Dr. James, 0s:

Fans of the Dentistry Invest podcast. If you feel like there was one particular episode in the back catalogue in the anthology of Dentistry Invest podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who's in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome, welcome to the Dentists who Invest podcast.

Dr. Jasneet, 42s:

Hello guys, we are live. I'm just going to be checking the stream. I've got none other than James Martin. James, you can only talk when I give you the microphone.

Dr. James, 51s:

Okay, I see In that case. Well, I'll just hold my horses until Giles passes the microphone to me. What's up? Everybody Absolutely buzzed to be here today with oh hello.

Dr. Jasneet, 1m 0s:

Hello Live. Indeed, everything's going well in that run. You should now go on your phone and share to Dentistry Invest so the Dentistry Invest guys can catch us in the gold, because very interesting topic we're going to cover today. By the way, let me build some context. Where we are right now. We are at the London Podcast Show, which is so cool. It's kind of weird to be at a trade event that's not dentistry. It's just great. And I came here to be inspired and we both came here to do good things. You want to go to the producer on podcast page and then you'll be able to share it. So, hi guys, any questions that come through for later, I'll be able to see them. If you can hear us. I think you should be able to cause I heard on my phone just say hello. Someone just say hello and you know they can hear us. Okay, hopefully catching you in your lunch hour. I know we're a little bit early for that, but maybe we are be able to have a little chat on some questions. Interesting topic, but anyway, just building some context. We're here at the London Podcast Show. We decided let's go live because this is an episode we're going to do anyway. I thought this is actually a first right. So when I met him today I was like hey, how's it going? I was pretty chilled about it. It was oh, it's the first time we met. I'm like no way, because I feel, like you know from the online world the presence.

Dr. James, 2m 7s:

I feel as though I know you already right, yeah, so that that was strange no, I, I totally understand, because here's the thing, um and I, I actually said the first thing. I said the jazz was jazz. I totally empathize because through doing this, through running a page, through running a group, you meet so many people and it's like bang, bang, bang, bang, bang and your brain can't distinguish between when is the first time, when is the second time, when is the third time, because the digital world pervades into the flipping real life world because, yeah, you just spend so much time there. Whoops, I'm not quite used to this whole professional mic thing, so sorry if there's any technical hiccups along the way. By the way, I've shared this on Dentist who Invests, so we should be welcoming some viewers from there very shortly.

Dr. Jasneet, 2m 45s:

I like the system. So if I touch the mic, you know that, okay, I've got something to say. You can finish up. And if you touch the mic, I know that you've got something to say, which is cool. So now we are officially IRL friends. Do you know what that means IRL, in real life? We are in real life friends now Amazon Music, spotify, sony, et cetera, et cetera. Youtube is here, et cetera. So we sat down to record, find a nice quiet place to record, and we really struggled. We got kicked out of Spotify and got kicked out of Amazon Music. I'm sure you'll agree that Amazon Music were much kinder in kicking us out than Spotify. Spotify were very venomous in kicking us out, which is an interesting story. But anyway, let's cut to the chase because we've got limited time. Let's talk about a really, really important question I'm sure you can write a whole book, like I said, on this which is how much income is enough for dentists. The reason I'm asking you this, james, and we can exchange our thoughts and values on this, is something I noticed on your dentist invest. Very often an anonymous poster will say I earn 2k a day or I earn 120K, 100k, whatever, insert number, 70k, whatever, and then eventually you get the idea or you suss out that they're trying to ask how am I doing, what is everyone else earning, kind of thing? Should I go limited? That's a very common question you get. Should I go limited? So if you take a step back, how much money is enough for dentists? I'm going to leave it very open and obviously we're going to niche into that. But how do you begin to answer that?

Dr. James, 4m 7s:

I love that question and, just like you said, jaz, it pops up on the group all the time. And here's the thing. I think we have to caveat everything with what we're about to say that even the average dentist earns close to two and a half times the national average wage. You know what I mean, and the thing about it is what you'll find is that most books which dictate or determine or discuss how people can invest are from the perspective of Joe Bloggs. You know someone who's on a wage which is conventionally more aligned with the mean average wage in the UK. So for us dentists, we have to look at everything. If every single one of those books says that actually you can make something, you can make a meaningful retirement from that level of salary, then surely to goodness there must be a way for somebody who's on much higher than that.

Dr. Jasneet, 4m 55s:

Should I just jump in with the Nasdaq figures?

Dr. James, 4m 57s:

Yeah, yeah, absolutely.

Dr. Jasneet, 4m 59s:

I asked such an open-ended question there, if I just jump in with the Nasdaq figures. So if you guys aren't familiar, it's the National Association of Specialist Dental Accountants and Lawyers. These guys publish a report every year and this report, the most recent one they published. They published in March 2022, just two months ago, and it was for the year. It was a year of pandemic. So income from 2020 to 2021, tough year, right, one of the toughest financial years we've had, and this is going to blow your guy's mind if you're not already familiar with this right. Overall, dental practices see an increase in average net profit per principal from 130K to 150K, all right. Nhs practices increase the net profit per principal from 116 to 145K. Private practices see an increase in average profit from 133 to 143k in the most toughest of climates ever, right. And then, lastly, us poor associates okay, listen to this. Average remuneration went down from 70k to 63k. Wow.

