126: Money Well Spent: How Dentists Can Buy Happiness - Part 3

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Welcome back everybody to another episode of the Dental Boardroom podcast. I'm carrying on on this miniseries about the relationship between money and happiness and how it relates in a nuanced way to a dental practice owner. Thanks for joining the show. I'm just gonna jump right in. Up to this point we've covered the following. We've covered what the research says says about happiness and money and that it does create happiness up to a certain level of income. In the study, they said around $100,000. I think that depends on where you live in the country at some level. But then there's diminishing returns after that. We talked about the ways to maximize your sense of financial peace of mind with your extra dollar. And it's really building those emergency reserve funds in and out of the practice so you could weather a down cycle, an economic down cycle, a negative impact to your practice on some unexpected event. Also delegating financial complexity in your life as well to create freedom and then lastly guarding against overspending in your life. Then we talked about the characteristics of millionaires from the Millionaire Millionaire Next Door book. Tom Stanley, William Danko, fantastic book. Highly recommend everyone to read that book. In my opinion, if you really care about your financial planning, that is a must read book. At least read a Cliff Note version of it. And we talked about the four disciplines of the Millionaire Next Door. Frugal, disciplined. They seek financial independence and they're very intentional about their spending, which we're going to talk more about today. Then I talked a lot about the relationship between income in your practice and profit in your practice and your personal wealth building in your personal balance sheet as well. That top very high collections doesn't necessarily mean very high profit and very high profit if you do have. That doesn't necessarily mean accelerated wealth building either because of the erosion that comes from consumer spending and vice versa. Sometimes people with a modest profit can accelerate financial independence quite well because they are very defensive with their spending. And then lastly, I quoted Tyler Durden from the Fight Club. Edward Norton's character lost all of his stuff. Brad Pitt tells him the things you own end up owning you. That they.

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Today we're going to carry on. We're going to talk about how to spend for happiness. Now. There was a. There was a significant study done. It's a very.

Deep study. It was called Happy Money the Science of Happier Spending. This was done in 2013 by Elizabeth Dunn and Michael Norton and it found the following that it's not how much you earn, but it's about how you spend and that there are five principles that they learn from this large study on this subject of money and happiness. Number one is buy experiences, not things. Number two, make it a treat that scarcity increases appreciation. So think about those things that you love to do that are quite Costly. If you do them too much, A, you're probably going to erode a little bit of the appreciation for it and B, it could really harm you financially. Make it a treat, says the study. Number three, buy time. Buy time. I can't tell you how often I think of this subject in my life at this point in time. Practice CFO has grown a lot. We have about 65 employees. We have a lot of sort of overhead needs. Tax compliance rules are incredibly difficult with all the changing tax laws. And the COVID stimulus still is.

Consuming a good chunk of our time in the tax department. And I have a tech startup practice, Orbit. Of course I have a family and a personal life that I want to have. And so I think about my time neurotically. And I am on a mission to outsource tasks. I'm on a mission to create time to do the things that I truly love and I truly care about. Using money to buy time. Number four in the survey is that. And again, these are the spending principles for happiness. Buying experiences, not things. Making it a treat. Buying time. Number four is pay now, consume later. Instead of the opposite consume now, pay later. That's what you want to avoid because that does create financial anxiety. It's just in the moment of that thing that you want, it feels so demanding, it feels so valuable that it will be worth the money and that you're. You're willing to pay future earnings in order to get that now.

However, the study finds that people are generally happier when they pay now and they consume later. Now there are certain purchases that's not going to be for most people possible, like buying your house or buying your dental practice, for example, those you buy now and sorry, those you consume now, you get them now and then you pay them later through debt. But again, those are assets that appreciate. And that in my professional opinion as a financial advisor and CPA is okay. That is, that is a good use of debt. So number four, pay now and consume later. Number five, they invest in others. They use their spending to benefit others. And generosity has. It's a, it's a known fact in all, almost all research, all research that I can think of, it boosts well being. Okay, so now, Len, that's the study. Buy experiences, not things. Make it a treat. Buy time, pay now, consume later and invest in others.

Now. How does this relate to dentists?

I would say the following.

Number one is to use your money to create margin in your life, not more busyness. And this might entail investing in your team. I find that the attitude and buy in of my team here at practice. CFO is what makes our world turn.

If I have negative viewpoints of our business, if I have a team member who doesn't have the vision, if I have a team member who gripes and complains and can't figure something out and blames other people, it not only brings down my entire experience as a business owner, it doesn't. It not only does that, it brings other people down and then it dramatically affects the culture of the company. And all of that ultimately will play out in a lower service level to my clients, in your case, to patients. And so using your money to invest in a great team and it's okay if you overpay your team a bit, if they are winners, and I said this in my last podcast, I'll emphasize it again, I would rather see you pay 20 to 25% over market for somebody if you're getting 50 to 100% better results.

