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In this episode of the Dental Boardroom Podcast, host Wes Read, CPA and financial advisor at Practice CFO, explores the mindset shifts and habits that separate high-income dentists who struggle financially from those who build lasting wealth and freedom.
Wes begins by revisiting the connection between money and happiness. He explains that while money can reduce stress, it does not automatically create fulfillment. How you use your money matters more than how much you earn. Many dentists experience stress from debt, high overhead, and lifestyle creep, which erodes both financial stability and mental wellbeing.
He encourages building strong financial hygiene early: creating personal and business cash reserves, delegating financial complexity to trusted professionals, and resisting the urge to overspend. True wealth, he explains, is measured not by income but by freedom of time and choice, the ability to live without needing to work.
Drawing from the book The Millionaire Next Door by Thomas J. Stanley and William D. Danko, Wes outlines four defining traits of mass affluent millionaires:
He warns that many dentists earn high incomes but remain asset-poor because they focus on appearances rather than net worth. Instead, he urges owners to maintain a personal balance sheet, grow appreciating assets, minimize liabilities, and track progress toward financial freedom.
This episode reframes wealth not as a number, but as a mindset and discipline choosing simplicity, consistency, and intentional spending so that money supports your life rather than controls it.
Wes Read: Welcome back everybody to another episode of the Dental Boardroom podcast. I'm gonna carry on on the subject of the relationship between money and happiness, and I always like to do a quick recap when there's things that I really, really want my listeners and our clients here at Practice CFO to understand.
When we review something after we first hear it, within a 24 or 48 hour period, it just sticks so much longer. So lemme do a quick review of what we covered in our last episode. Number one, what the research says about the relationship between money and happiness, and it says the following, that money does re reduce stress from financial insecurity.
Beyond that, how you use money matters more than how much money you have. The things that create the stress, the financial stress for dentists, a lot of debt, student debt, practice debt, high overhead, and that lifestyle creep of personal spending. And the way to mu use your dollars to maximize incremental happiness with your dollar is to build that emergency reserve fund, both in and out of the practice.
Use your. Money to delegate financial complexities. Remember, less is more lessen your personal life. Freeze up more to then. Hire the right people, get the right team in place, get the right technology, yada, yada. And it allows you to delegate financial complexity, and that frees up so much of your anxiety and stress related to money and running a dental practice.
And then lastly, start against that overspending in life, just punctuating that need to watch how you spend your money. And we're gonna talk a little bit more about that today. Alright, so now I'm gonna go into the characteristics of millionaires and then I'm gonna talk about what does the research say on how to spend money to maximize your happiness as well.
Alright, let's dive into this. Characteristics of millionaires. There was a great book, the Millionaire Next Door by Thomas Stanley and William Danko, and I've read it a couple times, I've listened to it in audio. And it is a very powerful book in understanding who truly, who the wealthy are. Because what you see is not necessarily reflective of who the wealthy are.
And I wanna step back and just make sure we understand the concept of wealth. The concept of wealth is not income. Wealth is your ability to not have to work and to be able to live a fulfilling life. Freedom of time, freedom of choice. Here are the four characteristics of the. The mass affluent, we'll say.
Now, when I say mass affluent, I don't mean the ultra high net worth that's a specific term in the financial planning space. Ultra high net worth, ultra high net worth are gonna be people worth probably 30, 40 million plus all the way into the hundreds of millions and even millions. That's ultra high net.
High net worth. The mass affluent are really the top portion of the. Um, upper sort of middle class, these are people who retire with probably somewhere around two to $4 million, maybe two to $6 million. And they have a comfortable life and they have generally live in the nicer parts of town, whatnot. But these are the, the mass affluent are the people who, uh, are, there's a much larger quantity.
Of that tier of wealth, then the ultra high net worth. And so I'm really talking about the mass affluent here. These are absolutely millionaires. They are. They have the following four characteristics. Number one is the frugality. Millionaires tend to live well below their means. They tend to drive practical cars.
