Dr. Doug Carlsen – GolichCarlsen.com

Doug Carlsen, D.D.S. retired at the age of 53 after 25 years in private dental practice and clinical lecturing at the UCLA School of Dentistry. Doug is now a writer, speaker, and business and personal finance consultant to physicians, dentists, and other medical professionals. Doug shared some of his best advice for dentists and physicians:

  • The 3 major keys to wealth
  • The importance of compound interest and having a clear savings plan
  • The 6 personal habits of super saver dentists and how you can adopt these and improve your financial health
  • The 3 big financial mistakes to avoid in your 30s and 50s – including the one mistake that can add 5 to 10 more years of work to getting to the goal of retirement. Avoid this one or find a way to minimize its impact!

 Josh Mettle: Hello, and welcome to the Physician Financial Success Podcast. My name is Josh Mettle, and this is the podcast dedicated to advising physicians how to avoid financial landmines. Today, we’ll be talking with Doug Carlsen, D.D.S. Doug retired at the age of 53 after 25 years in private dental practice and clinical lecturing at the UCLA School of Dentistry. Doug is now a writer, speaker, and business and personal finance consultant to physicians, dentists, and other medical professionals. We are excited to have you on. Doug, welcome to the show and how are you?

Doug Carlsen: I’m doing great today, Josh. It’s nice in Denver. You’re in Salt Lake City. Finally, spring is here. I was just talking to you about guys out in the yard. I’m at home here today working on the lawns with the blowers, and thank God they just stopped, so I’m ready to go here.

Josh Mettle: Well, I love that you’re at home, watching the grass get green in the spring because we’re talking to a lot of folks today on the show that are a long ways from where you are sitting right now in your living room nook there. So, we’re going to uncap how to get from in the chair, the dentist’s chair, in the office to where you are today, and I’m excited to do that with you.

Doug Carlsen: Sounds good.

Josh Mettle: All right, so let’s jump right into it then. I’ve read several of your articles, but one thing that jumped out to me right from the beginning is that you said in one of them that your mission is to accelerate early retirement for dentists, and I love that mission, by the way. I mean that just speaks clearly to the point. With that, would you tell our listeners a little bit about your background and history and maybe how you got started down the path to this financial information and – I don’t know – financial guru, certainly someone that we can learn something from.

Doug Carlsen: Yeah. It wasn’t a normal path. In fact, I kind of was thrown into it, if you want to look at it that way. Most of the people that I deal with that are able to retire early or be financially independent, some of them retire, some of them continue to work. A lot of them planned ahead of time or meticulous about their savings, their goals, keeping up with their finances over a period of time. I didn’t do that as much. I actually started to practice in 1979 and had something unusual happen. I never really planned on retiring early, and I did at age 53. At age 51, I had something a little bit unusual happen. I had a wife who worked in my dental practice with me in Albuquerque, and she died of breast cancer in 2001. The reason that I’m telling you this is because there was a change in my life, a personal change in my life. The year after that, I met a gal out in California at a college reunion. I’m from California. I practiced in Albuquerque. Right now, I’m in Denver. That’s my final target retirement area because I love skiing in the mountains.

I met a girl out in California or a gal out in California at a college reunion. I went to Occidental College, which is a small liberal arts school. I knew everybody in my class. I had the chicks role down. That’s not really PC today. That’s what we did back then. I knew all of them, but I’ve never met Vicki, so I met Vicki at a college reunion. Somehow, somebody was keeping her away from me for all those years. It worked out great between us, and she was totally different than my first wife. I meant that as a positive, and it still is. So we decided to put things together, and who was going to move where and into figuring out finances. I had not really ever studied them thoroughly before, but in 2002, I did at age 51, and thought, “Oh, my god, I’ve got enough saved for both of us that either one of us has to ever work again.”

I had not planned on retiring. I thought I’d work until I was 80 or so, but at that point, it was, we’ve got enough. So, I decided to sell the practice, move out to California. She was a college professor and had thought, “Maybe I’d like to go into administration and become a dean someday.” So, she did, and actually she’s still working, which presents some other problems, but at that point, we’ve had more than enough for both of us. So, that’s a little bit different. After this, after I did sell the practice and move out to California, I didn’t want to stay there, so I didn’t set up a practice. I worked a day a week in a clinic just to keep busy, but I was thrown into limbo, which happens to some doctors. They need to be careful when they retire. We weren’t going to get into this at all, but you become Mr. rather than Dr. I had a bunch of things on my mind that I thought I might want to do. So, what I did I do? Took art courses and engaged my right brain rather than my left brain for a change and found out that writing really was my strength.

