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Dentists Who Invest

How Much Money Is Enough For A Dentist? with Jasneet Gulati

Full Transcript

Jasneet: 

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: 

Okay, I see in that case. Well, I’ll just hold my horses until jazz parts of the microphone in me. What’s up? Everybody Absolutely buzzed to be here today with hello.

Jasneet: 

Hello. You should now go on your phone and share to the dentist and invest. So the dentist and invest guys can 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 petition on podcast page? Oh, I see, and then you have 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, because 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’s always the first time we met. I’m like no way, because I feel like you know, from the online world of presence, I feel as though I know you already, right, so that was strange.

Dr James: 

No, I totally understand, because here’s the thing I actually said. The first thing I said the jazz was jazz. I totally empathize because through doing this, through running a page, you’re on a group, you meet so many people and it’s like bang, bang, 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. 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 dentistry and Vest, so we should be welcoming some viewers from there very shortly.

Jasneet: 

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 got something to say. Which course? And now we are officially IRL friends. Do you know what that means IRL In real life? We are in real life friends now. So, anyway, we were sat at them. There’s like all the big brands here Amazon Music, spotify, sony, etc. Etc. Youtube is here, etc. So we sat down to record, find a nice 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 the 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 it got limited time. Let’s talk about a really, really important question I’m sure you can write a whole book, like you 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 and vest. 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 to 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 I’m going to send my initials to that. But how do you begin to answer that?

Dr James: 

I love that question and, just like you said, jars, 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 blogs. 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 you know much higher than that.

Jasneet: 

Should I jump in with the NASDAQ figures?

Dr James: 

Yeah, yeah absolutely.

Jasneet: 

I asked such an open 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, is 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 that? The one of the toughest financial years ahead, and this is going to blow your guys mind if you’re not already familiar with this right. Overall, dental practices see an increase in average net profit per principal from 130 K to 150 K, all right. Nhs practices increase in net profit from per principal from 116 to 145 K. Private practices see an increase in average profit from 133 to 143 K in the most toughest of climates, ever right. And lastly, as poor associates, okay, listen to this. Average deumination is went down from 70 K to 63 K. Wow.

Dr James: 

Yeah, wow, still a very good 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 wellbeing 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? That’s the question, really, that’s the burning question. Here’s the thing. Here’s a perspective from looking at investing from you can only ever have. 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, an IFA, cfa, whatever, or giving it some thought yourself, because the thing about it is it’s very easy to just go OTT and break it down.

Jasneet: 

FA. Like someone might not be familiar with that.

Dr James: 

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. I don’t have an FA, no, but you see, the thing about it is for someone who’s young ish I’m just 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, a lot of 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 that, yeah, they will actually say to people who are, 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 you can. Else, what they’ll normally do is charge your 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, 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. Josh, do you want to say something?

Jasneet: 

Yeah, so, firstly so, s&p 500 for those who aren’t familiar with the financial terms is the US index is basically a standard and important index of the 500 top companies in the US Right.

Dr James: 

Something like that.

Jasneet: 

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 gain wealth, and 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 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: 

I’ve heard the name is he. I’m not sure who he is. He’s an.

Jasneet: 

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 too. Two and a bit times more than the average in the UK, right, and we’ll come by the way that 63k is an is a mean, not a median, so it is a false representation. It is is also including, like part-time workers, people on maternity, DF, df ones, people who for some reason have taken sabbatical, etc, etc. Therefore, a better figure would be a median, and I’ve emailed nazel two, 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 medium is that in that middle person? How much they are they earning? But it doesn’t matter what the other person’s 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 then just go to go and I’m jumping points now. Rami set the. 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’s like if I can have a Starbucks every day, eat out twice a week, have them at the best gym membership in town. I’d be happy. And that is then your rich life. So what Ram is really good at saying? You write down what is your rich life, and every single person can attain their own rich life.

Dr James: 

Well, here’s the thing. Here’s the thing about money. Here’s another way to flash 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 do you notice what’s not in there, not in those three things? Hoarding it. Hording it, which is what we’re all guilty off 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 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 off. 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, 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, hello, now not, nor me, not nice to meet you, nor me, 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 has been eroded. Does that make sense, right? So imagine if I said to you Janse, you came and worked for me for seven days, for seven hours in a day, right, and I paid you 100 points, 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.

Jasneet: 

That’s the best way of an inflation. I like that.

