How Much Income is Enough for Dentists? – IC022

[Jaz]
We risk our health to do what we do. So if we didn’t pay what it does, would you still do it? Probably not. I know I’ve spoken to a lot of you about this and we all seem to say, you know what? You know it should pay more if anything, but if it paid any less, then you definitely wouldn’t do this job. Now it got me thinking how much money is enough because we’re in danger of doing this horrible thing where we look at other people’s lives and they say, oh yeah, he’s gone to Maldives on holiday and how many cars this person have, and you start to look over the fence and the grass is greener on the other side, we start buying things.

We don’t need to impress people, we don’t like, you’ve heard this all before, obviously, but the topic of today is something very sensitive. HOW MUCH MONEY IS ENOUGH? It’s a funny one, isn’t it? Right? What are your goals? We talk about retirement, we talk about how much money is your rich life, and I talk about the origin of that in the main podcast episode.

Just give some context. I went to the podcast show in London today, which was a nice, fun day out, and I went to be able to serve you guys better because it is become a big part of my life, the podcast. I love doing it. I’m so appreciative that I have an audience. You guys, you listen to me.

Thank you so much for listening to me. It means everything to me and I want to serve you more. So that’s why I went to the podcast show, pick up few tips and tricks. I invited my buddy James Martin from Dentist who invest come along. He of course did episode 44, if you remember. So if you’re beginning into investing, like if you’re a beginner in investing, then you should to totally listen to that episode.

We cover a lot of personal finances in that episode, but today we’re covering this, you know, it’s like a group function almost. Right? This episode we’re going to cover this one topic where how much money is enough, and I also cover this theme towards the end of as an associate, should you be looking to become a principal.

Because principals earn way more according to the figures that I quote, which are the NASDAL figures, which are like a bunch of averages. So we’ll share all of that and hope this episode doesn’t offend anyone. It’s sold very much based on averages and whatnot. And of course, finance is such a personal thing, right?

Main Episode:
So let’s join the interview with James, which was featured live on Facebook. So if you hear some shoutouts, that’s what’s happening. I was live.

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.

[James]
Okay, I see in that case, well, I’ll just hold my horses until Jaz passed the microphone with me. What’s up everybody? Absolutely buzzed to be here today with- Oh, hello.

[Jaz]
Hello live indeed. You should now go on your phone and share to ‘The Dentist Who Invest’ guys can catch us in the goal because very interesting topic we’re going to cover today. By the way, let me build some context where we are right now. Yeah, 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. And it’s just great. And I came here to be inspired and we both came here to do good things.

Hopefully catching you in your lunch hour. I know we’re a little bit early for that, but maybe we aren’t 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, so when I met him today, I was like, Hey, how’s it going?

I was pretty chilled about it. He was like, oh, it’s the first time we. I’m like, no way. Because I feel like, you know, from the on online world, the presence, I feel as though I know you already, right?

[James]
Yeah. Yeah.

[Jaz]
 So that was strange. So now we are officially IRL Friends. Do you know what that means? IRL?

[James]
In real life.

[Jaz]
We are in real life friends now.

So anyway, we were sat at, there’s like all the big brands here, Amazon Music, Spotify, Sony, et cetera, et cetera. YouTube is here, et cetera. So, we sat down to record, find a nice quiet 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 chase because we’ve got limited time. Let’s talk about a really, really important question. I’m sure we can write a whole book, like you said on this, which is how much income is enough for dentist?

And the reason I’m asking you this, James, and we can exchange our sort of thoughts and values on this, is something I notice on your dentist invest very often an anonymous poster will say, ‘I earn 2k a day or I earn 120K, a hundred k.’ 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. Again, should I go limited? So this, you know, if you take a step back, how much money is enough for dentist, I’m going to leave it very open. And obviously you’ll get a niche into that. But how do you begin to answer that.

[James] I love that question. And just like you said, Jaz, it pops up on the grip 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 or from the perspective of Joe Bloggs, 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 much higher than that.

