Dr James, 0s:

Early retirement is something that most people obsess over, and dentists are no exception, and maybe that doesn't look like stepping away entirely from what you're doing, but just cutting down a few days or reducing that. I have sat in front of me a gentleman who has that conversation regularly with his clients. His name is Mr Anick Sharma. He understands the tools that a dentist will need in order to make that transition because he helps people with that firsthand. In this podcast we're going to walk you through that journey, high level. So every dentist by the end of this will know what to expect and have some things that they can implement into their own life. So I guess a lot of people out there want to know when they can not always necessarily step away from their job, but maybe just do a little bit less of it and have a little bit more balance in their lives. And, annick, I know that you've got an amazing story on that front from personal experience.

Anick, 50s:

Yeah, so it's a really powerful client moment. Um was working with an individual for quite a few years, um, and they had in their mind sorry, I knew this person for quite a few years and they were always saying that I'll come see you one day and we can plan things through together. And it was one of those. Everyone puts it off and it takes a while to get around to, but eventually, once we did sit down together, it was obvious that what this person wanted more than anything was to finish working and travel the world with their daughter. Now, when we went through an exercise to see, can you afford to retire early and can you afford to travel around the world to all these amazing places that they actually could have done it about five years earlier, which meant they'd wasted about five years of their life doing something they didn't really want to do or not really being fulfilled when they could have been having amazing moments. Um, life is for living and money is just a fuel for that journey, which means, well, time's our most precious resource and a lot of that time is wasted.

Dr James, 1m 57s:

You can't get that back and how was breaking the news to that lady?

Anick, 2m 3s:

it was quite tough. Um, it was an emotional situation. Tears were involved, um, happy tears, and sad tears as well. Sad tears that this time would be wasted, but happy, knowing that moving forward, um, they could have done whatever they wanted to and fulfill their dreams of traveling with their daughter, which was, it was quite special.

Dr James, 2m 24s:

I understand and just for context, how old was that lady? I think you told me off camera yeah, about late 40s, early 50s yeah, 40s, I see. And what do you feel that that lady needed to know five years ago? What was the shift for when you had that conversation?

Anick, 2m 41s:

it it sounds really well. It might not sound obvious, but when we think about the future, I like to say it's point b and where we're at currently is point a, and it can be so easy to be on the hamster wheel of life and in the sandbox and not really taking note of it. But if we can't even define point a, what we have at the moment, it's really difficult to then draw a line to point b, ie our future state, where we want to get to, and just having some sort of awareness of those two points and what that looks like is it makes such a big difference. And bringing that into the context here, it essentially means how or what tools can we use to draw that line between the two points?

Dr James, 3m 27s:

what tools can we use to draw that line between the two points? So point b being her number, so to speak, or point b being how much money she needed to step away from working nine to five effectively, if I've got that right yeah, exactly, or it might be point b.

Anick, 3m 38s:

What is it we want to do? Travel the world with my daughter and spend however much a year for however many years. Now that is the point B, the future state, and obviously there comes some monetary costs with that. But by defining it and also defining point A, we know how far away or how close we might be. In that example, they actually were incredibly close because they were there but for whatever reason they didn't think they were and wasted all that time.

Dr James, 4m 6s:

I guess for me, I think a lot of people are in the zone where, as you say, they're stuck on the hamster wheel or they have this belief in the back of their head that they have to wait to a certain age to be retired, and then they just don't question that. And because of that, well, they don't actually weigh up their own circumstances and appreciate whether or not that's possible for them in the here and now, which it might well be, because there's lots of dentists out there that well, to put it in blunt terms, earn a lot more than what Joe Average does or the public does. And because of that, what that means is our circumstances are unique, and what that also means is that, potentially, there's scope for us to pull that date forwards versus what the average person might experience as well. Can you drill down into that point b a little bit more? What are the components of it? What do we need to know a way up?

