How Much is Enough?

The High Income Conundrum

Picture of by Dr David Phelps

by Dr David Phelps

We put in a lot of hard work. We spend so much time and money on education and acquiring skill sets to give the best care we can to our patients and clients.

This effort is rewarded with a higher than average income and the lifestyle that comes with it.

However, this privilege comes with the danger of complacency.

Complacency is a Killer

The complacency does not come from working hard or being dedicated. Complacency comes from a high income and high net worth.

You have earned the right to a higher-than-average income and to live a pretty darn good life. But this privilege comes with the danger of complacency, what I call the high-income conundrum.

We become accustomed to and are too comfortable with having to go to work. With transactional income, trading our time for dollars.

We too easily resign ourselves to a golden hamster wheel. 

Sometimes, it's a drag, but if you stay the course (so we’ve been told), you can eventually retire, kick your feet up, and maybe start enjoying life. You make some great memories with your kids, go on vacations, and pay for good schools, private lessons, and nice dinners.

But our focus is often misplaced on what society teaches us: education, degrees, professional licenses, certifications, etc. To do high-level work, solve high-level problems, and get paid well with transactional income. 

Transactional income is where we all start, but it should not be where we end. With transactional income, you can only earn if you go to work. You can hire associates, partners, hygienists, auxiliaries, etc., but with all of that on your shoulders, are you really free? 

Seek Assets that Buy Your Freedom

True freedom comes from owning investment assets that produce cash flow which replace your lifestyle burn rate – what you need to provide for yourself and your family. (Here are some examples of the kinds of investments I invest in today’s economy.)

Freedom doesn’t mean you have to retire. When you replace your burn rate, you don’t have to quit. I personally would hate to think about quitting or retiring. I always want to evolve to the next stage in life, where I can have a greater impact. 

My Wakeup Call and Freedom

My daughter, Jenna, is a survivor of early childhood leukemia. She then had uncontrolled epileptic seizures from ages 8 to 12. By age 12, she was in end-stage liver failure. It was devastating to our family. Jenna, thankfully, was blessed to be given the gift of a transplant when she needed it. It saved her life, but it was a wake-up call.

I worked hard to provide, but I was torn between the responsibilities of my practice and my family. The practice kept me from focusing on my family, particularly my daughter, when she needed me. Taking my time with Jenna for granted was something I could no longer do. That was the first time I asked myself, “How much is enough?”

Until we answer the question, “How much is enough?” we will keep on working, never knowing if we’ve made it. We think we're serving our families and doing the right thing, so we justify our hard work.

I'm still a driver today, but I made some significant changes in my driving style. It wasn’t based on a whim. I didn’t make it up and say, “My daughter's sick. I’ll just quit everything and go spend time with her.”

In some ways, it seems rational, but it's also solely based on emotion. I needed something to back that up. Something I cultivated in my earlier years before becoming a dentist which gave me the support to leave my active income to spend time with my daughter.

When I was in college, I studied how to invest money. I read books on the stock market and mutual funds. While it was interesting, I realized that there was no control there.

I read books on real estate, and it just made more sense to me. This led me to convince my dad, back in 1980, to be my co-investor in buying my first rental property. The rest is history. I went on to become a dentist and have my own practice, but on the side, I was building up my net worth.

The compound effect of small decisions and small acquisitions was profound. I learned to manage a small real estate portfolio, what I call bread and butter rental properties, in my own backyard. It took a lot of time and dedication and is not necessarily the pathway all professionals should take.

Focus on Tangible Assets 

Your business is a tangible asset. Real estate is a tangible asset. When I needed to leave the practice of dentistry for my daughter, I had to answer the question, do I have enough replacement income?

Net worth is separate from income. Money in a tax brokerage account or in a tax deferral account (like a 401(k) ) is great. It makes you feel good inside because you’re following the path others have taken, but it doesn’t translate to cash flow.

Today, I no longer have to actively work for money, but I love to have an impact and do meaningful things for my family, first and foremost, and then the people I serve in the Freedom Founders community.

I've helped hundreds of other doctors and their spouses take their hard work and their randomized investments (equity in their practice, commercial buildings, 401(k)s, tax deferral accounts, crypto, whole life insurance, annuities, etc.) and co-create a customized blueprint to replace their burn rate.

Most have spaghetti-on-the-wall investment plans. Their investments are all over the place and were not made with the intention of working together towards a common goal. Most doctors I work with have some net equities that could be consolidated and redeployed into tangible assets like your business.

Financial products may have a place in one’s portfolio for diversification, but tangible assets can produce recurring, sustainable cash flow without your active input of time or work.

Some people call this “set it and forget it.” But it’s important to note it doesn’t work like you think. You can’t just go to a store and pick out assets like candy. You can’t order assets online or call your financial advisor for the latest hot commodity. Investing in assets where you can “set it and forget it” takes a reinvestment.