Dr James: 

It’s cool, isn’t it? 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.

Jasneet: 

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, I against the 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 you must discuss I think we discussed in previous episodes of savings rate now, how much of our money are we actually saving, all that money that we are, and how much are we saving? How much are we investing? Okay, and how much of that? How much of our energy should we put into that, or should we instead put energy into trying to look at strategies to increase our income? What’s gonna get us to our retirement amount of money, which, again, we should all have aligned the sand somewhere. So let’s answer nani’s question. Okay, so, so. So, james, when do you envisage yourself retiring? Do you know what?

Dr James: 

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.

Jasneet: 

Do you have a number? Do you have an A that you thought you know?

Dr James: 

look, I know you love what you do.

Jasneet: 

I mean that’s the other one, but do you have a number?

Dr James: 

Do you 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, Just define both. 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 ranges there’s a little bit of scope. Yeah, you know what I mean. So for me personally, when do I want to retire? I don’t think it’s unreasonable that anybody might say they want to retire. You know, you know sub 40, you know. And for me personally, by the time, 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 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 non-ing okay, because my 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.

Jasneet: 

If you want to ask my name, I’m happy to reveal this to you guys. Me and my wife talk and I’d said to my wife, I said to him 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 local density and I just feel as though I don’t want to spend up to eight, 70 doing it. It’s 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. I lived and worked in Singapore. One of our goals in life is to travel further and 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, if you look at the Nazar figures, we’re earning way less than principles, but principles arguably take on more stress, like stress is inevitable. We wouldn’t do the jobs that we do if it earned like 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 clinical dentistry, 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 perform 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: 

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.

Jasneet: 

I was just I was going for it and I lost track, so I just gave you like five different questions. I think anyone you want.

Dr James: 

Basically what you said. The second thing you said was give us a ballpark way, the way that we can use to calculate at which point we might 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 what the 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. Have you heard this?

Jasneet: 

No.

Dr James: 

The rule of 25 says oh yes 4%, 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. You know your stocks portfolio effectively.

Jasneet: 

I was going to jump in. So let’s say you had a million pounds at 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 4% of that is 40 grand. So, based on that, yeah, well, exactly.

Dr James: 

Well, actually it gets more technical again because originally the original study refers to a portfolio 50% stocks and 50% bonds. But it’s still a good rule of thumb, no matter what your portfolio constitutes effectively, because it only ever is that it’s only ever a rule of thumb. So, because of that, what that 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 your 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 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 stake 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 practice 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, whatever 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. Okay, that would 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, was that?

Jasneet: 

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

Dr James: 

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. 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. But the point is it’s about enjoying life to a certain extent as well, the one thing you don’t want to do and 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’s about enjoying 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 the date that I’m aiming to retire for, even if it is very soon, it’s not possible to save anymore past a certain point, because you can only put so much in your savings account. Are you with me? Yeah, but it’s horses for courses and 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.

Jasneet: 

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: 

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. It’s always part of our identity, effectively. 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. And 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’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 steak. 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 spendthriftness, you’ll always find a way to blow your cash. You know, if you want to keep up with the smiths, next 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 clutch up with the jones. Eventually, yeah, you move to the next neighborhood and it’s got the bezos, bezos, bezos. I can’t always, can never forget, remember how to pronounce his name and the gates, right, and then guess what. You have to keep up with them, and they’re billionaires. So it’s a non-ending game that you might never win. And what do you sacrifice in the process?

Jasneet: 

that’s all I wanted to say 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 among dentists that I’ve seen that they against against all people psychologically. Is that it 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, uh, in in the outskirts of redding 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 that’s. If that’s part of your rich life, then great. But let’s, 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, 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’m a professional, um, I want to give my child the best private school. You have a second kid now you’ve got to send that kid to private school. We 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 at 55 and you to work until 68 to make sure that you 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 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 kind of things with caution. Is that the life you want? If it is, then fine. But if you wanted to try 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: 

