Ask Joe: How To Plan For Retirement | POP 602

Image of Joe Sanok. On this therapist podcast, podcaster, consultant and author, talks about how to plan for retirement.

Are you thinking about setting money aside for your future? How do you plan the financial future for your business and your family? Why should you consider building an emergency fund?

In this podcast episode, Joe Sanok answers your questions about how to plan for retirement.

Podcast Sponsor: Gusto

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In This Podcast

  • Concepts about money in your practice
  • Retirement planning
  • An emergency fund for business and home safety
  • “Is this smart?”

Concepts about money in your practice

1 – Have multiple streams of income.

When you are a solo practitioner, all the money you bring in is based on you working. That’s a dynamic we don’t want you to have always continuing … it is nice to have multiple streams of income coming in. (Joe Sanok)

2 – Investing your money back into things that will make more money in the future.

Look at your family finances and see how much money your family needs you to generate to put that money where it belongs before you start investing your income into other expenses.

Most months I am looking at the family budget then I’m also looking at the individual practice budget … to see how much needs to stay within the company? How much do I need to pay the staff? … how much can I pull out and into the family budget appropriately? (Joe Sanok)

3 – In general, you should be putting about 15% of your income into some sort of retirement fund.

In terms of paying off your debt, you can evaluate which debt is necessary for you to pay off first.

Retirement planning

  • Speak to an accountant about optimizing your retirement planning to best suit your personal needs.
  • Have your funds be separate from your business funds and accounts.
  • Play around with looking at how much money you should invest into index funds or another type of investment and over how long a period to see what your anticipated income might be.

An emergency fund for business and home safety

It is a great idea to build and maintain an emergency fund in case of rainy weather.

Consider having put away about six months’ worth of average income so that you can pay your employees, your expenses and provide yourself with a financial buffer until you can sort out your predicament.

This principle also applies to your personal expenses and family budget.

“Is this smart?”

I’m a big fan of looking at the things you are spending money on both personally and professionally and [asking] “is this smart?” (Joe Sanok)

When you want to make a new financial commitment or investment, consider having a meeting with your accountant to establish whether or not now is the best time for your choice.

Books mentioned in this episode:

Image of the book Thursday Is The New Friday written by Joe Sanok. Author Joe Sanok offers the exercises, tools, and training that have helped thousands of professionals create the schedule they want, resulting in less work, greater income, and more time for what they most desire.

Useful Links mentioned in this episode:

Check out these additional resources:

Meet Joe Sanok

A photo of Joe Sanok is displayed. Joe, private practice consultant, offers helpful advice for group practice owners to grow their private practice. His therapist podcast, Practice of the Practice, offers this advice.

Joe Sanok helps counselors to create thriving practices that are the envy of other counselors. He has helped counselors to grow their businesses by 50-500% and is proud of all the private practice owners that are growing their income, influence, and impact on the world. Click here to explore consulting with Joe.

Thanks For Listening!

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Podcast Transcription

[JOE SANOK] This is the Practice of the Practice podcast with Joe Sanok, session number 602.

Well, welcome to another episode of Ask Joe. Every Wednesday, I’m doing these where you submit your questions and I answer them. You can go over to practiceofthepractice.com/askjoe, and you can fill out the form there and ask me a question just like Jen Morley did today. Jen is one of my favorite clinicians out there in north Boulder. Jen’s been so active with Killin’It Camp and getting people to know about Killin’It Camp and about Thursday is the New Friday. She’s just been such an advocate for our work and Jen, I’m so excited that your question is here. So Jen has a question about retirement planning and finances and said, “I didn’t know where to start when my practice wasn’t doing well. Sprints helped me clear what I wanted to work and work backward from there. Turns out I needed to focus to work smarter, invest time and money strategically.”

So I’m really excited about Jen wanting to know even more about retirement planning and finances, maybe even beyond the practice. So super excited to answer this because it’s been something I’ve been studying for a really long time. I am not an accountant or a financial planner or an attorney. So I’m speaking from my own experience and just saying this, so you don’t come and sue me. I’m just saying, here is what I’ve learned and I’m sharing with you. Please do your own research. Don’t invest in things that you don’t understand because trust me, you can lose money on stuff like I just did on Bitcoin a few months ago. I didn’t know what I was doing and thought, well, I’m going to jump in on this. Oh, bad idea. If I had known what I was doing, it seems like I could have made a bunch of money, but it didn’t and I just threw money into Bitcoin and then it tanked.