Dr. James, 6m 4s:

Yeah, wow, still a very good salary salary. However, even though that's a downgrade, there's still a good salary compared to everybody else. But this is the thing. This is why it's such an important question, because I feel like for dentists and for lots of people you know, almost it's almost like you'll sacrifice your health and your well-being to pursue even more money and even more wealth, and the question is at what point do you stop doing that? At what point do you have enough? But that's the question, really, that's the burning question. Here's the thing. Here's a perspective from looking at investing. When you retire, you can either have enough, you can have too much or you can have too little. All right, really, really, really simple, yeah, but the thing about it is in that simplicity, there's a few things that we have to break down. Okay, to actually get that sweet spot all right requires some significant planning or significant foresight, or at least having a sit down with an FA, ifa, cfa, whatever or giving it some thought yourself, because the thing about it is, it's very easy to just go OTT. Breaking down FA, like someone might not be familiar with that oh, yeah, well, they're all just terms for financial advisors. So somebody who can plan your wealth journey, someone who can plan when it's a good idea for you to retire. Have you got one? I don't have an FA, no, but you see, the thing about it is for someone who's young-ish I'm just turned 30, getting close to 31, investing for someone who's young-ish is actually way, way, way simpler than someone who is closer to retirement. So, for me personally, some of the FAs that I know, the ones that are hmm, how can I say this? The ones that are, yeah, well, they look at the longer term picture, let's say are yeah, well, they look at the longer term picture. Let's say that, yeah, they will actually say to people who are my age, they'll say listen, you don't need me, this is what you have to do. Go do this, this and this, and it's so simple. What they'll normally do is charge you a fee to set it up right and then let you go from there. And then, really, where the skill comes in is when someone's a little bit closer to retirement and they're thinking okay, when do I move my stocks portfolio into bonds? At what rate do I do that? When do I keep some cash on the side? Which part do I siphon out and live on? There's all these other questions that come into play, and that's when the skill hits in. Be with me. So some FAs will say listen, don't bother, when you're so young. Your goal is capital appreciation, okay, not preservation in any way. And that's why, for me personally, it's really simple. But that advice doesn't go for everybody. And the Reddit knowledge, the Reddit logic, I suppose, is to just go and buy the S&P 500, but that kind of works for some people. Well, sorry, it does work for some people, but maybe not necessarily for everybody, because it becomes a more complex conversation the further down the line you go. Giles, do you want to say something?

Dr. Jasneet, 8m 50s:

Yeah, so, firstly so, s&p 500, for those who aren't familiar with financial terms is the US index. It's basically a standard and poor index of the 500 top companies in the US, right?

Dr. James, 9m 0s:

Is that fair to say?

Dr. Jasneet, 9m 7s:

Something like that. Yeah, and therefore a lot of people believe that the greatest economy in the world is USA and therefore, if you put all your money in that index as it grows, you obviously could gain wealth. So that's a very well-known and common strategy. But I'm just going to just go back to the point you made at the beginning, whereby you either have too little enough or too much. Yeah, but it takes a very special type of person to say you know what? I've got too much because you've got to draw the line in the sand somewhere saying this is enough. So I think the first challenge to answer this question about how much money is enough to earn per year is first having that sit down with your family, with your spouse, with your partner, whoever and deciding what is our end goal, what is enough? Because, interesting, I just remembered now there's a guy called Ramit Sethi. Have you heard of Ramit Sethi?

Dr. James, 9m 48s:

I've heard the name Is he? I'm not sure who he is.

Dr. Jasneet, 9m 52s:

He's an American chap and he wrote the book I Will Teach you To Be Rich and essentially he works with people of all different incomes and, as you said before, even that 63K is still two and a bit times more than the average in the UK, right, and we'll come by the way that 63K is a mean, not a median, so it is a false representation. It is also including, like part-time workers, people on maternity, DF1s, people who for some reason have taken sabbatical, et cetera, et cetera. Therefore, a better figure would be a median, and I've emailed Nasdaq two or three times over the last five years to find that out. They don't have those figures. So a median would be a better figure and I suspect that would be higher than the 63K a median, right? So median is that middle person. How much are they earning? But it doesn't matter what the other person is earning. We need to decide in ourselves how much is enough. So this is now very much your domain. How does one decide how much money is enough for them? And I'm just going to go I know I'm jumping points now. Ramit Sethi, he wrote that book I Will Teach you To Be Rich and he works with people with all different income backgrounds, and what I love about this guy is that he teaches everyone that you need to decide. What is it like? Imagine you had not unlimited funds, but you had good number of funds. What would your life look like? Would you have a Starbucks every day? Some people was like, if I can have a Starbucks every day, eat out twice a week, have the best gym membership in town, I'd be happy. And that is then your rich life. So what Ramit's really good at saying? You write down what is your rich life, and every single person can attain their own rich life.

Dr. James, 11m 28s:

Well, here's the thing. Here's the thing about money. Here's another way to flesh out or illustrate what you've just said. There's only three things you can do with money Okay, you can either have fun, you can give it away Okay, or you can invest it Right Now. Here's the thing, right, but you notice what's not in there, not in those three things. Hoarding it. Hoarding it, which is what we're all guilty of to a degree, because it looks pretty, it's a nice vanity metric to have a huge amount of cash in a bank account, but actually, past a certain point, past a certain buffer zone that you need to sustain yourself, in the worst case scenario, it doesn't really make much sense to have too much of that. And actually the money needs a better home. Okay, because at that stage, you're losing your wealth because of something called inflation, which many will have heard of. Maybe they don't know what the term means. Inflation is where your cash loses its value, uses its ability to be exchanged for stuff Okay, for stuff, for lack of a better term. Okay, okay, the things that you can buy from the shop every day. And effectively, what's happening is oh, hello, we've got some questions in. Do you both visit yourself retiring then, hello, nice to meet you, narnie. Um, but yeah, back to what we were saying. You know, past a certain point, those hours which you exchanged for that cash, effectively the record of those hours is being eroded. Does that make sense, right? So imagine if I said to you Jazz, you came and worked for me for seven days, seven hours in a day, right? And I paid you a hundred pounds, okay? And I, I give you 700 quid at the end of the day and I said done and dusted, we shake hands on it. Good day's work. Yeah, imagine if I came to you two weeks later and I said actually, jazz, I've just double-checked my records. You only work six and a half hours that day. I'll be having 50 pounds back, okay. How insulted would you feel? You'd be? Like, no, no way in heck, I worked those seven hours, right? That's the concept of inflation, right there. It's just another way of thinking about it.

