By Steve Tiret, C.P.A.
Director of Financial Planning
Tiret & Company, CPAs

Dental professionals invest all their time, energy and brainpower into their practice. But they often shortchange themselves, their families and their future comfort by ignoring this tough question: How am I going to replace the current income from my practice on the day I hang up my dental drill?

Or, and this is the tougher question, will I ever be able to afford to hang it up without worrying about how I am going to sustain my lifestyle?

Very few dentists, upon initially meeting with us, have spelled out a strategy to answer these questions. Many figure that if they work hard enough for long enough, and make some investments along the way, when it comes time to retire they will be able to pull the plug and coast comfortably through the rest of their life. As their accountants we can tell them that hard work is certainly important, but without a plan, and knowledge of where you stand in relation to that plan, all the hard work in the world could go for naught.

Sixty plus years of serving clients has enabled us to develop a roadmap for our clients to follow to their desired destination--financial independence and worry-free retirement. Our plan is not investment cure-all or an elixir that works overnight. It is a disciplined, but comfortable, regimen for professionals to convert the fruits of their hard work into a sound financial plan that will leave them comfortable throughout their professional career, as well as through their retirement.

The steps are based on our work with our own clientele as well as studies of financial successes such as Henry Ford, Andrew Carnegie and Sam Walton. We have found that the keys to achieving your financial goals are a burning desire and absolute commitment to a well laid out plan. Our research identified ten steps that, together, form the foundation for a solid financial plan. We call it The Tiret Ten. Couple the steps with a serious commitment to personal success and you have the vehicle for achieving financial independence…on your own terms and your own timetable.

Step One: Create Yourself Financially Independent. This is a psychological commitment and not a financial tactic. It is the understanding that your financial independence is dependent upon you-- on your hard work, as well as your commitment to your financial present and future. That may sound like a lot of responsibility, but it is far better than the alternative—your financial independence being dependent upon the work and decisions of others.

Step Two: Get Started Now. If there is a shorthand formula for financial independence it is the sum of “desire + time + money ”. Money is needed to fund the plan, and desire is needed to follow the plan. But, time has a magnifying effect on both of those factors. The earlier you get started funding your plan the more dramatically the power of compound interest will work to help your money grow to the level of your desire.

Step Three: Create Your Plan to Accomplish Your Goals. How much money are you earning to fund your plan? How much money do you currently need to fund your desired lifestyle? How much will you need during retirement? What are your priorities, both now and in the future? Answer these questions honestly in order to get a clear picture of the money needed to fund your plan and how that money should be allocated along the way.

Step Four: Protect Your Money. Protect your money from your own natural urges to stray from the plan in pursuit of unduly risky investments or unwise spending habits. Sound steady investments will ultimately get you where you need to go. Taking unnecessary risks with your money in pursuit of pie-in the-sky returns could lead to a loss that your plan is not equipped to handle. And constant spending in excess of what is built into your plan will have far reaching negative effects at the tail end of your plan. Wealth accumulation is the ultimate key to worry free retirement. In order to accumulate wealth, you must be diligent in the protection of your money along the way.

Step Five: Minimize Taxes. The best way to save for retirement is in a tax free or deferred account. With the power of compound interest your money will grow faster if you delay the tax bite. There are many creative tax-deferred and tax free savings plans today. There will be estate tax considerations at the end of your plan as well. It is important to work with a good CPA who can help you navigate the complex, and ever changing world of taxes.

Step Six: Insure Your Risks. Your health and your ability to practice is your biggest exposure. The odds are higher that you will become disabled prematurely, by accident or disease, than die early. This is why adequate amounts of disability insurance should be your top initial priority. Throughout your life your risks change, and consequently your insurance needs change. Life insurance becomes important when you are married and begin your family. As you reach the latter stages of your career, term life insurance becomes less important and long term care insurance becomes a necessity. Your plan must factor in these changing needs and address them accordingly.

Step Seven: Build a Balanced Investment Plan. Your investment plan is the backbone of your financial plan. The first step is to find a trusted advisor. Secondly, you and your advisor must jointly decide what kind of investor you are and what your risk tolerance is. The type of investor you are will change along with your needs, your risk tolerance, and market forces. When you are younger you can take more risks as you have more time to make up for potential losses. When you are older you have less time to make up for losses and a greater need to preserve the capital, off of which you will soon be living. It is important to work with a trusted advisor to monitor your ever changing position on the axis of risk vs. reward and tailor your investments accordingly.

Step Eight: Manage Your Business. If you are in private practice, it is absolutely essential that your practice goals are consistent with your financial goals. After all, your practice generates the income you need to fulfill your financial independence goals. If you have a written plan you should be able to calculate the daily production necessary to create adequate cash flow for attaining financial independence.

Step Nine: Make It a Family Affair. You are not an island. Your spouse must be involved, and kept informed, for the plan to succeed. You must both understand and believe in the plan in order for it to be followed to ultimate success.

Step Ten: Monitor Results. You need to review your financial plan once a year to update the plan and objectives. You want to make sure your original assumptions are valid in light of various economic forces and market fluctuations. As noted throughout these steps, your needs and desires will change along the timeline of your life and your plan. Monitoring your results enables you to make informed decisions to adjust the plan as your needs, or goals, whether long term or short tem, change so that your plan is always current, relevant, and effective.

That’s it. The Tiret Ten. The steps that, if taken in an orderly, disciplined manner, will lead you to financial freedom. The next step is yours.