[Jaz]
Should I just jump in with the NASDAL figures?

[James]
Yeah, yeah, absolutely.

[Jaz]
I asked such an open-ended question there, if I just jump in with the NASDAL figures. So if you guys aren’t familiar, it’s the National Association of Specialist Dental Accountants and Lawyers.

These guys published a report every year and this report, the most recent one they published, they published in March, 2022. It was just two months ago. And it was for the year. It was the year of pandemic. So income from 2020 to 2021. Tough year, right? That the one of the toughest financial years we go ahead.

And this is going to blow your guys’ mind if you are not already familiar with this. Right. Overall dental practices see an increase in average net profit per principal from 130K to 150K. All right. NHS practices, increase in net profit from per principal from 116 to 145k. Private practices see an increase in average profit from 133 to 143K in the most toughest of climates ever. Right. And lastly, us poor associates. Okay. Listen to this. Average ratio went down from 70K to 63K.

[James]
Yeah. Wow. Still a very good salary. However, even though that’s a down grade, 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, 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? But that’s the question really. That’s the burning question. Here’s the thing, here’s a perspective from looking at investing. When you retire you can either have enough, you can have too much, or you can have too little.

Alright? Really, really, really simple. Yeah. But the thing of what it is, in that simplicity, there’s a few things that we have to break down, okay. To actually get that sweet spot. Alright? 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-

[Jaz]
Break it down FA like someone might not be familiar with that.

[James]
Oh yeah. Well, they’re all just terms for financial advisor. So somebody who can plan your wealth journey, someone who can plan when it’s a good idea for you to retire.

[Jaz]
Have you got one?

[James]
I don’t have an FA, no. But you see, the thing about it is for someone who’s young-ish, I’m 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, some of the FAs that I know, the ones that are, they look at the longer term picture, let’s say that, yeah.

They will actually say to people 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.’ What they’ll normally do is charge you a fee to set it up 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 it at? 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 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 p 500, but that kinda 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. Jaz, do you want to say something?

[Jaz]
Yeah. So firstly, so S&P 500 for those who aren’t familiar with financial terms is, the US Index is so basically standard and important index of the 500 top companies in the US right? Is that fair to say?

[James]
Something like that.

[Jaz]
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.

So 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.

[James]
Yeah.

[Jaz]
But it takes a very special type of person to say, you know what, I bought 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?

[James]
I’ve heard the name. I’m not sure who he is.

[Jaz]
He’s an 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 two and a bit times more than the average in the UK.

Right. And will come by the way that 63K is a mean. Not a median. So, it is a false representation. It is also including like part-time workers, people on maternity DF1s. People who for some reason have taken sabbatical, et cetera, et cetera. Therefore, a better figure would be a median.

And I’ve emailed NASDAL two or three times over the last five years to find that out. They don’t have that, those figures. So a median would be a better figure, and I suspect that would be higher than the 63K, a median, right? So median is that and 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? I’m jumping points now, Ramit Sethi, he wrote that book, I Will Teach You To Be Rich, and he works for 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 was like, if I can have a Starbucks every day, eat out twice a week, have ’em at the best gym membership in town. I’d be happy. And that is then your rich life. So what Ramit really good at saying, you write down what is your rich life. And every single person can attain their own rich life.

[James]
Well, here’s the thing. Here’s the thing about money. Here’s another way to flashlight 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. Here’s the thing, but do you notice what’s not in there? Not in those three things, hoarding it. Which is what we’re all guilty of 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, it 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 of. 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. For stuff, for lack of a better term. 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?

[Jaz]
Hi Narni, just say hello to Narni first.

[James]
Hello, Narni. Nice to meet you, Narni. 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 is being eroded. Does that make sense? Right. So imagine if I said it to you, Jaz, you came and worked for me for seven days, or seven hours in a day, right?