Anick, 4m 52s:

so it depends on the individual, as with anything, um, but how to think about what it is you want and where you're at at the moment. Quite often when I sit down with someone, before we even talk about the money, is talking about the individual, what they want out of life and what means the most to them. And real wealth is measured in time, relationships and experiences with those that they want to do it with and mean the most, and doing whatever they want. And that view of life means we, we become more fulfilled and get the most out of it. So by starting to have these conversations or thoughts about what it is we want to get to, or where we want to get to, we can then start to draw the line and the mechanics of drawing the line slightly more nuanced, and that's where you can have various granular details, such as strategies, efficiencies, tax allowances, and that's where expertise can come in to help draw that line. But we, we idealize retirement, and rightfully so. It should be something we do aim for. But if we put it on the pedestal, just like that example, it's so easy to see your entire life and time go pass very quickly and next thing we know we've lost a whole load of time that we just can't get back is that and you'll, you'll, you'll be able to drill into this a lot more is is is the rule of 25, uh, relevant to this rule of four percent? We could do an entire podcast on this.

Dr James, 6m 29s:

Maybe if you could explain what that is for the listeners, because it's a rule of thumb, isn't it right it is.

Anick, 6m 35s:

So there is some literature out there that suggests a 4% withdrawal rate is what we deem a safe rate. So, in order to calculate that, what we essentially do is take our expenditure and times it by 25 to arrive at a number and that, broadly speaking, will give us a 4% per year amount we can withdraw whilst hopefully not depleting the capital there are an incredible amount of nuances to cover there, but a high level, that is broadly the rule of four percent overall of 25 yeah, I really like that from the point of view.

Dr James, 7m 9s:

Like all rules of thumbs, there's generally more nuance to it. I really like that from the point of view. It's a back of a napkin calculation as to whether or not, if you're in the right ballpark to be able to consider whether or not there's an opportunity there for you to reduce how many hours you're working. And, yeah, if you can basically calculate if you have cash, uh, or you sorry, wealth, rather, uh, that is, you know, that is, for it is 25 times your yearly expenditure well, you're in that ballpark effectively because obviously, as you were saying a second ago, the principle or the rule of thumb would be that you can safely withdraw 4% every single year over 30 years. I believe it is what the data shows, or at least that's how it looks for most people. So, yeah, something to consider. So that's how that point B can look. And you know what? There might even be people who hear that rule of 25 or rule of 4% that we were talking about just a second ago and realize themselves hey, dan, you know what? I've got a fair amount of cash in the bank over the years and I don't spend that much. Am I close?

Anick, 8m 16s:

Yeah, absolutely. The difficulty there is it's a linear assumption. So we're doing a calculation now and assuming it remains static that we're checking in to make sure are we still on track for this retirement or this sort of lifestyle, future desired goal? Because without having that plan to anchor between point A and point B, then we're moving around without any context, without any direction. That is a dangerous place to be.

Dr James, 9m 0s:

It's worth remembering as well that the rule of four percent only applies when you actually invest. Your capital is to your invested assets, right? It's not to. It's not if you have that sum of cash in the bank account stored as cash. It's only whenever it's in stocks or a combination of stocks and bonds, for example yeah, that's what the evidence is based on an invested portfolio. Correct. Okay, brilliant. So we've got a back of a napkin approximation for point B, so to speak. What about point A? How do we define that in a little more detail, point A being, just for clarity, where we presently are?

Anick, 9m 39s:

Yeah, with life going past so fast, fast, it can be difficult to overlook what what balance sheet is and that's essentially just a record of everything we owe and what we own. Just pulling together all that rich financial information, looking at income sources, looking at how income will likely change, whether it's dividends or capital events in the future, of a sale of a practice or multiple practices Having all that into the equation can be really rich to define point A and with that information we can then look to plot. Are we on track to point B? Can we draw a line to it? Are we going to meet point B? It's a similar way of thinking. Thinking about it, if you're setting off in a car and driving three hours to your destination, more likely than not you're going to use some sort of sat nav at google maps or whatever other software there is now. You wouldn't necessarily set off to your destination three hours away without having a map, having a plan of how you're going to get there and life's really similar you might know where you want to get to, but if you don't have a plan of how that's going to be, whether it's some sort of business exit a few years or how much that number needs to be.

