit from sale of the practice.

For those on CD, at age 30, debt can be up to 1.7 times your income; at age 40, 1.25; at 50, 0.75; at 60, 0.25; at 65, 0.

                                                                                                                 2  Charles J. Farrell, J.D., LL.M., “Personal Financial Ratios: An Elegant Road Map to Financial Health and Retirement,” Journal of Financial Planning, January 2006, page 2.  

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Let us look at an example: Rusty, a dentist, age 45, and his wife, Cindy, age 44, have a combined income of $250,000. Their total practice and personal savings, including tax deferred and taxable is $200,000 with the practice worth $300,000. Their total savings is for this exercise is therefore $500,000. This provides a Savings to Income ratio of 2.0 – not quite on track for age 65 retirement. As you can see, ideal is 3.1. Their total debt, including a $400,000 mortgage, auto leases, credit cards, and a lingering student loan is $590,000. This gives a Debt to Income Ratio of 2.36 – far above the recommended 1.0. Obviously, the debt load for Rusty and Cindy has not allowed them to save at Farrell’s 10%-13% per year for the last 15 years, and seriously hurts their chances to retire at age 65 with a lifestyle comparable to pre-retirement.

The couple is currently thinking of either remodeling their Des Moines home or purchasing a new one. Since their debt currently is much higher than what is prudent for a 45 year old, the new home is out of the question. Even a remodel that isn’t paid with cash savings is not wise at this time. Once the student loans are paid and the mortgage is better under control, taking on new debt may be appropriate.

I think in this economic climate it is imperative to have some guidance on one’s savings and debt. This useful tool is simple and a great guide for all ages.

All the early retirees noted earlier had all debt save for a mortgage paid off completely by age 45. No student loans, no practice loans, and they paid cash for cars. Brian Hufford of Hufford Financial has similar guidelines to Farrell.3 Mr. Hufford writes regular financial columns for Dental Economics and AGD Impact. He feels savings should be at the 20% level for age 65 retirement. This is again because dentists start their savings later than the general population. Mr. Hufford offers a different way of assessing, yet comes to similar conclusions. One unique thought of Hufford: You should never structure your debt such that you are paying more than 0.8% per month of the total. Let’s look at Dr. Rick: At age 33 he has a student loan of $100,000 at $1,200 per month, auto loans of $50,000 at $1,000 per month, a practice loan of $500,000 at $6,000 per month, and a mortgage of $400,000 at $2,400 per month. This is typical for a dentist starting a career buying both a practice and a home. His total loans are $1,050,000 and he is paying a total of $10,600 per month. That is 1.07% per month, well over Hufford’s limit of 0.8%.                                                                                                                3  Brian C. Hufford, CPA, CFP, “Dealing with Dollars: Maximize Your Wealth Improving Upon the Reality of Your Finances,” AGD Impact, February 2010  

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What should Rick do? Restructure the home loan if he can and keep the autos well beyond the payoff dates. $10,600 per month in loans will require Rick to have net income of at least $190,000 to fund his debt. This does not include food, clothing, and the other necessities of a modern budget. This is crazy, yet the banks have allowed this kind of onerous debt to stack up for young graduates. According to Farrell, Rick’s total loans, not including his practice, are $550,000; if he is earning around $250,000 per year, he’s in over his head with a debt ration of over 2 at age 45. Even if he is earning $365,000 and is 35 years old or younger, he is still on the verge of trouble. Anyone over age 35 with this debt load without earnings well above $365,000 will have huge obstacles to savings. The bottom line: to have both a practice loan of over $300,000 and a mortgage of the same amount is the limit for a practitioner making less than $300,000. Only when at least one is paid off can the dentist save consistently. Note, very few dentists actually can keep expenses and savings within the above parameters. Yet I bring up the point to show why a $250,000 income may be difficult to live on in today’s difficult climate of large practice and student debt. You are not alone, as many dentists face this same predicament.

So what is the key? The real bottom line? Debt is your enemy, my dental friends. Yes, it’s OK to own a nice home and have a 30 year mortgage, yet never, let me repeat, never take out a second practice or home loan. If you can pay cash for the trophy home or the new office, fine. Otherwise, you will ruin your chances to retire at an early age. And it doesn’t seem to have anything to do with your practice net income. Those netting over a million dollars still have problems with debt overload. The more they earn, the bigger the mortgage and practice loan becomes. Yes, there are those with $25,000 per month practice/building loans with a concurrent $10,000 per month mortgage.

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Where Should I Go For Help?

A major key to wealth is the power of compound interest, both in savings and spending. I’d like to spend a moment on this topic. An example involves two dentists, Dr. I.B. Smart and Dr. Wanda Beemer, who became financially prudent at slightly different ages. The first dentist, Dr. Smart, from age 30 until age 65, always purchased with cash a two year-old moderately priced, yet nice vehicle, such as a Toyota Highlander, and replaced every four years. The second dentist, Dr. Beemer, did the same, except for one slight difference. She splurged at age 30 and took out a four-year loan for a new BMW 7 series. Four years later, she became enlightened to the high depreciation inherent in a luxury auto and prudently bought two year-old Highlander-type vehicles for the remaining 31 years of her career. That one-time purchase created a difference in savings of $35,480 for those four years between our two dentists that compounded to $309,000 (in age 30 dollars) by age 65, or the equivalent of $14,000/year for life! After all fees and taxes, the average sale amount of a dental practice is near $300,000. In other words, an expensive capital purchase early in one’s career can have an effect as powerful as the sale of a dental practice. I’ve received some flack from dentists for this story, yet stand by its principles. Of course, many of us buy Mercedes and BMWs. And normally buy new. This is fine by me as long as you pay cash. Any interest payments significantly erode your ability to save for retirement. This is rarely mentioned in the popular press as the stock market is based 70% on consumer spending with most of loaned out. Economists do bring it up all the time, as do politicians when dealing with the government. Let’s now look at investment advisers:

There are a myriad of investment advisers with no state or national licensing. Bankers, insurance salesmen, mortgage brokers, real estate brokers, traditional brokers, certified financial planners, certified life underwriters, no-load brokers, and your brother-in-law Bob, all can claim to be “financial advisers.” Let us triage the horde.

There are two main groups of financial professionals, those that mainly sell, and those that advise. Let’s look at the salesmen first:

Insurance brokers, bankers, mortgage brokers, and anyone else touting to be a financial advisor without the CFP (more on that later) designation usually have limited education and normally will try to sell you a pre-packaged investment vehicle that has onerous fees. They may or may not provide other advice. Buyer beware.

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Beware, in particular, of any insurance company offering a retirement plan. Often they are deferred group annuities providing only a small choice of funds charging significantly more than a discount broker would charge for the same funds.

What about the traditional broker? “Broker-dealers”---known as stockbrokers, have been the usual adviser for many of us. Little did we know this crew has always been exempt from the Investment Advisors Act of 1940. The law exempts traditional brokers from “fully disclos[ing] how they’re paid or revealing conflicts of interest that might bias their recommendations. Nor are they subject to the same stringent rules regarding fiduciary duty---that is, placing a client’s interests ahead of their own---as are other advisers.” In 2006, part of this exemption was stripped, yet brokers still may sell commissioned products without the fiduciary responsibility of protecting the client’s best interest. No other advisers have this exemption.

A seminal eight-year study presented to the American Finance Association 2006 meeting, concluded that traditional stock broker “load,” or commission-based funds, perform significantly worse than those from a no-load discount broker, before the additional fees and commissions are taken into account.4 Repeat, load funds from traditional brokers do worse than similar no-load funds from discount brokers. Period. Sorry Morgan Stanley Smith Barney and Merrill Lynch. Hello Fidelity, Vanguard, and Scottrade.

The financial industry’s general practitioner for comprehensive financial planning is the Certified Financial Planner (CFP). They can provide a financial plan, insurance help, and plan your estate. For managing your money on an ongoing basis, use a Registered Investment Advisor (RIA). Both CFPs and RIAs act as fiduciaries. That is, they are required by law to act in your best interest. Conflict of interest selling “load,” or products with commissions is not an issue. As mentioned above, traditional brokers do not have this legal requirement. Often CFPs are also Registered Investment Advisors. CFPs and RIAs are fee-only; no commission is involved. CFPs and RIAs almost always use the discount brokerages, such as Fidelity, Vanguard, Schwab, etc., as third party custodians for accounts.

There are other, less well-known designations that also are ethical and have continuing educational requirements. Please make sure that an adviser you are considering is fee-only and has no conflict of interest.

                                                                                                               4 Bergstresser, Daniel B., Chalmers, John M.R. and Tufano, Peter, ”Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry”(October 1, 2007). AFA 2006 Boston Meetings; HBS Finance Working Paper No. 616981. Available at SSRN: http://ssrn.com/abstract=616981.  

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Where does the prudent dentist find these competent people? Traditional brokerages, banks, and insurance companies pitch a warm appeal for your financial goals, yet provide products that have high costs and underperform. There are, though, many ethical, high quality sources that utilize the aforementioned planners. I’ll touch on those with which I am familiar and stress that this is an incomplete list:

First let’s look at Dentist-oriented advisers: You will receive detailed and individual advice on all financial, insurance, small business retirement planning, and estate planning with these. be prepared to pay higher fees than with the other groups. Dentist-oriented advisers also offer practice transition service. They usually employ Certified Financial Planners or CPAs.

Hufford Financial, Caine Watters, and Mercer Advisers are examples.

Second, Independent, fee-only planners, normally again CFPs, provide comprehensive advice, including small business retirement plans, estate planning, and insurance advice, at a lower fee than the dentist-oriented specialists. According to Consumer Reports, comprehensive financial plans obtained from independent advisers average $3,000 with management fees normally between 0.5 and 1.0 percent of assets. Additional fees apply to small business retirement plans.

Garret Financial Network lists experienced CFPs, and is recommended by Consumer Reports. Another highly rated company that also provides extensive educational resources and planning services is Merriman Advisors.

Discount brokers offer the lowest fees, yet plans may not be as comprehensive as the other advisors, with some including estate planning and insurance advice, some not. Small business retirement plan sophistication also varies. Charles Schwab, in particular, offers extensive retirement options, yet does not provide in-house insurance and estate planning. The discount brokers employ large numbers of CFPs, CPAs, tax attorneys, and actuaries to handle your needs. All provide financial planning for fees of $1,500 or less, with management fees of between 0.5 to 1.0 percent for ongoing advice. Vanguard, Fidelity, Charles Schwab, T. Rowe Price, and others provide reasonable, easy-to-understand, and balanced investment and retirement planning assistance.

Which is best for the prudent dentist? The discount brokers provide the lowest rates, yet may not provide all the services one desires. Independent, fee-only planners provide extensive service with moderate pricing. Dentist-oriented planners provide the extensive services of the independent planner with the added benefit of transition assistance, yet one will pay much higher fees.

Please note that any business mentioned above does not have my endorsement and that many competent financial firms not mentioned are available.

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What about going it alone? To set up one’s own financial and retirement accounts with a discount broker, find one’s own insurance, and to coordinate with one’s estate planning attorney has merit and has been done by many, including yours truly. Fees are kept to a minimum, yet the time necessary to reallocate funds periodically, update insurance correctly, and keep all components organized may be more than the busy practitioner can handle.

In interviewing many dentists over a wide age and income spectrum over the last three years, my strong feeling is that those who employ a professional to handle all financial affairs come out in better financial shape and have much less stress.

But, for heaven’s sake, please keep away from the insurance “retirement specialist” salesmen and their sneaky annuities!

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Annuities

On the previous note, it seems at every lecture I’ve given lately a dentist will offer that an adviser has said, “Doctor, what if I told you about a product that invests in the stock market, pays a minimum of 5% per year, and guarantees you will never lose money?” What are these miracle products? They are equity index annuities. Numerous alerts have been posted regarding the sales tactics of insurance agents selling these products over the last several years. As recently as June 25, 2008 the Securities and Exchange Commission issued statements warning of fraudulent claims made regarding these products.5 What is an annuity? In the simplest form, you give an insurance company a sum of money and the insurance company pays you a guaranteed sum for the rest of your life. This is a fixed annuity. Many variations have come about over the years to attempt to spice up the basic premise and usually increase the commission for the seller. An annuity invested in mutual funds, with a hope of an eventual higher return than one formed from a one-time lump sum, is called a variable annuity. I’ll go over all annuities in more detail later in this section. Let’s look at this latest annuity, the equity index annuity, often investing in a common stock market index: The guaranteed minimum return, in this case 5%, may only apply to a portion of your total investment, and the contract may require you to hold the investment for up to 15 years to get credit for any increase! Further, that gain of the index you participate in, say the S&P 500, will normally be reduced by the following:

1. Participation rate: It allows you to recover a certain percentage of the index’s gain, often 70%. 2. Index Rate Cap: You may have a limit of say 7% on any gain on your funds. If the S&P 500 gained 25% in a year, you would only be eligible for 7% times 70%!

                                                                                                               5 See press release at www.sec.gov/news/press/2008/2008-123.htm.  

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3. Margin or Spread: The index gain for many annuities is determined by subtracting a margin or spread. This is often 3%.

Thus, in the preceding example, an S&P 500 return of 25% would be capped at 7%, reduced to 4.9% by the participation rate, then decreased down to 1.9% by the margin or spread. As you can see, in good years for the stock market you would receive a CD/money market rate.i To top it off, you must annuitize to realize your financial gains; this means taking monthly payments, not a lump sum. Can you actually lose money in one of these funds? According to the US Securities and Exchange Commission, yes. If you need to cancel your contract early, in some cases before 15 years, you will pay a significant surrender charge and suffer tax penalties. The bottom line here is that you’d have a better return with far more liquidity by investing in US Treasuries. Further information is available at the Securities and Exchange Commission at the listed site.6 Let’s now take a close look at other annuity products, since all dentists will come across the annuity sales pitch sometime in one’s career. As previously stated, you give an insurance company a sum of money and the insurance company pays you a guaranteed sum for the rest of your life. As the account grows, current tax liability is deferred. There are two annuity phases, accumulation and withdrawal. In the accumulation phase, you provide either a lump sum payment, producing an immediate annuity, or a series of payments. In the withdrawal phase, you receive payments, normally for the rest of your life. The payments may be a guaranteed amount---a fixed annuity, or may depend on investment performance---a variable annuity. Social Security and most government (defined benefit) pensions are a type of fixed annuity. You have invested money over your career and receive a fixed monthly benefit for the rest of your life.

                                                                                                               6 Collins, Patrick, Lam, Huy, Stemp, Josh, “Equity Indexed Annuities: Downside Protection, But at What Cost?,” Journal of Financial Planning, 22:5, 48-57.  