And I paid you a hundred pounds, okay? And I give you 700 credits at the end of the day. And I said, done and dusted, we share hands on it. Good days work. Imagine if I came to you two weeks later and I said, actually, Jaz, 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. That’s the concept of inflation right there. It’s just another way of thinking about it.

[Jaz]

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

[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 700 pounds is worth, how much you can obtain in exchange for that. Because if you think about it, that’s the record off your work. See what I mean? So, but the record is faulty. That’s the problem.

[Jaz]
Yeah, absolutely. I mean, that’s a great way to describe it, 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 against the effects of inflation, which is always in the media nowadays, what is our best strategy?

Is it also involving a high savings rate? Cause we must discuss, I think we discussed in our previous episodes or savings rate now, how much of our money are we actually saving? All that money that we earn, 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 going to get us to our retirement amount of money, which again, we should all have aligned the sand somewhere. So let’s answer Narni’s question. Okay. So, James, when do you envisage yourself retiring?

[James]
Do you know what? Right. Thanks for that question, Narni. 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? 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, 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.

[Jaz]
Do you have a number? Do you have an a that you thought, you know, cause I know you love what you do, but do you have an a number?

[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 constitutes. One is financial freedom, one is financial independence. So financial in-

[Jaz]
Define both.

[James]
Absolutely. 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, within those two ranges, there’s a little bit of scope. 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, sub 40, 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. 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 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 Narni..

Okay. Because 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.

[Jaz]
If you want to ask mine, I’m happy to reveal this to you guys. Me and my wife talk, and I’d said to my wife, said to Sim so many times.

I like the number 55. I like it. Okay. And as much as it’d be nice to retire at 38, whatever. Going back to what you said, I love what I do. I love my clinical dentistry, and I just feel as though I don’t want to spend, you know, up till age 70 doing it is 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 in work in Singapore. One of our goals in life is to travel further and, you know, 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’ll 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 constantly 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 are, if you look at the NASDAL figures, we’re earning way less than principals. But principals arguably take on more stress. Like, stress is inevitable.

We wouldn’t do the jobs that we do 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 form 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.

[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-

[Jaz]
Honestly, I was going for it and I lost track, so I just gave you like five different questions. Pick anyone you want.

[James]
Basically what you said, the second thing you said. Give us a ballpark way, the way that we can use to calculate, at which point we might viably be able to live off our assets, right?

So you have to drive some sticks 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 how much inflation is going to be. Nobody knows how much stocks are going to go up in value, are 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?

[Jaz]
Uh, no.

[James]
The rule of 25 says-

[Jaz]
Oh, yes, 4%. Okay.

[James]
4%. Yeah.

[Jaz]
Please.

[James]
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 the value of your assets in terms of pounds is how much you can live off. How much you can safely withdraw from that balance, that balance of your stocks and shares asset, your bank account, your stock portfolio effectively.

[Jaz]
I’m just going to jump in. So let’s say you had a million pounds at an ISR. So you’re an ISR millionaire, you have a million pounds in isr, 4% is 40 grand. Therefore, what we’re looking at here is 4% of that is, is 40 grand. So, yeah, based on that.

[James]
Yeah, well, exactly. 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%.

[Jaz]
Every year.

[James]
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 over a rule of thumb and it’s only ever something that we can aim for because the conversation becomes more in depth. Because it’s said that the first few years after you retire your portfolio’s performance in those first few years totally determines what that safe withdrawal with 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. But 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 stick in the grind.

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 all direct debit that I forgot about whatever. Okay. 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 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 will 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 grind. 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-

[Jaz]
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 25. And that’s a good way to go. But how important is saving the money that we earn now and that’s where the story of the janitor comes in.

[James]
Yeah, absolutely. So again, only ever a rule of thumb as there is with lots of things in fans, save just enough to be uncomfortable because then you know you’re working for it, you know. 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, you know?

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 support, 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 then what that would mean is, and actually I’m earning too much. My, the date that I’m aiming to retire for, even if it is very soon, it’s might be-

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 you know, do you want to save that extra money and put it in a business? Really, it just becomes this huge conversation. But the thing that I said earlier is a nice rule of thumb and just be careful because the most common problem is probably dentist 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 that-

[Jaz]
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?