They tend to live in slightly more modest homes. Now, I did a full episode on why dentists struggle to live. Beneath their means. I could have called that why humans struggle to live beneath their means. But as I like to nuance all of my financial planning conversations and podcasts to dentists, I try to find a direct correlation to these topics and the specific life of a dentist.
And in that podcast, some of the things I emphasized. We're the following that coming outta dental school, you have that pent up consumerism to go and buy, go and buy. And we have to resist that for a period of time. You may be 55 and I'm gonna ask you to go live like you're a dental student in order to get out of the financial pit that one may be in in order to get ahead.
Rich people stay rich by living like they're broke and broke. People stay broke by living like they're rich. I said in that podcast. Budgeting isn't about restrictions, it's about aligning your spending with what truly brings fulfillment. So if you wanna see the various reasons why dentists tend to struggle, uh, those that do struggle financially, it's because of overspending and why dentists struggle to live beneath their means.
Go back and listen to that. It's episode 78 of The Dental Boardroom Podcast. Alright. So number one is frugality. Millionaires tend to live below their means. Now that's relative. It's not that they're all living off of $50,000 a year, but they are living below their means, whatever their means actually are, which allows them to have a significant surplus, which that which they can then allocate toward wealth building vehicles.
Alright, number two, they are very disciplined. They consistently save and invest, avoiding consumer debt. Let's dwell on this one a little bit. This is different than just being frugal. Although frugality does entail discipline. It's not just about spending less than you make. Disciplined is then specifically about taking the difference between what you make and what you spend, and using that to save in a very consistent way and in a very intentional way, and not taking on debt.
So discipline means we stay outta debt. And the reason why that falls under the discipline category is because debt is so easy to get. It's so easy to get these days. If you have a modest credit score, the amount of debt you can get to go buy consumer items is incredible. It is not difficult to buy a $90,000 car regardless of your income.
It's just not that difficult. Debt is easy, and so avoiding easy debt requires discipline. An incredible amount of discipline. In some cases, I always find that the people who are truly financially wealthy, who are in the mindset where it's really clicked, they don't take on debt to buy a car, which really moves to this concept of avoiding consumer debt.
And if you've listened to my podcast, you've heard me say this many times, debt is an enabler of building wealth when the debt is used to buy a good asset. A good asset being a real estate property, which could be your own home, buying a good dental practice, buying good investments. Now, generally, I don't advise taking on debt to buy investments.
That's called leveraged investing. That can get very precarious, giving most investments that you would buy, meaning stock market investments, stocks, bonds, mutual funds, ETFs, buying with consumer debt. These things can be incredibly volatile. Subject to market trends, not just how individual companies are performing.
So I generally don't advise debt on investing. However, debt for buying assets that are very predictably going to increase in time more than the interest you pay on that debt is a great way to build wealth. This is why I don't shy away from good home debt or good practice debt. Because the math works out very favor favorably if done right in the right proportion of debt relative to the asset.
So millionaires tend to be frugal and they tend to be disciplined. Number three, independence. They value financial freedom and they value that over displaying status, and that can be very difficult because status gives you an immediate spike of self-confidence, an immediate sense. Of sort of satisfaction.
However, it's not a deep sense of satisfaction in my experience, in my opinion, and so people who are aggressively pursuing financial freedom have this sort of value or moral concept that to them displaying status just isn't as relative, relevant as the person next to them. It's at least less relevant and ideally significantly less relevant.
Then the goal of attaining financial freedom. So that is a theme in their mind. They want to be financially free as soon as possible. And as you know at practice CFO, so much of what we do, I use the word, is so much of what we do here as a business and personal CFO for our clients in organizing their financial ecosystem is to maximize the output and quote, accelerate financial independence.
'cause I can't think of a better. A kind of visual term to explain what is the mission of practice CFO. Now we have a stated mission for clients and it's helping our clients make their journey in life, financially speaking remarkable, making their journey remarkable. It's also our own internal mission for us as a company, making our journey as people remarkable and finances tend to play some role in that and financial freedom.
Greatly improves one's ability to have a remarkable journey in life. So millionaire next door, the millionaire next door that you probably don't even know who's a millionaire, next door is frugal, disciplined, and yearns for financial independence. Alright? And by the way, financial independence clearly is not just about how much money you make.