And so this is where having your financial planning done well, where you could say, okay, if I can invest an extra, let's say 5,000amonth in my team, or getting the right people in place, what will that do to the culture and the momentum and the excitement and the buy in of my team? And I promise you, it will do miracles as I think it was. Beer Drucker, the a great business consultant and legend, said, this is me paraphrasing that culture eats strategy for lunch. So investing in your team and your culture, I think that's one great way that you can use your money. And then also I will say this is what I'm doing right now is I'm thinking really hard in my life. I plan out the year and I plan out vacations and who I want to spend time with. And then I think about the experiences. I am becoming much more interested in in the experiences. And I just got back from a three week trip in Europe that was an incredible experience. From London to I love Skye, Scotland to Edinburgh to Paris, over to Nuremberg, Krakow. This was a three week journey through history. And I found that experience deeply rewarding, educational and tiring as well. But to me, that was worth more than having a nice car. Now I enjoy a nice car. I do have a Tesla Model 3. In reality, as a business owner, here's the cool thing is you can deduct, you can deduct the purchase of your car, which is like a 30 to 40% coupon of your car and you get to deduct sort of your miles and costs on that car. That's One of the beauties of being a practice owner is you get a deduction for buying your car. Now the one big beautiful bill is giving some interest deduction right now for your regular consumers. That's the first time ever. But business owners get much more benefit on that. There's a little bit of a side tangent on buying the car. And like I've always said, everything needs to be in proportion to what your income capabilities are.

Okay, let's go on now. Quote the best things in life aren't things. That's to drive home the value of buying experiences in your life. The best things in life are aren't things. And if you look at the results of that study, buying experiences, not things, making the things you do buy a treat. Buying time, you know, time's not a thing. For example, experiences aren't a thing as well. Investing in others, that's generosity. Boosting well being, that's not a thing. So three of the five things on the spending principles for happiness aren't actually tangible things. How interesting is that? Only two of those are really one, making it a treat. So the things you do buy, buy them less frequently. And then the things that you do buy try to pay for it up front, particularly on consumer items. There. All right, here's a few few more things on this. I'm going to get into how we now align our money with purpose. How do we align our money with purpose? Happiness is about alignment with values, not just accumulation. And I've shared this probably two or three times in the history of my 115 or 20 podcasts or so. Most of you have not listened to all of those. So at the risk of being redundant, I'm going to share the introduction, opening first two paragraphs of the book called the True Measure of Money, Business and Life by John Seymour Bogle. And John Bogle is the founder of Vanguard Mutual Fund Group. You've almost all heard of Vanguard. It's in that tier of Schwab Fidelity, Vanguard. He is the founder of Vanguard. He's also the founder, essentially of index funds, incidentally. But he was one of my legends that I really look up to and looked up to. He's now passed away a few years ago, but he said this in the introduction at a party given by a billionaire on Shelter Island. Kurt Vonnegue informs his pal Kurt Vonnegue was an author. He informs his pal Joseph Heller, also an author, that their host, a hedge fund manager, made more money in a single day than Heller had earned from his wildly popular novel Catch 22 over its whole history. Heller responds, yes, but I have something he will never have. Enough. The second paragraph goes on. John Bogle says, enough. I was stunned by the simple eloquence of that word.

For two reasons. First, because I had been given so much in my life, and second, because Joseph Heller couldn't have been more accurate. For a critical element of our society, including many of the wealthiest and most powerful among us, there seems to be no limit today on what enough entails. So let's talk about aligning your spending with your values, helping you define what is truly enough.

You know, one of the things I've thought about that if you want to know what a person's values are, there's an easy way to do that. It's simply get the bank statement and credit card statements over the past year or two for any individual and you will see if you were to run that through AN LLM like ChatGPT and say, what are the values of this person? You would be stunned at how accurately it reflects what are the true values. Maybe not the stated values of an individual, but the money is where the reality emerges of what value systems actually are. And maybe that's a decent exercise for for you to do that. Also, let's talk about budgeting. Budgeting does play an important role here when it comes to aligning your money with a purpose. And I don't like that budgeting has such a negative connotation to it. Budgeting isn't about restrictions. I mean, practically speaking, there's an element of that, but it's at its core. It's not about restrictions. It's about aligning your spending with what truly brings you fulfillment. Your spending plan is the bridge between your income and your goals. This is why when you intentionally engage in a financial planning process, the very first thing to do is to think about the end. Have the end in mind. Stephen Covey's seven Habits of Highly Effective People this is one of the habits of highly effective people is they always have a vision that they're looking out in the horizon at and they're pointing to and they're saying that's where I want to be. But they're also first doing a critical analysis of what the various horizons out there could be in order to prioritize the one that would be most meaningful for them.

