February 8, 2023 | Podcast
In this episode of The Art of Dental Finance and Management podcast, Art speaks on the importance of starting the new year strong with his top 10 tips for success. Art discusses how dentists may be impacted by the current economic landscape and what they should be focused on in their personal lives, dental practice and financial planning for a successful 2023 and beyond.
Reach out to Art if you have any questions regarding dental finance and management for your dental practice. More information about the Eide Bailly dental team can be found at www.eidebailly.com/dentist.
Being more strategic in all aspects of your dental practice will lead to increased profitability.
Art Wiederman, CPA: Hello everyone and welcome to another edition of The Art of Dental Finance and Management with Art Wiederman, CPA. Welcome to my podcast. My name's Art Wiederman. For those of you joining us for the first time. I am a dental specific CPA. I have been a dental specific CPA for 38 years, going on 39, I believe it is. I'm a proud member of the team at Eide Bailly. We work out of Southern California and we're recording first week of January and this is kind of my opening salvo for 2023 for my listeners, which I do every year. And we'll get to the topics in a moment.
But they say it never rains in Southern California. Well, they lie. They lie. We're getting, what do they call it, a cyclone bomb. And all I can tell you is I grew up in Brooklyn, New York, the first six years of my life. And, you know, when it rained about 20 minutes into the local news, they would say it's going to rain today in southern California. When it rains, it takes up half of the first of the of the broadcast of the local news because our state just doesn't hold water really well, I even saw an Instagram this morning, one of my clients there in a dental building with about I think 60 to 80 other dentists and their whole building had to be shut down because the electricity went out. So that is one disadvantage of living in Southern California is when it rains, things get all crazy.
But anyway, we are starting our fifth year. I just can't believe it. We're starting our fifth year of the Art of Dental Finance Management and we get thousands of downloads every single month and people joining our podcast family and I get emails and phone calls from all over the country. And I want to thank you from the bottom of my heart for listening and supporting the podcast. I am honored and privileged to serve the dental profession and to have made it my career since 1984, and I will continue to make my legacy to be helping dentists to get to where they need to be in their practices and in their personal financial lives and helping them to meet their personal financial goals.
And what we're going to do today, folks, is we don't I don't have a guest today. It's just me. And I'm going to kind of go through my thoughts for what you should be doing both in your practice and also in your personal financial planning for 2023. We're going to talk about what's going on in dentistry today. We're going to talk about the economy. We're going to talk about planning your taxes and retirement. We're going to hit on a bunch of stuff today. And as any podcast or webinar or a live lecture that you go to, this is a call to action. Hopefully you're sitting and listening to this, you're driving, you're doing whatever you're doing and you're listening to this podcast, and it's going to hopefully elicit a response of something like, Oh yeah, I need to get our estate documents done or Oh yeah, we need to fund the retirement plan or Oh my goodness, Johnny going to turn 13 this year and he's already said he wants to go to Stanford, or maybe it's Yale or maybe it's Harvard. Who knows? So I'm hoping that this is a call to action for all of you.
Before we get into the substance of the podcast today, what I'd like to do is first, thank our wonderful, wonderful marketing partner, Lorene Kent, and her amazing team at Decisions in Dentistry magazine. They are the premiere clinical dental magazine. Lorene and I have been working together for a good part of this four plus year journey. I have the greatest respect for her magazine, both the print version and the online version. They offer 140 plus continuing education courses at a very, very reasonable price. They've got a lot of great new stuff I know she's working on and we'll be letting the world know about sometime in 2023, so make sure you go visit them at our website at their website www.DecisionsinDentistry.com.
If you need some help from a dental specific CPA and we are dental specific CPAs, Eide Bailly handles approximately 1000 dentists across mostly the Western United States. We in our office in Tustin have 300 plus I don't even know how many we work with anymore. If you're not getting what you need from your CPA, if you're not getting year end planning, in other words, if you're not beginning of the year planning like right now in January, our dental team, our partners in Tustin, Don Watson and Pam Chamberlain, we're getting together with our clients and we're calling every single one of them up that own a practice and say, Hey, doc, well, how's 2023 looking? And you think you're going to make more money? You think you can make less money, you're going to sell a piece of property, you're going to set up a retirement plan, and then they'll go through and set up salary schedules for our incorporated doctors to make sure that we get started on the right foot for 2023. Check with them hopefully sometime in the middle of the year and then do a big year end planning meeting to make sure that we're doing everything that we can to save taxes. So if you are not getting that kind of service from your CPA, please give me a call. 657.279.3243 or email me at awiederman@EideBailly.com and I will be happy to help you answer your questions. If you have questions on partnerships, metrics of a dental practice and talk a little bit about that today. Tax planning, financial planning.
You know, by the time this is done, the national championship game will be done, but they're playing the national championship game for college football this coming Monday, which is again, January 9th, which will be after you know, you will have already had the results of that between Texas Christian University and University of Georgia. I give advice on everything, anything you want, especially if you're talking sports or golf. I'm definitely your guy. So give us a call.
A couple of things I want to touch on before we get into the meat of what we're doing. Three things. Number one, we've talked about the Employee Retention Tax Credit. We've helped over 125 dental practices and some other businesses. Just my group and I think probably pushing close to 500 to 1000 businesses they've helped with, maybe even more than that. The employee retention tax credit is a credit that if your business revenues went down most likely in the second quarter of 2020 versus 2019, you could be entitled to up to a $5,000 per employee tax credit for 2020 and up to a $7,000 per employee credit per quarter for the first three quarters of 2021. So the window for the 2020 employee retention tax credit will begin to close April 30th. You're allowed to use wages from March 13 through March 31st. So if you wanted to amend a first quarter payroll return for the ERTC, if you don't do that for the first quarter of 2020 by April 30th of 2023, which is about three months from when you're going to hear this podcast, you can't do it.