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 lambo. There’s always going to be a way to spend. So at which point do we say, actually this is my cutoff 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 you earlier of a gentleman called ronald reidon. 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 reid really a fascinating story. Read it a while ago, ronald reid. Ronald reid was a janitor. He was born in 1925. Okay, ronald reid, great topic. It is a great topic. It’s interesting, isn’t it? Thank you for that comment. Um, ronald reid was a janitor, born in 1925, and he was born in the midwest in america. Now, ronald reid grew up very modest background I want to say modest. I mean modest. You know barely. You know live in hand over fist parents, barely putting food on the table. Okay, this guy did not come from wealth, all right, ronald reid grew up. He was. He was conscripted in world war two. 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 on the road playing 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. When back to his midwest Life went back to his family in the midwest in america, and then around about that time you 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 thirty 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 where dependence there was still about ten at this point. But ronald took them under his wing. One look after them. He made sure they had a nice childhood. You know, they never script on anything. Okay, now ronald amongst his friends. He was A bit of a bit of a joke because he was no one for is not not his how can I say? Not his complete and order thriftiness, but he’s frugality. Frugality is a good word. He was no one, 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 time, His surname was patelle is that there’s a reference there that I’m not getting the actual reference okay. Okay, slightly lost on me, but okay, anyway, I’m. Yes. So ronald read wasn’t 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 twenty years. There was holes in them. Get 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 thirty 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 you worked hard, is 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 gotta remember this is the nineteen forties, nineteen, fifties, 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. This would use to do is used to enjoy that, yeah, and what he did was he got really into reading, investing stocks, all right, but he never really talked about it to his friends. Okay, this one became clear here 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 talks a little bit away every month even though he’s not earning that much, so I believe he was talking away about a hundred dollars every month and his wages maybe a thousand dollars, so a tenth of what year and but not a great deal. He was doing this consistently. And you 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 diversifies automatically across the whole market. He picked particular ones, but he spread himself across about ten or twenty and he realized that this principle of diversification was so important through his own reading. All right now was a creature of habit. He worked in this school for about forty years but he always talked away a little bit every month. All right, it came up and 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 ninety, ninety or so. When Ronald died, on his death bed he said that he bequeathed part of his wealth to his step daughters, to his surviving wife, some to the library and some to the school that he used to work in, and they went. When he said this, no one looked at his will. But he just mentioned on his death bed that he’d done this and everybody thought, okay, 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. Okay, ronald passed away very sad day. A lot of people knew him in the time. Very popular Ronald was buried. They looked at the goddess 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 eight million dollars. Eight million dollars, okay, this was from someone who never earned more than, I suppose, today’s equivalent of maybe twenty thousand dollars his whole life. Yeah, but what he done is he’d saved, consistent, 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 are, but actually not as part. You know, big apart, as my think it’s more about discipline, understanding the principles of investing. I’m understanding how you can use that consistently to generate wealth over time. But there has to be that upper limit. And how much was spending? Now Ronald can do it and Ronald salary is here and got dentists who are doing extremely well. I’ve seen some dentists return. You know their gross is four hundred K year, five hundred K things like that. I know one guy his is seven hundred and fifty thousand a year and that’s the most extreme I’ve ever heard. Very, good dentist out there, they are the outliers. Well, yeah, let’s, let’s put the outliers to one side. You know, let’s talk about the nasdaq.

Jasneet: 

Yes, sixty three K dentist.

Dr James: 

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 talk 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. Looking at this with my interest is that I love that story about Ronald Patel.

Jasneet: 

Before we summarize main points this episode, I just want to ask that one big question, because the blue we see here are associates losing out. What do you think, james, with the what I told you about, how much more principles and then associates. Do you think associates should be looking towards price ownership for the reason that the profits may be greater?

Dr James: 

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? 利고? 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 Grows, pay, your gross payers and associate and that’ll be after your practice deductions, to say, like, you’re on 50% and let’s say that’s 60 70,000 points a year or whatever it is. Yeah, now, if you 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 35 hours a week.

Jasneet: 

Unfortunately, we yeah, we might be working nine to five, but we’re doing clean checks in the morning.

Dr James: 

We’re good, this is where I’m going. It’s 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, but have a many out 35 times 52, whatever. That is off the top my head. You know, somebody will be able to work that out off the top 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 should 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 lot 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.

Jasneet: 

So we’ve got 63,000 pounds right divided by one, eight, two, five, which is the amount of hours.

Dr James: 

That’s 35 times 52. One eight, two yeah. One eight, two zero.

Jasneet: 

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

Dr James: 

Okay, interest in the note. So if we go off the numbers that I just said, you’re on how much it 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. 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 are just some examples. How much you’re spending on your car, for example? and you’re sad treating planning, emailing patients, treatment planning, learning, communicating with patients, courses, those patients? That needs an extra phone call after work? What is your real, 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 you?