So, from that, it was where do I go from here? You know I did some things in my practice, in my personal life that I think were probably important – what were they?

It took me a while to find out. After that, I decided to engage other dentists in particular, who had done well in their practices and find out what they had in common, and it was amazing the things that they had in common. That’s what this podcast is about.

Josh Mettle: What a great intro, and you’ve left me wanting more. That’s great. Okay so, let’s move a little into what you learned and a few articles that I thoroughly enjoyed reading. In your article titled, Retire by 50, you mentioned a stat that was shocking to me, but then I thought through my dental clients, and I believe the stat, but it says that only 4 out of 100 dentists can retire by age 65 and maintain the same lifestyle that they enjoyed while in practice. So obviously, you took a very different course and a very different route, and you’ve engaged, as you put it, other dentists that took a different route, but let’s talk a little bit about how that is and why is it that only 4 out of 100 dentists can retire by age 65 and maintain the same lifestyle.

Doug Carlsen: You know the actual statistic is bogus. I need to tell you that we can find no citation for it anywhere. It pops up all the time for doctors, any professional. Really, it’s not 4 percent. It’s probably more like 10 percent.

Josh Mettle: Okay.

Doug Carlsen: But still a low number.

Josh Mettle: Yeah.

Doug Carlsen: Brian Hufford of Hufford Financial did a study in 2007 of 1,100 dentists, and he came up with about 30 percent can retire by age 62. That seemed really good until 2008 and 2009 ‑

Josh Mettle: Sure.

Doug Carlsen: When it tumbled to about 10 percent, so realistically, when I talk to docs, and it’s all anecdotal, most of them are hoping to retire by their full social security retirement age, which is 66 or 67.

Josh Mettle: Right.

Doug Carlsen: It’s not 4 percent really, but it is a very low percentage and why is that? It has to do with spending, and we’ll get into that and the rest of it here.

Josh Mettle: So, that’s the key. The key to that fact in your mind is spending.

Doug Carlsen: Spending and not saving. Doctors get into a situation, The Millionaire Next Door, which I’m going to get into here in a little bit.

Josh Mettle: Sure.

Doug Carlsen: And take that next step has to do with the fact that doctors in particular spend more than they should.

Josh Mettle: Yeah. I got it. Okay, well that makes a lot of sense. Let’s talk about the article, Retire by 50, which I loved, and I’d like to dig just a little deeper into that article. In the article, you examined three major keys to wealth. Would you mind explaining those three keys to us?

Doug Carlsen: Yeah. Let’s go into some detail here, and Josh, I maybe reading a bit here while I’m going through things. So it maybe a little bit stilted, and I know you don’t like that. I don’t like that, but there’s important information that I can’t really memorize.

Josh Mettle: Great.

Doug Carlsen: The Millionaire Next Door was a book written by Tom Stanley and William Danko back in 1996. It opened the doors to a lot of different thoughts, and a lot of it pertains to doctors. They interviewed a thousand people who have one element in common: wealth. They had to have at least $1 million, not including their primary residence in the bank or in their portfolio. The average today in 2014 dollars of this group is about $6 million, so I think that’s an important number for doctors in particular.

Interestingly, of this group, 6 percent had American Express cards back in 1996 whereas 50 percent had MasterCard, Visa, and Sears cards. Back then, the most popular auto bought by these millionaires were Ford Explorer and Ford F150. Today, it would probably be a Toyota Camry, maybe Highlander, in other words a midlevel car.

Josh Mettle: Yeah.

Doug Carlsen: The most money any of them ever spent on a suit was $600, the most on a watch $350, no Rolexes, and the most spent on shoes $200. The big thing is they all learned to live well below their means. To accomplish this, at least one of the spouses was a meticulous saver, and the important thing here is that they lived below their means, and one of them was a meticulous saver. In couples that I’ve found, if both of them are savers, they’re in really great shape. If one of them is a saver, and one of them is a spender, usually the saver wins. If both of them are spenders, normally divorce happens. If there’s one person who really watches things carefully, you’re going to be okay. It’s really interesting. So, that’s lifestyle. That’s the first thing, lifestyle.