Okay. So let’s just think about a few different concepts around money in your practice. So one concept I would start with is that when you’re a solo practitioner, all the money you bring in is based on you working. And that’s a dynamic we don’t really want to have always continue. And now that you have to have a group of practice, but it is nice to have multiple streams of income coming in, either through e-courses a podcast I’m having 1099s or W2’s that work in your office or work through your practice virtually. Having streams of income beyond yourself is best. We also want to make sure that you’re really investing quite a bit of your money back into things that will make more money in the future, not just draining it all for your family. And so part of this equation is looking at your own family finances and making sure that you know about how much your family needs you to pull, to put into your family, to keep them going every month.

Because if you don’t know if that takes $4,000 or $10,000 or $15,000 or $2,000 or whatever, if you don’t know what your needs, it’s hard to know how much you can put into other things. And so I’m constantly evaluating that constantly. That sounds like it’s like all the time. Most months I’m looking at the family budget and then I’m also looking at the individual practice budget with Practice of the Practice to say how much needs to stay within the company? How much do I need to pay the staff? How much do I need to invest in things like marketing or growing? And then how much can I pull out into the family budget appropriately. So in general, most financial planners would say you should be putting about 15% of your money into some sort of retirement fund.

People like Dave Ramsey really want you to pay off all debt. I think there’s some debate around that where there’s debt like a car or a house that’s 2% or 3%. That’s barely even above inflation typically. Now you may say, I don’t want to have debt and that’s fine. And I’m not saying you have to but if you have a mortgage payment, for example, that’s 2.4% and the average inflation is 2%, I mean, you’re barely even paying that money. The way that works is that a hundred dollars is only going to be able to buy a $98 the next year and $96. So if your amount per month stays the same over 15 or 30 years, that actual cost is shrinking for you each year, because the money you make is going to be able to pay that smaller amount.
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[JOE SANOK] So you want to think through that and decide which kind of methodology you’re going to try. Are you going to try a Dave Ramsey approach? Are you going to try Susie Orman or whatever her name is, or are you going to kind of do a mixture that works for you? So you want to think through that as well. If you do have high interest credit cards you haven’t paid off that’s probably smart to pay those down first before you do too much retirement planning. So when we’re looking at retirement planning and I’m going to also talk about investing in things outside of your individual practice as well. You’re going to want to look at really talking to an accountant to optimize it for your individual tax situation. So in some situations, having a Roth IRA, depending on how much you make is the best decision. In other situations, having a simple 401k that you can match through your business is best.

I’m not a huge fan of talking to financial planners because financial planners often take a pretty large cut of your overall money. Tony Robbins had a great podcast for awhile where he talks about how for every percent that you spend on a fund, that’s what, 10 years of retirement income. So I have always kind of followed what the Bogel heads. So Jack Bogel who started Vanguard and some other things has a very low cost, whole market index fund that I have balanced with some bonds. And so within Vanguard that’s kind of where the funds are. So I did temporarily pay them in order to kind of reassess all of that. So I have my individual accounts and then I also have the business accounts. And so in those you want to look at what’s the max, you can put into those because if you look at like the lifetime value of a fund, let me just pull up like a simple, if you just go to like a simple savings calculator, I like the one that bank rate has.

So imagine that you were able to put, let’s say you had, we’ll start with $1 to start with and every month you’re going to put in a thousand dollars. Maybe you’re going to match 500, 500 and you’re going to do that for say, you are 40 years old, so you’re going to do it until you’re 65. So over 25 years and say on average, you get 8%. Okay, you’re going to have just under a million dollars when you end up retiring. But let’s say you do $2,000 a month, but you only do that for 15 years and then the last 10 years. So that gives us after 15 years at 8% and we do $2,000 a month, that’s going to give us $675, 215, so same amount of money. So actually, no, is that the same one or $2,000 over 15 years? It’s not. We would do it over, instead of over 25 years, we do at 12 and a half, 12.5 years.