Jasneet: 

Based on the nasdaq figures.

Dr James: 

Yeah, 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, you know, from 35 pounds an hour to 45 pounds an hour? Is it actually worth it at that point, you know? Or you spend in 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, yeah. Now, the thing about it is, even though on paper that looks like an upgrade in terms of how much you’re earning, I’m just calling in the 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? Okay, 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 now a principal. I’m not saying that that’s the case for everybody. But what I am saying is it’s worth having to think about, and it isn’t always the case. There’s there’s more to it than meets the eye effectively.

Jasneet: 

See what I mean 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 yet there might be some financial rewards. You might have to work harder for it. You know, when your nurse message on the WhatsApp group at 7 am that she can’t come in today, that’s your headache. Yeah, that’s on you. But don’t be Looking at this Nazar report thinking I’m gonna be a pretty. Make 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 one’s recently ended. So thanks for the 20 guys so alive at this moment in time. Let’s go for four or five summary points will do. Will do one each, okay, so one. For me, a summary point is find out what is your rich life. Read Ramin set these book, okay. So how 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, to gosh, I’m trying to think. For me, my rich life is having good Wi-Fi. All right, that’s one of the fundamentals. Being close to work, being able to go to cost and have a coffee and not have to think about look, check my bank funds. Going out my family to eat out and not having to open our man at West out. That’s, for me, is my rich life. And, to fair, I’m very much already my rich life because I don’t have. I don’t have desires of a Rolex, I don’t have desires for a fancy car. So I I feel like I’m scaled low. But my rich life now is also thinking about private school for a chance. 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: 

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

Jasneet: 

Just a shout out to abs. Abs was a was a restorative Restaurant when I was a chef will do my DCT. What a lovely guy. His story 11 years in general practice. He then went to do his very restorative restaurant training. So if anyone’s thinking I’m too late, you know, look at abs. Awesome guy abs. Thanks for joining in me. We appreciate that.

Dr James: 

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 long term. And it’s not always the case. Okay, there’s actually more factors to it and the real, 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.

Jasneet: 

But we’ve given you some real, tangible reasons as to why on this and actually fleshed out that statement, and it’s meaning and once you do figure out your hourly rate, let’s say you out, you know, let’s go take that 35 pound an hour average figure. You know 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, if a cleaner is gonna 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. 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 to me here today. The other Lesson I want to just finish off a Couple more points. A summary is think about your savings rate. Okay, 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 and the people who are into final for personal finance on there, if you’re saving like above 40%, if you’re at the 50% savings rate. You are doing amazing, all 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 say 50%. I know dentists who earn six figures and they struggled to save 10%. So we need to really evaluate a life and really consider powering through and working deliberately on getting a higher savings rate, investing more, saving more. Be like Ronald Patel, absolutely.

Dr James: 

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 points 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 points 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 points in that ISA 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. If we go back to the rule of 4%, 25 times your expenditure, then actually what that gives us is just over 40,000, 45,000ish yeah, 45,000ish which is a handsome salary and something that you can live on reasonably. 52k even better, Tax-free Tax-free if it’s in a 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’s someone in ISA 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?

Jasneet: 

That is an amazing, real lesson there. Guys, I’m going to 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 Cardoso 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 not about that 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. So your rich 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 your other associates are earning. Stop looking at how much your principal is earning. Find out how much is enough for you. Have that conversation. If you haven’t had that conversation, your family have it. Give you a significant other and extra squeeze tonight. Give your children extra kiss on the forehead tonight, because that’s what it’s all about. Screw money. It’s all about the big, important things. It’s about time. Time is a great one that you mentioned on. So thanks for joining on this episode. Check out Dentist, who Investors will be on both the groups. James is doing some wonderful things and teaching dentists about personal finance and if you’re looking at me and how I’m dressed, I’m dressed like the Nazel figures. Dentist, if you want to go into crypto, then you can dress like James.

Dr James: 

You know what? This is the one suit that I have. Crypto is not doing so well these days, so I spashed out my crypto winnings on this one suit. But yeah, thanks for having me. Jazz, absolutely a pleasure to talk to all of your members and for anybody who’s watching this on Dentist if you don’t know about Jazz Galati, check out Petrusif 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.

Jasneet: 

See you later. Thank you, Abs. Thank you, Nonny. No-transcript.

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