Dr James, 10m 49s:

It can be really difficult to even get to point b it's like that, saying if a ship knows not to which port it sails, then no wind is favorable. Yeah, exactly, I think that's Seneca. I'm going to have to look that up. Maybe Aristotle, I'm not sure, but yeah, that's the quote. I really like that one. So something to think about. And how many of us actually define point A? It's probably one of those things people are like oh man really, but it's so important because you have no idea you could already be where you could. You, your point a could be flipping point b. We haven't actually defined. It could be your point b, right?

Anick, 11m 27s:

exactly and, like I said previously or just a moment ago, time's our most precious resource. We can always get money, or earn money in the future, but earn some sort of capital. We can't get our time back. So if we're already there, we're what, you, what, we, wasting our, our potential, best years of our life for have you got any back of a napkin ways to do that? to figure out your point a in terms of point a way at the moment have a look at your bank balances, pull out a spreadsheet, maybe, or something on your phone, tally up the total of all your bank balances, company accounts to pension assets, isas, any sort of investments you may have across the board. That'll give you a rough balance sheet number, and on top of that you can capitalize income over longer periods of time too, which might be a steer in the direction. Apart from that, it generally comes down to complex cash flow modeling software, so it can be pretty difficult Gotcha, so they might need a little bit of help on that Question.

Dr James, 12m 31s:

For you, in your experience as a IFA slash financial planner direct first-hand experience what is the youngest that you've ever witnessed that someone, through figuring out their point a, has actually realized that they are already retired?

Anick, 12m 50s:

I've dealt with relatively high levels of wealth and there's been people mid early 40s that have have worked very hard. Big tech, big tech, uh. Corporate careers, high earnings at the outset, just being plodding along on the hamster wheel without realizing that potentially could be set for life and wouldn't have to continue that way anymore I think it's particularly pertinent when they're really not.

Dr James, 13m 17s:

They're not so much of a fan of their career as well, or maybe they do like it, but they would like to have a little bit more balance and moderation, shall we say, on that front, because another thing about retirement is people. I feel that people think that what it means is that you just have to down tools and not do anything for the rest of your life, but that's not true.

Anick, 13m 38s:

I often see retirement and retirement's a word, but if we want to delve into it, what is retirement? Previously, back in the day, you'd work at a single company, maybe likely receive a pension for life upon retirement and not really do anything. I think the way we're modern society is quite often it's a gradual slope. It might be the flexibility and freedom to go from five days a week to two days a week if you want to. It's that last bit. If you want to, it allows it. Um, I've dealt with so many people who the thought of retiring and sipping margaritas on in the bahamas is horrendous. Um, they still want to be able to go to the office a day a week and that's the beauty of it. It's your retirement, it's your next stage of life. It's not for me or anyone else to say what you should be doing. If you want to be in the office a couple days a week, and that's great, you can do that.

Dr James, 14m 33s:

Fundamentally, it allows flexibility to do what you want all right, we've talked about point b and we've talked about point A, point B being our retirement or financial freedom stage and point A being where we currently are. What does the parting between look like? What are the vehicles as in? How does somebody make that transition between realizing okay, cool, here's where I am realizing what their objective is and actually making that come into reality?

