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S1 E7: Making money moves
Timely financial tips for dentists, including simple steps that help you build wealth at every stage of your career.
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Financial guidance for today and throughout your career
New year, new budgets! It's time to set your money goals for 2023. In this episode of Dental Sound Bites, special guest and financial expert Stephen B. Dunbar III, J.D., CLU, shares tips for dentists at all stages of their careers to increase wealth and save for the future. Dunbar is the executive vice president of Equitable Advisors.
As Dunbar tells us, “All financial planning is (is) putting the road map, the Google Maps, together to show me how to get from where I am today to the fulfillment of the purchase of my needs and wants in the short, mid and long term.”
Stephen B. Dunbar III
- Dunbar works with many professionals, including dentists, to help them meet their financial goals and avoid money pitfalls that can often plague people with successful careers.
- One of the biggest mistakes Dunbar says newer professionals make is the “kiss of debt.” After getting a job with a bigger salary, they will “reward” themselves with lavish purchases using credit cards or loans with payments that will recur for years to come.
- Instead, Dunbar suggests a one-time purchase that you pay upfront, such as purchasing a nice watch or a dinner out and enjoying the gift to yourself without going into debt.
- He adds that “expectations without being anchored in habits are a recipe for frustration.” Consistent habits, such as saving a set amount of money per week and increasing it over time, assures progress towards your financial goals. He says people need to celebrate such progress and consistency.
- Dunbar also suggests making such deposits into retirement and savings accounts automatic and to automatically increase the amount over time.
- Also, Dunbar says to be aware of other ways to save money, such as saving extra cash after you’ve paid your Social Security taxes for the year. This applies to people earning more than $160,200 per year in 2023.
- Procrastination is also a pitfall that Dunbar sees. People often don’t take the time to set up automatic withdrawals or meet with a financial planner.
- Dunbar suggests everyone write down their short-term, mid-term and long-term goals and find someone who they trust who will help them meet those specific goals.
- If a financial professional guides you into a plan that doesn’t meet your goals, Dunbar says there is “no emotional juice” and you will not stick with it.
- Later career dentists who are thinking about retirement should be not only focused on their financial finish line, but the “emotional” finish line, too. If they don’t know what to do with their time once they retire, they might put it off, Dunbar says. Many of these former professionals can feel depressed if they don’t have an emotional plan in place for retirement.
- Stephen Dunbar is a financial professional who offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, S.I.P.C, offers investment advisory products and services through Equitable Advisors, LLC, an S.E.C.-registered investment advisor, and offers annuity and insurance products through Equitable Network, LLC. Equitable Advisors and Equitable Network are affiliated companies and do not provide tax or legal advice or services.
Wright [00:00:00] Hello, everyone. This is Dental Sound Bites an ADA podcast where dentists share solutions to some of the big challenges we face in life and at work. Now, I don't know about you, but I didn't get into dentistry to balance a spreadsheet. So, today we're going to get expert financial advice that will help us set up for success for this year.
Announcer [00:00:23] From the American Dental Association. This is Dental Sound Bites created for dentists by dentists. Ready? Let's dive right into real talk on dentistry's daily wins and sticky situations.
Hanlon [00:00:38] Happy New Year. Dr. ArNelle, did you make any resolutions this year?
Wright [00:00:43] I don't really make resolutions. I typically try to set some goals. So, I have been in the goal setting process since October. That's when I kind of start thinking and projecting for the future year. So, I'm super excited for the year ahead. What about you?
Hanlon [00:00:57] You know, I do set goals, but I do not make resolutions either. So, I think that goals are critically important for me, it really helps me to gauge my year and make sure that I stay heavily focused on what I'm trying to accomplish. So, I'm really looking forward to 2023.
Wright [00:01:15] One of the things that y'all said you wanted to hear this year was getting some help with your money and your finances. So, in this episode we have a very special guest financial advisor, speaker and money author Stephen B. Dunbar, the third with some very can't miss money advice. We are so happy to have you here, Stephen.
Hanlon [00:01:35] Yeah. Welcome, Stephen, and it's really great to have you.