Doctors get into a situation where, and Dave Ramsey talks about this. He calls it doc-itis. The Millionaire Next Door gets into Dr. North and Dr. South that he covers in his first book, The Millionaire Next Door. Doctors tend to think in terms of, “Hey. I’m a doctor. I need to live in a little bit nicer neighborhood. I need to have a little bit nicer car. My clothes need to be kept up. My wife, she needs to be acceptable. My kids of course need to be acceptable. They need to be smart, and if they’re not smart, they need to at least to be in private schools.”

All this adds on and on and on, so I talked about spending and the fact is, as doctors, we’re put up on a pedestal and a lot of patients think that, “Hey, if my doctor dresses well and drives a nice car, he’s probably a better doctor than the guy down the street who has a 10-year-old car.” That’s part of what we get into. That’s part of our philosophy, and it makes it tough on us. That’s number 1.

Compound interest is number 2, and I’m just going to give you an example here: Compound interest for your savings or your portfolio or for your investment. An example is my stepson, Scott. He’s a navy pilot. He’s in Virginia Beach. He’s 35 years old now, but at 25, he received an inheritance of $75,000 from his dad. His dad died of a heart attack at age 57. Scott invested it all in a – actually, it’s in a target-date fund now, but first it was in a total stock market index fund. This is with Vanguard. What we found projecting forward with regular returns over the next 40 years from age 25 to 65 is if he doesn’t touch that $75,000 at all and just lets it grow with reinvested dividends and all, he will have $1.2 million in those age 25 dollars or real dollars by age 65. It goes from $75,000 to $1.2 million. That’s not taking into account inflation. That would provide him an income of $54,000 per year. Seventy-five thousand dollars now not spent becomes $54,000 per year for the rest of his life in 40 years. That’s the amazing thing about compound interest.

The other third thing I’d like to get into is debt structuring. In the article, I outlined a Dr. Howe from San Diego. He’s an actual dentist. That’s not his real name. He retired at age 43, and he called debt structuring actually debt avoidance. Howe is actually, probably a superstar for the savers. Jim Dahle in his book, White Coat Investor, goes over the same types of things, the doctors, MDs that by age 40 are able to save up to $1 million. They’re well on their way, and by the way, I would really encourage any of you doctors, I don’t care what type of medical profession you’re in. The White Coat Investor just came out. I don’t know Jim, but I know his work, and it’s absolutely amazing. The White Coat Investor is online, too. Anyway, back to Dr. Howe. He paid off his practice loan in three and a half years, which is amazing for a dental practice.

Josh Mettle: Yeah.

Doug Carlsen: His net income, actually his production in his office is $500,000. His net income was $350,000. He actually saved over $120,000 a year.

Josh Mettle: Excellent.

Doug Carlsen: This was back about 10 or 15 years ago. So, one-third of his income was saved, which is really, really about at the top. Some quotes for him that I am reading here. “Any decision to spend capital is a decision to work longer to pay for that decision.” He’s got decisions all over the place here, but I think it’s important. Again, “Any decision to spend capital is a decision to work longer to pay for that decision.” I love that quote. He goes on to say, “Your retirement age will be extended accordingly. Don’t get caught in the sizzle of the moment. Shopping as a recreational activity, they become addictive until the next thrill purchase.” His mantra, and this one’s an important quote, too, “The ability to discipline and delay gratification in the short term in order to enjoy greater rewards in the long term is the indispensable prerequisite for financial success.”

Josh, I’m going to say that again because it’s so important, “The ability to discipline and delay gratification in the short term in order to enjoy greater rewards in the long term is the indispensable prerequisite for financial success. Those greater rewards provide less stress with the ability to purchase items for cash that one only dreamed about in medical school, without worrying about financing or credit.” Isn’t that amazing?

Josh Mettle: Doug, I just took a lot of notes, and I think we could – I think we could spend an hour just uncapping what you discussed, but here’s a couple of things that jumped out at me as you were talking. You talk about lifestyle. You talked about the millionaire next door. I immediately also started thinking of The Richest Man in Babylon‑

Doug Carlsen: Exactly.

Josh Mettle: Which is another one of those foundational books that I think both of those are a must read as early as humanly possible in your career and in your financial planning lifestyle, but there’s a quote that I have thought of many, many, many times. I can’t recall where it came from, but it was from some financial publication that I read early on, in you know when I was young, back in those days. The quote was, “In most cases, in about 99 percent of cases, you can either look wealthy or be wealthy.”