Anick, 15m 3s:

At a high level. It's having a clear strategy or a financial plan to get there, and life is all about today's enjoyment versus saving for tomorrow, and getting that balance right can be really helpful using, say, a cash flow model. A financial plan can be really helpful using, say, a cash flow model, a financial plan. Quite often you might have someone that says you need to invest in something to have retirement, or you must have this sort of wrapper or product or account in order to get to retirement. I think you need to be careful with that sort of thing, because the context of the financial plan can give you what your why is so in my seat anyway is a financial planner. I plan, and that's really different to a traditional financial advisor who would recommend some sort of product or investment without a financial plan, with no context to it. So fundamentally, when we create a financial plan, we're then looking for tools to get us there, and whether that's a certain investment or certain account type, I'm agnostic over what it is. It's about the correct tool to get us there. But having a financial plan is our guiding map, our north star of how we're going to get between the two points and, as I mentioned, life changes. But having that cash flow model to be able to test things, test the resilience of the plan, what happens if investment returns aren't what we think they are? What happens if inflation goes through the roof again? It means we can be centered and know that we have a guiding route in order to get us to point B. So that financial plan is so important to get us there.

Dr James, 16m 45s:

And broadly, what assets Would that utilize? Stocks and bonds.

Anick, 16m 50s:

Yeah, honestly, it depends on the individual. So I like to think of financial planning as a bucket and bear with me with this analogy. So just a sort of bucket when you wash your car. At the top of the bucket you have income sources. So for some people it might be employment, salary for your listeners, dividends largely a bit of salary from earnings, or whatever it might be. And as this income comes in, we can then accumulate assets within it. So it might be various wrappers, investments, stocks, bonds, isas, pensions, whatever it could be. Various wrappers, investments, stocks, bonds, isis, pensions, whatever it could be. Now at the bottom of the bucket it's a bit of a rubbish bucket. We have various taps and that's to fund our, our lifestyle. So essentially, when we think of a financial plan, there are only a few levers. Either more comes into the bucket, so we earn more what's in the bucket? Ie our assets have to work harder, and that comes into a conversation of what sort of asset allocation do we want or what perceived risk do we want to take to get a certain expected return. At the bottom we have expenditure to meet our lifestyle, essentially, as we go through life. What sort of taps or holes in the book. It will change because if you're in your mid-20s, compared to your late 70s, your expenditure profile is going to be completely different amazing.

Dr James, 18m 12s:

So it really does vary. Yeah, absolutely, because the traditional route is, I mean the traditional ifa or fa would would stick to a combination of stocks and bonds, but you're more about seeing things holistically right 100%.

Anick, 18m 28s:

And it's difficult because, philosophically I probably get quite annoyed that, let's say, you as an individual go to see a traditional IFA. Said IFA will likely say, James, you must invest in X or you must open this account with me. Whereas if you don't know what point B is and if you haven't contextualized that with a financial plan, how the heck do you know what investment or account needs to be selected? Because when we have point A, are you aware of? Now to point B, used by financial plan, an investment or an account is just a tool to help bridge the gap between point A and point B. Used by financial plan, an investment or an account is just a tool to help bridge the gap between point A and point B. So the context of it is so important.

Dr James, 19m 10s:

You know I'm going to speak to the dentist in the audience right now and I'm going to say one of the very first things that we learned at dental school was that if you don't have a treatment plan, no treatment or no treatment unless there's a diagnosis, there can't. No, no diagnosis, no treatment. I remember a tutor saying that to me once when I, in the early days, hadn't put the, the dx or the, the, the wdx, working diagnosis or differential in the treatment notes and he was like you can't, how can you possibly do treatment unless you've actually diagnosed something in the first place? And I was like wow, that makes complete sense. Yeah, obviously, and it's kind of like it's almost so obvious. You assume it's obvious, but it needs to be said at the same time. So really, whenever I hear you talk about this stuff, I think to myself right, well, we're all dentists and we obviously have to provide treatment plans whenever it comes to treatment for our patients. But what about the treatment plan for our wealth? How many of us have that? Please note that all content and information this channels for education purposes only, does not constitute investment recommendations or financial advice. For that you should speak to a regulated, independent financial advisor. Please see the description for further risk warnings.