Dunbar [00:01:38] Thank you so much. I'm thrilled to be here. And a part of kicking off the new year for people. If I may, I'll go back to your question about setting resolutions. I would actually recommend people think about that goal setting, but habit setting goals.
Hanlon [00:01:51] And I love.
Dunbar [00:01:51] That habit setting because good habits lead to goals necessarily as an outcome. And if we adjust our habits, we will definitely meet our goals. So, it's about what habits are we going to lose and what habits we're going to add in the new year so that we can hit the objectives we have in mind.
Announcer [00:02:09] Announcing the new.. wait. This calls for a drum roll. Perfect. Announcing the newly reimagined. ADA member app designed for dentists by dentists. It puts ADA membership in the palm of your hands with features like a personalized news feed, member chat groups, personal documents, storage, even episode exclusives from Dental Sound Bites. The new ADA podcast. Tap into all the possibilities by searching for an ADA member app in your App Store.
Hanlon [00:02:47] Tell us a little bit about yourself and your background, Stephen.
Dunbar [00:02:49] So, I'm educated as an attorney. I practiced law for three years and was recruited to Wall Street, spent most of my career on Wall Street doing investment banking, then went into private equity. I've just described to you what I call the first half of my life. In the first half of my life, my career was a 12 on a scale of 1 to 10. Anyone from the outside looking in would have been very envious of my career. The challenge, MJ, is that when you looked at the other areas of my life, fitness, family time, just having fun, some of these other basic areas of life, they are ones and twos because everything was being sacrificed on the altar of professional success. So, right around 2007, 2008, I made the transition. I ended up in this industry in 2010, moving from what I call the institutional side of finance to the retail side of finance, engaging with people and let's say smaller companies. Because for me, let's not fall for that lie. We can have life in harmony. We can do well professionally, but also personally. So, all of my advice is around helping people have success in both those areas and not sacrificing one for the other, because that's the myth which we're told we can only have one at a high level, not both.
Wright [00:03:58] Hmm.
Hanlon [00:03:59] It is so true. And I think that those dentists out there that may own several practices, the more you own, the more crazy it gets. And it's hard to balance, you know, your personal life and your professional life. I know I have to get up at 5:00 in the morning just so I can fit my exercise in because I won't do it any other way. At the end of the day, I'm too tired. I think that we do have to make adjustments and good for you that you made that decision not only for yourself personally but for your family.
Dunbar [00:04:28] I think, MJ, honestly, what happens any time we step into a room as individuals, we're going to do one of two things. We either will bring a rain cloud with us that's an outflow of the negativity that we're carrying internally, or we'll bring the sunshine. And what I want to do is help people bring the sunshine, not just for themselves personally, but for those around them, their employees, their families, the communities where they do work.
Hanlon [00:04:49] That's awesome.
Wright [00:04:49] I love that so much. Can we jump into some big money mistakes that you're seeing that dentists and other professionals are making?
Dunbar [00:04:57] I'll start off really, let's say on the earlier side of the career. Number one is what I call the kiss of debt. The kiss of debt. That's the big one.
Wright [00:05:08] Not, the, the kiss of death.
Dunbar [00:05:09] And why is that a big one? Because what happens is I work really hard to get my credentials and I come out of now and I'm now practicing. I'm a professional. The first thing I want to do is reward myself with a lavish purchase. So, the kiss of debt, what that looks like is if you have $3,000 on a credit card, let's say 12% interest and you pay $50 a month, it'll take you almost eight years to pay off. You end up paying almost 1600 dollars in interest expense alone, which would just, for the privilege of charging your card. Here's what I'm saying. The big mistake is. Reward yourself. You deserve it. You've worked really hard to get through dental school. When you reward yourself, pick a discrete one time expense to reward yourself, not an expense that's going to recur for 60 months or 90 months. So, by the watch, go to dinner, maybe take a trip to something like that, as opposed to buying a very large house or buying a very expensive car. That's one, the other, I would say is what we started the conversation around. I see a lot of people that have expectations. Expectations without being anchored in habits are a recipe for frustration. So, instead of talking about expectations, hopes, dreams, these are all synonyms for each other. They're really just teaming up for a lot of frustration. Let's talk about goals anchored in habits that we can measure. Here's the big one, for, for early career people. Most people want to be a millionaire or a multi-millionaire. And so if I set that goal for myself and I'm 29 or 32 and I look at my bank account in my savings accounts tomorrow, well, I'm not a millionaire, so I have the opportunity to be frustrated. If I do it three years and I'm still not a millionaire, if I do it ten years and I still may not be a millionaire, here's what I'm saying. Rather than having the goal be $1,000,000, have the goal be a million set, set the habits to to reach the million, but then do micro goals. What do I need to save tomorrow? It's $20. I need to save tomorrow to be on pace. If I wake up and I get to the end of tomorrow and I've saved $20, I can high five myself because I'm making progress. Let's get lost in the progress, not the achievement. Progress, not perfection, is how people normally talk about that.