Doug Carlsen: Yeah.

Josh Mettle: I try to contrast personally that in my own life, you know, is it important for me to look wealthy or is it important for me to be wealthy. That’s a real fundamental lifestyle decision, and the reality is, there is maybe 1, 2, 3, 5 percent of the American population who can do both. They can look really wealthy and be wealthy. The rest of us are going to have to make a choice. We’re going to have to decide whether we look wealthy or we’re actually wealthy. When you kind of break it down like that, I think it makes it a little easier to pass and to say, “You know, those are really nice shoes, but I’d rather be wealthy than look wealthy.” So, I love your point, and I love the book, The Millionaire Next Door. I think it’s one of those books that sets up your foundational thinking going forward. You mentioned compound interest. Was this your son-in-law that was at 25 years old had the $75,000?

Doug Carlsen: Stepson.

Josh Mettle: Stepson. Okay.

Doug Carlsen: Yeah.

Josh Mettle: What I love about that is that you created a vision. So, you walked through what is $75,000 equal today, and if invested prudently and left alone for 40 years or 30 years, whatever it was, what does that look like and what are those dollars going to be in future dollars? Fifty-four thousand dollars a year for the rest of your life. And so, you created a vision if you will, to the other side of the tunnel, right? All we kind of see is the tunnel going into the hole. We don’t see the other side, and I love that you were able to create that and use that as an illustration. I think that helps people with debt avoidance, with putting off the instant gratification if they can see the other side of the tunnel.

Doug Carlsen: Yeah. I’m going to interject something here for a minute. I talked about myself at the beginning, but I did not talk about the fact on what I did do and what my first wife and I did is we saved consistently at least 15 percent every year. That was our savings grace. We were watching it carefully, but that money was compounding over a period of time such that after 20, 25 years of saving, all of a sudden, I looked down and went, “Oh, my god. We’re here.”

Josh Mettle: We’re here.

Doug Carlsen: It’s much more than what I really expected it to be. We’ve been saving. I wasn’t watching that carefully. Of course, I watch my personal finances, but it’s the same thing. It compounded to a magical amount of money.

Josh Mettle: Yeah. That’s beautiful. And then, just the last note that I took down on the three things that you mentioned was the debt avoidance, putting off instant gratification for eventual gratification, and to me, that kind of comes down to the “Why.” When I say the “Why,” I mean when you think about that new Audi, or that new Porsche, or that new cool car now that has a very emotional charging, exciting addictive feel.

Doug Carlsen: Exactly, totally. Yeah.

Josh Mettle: But if you can envision what that money invested or what it’s going to feel like to retire with a very secure and no worry of financial – you know, very financial freedom feeling, whatever that looks like, whatever that long-term objective is. I think that should be clearly defined and kind of thought through because then when you get into these emotionally charged moments, where there’s a really cool new Porsche, you can go, “Okay, what’s my big why, and where is that down the road, how does this fit into it?” Great. I loved those. Those are such good advice. I appreciate you uncapping those.

Doug Carlsen: Sure.

Josh Mettle: All right. So, let’s move on. We’ve got so much good stuff to cover. The other thing that was really interesting to me is that you uncapped six personal habits of the super saver dentists. And I found that applicable to physicians and really anyone with relatively high income. So, can you tell us a little bit about how you discovered these six habits and what are the six personal habits of the super saver?

Doug Carlsen: Yeah. In really constructing this article, I talked to about two dozen early retiree dentists, and again, these things just popped out. They were common, almost everybody, not everybody but a lot of them. Since then, I have access to well over a hundred, and they have the same commonalities, and again, it’s Millionaire Next Door, it’s in Jim’s new book. It’s basically delayed gratification, what we just talked about. As far as cars. Most of them paid cash for cars, not all of them. Some of them got zero down payment. Some of them bought new. I have a tendency to buy used. I like to have that depreciation gone before I buy it. I’ve never had problems with a 2-year-old used car, but a lot of them bought new.

Interestingly, this is my first point, interestingly in retirement, a lot of them have luxury cars now. In other words, they’re not cheapskates their whole life. They may downplay spending for their career, but once they get into retirement, most of them are enjoying it.

Josh Mettle: Sure.