[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 got 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. You know, it’s always, it’s part of our identity effectively. I do think a second component to that is competitiveness. 100% of anybody who, what’s that restaurant? It opened in London and it’s got a thousand Pine Tomahawk stick.

[Jaz]
Must.

[James]
Yeah. There we go. Yes. I could never pronounce it properly, but anyway, so when that opened, some of my friends caught me up and they were like, oh, have you heard about this place? It’s got a tomahawk stick for a thousand pounds. And I was like, oh. Nate, I suppose. Then they were like, when are we going?

And I’m like, 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 like, 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 tomahawks stick.

It’s not going to be me. That’s never going to be me. You know what I mean? But with that level of spend, thriftness, you’ll always find a way to blow your cash. 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 beat crutch up with the Jones eventually. Yeah. You move to the next neighborhood, and it’s got the bezos. Can never forget, remember how to pronounce his name and the giz, 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? That’s all I wanted to say.

[Jaz]
Very good. And on that note, very relevant is when we are getting a mortgage, are you a homeowner?

[James]
No.

[Jaz]
So when we are looking for mortgages, there’s a trend among dentists that I’ve seen that they against all people psychologically is they 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.

Yeah, with five bedrooms and three en suites for their husband, wife, couple. Why are we doing this to ourselves? I am so glad that me and my wife bought a small little two bedroom, in the outskirts of Reading, which didn’t cost that much. And I look at my colleagues and it’s not a bad thing though.

My colleagues have bought huge houses, if that’s part of your rich life, then great. But let’s be considerate about the kind of debt you’re getting. I mean, I know properties property mortgage is a good kind of debt, but we’re really, you know, we’re stretch. 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. I want to give my child the best private school you have the second kid, now you’ve gotta send that kid to private school. You 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 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 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, that 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 drive 55, why don’t we plan our expenditure in the same way when it comes to property and the school that you send your child to.

[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, but then you can buy 10 solid gold Lambos. 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. So that brings me onto to what we were going to talk about two seconds ago, which was the story that Jaz referred to earlier of a gentleman called Ronald Reed. 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.

Alright. Story of Ronald Reed. Really personal story. Read it a while ago. Ronald Reed. Ronald Reed was a janitor. He was born in 1925. Okay. Ronald Reed, great topic. It is a great topic. It’s interesting, isn’t it? Thank you for that comment. Reed was a janitor born in 1925, and he was born in the Midwest in America.

Now, Ronald Reed grew up very modest background, and when I say modest, I mean modest, you know, barely living, handover, fist, parents barely putting food on the table. Okay? This guy did not come from wealth. Alright. Ronald Reed grew up. He was conscripted in World War ii. He went to fight in the US nearby.

He survived the war. He had a fairly unremarkable war career. There was nothing really much to say. He was straight down the road playing, 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. Went back to his Midwest.

Life went back to his family in the Midwest in America, and then around about that time, he 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 30, he met a lovely lady. He settled on, she had two kids from a previous relationship. He never had any kids himself.

Both of those kids were dependents. There were still about 10 at this point, but Ronald took them under his wing. Ronald looked after them. He made sure they had a nice childhood. You know, they never scrimped on anything. Okay. Now Ronald, amongst his friends, he was a bit of a but of a joke because he was known for his not his, how can I say? Not his complete and utter, thriftiness, but he’s-

[Jaz]
Frugality.

[James]
Frugality is a good word. He was known not, 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 runden in if he was at the pub, this, that and the other.

[Jaz]
His surname was Patel.

[James]
Is there’s a reference there that I’m not getting yet?

[Jaz]
A cultural reference. Don’t worry. I’ll come to it.

[James]
Okay. Okay. Slightly lost on me, but, okay. Anyway. Yeah, so Ronald Reed wasn’t the most thrifty person in the whole world when it came to his friends, but it was, when it came to his personal life, he Had clothes that he wore for about 20 years.