Hanlon [00:07:18] You just make little steps every single day with consistency. That's, I think, is the key, is the consistency. If you consistently stick to it, don't even pay attention to it, have it automatically taken out of your, your check when you do get it, you never miss it and you don't count on it. So, and it's just, it's amazing. I remember graduating from dental school. My daughter was five when I started, so I think she was about 12 or 13 years old. I had her start to work at my practice. And I started an IRA for her and it wasn't much. It's $250 a month, but by the time she was 21, she had $25,000 in that account that she could use to buy a condo or, you know, she used it for her first house. So, it did accumulate very quickly. So, I encourage anybody that's listening that even a little bit is better than nothing at all.
Dunbar [00:08:09] I'm going to highlight that because that's super important. Most people think that I need to earn an excessive amount of money to accumulate wealth. Not true at all. It goes to the point you're making MJ about small, consistent habits over a long time. So, the most comfortable client that I have, he was a principal. She was a school administrator. They have more than they know what to do with because, small and consistent over a total career. That's number one. Number two, when you think about this, it doesn't matter how much you start with. That's the other thing. To your point of the story, you just told MJ. Start anywhere. And not only have that come out automatically, but have increases happen automatically as well?
Hanlon [00:08:48] Yeah.
Dunbar [00:08:48] So, have my savings percentage maybe increase 1% every three months.
Wright [00:08:53] Oh, nice.
Dunbar [00:08:55] Because, that, that also happens automatically. The other thing, and this is a subtle one, is if I'm earning over $160,000 a year, I have an automatic pay raise built into my income that I don't realize and I'll spend if I don't if I'm not careful. For example, if I make 200, if I came out of dental school and I'm working for a system that's paying me 200, I will earn in the last two months of the year an additional roughly $2500 because I've paid into Social Security once I hit $160,000 a year, figure out at the beginning of year what that number is for you and plan to save it so it just doesn't end up in the checking and running through the checking out the door to something that doesn't count for anything.
Hanlon [00:09:34] Great point. Great point.
Wright [00:09:36] You're helping me so much here because I have young kids and I'm five years out of dental school. So, like even being on the receiving end or just hosting this podcast is helping me make some financial plans for my family and myself. So, thank you so much for that because, listen, I remember being a student in dental school and once I graduated, I had a completely different set of money worries than I do now. And so kind of keeping that in mind, I have a question for you, like about some common pitfalls. I know you talked about like the kiss of debt, but any additional pitfalls that we can avoid or any best practices that you can share about? For someone who's mid-career, someone who's graduating dental school and someone who's close to retirement?
Dunbar [00:10:18] The other pitfall is the P word, procrastination. That's the other pitfall is I will do it tomorrow and then tomorrow never comes. So, for those listening, I would say this is your opportunity. You've heard the pitfall. When you terminate this podcast this evening, take one step towards starting your financial plan. So for you, it might be starting your contribution. It could be writing the plan down. It could be reaching out to a professional who's going to provide your advice. But procrastination. Dr. Wright. That's the other pitfall that I see that hammers people, because let me give you an example. And I have the numbers here in front of me. If my goal is to save $500,000, if I start at 25, let's say, compared to starting at 45, the difference is my monthly savings has to be $189 a month as a 25 year old versus that's it versus $954 a month as a 45 year old. That's the cost of procrastination.