Dr. Jasneet, 13m 24s:

It's cool isn't it.

Dr. James, 13m 27s:

It's someone reaching into your pocket and taking back that money. Now, obviously, the analogy breaks down slightly, because the bank balance doesn't go down, but it's just the value, how much that, that 700 pounds, is worth, how much you can obtain in exchange for that. Because, if you think about it, that's the record of your work. See what I mean? Yeah, so, but the record is faulty. That's the problem. Yeah, absolutely.

Dr. Jasneet, 13m 53s:

I mean, that's a great way to describe inflation, so we're all subject to that. So, before we get to the point of, okay, how do we hedge against that investing or whatever, against the effects of inflation, which is always in the media nowadays? What is our best strategy? Is it also involving a high savings rate? Because we must discuss I think we discussed in previous episodes of savings rate how much of our money are we actually saving, all that money that we earn? How much are we saving? How much are we investing? Okay, and how much of that? How much of an energy should we put into that? Or should we instead put energy into trying to look at strategies to increase our income? What's going to get us to our retirement amount of money which, again, we should all have a line in the sand somewhere? So let's answer Nani's question Okay, so, so. So, james, when do you envision yourself retiring, do you?

Dr. James, 14m 42s:

know what right? Thanks for that question, nani. Okay, here's the thing about retirement Retirement is the day that you stop exchanging present unhappiness for a future promise of being unhappy. Okay, not to get too deep and philosophical, but does that make sense? Yeah, so here's the thing. What about if you love what you do every day? Aren't you, in a way, retired? You know what I mean, because you do it for free anyway. You know, not to get. You were probably just expecting an answer. Maybe, like I don't know, 50, 60, 70, you know, some sort of something really tangible there.

Dr. Jasneet, 15m 11s:

Do you have a number? Do you have an A that you thought you know? Look, I know you love what you do, but do you have a number, do you?

Dr. James, 15m 18s:

know what I think we get to. Again, not to be slippery, but you know, I think that when we look at retirement, there's actually two terms that that constitutes. One is financial freedom, one is financial independence. So financial independence is the point where your assets sustain your expenditures, okay, but you have nothing left over, because then at that point, if you think about it, you could continuously live and not work anymore. Financial freedom is when you have a little bit more on top. You know what I mean. But within those two, within those two ranges, there's a little bit of scope. Yeah, you know what I mean. So me personally, when do I want to retire? I don't think it's unreasonable that anybody might say they want to retire. Uh, you know, you know, sub 40, you know, and for me personally, by the time I, I, I I'd be very pleased if that was me, and I think a lot of people would say the same. Yeah, but my goal is to get there, to that point of financial independence as soon as possible. Not necessarily freedom, because if you think about it, where's the sky's the limit on freedom? How much freedom do you want? How much fun can you have? Just to go back to what we were saying earlier, the three things that you can do with your money. That's a little bit of a different conversation. When I reach financial independence, I'll let you know, narnie, okay, because my perspective might have changed by that point, but it's an interesting way of looking at it. The concept of financial independence and financial freedom For most people, when they say retirement, they mean financial independence plus a little bit of freedom on top. But how much scope is there? That's different, based on the individual. Financial independence is the first aim for me. Real quick, guys. I've put together a special report for dentists entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don't even necessarily realize that they're happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdenisoninvestcom. Forward slash podcast report or alternatively, you can download it using the link in the description. This report details the seven most common issues. However, most importantly, it also shows you how to fix them Really. Looking forward to hearing your thoughts, to hearing your thoughts.

Dr. Jasneet, 17m 38s:

If you want to ask a mom, I'm happy to reveal this to you guys. Me and my wife talk and I said to my wife, I said to Sim so many times I like the number 55. I like it Okay, and as much as it'd be nice to retire at 38 or whatever. Going back to what you said, I love what I do, I love my clinical dentistry and I just feel as though I don't want to spend up till age 70 doing it is backbreaking. It's tough stuff, but if I can be financially independent by 55, and so that I don't need that income anymore to sustain the lifestyle I have, I'd be happy. I'd love to go traveling the world. You know, I've had a taste of that, lived and worked in Singapore. One of our goals in life is to travel further and you know, live in Dubai for six months, live in Peru for six months. I'd love to do that kind of stuff, but you need to be independent enough to be able to fulfill your dreams. So I think it's really important to have some dreams, but even more fundamentally important I repeat it again is we need to sit down with our significant others as a family and decide what is your rich life. Look like how much money is enough money, so that you're not chasing numbers. If you just, you know, if you just constantly just like I want more, I want more, I want more, you'll never be satisfied. So with that, with our incomes and with our average incomes and whatnot, how much money is enough money? And the fact that associates are. If you look at the NASDAQ figures, we're earning way less than principals, but principals arguably take on more stress, like stress is inevitable. We wouldn't do the jobs that we do if it earned like if it was, if it earned half of what we get, we just wouldn't do it. It's just too stressful, right? A lot of people, even at this income level, it's like no, it's not worth it. I'd rather earn less and not do, for example. So the question I'm getting is how do we protect against the losing value of money? At the same time, how do we form a strategy so that we're able to look towards financial independence? And I don't know if you want to bring in your janitor story that you were telling about as well.