Doug Carlsen: Not hoarding things, not being cheapskates. So, cars is number 1. Number 2, pretty much all of them bought one home and remained in that until retirement. But that’s about age 50, so throughout their practice, they hung on to the same home. What happens with a lot of doctors is they get loans paid off like their practice loan in particular. For dentists, they will actually buy a practice, a lot of physicians don’t. But when things are going well, “Hey, honey. Let’s buy a new home.” So all that money that could be put towards savings is put towards a new home. I know you’re in real estate. You understand that, too, but people spend an awful lot of money on upgrades and maintenance for big homes.

Josh Mettle: Agreed.

Doug Carlsen: We all know that. So, they bought one home and remained in it until retirement. Where are they living now? Most of them on golf courses and much larger homes. The third thing, all were massive savers. That’s really the key, and that was the key for me. I was between 15 percent and 20 percent every year. A lot of these people were 25 percent that they saved per year.

Josh Mettle: Yeah.

Doug Carlsen: That’s the key indicator. They all paid off their credit cards monthly. I think that’s a given. All had at least one of the spouses monitoring the budget. In other words, there was there was one saver in the couple at least. This is with all of these, 100 percent of them. Investing – investing was all over the place. Now, this group I originally looked at in 2007 and a lot of us still had traditional brokers back then. That was seven years ago. A lot of them have changed, you can go to index funds with discount brokers such as Schwab, Fidelity, Vanguard at this point in our lives, but they were all over the place. Some actively – had funds actively managed, a few traded, a few were in investment clubs. The savings, though is what the key thing was. In this day and age, I would not recommend anything personally other than index investing. We’re not really going to get into that today, but they had different methods, and they still came out ahead. So, that’s the six habits of the doctors that did well.

Josh Mettle: So, when you’re saying massive savers because to me, it all comes back to that, and my belief is if you start with that habit regardless of what that 10, 15, 25 percent looks like, you – and this is really the lesson from the Richest Man in Babylon, is you just start. You discipline yourself to start, and then, you start to get momentum, and then, it starts to get fun and like you, 25 years later, you look up and you go, “Oh, my Lord. Look at what we’ve created.” So, when you say massive savers, and many of these folks that you interviewed were 25 percent of their income, is that 25 percent of gross or of net?

Doug Carlsen: That’s their net family income. In other words, what they brought home.

Josh Mettle: Right.

Doug Carlsen: What is on their 1040 Form, not the production of their practice, which could be three times as much in a lot of cases.

Josh Mettle: Sure.

Doug Carlsen: No. If it’s somebody who’s a dentist or a physician in a private practice and produces $1 million, they may be bringing home $300,000, so 25 percent of that $300,000.

Josh Mettle: Got it. In The Richest Man in Babylon, there’s a very interesting formula for budgeting, which isn’t really managing the budget all that close, but it’s the concept of paying yourself first. In your interview of these dentists and different folks that you were talking about, that were the super savers, did that ever come up where they were paying themselves first or covering all the rest of the lifestyle bills and then paying themselves. I’m just wondering if that was a trend that maybe you detected somewhere.

Doug Carlsen: Almost all paid themselves first. In other words, they had this vision. In fact, my wife and I had this vision: It has to be at least 15 percent. If we can do more, great, but it’s got to be 15 percent – whatever we have to do to do that, we will make sure it happens absolutely.

Josh Mettle: That’s a key, and I think‑

Doug Carlsen: Yeah.

Josh Mettle: It’s subtle, but it’s often overlooked, and this is just a little habit that we have. When a check comes into the checking account, there’s always a debit immediately. There’s never an in without an out. That debit is whatever our target saving percentage is over to savings. So, literally in the check register, which in my family, my wife administers, you’ll always see an incoming and then an outgoing right below for whatever percent, and then what’s left is what we have to live on. And then, we can make decisions. Do you get the purse? Do you get the shoes? Do we get to take the trip? But it’s always on the post-savings nut, instead of the whole picture, and if there is anything left over after the purse, the shoes, and the trip, then we’ll save. So, that’s a real, just a little nugget of wisdom which I’m glad we got to touch on.

Doug Carlsen: Yeah. I’m glad you touched on it because that’s really important and the fact that you and your wife talked about it rather than just spending and dealing with the repercussions later is really important. I have this thing where I tell couples that you set a dollar amount, $500 to $1,000, whatever it is. If you want to purchase something more than that, we both need to agree on it. In other words, you have to wait for it.