Hanlon [00:11:16] What is that? The, the factor of seven? What is that?
Dunbar [00:11:20] Oh, that's my favorite seven. Rule of 72. Rule of 72, ready for this one?
Hanlon [00:11:24] That's what it is.
Dunbar [00:11:25] This is fun. Anybody can do this. Let's do this together.
Wright [00:11:27] Let's do it.
Dunbar [00:11:28] Let's say we're solving for a 10% rate of return, meaning our expert, because we want the math to be easy, that we think we can earn a 10% annually. What that means is every 7.2 years my money will double because you take 72, you divide into it. Whatever your rate of return is, the answer or the quotient, that's the number of years you take your money to double. Here's the power of that, I think people miss.
Hanlon [00:11:50] It's amazing.
Dunbar [00:11:51] It's incredible. I'd say I started $100,000 just to really make it eye popping, in seven years I'll have $200,000. In 14 years, which is another seven, I'll have $400,000.
Hanlon [00:12:05] Now.
Dunbar [00:12:06] In, at 21 years, which is another seven, I'll have $800,000. Yes, that's the power of compounding. That's the other principle that is behind a lot of investing and math is the power of compounding, and that happens behind the scenes.
Wright [00:12:22] I am a first generation college student, first generation doctor. I didn't kind of have my path outlined for me, so I might just be getting some advice for myself here. But I think someone on the listening end can benefit from this. So, like wealth and generating it, those are not topics of discussion in my household, so I'm kind of having to figure it out. What kind of advice would you have? I know like, the procrastination, but someone who doesn't even understand bare minimum financials and they may even still be a doctor. Can you just coach us on that for a moment?
Dunbar [00:12:56] For sure. Let me start by saying, Dr. Wright, let me give you a for instance, I counseled a CEO of a company that did revenues north of $50 million.
Wright [00:13:06] Mm hmm.
Dunbar [00:13:07] This was a complicated company because it involved a little bit of science and some pretty complicated logistics. So, this was a gentleman that was highly, highly intelligent.
Wright [00:13:16] Mm hmm. Mm hmm.
Dunbar [00:13:17] And he admitted at the end of the process, he went with us. Because, for the first time, you didn't assume I was knowledgeable, nor did you speak down to me. And you gave me the information I needed to make a good decision. The point I'm making is this: Please do not put the burden on yourself or any of your listeners that because you're an excellent dentist, you should be an excellent financial person.
Hanlon [00:13:41] Here, here.
Dunbar [00:13:41] Totally unrelated concept, right, MJ?
Hanlon [00:13:42] Absolutely. Amazing. Yeah, we can't be great at everything now. Obviously, I think, that, that we do fall short with explaining the business side of dentistry to our students.
Dunbar [00:13:55] Mm hmm.
Hanlon [00:13:56] But there's really not enough time. People spend 30 years to become experts in business and in finance.
Dunbar [00:14:02] So, here's what I would do. Take out a piece of paper, and I would create three columns on the piece of paper. We're going to do this real quick, and I think all of your listeners have all three columns. First column is short term. Second column is midterm. Third column is long term.
Wright [00:14:18] Okay.
Dunbar [00:14:18] And you want to give yourself enough room under those headings to fill things in. Document needs and desires you have over the short term. Short term is defined as 0 to 5 years. Needs and desires are, have in the short term, maybe buying a car, maybe deposit on a home. And let's skip over to the long term, because that's the most intuitive and obvious, needs and desires for the long term. The biggest one we tend to hear there is retirement. Right. But go a little bit further and say, what is my lifestyle I want in retirement? What do I see myself doing in retirement? Fill in needs and wants in the long term. Then do needs and wants in the midterm. The biggest one we tend to see in the mid-term is education for dependents.
Wright [00:14:58] Kids.
Hanlon [00:14:59] Mm hmm.