If you remember the quote I, I think I had in our last episode, quote by epic TEUs. Wealth consists not in having great possessions, but in having few wants. So you don't need a $4 million practice with a 40% profit margin in order to be financially independent. 'cause the other side of the equation is simply how much stuff do you have and how much stuff are you trying to buy in your life?
Okay, and the fourth item here as a characteristic. Of the true millionaires, the true wealthy, oftentimes a stealth wealth. You don't see it. A lot of people you see walking the streets driving a car at the restaurant, at the mall. A lot of people that you would not place in the financially independent category are financially independent, and a lot of the people you look at and place in the financially independent category are absolutely not financially independent.
They're financially dependent on income and debt. I can't tell you how many times I've, it's almost the rule. It's almost, it's almost the norm over the exception, that people that tend to flash a lot of wealth tend not to be the ones tend to be the ones I'll say, who are farther behind in their path toward financial independence.
Obviously that's not in every case. You have very wealthy people who are very flashy. You have very poor people who reflect sort of a financially underperforming life, but the opposite is very much true in many, many cases. Okay? I mean, there's a particular person I'm thinking of in mine whose name I will absolutely not mention, but always the nice cars.
The kids are getting escalates when they turn 16 fancy clothes living in a really nice part of town and yet has not, not. A dollar in an emergency reserve, not a single dollar. And I suspect, I don't know, but I suspect not a whole lot of money saved for the future. So there is a very high reflection of wealth in terms of the type of clothes that are bought, the types of handbags, type of cars, the type of house.
But in reality, in reality. This person is deeply struggling financially. And that's a, that's a choice. And that person is gonna experience a tremendous amount of financial anxiety and insecurity as a trade-off to be able to live that life and reflect what they want to reflect. And I've seen the opposite.
I have an uncle, you know, he just would not buy a luxury car. He's worth 55 million drives, I think a Ford Taurus or something. I dunno. It's definitely not a luxury car. He has done such a phenomenal job at Living Below his means for a long time, and it goes to show now that his personal balance sheet is so strong, he could live indefinitely off strictly his assets and still have whenever he passes away, a significant amount of inheritance to pass on.
That's the rare case where I'm telling my uncle, Hey uncle. What do you wanna do in life that has a price tag? Let's give purpose to the wealth that you've accumulated. 'cause it's not just about accumulating a number, it's not just the number. It's about how you convert that number into doing wonderful things that give you deep abiding satisfaction with the purpose of your life.
And I love those conversations. Those are just my favorite. But it's so interesting the dynamics that some people have. They, they can't help but spend more than they earn. And then some people can't help. But spend significantly less than they earned. So maybe there's a balance there. Alright, moving on.
What's the tie in for these four characteristics coming out of the study? The largest study I think ever done on millionaire Millionaires by Tom Stanley and William Danko in this book, the Millionaire X Door. Those characteristics are frugality, discipline, financial independence, and or a sort of a, a desire for financial independence.
And intentional spending. What's the time for dentists? Don't assume that high income dentists are wealthy. Many dentists are high earners, they're not wealthy. And I can vouch for that because I look at hundreds of p and ls. I talk to hundreds of dentists, uh, who are considering our services here at Practice CFO.
And although there is a correlation, it is not a very tight correlation necessarily. Between collection levels and personal wealth. And if I have to sort of clarify for you what I mean by personal wealth, every person has a net worth statement. I call it your personal balance sheet. And the net worth statement shows everything that you owe, that you own.
And these are things that go up in value. I don't care if you have a nice. Uh, I don't know, a nice road bike or car. I don't care about things that lose value. I don't even put those on a personal balance sheet to me, they're pretty much worthless. You could sell 'em for a little bit. Sure, but nothing meaningful.
Now a house does go on your balance sheet 'cause that increases over time. Your 401k absolutely goes on your personal balance sheet, your IRAs, your rental properties, your. Stocks and bonds that you own, maybe certain private placements that you own. These are things that are intended to go up in value over time.
