Addressing Financial Gravity In Practice
Bringing simplicity to the financial complexities of a Doctor
Gravity is no respecter of persons. It doesn’t matter how nice of a guy or gal you are, if you jump off a cliff, there are harsh consequences simply due to the principle of gravity.
As a Financial Advocate to professionals that have become business owners (especially doctors), I constantly encounter people that are not efficiently dealing with the financial gravity that comes with being a business owner. Just like gravity, it doesn’t matter if you are a good person, have the right intentions, or are working hard, if you do not deal certain financial aspects, you will lose money.
When you raise your hand and opt in to becoming a business owner there are certain rules that apply just as sure as gravity exists. These are more complicated rules of finance and business that if not understood and addressed cost millions of dollars over ones lifetime. At the same time, these are some of the greatest advantages to entrepreneurs when these items are properly understood and addressed.
Some of the things that take a higher degree of knowledge and attention include tax strategy, acquiring loans and negotiating the best interest rates, acquiring proper insurance coverages (the types only bought or used by a business owner), employee benefits, and many others. Most of the time rather than being more efficient or effective in these areas, the doctor merely tries to work their way beyond this by adding more space, hiring more people, selling more procedures, working more hours, etc etc. Rather than address the gravity, docs use hard work to temporarily help or even increasing marketing or reducing expenses or eliminating staff and asking some to just do more by working them harder, but this is a limiting view that leads to frustration and eventually can be very destructive.
There is a better, although little known way to address this issue and keep more of your money without wearing yourself out by working harder.
First, it is critical to realize that financial planners are not the right professionals to address this situation. Unfortunately, most people who call themselves “financial planners” are actually just salespeople. Because they get paid from commissions on selective products, they have little or no incentive to give you an accurate, comprehensive, and efficient financial plan that accounts for every variable. Hence, their recommendations are skewed and incomplete at best and their objective is not one of efficiency and effectiveness, it is mostly about saving, sacrificing, delaying and deferring through the purchase of retirement plans and products.
My firm works on a personal level with more than 500 doctors. With thorough research we have proven that 93% of them take home far less money than they should—regardless of if they have financial planners. Even if your financial planner is trustworthy and knowledgeable, most likely he or she is just one part of what should be a more complete financial team and strategy.
Use the following guidelines to determine whether or not you are addressing the financial gravity that weighs on you as a business owner. Once again, it doesn’t matter if you are a nice person or not, the numbers just don’t care. It matters if you have an awareness and address the “gravity” of the situation to keep more of your hard earned money.
- Do you analyze the expense structures and uncover hidden financial fees and commissions in all your existing financial products.
- Fees on your retirement plans
- 12b-1 Fees
- Expense Ratios
- Administration Fees
- Advisor Management Fees
- Fees on your retirement plans
- Do you have any investments that are not outperforming the cost of some or all of your loans?
- Consider paying off the guaranteed cost vs. earning the non-guaranteed interest.
- For money that stays invested, do you have strategies for limiting your exposure to market risk while also giving you as much upside potential as possible?
- Do you analyze your accounting strategy and every aspect of your taxes to ensure you’re keeping as much of your money as possible?
- Have you considered cost segregation if you own your building?
- Do you separate out your activities from a salary vs. dividend perspective?
- Do you have the type of corporation that best fits minimizing your taxes?
- Do you talk with a tax strategist throughout the year versus just during tax season?
- Does he teach you to defer your taxes until later when your tax burden will be higher, or do your tax strategies limit or eliminate your taxes when you withdraw on the back end?
- Do you have a current strategy to provide you with practical exit strategies on all your investments, or will you be subject to unexpected penalties, fees, and taxes?
- Do you know of ways to prepare your business now if you were to sell it in the future to:
- Limit taxes
- Maximize your multiple (how many times earnings you sell for)
- Do you know of ways to prepare your business now if you were to sell it in the future to:
- Have you reviewed all your insurance coverages to check for duplicate coverage and ensure the most efficient structure and best possible premiums while transferring as much risk as possible?
- Do you have a Business Owner Policy for liability protection?
- Do you have an umbrella policy to protect from liability anytime you are not acting as a doctor?
- Does your umbrella policy include uninsured/underinsured coverage?
- Have you looked into Health Savings Accounts?
- Have you increased your deductibles to lower your premiums?
- Have you increased your elimination periods to lower your premiums on your disability policies?
- Do you know how to present yourself to a bank in order to ensure you’re getting the best terms and rates, maximize deductibility and to provide the best debt payoff strategy?
- Do you have a credit score above 780?
- Have you renegotiated your loans in the last year?
- Mortgage
- Credit Cards
- Business Lines of Credit
In the areas of tax, 93 percent of the time the doctor is overpaying. The average is 11,730 dollars per 500,000 of revenue. These are the areas a business owner never gets the convenience of opting out. It is just the gravity of being a business owner. Like it or not, it just exists. You either address it head on, or you lose money, it is that simple.
Some of the unfortunate excuses are:
- I don’t handle that, my spouse does
- I don’t have the time
- I am no good at money
There are many learned skills through school and practice. This is one that can be learned and there are millions of dollars at stake. This is one of the things you signed up for when you choose to own your business. You may not have known you were singing up for it, but by not addressing it, you leave money to the government, financial institutions and waste that is rightfully yours. You just have to be aware of the situation first. Second, realize financial planners are not equipped to solve this issue.
One of the critical flaws of the financial services industry is that it’s driven by sales commissions. Working with salespeople posturing as “financial planners” causes you to lose money in taxes, hidden financial fees, insurance premiums, and mismanaged credit. It means you’re not optimizing your current cash flow, nor are you adequately preparing for the future.
Next, you have to get organized at a level that this information is something you are aware of and can look over. Next, you intentionally ask and look for ways to be more efficient with your dollars in the areas mentioned above. For the best results it is critical to assemble a team or join a firm that has already fully aligned a team to provide these services.
So the next time you go to fund your retirement, miss out on a trip as you are trying to save more money, delay on hiring a critical person to your office until your in a better financial position, or find yourself overworked, remember to find ways to keep more of what you make and therefore create more choices rather resorting to exhausting yourself, trying to do this all alone, or limiting your enjoyment in life in the name of sacrifice for a better future.
To see your level of financial gravity and financial health go to www.freedomfasttrack.com/health and take a complementary Financial Health Assessment. In just a few minutes you will see what is handled, what is not, and areas you may not have been aware of that can make a massive difference to your financial health.
Read another blog by Garrett B. Gunderson.
Certified by the New Jersey Department of Banking and Insurance