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Many retirees use a form of self-regulated annuitization to take out a fixed amount each year from their portfolio. This is quite simple and can be increased for cost of living increases each year. The magic formula is to take 4% of your total out each year, increasing each year for inflation. 4% is a safe amount in almost any actuarial scenario. Also, you or your heirs get to keep any leftover principle. This is the most effective way to withdraw in retirement and costs much less than using insurance annuities. Why don’t more dentists use this method? Actually, many do! The reason for having someone else do it is to save 10 minutes at the start of your retirement. The cost for saving 10 minutes is usually hundreds of thousands of dollars. Remember, with an insurance annuity, you don’t keep any principle. To do it yourself, all the calculations can be automated by your bank for monthly checks and your investment broker can automatically transfer the 4% with inflation adjustment to your bank money market account every year. It’s that simple, docs! For those wishing to delve further into the withdrawal subject, read William Bengen’s book, Conserving Client’s Portfolios in Retirement. Let’s return to the different types of annuities:

• Immediate annuities: You invest a lump sum then receive a check a month for the rest of your life or for a fixed number of years. When you die, the checks stop and any residual amount left in your account is kept by the insurance company. If you live a long time, the insurance company loses; if you live a short time, you lose.

The downside to this product is that once you start taking payments or annuitize, you can never access the principal again. Also, normally the checks don’t increase with inflation. Be sure to consider to asking for inflation protection. Vanguard Lifetime Income Program offers such an annuity.

• Tax-deferred annuities: These should only be used after all other tax-deferral plans are maxed out. Even then, they have marginal usefulness, as will be seen shortly. These annuities include all the other types of annuities sold.

As with all annuities, you give the insurer payments that are invested by the insurer with growth tax-deferred. You withdraw funds later, either in lump sum, or most commonly, in monthly checks for life.

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Problems with annuities:

1. Your funds are not liquid. Surrender charges of between 8% and 20% start the first year of ownership and may continue for up to eight years.

2. If you withdraw before age 59 ½, you will pay a 10% federal tax

penalty.

3. Typical sales commissions run from 5% to 14%.

4. Total yearly expenses average 2.5%+ Types of tax-deferred annuities:

• Fixed Rate: These are like CDs, yet not with federal deposit insurance. You invest a certain amount and receive a fixed return for a certain number of years. Note: you may have your rate adjusted down under certain policies after a few years.

• Variable Annuities: The salesman’s favorite! Mutual fund subaccounts are

attached to the annuity contract. The fund’s account balance is affected by how your investment choices in the subaccount perform.

Often, your investment choices are limited and don’t provide good diversification, thereby increasing your risk. The fees, often hidden, can add up to well over 3% per year, eroding any gain. Surrender charges are as with other annuities.

Terry Savage, financial writer for the Chicago Sun-Times, indicates that if the annual fees are over 1.5%, the tax-deferral advantage is lost. I have never seen an insurance company variable annuity with less than 2% annual total charges. In that case, a regular after-tax brokerage account is not only more liquid, but any taxes are normally at the 15% capital gains level rather than an annuity’s taxation at your regular income level.

Overall, these “investments” are not liquid and provide a much lower overall return than a mutual fund after-tax account. Note that our equity-index annuity mentioned earlier is a type of variable annuity.

Remember to fund these annuities with after-tax money, as they automatically provide tax-deferred growth. To put IRA money into an annuity makes no sense

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except for the following: if you wish to use the death benefit guarantee for your heirs without intention to use the funds in retirement. This is very rare and requires strict estate planning savvy with a tax attorney. If a “financial planner” has placed your IRA money into an annuity without the above caveat, it’s time to find a new planner, such as a CFP (certified financial planner) fast! If you ever consider a variable annuity or any of it’s flavors (remember, if the pitch sounds like you can never lose any money or promises growth, it’s a variable annuity), please ask yourself these questions:7

1. Am I already contributing the maximum possible to my IRA and other tax-deferred accounts?

2. Am I very sure I won’t touch the money until I’m at least 59 ½? 3. Am I prepared to lock up this money for at least 10 years? 4. Am I considering buying a no-load annuity contract, meaning there is

no salesperson involved? 5. Am I certain that my tax rate will be lower when I retire than it is now?

If you can answer yes to all the above, then a variable annuity may be right for you. If you have existing annuities, it would be wise to contact Vanguard, Fidelity, or USAA to look into transferring your annuity account. The above companies have non-commission annuities with much lower, non-hidden fees. Your investment, over a 20-year time frame, may be worth up to 50% more, depending on how heinous your previous fees were. If you’ve invested after-tax dollars into an insurance company annuity contract, you can easily transfer via a 1035 exchange to a new and less financially onerous annuity contract. And now for the good news: if you have had the misfortune of investing tax-deferred money into an annuity, you may be able to transfer your annuity into a regular IRA account with one of the companies listed above. This step repairs much of your tax-deferred damage and gives ultimate financial choices. Bottom line: If you have an existing annuity contract, please contact Vanguard, Fidelity, USAA, or any discount brokerage to evaluate fees and a possible transfer. If you have tax-deferred money in an existing annuity and wish to use                                                                                                                7  Paul Merriman, “All About Annuities,” downloaded at www.fundadvice.com/fehtml/investingbasics/0103b.html on August 16, 2010.

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the funds this life, I implore you to contact one of the named firms to evaluate transferring funds into a traditional IRA. Yes, you may need to wait if you have high surrender charges, but you can formulate a wise plan for the future. Note: Much of the information on annuities was paraphrased from Terry Savage’s book, The Savage Number.8

                                                                                                               8  Terry  Savage,  The  Savage  Number,  John  Wiley  and  Sons,  Inc.,  Hoboken,  NJ,  2005,  161-­‐174.  

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Risk

Let’s take a look at investing risk. The information following has been paraphrased from a 2006 article found on fundadvice.com, written by Paul Merriman called “How to manage the most important risks of investing.”9

According to Merriman, it makes sense to think like a banker when it comes to evaluating risks and rewards: Bankers carefully calculate their risks; investors should do the same. Too many investors forget the link between returns and risks. If you’re seeking above-average returns through aggressive investing, you are unavoidably taking above-average risks. And if you’re seeking above-average safety, as when you invest in Treasury bills and CDs, you will unavoidably get below-average returns. Unfortunately, too many dentists in the last decade have chased higher returns after the market meltdowns of 2002 and 2008 and have exposed themselves to undo and unfortunate risk. To evaluate how much risk is appropriate is one of the most important investment decisions a dentist can make. Risk comes in many forms, some very subtle. Below are the most important forms of investment risks and ways the savvy dentist may evaluate. 1. Business risk: This is risk of company failure or deterioration. Any company may have its stock fall due to poor management, political changes for it’s product, events it can’t control such as natural disasters, internal fraud, poor quality control, poor advertising, and a myriad of other reasons. The cure for this risk is basic and simple: diversification. If you own stock in one or a handful of companies, your potential for portfolio failure is high. If you own stock in many companies, or as with many index funds, the whole market, a single company disaster will have little overall effect. Often dentists think they can “outsmart” the system by betting heavily on a single or several companies. Often the company provides medical or dental devices or systems. Key bets over the last decade have been in implant and                                                                                                                9  Paul Merriman, “How to manage the most important risks in investing,” September 16, 2006, downloaded from www.fundadvice.com/articles/investing-basics-6.html on August 16, 2010.

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CAD/CAM systems, dental microscopes, veneering materials, and even in software systems. Some companies have done well, others poorly. Often the performance of the company has not had much to do with the quality of the product---a big challenge for the dentist to evaluate. Another problem is to bet heavily on an asset sub-class, such as pharmaceuticals or health care. A given fund may involve many companies, yet the scope of the sub-class is normally so small that a collapse of one company may have an effect on the whole industry. Another area of risk: commodities. According to Wikipedia, “A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are substances that come out of the earth and maintain roughly a universal price.” These goods include gold, platinum, silver, paper, and any product that is an actual entity that can be stored, such as wheat or corn. A good rule of thumb is to never have more than 5% of one’s total portfolio in a single stock or sub-asset class. Yes, a widely diversified mix provides good growth with risk diluted.   2. Inflation risk: This is the risk that money you save or earn will lose its purchasing power over time. Today, inflation is at historic lows. Many a cautious senior is comfortable knowing their funds are not falling behind due to dollars being worth less in future years. Yet most of us remember the double-digit inflation of the 1970s and 1980s which caused mayhem with many fixed income funds and the Social Security system. For the last 35 years, the cost of living in the United States has risen at a compound rate of 4.7 percent a year. A dentist’s retirement income of $150,000, more-than-adequate today, may shrink to $48,000 in 25 years, an intolerable living for most of us! The way to protect yourself against this risk is to own at least some stock funds. Over the past 80 years, the annual inflation-adjusted return (real dollars) of the Standard & Poor's 500 Index was 7.1 percent, while it was only 0.6 percent for Treasury bills and 2.4 percent for government bonds. This means that owning extremely “safe” investments couldn’t control erosion. Having stock funds as part of your portfolio is a must long-term. Of interest, real estate was slightly above zero as was gold. No, you can’t protect yourself against inflation long-

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term with large holdings of gold or real estate, contrary to what you see on all the infomercials today. For the most timid investors, TIPS, treasury inflation protected securities, may help. TIPS are the inflation-indexed bonds issued by the U.S. Treasury. The principal is adjusted to the Consumer Price Index, the commonly used measure of inflation. The coupon rate is constant, but generates a different amount of interest when multiplied by the inflation-adjusted principal. Most investors ought to have at least 10 percent of their portfolios in assets that can increase in value, such as stock funds. Most seniors, even in later years, have exposure to some equities.  Over the past decade, those with a 50/50 mix of stock funds and fixed income securities have fared quite well, averaging 4% per year, higher than inflation. Our level of inflation over the last ten years has been near 2%. Even in crazy times, a solid buy-and-hold portfolio of mixed stocks and bonds has grown and outpaced inflation. 3. Asset risk: An asset class is a category of assets such as U.S. large-cap growth stocks or international stocks, or REITs (real estate investment trusts), or small cap stocks, to name a few. Some inexperienced and experienced investor-dentists put most or all of their portfolios in whatever assets have been showing superior recent performance. This is called market-timing or active management and is often dangerous for both the non-professional and professional investor. Few investors today realize that asset classes that have been reliable in the past can be extremely disappointing for long periods of time in the future. Imagine a 55-year-old dentist in 2000 that counted on decent stock market returns as he planned to retire in 2010. From 2000 to 2010, the Standard & Poor's 500 Index compounded at an annual rate of essentially zero. He would have gained a bit on reinvesting dividends, yet would have essentially had no growth if only invested in stocks. With $500K to start in 2000 with100% of holdings in an S&P 500 fund, adding $30K per year, our friend would end up with $800K in 2010. If he would have diversified with 50/50 Vanguard Total Stock Market/Vanguard Total Bond funds, he would have gained 4% per year and ended up with $1.1million, a $300K difference. Yes, diversification helps. In the 2000-2010 period, the annual gains were -1% percent for large cap US stocks, -6.8% for the NASDAQ 100, +7.5% for long-term bonds, and +13.9% for international small-cap value funds.

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How would one know where to invest in 2000? The obvious conventional wisdom would be to be in NASDAQ, large-cap stocks, and forget the rest! The way to protect yourself from asset risk is to diversify. Identify the major asset classes available to investors, along with the historical returns and risks of each, and determine what mix is suitable for you. Later on, I’ll provide a sample model portfolio to examine. 4. Market risk: This is the day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away. We have total market falls every so often. Market risk is also referred to as "systematic risk". The market is the product of nearly countless influences and forces, both economic and psychological, both rational and irrational. In the long term, it’s a relatively safe bet that the market will continue its upward climb. Yet even the most seasoned pro can’t tell when the whole market will fall. Since 1900, the U.S. stock market has experienced 24 bear markets in which the index declined more than 20 percent. The following table shows those declines.

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The following table is taken from Merriman’s article and does not include the 2007-2008 decline.

Past Bear Markets Starting Date Ending Date Decline 06/12/1901 11/09/1903 46% 01/19/1906 11/15/1907 49% 11/19/1909 09/25/1911 27% 09/30/1912 07/30/1914 24% 11/21/1916 12/19/1917 40% 11/03/1919 08/24/1921 47% 09/03/1929 11/13/1929 48% 04/17/1930 07/08/1932 86% 09/07/1932 02/27/1933 37% 02/05/1934 07/26/1934 23% 03/10/1937 03/31/1938 49% 11/12/1938 04/08/1939 23% 09/12/1939 04/28/1942 40% 05/29/1946 05/17/1947 23% 12/13/1961 06/26/1962 27% 02/09/1966 10/07/1966 25% 12/03/1968 05/26/1970 36% 01/11/1973 12/06/1974 45% 09/21/1976 02/28/1978 27% 04/27/1981 08/12/1982 24% 08/25/1987 10/19/1987 36% 07/17/1990 10/11/1990 21% 01/14/2000 09/21/2001 30% 03/19/2002 10/09/2002 32%

Source: www.fundadvice.com. Copyright by Merriman, Inc. How does the prudent dentist protect himself from these times? You have several ways:

• First, you can use market timing to attempt to get out of stocks before they experience major losses and to attempt to get back in before they experience major gains. This has led to many a dentist’s downfall in 2002 and 2008. Those that have prospered have done so usually out of luck rather than real expertise.

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• Second, you can have a mix of stocks and bonds in your portfolio to

dampen the volatility of equities so your temporary losses won’t exceed your risk tolerance. This method will work well with a buy-and-hold strategy.

One form of market risk is by “buying high, selling low.” By using dollar cost averaging, the practice of routinely investing a fixed amount in an asset every month or every quarter or every year, you automatically buy more units when prices are down and fewer when prices are up. This diffuses “buying high, selling low” problem. Over time, this technique will make your average price per share of a mutual fund lower than the average of all the prices at which you bought. For dentists, put a stable amount away in a pre-designed fund each month, using dollar cost averaging. I used that method throughout my career to great advantage. 5. Tax Risk: This is the risk that your investment gains will be diminished by income taxes. This risk is primarily of concern in non tax-deferred accounts. Note that all mutual fund prospectuses are required to disclose the impact of taxes on their returns. There are wide differences in the handling of tax issues. Prospectuses and advertisements are standardized to assume investors are in the highest individual federal income tax bracket when presenting after-tax returns. Here are some ways you can save taxes on your investments. Each works, yet each has drawbacks.

• Buy and hold. If you don’t sell, you won’t be hit with a capital gain. Eventually you will have to pay, yet waiting until your highest taxes or marginal rate is less can be beneficial.

• Invest in mutual funds with low portfolio turnover and high tax efficiency. The more the funds are bought and sold, the more taxes are due, eroding the growth of the funds. Actively managed funds (those that have active buying and selling as the manager tries to beat the market) generally have larger tax consequences than index funds. The best funds for eliminating tax risk are ETFs, index, and tax-managed funds available to the public at Vanguard, Schwab, Fidelity and T. Rowe Price.