Dr. James, 19m 31s:

Yeah, that story does work, but actually there's probably something else that I could say that's probably more relevant at this point. So the second thing you said was what was honestly.

Dr. Jasneet, 19m 40s:

I was just I was going for it and I lost track, so I just gave you like five different questions basically what you said.

Dr. James, 19m 47s:

The second thing you said was give us a ballpark way, the way that we can use to calculate at which point we might viably be able to live off our assets, right, so you have to drive some stakes in the ground, and here's the thing. Whatever that number is, it can't be too specific for each individual, and the reason is things change with time. Nobody knows how much inflation is going to be, nobody knows how much stocks are going to go up in value or going to go up in price, but there's a really good rule of thumb that everybody can use, and it's the rule of 25. You heard this. No, the rule of 25 says oh yes, 4%, yeah, yeah, yeah, yeah, yeah. So for anybody who doesn't know, it's commonly accepted that within the financial industry that if your assets whatever 4% of your assets is is the value of your assets in terms of pounds, is how much you can live off, okay, how much you can safely withdraw from that balance, that balance of your stocks and shares. I say your bank account, your, you know your stock portfolio effectively.

Dr. Jasneet, 20m 50s:

I'm just going to jump in. So let's say you had a million pounds in an ISA, so you're an ISA millionaire. You have a million pounds in ISA. 4% is 40 grand. Therefore, what we're looking at here is's only ever a rule of thumb. So because of that, what that?

Dr. James, 21m 1s:

means is if the safe withdrawal limit, the safe amount that you can take value out of your portfolio, is 4% every year, every year. Important thing to mention, then, by extrapolation, if we take however much we want to live on and multiply it by 25, then that is a good thing to aim for. But, like I say, the key thing to understand is it's only ever a rule of thumb and it's only ever something that we can aim for, because the conversation becomes more in depth, because it said that the first few years after you retire, your portfolio's performance in those first few years totally determines what that safe withdrawal weight will be. So this is again. This is this is now you can see where the complexity comes in a little bit, but that's why it's a good rule of thumb. The thing about it is we can get as complex as we like, but we can never predict the future anyway. So that's the best way to drive a stick in the ground. So here's a way that you can calculate that. Okay, now you can get into spending and budgeting and things like that and try to reduce how much money goes out of your bank account every week, every month, based on budgeting practices or just having an awareness of what you're spending, looking at your bank account and saying do I need to spend this, do I need to spend that? There's an old direct debit that I forgot about. Okay Now, without going into that as a subject, because that has massive depth, which will actually give you a better figure of how much you're likely to spend, or how much you are spending, because you've spent some time thinking about it and thinking about how you can reduce it Without doing any of that, go to your bank. Figure out what was the balance at the start of the year. Figure out what was the balance at the end of the year. Figure out what was the balance at the end of the year. Okay, that will be the net increase. Subtract that from how much you brought home last year, how much you were paid. There's a rough figure for your net expenditure. Multiply that by 25. There's your stake in the ground. There's the thing that you're aiming for. Are you with me? But remember, it only is ever something that you're aiming for. But then it comes. Begs the next question how do you actually get there? And that's probably something we could spend a whole podcast talking about in itself, but it's a nice rule. I like that, the rule of 25 and the story that you're referring to about ronald reed. I'll delve into that in just a minute, but first of all, did that make sense? Did you like that it?

Dr. Jasneet, 23m 33s:

totally makes sense, and it depends on which stage of life you're in. So, yes, calculate how much you spent in one year, multiplied by 25. If you want a snapshot of what kind of money you need to have in a pot somewhere as assets, whatnot, so that you can use this rule of 25. And then that's a good way to go. But how important is saving the money that we earn now, and that's where the story of the janitor comes in.

Dr. James, 23m 58s:

Yeah, absolutely so. Again, only ever a rule of thumb, as there is with lots of things in France Save just enough to be uncomfortable, because then you know you're working for it, you know. But the thing about it is, people always say, how much do I need to save? And the question is, you can only save as much as you can, you know. But the point is it's about enjoying life to a certain extent as well. The one thing you don't want to do, the one thing that is actually most common with dentists most people have an issue with getting the money in the first place. Dentists often have a problem with the opposite issue they have too much money but they're spending too much and they're working too hard for it. And life support and join the journey a little bit as well. And at least, if you have something that you can aim for, you might think to yourself actually I'm working too much because I'm earning too much, because what that would mean is and actually I'm earning too much to, you know, my, my, the date that I'm aiming to retire for, even if it is very soon it's might be it's not possible to save any more past a certain point, because you can only put so much in your savings account, are you with me? Yeah, but it's all. It's horses for courses and you know, do you want to save that extra money and put it in a business? Really, it just becomes this huge conversation. The thing that I said earlier is a nice rule of thumb. And just be careful, because the most common problem is actually probably dentists. Because of the sheer fact that we're there in the first place, that we are dentists, we work hard, it's in our DNA, it's what we do and we're probably overdoing it. That's the mindset flip. That's the perspective.

Dr. Jasneet, 25m 23s:

What do you think is driving that? Why are we doing that? Is there a degree of looking on social media and seeing some dentists with their watches and cars and thinking that you know what I want? That? Is it a lifestyle thing? What's driving this behavior?