Most of you will be amending the second, third and possibly fourth quarter returns and that window will start closing at the end of July. So if you do not or have not engaged in looking into this or talking to someone and we can help you with that, now is the time for 2021. You have another year to worry about that. So just, you know, give us a call. We are still getting calls from people who say, Oh, well, yeah, I've been thinking about that, but you know, I've been a little busy. But can we still do this? Yeah, well, the window for 2020 is closing, folks.
Okay, The second thing I want to share with you, and we're going to do a separate podcast on this topic, so I'm not going to get deep into this subject right now is President Biden signed into law the Secure 2.0 Act of 2022. He signed that into law December 29th of 2022. This makes major changes in the retirement rules, rules for retirement plans, rules for retirement savings. Just a couple of tidbits and I'm not getting into this anywhere. In this podcast, they have raised the required minimum distribution age from 72 to 73 starting in 2023, and it will go to 75 starting in 2033. They're increasing the catch up contribution limits for those who have attained age 60, 61, 62 and 63. I'm 63, so that affects me. There are all kinds of things. So what I would recommend folks would be for you if you have a qualified retirement plan. Give a call to your what's called a third party administrator and have your third party administrator say, listen, I was listening to this guy named Art Wiederman on this podcast, and he says that there's this whole new law regarding retirement plans and it's called Secure 2.0. Is there anything that I need to know about that law? And you can engage in a conversation. But again, we are going to go ahead and deal with that in a separate podcast coming up here.
The next thing I want to share with you is we are now into reporting period for the HHS Provider Relief Fund. Now, if you remember, folks, you all got. That's my Southern drawl from going to Louisiana a couple times for some football games. Y'all got money in 2020, around August or September. Usually 2% of your revenues are from the HHS Provider Relief Fund, which was a $175 billion. Part of the $3.2 trillion CARES Act that passed Congress in March of 2020 when the pandemic hit. So you've been applying for this money over time, 2020, 2021, in some cases 2022. For those of you who received money between July one of 2021 and December 31 of 2021, if you received more than $10,000 from the HHS Provider Relief Fund, then during this period of time you have between January one and March 31 of 2023. That means right now to go on to the portal and report how you used the money, either for expenses or in many cases to protect the loss of gross revenues. So if you need any help with that, give us a call. If you don't report and you got this money and you don't report by March 31, 2023, and you find out about it, then on April 2nd of 2023, you go on to the website, it is very likely that you will see a little notice that says, Sorry, Charlie, you had to do this by March 31 and here's the address to send the money back that you got from us back in 2021. So don't miss this deadline. Very, very important.
Okay, So let's get into Art's top tips. I put down initially five. I think there's probably ten of them here we're going to talk about for 2023. So I am a very positive person. We had Alan Specter on the podcast in late 2022, and he taught me a whole lot about the non-financial aspects of retirement and getting older and all this stuff and taking care of yourself. And so, you know, one of the things that he says is that people with a positive attitude will generally live eight years more than people who don't have a positive attitude. And I truly do believe that. So I have a positive attitude, folks. I think that 2023, although we have our challenges, everybody is talking about a recession coming. Let's talk about that for a second. So, you know, the again, we're recording this probably 4 to 6 weeks before it comes on.
But today, the stock market is down a little bit because of the fact that the jobs report was strong. And the jobs report being strong means that maybe inflation isn't going to come down as quickly. And the economy, you know, it's sending mixed signals and the markets don't like that. So, you know, there was a survey of I think it was, you know, hundreds of CFOs and many of them believe that we might have a more severe recession. We don't know what's going to happen. There are so many factors that are involved in this. But the fact of the matter is, is that you control what's within the four walls of your dental practice. You don't control what interest rates are. You don't control how many people Google or Meta or anybody is going to layoff. You don't control the stock market. You don't control anything other than what you control inside your dental practice. So I would like to strongly recommend. Here's my first tip is if you haven't done it already, have a team meeting beginning of 2023. Okay. First of all, I want to recommend that you take a look at what happened in 2022. The good, the bad, and the ugly. Focus on the good. Okay. Well, hey, you know, guys, we had turnover in hygiene in the front office and to dental assistants, and we still went up by $30,000. I think that we all deserve a round of applause for that. All right. What were the challenges that we had? Well. I was out for a month, I got sick and, you know, our costs went up. You know, costs went up everywhere. And so those were some of the challenges. But I'm very pleased that my team and how we're doing and let's talk about 2023. So what are we want to talk about?
And I think as a leader. And this is what I used to do in my CPA firm every January, I would get up and I would say to my team, this is what we're going to be doing. These are our challenges. These are our goals for 2023. And I would say I'd like to grow by this amount. We'll get to that in a second. But here are the things you want to talk to your team about. Remember, you're the leader. People don't come to work in your dental office because they want to be the leader. If they wanted to be the leader, they would start their own business and then they could be the leader and they can make all these decisions. They are here to help you. You, as the leader, want to let them know that their input is valued. It's important. I mean, I had three employees that worked for me and I mentioned their names on this podcast, and I'm proud to mention Pam Chamberlain, Debbie Sanders and Raquel Goyette all worked for me for over 30 years. We were a team and I never made any major decisions in the CPA practice without their input.