Josh Mettle: That’s right, and that takes thought and discussion and deliberation.

Doug Carlsen: Yeah, same thing.

Josh Mettle: Great. Okay, great. Well, Doug in another insightful article that you wrote, this one was titled, Financial Mistakes to Avoid in Your 30s and 50s. I love these. You lay out some big no-noes, my take away was no-noes that’s my term, not yours, but I like to ask you about three of them that jumped off the page to me. No-no number 1 that struck me has to do with young medical professionals in their 30s spending without a budget. I know we’ve talked just a little bit about that, but maybe tell us a little bit more about that mistake and a simple way to think through a budget for someone who’s just getting into this thought process.

Doug Carlsen: Yeah. I’m going to go through this fairly quickly for time considerations here I think and that’s probably even better. What I did is I wrote down notes for a dentist just out of dental school, a resident out of their medical school or an attending. And dentists normally out of school make about $7,000 a month after taxes are taken out.

Josh Mettle: Okay.

Doug Carlsen: He’ll be making $120,000, $100,00, but by and large about $7,000 is what they have as earned nuts. Residents, it’s about $3,500‑

Josh Mettle: Yeah.

Doug Carlsen: Quite a bit less. Of course, attendings, once you really get your first real job, often it’s about $15,000 and this is after taxes that you have. There’s a big difference.

Josh Mettle: Sure.

Doug Carlsen: When you’re first out of school, you have some basics. Rent maybe $1,500. Car payments a couple of hundred, student loans can be $2,300 for $300,000 over 25 years, $2,300. Auto insurance, maintenance, gas, etc. is about $200, groceries $300, utilities $500. That all adds up without the student loans go about $2,500 a month. This is what residents face: $2,500 a month. They got $3,500. They got $1,000 left over for the other things: clothing, dining out, sports, concerts, vacations, gifts, and savings. They’ve only got $1,000 for all those extra things that they’d like. Residents have to really, really cut it down to the bone. They have to be very careful. They really can’t have a new car and make car payments. Probably they’re going to have an income-based repayment on their student loans to begin with.

Josh Mettle: Right.

Doug Carlsen: They can’t afford $2,300 a month. Residents have it tough. Dentists getting out, if they’re paying off their student loans at $2,300 to $2,500 a month, that’s $5,000 that they have, and they’re only making $7,000, so still they only have $2,000 left for these extras like dining out, vacations, gifts, savings, that sort of thing. They’re hurting for the time being.

Josh Mettle: Yeah.

Doug Carlsen: Can they save? Yes, they actually can. They can save on their student loans. They can kick in more money, as long as they’re not spending a lot of money on cars or homes. So basically, we’re coming back to that $5,000 amount that’s needed including student loans once you get out. Attendings have it better. All of a sudden, they got a lot more money, maybe $8,000 or more dollars per month out of pocket that they can spend on things. It could be a home. It’s a really good time to buy a home. You can be spending $3,500 to $4,000 a month and still have at least $5,000 a month more to pay down your student loans. I think that’s the key.

A couple of other things here, I really think that when you’re out of practice, first of all, you need an emergency fund. That’s usually six months of your budget. For dentists, it’s about $100,000 a year, is what their budget is. For attendings, it can be a $150,000 to $200,000. Dentists really need to get, as soon as they can, and I normally tell people before you buy a home, they have $50,000 in money market funds ready for medical or special emergency that can be a medical problem, it can a spouse losing a job. Attendings probably need $75,000 to $100,000. This is in easily obtainable cash. Residents, I think $5,000 is probably enough. That covers a car that goes kerplunk or a minor medical emergency. That’s basically it in a nutshell, where to go in the beginning.

Josh Mettle: I think it’s great. My big take away from that is that, you know, you’ve broken it down to the basics of what those living expenses are and just by simply putting that down on a little notebook, a little yellow piece of paper, wherever maybe you journal or keep your thoughts, you’ve started the thought process of, “How much cash do I have coming in, how much cash do I have going out?” And as soon as you start putting attention on something, or you start measuring it, you’re going to do better in that area than if you just completely avoided it and didn’t take the time to do it. If you haven’t done that, I think it’s so important, even in its – I mean there’s a million software programs out there, but even in its most simplistic form to just write out what your monthly outgoing is versus your net ingoing and start thinking about how to shave off and tighten that up a little bit, I think it’s important.