Dr. James, 25m 38s:

I think it's first of all by qualification. We're there because we do work hard, so I think it's going to be our DNA, I think it's going to be the fact that we've been doing it for a while. We're probably creatures of habit to get through university, to get through education. We had to do that, you know, know, it's always, it's part of our identity, effectively. Um, I do think a second component to that is competitiveness. 100 of anybody who. There's, what's that restaurant? It opened in london and it's got a thousand pound tomahawk steak. Yeah, there we go. Yes, I could never pronounce it properly, but anyway. So when, when that opened, you know, some of my friends called me up and they were like, oh, have you heard about this place? It's got a tomahawk steak for a thousand pounds. I was like, oh, that's neat, I suppose. And then they were like, when are we going? And I'm like no, no, no, no, no, no, I'm not going there. I don't want to go there. I think that's way too much so for me. It it's an outlet. Where does that come from? Where did that sentiment come from? Part of it is for the gram, you know. Let's be real. You know people wanted to take a snapshot with a thousand pound tomahawk stick. It's not going to be me. That's never going to be me. You know what I mean. But with that, with that level of spendthrift door, you'll get a nice car. You'll get a nice Beamer like the Smiths have, guess what. You'll eventually buy a nice house. You move to the next neighborhood with the Jones. The Jones are going to have a mansion. You might find that you'd be catch up with the Jones. Eventually you move to the next neighborhood and it's got the Bezos. I can never forget, remember how to pronounce his name and the Gates. And then guess what? You have to keep up with them and they're billionaires. So it's an unending game that you might never win. And what do you sacrifice in the process? That's all I wanted to say.

Dr. Jasneet, 27m 22s:

Very good and, on that note, very relevant is when we're getting a mortgage. Are you a homeowner? No, so when we're looking for mortgages, there's a trend amongst dentists that I've seen that they against all people psychologically. Is they really max out, like my wife told me? I don't know anything much about this. My wife told me that you can borrow four times your combined income, whatever, right? So dentists will. The year that they're going to get a mortgage, they're going to declare the least amount of expenses to bump up their income. So now they can borrow the highest amount from the bank so that they can live in the biggest freaking house with five bedrooms and three en-suites for their husband, wife, couple. Right? Why are we doing this to ourselves, right? I am so glad that me and my wife bought a small little two bedroom in the outskirts of Reading which didn't cost that much. And I look at my colleagues and it's not a bad thing that my colleagues have bought huge houses and if that's part of your rich life, then great. But let's be considerate about the kind of debt you're getting. I mean, I know property is property, mortgage is a good kind of debt, but we're really, you know, we're stretching that, so we're stretching that, we've got high mortgage payments and then private school first kid comes along. You think, oh, you know what I got. I'm a professional, um, I want to give my child the best private school. You have the second kid. Now you've got to send that kid to private school. You can't, bloody, send the first kid and not send the second kid to private school. And now suddenly you need to work. You can't retire 55 and you need to work until 68 to make sure that you've got enough money to give your kids when they go to uni as well. So this is the kind of issue that I think dentists get trapped into. I know some high earning dentists, you know implant dentists, and they're still working at 63. And I'm like you know, why and they're like oh man, yeah, private school this and the other, they got high monthly expenditure. So you have to commit to these kinds of things with caution. Is that the life you want? If it is, then fine. But if you want to drive 55, why don't we plan that expenditure in the same way when it comes to property and the school that you send your child to?

Dr. James, 29m 24s:

But yeah, you've just touched upon something huge. There you can spend as much as you like. There's no upper limit. You know there's always going to be. You can buy a Lambo, then you can buy a solid gold Lambo, then you can buy 10 solid gold Lambos. There's always going to be a way to spend. So at which point do we say, actually this is my cut off point, and for some people that threshold is lower and for some it's higher, but there has to be an upper limit, yeah, so that brings me on to what we were going to talk about two seconds ago, which was the story that Jazz referred to earlier of a gentleman called Ronald Reed. And this is super interesting. And within this story there's a lesson for how much is too much, how much is enough, how much is too little. All right, story of Ronald Reed, really interesting story. Read it a while ago. Ronald Reed was a janitor. He's born in 1925. Okay, ronald Reed, great topic. It is a great topic. It's interesting, isn't it? Thank you for that comment. Ronald Reed was a janitor, born in 1925, and he was born in the Midwest in America. Now, ronald Reed grew up very modest background. I want to say modest, I mean modest, you know barely. You know living hand over fist parents, barely putting food on the table. Okay, this guy did not come from wealth. All right, ronald Reed grew up. He was conscripted in World War II. He went to fight in the US Navy. He survived the war. He had a fairly unremarkable war career. There was nothing really much to say. He was straight down the road, plain Jane, mediocre and self-professed as well. That was not a discredit to the guy. He just wanted an average life. He was totally happy to have. That existence went back to his midwest life, went back to his family in the midwest in america and then around about that time he got a job as a janitor in a school and that's where he worked for the rest of his life. Okay, when he was 30 he met a lovely lady. He settled down. She had two kids from a previous relationship. He never had any kids himself. Both of those kids were dependents there were still about 10 at this point but Ronald took them under his wing. Ronald looked after them. He made sure they had a nice childhood. You know, they never scrimped on anything. Okay, now Ronald amongst his friends. He was a bit of a butt of a joke, because he was known for his not his, how can I say? Not his complete and utter thriftiness, but his frugality Frugality is a good word. He was known not, you know, he wasn't totally tight with his money, like he would ensure that his friends had a good time. You know he would always get around and if he was at the pub, this, that and the other.

Dr. Jasneet, 31m 51s:

His surname was Patel. There's a reference there that I'm not getting. The cultural reference.