Those are things that you own, and then there's the things that you owe, and that's the debt as well. And the difference between those two, everything you own less, everything you owe is called your net worth. In business. That's called your equity, your net equity in the business, the value of your business, less what you owe is your net equity.
Well, that also applies on a very personal level in a personal balance sheet, more formally called the net worth statement, and it's very common that I see the following. Some high collecting dentists have a very low profit in their practice, and that's because there's so much bloat. Inside the p and l, the expenses are so high, the employee expense are over 50%.
When for a GP, they should be in the upper twenties. If you have independent contractors or you have some, um, specialists that come in, that might edge up closer to 35%. I get that maybe in 37%. Uh, your supplies and lapse, if you're paying 20% for those, maybe even 18% for those, too much. Your rent, did you get in too much rent?
Do you have more real estate than you need, or do you have a lot of empty rooms, therefore, um, too much debt buying, buying the, the, the nicest of equipment and therefore having so much debt. All of that oftentimes results in, even though there's a high collection, a very low profit margin. And so I would rather be running personally a million dollar practice with a 40% profit margin.
That's 400,000 after overhead pre debt, but after overhead, I would rather have that than a $5 million practice with a 5% profit margin. Now, I'm using some nice extremes here in that example, but a $5 million pr, even a $5 million practice with a 10% overhead, I mean with a 10% profit margin, that's giving me 500,000.
Now that 500,000, in example, two. More than the 400,000 in example one, but you know what you're gonna get. In example two, you're gonna get a massive headache. All the complexities of running a $5 million practice, it wouldn't be worth the extra a hundred thousand in most cases. However, I love a $5 million practice if you've got a 30% profit margin on that because you're running it as a well-oiled machine.
That's a great scenario because then you're at 1.5 million of take home pre debt. That's a great place to be. If you have your spending under a modestly reasonable level, you are gonna become financially independent very quickly in that scenario. Now, not many people are running a $5 million multi-specialty practice.
However, I'm using some extremes here. My main point there is I'd rather have a million dollar. I'll use a more realistic example. I'd rather have a million dollar practice with a 40% profit margin that's bringing me 400,000. Let's say I pay 80,000 in debt, that's 320,000 take home pre-tax. I'd rather have that than a $2 million practice with a 15% profit margin.
For obvious reason. 15% profit margin on a $2 million practice is 300,000. A that's less than the 400,000 in the first example, and B, I'm gonna have more debt most likely that I have to pay on that $2 million practice. So after the debt, the take home is gonna be significantly less than the first example.
And the first example is probably an easier practice to run than the $2 million practice. So all that to say, all that to say is that in that example, um, income or collections does not equal accumulating wealth. It doesn't mean that. The second thing is that even in that example where you're taking home 500,000 plus, or in that extreme example I used of $1.5 million plus, there is still an atrophy that occurs when that accumulated wealth.
I'll call it your potential wealth building amount, which is the amount after your overhead and debt in the practice. That sort of potential wealth bullying amount, it tends to, it tends to atrophy or it tends to leak. As it goes from the business to the personal balance sheet, from the business balance sheet to the personal balance sheet, because it comes out and it ends up going in a tremendous amount of consumer spending items and consumer spending items.
Never show up on your p on your personal balance sheet because they're not assets, they don't have value. Or if they do, that value is lost very, very quickly and therefore it's not even worth putting on your personal balance sheet like a car. For example, could you buy an $80,000 car and eventually sell it for 40 or $50,000?
Yes, but it declines in value so fast. Now, at the end of the day, it's not gonna produce a whole lot of return once all is said done, and usually it's being traded in for another car, and so it never actually makes it. To a true wealth building tool, it never actually goes into something that appreciates in value over time.
And so even extremely high income, high profiting dentists oftentimes aren't building their wealth in a correlated rate as the success of their practice just because of that lifestyle spending creep. That has happened year after year. And there are doctors who don't earn as much. They don't have as sexy of a practice.
It doesn't look as profitable, but they do such a phenomenal job at translating the net profit out of their practice into their personal balance sheet, that they do accumulate wealth faster than a lot of dentists who you would expect to be financially independent. And these characteristics are very human, they're very behavioral, and they're very, very real.