Now, that didn't mean that I didn't change what their recommendations were, and most times I didn't because most of the times they were right. But I got their input. So you want to get the input of your team. You want them to know that you are listening, but you also want to let them know that you're the leader and you make the decisions and they need to respect your decisions, but that you're going to listen to their input. So number one, talk about any new procedures you're going to add in the practice. Are you going to do sleep dentistry in the practice? I am a big, big advocate of sleep dentistry. I've told the story in the podcast many times how my dentist in Mission Viejo, California, diagnosed my sleep apnea. I won't go to a sleep study. I've been sleeping with a CPAP machine for 15 years and it probably saved my life.
Are you going to add, you know, Invisalign or clear braces services to your practice? Are you going to start placing implants? Are you going to do this or are you going to do that? Are you going to add procedures to your practice? If you are, you don't just say I'm adding them. You come up with a plan of this is how we're going to do it. This is over the time we're going to do it. This is the training that I am going to get and the training that everybody else in the team is going to get. And we set the goals, set short term goals three months or sooner. Mid-term goals in my mind, three months. To, you know, six months and then over six month long term goals. This is one we're going to do. We're going to shoot to do this in mid 2023. Okay. Number two, we're going to buy some new equipment. We're going to buy a digital scanner. We haven't done that before. That's a really great tool for us. We have a lot of people in our practice. We're doing a lot of crowns. It's got very big. We're going to be looking at CAD cam technology and again, you know, you want input on this CAD CAM technology is not right for everyone.
We've talked about it on this podcast, but for practices that do lots and lots of units and are maybe contracted with insurance companies and not getting full fee, it will save you a significant amount of money and you have to decide if that's the right technology for you. Are you going to add a CBC machine to your practice? So these are the things you want to talk about in your meeting. And, you know, again, we've now got live conventions going on. We've been to the CDA Convention. And by the way, I will be speaking at both the Northern and Southern California Dental Association Conventions, and I believe that is second week of May in Anaheim. And I believe it's the first or second week of September this year. They're moving the CDA convention from San Francisco to San Jose. And so that's where that will be. We are also going to be doing live webinars for dentists working with the CDA March 23rd and March 25th here in Southern California and first second week of June in Northern California. And as soon as we have finalized dates and locations, I will let you know about that.
Staff and team training. I think this is so important, so, so important. Verbal skills and asking for referrals. I've said for years, why are we not getting new patients? Well, do we ask for them? I mean, asking for a referral is as simple in my mind as going to a patient and saying, Mrs. Smith, how did it go today? And if you're doing everything right, Mr. Smith is going to say something to the effect of, Oh my goodness, Dr. Art Wiederman, I look forward to coming here every six months or four months or how often I come to the practice. I love your team. My hygienist is if you ever let her go, I'm going to be very angry. I love my hygienist. And then there's your opening. You say, Well, Mrs. Smith, we hear that a lot, fortunately. And I will tell you, when we had our morning huddle, which we're going to talk about in a minute, when we had our morning huddle, I will tell you that we saw your name and everybody smiled. And we're very excited that you were coming in asking for referrals. And Mrs. Smith, I don't know if you know that, but I don't know if you know this, but we are always looking for wonderful, wonderful new patients. They have to be as nice as you. That's a requirement. But we would love the honor and privilege of treating your friends and anybody else who you think would benefit from what we think is the best dental care in our area verbal skills and case presentation.
And this is we're working with the dental coaches so, so critical. It's I mean, it's even how even I went to Deborah Engelhart Nash's presentation on case presentation at the ADA Convention in Orlando last summer. And just watching her show pictures of how you position yourself in the dental assistant when you're presenting a case. I mean, there's a science to this, folks. It's not what I teach, but there are people out there that do that. If your case presentation percentage is low yet working on verbal skills, what does the team say when the doctor leaves the room and is presented the case and the patient looks at the hygienist or the or the dental assistant and says, So Susie, do I really need all this work? Susie has got to have the right answer or you're dead meat, period. So working on verbal skills, staff training, and you tell your team, folks, we're doing this training not because you're doing anything wrong, but we are always learning the day you stop learning, the day you stop marketing is the day your business starts to die. Talking about changing our relationship with insurance. We'll get to that in a second. Marketing. Where are we on marketing now? A lot of you have. Tons of work in your uncompleted treatment plant reports. And you want to be looking at that. Absolutely. And that's looking at metrics. But do you have a 2023 level website, a website that works just as well on a computer as it works on your mobile device? Mobile devices are so important. Social media. Are you on Instagram? Are you on Facebook? Are you on these platforms that your competition is on?
And the most important thing in my mind as far as marketing is getting more and more five star Google reviews. And I've said this and I will repeat it again, folks, you listen to my podcast, you hear me I repeat things. I'm sorry. That's the way it goes. My good friend Gary Takacs, and one of the lectures that he and I gave together and I loved this, he asked the audience, So what's the number one, you know, review platform out there? And everybody goes, Google. And he goes, Well, what's the second one? And they go, Yelp or City Search or whatever. And his answer is, who cares? Google is what everybody looks at, folks. That's the way it goes. More five star Google reviews encouraging your patients to do that. That is going to get people to pick up the phone and call you.
Are we making any changes in the team? Do we need to add any hygiene days? Do we need to cut any hygiene days? Do we need a patient coordinator on the team? What's the plan for 2023? Are we raising our fees now? You can't raise your fees if you're contracted with insurance plans, but for people that are not contracted with insurance plans. Are we going to raise our fees? When's the last time we raised our fees? Folks, I guarantee you you've had inflation. Inflation is running 7 to 9% per year. I mean, your team members have gotten raises. Your new team members have gotten raises. I mean, I was talking to a specialist back in December who was telling me for 30 years I could hire somebody guaranteed in the 20 to $28 range. I can't touch anybody now for less than 35 to $40 an hour. Now, this is in a high income area. Your fees have to go up and we'll talk about relationships with insurance.