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• If you’re in a high tax bracket, you may look to invest in municipal bond funds and tax-free money-market funds instead of taxable bond funds and taxable money-market funds. 100% of my taxable funds were in municipal bonds while I was practicing. Actual bonds may not be as attractive today as they were in previous years because of possible business risk for cities having financial troubles. Yet municipal bond funds, groups of individual bonds, will have safety, even though the yields may not be as attractive. Tax-free money market funds are almost always a better deal for dentists to have in their cash portfolios. The rates are normally not far from those rates for taxable money market funds. Try to find a fund that also limits your state taxes also. Vanguard offers tax-free funds for California, New York, New Jersey, Ohio, and Pennsylvania.

• Invest as much as possible in tax-sheltered accounts such as your SEP and Simple IRAs, 401(k) plan and other tax-deferred plans. If you can, make your annual contributions to Roth IRA accounts as well, so the earnings will be tax-free, not just tax deferred.

• If you have exhausted all other avenues and still need to reduce taxes, consider annuities. But be certain you understand any annuity before you invest in it. And always buy from a discount broker, not an insurance company. Insurance company’s commissions and yearly fees will destroy any tax-deferred advantage. Also, insurance companies rarely disclose all costs and salesmen never are aware of all costs---only their commissions!

  6. Expense risk: This is the risk that paying needlessly high expenses will erode your investment returns. Expenses are like anchors being dragged behind a sailboat. They may be invisible, but they inevitably reduce the speed of the boat. High expenses take many forms, including sales commissions (called loads in mutual funds) and ongoing expense ratios. Here is where disclosure is important and where insurance companies and many traditional brokers fail miserably, to their advantage. Please do your best to find out expenses before you invest. Here are suggestions:

• When you buy mutual funds, buy no-load funds. This will save you from one of the biggest one-time losses your investment can experience. A 5.75% commission on a $50,000 investment, with the same commission for each subsequent addition of $50,000 per year for a typical dental career of 30 years adds up to $5.13 million. This assumes 7% real growth with a buy-and-hold strategy. Without the load, the total is $5.49 million, a $360,000 difference.

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• If you’re a buy-and-hold investor, invest in index funds for their ultra low

expenses. Vanguard Total Stock Market Index charges only 0.18 percent in annual expenses. A similar fund that is most popular with traditional brokers is the Growth Fund of America with 0.76 in annual expenses. If you take into account these expenses, our load fun from above will end up with $4.44 million after 30 years. The no load, low expense Vanguard fund will provide $5.29 million. This is a difference of nearly $850,000! Often insurance carriers will add another 2% to fees, bringing the insurance company’s total down to $3.57 million. This is a difference of $1.72 million!

Doctors: By using load funds with a traditional brokerage, you may see a 16% or more loss of investment dollars over a 30-year career. By using an insurance carrier for investments, you may see a loss of 33% or more, depending on additional fees that may or may not ever be disclosed to you. If you invest in stocks or bonds, always make sure that you or your advisor uses a discount brokerage firm. If you have multiple IRA accounts with different firms, consider consolidating them to reduce or eliminate the small but persistent annual fees. I recently did this task. It takes much paperwork, yet will pay off in the long run, as you can easily track all your investments. 7. Event risk: This is the risk that some unexpected event will affect he market, or part of it. This may be a natural disaster, a political upheaval, or some man-made crisis that causes investors to question the future. Also, personal events, like death of spouse, family member, or loss of job carry risk. Unless you keep all your money in government-guaranteed bank accounts, there is no absolute protection against sudden events. Gold has traditionally been the “flight to safety” hedge. Yet, it doesn’t perform well in highly inflationary times and doesn’t always do well in times of stress. Your best protection is to have an emergency fund of at least 6 months expenses. For dentists, this is normally $50,000 to $75,000 placed in a money market account. 8. Liquidity risk: This is the risk that you won’t be able to get your money quickly when you need it without taking a significant investment hit. For your practice, selling it for anything close to what you think it’s worth is usually difficult and time

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consuming. If your wealth is tied up into personal or commercial real estate, and you need to turn it into cash, you may have to wait months or years to get the price you think you deserve. Limited partnerships have had a dismal record in the past few years for liquidity. Many a “cagey” doc has lost his hat in these investments. You protect against this risk two ways: First, by making sure that most of your investments are in liquid assets that can be sold quickly and inexpensively; this includes stocks, most bonds, and mutual funds. Second, by having an emergency fund that will let you quickly get your hands on money when you need it, without having to sell an investment you had planned to keep. I can’t stress enough the common sales tactics of the real estate and limited partnership sales force. These investments often carry heavy penalties when you are forced to sell quickly. 9. Fraud risk: This is “Bernie Madoff” risk. Fraud deliberately creates victims. To keep yourself from becoming one of them, deal with reputable investment professionals. Look for the professional designations listed above. If something seems too good to be true, in the investment world, it most often is. Don’t make impulsive decisions about unfamiliar investments; instead, take the time to have somebody thoroughly check out anything you are considering. If you’re told you must make a decision immediately to take advantage of a deal, run away as fast as you can! If you are offered something promising an unusually high return, remember that risks and returns always go together; if the risks aren’t identified in order to seek a high return, please pass on the offer. As Warren Buffet has said many times: Don’t invest in something you don’t understand. Typical scams include the following, found in Consumer Reports Money Advisor in 201010: Several hundred retired teachers in Texas were persuaded to roll money from retirement plans into promissory notes. The notes promised a return of 10% per year, far above the presiding 2-3%. Ultimately, the state stopped the scheme with investors recovering only 69% of principal. How about minus 31%! Oil and gas swindling is always present in a high-cost energy environment. Beware of anything peddled as a “private placement” or that touts “green”                                                                                                                10  Greg Daugherty, “Beware these schemes and scams,” Consumer Reports Money Advisor, September, 2010, 15.

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energy. If you wish to invest in gas or oil, always use individual stocks, mutual funds, or ETFs. I’ve seen such peddlers at the California Dental Association convention. No place is safe! Precious metals have been an extremely popular scam in recent years. Often a seller will convince you to buy gold bars or coins, knowing you will need to store the product. Of course, the seller has storage for you. Not only will your gold not be stored, there may have been no gold in the first place. Please always invest in precious metal funds, not physical gold. The prices are lower, liquidity is high, and you will have a real, not phantom investment. Good ETFs to evaluate are SPDR Gold Trust (GLD), iShares COMEX Gold Trust (IAU), or PowerShares DB Precious Metals (DBP). And please be careful to not buy anything attached to a free meal. Free dinners abound for the annuity salesmen. Usually you are pressured to buy overpriced variable annuities by salesmen with limited or no knowledge investments. In this case, lack of knowledge is a blessing---for the salesman. 10. Emotional risk: This risk has been especially apparent in the last decade. Often emotions get out of hand and start dictating your decisions. Greed and fear are the two biggest forces driving Wall Street. Emotional risk is seen clearly when investors who are on the sidelines see others making big gains, and eventually they get anxious to get some of those gains for themselves. This was true of tech stocks in the year 2000. Anyone that predicted a yearly fall of over 7% per year during the decade of 2000-2010 would be called crazy in early 2000. Over and over again, investors will jump into a market near peak, only to sell when prices are at the lows several years later. Merriman calls this the “I can’t stand it any more” market timing system. If investors could follow the old Wall Street saying, “Buy low and sell high,” they would make money. But, in practice, this is extremely difficult to do. The best protection against emotional risk is a disciplined plan for buying and selling. Make sure you have a plan for your investments and stick to it. Don’t let daily or monthly fluctuations cause grief. Make sure your portfolio is properly balanced, according to your plan so you can sleep at night no matter what the market is doing. If you use market timing, follow a strict discipline and keep emotions at bay. Have a professional or good software program at hand to keep your emotions out of the decision making process. If you are a buy-and-hold investor, make

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sure you have enough fixed income in the portfolio to moderate the volatility of equities. Dentists, in particular, fail in regard to the emotional content of investing. I’ve come across countless extremely intelligent docs that bailed out of the market during the nadir of 2002, missed the big gains of 2003-2006, finally getting back in in 2007 as things peaked, then gave up again in the doldrums of 2008. Many lost well over a third of their portfolio in 2002, then lost another third in 2008. And they are pissed. 50 year-olds in 2000 with a million on hand with dreams of having $1.5 to $2 million by age 55 now have less than $500,000 a decade later. This is killing dentists’ spirits and hopes of retirement before age 70. Meanwhile, the docs that had a million in 2000 and did nothing with a 50/50 portfolio but put in $30,000 per year, now have $1.9 million, the goal of the docs that were vastly more interested in investments! In other words, the guys that snoozed the whole decade are now way ahead in the game of finance. Is this fair? Not according to the guys and gals that really studied the market’s technical indicators, listened to MSNBC, and read all the glitzy books at Barnes and Noble. Yet if only they would have followed the true academic strategies presented in many good books at the time, they would have done well. Last risk: You could run out of money before you run out of life: This is the biggest fear of many retirees. There are several good ways to protect against this risk. You must keep your living costs within reasonable bounds. It’s all about the budget docs in retirement. Few work out a budget before retirement, yet I can guarantee you’ll have one when you finally retire. Keeping your travel, entertainment, and hobby costs down will be at the forefront. You must start with enough assets before you stop working. This is usually not a problem for dentists. Many a financial adviser keeps his dental client on board as long as possible for the commissions and yearly fees. Often, this turns out to be longer than necessary. Make sure your adviser uses a Monte Carlo simulation to find your true “number.” A free and useful simulator is called Flexible Retirement Planner. Google it. Also, make sure you use a realistic budget for your expenses, not the 70-80% rule. This is normally too high! Talk to your CPA or call me to find your retirement budget.

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Asset Allocation

You’ve all heard from the media that Buy and Hold is dead. Many “financial planners” are panicked with their poor Market Timing of the last several years and are looking for any way possible to attract new customers to replace those they have lost. Buy and Hold is still king and the academic evidence is still intact to support it. Beware Tactical Asset Allocation. It’s market timing in disguise and may have more risk than you desire long term.

None of my early retiree colleagues have suffered much since 2007. Why? Any money they will need access to in the next 5-10 years is safely held in an income portfolio often similar to seen below. The following allocations are provided at www.fundadvice.com. Merriman Advisors provides do-it-yourself portfolios as an educational wing of the company. Merriman can be found at www.merriman.com.

For any income you will need in the near future, the following allocation from FundAdvice is a good sample. I personally use TIP funds also, as we don’t know where inflation will head in the next few years. The FundAdvice web site also has allocations for other discount brokerages, such as Fidelity and T. Rowe Price.

VANGUARD MONTHLY INCOME: BUY-AND-HOLD

Fund Name Symbol Asset Class Allocation

Vanguard Short-Term Inv. Grade (VFSTX) ST bond 25.00%

Vanguard Interm.-Term Inv. Grade (VFICX) IT bond 25.00%

Vanguard GNMA (VFIIX) MBS 25.00%

Vanguard High-Yield Corporate (VWEHX) HY bond 25.00%

Source: www.fundadvice.com. Copyright by Merriman, Inc.

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For a longer time period, it is wise to have a diversified portfolio of many equity asset classes, both in fixed income and equities. The following sample portfolio is for the tax-deferred portion of your portfolio.

VANGUARD TAX-DEFERRED PORTFOLIOS

Fund Name Symbol Asset Class

Aggressive Moderate Conservative

Vanguard 500 Index (VFINX) LCB 10.00% 6.00% 4.00% Vanguard Value Index (VIVAX) LCV 10.00% 6.00% 4.00% Vanguard Small Cap Index (NAESX) SCB 10.00% 6.00% 4.00% Vanguard Small Cap Value Index

(VISVX) SCV 10.00% 6.00% 4.00%

Vanguard REIT Index (VGSIX) REIT 10.00% 6.00% 4.00% Vanguard Developed Markets Index

(VDMIX) Int'l LCB 10.00% 6.00% 4.00%

Vanguard International Value

(VTRIX) Int'l LCV

20.00% 12.00% 8.00%

Vanguard FTSE All-World ex-US Small-Cap Index*

(VFSVX) Int'l SCB 10.00% 6.00% 4.00%

Vanguard Emerging Market Index**

(VEIEX) EM 10.00% 6.00% 4.00%

Vanguard Short-Term Treasuries

(VFISX) ST Bond 0.00% 12.00% 18.00%

Vanguard Intermediate-Term US Treasuries

(VFITX) IT Bond 0.00% 20.00% 30.00%

Vanguard Inflation-Protected Securities

(VIPSX) TIPS 0.00% 8.00% 12.00%

Total 100.0% 100.0% 100.0% Minimum Initial Investment $30,000 $50,000 $75,000

Source: www.fundadvice.com. Copyright by Merriman, Inc.

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FundAdvice also has recommendations for your taxable portfolio. As you can see, different risk is involved in the aggressive, moderate, and conservative portfolios. I tend to keep my holdings in the moderate group, which is 60/40 equity/fixed. The early retirees more often kept their holdings in very conservative allocations.

Please be aware that the above are sample portfolios. Make sure to talk about your risk tolerance with your adviser before making any allocation decisions.

As mentioned previously, discount brokers are where to hold your investments. Any ethical adviser will use a discount broker as a custodian for your funds. Most these days tend to use Schwab--- a fine institution.

But all these seem to be index funds. What about a bucket of individual stocks?

All the academic evidence points to wide diversification as key. A bucket of 20-100 stocks will not perform better long-term than an index fund and the higher fees will rob you of profit.

What about ETF’s? Aren’t they cheaper and just as good as mutual index funds?

ETF’s are fine. The jury is out on whether they perform as well or better than mutual funds. The fees of index mutual funds are about the same now as ETF’s. ETF’s can be sold like stocks during the trading day, yet for serious investors, that isn’t an issue. By serious, I mean Buy and Hold vs. Gambling (speculation).

I don’t see gold or commodities listed. Why not?

A very small portion of your portfolio can be labeled “play” money, for individual stocks, commodities, etc. This is for speculation. Yes, serious ethical advisers consider gold funds as speculative.

Please note that I say nothing about tax-deferral. Why? The amount you save per year is a magnitude more important than whether it’s deferred or not. All the early retirees written about below used almost all after-tax savings. Of course, tax-deferral is preferable whenever possible. But don’t spend a fortune on fancy plans that earn attorneys, actuaries, and shady planners big commissions. Be careful with complicated and expensive tax-saving strategies.

Be advised that none of the material in this program constitutes financial advice. Please make any financial decisions with your own advisor. A good professional is key.

