If I could change one thing for the doctors we work with, it would be their struggles in how they spend and save. Could there be a more pervasive topic than money troubles and their causes? It amazes me that 95% of all dentists end up not being financially secure by age 62. A life spent making money and running a very profitable business still leaves the average dentist scrambling at retirement to pay their bills and lead the good life without having to be a wet fingered dentist every day. For today’s discussion I want to outline six types of people who will always have trouble with money. We all know that at one time or another we make financial mistakes or have a challenging deadline that tests our financial resolve. I am not talking about that. These six typical poor money handlers spend a lifetime repeating the same mistakes and thinking that they will magically come up with a successful result. Here they are:
- The Spender. Number one on the list because it is the most common mistake in handling money. It is almost a certainty that the average dentist will spend just a little more than they make. Complicit with this is often times a spouse that is in denial of the family’s financial situation and yet still runs up their credit card charges and just can’t ever seem to pay them off. They may spend well beyond their means and swipe credit cards to their max. Unfortunately, this can be a quick way to incur massive amounts of debt and hurt any chances for financial success and security. If you are not saving, you are not helping your future. For the average dentist, you must save 15%-20% or your earnings if you ever plan to retire financially independent.
- The Risk Taker. This is the doctor that always swings for the home run. High risk can lead to higher rewards, right? I routinely speak with doctors who have a history of bankruptcy, over spending, and failed financial strategies. It always seems to me that the risk taker is also the one that has the largest entitlement mentality. This type doctor feels like he deserves the biggest house, nicest car, and elite schools for the kids, etc.
- The Procrastinator. Making late payments, waiting to save for retirement, letting bills pile up, or putting off goals are all common examples for the financial procrastinator. Even with new graduates, I ask them to set a goal to pay off all of their school debts in 3-7 years, not go into debt on a house they cannot afford, and keep driving that clunker till it drops. When asked by these new graduates about how much to save, I always give them this for a starting point: “Save a thousand dollars a year for each year of your age”. If you are 26, then save $26,000 this year. For a 34 year old, it would be $34,000. Etc.
- The Dummies. These folks, like The Spender, have a “you only live once” mentality when it comes to money and as such, end up spending it all. They have not taken the time to educate themselves on finances and show no interest in learning. You can’t fix “stupid”.
- The Pessimist. Unlike The Risk Taker, these doctors are afraid of taking risks because they fear things will not work out. Kind of a negative goal setting personality. They don’t save because they think they don’t deserve or will ever be able to retire.
- The Giver. Here is where I found myself for decades. I preferred to purchase nice things for my loved ones. I found joy in giving. At first glance that doesn’t sound like a bad trait to have, right? Keep in mind that as much as you want to shower those you love with gifts, there ought to be limits. I see this in others, where they create unrealistic expectations from their children by giving them a lifestyle that The Giver really couldn’t afford. It gives your spouse and kids a jaded vision of how things should work.
Change is difficult in any area, but when it comes to finances, we tend to operate from a perspective of “appearances”. Just because you are a doctor, you should not think that you deserve to drive a new car and live in a gated community, where your kids go to a private school while you play tennis and golf at the best clubs. I rarely find doctors who struggle with money at the office doing any better at home. Your business is an exact image of the finances, culture, personality, and interpersonal relationships that you have at home or in your “non-work” life. Money should be one of the first challenges you set goals for and commit to change. This is how you Summit.
Michael Abernathy, DDS