You invest in yourself throughout your life for education, to build a practice, and to build your skill sets. These are all important investments, but understanding how money works is the reinvestment that most have not even touched.

The default mode is to do what Wall Street tells you. Your CPAs and financial advisors say, “Give your money to us. We'll manage it for you. We'll save you on taxes.” It’s all the same grandiose schemes that never pan out.

We have yet to see a single generation successfully retire on the basis of the 401k model alone. 

I hear about this all the time from the hundreds of hardworking, high-income professionals I speak with every year. Most of them have amassed a nominal amount of equity and net worth, but it's all spread out and disorganized.

You Need a Plan

Most professionals’ investments are not based on a game plan with milestones, each increasing freedom until they are financially free. That's the main issue.

There's no plan, no organization. Until you're willing to reinvest in yourself and commit to understanding how money can work for you, you won’t be able to create this plan, let alone reach financial freedom.

You know how to make money, but putting money to work for you requires a different set of skills. You don't need to go back to school to get an MBA in finance or real estate, but you can still learn how to invest your money. What I've done is take all my years of experience and my network and build a community called Freedom Founders.

Every time people join, they say they have no idea what this is about. Some think we’re just going to sell real estate like any other syndicator or promoter. No, I don't sell you anything. It's all membership-driven. I don't take any fees or commissions off of what the investments are.

Together as a community, we leverage our capital to access curated investments and perform detailed due diligence only sustainable with such leverage—a financial balance review using a CFO, Chief financial officer, and security attorney who help us vet the vast network I have built.

This allows us an array of investments that can fit all seasons. We answer both questions: Where to invest and how to invest?

Reinvest in Yourself Today

Reinvesting to learn how to make money work for you is a reinvestment in your future and the future of your kids, grandkids, and other family you want.

Once you understand the fundamentals, you can impart that knowledge to your kids and family. This includes principles about investing, taxation, the economy, market behaviors, and even patterns of this country.

If you're not willing to do this, you are abdicating your future to others who may not look out for your best interests or your money as much as you would. This isn’t to say that they have bad intentions, but it is human behavior.

Advisors and money managers are incentivized to get you to play no matter what investment or product you buy. It’s difficult to say whether the assets you invest in are actually the best for you and your situation whenever your advisor is incentivized to sell you it, no matter what.

Financial advisors only have a menu you can pick from (all found on Wall Street) and are extremely skeptical of anything outside of Wall Street. Of course, Wall Street is all they know.

Freedom Founders, on the other hand, brings the best of the best. We take no commissions and have no incentives for any particular investment. I, like the rest of the Freedom Founders members, am along for the ride.

Is Freedom Founders Right for You?

It’s scary to take steps in the investment world. The world of finance has burned many. But once you cross the threshold of Freedom Founders, your eyes will be opened. New members often experience personal epiphanies and profound realizations regarding finances, investing, legacy, and freedom.

Spouses have conversations like they've never had before about their finances and their future. Dreams that were laid out when they were first married and somehow dissipated are now in the picture again.

You can follow your financial advisor's advice like a robot. But where does this take you? To what? What is the final destination? And when will you get there? Can you have peace of mind and decrease your stress?

The lights go on at our Blueprint Weekends in the community. That’s where the support, the dreams, the milestones, and the specific goals come together for each of our couples. The transformations that occur throughout this process are what get me up every day.

Working harder is not bad, but it will not get you where you want to go. As much capital as you are able to make and amass, I know in your heart you don't really know when you should stop. Hoping and keeping your fingers crossed is not a plan.

You need clarity on how much is enough and focus on creating and implementing the right investment plan. There's no time like the present. Your fears will get in the way every time if you let them.

I love to help people. Helping you make a difference for your family and your vision is my goal.  In turn, you can then be productive and give back in the same way to your family, to those you care about, to your community. That’s the impact I believe all of us would want to see.

Fill out the application and schedule a call with one of my team members today to create clarity for your goals whether you decide to take a step forward with us or not. It’s up to you.

You need clarity on how much is enough and focus on creating and implementing the right investment plan. There's no time like the present. Your fears will get in the way every time if you let them.

To your freedom!

– David

 

P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :

 

1. Schedule a Call with My Team:

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest. www.freedomfounders.com/schedule

2. Become a Full-Cycle Investor:

There are many self-proclaimed genius investors today who think everything they touch turns to gold. But they’re about to learn the hard way what others have gained through “expensive” experience. I’m offering a free report on how to become a full-cycle investor, who knows how to preserve and grow capital in Up and Down markets. Will you be prepared when the inevitable recession hits? Get your free report here.

3. Get Your Free Retirement Scorecard:

Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Click here to take the 3 minute assessment and get your scorecard.

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