Dr. James, 31m 58s:

Don't welcome to it okay, okay, slightly lost on me, but okay anyway. Um, yeah, so ronald reed wasn't, uh, wasn't the most thrifty person in the whole world when it came to his friends, but it was when he came to his personal life. He had clothes that he wore for about 20 years. Uh, there was holes in them. He had the dungarees, the American style dungarees. There was a little linchpin in them to hold them together. He did not spend any money on himself. He drove this Toyota for about 30 years. Okay Now, from the outside, looking in, ronald did not look like he had any money whatsoever, and certainly he worked as a janitor in the school, and whilst he worked hard, his wage was never above average, slightly below average. Now, ronald had a habit Every single day, after he worked in the school, nine to five, he went to the local library, yeah, and there he would spend an hour. All right, now we got to remember this is the 1940s, 1950s, 1950s, you know. So, activities aside from, you know, there wasn't that many things to grab our attention as there was nowadays. So he used to go and read. That's what he used to do, because he used to enjoy that. Yeah, and what he did was he got really into reading of investing and stocks, all right, but he never really talked about it to his friends. Okay, this only became clear later, for reasons that I'll go into in just a moment. And what he did was he realized with time and actually, that if he is very disciplined with his money and he tucks a little bit away every month even though he's not earning that much, so I believe he was tucking away about a hundred dollars every month and his wage was maybe a thousand dollars, so a 10 what he earned, but not a great deal. But he was doing this consistently and he picked very particular stocks to buy in, because this was before the day of funds, this was before the day of etfs, which are things, assets that we can purchase, which diversify us automatically across the whole market. He picked particular ones, but he spread himself across about 10 or 20. And he realized that this principle of diversification was so important through his own reading. All right Now, ronald was a creature of habit. He worked in this school for about 40 years, but he always tucked away a little bit every month. All right, it came up in passing conversation between him and his friends, but he never really talked about it a huge, great deal and certainly, as I say from the outside, looking in, he was good to his friends, he was good to his adopted kids, he was good to his wife, but the one person he wasn't good to was himself. Yeah, and he certainly had a modest house, modest car, all of those things. Yeah, ronald lived to a grand old age. Ronald lived to about 90, 90 or so. When Ronald died, on his deathbed he said that he bequeathed part of his wealth to his stepdaughters, to his surviving wife, some to the library and some to the school that he used to work in. And when he said this, no one looked at his will. But he just mentioned on his deathbed that he'd done this and everybody thought, ok, well, that's very generous of Ronald. But I suppose at the same time they thought, well, we can't expect too much given what we know about Ronald. Ok, ronald passed away Very sad day. A lot of people knew him in the town, very popular. Ronald was buried. They looked at it. They got his will. They looked at his will. His family looked at his will. They had no idea what to expect. They saw that his net wealth was $8 million. $8 million, okay, this was from someone who never earned more than, I suppose, today's equivalent of maybe $20,000 his whole life. Yeah, but what he'd done is he'd saved consistently. He bought certain stocks that were very generous in their remuneration they pay high dividends and he reinvested every single thing. Okay, yeah. So you know, when we have people who are high earners and they're saying, how can we put enough, how much is enough to put away, okay, what that tells us is that actually part of it is how much we earn, but actually not as part, you know, bigger part as we might think and it's more about discipline, understanding the principles of investing and understanding how you can use that consistently to generate wealth over time. But there has to be that upper limit and how much we're spending. Now, if Ronald can do it and Ronald's salary is here, and we've got dentists who are doing extremely well, I've seen some dentists who turn. You know their gross is 400k a year, 500k, things like that. I know one guy his is 750 000 a year. Now that's the most extreme I've ever heard.

Dr. Jasneet, 36m 27s:

Uh, very good dentist they're the outliers yeah, they are the outliers.

Dr. James, 36m 31s:

Well, yeah, let's, let's put the outliers to one side, you know, let let's talk about.

Dr. Jasneet, 36m 34s:

Let's talk about the NASDAQ. Let's talk about 63k dentists.

Dr. James, 36m 37s:

And that's the best point, right, that's even better than what I was about to say, because that's the average wage, yeah, and surely there's some scope in there somewhere that if we have the right mindset, we have the right discipline, we have the understanding that there is enough to tuck away, yeah, to give ourselves a healthy retirement. How we do that is another question. That's, again, probably a subject for another podcast, because you could flesh that out in a lot of detail. But in that story there is a massive lesson in itself that those are the eyes that we should be looking at this with.

Dr. Jasneet, 37m 7s:

How interesting is that? I love that story about Ronald Patel. Before we summarize main points of this episode, I just want to just ask that one big question, because in the blue we see here are associates losing out. What do you think, James, With what I've told you about how much more principals earn than associates? Do you think associates should be looking towards practice ownership for the reason that the profits may be greater?

Dr. James, 37m 33s:

Okay, I love this question. So, to answer this question, here's what we have to look at. We have to look at how much you're really earning your actual hourly pay. Have you heard of this concept? Yeah, all right, I'll flesh it out in more detail for those who haven't heard of this. But basically, if you go to work and you work nine to five, you might look at your gross pay, your gross pay as an associate, and that'll be after your practice deduction. So say, like, you're on 50% and let's say that's 60, 70,000 pounds a year, whatever it is. Yeah, now, if it's very easy to look at the nine to five and you know, let's say you've got a lunch hour in between there, so you've got eight hours is between nine, five minus your lunch hour, so that's seven hours a day, right, so let's say you're doing that five times a week, 35 times, uh, 35 hours a in a week.