And then finally, set your financial goals. Put a spreadsheet together. What did you produce last year? What did hygiene produce last year? If we're going to add two days, one day a week of hygiene and we're averaging $1,000 a day, that's $50,000 more in hygiene. Are we talking to the hygienist about the fact that maybe only 4% of our production in hygiene is in the 4000 codes, what we call nonsurgical periodontal maintenance? And if that's the case, then is it that you just don't have anybody who has more than three or four m pockets when you probe. Or is it that your hygienist is just not taking the time to educate the patient and to educate the patient about the risks of not treating periodontal disease and the risks and the links between periodontal disease and Alzheimer's and heart disease and lung disease and liver disease and all kinds of afflictions. That's got to be a primary part of your practice, and I don't hear it as much as I should.
But set your financial goals. Go through your budget. See what the goals are, and so you can let the team know. Last year we did 900,000 through all of these things. I'd like to see if we do a million. And by the way, if you're near a milestone, that milestone could be a million. It could be 2 million. It could be 1,000,003. It could be whatever you want it to be. When we hit a particular milestone in our CPA practice, I basically went to my wonderful, wonderful, incredible wife of 30, almost 38 years, Lynne. And I said, Lynne, here's the company credit card. Take everybody for a spa day. And that's what they did. And it was wonderful and they loved it. If you're going to hit a financial goal, doctor, and you're making really good money and you're living a good life, remember that your team members have gone through a really tough time in the last three years with this pandemic. Give them something nice. Take care of your team. A.
And the last thing I want to talk about as far as goals go and just kind of how you treat your team, you need to treat your team. And we'll talk about culture here in a second. Like they're gold. Absolute gold. Like they're your family with respect. Catch them doing something right. Don't catch them doing something wrong. So we'll talk about that. Let's talk a little bit about changing your practices, relationship with insurance. Okay. You can't deal with the increasing overhead if you can't raise your fees. I believe that. And I'm seeing this more and more. Every one of you should look at your relationship with insurance and take a look and see. How much are you writing off if you're collecting less than 70% of your UCR. On your major procedures, you need to evaluate whether you need to change your relationship with insurance plans. Begin educating your team on how to start communicating to patients. If you do change, it's a one year process, folks. You have to start educating your team at the beginning to educate the patients as to how it's going to affect them. They don't know how this works. Work with a dental consultant who has helped other practices and start, you know, start with a smaller plan, start with a small plan and see how it goes and see what the good, the bad and the ugly are. Do you have the right culture in your practice that the majority of your patients will stay with you if you don't have an amazing culture that your patients love and worship your dental office and trust you to the point that they trust their families. Going are changing your relationship with insurance will be more difficult. You should be able to retain 75 to 80% of the patients that are on a dental plan. If you choose to go out of network with that plan, you should be able to retain 75 to 80%. But you've got to have the right verbal skills and the right language. And if you do that, you want to look at implementing an office membership plan. This is only for patients not contracted with insurances, and we've done podcasts on that before.
By the way, if you go to your podcast app, you can look at all the. I think we're you know, we're coming into close to 200 podcasts. We've done podcasts on every subject you can think of. The next thing I want to talk. So take a look at your relationship with insurance. You may decide not to change your relationship. You may decide to change it, but it is something you really need to evaluate and talk to your team about. Using practice metrics to increase your topline. Reactivating patients who fall through the cracks. If you're not using one of the ten or so metrics programs, dental metrics, dental intel any of those programs. If you're not using those programs, you need to be using those programs, reactivating patients who have fallen through the cracks.
I read a great article that Roger Levin wrote on dentistry today about things to do reactivating patients who haven't been to the office in the last 18 months. Why patients who have and haven't had at least three appointments in the last 18 months. Why not patients who have been in six months or earlier and who are not currently scheduled for a future appointment? Why not? That is where you are losing revenues. You cannot make up for a spot in your schedule that is not filled, that is lost revenue forever.
And a morning huddle is critical if you're not doing it, if you're not using one of these modules, one of these and these metrics programs have wonderful, wonderful morning huddle modules. They'll show you that patients with treatment diagnosed but not accepted family members who haven't been in to your office. Hey, Mrs. Smith, it's great to see you, but we haven't seen your husband, Joe or Johnny or Susie. Your two kids in here, they haven't been in. Are they okay? We're really concerned about them. We want to make sure that they're taken care of. Does a patient have past due balances? Have you recommended treatment that they haven't followed through on both dental, you know, clinical treatment and nonsurgical periodontal maintenance treatment? And who's going to ask the patient for the referral or not? I mean, you don't want to ask them every single time. So those are the things that you really, really need to look at.
So I want you to be working on your practice instead of in your practice. And I want you to start looking at some of these things. And working with a dental coach is a great thing to do. Working with a dental CPA. I'm a member of the Academy of Dental CPAs. We work, we all know how to do this stuff and looking I mean, we were looking at a dental practice of one of our clients about a month ago, and we looked at their relationship with insurance and the practice was doing 600,000 a year and losing money they weren't making they're losing money because they were writing off over $400,000, $400,000 in write offs because of reduced fee PPOs that they were contracted with.
