In this podcast episode, I meet with a close friend of mine, Chuck McKee, to discuss something that dentists are reluctant to talk about – financial freedom.
Chuck has 20 years of dental experience and partners with dentists across the country to help them integrate technology and grow their practice. His business, Ask Chuck McKee, focuses on assisting practices to achieve a consistent and balanced overhead.
On the podcast we discussed:
- The three phases of financial freedom
- How much money you should keep in your business checking account vs. your personal account
- Why you should pay yourself the same amount you would pay an associate to work at your practice
- How to measure overhead and fund your working capital account
- Planning for the future and saving for retirement
- Working on a timeframe that applies to you, your practice and your vision for the future
To listen to the podcast episode hit play below or read on for a more detailed overview of our discussion:
How to Reach Financial Freedom with Chuck McKee
The 3 Phases of Financial Freedom
We dived into our discussion by identifying the three phases of financial freedom:
We talked about each phase in detail because, in my opinion, financial freedom is a topic that dentists don’t talk about or even think about often enough.
On top of that, many dentists fail to plan for financial freedom, or they leave it too late and aren’t able to achieve the same results they could have if they planned sooner.
Business Checking Account Vs. Personal Account
On the podcast, Chuck and I talked about how much money dentists should put into their business checking account and personal account each month.
Chuck’s advice is to consider how long insurance companies take to pay because that’sessentially the amount of money you need to keep in your business checking account.
Another question Chuck gets a lot is how much dentists should keep in their personal or savings account. His advice is to “run your home like a business.”
Chuck tells dentists to keep 1x a month’s production in your business checking account and 3x that amount in your personal/rainy day account.
How Much Should You Pay Yourself?
If you’re a dental practice owner, I’m willing to bet there’s been more than a few times in your career where you’ve questioned how much money you should be paying yourself each month.
Of course, it all comes down to personal choice and circumstances. However, there are a few areas you need to look at when it comes to your monthly salary such as mortgage payments, car payments, and college tuition fees, etc.
Are you earning enough to live comfortably?
Are your spending habits a little too extravagant?
My advice to dentists seeking financial freedom is to pay yourself the same amount you’d pay an associate to work at your practice.
The office overhead should be around 80% after you pay the dentists. Your overhead should be measured at what it costs to run your practice, and this includes what you pay the dentist.
Funding your Working Capital Account
Chuck and I discussed working capital, which is something that everyone who owns a practice must keep in mind. The problem is that each practice starts with a working capital, but it’s rarely refunded.
You need discipline. Don’t live beyond your means and take some time out of your busy schedule to create an 18-month plan that will help you to put money away into your working capital account each month.
In my opinion, a million-dollar practice should be putting at least 90k into a working capital each year. If that sounds impossible, fund it over 12 months. Force yourself to put $7,500 into your working capital account per month.
You can do it, BUT you need discipline.
Achieving Personal Financial Freedom
Chuck said something that stuck with me, and that’s the sad fact that personal freedom is the number one bill people aren’t paying.
Family comes first, right?
So, it makes sense to put money away into a savings account for a rainy day. If you want to achieve personal financial freedom, saving a percentage of your monthly wage goes a long way.
Chuck recommends two books to everyone who wants to discover personal financial freedom through wealth management. The first book is The Automatic Millionaire by David Bach and the second is How to Become a Rainmaker by Jeffrey J. Fox.
Planning and Saving for Retirement
80% of dentists aged 65 and older can’t afford to retire and maintain their current lifestyle unless they sell their practice and use the proceeds to pay off their existing mortgage. This is something that Chuck and I can hardly believe because it’s so easy to avoid!
We discuss ways that dentists can plan and save for their retirement. Our number one piece of advice is to set yourself a goal and then work backward to achieve it. So, if you want to retire when your 60 with 5 million dollars in the bank, make sure you’re putting away x dollars each month to reach that end goal.
It’s time you started to look at your retirement as a bill that MUST be paid.
Here’s my last piece of advice for you: Figure out what it takes to live and add your funding and retirement because that’s the income you need to shoot for.
If you would like to find out more about Chuck McKee and his business, you can visit his website or call 919-454-6533.
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This article originally appeared on T-BoneSpeaks.com.