There was holes in them, had 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 30 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 he worked hard, his wage was never above average.

It was 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. And there he would spend an hour, alright, now we got to remember this is in 1940s, 1950s, you know, so activities aside from, there wasn’t that many things to grab our attention as there was an nowadays.

So, he used to go and read. This is what he used to do because he used to enjoy that. And what he did was he got really into reading of investing and stocks. Alright. But he never really talked about it to his friends. Okay. This only became clear later for reasons that I’ll go into in just a moment.

And what he did was he realized with time that actually that if he is very disciplined with his money and he tucks a little bit away every month, even though he is not earning that much. So, I believe he was tucking away about a hundred dollars every month and his wage was maybe a thousand dollars, so a 10th of what he earned, but not a great deal.

But he was doing this consistently and he 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 diversify us automatically across the whole market. He picked particular ones, but he spread himself across about 10 or 20, and he realized, that this principle of diversification was so important through his own reading.

Now, Ronald was a creature of habit. He worked in this school for about 40 years, but he always tucked away a little bit every month. It came up in 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 wasn’t south. Yeah. And he certainly had a modest house, modest car, all of those things. Ronald lived to a grand old age. Ronald lived to about 90, 90 or so when Ronald died. On his deathbed, he said that he bequeathed part of his wealth to his stepdaughters, to his surviving wife, some to the library and some to the school that he used to work in.

And when he said this, no one looked at his will, but he just mentioned on his deathbed 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, 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, they got his 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 8 million dollars.

[Jaz]
Wow.

[James]
8 million dollars. Okay. This was from someone who never earned more than I suppose today’s equivalent of maybe $20,000 his whole life. Yeah. But what he’d done is he’d saved consistently; he’d bought certain stocks that were very generous in their remuneration. They pay high dividends and he’d 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?

What that tells us is that actually part of it is how much we are, but actually not as part, you know, big a part as we might think, and it’s more about discipline, understanding the principles of investing. And understanding how you can use that consistently to generate wealth over time.

But there has to be that upper limit on how much we’re spending Now, if Ronald can do it, and Ronald’s salary is here, and we’ve got dentists who are doing extremely well. I’ve seen some dentists who turn, you know, their gross is 400K a year. 500K, things like that. I know one guy his is 750,000 a year. Now that’s the most extreme I’ve ever heard. Very good dentist.

[Jaz]
They’re the outliers.

[James]
They are the outliers. Well, yeah. Let’s put the outliers to one side.

[Jaz]
You know, let’s talk about, let’s talk about the NASDAL. Let’s talk about 63k dentists.

[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, and we have the understanding that there’s enough to tuck 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 flash 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 width. How interesting is that?

[Jaz]
I love that story about Ronald Patel. Now , before we summarize it, main points of this episode, I just want to just ask that one big question because in the blue we see here are associates losing out.

What do you think James? With what I’ve told you about how much more principals earn than associates, do you think associates should be looking towards practice ownership for the reason that the profits may be greater?

[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? Yeah. Alright, 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 gross pay, your gross pay as an associate, and that’ll be after your practice deduction.

So, say like you’re on 50% and let’s say that’s 60, 70,000 pounds a year, whatever it is. Yeah. Now, if you, it’s very. 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, it’s between nine to 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 in a week.

[Jaz]
I just want to add the community that, James, that the Protruserati, unfortunately yeah, we might be working nine to five, but we’re doing clin checks in the morning.

[James]
But dude, this is where I’m going. This is exactly where I’m going. Exactly. Okay. Because it’s very easy to look at that metric, you know, and divide however much you’re getting in a year by however many hours, 35 times 52, whatever that is off the top of my head, you know, somebody will be able to work that out off the top of 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, but what’s your actual hourly rate? How long does it take you to get to work every day? Watch your 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 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 other. So we’ve got-

[Jaz]
63,000 pounds, right? Divided by 1825, which is an amount of hours.