Dr. Jasneet, 38m 20s:

I just want to add the community that you know, james, that the patricerati, unfortunately we. Yeah, we might be working nine to five, but we're doing clin checks in the morning but, dude, this is where I'm going.

Dr. James, 38m 29s:

This is exactly where I'm going with this. Exactly okay, because it's very easy to look at that metric, you know, and divide however much you're getting in a year by however many hours. 35 times 52, whatever. That is off the top of my head. You know, somebody will be able to work that out off the top of the head. Maybe we can use a calculator on that one. And it's very easy to look at that and think that's my hourly rate. Okay, what's your actual hourly rate? How long does it take you to get to work every day? What's your commute? Remember, you have to times your commute by two, okay. Then you have to minus travel and expenses. Then you have to minus the lunch or maybe you might have a nicer lunch because you're at work. Then you have to minus how many hours you spend thinking about work. Okay, when you come home, because that's actually time that you wouldn't be spending otherwise.

Dr. Jasneet, 39m 13s:

So we've got 63,000 pounds right Divided by 18250, which is the amount of hours.

Dr. James, 39m 19s:

That's 35 times 52. Yes, 182. Yeah, 1820.

Dr. Jasneet, 39m 23s:

The answer is that's a 34 pound an hour.

Dr. James, 39m 27s:

Okay, interesting to know. So if we go off the numbers that I just said, you're on.

Dr. Jasneet, 39m 31s:

How much was it? A year? 63,000.

Dr. James, 39m 35s:

just said you're on how much was it a year? 63 000. Just take that nasdaq figure. Brilliant, yeah, and you're working 35 times, 52 hours a year and you're on just over 30 pounds. That's what you said just now. Just about 35 pounds. 35 pounds, that's your rear real hourly rate, but remember that's going to be much less than what meets the eye because of all the things that I've said the commute, how much you're spending to get to work, these these are just some examples. How much you're spending on your car, for example?

Dr. Jasneet, 39m 57s:

The treatment planning. You're sat treatment planning emailing patients.

Dr. James, 40m 0s:

That's most of my day Treatment planning, learning, communicating with patients, courses, those patients that need an extra phone call after work. What is your real hourly rate? Okay, and we're just talking about an associate at this point. What happens when you become a principal? Okay, what happens when you become a principal? Yeah, your wages go up on paper by 20%, but how much are?

Dr. Jasneet, 40m 21s:

you. They go up by a hundred percent based on the NASDAQ figures. Brilliant yeah.

Dr. James, 40m 26s:

Yeah, yeah, okay, fair enough. So they double, but are you working twice as much? Or even if it does go up does it go up £35 an hour to £45 an hour? Is it actually worth it at that point? Are you spending so many hours working that actually it's like a flipping pair of hands around your neck Because, remember, there's only 168 hours in a week. If you think about it, you can't get more hours. You can always get more money, but you can't get more hours. Now, the thing about it is, even though on that looks like an upgrade in terms of how much you're earning, I'm just calling into question how much more are you actually earning, given your true hourly rate? And also, how many things are you simultaneously cutting yourself off from holding yourself back from like, for example, educating yourself on finance, educating yourself on investing which, by the way, can pay you six and seven figures over the course of a lifetime? Ok, because you're sacrificing that short term extra. However much a week, yeah, but, like I say, you're cutting yourself off from opportunities in the long term because of the fact that you're not a principal. I'm not saying that that's the case for everybody. What I am saying is it's worth having to think about, and it isn't always the case. There's more to it than meets the eye. Effectively See what I mean.

Dr. Jasneet, 41m 41s:

Absolutely, I think. Are we losing out as associates? It doesn't matter. Don't think of it like that. If money is your primary driver for becoming a principal, you'll be miserable. Right, be a principal because you want autonomy and you want control, and you want to be the captain of your ship and you want to just not have to answer to anyone, right. And then, yeah, there might be some financial rewards. You might have to work harder for it. You know, when your nurse messaged on the WhatsApp group at 7am that she can't come in today, that's your headache. Yeah, that's on you. But don't be looking at this NASDAQ report thinking, oh, I'm going to be a person that makes so much more money. Right, there's other issues, so look beyond the money. So let's now take in turns, one summary point each. Now that everyone's reached the end of this episode thanks for the 20 guys that are alive at this moment in time let's go for four or five summary points. We'll do one each, okay, so one for me. A summary point is find out what is your rich life. Read Ramin Sethi's book. Okay, so I Can Teach you To Be Rich is his book, and essentially it's about finding what your rich life is. So for me, as long as I can gosh, I'm trying to think. For me, my rich life is having good Wi-Fi right, that's one of my mentors being close to work, being able to go to Costa and have a coffee and not have to check my bank balance, going out with cost and have a coffee and not have to think of a look, check my bank balance, going out my family to eat out and not having to open my NatWest app. That's, for me, is my rich life. And, to fair, I'm pretty much already my little rich life, because I don't have it. I don't have desires of a Rolex, I don't have desires for a fancy car, so I feel like I'm scaled low. But my rich life now is also thinking about private school for a chance. So as long as I can do those things, that's my rich life. So I know how much is enough for me. So that's point number one. Point number two Jane.

Dr. James, 43m 17s:

Yeah, I love the thing about how much is your rich life, because it's totally a thing that you can have too much.

Dr. Jasneet, 43m 24s:

Just a shout out to Abs. Abs was a restorative registrar when I was at Sheffield doing my DCT. What a lovely guy. His story 11 years in general practice. He then went to do his restorative registrar training. So if anyone's thinking I'm too late, look at Abs. Awesome guy Abs. Thanks for joining in, mate. We appreciate that.