So the same amount of money. So $2,000 a month over 12.5 years. So that ends up being $502,629 at 8% interest. So let’s put that $502,629 as the initial deposit and we, they make you put something in and we’ll say a dollar a month for 12 years. So we ended up having $1.3 million instead of that just under a million dollars with the same amount of money, if we can fast forward that earlier on. So it’s just like the power of compound interest. I love these savings calculators to just have a general ballpark of if we can put more money in earlier on, we’ll have a lot more money towards the end. So that’s one thing to think through, looking at all of that when you’re doing the savings.

Now, we also want to make sure that you have some sort of emergency fund in your practice. I love to have a six month or so buffer that if things go really rough, that I have enough to pay my team for six months and that I can make sure that they’re paid, that all my expenses are paid. And then also in your own home fund, you typically want to have six months or so of emergency fund, just in case things hit the fan. You don’t want to be backed into a corner if at all possible. And then another area is looking at multiple streams of income outside of your practice or your e-courses or things like that. So for example, we’ve been investing in a real estate that can be used as an Airbnb. So at the time of this recording, I have two properties and each of those properties I would say on average in a year, bring in about $90,000 a year with about 20,000 expenses.

So we haven’t paid that off quickly but that’s also something that it’s an income property. So, I mean, you even think about, if you can get a starter home and you can get a 15 year mortgage and then have the basic expenses covered of the mortgage, the taxes insurance a little bit of upgrades. If for 15 years you have somebody paying just above what that mortgage is and say you bought a house a year, that means in 15 years, every year, you’re going to be able to sell a house, or even if you just have a couple of those houses. So there’s a lot of ways to think about money on a macro scale.

Now back to Jen’s question, I think she also wanted to know a little bit about just finances in general. I’m a big fan of looking at kind of the things that you’re spending money on both personally and professionally and saying, is this smart and having a good meeting with your accountant to say is it smart for me to upgrade my computer this year? Is it smart for me to upgrade some systems this year? Because sometimes it’s smarter to put that money into the business to pay fewer taxes and other times you want to have that larger income. So that’s where talking to some sort of professional can be really helpful on an hourly basis where you just pay them kind of for the time that you talk.

So that’s the way that I approach it. We’d love to hear from all of you as to how you approach finances. Because so often we pick things up here and there, and it’s like, well, how do I actually do this? What do I actually do to make this happen? So how are you setting money aside? How are you growing your business? What are you doing to make sure that it scales in a different sort of way?

I love Gusto, speaking of money, and Gusto has been my payroll solution for years. Over at gusto.com/joe, you can get your three months totally free to try Gusto. They pay your taxes on your behalf, you can see where you’re at, you can see it as an employer and as your employee. And so it’s really helpful when you need that paperwork. So I had an over to gusto.com/joe, and you can get those three months for free to test it out.

Also, we’ve got some really awesome shows coming up. The next show that we have coming up tomorrow is five mistakes made starting a group practice with Alison Pidgeon and Whitney Owens. Really excited about that. Group Practice Boss, the doors open on September 7th. So Group Practice Boss, I’m sorry, Group Practice Launch where if you are moving from being a solo practitioner over to being a full group practitioner, that’s right around the corner. So make sure you sign up for that if you are starting.

If you aren’t sure at all about any of these things, either just email me, joe@practiceofthepractice.com. We’ll make sure we point you in the right direction, or you can always go to Practice of the Practice and in the bottom right corner, you’ll see Chat With Us. Jess is hanging out there to answer your questions throughout the week. And if she’s not, Jess happens to be working on something else, so just drop a message. Usually she gets back from an hour or so. So if you’re stuck in any way and you want to join something, if you want to join a Group Practice Launch, that’s starting. We want you to join up because you want to expand the way that money is coming in.

And then I’m so excited that we have Allie Casazza coming up. Allie is coming up on the 7th of September, and she’s talking about how to declutter like a mother and it’s just going to be an awesome episode.

So thanks so much for letting me into your ears and into your brain. Have an amazing week by special. Bye .

Special thanks to the band Silence is Sexy for your intro music. We really like it. And this podcast is designed to provide accurate and authoritative information in regard to the subject matter covered. This is given with the understanding that neither the host, the publisher, or the guests are rendering legal, accounting, clinical, or other professional information. If you want a professional, you should find one.

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