Dunbar [00:14:59] But it could be opening a business. It could be buying a practice, needs and want in the midterm. What you're doing is, you're anchoring your financial planning in your true needs and wants as opposed to what I ought to be doing. This is the other big mistake I see people make trying to do what they ought to be doing or what they are told to be doing, which has no emotional juice. And I will not stick with it. The moment something becomes hard, I'll bail because that was not my goal in the first place. So, start with needs and desires that are my own by documenting short, mid and long term. Then get with someone you trust to do some math, to finance your needs and desires in the short, mid and long term. That's all financial planning is, is putting the road map, the Google Maps together to show me how to get from where I am today to the fulfillment of the purchase of my needs and wants in the short, mid and long term. That's all it is.
Hanlon [00:15:51] It's awesome. Great advice. Now, you know, the only person that is really close to retirement in this duo here is me. So, let's, let's, let's talk a little bit more about retirement. You know, what do people get wrong and what do people get right? And, you know, I know we've heard the statistic that less than 1% of dentists in this country can actually retire on time. You know, most dentists are working until they're 70 or 80. And, you know, quite honestly, we've had the 2008 crash. We had, obviously COVID. And, you know, we have inflation happening right now. So, we have a lot of things that have happened in a very short amount of time I think, that is, really impacting our portfolios.
Dunbar [00:16:32] So, I think if I look at the mistakes that you're, let's call them later career dentists are making. A couple of things. Number one, the plan was never updated and adjusted. So, we don't have a clear finish line. And here's the thing that's the hidden trap for people. There's two kinds of clear finish lines. One is a financial finish line and one is an emotional finish line. Let me start with the emotional finish line, because that's the one that's not so intuitive when I get to the finish line, if I have not decided on something that will be a passion of mine post being a dentist, a post being a professional. Do you know the biggest issue people have in retirement who are able to financially retire? Depression.
Wright [00:17:12] Depression. I know you're going to say that.
Dunbar [00:17:13] Because they go from being the woman of the hour that's always on call, dealing with heady issues, managing crises, running successful firms to everybody returns my phone call to the phone doesn't ring anymore. So, I have to have something to emotionally transition me from professional to post professional. And if I don't have that, I don't retire. Not because I'm not financially ready. I'm not emotionally ready. So, that's the first thing we've got to dig deep and be ready for. Then there's the financial finish line. And here's the other pitfall I see when you think about later career people. They have taxable and they have tax deferred. The bucket they're missing is the tax favorable or tax exempt bucket. So, they have the investment accounts that wherever they have the retirement account at the office, they don't have the Roth IRA as an example. That's an important gap, because if I have all of my money in a retirement account, 401k, for example, my profit sharing, and I've done an amazing job, if I have $1,000,000 in there and I go to retire, do I have $1,000,000? No, I've got.
Hanlon [00:18:19] Not when the taxman comes.
Dunbar [00:18:20] That's it. The tax person is going to show I don't have $1,000,000. So, diversification of my tax bracket is what I like to talk about when I go into retirement, because then my money will last longer because I keep more of what I've earned.
Hanlon [00:18:35] That's awesome.
Wright [00:18:35] So, Stephen, do you have something like a five step guide to help our listeners set themselves up for financial success? Or like just some resources that you can tell us about?
Dunbar [00:18:45] Sure. So, if anyone's interested, I have a something called a love letter, and it's produced by an attorney and accountant and us as financial advisors. I'll share that as a resource with your listeners. It's a document that, you know about 20 or so pages, but it really you can use it as a guide to make sure you've puy your, not just your financial house in order, but sort of get a start on your estate planning, your legal documents, your will, your health care proxy, so on and so forth. So, anyone who's interested, reach out to me and I'll make sure you get a copy of The Loving, Love Letter.
Wright [00:19:15] Awesome.
Hanlon [00:19:16] So I'm curious, what's the best money advice you've ever received?
Dunbar [00:19:19] You said at the beginning of the call. Consistent, repeated steps over a long period of time will yield the outcome. And it almost doesn't matter if you're young enough. It almost doesn't matter what amount you start with. That's really the secret. The other secret. This one's going to hurt some people's feelings. Here's the other secret. Live below your means. So one of the.
Hanlon [00:19:40] Means.
Dunbar [00:19:41] Things I do, that's.
Wright [00:19:41] What I was going to say.