[James]
That’s 35 times 52. Yes. 1820

[Jaz] So the answer is that’s a 34 pound an hour.

[James]
Okay. Interesting to know. So, if we go off the numbers that I just said, you’re on, how much was it a year?

[Jaz]
63,000. Just take that NASDAL figure.

[James]
Brilliant. Yeah. And you’re working 35 times, 52 hours a year, and you are on just over 30 pounds. That’s what you said.

[Jaz]
Just about 35 pounds.

[James]
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. How much you’re spending to get to work. These are just some examples, how much you’re spending on your car, for example.

[Jaz]
The treatment planning. You’re sat treatment, planning, emailing patients. That’s most of my day.

[James]
Treatment planning, learning, communicating with patients, courses, those patients that need an extra phone call after work. What is your real hourly rate? Okay, now we are 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 weight just go up on paper by 20%, but how much are you-

[Jaz]
Way more, you know, they go up by a hundred percent based on the NASDAL figures. \

[James]
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 from 35 pounds an hour to 45 pounds an hour, is it actually worth it at that point? Or are you spending so many hours working that actually it’s like a flipping pair of hands or on 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 into 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 not a principal. I’m not saying that’s the case for everybody, but what I am saying is it’s worth having a think about it, and it isn’t always the case. There’s more to it than meets the eye effectively. See what I mean?

[Jaz]
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 then, yeah, 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 7:00 AM that she can’t come in today, that’s your headache. Yeah. That’s on you. But don’t be looking at this NASDAL report thinking, oh, I’m going to be a pro that makes 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 everyone’s reach to end this episode, thanks to the 20 guys or so live at this moment in time. Let’s go for four or five summary points. We’ll do one each. Okay. So one for me, summary point is, find out what is your rich life read Ramit Sethi’s book.

Okay. So, 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, gosh, I’m trying to think. For me, my rich life is having good Wi-Fi, 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, look, check my bank balance going out family to eat out and not having to open a man at.

That’s for me is my rich life. And to fair, I’m very much already my little rich life because I don’t have desires of a Rolex. I don’t have desires for a fancy car. So, I feel like I’m scaled low. But my rich life now is also thinking about private school for Ishaan. So 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, James.

[James]
Yeah, I love the thing about how much is your rich life, because it’s totally a thing. You can have too much.

[Jaz]
Just a shout out to Abzu was a restorative registrar when I was a Sheffield doing my DCT, well, a lovely guy. His story, 11 years in general practice. He then went to do his re restorative registrar training. So if anyone’s thinking I’m too late, you know, look at abs. Awesome guy. Abs, thanks for joining in mate. We appreciate that.

[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 hourly rate that we were just talking about a minute ago is so flipp and powerful and so flipping useful and more money doesn’t always equal more happiness, and that’s the older dash really. But we’ve given you some real tangible reasons as to why on this and actually fleshed out that statement and its meaning.

[Jaz]
And if, once you do figure out your hourly rate, let’s say, you know, let’s go take that 35 pound an hour average figure, a very, very crude figure just to keep things simple.

And then you were going to, actually, my hourly rate is really 25 pounds an hour because of all the time I’m spending. But then if a cleaner is going to 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, uh, that’s that, but 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 in me here today. The other lesson I want to just finish off couple more points to summary is think about your savings rate.

Okay. And that’s what it’s called. How much money are you actually saving, 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 the people who are into final for personal finance on there, if you are 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 20K-30K a year and they’re able to achieve a frugal life and save 50%. I know dentists who earn six figures and they struggle 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.

[James]
Absolutely. Well, here’s a start 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’re, if you save of 20,000 pounds and you put that in an ISR so an ISR individual savings of kind.

Something that’s accessible to every single individual whose UK based stocks and shares, 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 pounds and we maxi our savings of account every year, maxi 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 pounds in that ISR coin, 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. Now, if we go back, to the rule of 4%, 25 times your expenditure.