So we talked about putting a plan together to get rid of some of these over a year to two years. You don't do it overnight, but you've got to work on your practice. Every dollar that you can add to the top line folks is going to net you 70 to 80%. Because remember, if I can do one more crown, let's say that crown is 1200 dollars. The only expenses I have for that crown, there's no additional rent, There are no additional employee costs, no payroll costs, no cleaning fees to clean the office. I don't have any additional office supplies. Maybe I have one more folder. And if you're digital, you don't even have that. You have lab, which generally runs 6 to 9% and it's even less if you have a CAD cam machine and you have dental supplies, which is again probably about the same 6 to 8%. So if I can add 1200 dollars procedure and that goes into talking about same day dentistry, you come in, you put on the video, I'm sorry, the general camera, and you show Mrs. Smith, you know, two teeth right next to each other. One looks bad. The other looks really bad, and Mrs. Smith looks at it and says, Oh my goodness, you're recommending we do number 13, Can we do number 14? And that looks really bad. And a picture is a thousand words, right? So same day dentistry, you can do two crowns or three crowns pretty much as quickly as you do one.
And if I can add 20 $400 to the schedule that day, that's going to net me 80%, which is almost $2,000, $2,000 by just adding two units by doing same day dentistry. This is the type of stuff that you as a leader need to impart on your team and to have systems that will allow you to do that.
Okay. Let me switch gears here, folks, and I want to talk about financial goals. And financial goals are really, really important for everybody. I mean, there are seven aspects of financial planning that we teach. I was a teacher for the certified financial planning program in the tax area. So you've got seven different areas. You've got cash management budgeting, you've got taxes, you've got retirement, you've got college education, you've got investing, you've got insurance, and you've got estate planning. When I touch on each of those just a little bit today. If you need to do a financial plan, we at Eide Bailly have, as far as I'm concerned, the best financial planning group on the planet. I mean, I've gone through this financial planning process with some clients and it's very thorough and comprehensive and it really opens your eyes because I don't want you to get to the age of 62 and wake up one day and say, you know, I've been doing this for 38 years and I don't want to do this anymore, but I only have $500,000 saved.
If you are listening to this podcast and you're in the first ten years of your practice, I want to encourage you to get into the habit of saving money. We're going to talk about that. So let's get into all of this the beginning of the year. I want you to evaluate your personal balance sheet. Now, balance sheet is your assets. You've heard your accountant talk about a balance sheet. Well, your practice has a balance sheet, but you personally have a balance sheet. Okay. Balance sheet says I have assets. It's called assets stuff. I got bad English, poor English. Gee, I can't speak English. Right. Poor English stuff. I've got cash, real estate, retirement plan, dental building, partnership investments. This is what I've got. Debt. Okay, Liabilities. So my assets, let's say I have assets of $5 million. I have a house with equity of $1,000,000. I have a practice that's worth $1,000,000 and I have 3 million in my retirement plan that I have assets of 5 million. What's my liabilities? What do I owe? Assets are what I got. Liabilities or what I owe. How much do I owe to people? What do I owe on my house? What I owe on credit cards? What I owe on my building? What do I owe on my practice? So how much debt do you have? What's your net worth?
Okay. I want to talk about debt. And I'm going to hammer on this, folks. Hammer, hammer, hammer. Credit card debt is the devil. The average credit card debt has now approached 20%. So if you owe $10,000 on a credit card, you're going to pay $2,000 on interest. So if you make the minimum payment of $79, your credit card balance is actually going to go up because you're not even paying the interest. And the credit card companies know that. So what I have done for years and years and years and this really comes down to living your life within your means. And I don't expect everybody to live their lives the way I do. That's what makes my late dad Irving used to say that's what makes horse racing, is that everybody is different. So I don't have a car payment. I have a 15 year old car that runs really, really well. I put 3 to $5000 in it a year and I love it. I've got it all set up. It's clean, especially today. It's clean because it's raining, which is the best way to save money on financial planning is if you need a car wash, just wait till it rains. Now, it's a little harder here in southern California. Doesn't rain as much. But on the East Coast, that's a lot easier.
I have had one credit card, a personal credit card. The Visa card. I believe my limit is $15,000 and it is set up on an automatic payoff on about the 19th or 20th of the month when it's due. So on the 19th of the month, I see my personal checking account go down for both my wife and my credit card. We both have credit cards and we know the limits and we checked them. And I don't go over the limits and I have not had credit card debt in I don't remember 20, 30 years. I probably had them when I was younger, when I was just starting out. But it's about living within your means. It's about, you know, planning things.
So here's something and I actually heard this on TV. I thought it was really cool to go back and figure out how much money you spent on the holidays. Christmas, Hanukkah, Right. We all know that we go crazy. We buy our kids,, our grandkids we buy our brothers and sisters and friends. We buy presents. And everything is more expensive because inflation is high. So let's say you spent $5,000 extra on Christmas this year, okay? What you might want to do is start a little savings account, little slush fund, starting with January, and put $416 a month away in that slush fund that you're not going to spend on anything. And it's going to be saved for the Christmas time for next year so that you don't have to put 5000 on a credit card next year because they said the average American today was listening on the news is paying off about 1500 dollars of credit card debt. I suspect for my dentist it's higher because you make more money and you probably spend more on the holidays.
One of the other things you should consider is that even though interest rates on home mortgages and home equity line of credit are now in the, I don't know, 6 to 9% range, probably 7 to 9%, they're still low. When I bought my first house, I told this story by my wonderful wife Lynne, when on The Price Is Right in 1985 and won $10,000, which we once used as the part of the down payment for our first house, which was $151,000 in Huntington Beach, California. The interest that we got on the loan was 16%. That's what it was back then. So right now it's 7% if you've got $50,000 on credit cards. 20% of that is $10,000. That's what the interest is that you're going to pay if you can narrow that down from. 50. From 10000 to 7% or 3500, you're going to save 60 $500. Now, the interest is no longer deductible as it used to be, because you're not using the money for home improvements. And that's a whole nother conversation, which we're not going to get into. But 6500, what can you do? You can fund an IRA with 6500. You can put money in a college fund. You can you know, you can use that money to pay down your credit card, pay down the home equity line of credit. Consider doing that even though the rates are higher. Or maybe you wait until the end of the year.