The next thing is ‑ and feel free to correct me if you think that I’m wrong here is, I want to encourage young dentists, residents, newly attending to start the savings early, even before newly attending, to be honest. Even if that’s 10 percent, and so you’re looking at $3,500 a month income and 10 percent is a couple of hundred bucks, even if it’s 5 percent, the point is not how much money. The point is start – getting pointed in the right direction. You’re on the right path if it’s $50. I know that seems so insignificant, but the point is if you don’t ever get started, which is the biggest mistake that I’ve seen my clients make, is that they look up. You looked up in your 50s and say, “Oh, my gosh, look how much you have,” because you started down the road.

I have had an unfortunate number of clients who never got started down the path, and they never got started with $50 or $350. Thirty years into their profession, they look up and go, “Oh, my gosh. I never got started.” So, I just want to make that point that starting early with the thought process of a budget and even if it’s a ridiculously small amount of savings, I think starts to give you vision of where you’re going, and you’ll gain momentum naturally.

Doug Carlsen: I agree with that. I’m more into the debt process and taking care of that to establish that debt is not a good thing to have, more than savings at an early age, but I think that’s a really good idea. A small amount to put away I think is very important, especially if you’re working. MDs in particular may be working with somebody who has a 401k plan with matching funds. You always take those.

Josh Mettle: Sure.

Doug Carlsen: Absolutely always take the max of that. I don’t care how much or how little it is. It’s foolish because it’s ‑ to not take it because it’s free money, so absolutely take that.

Josh Mettle: Yeah, absolutely. Okay, so this is an interesting one. In your 50s, you list divorce as one of the big mistakes. I love that. Just tell us a little about that mistake and your thoughts on it.

Doug Carlsen: That is really a tough thing to cover. I have not been divorced. I was blessed to have a really good first marriage. My second marriage is going along great, but so many people get involved in that, and who’s really to blame? You can’t you can’t call it. It’s just a really unfortunate. It’s the most traumatic thing that doctors can go through other than losing their license. It’s the most traumatic. You’re going to add 5 to 10 years to your working career if you go through it.

I have secret accounts listed on one of my sheets here. Secret accounts is something that seems to be very common, and before you get married even, please go through debt with your potential spouse. Go through what you owe. Put everything out there, how ugly it may seem. My wife had some ugly credit card debt before we got married. We got that taken care of and settled on what we were going to do with it. This is my second wife.

Talk about it. Talk about your plans for the future. When are you going to retire? Where are you going to leave? How big of a home do you have? How many kids? Secret accounts are widespread, and I tell you, they almost always lead to divorce. That’s a huge thing for me.

Josh Mettle: It’s a good one, and I like that‑

Doug Carlsen: Yeah.

Josh Mettle: Intentional thought on, you know 5 to 10 more years of work to get you back to where you were before the divorce. It just puts things in perspective.

Doug Carlsen: I had another little note here about adult children in particular, which Tom Stanley goes into in his first book. It’s a chapter that I almost didn’t read in The Millionaire Next Door. It’s called economic aid to children. Oh, my god. Us doctors get into that, we work hard. We’re not at home as much as we’d like to be. We throw money at our kids.

Josh Mettle: Oh, boy.

Doug Carlsen: And there are so many kids out there that are being spoiled by their parents or living at home in their 30s. That’s something that’s going on in America anyway, but especially with doctors. Every now and then, I come across somebody who’s a doctor who says, “You know what, I live in Santa Monica. I really would like my kids to be able to live in Santa Monica also or La Jolla. You know, I’m a West Coast guy.” These are really expensive neighborhoods where homes are $1 million to $1.5 million. “I really would like my kids to be able to do that, to be able to live there. So, I’m going to take care of them.” Rather than, really the greatest gift, is to provide the education and tools for your kids to be able to be self-sufficient wherever they live.

Josh Mettle: Very good point. Excellent point.

Doug Carlsen: Yeah.

Josh Mettle: All right, well, last but certainly not least here, I’d like you to talk to us just a little bit about the mistake of trying to beat the market because you might feel that you’re behind in your retirement savings.

Doug Carlsen: Man, is this a big one.

Josh Mettle: A big one.

Doug Carlsen: So many guys, I know so many doctors I’m 63, that are age 60, and they really got battered in 2008. They got out of the market. They didn’t get back in. They didn’t stay in the market like a lot of us did, and we’re fine. It’s like, “How in the heck do I catch up?” Well, active investing and trading is a real losers game.