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Self Help

Podcasts “Sound Investing” provides clear, concise advice on money and retirement, and includes interviews with the most influential people in the money business including Vanguard’s Jack Bogle, Kiplinger’s Knight Kiplinger, and Money Magazine’s Jason Zweig. Straight shooting from a position of integrity. “On the Money with Steve Pomeranz” provides an honest and frank discussion of investing, insurance, and how to avoid the “too good to be true.” “Bloomberg on the Economy” gives analysis of the World's Markets and Economies from an economic standpoint. For those interested in an academic approach. The Web All sites are free. Some have upgrades available for a fee. MSN Money at www.moneycentral.msn.com is simply the best comprehensive site for advanced screening and portfolio tracking as well as market news and complete stock and fund data. Its portfolio tracking for all of your investments is highly rated. Fundadvice.com at www.fundadvice.com provides free model portfolios for Vanguard, Schwab, T. Rowe Price, and Fidelity investors. What can be easier? Bankrate.com at www.bankrate.com is a must. Whenever you consider any loan, money market or savings account, or new credit card, go to Bankrate first. You’ll save a bundle on auto loans, mortgages, and personal loans. The calculators are also quite helpful for those wishing to compare products or financial outcomes. Bloomberg.com at www.bloomberg.com provides domestic and international news in depth. Offers many podcasts beyond ”Bloomberg on the Economy” mentioned above. Good videos. BigCharts at www.bigcharts.com provides up to 30 years of bars, candlesticks, and more for advanced technical analysis with Java flexibility. For the technical analysis geek. InvestinginBonds.com at www.investinginbonds.com provides education on all bond types as well as real-time pricing.

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TreasuryDirect at www.treasurydirect.com is the US web site to directly purchase US Treasuries, including TIPS and savings bonds. Books Please notice that the investment books are not all at the top. If you don’t have a global view in today’s world, you might as well work for General Motors. All books except Friedman and Malkiel are easy, fun reads. Your Money Ratios, C. Farrell: Quoted in this course. An elegant, easy read with much more than I had time to relate. Mr. Farrell also gives sound advice on how much disability, life, health, and long term care insurance to buy. He also gives incredibly simple advice on how to invest. It ain’t rocket science, guys. The Millionaire Next Door, T. Stanley, W. Danko: Tips on how the truly wealthy operate and what they don’t buy. No Rolexes, no Lexi, no GPS homes. And no debt. Bridging the Financial Gap for Dentists, L. Mathis: A simple and straightforward guide to financial goal setting, cash and debt management, asset protection, and retirement planning. This 131-page book is written specifically for dentists, providing vision we, as dentists, can relate to well. The World is Flat, T. Freidman: Why the world is a lot more important than you think. Awe-inspiring in scope. A must read for anyone in business. Friedman has almost overnight become the de facto American World Economist. Tipping Point, Blink, and Outliers, M. Gladwell: Why did crime drop so dramatically in New York City in the mid-1990's? How does a novel written by an unknown author end up as national bestseller? What is going on inside our heads when we engage in rapid cognition? When are snap judgments good and when are they not? Why is our understanding of success really so crude—is there an opportunity to dig down and come up with a better set of explanations? A trio of exciting and easy reads about the entrepreneurs of the millennium. The Little Book of Common Sense Investing, J. Bogle: Maybe the best investment advice of all time. This guy started index funds and still beats the street at their game.

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A Whole New Mind, D. Pink: Why the Right Brainers will rule the 21st century. An intriguing study of why design will trump the math and science nerds that dominated the 20th century. Yes, Dentistry is safe! Total Money Makeover, D. Ramsey: Recipes for debt destruction from the stalwart of “cash is king” mantra. If you ever are in a debt crisis, Ramsey is the one to tame the beast. A Random Walk Down Wall Street, B. Malkiel: Academic proof that investing really is easy. A bestseller since the 70’s. Newsletters The Hulbert Financial Digest tracks the performance of over 180 stock and mutual fund letters with more than 500 recommended portfolios — to give you an honest picture. Please start here before subscribing to any print or on line newsletter. The maze of newsletters claiming to double or triple your money in a short period weaves a twisted path of short-lived promotions. The Pure Fundamentalist, The Prudent Speculator, Fidelity Monitor, and Dow Theory Forecasts all are highly ranked and provide a wealth of information. Disclaimer---I do not subscribe to any newsletters as I find more than enough information at web sites and through the AAII Journal listed below. Non-profit Journals Consumer Reports Money Adviser provides succinct advice on portfolios, investing, spending, tax strategies, and retirement in a ten minute per month read. American Association of Individual Investors Journal is for those wishing to engage finance on any level. Beginning investors to day-trader cyber rats use AAII materials. A wonderful non-profit educational organization that provides sophisticated computer screening devices as well as easy-to-use beginning portfolio strategy. If you’ve read this far, join this group, now! Magazines The Economist has tight, insightful writing on all the national and international economic and political issues the world faces. Business Week has easy-to-read content with real insight, yet provides debatable investment advice from columnists.

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Money, Forbes, and Smart Money are all fun reads at the airport but have limited value for those interested in investing wisely. They cover hot products and hot themes. TV If you want to laugh, cry, go postal, or wish you had a lobotomy, please watch CNBC for over ten minutes. But you’ll have better financial luck watching QVC. Bloomberg TV has sophisticated and professional reports on all national and international issues. Newspapers Wall Street Journal is our de facto national financial newspaper. Barrons is encyclopedic. They both are comprehensive and a daily must for the mavens of finance. I find MSN Money on-line easier to read daily, and it has all the top WSJ and Barrons articles. The above is a partial list at best and many would disagree with the choices. Realize it is compiled by a dentist that spends an average of 10-15 hours per week researching finance and investments, for education, not to beat the system. John Bogle, who has a highly rated book listed and founded Vanguard, doesn’t personally check his portfolio more than once a year. In other words, I’ve provided too much information. Please diversify, reallocate once a year, and sleep at night. Also, you just might lose out in the “money lost” bragging rights contest at the next cocktail party.

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Interview with Charles Farrell, J.D., LL.M.  Today I’m very pleased to be talking to Mr. Charles Farrell, financial adviser with Northstar Investment Advisors. He writes the Retirement Roadmap column for CBS Moneywatch, contributes monthly to Investment News, and has research frequently cited in the Wall Street Journal, Smart Money, and the Chicago Tribune. Mr. Farrell also is a tax attorney. Farrell’s new book, Your Money Ratios--- 8 Simple Rules for Financial Security, has been a best seller for three years. Thanks for taking the time for the interview today, Charlie. I know many dentists will appreciate your research and conclusions. Carlsen: In your book, I find your comment, “All decisions you make should help you move from a laborer to a capitalist” most interesting. Can you elaborate on what that means? Farrell: One of the things people sometimes fail to understand is that in the field of personal finance, you have to transform your personal finance situation if you hope to retire. Essentially you have to move from a condition where you are generating your income from your labor. It doesn’t matter what you do, whether you are a dentist or a fireman or a teacher or a construction worker---you have to work, or labor to generate income. If you want to retire, what you hope to do is turn off your labor income and generate income from another source. The only other source available is normally the return you’d get from your financial assets. That’s the essence of being a capitalist---someone who owns financial assets and can generate and manage those assets for income. You need to make the transition from a laborer---someone who produces income from their work, to a capitalist---someone who produces income from their investments. The financial decisions you make along the way to retirement, like buying a house, figuring out how much debt you should be taking on and how much you should be saving, and how you should invest your money, should all be geared for making that transition. Each of your decisions should help you make progress to transform from a laborer to a capitalist. If you look at each decision in that light, it helps clarify decisions.

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C: So many dentists are used to having large incomes that they fail to realize that someday they won’t be making income, and they don ‘t ask, “How do I make my money make money.” You talk about the “unifying question.” Please go over. F: The transition you want to make is again from a laborer to a capitalist. Every time you face a financial decision, ask yourself, “Is this going to help transform my finances from being a laborer to being a capitalist?” This helps frame any decision. Say you are going to buy a new car, and you have a choice between a $25,000 car, a $35,000 car, and a $50,000 car. If you recognize that cars are basically wasting assets---meaning that they immediately lose value; that car, besides providing basic transportation and maybe a certain level of status, is not going to help you at all in the transition from laborer to capitalist. If you are looking for a place to spend money to help that transition, a car is not a good place to do it. The same is true with a house. If you are going to buy a home, it provides a safe place to live, a foundation for going to work every day, and will eventually provide a rent-free home. But the bigger your house is, the more of your assets you commit to your home, and homes don’t produce income in retirement. Buying a big house often impedes your ability to transform yourself from a laborer to a capitalist. Think about how your decisions help you to build more capital. Are they adding to my capital or reducing it? Decisions should use this guidance. C: Let’s talk about a boomer dentist. According to Amy Morgan and Michael Gerber, the average boomer dentist is 52 years old, has $225,000 in savings.11 In my interviews, I find the average earnings for dentists is between $200,000 and $250,000 per year and he or she has a mortgage with around 20 years left to pay off. I find many lease autos, and at age 52, many have a child with four more years of education, often at the rate of $50,000 per year. You list a total of eight ratios in your book. I mentioned capital or savings to income, debt to income, and mortgage to income. Which ratios are priorities for the above average boomer dentist?

                                                                                                               11    Amy Morgan and Michael Gerber, “The E-Myth for Dentists,” Dental Economics, May 2007, downloaded at www.cbsnews.com/video/watch/?id=6298082n&tag=contentMain;contentBody on December 30, 2009.  

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F: Because of what we’ve gone through the last couple years with the decline of the financial markets, I have an investment ratio that is really about understanding how to manage risk with the capital that you are building for retirement. One problem people have had in the big market decline is that they’ve lost a lot of their savings that they have accumulated over decades. One of the most important ratios is the investment ratio, which involves how to grow your money prudently over the years while protecting it. The ratio is a mix of offense and defense. Too often people have forgotten about the defense. This is very important over the long run. In sports, very few teams win championships without defense. The business of financial management is very focused on selling and promoting offense. It does not talk to people enough about defense. I also have a number of insurance ratios. For dentists, disability insurance is critical. If they don’t have it, it’s time to take seriously. They are generating their income from personal services, and their only way to make the transition from a laborer to a capitalist is to have excess income every year that is dedicated to one’s retirement plan building financial assets. If your source of income gets cut off; that is, if you become disabled, there is no way to make that transition. You have to think about disability insurance that not only takes care of you, but that will continue to contribute to your retirement plan and savings. At age 65, disability policies end and you will need a sizable amount of assets. This is an area where professionals tend to be underinsured for the specific risk they face because their incomes are so closely tied to their personal ability to work. C: With this family---this question comes up often---especially in with families in their 50s, if the additional four years of education for their child is for graduate school, should the dentist pay, or have the adult child get loans? For undergraduate educations, most dental families assist their children, yet this issue is beyond undergraduate education. F: Most financial advisers give the following advice: If you haven’t built a solid foundation for your own retirement, you need to have the kids pursue loans on their own, whether for undergraduate or graduate school. If you are taking out additional loans to pay for higher education or liquidating funds in your retirement account--- and remember your retirement horizon is very short in your 50s, often only 10-15 years to build up enough assets for retirement---you will increase your debt load and you will fall further and further behind the eight-ball. The basic rule is to take care of your retirement plan first. There are all kinds of options available for students to get financing. The reality is, if you take care of

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yourself and you end up with more money than you need, you can always make a gift to your kids later to help them pay off their student loans. If you do everything right, they’ll probably get an inheritance to further assist. You don’t want to take on excess debt for your child’s education when you haven’t built a decent foundation for your own retirement. C: Let’s go back to investments. You advise a very conservative investment ratio and talk about defense as being very important. Your investment ratio is normally 50/50 stocks to bonds from age 25 to near retirement, then an even more conservative 40/60 ratio. Why is this so different than the common theme of a high ratio of stocks, up to 90% early on, with a slow change to a more conservative mix over the years? F: One of the things people have assumed in the financial markets is that stocks will always beat bonds over the long term. So if you have a twenty or thirty year time horizon, of course, why not invest in stocks because if you put the money in when you are thirty years old, it will do better than bonds by age sixty. There is no guarantee of that. We have one modern market that has been negative for over twenty-five years. This has happened in Japan. It’s the second largest stock market in the world---the second largest economy in the world---with a market that has been declining for over two decades. If you had been an investor during that cycle, and all of your investments were equities, not balancing with a healthy amount of fixed income that produces interest payments every year to help build your capital, you might find that you’d be out two decades with not much to show for your efforts. In this case, [for almost all of your career,] you’d only get to invest in one cycle. You can talk about all the averages you want, but if you happen to hit a bad long-term cycle, you have no plan B. So my plan B is to make sure that you have roughly half of your assets in very high quality fixed-income securities because it guarantees a positive return on your money every year. People can take different approaches, yet it’s all about managing risk. If you are a professional, you won’t have a large company pension to rely on. Your financial success is going to come from the dollars you save from the income you generate from your practice. Finances are fragile. The assumption that stocks will always do better is by no means guaranteed. Particularly in the US, we have had multiple cycles for fifteen to twenty years producing very modest returns. Look at the twenty-year cycle with the Great Depression, for instance. People ask, “Can you even look at that?” Well, we just went through ten years

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of a negative return in the stock market and I can guarantee no one was mentioning that in 1999! It’s really about managing risk. Half the money in the world is invested in fixed income, half is invested in stocks, and there’s a good reason for that. Companies raise both debt and equity, so there are really important reasons to invest in both of these pieces of the puzzle. For Wall Street, though, it’s easier attracting money when you are selling equity returns. I think being a balanced investor, even from a younger age, is really important. Plus it develops discipline. Having discipline throughout all the market cycles is what will prevent you from being wiped out if we do happen to hit a financial crisis. Also, even though people start more aggressive with investments at an early age, they often time never scale back, especially in good cycles. In the late nineties, very few people were selling their equities to buy bonds because they thought, “Why would I ever to do this?” And then we had a fifty percent decline on the heels of the best bull market ever. It’s always good to have both sides of the equation, offense and defense, at every age. C: I was just looking at the American Association of Individual Investors (AAII) Journal with top mutual funds listed. The journal indicated that during the last ten years, the asset class that has gone way positive has been fixed income. Many fixed funds got over 7% returns per year over those ten years. Of course, interest rates have gone down to increase the base price of the funds. This displays the point that at times having something conservative often will come out way ahead. F: What we are trying to do is balance the uncertainty associated with stocks with their uncertain return, with the certainty associated with very high quality fixed income. You need both, and my feeling is that half and half is a nicely balanced split. C: How can people contact you, Charlie? F: You may call the office at 303-832-2300 or email me at [email protected]. C: Thank you so much for your time and professional guidance. Good luck on the wonderful book. Your book, titled Your Money Ratios: 8 Essential Tools for Financial Success and Security, is really an easy read and puts money into a totally new an easily understandable perspective.

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Carlsen postscript: This is the best basic money book I’ve ever read and should be required reading for college freshmen. Many of us have fallen far behind Charlie’s ratios by age fifty, and will pay dearly to catch up. If we’d only know that homes aren’t the key to success at an early age, many of us would have much more real wealth today!