Do you ever feel lost in your practice finances? And how about your personal finances? Ever wonder where your hard earned money goes and why you're not seeing the financial progress you want work so hard for? If so, listen up. As a Dental CPA and Financial planner. I've created our company Practice CFO just for you. With almost two decades of experience, Practice CFO integrates great CPA services like accounting and tax with customized financial planning, both business and personal. Think of it this way. Our dental focused CPA services give us the x rays we need need to clinically plan your global finances and be effective financial planners. It's a highly customized approach we call the CFO model. Historically, having a CFO or chief financial officer was an advantage of large corporations only. But today Practice CFO gives that same advantage to private dental practice owners. As a client of Practice cfo, you'll be assigned one of our dedicated CFO CFO advisors. You'll receive insightful financial reports each month, have regular financial review meetings, reduce taxes, grow your wealth, and feel more in charge of your numbers. Because we believe that in the competitive landscape of dental practice ownership today, you have to be an effective business owner, not just a capable clinician. Reach out to learn more at www.practicecfo.com.

There was a great documentary on Arnold Schwarzenegger that came out, I think it was last year. It's I think a three or four part series. And he's interviewed today. And it goes back in his whole life as sort of a poor person in Austria, eventually coming to the States, weightlifting as a professional bodybuilder, getting into movies and getting into politics. I mean, he had one of the most fascinating lives, I think imaginable. And one thing about him, whether you like him or not, set all that aside. I mean, there's a lot of things to like about him for sure, but whether or not you like everything about him, set it aside for a sec. And the wisdom that he has from his life and his experience was so valuable. And he said in there, if I could envision something I learned about myself, if I could envision it, I could accomplish it. But I had to envision it. And if I couldn't envision something, I was terrible at it. But it's the vision. Thinking hard about the vision of your life is the absolute first starting point. You want to be efficient in the way you spend your time and your money and your activities. So, Stephen Covey, start with the end in mind and then a spending plan is to bridge your income with that vision of your life.

And the way that I like to think of it is that there's this here's an equation I sort of think or see all this through. It's that.

The real goal is the following. It's freedom of Choice plus peace of mind. It's that equation. The real goal equals freedom of choice plus peace of mind. Now the reason why we as humans, and I will say dentists, oftentimes don't ever get to a true peace of mind or even a freedom of choice is because we are constantly thinking about today and we're thinking on the margins. Marginal thinking, it's one of my themes. I share this all the time with people, with my clients on the podcast. Marginal thinking is the belief that it's okay to neglect a small but important decision because the consequence of that one neglect feels harmless. That is marginal thinking. Blockbuster thought on the margins. When Netflix was emerging, Netflix was tiny. It was fringe space on the Internet. It had very small margins. They had to literally spend, pay money for mailing costs on these DVDs back in the day that would be mailed to and from. And they didn't care about it. They were only concerned about their fat profits and they were thick. Especially the, the late return penalty. It was thick. They thought on the margins. Fast forward about five years, Blockbuster files bankruptcy and Netflix is where it is today. Marginal thinking brought Blockbuster down. Marginal thinking in our lives brings so many things down because the accumulation of those very small neglects each day aggregate up to something colossal. And that colossal neglect is ultimately what creates a tremendous amount of regret. It creates poor health, ruined relationships and a very bad financial situation and a delayed retirement and even a very unenjoyable retirement. So gotta overcome the concept of marginal thinking and say this decision today to save this extra few thousand this month, this decision to not buy that level of car, but that one, this decision to, to do a little bit lower cost on my, on my travels, this decision to do this, this, this or this, those things add up and they aggregate fast. And then you take what would have been the difference in spend and you put that in an investment, stock market, or in a, any form of asset that appreciates over time and you watch it grow. You don't have to do anything for a lot of those investments. You just sit back and watch it grow. And the compound growth is absolutely phenomenal and rewarding and creates such a great peace of mind and just a great financial experience overall. So that equation, real goal equals freedom of choice plus peace of mind. And here's my quote. Success is getting what you want. Happiness is wanting what you get. That is Dale Carnegie. All right, let me do a little takeaway here, everybody. We are focusing here on the following. Money can buy happiness to a point, depending on how you use it. For practice owners, we want to reduce stress, we want to buy time, we want to create experiences, and we want to align our spending with our values. And here's my call to action for y'. All. Reflect on whether your money decisions this week are buying you peace of mind or just more possessions that end up owning you. And I think I'm going to try to really stick the landing here with an emphasis. This is a little bit more tangential to finances, but it does relate absolutely to happiness and to some extent to money. Is relationships. The quality of your relationships, more than anything per these studies, is the biggest measure of your happiness. The quality of your relationships is the biggest measure of your happiness. Nurture those more than you nurture anything else. That's with spouse, that's with kids, that's with siblings, that's with friends. Nurture those and you have a pretty much guaranteed pathway toward a more fulfilling and happy life. And use money to support that through wonderful experiences with those people and through creating environments where those relationships can be nurtured and maintained in a very healthy way. All right, everybody. The relationship between your money and your happiness is a deep and real and very, very relevant financial subject for all human beings. It's definitely relevant for dental practice owners, where money is inevitably a massive part of their life. There's a tremendous amount vying for their money. Having a great plan will keep you financially secure and have a much better peace of mind, accelerating your financial independence. Thanks, everybody for joining. Until next time, have a great one.