Alright, now, what are a few things that dentists tend, uh, what are a few, um, two things that dentists can do here to merge themselves into these characteristics of the millionaires next door. Number one is m manage behavior, delay gratification. Do smart practice reinvestments. Live below your means. Every time we meet with a dentist.
And if you're not a, a client of practice, CFO, trying to find somebody who, A, gives you clarity of your financial economics, and b gives you effective coaching on how to allocate your profit across the different demands in your financial life is essential here. And that can be a CPA, it can be a financial consultant.
Here at Practice CFO, we call ourselves CFO Advisors, chief Financial Officers, which is sort of a metaphor for the role we play inside of the practice and in their personal life as well. And this is what I, I sort of call financial engineering. Sometimes financial engineering, that term comes with a bad rap, a bad term.
It sounds like you're drafting up a scheme that ultimately is sort of tax evasion or something illegal. But good financial engineering is simply structuring a pattern and a strategy and, and a set of tactics. Around the flow of your dollar as it plin goes from the insurance companies and patients through your labor lab, supplies, facility, marketing, overhead, debt, taxes, personal spending and savings.
As your dollar plin goes through all of those things, financial engineering is, how do you get that Plinko nugget to land in the right spot at the bottom? Now, hopefully you've seen, um. You've seen, uh, jeopardy and that classic game of Plinko. If not Google it, it's worth it. Such a great game. But financial engineering is how do you, how do you set things up so there's a predictable way that that dollar flows from beginning to end and ultimately maximizes the output to you as a point of value.
Maximizes the increase in your financial wellbeing. How do you get that? How do you maximize the amount of your dollars over to your personal balance sheet for financial peace of mind and financial independence, financial engineering. So when I say find somebody to help you be accountable, that does one, creates clarity, and two, gives you good financial coaching.
I think that is absolutely essential unless you have a background in say, accounting or finance. Then it's gonna be very, very difficult. Now you're a dentist, you're incredibly intelligent. You can learn virtually anything. You could do this. Is it a great use of your time? Probably not. And it's also difficult when you're inside of your own bottle.
It's hard to read the label from the inside of the bottle, as you've heard me say at times. Having somebody externally who does a lot of label reading on bottles, on many bottles like yours in. Terrible analogy here is actually very important. So here at Practice CFO, is this a plug? Maybe? Probably. Of course.
My podcast is intended to try to draw attention to our services because I'm such a massive believer in the effect of what we do for our dentist. But finding a person who acts as a CFO for you in your business and personal life, A CFO is different than a CPA. An account, A CPN accountant, they're historians.
They're not dishing you up, clarity, nor are they giving you really good strategic coaching because they don't go into the strategy in a deep way. They're primarily about aggregating numbers and giving you some reports, and then you have to do your best to decide what to do with those reports. A CFO or somebody in finance looks into the future and says, how do we align the levers?
How do we structure your financial ecosystem today so that you are optimizing or maximizing or simply getting the most. Return on your financial resources to promote financial security and financial peace of mind in your life. So financial engineering, I can't tell you, I just believe this so strongly that you need somebody to help you do that.
Alright, here's my, um, here's my, my quote. And this is, this is a context from the Fight Club. I may have mentioned this in my last episode. I, I wanna dwell on this one just a little bit more. I'm not sure how many of you have seen the Fight Club, but, uh, it is. Lemme see. I've got a few notes here. So the Fight Club has Brad Pitt and Edward Norton, I think came out like the late nineties, I believe, or early two thousands.
It's actually a great movie. It's IMDB is really high. And for a long time I'm, I just wasn't terribly interested in the, the concept of it. And then I watched it and I thought, okay, that's actually a really good movie. And the Fight Club. In the Fight Club, there's uh, the, the main guy is Edward Norton and his character is this guy living sort of a corporate life, consumer driven life.
Traveling a lot. He's buying a lot of, uh, furniture for his home. He's really obsessed over like catalogs for the perfect home goods. He's clearly interested in buying things. And then he meets Tyler Durden and as Brad Pitt's character. And Tyler Durden is this anti-consumerism, charismatic, free-spirited guy who's just, he's just not concerned with material possessions.