Dunbar [00:19:42] One of the things I do is my wife and I. We are working on the discipline of reducing our expenses by 1% a year. We started this a long time ago. 1% of you.
Hanlon [00:19:53] Good for you guys, that's a great goal.
Dunbar [00:19:54] Because it doesn't it's not a big number again. Small, small, small. But you do 1% over a decade. That adds up. And ideally, hopefully your income is increasing at the same time you create that gap.
Wright [00:20:04] Stephen, can you tell us where people can easily learn about how to manage their money?
Dunbar [00:20:08] My thought would be there's a magazine called Kiplinger. I would recommend people read that it's actually designed to be for do-it-yourselfers. It has anything from a beginners knowledge level to use it, but you can also be an expert ... I actually am a writer for Kiplinger, so I have a monthly column on the online version of Kiplinger. So if you Google me with Kiplinger, my columns will come up and you can certainly read those articles as well.
Wright [00:20:33] Awesome. I wanted to ask if you could recommend, like, the top characteristics that we should look for in a financial advisor, like how do we vet them out? Someone to bring on our money team.
Dunbar [00:20:45] Look for someone who has credentials. So, beyond just getting the basic securities licenses required by the state and federal government, look for somebody who has a designation a CLU, a CFP, a CHFC, so on and so forth. That's going to show a commitment to continued learning. And you'll be the beneficiary of that. Look for someone that fits your style. That's really more important than anything else. And what I mean by that is try and get a feel for the way they give advice and the way you receive advice. If they're highly analytical and they're going to be all about numbers, and you're somebody who really desires to have things more in charts and graphs and pictures and make sure your styles align with each other. The other thing I would look for is someone that has duration in the business. So, you don't want to be working with someone that has three years. Find someone who has a decade or more in the business, as the author says, to become an expert or something, it takes at least ten years. So, really look for someone with about a decade or more of experience. So, you really are getting the benefit of that. The last thing I'll say is find someone who's a part of a team. Our financial needs are complicated, and to think that one person can handle everything from my household is just not a reasonable expectation. So, look for someone that's part of a team so that they have the ability to be good at what their lane is, but they have others to help. And then the last thing I'll say is, work with an advisor who is comfortable working with other professionals. So, an advisor who is trying to create a competition between you, he or her, and the CPA or the advisor and the attorney. That's not a good advisor. An advisor is somebody who's willing to work with other professionals, because again, they know that those other professionals provide a critical part of the service to provide holistic advice to the client.
Hanlon [00:22:23] Great advice.
Wright [00:22:24] The ADA also has a lot of resources on ADA.org/money. Whether it's refinancing your student loans, help keeping you on a budget or financial planning support. All of these resources are going to be free and available to our members. And for our listeners today, you can find all of the resources that we discussed on this episode and more in our show notes section, which is going to be ada.org/podcast.
Announcer [00:22:50] On the next Dental Sound Bites.
Wright [00:22:52] Dental insurance can be a pain in the well, you know, if you have billing and insurance questions, tune in. The ADA's resident insurance experts are here to help you decode contracts, billing and help you get paid.
Hanlon [00:23:08] Stephen, it was so amazing to have you on the show today. Thank you so much for all your advice. And, and I know that it's going to get to somebody and you're going to make a difference in somebody's life.
Wright [00:23:18] This is like a great starting point. So, this conversation needs to continue happening in our community. So, I just want to thank you so much for all of that wealth of knowledge.
Dunbar [00:23:25] Thank you so much.
Hanlon [00:23:26] If you liked what you heard today, please subscribe to the podcast wherever you are listening so you can get our latest episode.
Wright [00:23:33] You guys can also rate and write a review and follow us on social media. And don't forget, the conversation will continue in our member app, so please join us there.
Announcer [00:23:44] Thank you for joining us. Dental Sound Bites is an American Dental Association podcast. You can also find this show's resources and more on the ADA member app and online at ada.org/podcast.
Dunbar [00:24:00] Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. Tax information was written to support the promotion of marketing of the transactions addressed, and you should seek advice based on your particular circumstances from an independent tax advisor.
The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of the American Dental Association.