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Part II Practice Finance Up until now, I’ve written almost exclusively of your personal finances. In this section, I’ll provide my thoughts on what the real keys are to a profitable practice. Part II won’t be laborious; rather, it will be fairly concise. And it is guaranteed to be much different than any other course in practice management you’ve ever taken. Being a numbers geek, you might think I will provide accounting chores and practice monitors galore. You are dead wrong. The “fifteen most important practice monitors” touted by at least one consultant won’t be found in this course! I will provide a simple way of monitoring just a few numbers in a five minute per month session later on. That will be it for the statistical analysis. Yes, I’m familiar with all the analyses available and have looked at many a balance sheet and income statement. These are important for your accountant. Yet, on a day-to-day basis, keeping things simple and focused is more valuable for the busy practitioner. There are two main ingredients to the profitable practice: proper attitude and a small, efficient staff. All the following will derive from that premise.

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Practice Attitude and a Future Plan I’ve visited many offices over the past 30 years, and especially over the last six. The top producing, top net income practices all have one key element in common. That element is an enthusiastic attitude. Every single productive office has that “fun” element. More often than not, the doctor is the one leading the charge. Let’s look at the personalities of two real doctors, one who we will call Dr. Greg, the other Dr. Phil. Dr. Greg, age 45, has a newly redecorated office in an older part of town. It’s not high-tech looking on the outside, yet inside there are many indicators of a high-tech office. Portrait pictures of smile redesigns pepper the walls, glass is used in a modern decorative manner, and flat screen computer monitors, TVs, and patient monitors abound. Dr. Greg is fiscally conservative, yet spent around $100,000 on his office’s recent remodel. To move to a new location would cost around $500,000, not counting the building. He feels he made a wise financial choice. In talking to Dr. Greg, he constantly asks questions of new techniques and advances in dentistry. He reads dental literature when he can, yet intimates that his real continuing education is received from the several study clubs he attends regularly. He is a constant whirlwind in the practice, talking to staff about office issues between patients. I asked why he doesn’t retire to his private office between patients to sign charts, check emails, etc. His reply, “That crap is so boring!” He seems to enjoy his time at the office. I asked him if he enjoyed dentistry and if so, what made it enjoyable. I’ve always liked the verbal and non-verbal interplay with patients. Yes, I’m aware that the patients are nervous in seeing me, yet I find it fun to be reassuring to them. I see many older patients from this community. They are a hoot! Sure, I’m the star here in the office……I guess ego is part of the process. I really do enjoy the process of working on teeth and making even a small difference in my patients’ health. I always have the mental image that I’m making a positive difference in my patients’ lives. That fuels me. Yes, the work is hard and I’m normally spent at the end of the day. And there are patients that aren’t the greatest to deal with. Fortunately, I have a good team that takes much of that load off my shoulders.

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Overall, I feel fortunate to be in dentistry…..to be able to work on a part of the body that rarely involves life-threatening circumstances. I’m constantly mentally challenged, have fun with the staff and patients, and make a good living. What could be better? Let’s now go over to Dr. Phil’s office. Dr. Phil practices in a nicer location, with a newer building. Inside, though, all looks like the1980s. Clean, yes; yet not really up-to-date. He does have an intraoral camera and does do modern techniques including veneers, implants, and newer endodontic techniques. The office décor consists of older looking western prints in the reception area and in the operatories. Dr. Phil’s style is quite different than Dr. Greg. All seems slower. This isn’t necessarily a bad trait; yet, in this case, the “slow” equates to “tired.” Dr. Phil is never at the front desk and retreats to his office between patients to check emails and dental products. He rarely says much to his assistant or patients while working. In other words, Dr. Phil is boring. Dr. Phil’s staff seem to mimic his boring demeanor. Phone answering is unenthusiastic at the front desk and the assistant is very quiet. If ever patient education is provided, it’s done with patient brochures. The hygienist does have a spark and is the one motivating factor in the office. The front desk woman has been with the office for 20 years, the assistant 18 years, and the hygienist one year. I asked Dr. Phil the same question asked of Dr. Greg: if he enjoyed dentistry and if so, what made it enjoyable. I’ve got an older group of patients than many dentists around here. Unfortunately, many aren’t happy about their lives. That makes it difficult. And they don’t seem to care at all about their teeth or their overall health. All they want are discounts! I do great work, yet I don’t think the patients really appreciate it. We do our best to provide proper instructions and make sure they are all on our recall system. It’s been tough financially the last couple years. My staff is feeling the economic woes, my patients, and now me. It’s a tough time to be a dentist, yet it looks like I’ll be able to retire in 5-10 years, as my investments have done well. I’ve made a killing on Apple stock and healthcare stocks!

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I think the difference is apparent. Greg loves the old farts and Phil thinks they are a pain. In fact, Phil didn’t say one positive thing about dentistry. He only got excited when he brought up investing. Whose practice does better financially? Dr. Greg by miles. And actually, Dr. Greg was able to retire five years ago, yet can’t think of anything he’d rather be doing. Dr. Phil plays the part of the victim. Dr. Greg is out there enjoying life. The dentist doesn’t have to be the one leading the charge. There is ample documentation of dentists with the personality of a slug that have done great. Their key is to acknowledge their slugness and have enthusiastic employees surrounding them. Now comes the workbook part of this course: The next section will provide an awareness of you, your staff, your office, and help provide or restructure your true vision and will provide your ideas as to how to progress in the months ahead. The exercise takes, at most, ten minutes per day. I’d like you to remove the following 9 pages, as they will be used to evaluate your practice. This is a nine-day exercise. Each day has a simple task with notes you write down. It’s important to not skip ahead. Sure, you can evaluate all in one day. Yet, to be able to do a little each day and digest and ponder is vital. Let’s get started……

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Day 1: On a regular office day, walk out the private entrance and come back in through the front door of your practice, as patients do. Normally there might be a couple patients waiting in the reception area. They will love it! Take a close look at all areas of the reception area, as a patient would. Look at the magazines, the walls and coverings, any pictures or photos, etc. Check for any clutter and any worn areas. Check furniture, walls, carpet or flooring. Go to the patient bathroom! This is a must. Patients judge your practice by many variables, yet the big three are your injections, gentleness of the hygienist, and the patient bathroom. I would also pay close attention to any audio effects. Is the receptionist voice clear and kind on the phone? Is there chatter going on up front? Is the noise level high from the operatory area? Take in the whole aura of your reception area. Your reception area reflects you. What does your front office say about you? Cluttered or squeaky clean. Functional? Inviting? High-tech Euro-design, Bat Cave from the 60s? The reception area reflects much about you. Please list as many things you see as you can. What would you change?

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Day 2: Look at your private office if you have one. What would you get rid of? What would you keep? What would another doctor say about you, just looking at your office?

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Day 3: Reflect on the first two days. What sort of dentist does the reception area and private office say you are? Write down four things. What do you agree with? What do you disagree with?

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Day 4: Take a look at your schedule for the next week. What procedures do you look forward to? What procedures make you nervous or not want to do? This could be because of either the procedure itself or the patient. How would you like to change the schedule?

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Day 5: Watch yourself with your staff today. This is tough to remember to do, as so much is automatic. Yet, a reminder may be to place your wedding ring on the other hand or switch your watch to the other hand. What do you do well with your staff? What do you do poorly? Which staff members support you completely? Which staff do you not get along with 100%?

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Day 6: This is the day you write a vision statement if you don’t already have one. If you do, then you may want to alter or augment it. Review your notes from the past 5 days. Who are you at your best? An example may be: Cheerful, playful, and humorous, with an inventive nature that challenges others with a wink and smile.

What one sentence inscription would you like to see on your tombstone that would capture who you really were in your life?

Here are two examples of vision statements, both from clients I’ve advised.

• I want to provide the best patient experience possible, from the moment they walk in the door the first time, until I retire. Family is most important to me: patients and staff that share my compassion and integrity will always be welcome in my dental home.

• Above all else, I want to be honest in all my dealings with people, even if it involves confrontation, for in being honest, I can exhibit the joy and passion I have for giving others a more physically comfortable life.

Now devise your own vision statement. It should be from your deepest passions, your heart, and your soul.

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Day 7: Share your vision with someone close, like your spouse or a good friend, either dental or not. If you feel funny about telling someone, say you are in a program that you paid big buck for and this is an important step. It actually is! Listen to the answer and don’t expect 100% positive feedback. Write comments below:

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Day 8: Share your vision, or altered vision, with your staff. Watch them today. Is there a positive or negative change from anyone today? Write down any thoughts at the end of the day.

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Day 9: Write down a plan of at least four things you will do/change in the next month. This may include procedures, schedule, equipment, staff, equipment, vision, treatment planning, patient payment options, new courses, etc.

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If the preceding has made a positive difference, I’m quite happy. If it hasn’t, at least you know all is stable in your practice. I have yet, though, to find a dentist that hasn’t found at least one significant change to be made. And 90% of those involve a staff member. Attitude and vision, with time to formulate planning is crucial. Yes, I know it’s tough to initiate. Here’s a personal example: In my early career, I made it a habit of talking to all patients for at least three minutes before any procedure with the patient sitting up in the dental chair, facing me. That three minutes frequently became ten. My idea was to see how things would work if I had the assistant lay the patient back in the chair, at least part-way, and have me come in and lay the patient back fully as I was giving my usual introductory schpiel. It took me two years to finally remember to tell an assistant to initiate this change, which for me, made all the difference in the world for my timing of procedures. Sure we had staff meetings. Yet, I never wrote the idea down and it never came up at a meeting. Is that ridiculous or not? Yet, I’m sure I’m not the only one that came up with a great idea that wasn’t initiated simply due to day-to-day distractions. Look at your answers over the past nine days. You may wish to add to any list or thought. And do take your ideas seriously.

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Too Many Employees I had the fortune to attend a Blatchford Solutions “Dynamo” staff training seminar in May 2009. I do not endorse any specific consultants, yet wish to recognize and give credit to important ideas. In the course, Dr. Bill Blatchford continually talked of the benefits of a small, enthusiastic, cross-trained staff. He writes in his books of offices that produce over a million dollars with only three team members: one front office, one assistant, and one hygienist. These offices have overhead normally less than 60% with the team members receiving impressive bonuses. How is this achieved? According to Blatchford and others, through the following:

Possibly end an employee’s relationship: If there are employees in your practice that don’t fully share your vision, please end their turmoil and provide them an opportunity to work elsewhere. Firing an employee is never a pleasure, yet if the staff person is not really a team member---does not fully support you and the others’ vision and purpose---then I can guarantee you that person will be happier elsewhere. This is not to judge that person at all. Just because they are not “on board” with you 100% doesn’t mean they won’t work well in another office. Please give the person that credit. If you do let someone go, it is always prudent to see how the others fill in if you have an office staff of 5 or more. It’s amazing how productive an office becomes when all have the same focus and mission. Cross training: Make sure all can perform all the duties legally permissible. The front desk person should be able to fill in with assisting, sterilization, and even taking radiographs, if possible. The assistants and hygienists should be able to schedule, post payments, and post insurance forms. With computers in operatories, this is not only possible, but advisable. In many cases, this can make it possible for one person to handle the front desk for practices grossing over $1 million. Remember also that many practices have a doctor and assistant working two operatories. I did it for years. With all staff pitching in, there is little need for two assistants in most offices. And doctors, guess what? You need to be able to perform front desk and sterilization duties also. This is a team effort. With the right staff sharing the doctor’s vision, the days can be extremely fun.

This is a win/win/win. The doctor enjoys lower expense, the patient enjoys a more time efficient service, and the staff enjoys a more diverse

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environment and knowledge that if things get busy in the office there will always be help available.

Make sure your staff all have perfect smiles also. Provide them the work necessary at a reduced or lab fee, depending on your office policy. Patients notice small details. To have a staff with crooked, yellow teeth makes selling cosmetics nearly impossible.

Hiring: Do it right. Paraphrased from Blatchford Blueprints12:

Advertise on Craig’s List: List all aspects that make your practice special. Use terms such as “four day week; holidays, uniforms, continuing education with travel expenses paid by office; full medical and 401(K)benefits; bonus averaged $750/month in 2009.” Continue with aspects such as compassionate, fun, caring, close-knit.

Have resumes sent in via fax, email, or snail mail. Check all resumes received for correct spelling and grammar. Eliminate people you don’t like.

Email the doctor’s practice vision, ask for comments, to all that are left and evaluate.

For those you like, schedule a phone interview.

Possible questions:

Describe your perfect job.

Tell me your strengths and weaknesses.

Why did you leave your last job? Give positives and negatives.

Carlsen input: On the phone, evaluate the voice. Would you like to have this voice in your practice?

By this time, you’ve eliminated 95% of the applicants.

Working interview:

Have the person work a half-day. Have the team take to lunch. Evaluate.

Interview the patients treated or interacted with afterward.

                                                                                                               12  Bill and Carolyn Blatchford, Blatchford Blueprints, Blatchford Solutions, Bend, OR, 2009, 116-118.

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The above steps lead to a much higher chance you will realize a “dream team.”

Let’s now look at other methods to a more financially rewarding practice.

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More Practice Tips:

Internal Marketing:

The following is excerpted from a Dentaltown thread that can be found at www.towniecentral.com/MessageBoard/thread.aspx?a=11&s=2&f=108&t=152079&g=1&st=internal marketing.

I’ve included ideas not normally mentioned in the literature, yet of strong value to any practice. My comments are in italics:

Children can be one of the best ways to build a practice. Treat them right and the family will follow. First the child comes in, then the mom, then a referral from the mom, and finally the dad comes in with a toothache. Keep dinner gift certificates on hand to give to patients when you are running late. Hand out Starbucks or similar gift cards to patients whenever needed. Have fresh flowers in the waiting room. Give the flowers away to a patient to celebrate an occasion. Make care calls to patients who were treated earlier that day. This is one of the most important practice builders. Address any concerns and begin any conversation with “I just wanted to see how well you are doing.” This is so important, takes only 5 minutes for 5 calls, and only 5% of dentists take the time to do. Send out thank you cards or letters to thank patients for their referrals. Consider doing something special for multiple referrals. Have each staff member hand-write one thank you note each day to a patient that they encountered thanking them for the visit or whatever special moment they shared during their time together. This can be wishing them a safe vacation, congratulations on their new grandson, or a new recipe they should try. Handwriting is a lost art and totally freaks patients out. Try it!

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Offer your home phone number to patients who may need it, especially after difficult procedures. How often do they call? Almost never, yet really appreciate the gesture and feel empowered that they have a doctor’s home number! Send out post-treatment letters to your patients. This guarantees a recall visit. Schedule lunch or a meeting with several physicians or professionals in your area and let them know that you are accepting new patients. If you can’t easily schedule a lunch, ask when you can drop in to meet the doctor. Get to know several area pharmacists and let them know that you are available for emergencies. Hairdressers are some of the best referrals. Get to know several shops and send over lunch. The last three are what I found the keys to building a successful practice. Most docs are afraid to contact other professionals. It’s the key! Print business cards for your staff and encourage them to hand them out in all their daily affairs. Let patients know that you are accepting new referrals. This is so rarely done and is so important! Send flowers to a special patient for any reason at work. This will surprise them and impress their co-workers. Have some pillows and blankets available for patient comfort. Provide the daily newspaper along with magazines in your waiting room. Give the magazines away if a patient likes an article. A major sign to patients that the practice is not about money only. Place flat screen televisions in the operatory for patient enjoyment and education. Provide cable or show movies. Provide a list of movies or such to choose from.