And later after Edward Norton's character's apartment is blown up and he loses all of his things, he is sitting down with Tyler Durin and he is just sort of depressed and he is talking about this. And Tyler Durin, that's Brad Pitt says, the things you own end up owning you. And I actually printed this out.
I think it's a great quote because the message is clear that possessions can enslave you. They demand maintenance and uh, and money and emotional energy. Sometimes instead of making you freer, these things can be a, a bit of a trap for you and this cycle of work and consume and work and consume the things you own end up owning you, which is very closely aligned with the, with the quote I mentioned a few times in these last two podcasts.
Wealth consists not in having great possessions, but in having few wants. Okay? And to put that in, into my own personal, broader perspective, it's okay to have nice things. It's okay to have a nice house. It's okay. To drive a nice car. It's all within proportion to what you have in by way of income savings and emergency reserves and um, and saving for your future.
So there's a bit of relativity here. I do want to emphasize that, but I do want you to, if there's one thing I want you to remember as you walk away from this podcast is that the things you own end up owning you. If you haven't seen the Fight Club, good show. If you watch it, remember that moment. Look for that scene where they're sitting down in a bar table.
Alright, let's go on to, and actually I'm gonna, I'm gonna end the podcast here. My next podcast, I'm gonna go into how to spend for happiness. It's not just about accumulating, but it's about how you then use that money to allocate to vendors and the savings. How do you spend money to maximize your happiness?
Stay tuned. Until then, have a great day everybody.
Wes knows what's best for dental practices. He's been doing this for a long time and he sees lots of practices. He can tell me how our practice is doing, and what we can do to increase our productivity. With past CPA's, there were no ideas. It was all coming from me, saying "I think I can do better, but I don't know how." I come in to meet with Wes and he says "You CAN do better, and I know how."
PracticeCFO is in hundreds of dental offices around the country. They know what numbers should look like. They know what percentages of payroll, rent and supplies should be, and they will hold you accountable to those numbers, which will really help you stick to your plan and your path of growth and savings. That is invaluable
Whenever something comes up, whether it's building or practice related and we weren't sure where the numbers would go, PracticeCFO has been instrumental in helping us figure that out. I can't say enough of how important that is - that it goes beyond that initial partnership. They make sure this business marriage works.
When I go home from work, I don't spend a whole lot of time stressing about what my books look like, or how much I owe in taxes. By using PracticeCFO, the burden of keeping track of a lot of the big financial numbers and metrics are taken off my plate.
PracticeCFO helped me develop a plan for the future. I have colleagues that work with other accountants that don't have a plan - they just look at the numbers of the practice and that's it. There's no plan for 10, 20 years from now. But with PracticeCFO, you get that. PracticeCFO makes you feel like you're they're only client.
(In reference to his practice sale) What could've been super stressful, wasn't! When picking John and Wes, it was from word of mouth recommendations and other people's experiences from the past that really did it for me. And it turns out that those recommendations were right on the line.
Wes knows the business side of dentistry. His comprehensive plan will organize your personal and professional finances so you can focus on taking care of patients. Massive ROI.
I can’t say enough good things about everyone at PracticeCFO. Everyone on the team is professional, organized, knowledgeable, helpful and kind. They also respond to emails and phone calls immediately and are always happy to help. They have helped me navigate year-to-year as a business owner. PracticeCFO gives me peace of mind that my business is in good hands.
I love Practice CFO! They have helped me obtain a practice and maintain a practice. They are incredible people who are on top of everything and make owning and running the business portion of a practice easy. They couldn’t be better for my business and my sanity. They have every detail of the business and taxes taken care of where all I have to do is show up and follow their easy steps to success!
Practice CFO has the best tools I’ve seen for personal tax and financial planning in addition to top-tier corporate tax and accounting services. I have been very pleased with the level of quality service. They manage my monthly bookkeeping and accounts payable. It is a great system and saves me a ton of time, and it allows us to have monthly financial statements within a week of month end.
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