Academy of Chiropractic Personal Injury & Primary Spine Care Program
Quickie Consult 1169
Infrastructure 247 I
Preamble: Many of the issues I bring to you are very small, yet each issue is just that, an issue. If you take care of the small issues, then you will be able to build and more importantly, focus on the bigger issues...a larger practice and more family time. -Mark Studin 2006
"Financial Strategy to Keep More of Your Money"
Dr. Studin: I am on Dr. Ron Manone, who does her IME rebuttals, so today I want to discuss money, just money and retirement strategies. So, Ron, how old are you?
Guest Dr: 69.
Dr. Studin: so you're a little bit older than I am and you're retired from practice, you're teaching in chiropractic academia, your consulting.
Guest Dr: I still like to keep my head in the game, but yet I do like to gamble and do other things yet.
Dr. Studin: so one of the things I would like to talk about is that, I'd like to talk about savings. I'd like to talk about investing in yourself, and all of those things are important towards the long term fiscal stop, let's say in a contemporary chiropractic practice. And this is as much for the 30 year olds as it is for the 50 and 60 year old with the potential retirement looming. Now most chiropractors retire because their body breaks down. You go out on some sort of disability. For me, I broke my back , what did you hurt?
Guest Dr: I had a similar issue. I had to have my thumb fuse that shoulder surgery, neck surgery.
Dr. Studin: That's how most chiropractors would get out of the game. It's not by choice. It's because we have the choice and disability really sucks. They'll pay a very short amount of time and then we'll torture you, the biggest single mistake I made in practice is I rented my office and I didn't own the building that you were a little bit smarter than I did then you owned your building, correct?
Guest Dr: Yes, I just sold it July.
Dr Studin: So when you bought the building, how much did you pay for it?
Guest Dr: Price was $275,000. I put about $300,000 into it.
Dr Studin: you paid $275,000 and did you have a note on it or did you pay it outright when you first started?
Guest Dr: I had to note, I stated off many years ago.
Dr. Studin: How old were you when you bought it?
Guest Dr: 35, 37 around there.
Dr. Studin: So you were young and you didn't have a ton of money behind you. You had a young family like the rest of us building your practice, learning the ropes, but you bought the building. Do you remember how much that payment was? A month for the mortgage?
Guest Dr: no. probably around $2k.
Dr. Studin: and how many square feet is your building?
Guest Dr: I had 2,500 square feet downstairs. 1100 square feet upstairs. I had an apartment upstairs.
Dr. Studin: I had a 3000 square foot office. And I lived in Stony Brook, long Island. And you're in Danbury, Connecticut, which is pretty similar socioeconomic areas. I paid initially $4,500 a month and then at the end when I left after escalations, I was close to $6,500 or $7,000. But you paid pennies on that and every month you paid yourself and build equity. And every month I pay the landlord and I pay for his vacations.
Guest Dr: Yeah, I had a tenant upstairs and then I actually bought my office building before I bought my house. So I want to get that squared away for it. Then I bought a house.
Dr. Studin: I bought a house first because I had a home office initially and then I had to move, so you actually did everything. So you invested in yourself first before you got a home. How much did you sell your building for?
Guest Dr: $480,000.
Dr. Studin: almost half a million dollars, all those years later and you've got a depreciation on your taxes for 30 years. So if you divide $275,000 divided by 30 that is $9,000 a year, you are able to deduct off your taxes for capital depreciation.
Guest Dr: Of course when you own the building, you get a lot of write-offs as well. Legitimate right offs.
Dr. Studin: Well, every right offers legitimate isn't it? So you paid yourself for God knows how many years, and then when it was paid off, you didn't have to pay anything but the taxes and then at the end and you've got the capital depreciation for 30 years, which is 1/30 of the purchase price deducted every year. Or if you're off the top of your taxes and at the end you sold it for half a million, roughly, and you got the practice there. That's a pretty good deal. So, who taught that course that we all went through for years ago about money?
Guest Dr: Greg Stanley.
Dr. Studin: I don't always practice the way he suggested conservatively with tax free municipal bonds, which he taught in. I did some of that. the secret was pay yourself first 10% of your top number and put it away in savings. Don't touch. And of that, what you take 10% goes to longterm savings in a retirement plan and whatever you want to do in longterm savings. Now, and that's a hard rule and it's a rule that I still ascribed to today, it's just because you have cut the compounding factor. Now the other thing is let's talk about debt. You and I can't do anything to a credit card debt. So then create more debt to pay that debt to credit. So what's been you've got to um, two large box stores, Lowe's and home Depot. The Lowe's corporation felt though the hardware chain. So money is so cheap. Let's just leverage it to death. Power was much as possible. Expand and grow. Home Depot said we don't care how cheap money is cause you could find money for two and a half, 3%. We're going to use our own money and only expand without going into debt for all of these facilities. And if you look at what's happening right now, home Depot is still expanding and Lowe's is contracting because they can't carry all that debt even though it's cheap. I guess it can't be sustainable in good and bad times. So what's your philosophy on debt?
Guest Dr: You cannot accumulate wealth if you have debt. You have to pay a few debts as you go along. The smallest ones first. Well, you have to get out of debt as fast as you can without jeopardizing your growth.
Dr. Studin: Now the other thing, a friend of mine that owns a bank, he owns one of these boutique banks and he gave me some very good advice about mortgages and credit card payments. If your mortgage or credit card payment, say you have a $300,000 mortgage, and your payment is due on the 30th of every month, pay it on the first of every month, because in that grace period that they give you interests still cures, you're building that up and over the life of the loan, it's an extra 30 or $40,000 of interest that accrues. So, if you pay it on the first of the month, which means the first month you'll double up.
Guest Dr: I think the arithmetic is that if you pay an extra month a year, you can shorten the 30 and watch something else like 22 years.
Dr. Studin: What I do for me is I double the principal payment every month. So you paid it off in half the time, you save a lot. So when you get a mortgage, you should always get like a 30 year fixed at the cheapest rate. You can then prepay the principal because there's no prepayment penalties anymore. If you're able to do that. The easiest way to borrow money as credit cards don't, you'll pay 20, 30% by the end of the day on that credit card, you'll be accumulating interest rather quickly, a lot of interest rather quickly.
Guest Dr: my philosophy is if you can't afford to pay it off the end of the month, don't put in your credit card.
Dr. Studin: So the bottom line is you could do without. You don't need a $3,000 Italian suit. Men's warehouse for $250 bucks in the beginning is perfectly fine.
Guest Dr: later on you can do that, but not in the beginning or if you're not in the situation, you should wait.
Dr Studin: you can't teach experience, you can only teach stuff, experiences is what you get from making all your mistakes and doing it, watching him. Are there any closing comments you want to make?
Guest Dr: I think another interesting book to read that's very timeless is the millionaire next door.
Dr. Studin: I never heard of that one. I like to think and grow rich. Or the richest man in Babylon.
Guest Dr: a millionaire next door is very, very quickly just summarizing of people who may be living in your neighborhood, had very modest car or hottest a house, but they've been saving and reducing their debt. And then multimillionaires. You just don't know it because they have like mundane jobs.
Dr. Studin: at one point in time I was pretty much 100% debt free and my friend who owns the banks said I hate you, you're our biggest enemy. The banks want you to be in debt up to your pot.