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Have a makeup area available for patients complete with a wall mirror that they can use after treatment. Provide hooks in the operatory where patients can hang coats or other items. Must haves. Provide painless injections (and this means painless). Develop the proper techniques if necessary. This is one of the most important marketing skills. Use analogies to which patients can relate. For example, “These fillings have 100,000 miles on them and may only go another 20,000 miles, not a lifetime.” Always explain. Let your patient know what to expect and be available for questions. For example, tell the patient the tooth could be sensitive for a few days. This is extremely important at the end of any doctor visit. Most doctors don’t take the time. I really feel this was why I never had a lawsuit. Let the patients know that they are in a state-of-the-art environment. Inform them of courses you have taken or honors that you have received. Promote your continuing education. Give the patients the confidence that they are in the hands of a skilled practitioner! Hang your diplomas in clear view for all the patients to see. Frame all your accomplishments. Take before and after pictures of your patients. Ask for patient testimonials about their treatment. Make these available to show your patients and for those considering similar procedures. Place on your website. Inform the patients if they are left waiting. Patients appreciate that the Doctor acknowledges the patient’s time. Do something special if they have to wait too long. Another no-brainer that so many offices miss. Have fun while working with the patient in the operatory, but always include the patient. Avoid conversation that does not involve the patient.

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Absolutely always let the patient in on the conversation. To omit them is rude. Always give the patient more than they expect from the time they first call the office to when they leave the appointment. This more than anything will create value. Use humor with your patients. It helps to provide a connection between the doctor and patient and can relieve stress. Always have someone walk the patient to the front desk or restroom. Have your staff wear name tags. I get so irritated at medical offices when people don’t name tags! Place photos of you and your staff on the wall in a common area or in the waiting room. Phase treatment. Do treatment sequentially over a period of months or years. Treatment planning is always easiest when you ask yourself one question and one question only, “What would I do in my own mouth if I were the patient?” Don’t charge your patients for many services. This will go a long way to building a long-term relationship. Try to build a patient for life, not for the moment. One of my main practice builders.

Don’t be afraid to redo something at no-charge or a reduced fee. Don’t a la carte everything you do. Patients will appreciate it more than you realize. Utilize an intra-oral camera system. Give them at least some clue as to what you and the assistant are mumbling about in Latin!

Block Scheduling: Block scheduling is a must for practice control. 70-80% of the doctor’s production will come in blocks, usually scheduled in the morning. This can be as simple as scheduling one two-hour and two one-hour blocks for the doctor each morning with new patient exams, emergencies, crown and bridge seats, and small fillings in the afternoon. The one-hour blocks can be for endodontic treatment, multiple fillings, crown preps. The two-hour block can be for bridge preps, implant placements, sedation cases, perio surgeries, quadrant

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preps, and any other more complicated procedures. Of course, the two one-hour appointments may always be combined to make a two-hour block.

Using this simple format, offices are able to easily produce $5,000 per day with one assistant and one hygienist.

Block scheduling requires discipline for all staff. Many doctors never fill those spots with anything else, even at the last minute. Block scheduling is this simple! You don’t need a full day course or lots of colors and symbols on your schedule.

Staff Meetings: These should be held often and consistently. High net income practices hold multiple 1-4 hour meetings per month. Monthly meetings may discuss continuing education courses taken recently, have online or DVD training for staff, and discuss monthly practice figures. A weekly shorter meeting may be held to practice scripts and role playing. New ideas from staff must be welcome at any meeting. Most consultants encourage offices to incorporate weekly role playing and scripting training. All staff must be involved. Video is helpful in analyzing. This is not a horribly stressful task. Done in a playful environment, it can be a total blast. I’ve encouraged offices to call it the “Blooper Session.” No one says all the right things all the time, and to be able to make communication easier for the patient in a listening environment is essential.

The Morning Huddle: If you aren’t taking ten minutes before seeing patients every morning to discuss the day, do it immediately! If you take nothing else from this section, the morning huddle will increase your net by 5% and provide much less stress for all the team.

The Huddle list:

Daily Production---if not at or above goal, discuss ways to reach goal.

Emergency placement

Strategies for any open blocks or other appointment slots

Any procedural difficulties anticipated

Any financial difficulties anticipated

Any help anticipated from front desk, hygiene, or doctor. Remember cross training.

There are numerous other practice management tools available. This discussion covers only those major areas I feel of most importance. Please use a

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management consultant that can provide referrals from dentist that have had net income increases, not just production increases.

Let’s now look at an easy way to track your practice numbers.

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The Five Minute Financial Practice Monitor How many times have you been to a financial seminar or started to read an article about divining front office occult numeracy when the lecturer or writer issued forth with great pride that “There are only a few pivotal financial monitors to watch in your practice; we will now detail the top 17!”How often have you listened past number two? Sure, your trusted front desk petty-cash savants are attending the course to record and recount the details later at the staff meeting rescheduled from two months ago. Yet, you really do wish to have an inkling of what proportion of your time goes to pay off the infinity pool and how soon you’ll be able to update from E Class to CL Class. Here is an easy five minute monthly monitor that will build confidence in your office’s financial status. I realize that 90% of you hate this stuff, so for ease of use, the article may be presented to your office financial person with you, the doctor, just reading the bold print below. To only have a staff person print out the following numbers and discuss with you, without any further work on your part, can make a huge difference. My office produced the Practice Monitor near the last day of the month, yet another time may be more apt for your office. The numbers: 1. Have your financial manager or accountant notify you of whether all Accounts Payable are current. Actually, this is not a number, just a yes or no. Seems a no-brainer, yet many offices fall behind without the doctor’s knowledge. This includes practice loans, staff salaries, lab and supply bills, taxes, everything. If you are not current, find out why pronto. 2. Look at the office Checkbook. This is the real barometer of your practice. Your collections minus your expenses, hence your profit, is inherent here. Find the low point for the last four months----not the high points, the low points. Are the numbers increasing, decreasing, or about the same? 3. Check Total Accounts Receivable for the last four months on the same day each month. Pick a day when there are less insurance payments posted, as that can skew the numbers. The last Wednesday was always a good day for us. Other AR numbers are equally valid, yet this number is the most commonly used and easiest to find. Is the number going up or down? 4. Check the amount of Refunds/Write-offs per Month for the last 4 months. This is a new addition to the list as the explosion of HMO’s, PPO’s, and office embezzlement have taken a toll on collections. 5. Compare the Number of New Patients per Month for the last 4 months.

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What could be simpler? In my practice, I had the list presented to me at an end-of-month. Note that Total Production, Total Expense, and Overhead Percentage have been left off the list. I’ve left these out on purpose to emphasize the importance of the office checkbook in evaluation. You can easily add these, as we all seem to be drawn to Production and Overhead as the holy grails of the modern dental finance. What does one do if the numbers aren’t heading in the right direction? Go to the source directly involved with the errant number. This sounds a bit vague, but it works. If the checkbook is steadily withering, ask the staff person who pays office bills and the staff person who collects and posts payments. If accounts receivable are up, go to the insurance and billing coordinators. The person who works directly with the number in question will usually have an intuitive monitor to assess the reason for the change. That person will lead you through the maze of the other practice indicators that I shudder to mention: total collection, production/collection ratio, production per new patient, no-show percentage, total production per hour, overhead percentage, days of accounts receivable, accounts receivable 30, 60, 90, 120 days, unpaid insurance claims, PMS/production ratio, blah, blah. Are you still awake? The point is that you don’t need a long list of numbers to evaluate---the staff has access to any number and can assist your evaluation at a more sophisticated level.

Let’s look at a real doctor using the five-minute monitor: Dr. Carey Billings’ first inkling of a cash flow problem appeared when his financial secretary notified him that payroll would need to be delayed a day at the end of September. Billings asked if anything was wrong, and was satisfied with, “Of course not, Doctor!” He went no further, being the normal doc that never asked for trouble, especially when it came to financial issues. Unfortunately, the next month, the same issue came up again, with an additional surprise----Doc’s 401(k) plan would not be paid for a week. Now the big worry started. Obviously, there was a cash flow problem. Billings had not gone on a dental spending spree, had not attended a CE course for months, and the busyness factor was normal in the practice. What was he to do? We looked at the five minute monitor. First, were all Accounts payable current? Billings’ financial secretary said yes. We checked all statements for the last month and found that they were current. Next, we looked at the business checkbook. The low amount for the last 4 months had gradually gone from $8,000 down to near zero. Problem .

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Next, we checked Accounts Receivable Total and found that it had gone from $75,000 to $85,000 in the last 4 months. Problem. Refunds/Write-offs were stable over the last 4 months. New patients were unchanged over the last 4 months. Whenever there is a problem with one of these monitors, we delve further into each. Checkbook: In evaluating what the checkbook reflects---collections minus expenses---the financial secretary showed us that expenses were stable, yet collections were down. Collections reflect production minus write-offs/refunds minus unpaid charges. Production was stable, write-offs/refunds were stable, yet unpaid charges were higher. Either the patients or the insurance companies weren’t paying. On to accounts receivable. Accounts Receivable: The insurance secretary informed us that the number of outstanding insurance claims was mounting quickly. Bingo! From a normal total of about 25 outstanding claims over $200, there were now 75. It turned out that one of Doc’s PPO providers was two months in arrears in paying claims over $200. The insurance secretary was new to the job and was afraid to tell the doctor or anyone else. This scenario presents two morals: First, open communication with all staff must be implemented and encouraged at all times. Often, staff may feel overwhelmed and not be inept, just afraid of the doc---you! Second, insurance companies need to be sent proper notification of the legal statutes that they must follow. Most offices are not proactive in monitoring and pursuing late payments. You need to provide ample staff time to chase these creatively callously bottom feeders. I allowed staff as much time as necessary on Fridays. We also scheduled a ten-minute doctor-insurance secretary meeting each month. Could Billings and his staff have solved the problem on their own? Absolutely. The case presented was relatively simple, yet complex cash flow problems can be solved in-house using the staff’s knowledge of their particular area of financial knowledge. Allow them to thrive!

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Office Overhead: Below are selected overhead percentages that should be a goal in your practice. Salaries:

Assistant(s): 4% or less. Administrative: 5% or less. Hygiene: one full-time---8%; two full-time---10.5% Taxes: 2-3% Fringe Benefits: 3%

Total: 22% or less with one hygienist, 24.5% or less with two hygienists.

Rent: 6% or less. Dental Supplies: 5% or less. Advertising: 0-5% Lab: at least 10%. Higher is better! Leasehold Improvements: 2% or less. The list does not include other expenses, such as bank charges, office supplies, utilities, tech support, etc. Total overhead goal is to keep under 60%.

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This ends the formal course. I hope it isn’t the same drivel doctors are exposed to at many a course.

It is my firm belief that most personal finances and practices become way too complex. To keep a strong vision and all your systems as simple as possible is paramount.

As I said at the beginning of this course, too many loans and too many employees create chaos in one’s life. Clear out the clutter in your life and not only will your life have more meaning, your financial fortune will improve immensely.

There are additional articles that you may find helpful in the addenda section.

Be well, and please celebrate that you work in Medicine’s best niche!

Doug Carlsen

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Addenda

“Gold---Another Bubble, or a Great Investment Opportunity?” Recently, gold appears to have entered the best of all bull markets. It actually rose above $1,200 per once on December 2009! But don't be fooled, says Jon Nadler, metals market analyst and PR head for Kitco Metals, Inc. and writer for the Wall Street Journal, Bloomberg, Reuters, the Associated Press, Financial Times, and CNBC. The precious metals expert says the current bull market in gold is all an illusion—one that the fundamentals can't support for long. According to Mr. Nadler in an interview by Lara Crigger, associate editor, HardAssetsInvestor.com, posted Nov. 2, 2009 on Seeking Alpha, http://seekingalpha.com/article/170475-gold-is-not-in-a-bull-market, this phenomenon here has largely been a dollar-driven story. Mr. Nadler says there are four factors that truly make a gold bull market:

• First and foremost, you have to have demand that far outstrips supply. Like any commodity in higher demand than supply makes available, you'd obviously see a price reflection. This year, there has been an actual 7 percent increase in mine output. Demand? It's been a total disaster, effectively. World gold fabrication through midyear has fallen to a 21-year low; it's down 20 percent year-on-year. Jewelry fabrication, which is usually 60-70 percent of the gold market demand, fell to its lowest level in 20 years. Industrial fabrication was down 26 percent.

• Secondly, we need a falling stock market. Stocks have been up 50 percent-plus this year.

• Third, you'd have to have an actual, tangible inflation level, and the threat of much higher inflation on the horizon as well. Obviously that isn’t the case.

• And fourth, you'd need an increase in the price of gold across all major currencies—no exceptions. Gold is more expensive for the US, but in other world currencies it is down.

According to Mr. Nadler, “What we really see is a momentum- and index-fund-driven speculative move that started almost on cue on Sept. 1. People will say, ‘Well, it's a perfect inflation hedge.’ But gold's correlation to inflation is about 10 percent. So, perfect inflation hedge? Far from it. In fact, it's rather ineffectual

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against the mundane, everyday 5 percent (or sub-5 percent) inflation that we had for 25 to 30 years.” Ms. Crigger then asked when we might start seeing price corrections? Nadler: “It's based on two factors. First, when the dollar starts to recover in earnest. The other factor will be the clear indication by the Fed that it's done with low interest rates, and it starts to tighten.” Crigger: Based on fundamentals, where do you think gold should be? Nadler: “…realism compels me to say ‘reversion to the mean.’ We're trading some 30 percent above long-term averages. But if we take away the fear premium and put in fundamentals, you're left with a range of $680-880. It still gives producers double the return on their cost of production.” In addition Prof. Nouriel Roubini of NYU, see http://www.kitco.com/ind/nadler/dec142009.html, argues that the following potential deal-breakers are very much at work in the background and could precipitate an ending to the gold mania:

• First, the dollar carry trade may at some point unravel. • Second, central banks will eventually need to exit quantitative easing

which will put downward pressure on risky assets including commodities. • Third, the global recovery may turn fragile leading to a rise in the U.S.

dollar that would drive down prices of commodities and gold in dollar terms.

• Fourth, some of the recent rise of gold is also bubble driven by herding behavior and momentum trading, pushing gold higher and higher. But all bubbles eventually crash.

• Fifth, the effect of rising sovereign risk on gold prices is ambiguous. A risk in such risk could push up the price of gold if it leads to expectations that central banks will eventually monetize those fiscal problems. But in practice it has weighed on the price of gold because it has increased investors' risk aversion and led to a rush into a different (and more liquid) asset than gold—e.g. the U.S. dollar—thus pushing gold prices down.

