The Passive Income Myth Exposed…
Is Retirement a Requirement for Freedom?
It's time to expose the myth of passive income…
Go back in time. Recall the nervous excitement (and torment) as you counted down the number of credits needed to qualify for graduation. Next up, board exams, licensure and, ”It’s official! You’re a qualified dentist ready to start your dream life!”
Now, where are you today?
You’ve built the practice inch by inch, reinvesting in yourself, your team, and the practice experience. You have a reputation. You have a family, a lifestyle that you have earned. You’re in the top 2% of income-earners. Life is good… or is it?
What could possibly be missing?
Maybe you need:
-A larger practice?
-Higher hourly production?
-More doctors, hygienists?
-Increased top-line revenue?
-Greater net profit (EBITDA)?
I submit that the answer is not in any of the above. These are great metrics to measure the efficiency and profitability of a business, but what was the “real goal?”
What about TIME?
Being your own boss in a lucrative professional field – wasn’t that supposed to be the ticket to Freedom?
Despite your obvious success as measured by society and our own dental industry, how do you answer these questions?
- – Can you vacation with your family for three months in Fiji and return to life and practice without any financial deficit?
- – Do you control your schedule? Can you work your own hours whenever and from wherever you want to be?
- – Are you able to freely determine the value exchange fee for your time and expertise in solving patient problems without any third-party interference?
- – Can you select to treat only the patients and procedures that you fully enjoy?
- – What percentage of your working hours are you in your genius zone, doing what you really love to do?
In our early years, the answers to the above questions are likely not in the realm of true freedom, choices, and options. There is a sacrifice period to attain any significant goal.
But for how long do we sacrifice?
The obvious problem is that our lifestyle and freedom are far too dependent on our labor – trading time for dollars.
Genuine freedom comes from recurring passive income or cash flow NOT dependent on your direct labor.
What does that look like? 3 possibilities:
- Build a “real business” that is not fully dependent on you, the owner.
- Build a Plan B wealth and cash flow strategy outside of your primary business.
- Build a hybrid of #1 and #2 that allow for freedom far earlier than traditional “retirement age.”
In my experience, both personally and having worked with hundreds of professional practice owners, is that #1 by itself is very difficult (though, not impossible) for the majority whose training was focused on specialization as a technician (dentist) and not as a business owner.
It’s all about Income Replacement.
(Disability insurance is a separate issue and not the topic discussed here).
Plan B wealth and recurring cash flow built on tangible assets outside of the primary business (Plan B) provide the fastest track to freedom in the shortest period.
The problem? How?
The financial media (Wall Street) indoctrinates early and often that financial planning is too complex and requires specialized knowledge and training.
The mantra is that it is best to focus on what we were trained to do and leave the financial strategies to “the experts.”
Unfortunately, no one cares about your money and future more than you do. Period.
Missing Key Inflection Points
Understandably, doctors’ training is targeted on technical skills which provide for the opportunity to earn a better than average income.
Regrettably, there is no training in financial strategies or financial literacy (especially in creating passive income for retirement). A doctor is taught to engage in the services of a financial advisor to manage money and investments.
This is what I call “consensus thinking” or groupthink. Following the crowd leads to average results, and the average “retiree” doesn’t have the investment capital to provide for a secure lifestyle after active income.
All the hard work, risk, and missed memories result in a scarcity retirement for the majority.
It doesn’t have to be this way. What you need is a guide – someone who has navigated the path to financial independence and who has helped others achieve the same outcome in far less time.
How much passive income is enough?
Once again, Wall Street pundits have created the myth of the “accumulation-depletion model.” If you are willing to work long and hard enough to save enough (accumulate), Wall Street will gladly be the custodian of your funds (often through another myth that I call the “401k tax deferral lockbox”) and have them ready to begin the drawdown period after you retire and leave active income production.
So, how much is enough? Hard to say, isn’t it?
Your financial advisor can make up a number, and often they do, pegging the accumulation number in the significant millions of dollars for most professionals.
But based on what math? What inflation rate? And what yield return on your money?
The point that I’m making is that it’s not about the net accumulation number, but how much recurring income/cash flow will that net worth number produce?
If you’ve never focused on income replacement, then how would you even begin to consider income vs. net worth?
Answer: You don’t, and neither does your financial advisor/planner or CPA. It’s not in their wheelhouse. In fact, your advisor is likely to move you out of more volatile equities (stocks) and to “less risk” investments such as bonds, CD’s, annuities, or U.S. Treasuries.
But what is the yield return or dividend of these “low risk” investments?
In the last 40 years, those investments returned on average less than 2%. Today, with the fight against inflation at 40-year highs, those returns have about doubled nominally to the 4-5% range. But over a 20-30 year retirement period, will that return be enough?
Instead of wondering, take action! Get the knowledge necessary to manage your own money and take control of your financial future.
To your freedom!
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.