A couple of quotes here, Dan Kahneman of the University of California did a study for American Association of Individual Investors Journal, which I subscribe to. It’s a really neat journal, all about different types of investing. He says, “Every action the individual investor takes has a negative expected value. Every action the individual investor takes has a negative expected value.” In other words, if you mess with stuff, it may be fine for a while, but not for long. He goes on to say, “On average, they lose, and the more ideas they have, the more they lose.” Doctors are extremely intelligent. Most of us have high math IQs. We know we can beat the system, but you can’t, you can’t. You’re up against the machines that the large corporations use that do investments in 0.007 of a second. They arbitrage back and forth with pennies and make a fortune. We can’t compete with them, but we’re smart and we think we can emotionally.

Another remark by Chris Gay of U.S. News and World Report 2002 in a money article, “The average investor underperformed the S&P 500 by an annualized 4 percent over the last 20 years. This is from 1992 to 2012. They underperformed the S&P 500 by 4 percent. In 2011 alone, the average stock or equity investor lost 6 percent compared with 2 percent that the S&P 500 made positive.”

Josh Mettle: Wow.

Doug Carlsen: In other words, they were 8 percent under. You can’t really do it by trading and investing, by rotating sectors, by fundamental or technical analysis. You can’t beat the system long term. You may for a short term, but not for the long term. As far as beating the market and catching up risky investments, I have listed here: gold is the dentists’ favorite. Doctors, MDs in particular, love hedge funds, oil and gas, LLCs, private investments peaked up in the last couple of years. These are not public. Public is stock exchange obviously, but private investments where your money is held longer, it’s a lot more risky, yeah, you may make bucks, but oftentimes, you lose. So realistically, I think it’s really important not to time the market. Do not. Buy and hold modern portfolio theory was especially proved in 2008, especially.

Guys that I like to read: Larry Swedroe, Rick Ferri. I’m going to actually spell these out. Swedroe is S-W-E-D-R-O-E, and Rick Ferri, F-E-R-R-I, John Bogle B-O-G-L-E, and Burton Malkiel, last name is M-A-L-K-I-E-L. Burton Malkiel wrote A Random Walk Down Wall Street back in the ‘70s. You know there’s probably 10 versions or reprints of that. He’s an old guy from Princeton, an economist. I wrote him an email about five years ago, and it took me about 20 seconds to get a reply from the guy. An amazing man. He’s a Nobel Prize winning or if he’s not Nobel Prize winning, he should be.

These guys are all academically based. They’ve watched things over the years. They have a really, really strong sense of what’s going on. Obviously, Warren Buffet says the same thing. He says, “Individual investors should be in the index funds.” He doesn’t talk about Berkshire Hathaway. He talks about index funds.

Josh Mettle: Yeah.

Doug Carlsen: For individuals.

Josh Mettle: I always know it’s a good interview when we’re going strong, and we’re over in time, and I feel like we could go on for a long time. And so, I think the best thing that I can do for our listeners, Doug, is first of all to thank you, and then second of all tell our listeners how they can follow you and connect with you and potentially ask you questions and be prudent with your time of course. But how would you like them to reach out to you?

Doug Carlsen: A couple of different ways. Let me get my microphone set, a couple of different ways. Phone number (760) 535-1621, again (760) 535-1621. Yeah, I know this is a podcast, so you can back up, but I still like to do it that way. Email is drcarlsen@gmail.com, all run together, all small caps, no periods, D-R-C-A-R-L-S-E-N @gmail.com. Also, I’ve got a fair amount of information on YouTube. To find me, you can just go to YouTube, and in the search, put Dr. Doug Carlsen any way you want, D-R-D-O-U-G-C-A-R-L-S-E-N or Doug Carlsen will work. You’ll come up with my channel. There’s about 25 videos, I think on there for various things like the mistakes that we just talked about. There’s videos on the mistakes dentists make. That should do it.

Josh Mettle: That’s great, and we’ll put all your contact information directly into our podcast transcription and notes as well, and Doug, I appreciate your time and your generosity in sharing these thoughts and unpacking these articles with us, and you know more than anything, for what you’re doing for the medical profession and we appreciate you and thanks again. It was great and I’d like to connect again with you soon.

Doug Carlsen: Sounds great. Thank you so much for doing a great interview, Josh. I appreciate it.