It seems like yesterday, but I remember taking all my kids aside at 5 years of age and explaining how to make, save, and invest their money. I then gave each one a job or chores that paid about 50 cents a week. I know that’s not much, but it was also 35 years ago. With the job and the pay, I also gave them a plastic box. It was similar to the plastic fishing boxes they sell at sporting goods stores but smaller. It had three compartments about 2 inches wide, 2 inches tall, and about 5 inches long. The explanation was this: One compartment said God, the next was Savings, and the last was “me”. The “me” compartment was money they could spend on anything they wanted or needed. God got 10%, savings got 20%, and 70% was theirs to spend. Every Sunday they gave their tithe. They never were to spend the 20% in savings, and the 70% was to be spent on what they needed and wanted. Because the money was limited in the “me” compartment, they learned not to have instant gratification or entitlement. Surprise, they had to wait till they could afford something. A very strict budget with very little money, but it rewrote their attitude about money, debt, and spending when they became adults. The only thing that changed was that as they aged the jobs got more difficult, taking more time, but they were paid more. The thing that stayed the same was the same box with the same compartments. You have pretty much the same compartments for your life, too. The scary thing about being a dentist is that we can have pretty much anything we want. We just can’t have everything we want. So, be careful with what you spend your money on. You are promised today, and the future can come tumbling down.
I always believed that if I followed these percentages that things would financially turn out well for me, and they did. Building wealth and wisdom takes time but it is always easier if you begin early.
The second thing I did with the kids was when they turned 8, I got them all a social security card and gifted them the maximum allowable, put in an IRA and later in a Roth IRA. At the time it was about $2,000/year. Once again, I sat them down and explained how the IRA worked and that it was money that they should not spend until they retire. If you save your money, don’t spend it, invest it wisely, it will be there when you really need it. At 75, I found out it was true. As I took the time to explain in easy-to-understand terms about how this “saved money” would grow because I was going to do this for each of them each year until they were 18 (10 years for you math challenged individuals), I also told them that each year the money would grow because of the interest paid and the investments made on it.
For you adults, I wanted to show you that when they were 18 and we looked back on 10 years of building their IRA accounts, what this means for their future. The truth is, if they stopped funding the IRA at 18 (please don’t), and one of their friends started at 18 and put the maximum amount into their account, at 65 my kids, because they started early, would still beat the ones that started late. Hello compound interest and not spending your “seed corn”.
In dentistry, I find “common place” things that are done by a majority of dentists. They are not common sense, but they are very common to see. It is as if everyone is betting on the future being awesome, so they borrow against the future. You go to school and graduate with hundreds of thousands of dollars of debt thinking that you will hit the lotto and pay everything off. I even hear doctors betting that they will just pay the minimum and in ___ years the government will just forgive the debt. It won’t be me, but someone, someday is going to ask you how that worked out for you. Kind of like a Dr. Phil moment: “What were you thinking?”. Not much common sense in this strategy. But because many, if not most, follow it, you become the “sheeple” or adopt a herd mentality and just follow along.
Just because you can borrow money, doesn’t mean you should. Credit is not money. Try paying your taxes with your credit card. That won’t work.
Consider that debt is the tax on future earnings. Here is a great question to ask yourself: Who should be responsible for your financial future? I love the sign in Gold’s Gym: “Pick up your own weights, your mother doesn’t work here”!
Stop just a moment and reflect on these last few thoughts and ponder this question. Are you building a house (your life and business) on a sand or stone foundation? I am here to tell you that sand is no foundation or strategy that will actually work over time. There will be storms in life, and they will always come. If you struggle in a storm, you are on sand. In a way we should each become a seeker of truth and not just information. We should follow the path of “common sense” instead of “common place”.
For you over achievers, let me pose this question. Who else is paying the price of your quest at making more and having more?
Sense most of us are visual leaners, let me give you 2 slides to chew on as we finish this article. The first is from a book entitled: Your Money or Your Life. As you look below, this simple graph describes money spent and fulfilment. We get a lot of fulfilment from survival things like a house, a car, a job, etc. Comforts are nice also. Then we jump to luxuries: the bigger home, nicer car, better clothes, the best schools, exotic vacations, etc. You get the idea. Money spent and fulfilment are kind of like a drug. It takes more and more to feel the buzz, but at some tiime, there has to be a point of enough. It is this point I want you to look at. Just short of this point is addiction, divorce, bankruptcy, or some other crisis. All the things you knew you could avoid and boom, there you are. For the people that follow the “common sense” path of development, you will know you have arrived when you have purpose and accountability with an internal yardstick that rivals the best of us. This point of enough will always give you peace of mind, community, as well as savings and no more debt.
This next slide is what I want to leave you with. I hope you run a copy of it off and put it somewhere that you can see it daily. Far too often we find ourselves regretting the past and fearing the future. These twin thieves will rob you of today. From now own, try to determine the things that really matter, and the things that you can control. It is the intersection of both where you should spend 90% or your time and effort. Do this and reap an incredible future.
Michael Abernathy DDS
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