Dr. James, 43m 42s:

Awesome Thanks. So, yeah, biggest thing for me is it's a trap that I nearly fell into the trap of thinking that more is always better, especially when you look at it purely from the lens of finance and you think to yourself how can I get more money? Because actually, the very basic logic on that one would be the more money I can get, the easier my life becomes in the longterm. And it's not always the case. Okay, there's actually more factors to it, and the real hourly rate that we were just talking about a minute ago is so flipping powerful and so flipping useful. And more money doesn't always equal more happiness, and that's the old adage, really. But we've given you some real, tangible reasons as to why on this and actually fleshed out that statement and its meaning.

Dr. Jasneet, 44m 25s:

And once you do figure out your hourly rate, let's say you're out, you know, let's go take that 35 pound an hour average figure. You know very, very crude figure, just to keep things simple. And then you figure out actually my hourly rate is really 25 pounds an hour because of all the time I'm spending. But then if a cleaner is going to cost you 15 pound an hour, you get the cleaner in. You don't clean it yourself. Basically, that's a huge, huge lesson there. Basically, you just work an hour extra, for example. I'm just giving you an idea basically. So that's that, but that's a side thing from you. So the other summary of this episode and James, thanks so much for just being so fluid and good with me here today. The other lesson. I want to just finish off a couple more points. The summary is think about your savings rate and that's what it's called. How much money are you actually saving per? You know if you look at your annual income, what percentage of that is being saved, and the higher the percentage the better. So if you go by Reddit standards and the people who are into personal finance on there, if you're saving like above 40%, if you're at the 50% savings rate, you are doing amazing right, and this is based on people who are earning like 20, 30k a year right and they're able to achieve a frugal life and save 50%. I know dentists who earn six figures and they struggle to save 10%. So we need to really evaluate our life and really consider powering through and working deliberately on getting a higher savings rate, investing more, saving more. Be like Ronald Patel.

Dr. James, 45m 51s:

Absolutely Well. Here's a stat. Just to put that one into something tangible and actionable. If you have whoops we've just lost a little boom for the microphone let me grab that hello, we're back again. There we are. If you save 20 000 pounds and you put that in an isa, so an isa individual savings account, something that's accessible to every single individual who's uk-based stocks and shares isa specifically which you can use as a tax-free wrapper to invest in the stock market or bonds or other assets effectively. So if we take £20,000 and we max out our savings account every year, max out the limit which each one of us have every single tax year, and we attain a 10% accrual rate, a 10% rate at which that appreciates every year, which is what is typical-ish for the stock market, on the high side of typical. There's more factors to it than that, but let's just leave that for the superficial level. For the moment, 10% is something that's achievable. And if you do that, put that £20,000 in that ISO account and you do that for 20 years and every single rate every single year, that is appreciating by 10% and it's compounding, yeah, then by the end of those 20 years you should in theory have 1.3 million. Now if we go back to the rule of 4%, 25 times your expenditure, then actually what that gives us is just over 40, 40 000, 45 000 ish. Yeah, 45 000 is, which is a handsome salary and something that you can live on reasonably most people okay. 52k even better there we go free and it's a nicer if it's a nicer tax free if it's in an isa as well, and that's what we have to remember, because you pay tax on the way in but not on the way out, which is interesting. So, yeah, that's a really important thing to remember that's also tax-free. So what that tells us is the theory is that after 20 years of being able to tuck away that someone and I, so which is within reach of a lot of dentists, but not always the general population then that gives us a nice stake in the ground and a nice perspective through which we can view things, and it just shows us how, really, in theory, that with that knowledge and with that logic, it's achievable for anybody within 20 years. How cool is that.

Dr. Jasneet, 48m 0s:

That is amazing, real lesson there. Guys, I'm gonna wrap up one last message. I said it in a few episodes ago, but it's really, really, since I had that episode or that sit down with George Andre Cardozo in that restaurant in Porto and he said this wonderful thing is that life is not about the destination, it's not even about the journey. Do you know what life is about, james? Love? It's about love, but it's about it's not about the journey. I love that. It's not about the journey, it's not about the destination, it's about the company, right? So your rich life is determined by your little network. Your family life is determined by your little network your family, your friends, your nearest and dearest. That is worth more than any amount of money. So stop looking at how much other associates are earning. Stop looking at how much your principal is earning, right. Find out how much is enough for you. Have that conversation. If you haven't had that conversation, your family have it right. Give your significant other an extra squeeze tonight. Give your children extra kiss on the forehead tonight, okay, because that's what it's all about. Screw money. Kiss on the forehead tonight, okay, cause that's what it's all about. Screw money, right. It's all about the big, important things. It's about time. Time is such a great one that you mentioned on, so thanks for joining on this episode. Check out Dentists who Invest. This will be obviously on both the groups. James is doing some wonderful things and teaching dentists about personal finance, and if you if you're looking at me and how I'm dressed I'm dressed like the, the, the, the Nasdaq figures dentist. If you want to go into crypto, then you can dress like James.

Dr. James, 49m 20s:

You know what? This is the one suit that I have. Crypto is not doing so well these days, so I splashed out my crypto winnings on this one suit. But yeah, thanks for having me, jaz. Absolutely a pleasure to talk to all of your members and for anybody who's watching this on Denvest if you don't know about Jaz Galati, check out Protrusive Dental Podcast Guys. It's been a thrill to talk money, finance and also how much money us dentists need. Such a pertinent question today with my good friend Jazz. Hope everybody is having an absolutely smashing Wednesday and we will catch up super soon.

Dr. Jasneet, 49m 49s:

See you later. Thank you Abs, thank you Nani, thank you everybody.

Dr. James, 49m 52s:

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