I was talking to my mortgage broker the other day and he was telling me that he's thinking that interest rates are going to start coming down late 23, early 24. I don't think they're going to be coming down any time in the next month or two or three. So that's something to consider. Get out of debt. Set up a plan to get out of debt. Set up a plan to pay off your house about the time you're ready to retire.
Okay. Let's talk about personal budgeting, spending. We talked about extraordinary purchases again. Are you looking at buying a new home? Are you looking at a wedding that you're planning? Are you looking at some vacations, home improvement at the beginning of the year? Sit down. How are we going to pay for that? I don't want you putting it all on a flipping credit card, folks. I don't want you to do that. But we need to plan. Is it going to be a home equity line of credit? Are we going to cut back in some other areas so we can do this? Sit down. If it's yourself, sit down with yourself. Sit down with your spouse. Sit down with your significant other, your partner, whomever you're with, and go ahead and start planning for that. And are you meeting Art's 65 25 10 spending rule. Remember 65% of what you earn. And I'm talking about your gross salary. I'd say at $200,000 a year. 65% at 130,000. That's what you live on. That's what you pay your is your home mortgage. Home mortgage should be one week's take home pay. Approximately. Give or take. Food, clothing, car payments, vacations, all these things that are not business expenses. 25%. You're going to pay in taxes give or take. If you live in California, you might pay 28%. If your income is much higher, you might pay 30%, but it's about 25% and then 10% you save. And again, you've heard this from me over the last four years.
Many of my clients live on the 90 25 15 rule. And again, I'm repeating myself, folks. But this is this doesn't change. They live on 90% of what they make. They struggle to pay their taxes. They go into installment arrangements with the IRS every year and they put 15% of their living expenses so they can take those vacations and buy the fancy cars on credit cards. And a credit card debt is abhorrent. And I you know, I am your advisor. If I'm your CPA or your financial advisor, I don't live your life. You make the choices. My job as a financial planner just is the job of you as a dentist to say this is where you're at with your teeth. This is the decay you've got going on. These are your lifestyle choices that are affecting all of this, and this is what I recommend. And then it's up to you to make the decision.
Okay, So personal budgeting and spending plan it out for the year. Is my practice revenues going up 300,000? So maybe I'm going to net an extra, I don't know, 150 180. Are we going to put in a retirement plan? Are we going to start a college fund? So this is what you need to do. Retirement savings, folks. My legacy in this industry in your profession is to be able to say to a doctor when they're ready to retire. Okay, doc, you ready? And they're going to say to me, Art, because you beat me over the head for 20 or 30 years, I now have enough money to retire. Thank you. And fortunately, I've had many of those conversations with my clients. Number one, how much are you saving every year? All right. And you can run a retirement projection on how much you need to save. The rule of thumb, folks, is that you should be able to pull 4 to 5% of your nest egg out. So if you have $2 million, 4 to 5% of that is 80 to $100000 a year is what I'm comfortable letting you pull out. Now, if you're 90 years old, that's a different conversation because your life expectancy is much less.
Do you have the right retirement plan? A simple IRA is a great plan. There's no administrative cost, but it's not going to get most of you to your goals. What is going to get you to your goals is a profit sharing 401K plan or a cash balance plan combined with a profit sharing 401k plan. Again, we can help you with all those decisions and have you updated your financial retirement plan. Have you gone in and said, okay, the markets went down last year? So I started the year with 3 million. Now maybe I have 2.7. Am I still on track? Do I need to save more? Do I need to put my retirement date out? The good news for many of you retirees who are getting Social Security that are listening to this podcast, is that your Social Security check this month, January is going to go up by almost 9%. That's nice. And that's money you can use to pay down debt or maybe to fund a grandchild's college fund. So, again, it's all about planning. My life is a math problem. This is all a math problem. It's not rocket science. And it's about providing facts for people to make good decisions. And that's what we're talking about.
College education, savings. College education costs are going up 5 to 7% per year, folks. And with inflation, they're probably going up even more. I mean, I was talking to a friend of mine whose kid is going to Yale and he's throwing out numbers of 80, 90,000 a year because, remember, it's not just tuition. It's room and board. It's if you live in California and you put the kid on a plane four times a year, that's $5,000. Maybe like it's the cost of it, You know, the kid living away from home. They're going up very, very fast. And you want to be able to provide your children I put both my boys through college, one through art college, the other one year at San Jose State and the other three years at Chapman University, a private university here in Orange County. Best money I ever spent on both of them.
And the fact of the matter is, you need to be saving. How much are you saving for? Many of you, depends on how old your kids are. If your kids are, you know, one in three, you need to save less than if your kids are 13 and 15. What vehicles are you using? Are you using 529 plans? 529 plans, if you're not aware of them, are plans that each state Section 529 of the Internal Revenue Code is put out. These rules. You can invest money on an after tax basis. And in some states, like, as I recall, Oklahoma and other states, you actually can get a state tax deduction for payments to these plans. There is no federal tax deduction. You put money in these plans. You let them grow the companies that manage them, for example, in California. TIAA Cref, I believe, still manages. If I'm wrong, I apologize. They did manage for many years the 529 plan for the State of California and the theory behind the 529 plan, folks is that when the children are younger, you invest the money a little more aggressively, more into equities and less into cash and bonds. And as the children get closer to college age where you need to have the money, you reduce the risk and change the allocation. That's what these plans do. I'm not going to get deep into the weeds on that. And then when that money comes out, as long as it's used for college, all of the money when it comes out is tax free because you didn't get a deduction when it went in. But all of the earnings on that money over the 18 year ends up tax free forever. You don't get that opportunity too often.