And now my two cents: It seems whenever any financial entity is talked about incessantly on the street, it is near peak. Remember the real estate craze three years ago with all the billboards advertising 1% interest with easy qualification? All I seem to read about now are gold ETFs, how to find the best Krugerrand deals, and how to sell your old jewelry for great prices.

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Yes, this is mania and the party will stop. Just when is anyone’s guess. The preceding two experts don’t rule out $2,000 per ounce gold, yet predict that it can’t stay high for any extended period. Is now a good time to invest in gold? Not nearly as good as 2005.

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“College 101”

From Facets of the San Diego County Dental Society, November 2009. Dr. Phil, age 50, has a well-run dental practice in Target-Lowesville suburbia of mid America. He has two children, aged 15 and 18, who have grand plans for the future. Kyle, the elder, has been accepted to Dartmouth, University of Chicago, and nearby University of Illinois/ Urbana-Champaign. Kyle plans to double major in economics and physics, then attend med school. Bethany is currently scanning art schools in the East and has her heart set on Rhode Island School of Design. In a culture where dentists’ children are showered with lavish educations and the proper appointments---cars, clothes, and anything you can put in your hands while driving---what can Phil afford with the meager sum he’s been able to save for both children’s education? He feels a strong urge to raid his retirement funds. His wife is unyielding about any siphoning of the nest egg. The following may prove helpful for those of you with future financial involvement in Hollister, Roxy, iEverything, and that magic number 529. Discount Broker T. Rowe Price has analyzed four different savings scenarios for a family earning $200K per year with 3% inflation.1 The family invests 6% of their earnings per year for 36 years: 18 years before children start college and for the next 18 years until they retire. Savings receive an 8% return. Retirement savings all go into a 401(K) plan and college savings into a 529 College plan. Scenario 1: All investing goes to retirement only. They have $3.4 million for retirement, zero for college. Scenario 2: All investing is for retirement until college begins. Then the full savings amount goes to pay off a college loan for 10 years at 5% interest. The retirement investing would then resume for the last 8 years until retirement. They have $2.8 million for retirement and $160K for college. Scenario 3: Investing is 50/50 college/retirement until the children start college. Afterward, for the next 18 years, all investment goes to retirement. They have $2.2 million for retirement and $250K for college. Scenario 4: Investing is all for college in the 529 until the children start college. Afterward, all investing is for retirement. They have $1million for retirement and $500K for college. No one method is best for everyone, but this provides a rough guide for planning.

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Remember, this assumes that 6% is saved for 36 years straight with no breaks---a formidable task for any dentist. Dr. Phil has followed scenario 3 above halfheartedly for 20 years and can afford to send his children to state universities, yet not elite private schools. His family will need additional support for anything beyond the basics. For excellent college planning advice, go to www.savingforcollege.com for complete information on 529 plans and Coverdell ESA’s. Tutorials, calculators, and lists of all states’ plans and comparisons are given. Once Kyle and Bethany get to college, what other financial perils may unfold? From Consumer Reports Money Adviser: A Denver physician took the traditional route of paying all her younger son’s expenses for his freshman year in college. But “he was like a sieve, and by year’s end was loaning money to others.” When he came home for summer, a showdown ensued. “We jointly own his car and took it away.” The son applied for government-backed student loans and now has a job as a teaching assistant.2 There are many loans, work-study programs, and even merit-based scholarships available. According to Drs. Stanley and Danko in The Millionaire Next Door, “Gift receivers [adult children] have significantly more credit debt and invest less money [in later years] than nonrecievers.”3 Putting a limit on financial aid for college and grad school is a must for family stability. Any financial consultant will also warn against co-signing for any college fee financing. And keep a tight rein on any campus credit cards. Dr. Phil and Kyle are in the process of assessing University of Chicago fees, loans, and part-time work vs. a relatively easy financial ride at University of Illinois. The distance to Dartmouth has eliminated its consideration. The key is for open discussion of family finances and active participation in the planning by the now-adult children.

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“Is It My Retirement or My Children’s?”

From Dental Economics, January 2007. Dr. Bob, age 55, with an income exceeding $250,000 and a portfolio approaching $400,000, lived with his wife, Claudia, in a lovely community. He was determined to enhance the lifestyle of his daughter, Kelly, and son-in-law, Matt, both age 28. Bob paid a sizeable portion of the down payment for a home in an upscale area for Kelly and Matt. He also paid the mortgage each month. The arrangement was originally to be an interest-free loan. But Matt spent six years (or was it seven?) in graduate school (funded by his father-in-law) with no income. Then he procured an administrative position that paid only $80,000 annually. Kelly, meanwhile, remained home with the couple’s two children. With the children starting private school and the couple paying one-half the school’s fees, guess who paid the remaining portion? Kelly and Matt had a tough time making ends meet. Therefore, the “loan” continued and, in reality, was forgiven. According to Kelly, even with the house and school payments, Matt and she would be in serious debt without her father’s help. Living in an “acceptable” neighborhood required more than just a mortgage payment. Kelly and Matt needed to “fit in” in terms of their clothing, choice of school for their children, landscaping, home furnishings, autos, etc. In fact, in the last year, Kelly and Matt made the following purchases: • A $3,000 watch • More than $20,000 for clothing, not counting clothing for their children • $10,000 for dues/fees at the local country club • Enough goods purchased on credit to generate $5,000 in payable interest Cash gifts of more than $20,000 per year by Dr. Bob made this possible. But that’s not all! New vehicles were needed. Kelly was used to “foreign luxury.” How were Kelly and Matt able to own these vehicles? They purchased a new vehicle every three years. How? Every three years, Dr. Bob gave his daughter stock from his nongrowing retirement portfolio. Many adult children invest such gifts; many, such as Matt and Kelly, do not. Instead, they buy cars. Was Dr. Bob a wimp? Apparently not. The preceding example typifies those illustrated in “The Millionaire Next Door,” written by T. Stanley and W. Danko, PhDs. The example

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was modified to reflect a dental flavor. The phenomenon in this example, labeled “economic outpatient care” by the authors, is widespread. Many Americans, especially professionals, feel compelled to provide financial support to their adult children and grandchildren. What is the result? According to the book by Stanley and Danko, “Those parents that provide certain forms of EOC have significantly less wealth than those parents within the same age, income, and occupation whose children are economically independent. And in general, the more dollars adult children receive, the fewer they accumulate, while those given fewer dollars accumulate more.” Many children of professionals are playing the role of high-profile, successful upper-middle class folks. Yet the appearance is a façade, perpetuated well into the children’s middle-age years. Who is responsible for this behavior? Let’s look at the characteristics of this economic assistance and where it leads, according to Stanley and Danko: • “Giving precipitates more consumption in children than saving and investing.” Not only are gifts of cars, housing, and schooling provided, but also the other ‘necessities’ of living in an upscale neighborhood, such as furniture, personal accessories, and electronic equipment. • “Gift receivers have significantly more credit debt and invest less money than nonreceivers.” This continues the need for higher and higher levels of assistance as the family grows, and as neighborhood peer pressure mounts. In a January 2006 study entitled “The New Retirement Mindscape,” conducted by Ameriprise Financial, 2,000 people ages 45 to 70 were polled. The study revealed that the top financial concern of those planning retirement, such as Dr. Bob in our example, was “advice to help our children become more financially savvy.” This came before “help sorting through health care and social service options,” and “help to make sense of Social Security and employer pensions.” Dr. Bob would have liked to consider retirement in 10 years or less. He was not funding his retirement plan at all, and was becoming more and more agitated with decreased hopes of retirement since he was bound in the clutches of the financial desires of his adult children, to whom he was now contributing the equivalent of the annual budget of Kazakhstan. He “called in sick” to his accountant, did not return his financial planner’s calls, and felt enormous pressure at the office to produce more dentistry. The dream of reducing his work schedule to four days a week, with several extended vacations during the year, faded. He also became more nervous anytime Kelly wanted to talk “privately.”

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What were Kelly’s main concerns? • Her parents’ estate being heavily taxed • Not getting her children into acceptable colleges • Any reduction in her standard of living • Not receiving her fair share of her parents’ inheritance As Stanley and Danko reported, “Gift receivers never fully distinguish between their wealth and the wealth of the giftgiving parents.” Instead, they are waiting for their parents to die since inheritance is the biggest potential gift of all. Dr. Bob and Claudia subsequently noted that the success of their children’s lives was a reflection of how good a job they did, and not how the children performed. The money the couple spent was “for the things we may not have had time to do, that may have made a difference.” This shows conviction that any financial shortcoming on Matt and Kelly’s part is the parents’ fault, making Dr. Bob and Claudia vul- nerable to continued emotional and financial extortion. The book, “When Parents Love Too Much,” points out that parents who give too much do so out of their own needs, not their children’s. They give out of unmet desires of self esteem, love, or attention. They give to change their adult children’s behavior, or to replace the emptiness inside them. Dr. Bob and Claudia were on a guilt trip. How did they escape this dilemma? The turning point occurred when Dr. Bob had a minor myocardial infarction. Although he missed a small amount of time at the office, the warning was heeded. He and Claudia discussed their personal and practice finances and said: “With Bob’s future earning capacity in doubt, we simply could not afford to aid Matt and Kelly any more. We didn’t want to be in a position in which we would be dependent on the kids — that is every parent’s worst nightmare.” The couple had a long talk with Matt and Kelly soon after Dr. Bob’s recovery. Their plan included: • The house loan would be forgiven. This money would be deducted from what would be left in the estate, if anything remained. (As a note, besides Kelly, Dr. Bob and Claudia have another daughter who refuses any assistance.) Matt and Kelly would phase in mortgage payments during a three-year period. • Stock gifts would cease so Matt and Kelly would need to purchase their autos. Private schooling would be subsidized for the current year only. • Cash gifts would be scaled back to zero during a three year period.

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Both Dr. Bob and Claudia did not relent from their plan. They realized that possible future medical complications to either of them could subvert Matt and Kelly’s financial future with the current structure, so it was time for the adult children to bear responsibility. During the next two to three years, Kelly responded with immense resentment to the plan. She did not talk much to her mom and dad. She did find part-time employment at a local dental office, and realized the value and nurturing that Dr. Bob brought to the patients in his practice. Meanwhile, Matt blossomed. He was promoted twice in three years, and was able to afford the home mortgage. Matt and Kelly now own a four-year-old pickup and a seven-year old BMW. Upon reflection, Dr. Bob and Claudia offered some poignant thoughts. “We realized that, eventually, with our deaths — if nothing else — the gifting would cease. Also, not providing the kids a chance to own their future was a huge disservice.” The couple asked, “Did our parents ever give or loan money or gifts to us? How did we feel when we paid it back, or did not pay it back? Could we live with Matt and Kelly having a different future than the one we imagined?” The example presented in this article demonstrates an increasingly alarming problem for “baby boomers” who are intent upon financial security in their later years. In my retirement seminars, this issue appears with 25 to 50 percent of the audience. A quick read of Chapter 5 of “The Millionaire Next Door” may help.

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“Take Money Off Your Worry List, Part I”

From Facets of the San Diego County Dental Society, March, 2008.

If you are the normal professional, any mention of bill paying, credit cards, or the most dreaded term of all, reconciliation, will spawn beads of guilt down your loupes. As long as the house doesn’t leak, the children’s cars find a way home, and both your spouse and dog approach you upon recognition, all must be well. Let us examine easy ways for the professional family to control finance. Bills:

• Who pays? Whoever isn’t the spender. That person always wants to do it, don’t they? And they are seldom late. Several people I know have their kids write the checks. Great---just make sure an adult signs!

• Pay on line, whenever possible. It’s safer than mail, and you’ll never have late charges.

Personal checkbook: • Do you reconcile monthly? My Wells Fargo reconciliation form makes

proving the Pythagorean Theorem seem easy. If you don’t reconcile, and few do, have one of your children do it for you, on paper. The more your kids know about family finance, the less chance they will live with you in their thirties.

• Alternatively, make sure the check balance is safely positive, and check for spurious entries. For questionable checks, view on line. If the entry in question is a “direct bill pay,” call the institution. You have similar protection for unauthorized drafts as with credit cards.

Loans: • Should I refinance loans, now that rates are lower? A qualified yes. Start

with your existing institution; ignore the junk e- and snail mail. Where will interest rates bottom out? My guess is that when the words subprime and crisis aren’t on all’s lips, rates will soon rise.

• Never lengthen the term of any loan.

Credit cards:

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• Enter every transaction into Quicken? Get real! Check for questionable charges. Entries normally have a company phone number on your statement. Call for questionable bills; for erroneous charges, hand-write a letter. It’s legal and protects your rights.

• Number of cards? Every doctor needs to prevail by sorting through the myriad of “corporate platinum” choices at every opportunity, right? I had one personal card and one business card. Early on, I had over ten cards, yet had lingering fear that if I misplaced one, I wouldn’t know until the hideous statement appeared.

• You do not need a “business” credit card to provide an annual business statement. And no, I’m not impressed with American Express. I am impressed with no-fee cards, especially those that pay back a portion in cash.

• How does one pay down credit card debt? This, along with autos, is the bane of retirement. An easy answer: work with your spouse and kids in the dental office seven days a week. Alternatives :

With your spouse, total your credit card debt. Often, this elicits outbursts such as, “I can’t believe you don’t trust me.” Try blaming me. Start with, “A dentist who writes financial articles claims the average dentist has $75,000 in credit card debt (not true, but most of you will come out looking good) throughout his career, and consequently most dentists have to work part time in retirement (actually, a majority choose to work in retirement, according to Hufford Financial’s 2007 AGD Study ). Let’s see how much we have.” Then let things settle for a few years. When it seems safe, below are tips to overcome this grizzly beast:

1. Doctor: do not shop on line at the office. It is not the spouses that create the most debt, it’s the docs on break.

2. Have both spouses look at all credit card statements. This is tough, yet foolproof. A quick explanation of the purchases is all that is needed. “What the hell was I thinking?” summaries are embarrassing without any added comments. That’s no added comments needed, Doc. This is a most powerful pearl.

3. Have both you and your spouse take the maximum $400 out of the ATM, and see how long you can get by without using plastic. There is a big psychological difference between using cash and a credit card. Cash is harder to part with than a quick swipe.

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4. This means paying cash at restaurants. Soon, you’ll know the power of paying a corkage fee.

5. Visit Barnes and Noble without buying a book. Yes, a chai or latte is OK, with cash.

6. Destroy all but one card apiece. Get creative. If you use fire, make sure you use a Blazer or other quality torch. Covering with peanut butter and giving to Lucky to play with for a minute is fun. Be careful---doggie Amexiarrhea is not pretty. Alternatively, microwave on high for a minute. The warm paper-like card can be oragamied into interesting shapes. Always place remains in a biohazard container.

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Executive Lifestyle Parts 1-4; Published in 2006 San Diego County Dental Society Facets

Part 1

Why Can’t I Get to That, Even if I Have the Money?