Then actually what that gives us is just over 40,000. 45,000 ish. Yeah. 45 thousandish, which is a handsome salary and it’s something that you can live on reasonably. Most people-

[Jaz]
52K

[James]
52K even better. There we go.

[Jaz]
Tax free is a nicer, it’s a nicer.

[James]
Tax free if it’s in a nicer 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 over after 20 years of being able to tuck away that someone in iso, which is within reach of a lot of dentists, but not always the general population, then that gives us a nice stake in the grind 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.

[Jaz]
That is 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 Cardozo 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.

[James]
Love?

[Jaz]
It’s 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, right? So your rich life is being determined by your little network, your family, your friends, your nearest and dearest.

That is worse worth more than any amount of money. So stop looking at how much other associates earning. Stop looking at how much your principal’s earning, right? Find out how much is enough for you. Have that conversation. If you haven’t had that conversation, your family have it. All right? Give you a significant other and extra squeeze tonight.

Give your children an extra kiss on the forehead tonight, okay? Because that’s what it’s all about. Screw money. Right. It’s all about the big important things. It’s about time. Time is such a great one that you mentioned on. So thanks for joining on this episode. Check out dentists who invests will be obviously 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 NASDAL figures dentist. If you want to go into to crypto then you can dress like James.

[James]
You know what, this is the one suit that I have. Crypto is not doing so well these days. Yeah. So, I spared out my crypto winnings on this one suit. But yeah, thanks for having me. Jaz, absolute pleasure to talk to all of your members and for anybody who’s watching this on ‘The Dentist Who Invest’ if you don’t know about Jaz Gulati, check out Protrusive Dental Podcast.

Guys, it’s been a thrill to talk money, finance, and also how much money us dentists needs. Such a pertinent question today with my good friend Jaz. Hope everybody is having an absolutely smashing Wednesday and we will catch up super soon.

Jaz’s Outro:
There we have it guys. Thank you for listening. All the way to the end as always. It’s very, very good of you. You are so loyal listening to the end always. I really appreciate it. Just one favor, if you don’t mind when I go on my Apple Podcast page, and I used to have over a hundred ratings and now I’ve only got seven. I don’t know what’s reset or why that’s happened, but if you are listening on Apple, and if you gained from this episode or my podcast, I would love for you to help me get discovered by other dentists by giving it a five-star review.

If you believe that’s how much this podcast is worth to you, please do consider leaving a review. It really means a lot. If you listen on Spotify, then please do as well. But Apple, I don’t know what’s happening with Apple. So please help me out. And I catch you in the next one. Oh my God, the next one’s going to be amazing.

It’s about update on ceramics. So what’s changed in ceramics in 2022 with an absolute rockstar in the industry? I’m not going to spoil who it is. E is an absolute rockstar, so I cannot wait to bring him on the show. Oh, and one more thing guys, for obvious reasons, this episode will not be going publicly on YouTube.

It’ll be an unlisted link. So you have to go to protrusive.co.uk to go on the relevant episode and then click onto the YouTube video from the website. You can’t actually go on find it on YouTube like you usually would do because we’re talking very sensitive topic, obviously, right? Money, right? So we don’t want this to be out in the public to a non-dentist.

Which is why I think the Protrusive app, when I fully launch it publicly to all dentists, will be useful because it’ll help to filter out a non-dentist and then I can get the right people listening and watching the episodes because the other day I had someone actually from Bangladesh, a regular Joe Blogg’s public member, a patient if you like, email me photos of his wisdom teeth with a bit of bone in between ie a minor tuberosity fracture, saying that I’ve been searching the internet for hours and I came across your episode about broken tuberosity and I’m want you to take a look at these wisdom teeth.

By photo when you think, is this okay? Because I don’t trusts my dentist bloody ba I’m like, what on earth is going on? Right? So I don’t want the wrong eyes seeing our stuff. So our stuff is our stuff. Therefore, do consider that maybe in the future this kind of content will be exclusively available on the app. So I catch you next week.