Are you saving on your own municipal bonds? Are you using UTME Uniform Transfer to Minors Act accounts? Are grandma and grandpa doing this? I mean, you know, do you have an inheritance that's coming? Bottom line is college education costs are a real thing that is going up at higher than the rate of inflation has for many, many years. And, you know, you could and you as a parent have to decide how you're going to do this. We have parents who say, you know, I'm going to cover $10,000 a year. You're going to go out and take out student loans and you're going to work while you go to college and you're going to pay for the rest. And that's all I'm going to do. Is that right? Is that wrong? No. It is your choice as a parent, how you decide to pay for and how much you decide to pay for college. But if you are looking at putting having your kids ready to go to Stanford, to Yale, to Harvard, to Georgetown, to these schools that are very, very expensive, then you got to plan for it. And that's part of the whole comprehensive retirement plan. And that includes how much my saving for retirement, how much is my personal budget, how much are my college education costs going to be?
Let's talk quickly about life and disability insurance. We don't know when we're going to die. I did see it was a TV show. It was a drama show. It might have been I don't even remember what it was, but I remember it was about people carrying on their shoulders, their date of death. That was freaky to me. Wouldn't it be nice if we knew how much time we had left? You know, I've made some personal lifestyle changes in the past three months, and I've lost some weight, a good amount of weight, and I feel better and I'm exercising regularly, which I was anyway. So it's all about doing what you can do. But when you get to my age, age 63, you know, it's kind of like the car. We wish cars would run for 50 years and never go wrong. Well, the body's the same way. If you take care of it, it's great. If you don't, you're going to have problems.
So life and disability insurance, how much life insurance do you have if you have a $20 million net worth? You probably don't need life insurance if you have proper state documents. If you have a $100 million net worth, you need it for estate planning. Remember? Life insurance serves two purposes, folks. Number one, purpose it serves is for replacing costs of you being gone and not earning 300,000 a year as a dentist. Number two is to pay estate costs and under current law. And if you do proper planning, husband and wife, you don't have a problem unless it's over about $23 million of an estate. And most of my clients are not quite there yet. So make sure you have proper life insurance to protect the ones that you love. That's one of our golden rules. Make sure that you have enough life insurance. You need to have enough life insurance, in my opinion, folks, to pay off your house, to pay off the college fund, and to leave your spouse if that spouse is not working outside of the house.
I made the big mistake years ago in a lecture to say for now. For those of you spouses that don't work. And I got an earful. This was 30 years ago. Oh, my goodness. We work harder than our spouses do, running the home, taking care of the kids. So for those of you who have spouses who do not work outside the home at an outside job, I hope I cover my bases there. You need a pot of money so that your surviving spouse can continue to live his or her life and raise the kids and take care of business. For most of you, the minimum number, in my opinion, is $3 million of life insurance. I think more is better because you're protecting the ones that you love.
How much disability insurance do you need? If you're 65 years old and you've never had it, don't go buy it, because there's very few policies out there that go past the age of 65. But disability insurance needs to be your own occupation. Guaranteed renewable non cancelable and all again, all occupations that you get disabled and you have shoulder and you can't practice. But you could go teach at the dental school. You still get your disability insurance. How much do you apply for? It's a very complicated calculation. As much as they'll give you because you need to have life and disability insurance.
Take the beginning of the year and look at your insurances. Look at all of your insurances. Look at your homeowner's insurance. Look at your auto insurance. Look at all of these and make sure that they're in good shape. You go hopefully to your physician or health care provider and you get once a year a physical. I got a physical. Now it gives you information. You have once a year, a financial physical. And we go through all this. You have enough insurance. Are you saving enough for college education costs for your children or grandchildren, if that's part of your plan? Are you saving enough for retirement? Are you planning out your tax liability, folks? You are not required to pay one dime more in income tax than the tax law provides you to do.
So I'll give you again my opinions. Now, you remember I work with health care providers, primarily dentists, 90 plus percent of what I've done my entire career. And there are dentists. There are small business owners and everything who paced up through the practice. We had a client that we who you quoted this thing called a business account. It's a combination of business and personal or whatever it's worth, right? So, you know, that's another conversation for another day. But you need to plan your tax liability up. Are you using your car for business purposes? Are you making equipment purchases? Are you funding a retirement plan? Is it appropriate to have your children or grandchildren or spouse on the payroll? Is that going to save you taxes, all of these things.
You want to sit down at the beginning, middle and end of the year with your CPA, hopefully a dental specific CPA who understands your business and helps you to save taxes? Are you three years from retirement? Maybe we put a defined benefit plan in and we fund it. And then in the third year when you sell your practice, we dump a bunch of money in that and save taxes. I've done that with clients. So there's all these things is planning out. We don't want to have April surprises. The only clients we do, we have clients. I will be very transparent with you. We have clients in our practice who get April surprises, and the only reason that they do is they fail to engage with us during the year. They send us their stuff once a year and they don't understand the fact that planning, Yeah, we're going to charge you a fee for that. We are going to charge you to help save you money, but it's going to come back in spades to save you money. Any money that I can save in taxes, you know, little things like AB 150 the work around. For the $10,000 state tax deduction limitation. We've saved clients tens of thousands of dollars in federal income taxes by basically paying their state income taxes through their corporations.
And if it works, if the numbers work and the numbers have to work, and then you get a deduction at the corp level and you get a credit towards state taxes page or prepaying them, but you'll get them back. And basically you're getting to deduct your state taxes, whereas on your itemized deduction sheet schedule A, you only get $10,000. So plan out your taxes.