Dentists, as part of our rigorous training, are taught that we will work hard, yet enjoy the spoils of life after each rewarding day. Why are the spoils not only often unreachable time-wise, but spoiled when we get them? This first installment will examine three people: Jason, age 46, a periodontist, earns $300,000 per year. He initiated and heads two local study clubs for general dentists that meet once a month, while also participating in two additional gp groups. He writes columns for his local dental society publication, and a dental “glossy “journal. Jason’s week follows: Monday-Thursday: Patients from 7:30am -4:30pm. Calls to general dentists and chart review from 4:30pm-6:00pm. One night per week at study club until 9:00pm, one preparing Power Point for his presentations, and one spent reviewing journals. Friday: Staff Meeting from 8:00am-10am biweekly, followed by insurance and mail review, lunch with a referring dentist, then personal and office bills. Saturday: Golf with clients and house chores. Out to dinner with wife, friends. Sunday: Writing articles in am, correspondence to doctors in the afternoon, personal emails in evening. Jason believes he is still married and knows there is an angry 15 year-old around somewhere. Ashley, Jason’s wife of 23 years, spends $500 per month on lunches with her friends and $2,500 per month on clothes, most sitting in the closet unopened, sometimes forever, reports Jason.

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Jason wishes he could afford newer cars (currently owns 2006 Highlander and 2002 Mercedes E350) and could contribute more to his retirement plan at work. He has saved $400,000 to this point, yet will need to increase contributions significantly to reach his goal of retirement at 60. Jason’s main concerns are his lack of time to read or ponder anything, poor physical condition, and that his son is doing poorly in school. Ashley’s concern is that she needs to be at the office to ever glimpse her husband. Chuck, age 56, works for Sears. His current job is not stimulating, yet Chuck enjoys the clients. Chuck and his wife combine to make $55,000 per year. They place $10,000 a year into a retirement account and live on a budget of $3,000 per month. He and his wife, Tina live in a single-wide trailer park. They have a 2005 Ford Escort and a 1998 Ford F-150 pickup. Both Chuck and his wife have unglamorous 8-5 jobs, yet all nights are free. They frequent Appleby’s once a week, yet normally eat well at home, including lunch for Chuck. Chuck still plays softball twice a week, while Tina loves to read and surf the internet. They have no complaints or needs at this time. Chuck and Tina have $150,000 in retirement savings. By age 66, with current contributions, they will both be able to easily retire with their current budget Our final person, Mark, age 59, is a corporate attorney making $1,200,000 per year. He saves $250,000 per year, and has an after tax budget of $45,000 per month. Mark owns a small plane and is able to take two two week exotic vacations per year at approximately $40,000 apiece. He spends $2,500 per month for his business attire (the same amount that Ashley spends!) and collects sculptures to the tune of $75,000 per year---his weakness. Mark works 7am-7pm, Monday through Friday, with extensive travel. He is usually home, though, on weekends. He either skis or bike-rides with a Saturday group most weekends. Flying is on Sundays. Mark works hard, yet isn’t particularly stressed. He always has had time for Sara, his wife, and Stephanie, his daughter, and enjoys his athletic passions. He would like to arrive home earlier in the evening and be home every weekend. He has suffered from insomnia the last three years. Mark’s main concern is that he is well short---at $3,000,000---from the $8,000,000 that he will need for retirement. He will need to save at a much higher rate than $250,000 per year to be able to retire by age 70. Poor attorneys! Who is best off here? Mark has the larger financial headache, yet has his weekends free and is often home before 9:30pm. Chuck has it made in the

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shade, but has to lounge in his plastic chaise within ten feet of his neighbor’s home. For now, we leave Jason feeling that those spoils of dentistry are for him, merely mirage. Next, we will focus on millionaire myths and realities.

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Part 2 Millionaire Myths and Realities

In 1996, in an obviously deliberate attempt to agitate dentists everywhere, Drs. T. Stanley and W. Danko wrote a wonderful bit of prose entitled The Millionaire Next Door. What is so agitating about it? Simply this: the book indicates that despite the costly and exhausting years of education and medical training required of dentists, many plumbers, auto workers, and teachers have more wealth than we health professionals. This installment examines why. The statistics given below are taken from the book and updated to take into account inflation. The Millionaire Next Door is a study on individuals having a net worth of at least 1.5 million dollars, not regarding any factor but wealth. The average net worth of subjects was $5.5 million with an average yearly income of $400,000. A Portrait of the Affluent:

• Two thirds are self-employed. • Only 17% went to private high schools. • 50% have never received any inheritance. • 50% never received any aid for college from any family members. • Spouses are meticulous budgeters. • 50% save 20% or more of pretax income each year. • Gifts to charity are limited. • Most have MC, VISA cards. Many more have Sears and J. C. Penny cards

than Saks or Brooks Brothers. Only 6% have Amex platinum! • Average price of last motor vehicle purchased was $30,000---37% bought

used (average cost of a new vehicle in USA is $29,000). Most popular vehicles for the affluent: Ford F-150 pickup, Ford Explorer, Cadillac Deville.

• Home is usually in a modest, middle class neighborhood. • Most ever spent on a business suit---average is $600. • Most ever spent on a watch---average is $350. • Most ever spent on shoes---average is $200. • Little, if any, economic assistance has been provided to adult children.

What? No Mercedes? No Rolex’s? Unthinkable! What about country clubs, boats, planes, second homes? No, no, no, no! At least throw in an RV! Never! What characterizes the affluent more than anything else is their lack of drive to be recognized as such. The above portrait indicates that in-debt, high-consumption people are more likely to be those sporting fancy attire and foreign luxury cars.

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The message? The affluent live well below their means. They feel that financial independence is more important than display of social status. Budget and investment planning are top priorities of the affluent. Most often, the spouse of the primary bread winner is the most budget-conscious of the couple. What is the real problem with dentists not reaching “affluence?” We are put on a social pedestal --- we are perceived as being affluent, and so it is expected of us. The common person sees affluence as driving luxury cars, living in ritzy neighborhoods, and sporting expensive clothes and jewelry. Because of this social pressure, it is much easier for a plumber or homebuilder to display “boring” accoutrements than a “professional.” For the general public, display of wealth often equates to a successful, trustworthy health professional. What can a dentist do to not be lured into the trap of prodigious consumption? Marry a budget-minded spouse! If you’re smitten with a big spender, or it’s otherwise too late for you, budget anyway. If you need help, hire someone to help you budget. Many highly respected doctors live in condos, drive late model, non-luxury cars, and dress smartly in non-designer clothes. The real key to affluence is to match your yearly savings (including both deferred and non-deferred) to your mortgage payment. If your mortgage is $50,000/ year, then you need to put $50,000 into your nest egg. This implies that many on either the West or East Coast would be better off renting a home. As a matter of fact, many millionaires on either coast are renting now. They sold their properties in 2005! So how does this fit into the topic at hand---executive lifestyle? Executive lifestyle, if seen as being lavish, is largely a myth for those with real savings. An expensive, beyond-our-means lifestyle often leads to delayed or no retirement. Though by no means easy, greater affluence can be a simple matter of reevaluating and realigning our priorities. A carefully planned lifestyle leads to a happier family, personal contentment, and retirement on your terms. Next ---stress relief for the now budget-confused executive. And I promise not to discuss money, costs, or retirement savings at all…

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Part 3

Learn to Say No and Don’t Answer the Phone!

This segment of this series will key on concepts that increase personal time and release stress for the dentist. Following are some valuable ideas culled from my years spent learning how balance work, home life, and personal happiness. Office tips:

• Always have a team huddle before seeing patients. You all know the rules---no surprises during the day.

• Doctor: Preview any charts of difficult procedures or difficult patients. I spent time before the huddle each morning previewing. Price? 15 minutes. Reward? You’re ready for Mrs. Barkpants.

• Contract with your local dental supplier to perform monthly checkup and maintenance of equipment. Price? $100. Reward? When anything does break down, that group will come to your office first. I rarely had to wait more than an hour for emergency service.

• Resolve any team issues before going home. Always. Your team will respect you, you will respect you, and your dog will sleep better.

• Call surgery and tough-case patients at night. Don’t gab, make it sweet and quick. This is a great practice builders and I never had a late call in 25 years.

• If you can’t make enough money working 7 hours a day, 4 days per week, then get a consultant, pronto! We all tend to lose it after 3pm and you need a week day to decompress.

• No more than one night per week missing family dinner. Easy to break this one. If you keep it, you’ll stay married and will be able to retire before age 75. If you don’t, you might as well become an attorney, as you’ll be around them a bunch.

• Have assigned duties for all office cleanup chores with hand signed check offs. Seems dumb, but anything less doesn’t work.

• Set up an emergency call group with local dentists—call me about this. Home and personal tips;

• Household help: At least have a cleaning person, with possible cooking if your spouse works too. Don’t worry about the fee---you can’t afford not to have this help. If spouse doesn’t work, still bring in the cleaning crew---he or she will tell you why! Have this person be at your home to supervise repair people if spouse works. Again, pay well; their normal cleaning fee is appropriate. Have a yard man, unless you can do it all in less than 15

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minutes per week, including repairs. Hire a pet sitter rather than a kennel---old Yeller will sleep better again and be healthier.

• Do not try to fix appliances! Repeat; do not try to fix appliances. Sure, you can do it better. You do this sort of thing all week. When you ask the wife to pass the wrench, then suction, you’re in big trouble.

• Meditate 20 minutes each morning. Get a tape at Amazon---anything by Shakti Gawain is great. Play the darn thing each morning—you will get used to it, and will not tire of it for hundreds of playings. This step is what I use to prepare for any potential conflicts I may expect during the day, from any source. Yeah, there goes another 20 minutes. No whining! I’ve already cut out an hour a day and a day a week! You actually can produce more work in less time with these steps.

• Ignore as many emails as possible. Ignore Uncle Harry’s joke mill. For any important correspondence, either personal or professional, hand write a note. This is a key tip that all the big executives use.

• Limit your time on the computer---30 minutes a day is plenty. Your wife will love me for this one!

• Do right brain activity for a few minutes each night. Read a strange novel, do some art work, wrestle with your kids. Non-fiction doesn’t count.

• Vacation: Take three weeks per year. I don’t care how much you lose by not being in the office---you need the break---ask Yeller. This does not include CE time. CE trips are not vacation, no matter where you go. I really feel this is a major source of burnout. Forget the deduction! Do not take office calls on vacation—I’m surprised at the number of you that do. Before leaving: block out the last two hours of your schedule to clear out all charts, etc. Upon returning: Spend one half day per week’s vacation at the office, yes, during office time, checking charts, reading mail, catching up-not seeing patients. You guys that fly in at midnight the night before and work a full schedule upon returning are not doing kind karma to anyone.

The final installment will give specific tips for the gents from Part 1. Will Jason and Ashley survive? Will Mark ever retire saving a mere $250,000 per year? Stay tuned…

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Part 4

Will Jason Ever Come Home?

Several months ago, we left the three men several months ago adrift in executive wasteland. Below are tips to transformation into the nirvana of executive privilege: First, we revisit Mark, our $1,200,000 attorney, who can’t sleep, most likely because he’ll have to work to age 75 to accumulate enough money to support his sculpture and flying habit: Advice: Fly more—he will never make it to 75! Seriously, Mark needs to put away an additional $100,000 per year to retire by age 65-70. He now spends $75,000 per year on sculpture. My advice: start giving away items not of use or enjoyment to either Goodwill or a non-profit art gallery. For some wonderful reason, when one starts to give items away, one realizes that it is not so important to accumulate. This action alone can stifle the urge to buy expensive artwork. The sale of his plane would also help tremendously. He doesn’t want to give it up yet, but has a friend who would like to buy half and share expenses. This would present Mark with an immediate windfall and cut his yearly hanger rental and other expenses by tens of thousands of dollars. These two acts, obvious to many of us, have been a mark of privilege to Mark and are not easy normally to do. But the act of sharing his wealth with others, strikes a deep chord with Mark. His wife, apparently, has been on his case regarding both these proclivities for years! Next, Chuck, the Sears employee, with low income, low expectations, and more than enough money: Our most conscientious saver is worried about his elderly parents. They are living solely on social security, in a small apartment, five miles away. Chuck is concerned about the probability of assisted care for either or both in the coming years and possible medical crises. Tina, the computer nerd of the family, has read considerable literature on senior care and has arranged interviews with senior center advocates and AARP representatives. Elderly health care is the foremost challenge facing our generation, both for ourselves and the support of our parents. I have no solutions other than to read extensively from reputable sources, such as Consumer Reports and AARP. Stay away from insurance agents for advice: decide what insurance you need before approaching any agent. Beware annuities! Finally, we return to our dentist, Jason:

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Jason needs to come home. He’s at study clubs or at the office late almost every workday. He spends time on study club or journal preparation every extra moment. No wonder his wife spends so much money frivolously! In talking to Jason, his motive is to provide well for his family, as he has to work so hard. A circular argument. Since Jason has a mature practice, he has accepted that he doesn’t have to lead his two study groups, or even attend them. He’d like to stay in his perio group and the business gp group. These measures alone decrease his nights away during the week to one. Ashley, his wife, has asked if she and their son can bring by takeout and “hang out” at the office with Jason one night a week. Actually, while Jason is reading journals, their son Dudley, who’s name Jason finally remembers, gets to surf the internet with no blocks on his dad’s computer (yeah, he can get by that anyway, but Dad’s has cooler graphics than at home), while Ashley peruses Nieman Marcus catalogues. On other nights, Dad now watches Idol, 24, and Baywatch reruns with Ashley, while Duds learns how to gamble online. Jason isn’t reading, but he is getting more exercise at night. Ashley’s expenses have tumbled recently, yet weird bills from the Cayman’s keep appearing on Jason’s American Express….. Weekends have improved also. Duds wants to learn golf and Dad likes to watch the orthopedic nightmares of the skateboard park. They split the two activities on alternate Saturdays. Dad’s golf handicap is quickly approaching his cholesterol level, so it is no disgrace to bring the Duds out to play. Sometimes the other golfers play with this duo, sometimes they need lunch. When at the Skate Park, all eyes are on the guy with his kneepads, elbow pads, shin guards, butt pads, mouth guard, goggles, and catcher’s helmet. Dad watches from the bleachers. With a happier family and more free time, Jason’s office team seems in better spirits and production is up. Can he save more each year? With Ashley’s moderate frugality, hopefully so. Is this scenario overly rosy? Try spending less time on your emails, more time doing anything with your family, and tie your ego to your spouse, not your practice. Enjoy the magic. Addenda Endnotes:                                                                                                                 1 Christine S. Fahlund, “Juggling Competing Goals: College vs. Retirement Funding,” AAII Journal, April,

2006. Numbers doubled to approximate dental income. 2 “Help ‘kids’ become self-sufficient,” Consumer Reports Money Advisor, November 2009, 6-7. 3 Thomas J. Stanley and William Danko, The Millionaire Next Door, New York, NY, Pocket Books, 1996.