And the last thing I'm going to touch on, folks is estate planning. I'm going to tell you that if I sent out a SurveyMonkey to you and said, How many of you have up to date estate planning documents, I'm going to tell you, more than 50% of you would tell me I don't have up to date documents, and many of you would tell me you don't have any documents. And that's bad because you want to make sure that your family is protected, that your assets are going to go where you want them to go and how you want them to go. You want to make sure that on your IRAs and retirement plan accounts that you get with your financial advisor to make sure that your beneficiary designations are what you want them to be.
For many of you, one way to do it is your primary beneficiary would be your spouse. And if you and your spouse pass at the same time in a common accident, God forbid. Your revocable living trust is the beneficiary. And that trust would then talk about how those retirement assets are distributed. Do you have special needs children? Do you want privacy? But the bottom line is go to an estate planning attorney. It's not a pleasant thing. Let me see. I have a choice. I can go play Pebble Beach golf links or I can go get my estate planning documents done. Hmm. Which 1 a.m. I going to choose? Arthur. Arthur. Which one? I'm going to choose. Oh, go play golf. Well, you need to get this done. My wife and I got it done. It took a year because there were a lot of issues that we had. Not with each other, just things we had to figure out. And everybody gets busy in life, and we got it done and everything has been recorded.
And remember, folks, you know, you need to record your assets in the name of your revocable living trust, because if you don't do that, it doesn't do you any good. Promise me that you're going to take care of your estate planning needs. To protect the people that you love. That is my message to my listeners. At the beginning of 2023 folks. I am very optimistic about the practice of dentistry. I'm optimistic about all of you. All of you are wonderful, caring people who want nothing but the best for your patients and your legacy is the fact that you are changing people's lives for the better. And as long as you do that and continue to make the number one premise of your dental practice, the total health and well-being of your patients, the money will come. It is secondary. And. I can't stress that more.
And if you don't work on your practice instead of in your practice and you don't work on your financial goals, you'll live your life, you'll have fun, you'll get stuff, you'll do things. But at the end of the day, you will not have done as well as you could have done. And it doesn't take a lot of time. It does take effort. And I've had some clients who say, Well, I need to know exactly how much time because I don't have a lot of time and I don't I want to know how much time is going to take and I'm going to go it's going to take hours of your time. Is it going to take 500 hours? No. Is it going to take 20 to 40 hours? Maybe. But we need to get this done so that at the end of the day, you can retire because you want to, not because you have to. Don't put your financial goals in the hands of others. The weather, your muscles, you control them.
Promise me. Promise me. Promise me that you're going to do some planning in your practice. You're going to make your practice better, which is the catalyst to allow you to meet all your personal financial goals. And it gives me pleasure when I see people doing this, and I see a lot of them doing it. That is my message to you for 2023. So that is about what I've got for you today.
I again want to thank you from the bottom of my heart to the thousands of people that listen to this podcast every single month, to the people who I hope I've helped, who I hope take our advice, who have listened to the great experts in the field of dentistry, both financial and management that have had conversation with me on this podcast, I want to thank all of my friends in dentistry. You know, I have many, many friends in dentistry. I want to thank the members of the Academy of Dental CPAs my mother ship. Without you guys, I wouldn't be what I am today. And you are some of the finest human beings that I've ever met. I wish I had the time to mention every one of you by name, but from the top, the President, Alan Schiff, all the way East Coast to West Coast, the best human beings I know.
And I want to thank the CPA firm of Eide Bailly. I never thought I would come full circle and end my career at a large CPA firm. I started my career at Deloitte Haskins and Sells, which is now just known as Deloitte, which is one of the big four firms. I worked there from 1988 1981 to 1984. I then ran my own firm for 33 years and then went with a smaller local firm, a larger local firm, HMWC, and then we merged with Eide Bailly and I couldn't be happier finishing my career for how many ever years I'm going to continue to work. And, you know, my wife Lynne, said I married you for better or for worse, but not for lunch. And we do have lunch most days and it's working out really well.
But I really enjoy doing this work, so I couldn't be prouder of the people at our firm. I couldn't be prouder of the people I work with. Don Watson, Pam Chamberlain, my dear, dear friend of over 30 years, who is I mean, we've been through everything together. We've been through raising our separate kids together. We're not married, by the way. So she's got two amazing girls. I've got two amazing boys. And, you know, and all the folks on our team are Irina and Sam and Henry and Judy and all everybody on our team. Just this wonderful Raquel and everybody. And. And I just I can't be happier with the people on our team. I love everybody on our team.
So, folks, just a couple more reminders. Again, please go on to the website of our partner, Decisions in Dentistry magazine www.DecisionsinDentistry.com. 140 Continuing education courses at a very reasonable price and the best clinical content on the planet. www.DecisionsinDentistry.com. Go to our website at www.EideBailly.com. Get all these podcasts and all the webinars. We're going to be coming out with information in the next several months about our 2023 Business and Dentistry webinar series. We'll get that information to you.Again, I'm going to be in Southern California, in Northern California in June and at both CDA conventions and probably lecturing in some other places. I'll let you know as that comes up. And again, I want to thank you from the bottom of my heart and wish you all a wonderful, prosperous, profitable 2023. Be good to your team. Be good to your family, be good to your spouse. Take care of people. Help people. I've been doing more charity work than I've done. I mean, we have lots of people who are out there who are not as fortunate as we are. Help them if you can. And with that, I will bid adieu for today. This is Art Wiederman for the Art of Dental Finance and Management with Art Wiederman, CPA. And we'll see you next time.
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