Optimizing your balance sheet with Michael Schwartz and Alex Nosal

Tuesday March 19, 2019

Tune in to hear as Josh chats with Michael Schwartz and Alex Nosal and learn:

 

• What is financial balance?
• How do I get financially coordinated?
• What are the four financial domains?
• How do I maximize the efficiency of every dollar?
• What are possible financial threats and how to alleviate them?
• How do I maximize my maximum wealth capability?

 

Mike: The work we do is really all about helping people and providing somewhat of an intangible resource to the general public out there. And what we find, and what I’ve really learned over time, is everybody wants to have financial security, they wanna have financial success in their future.

Mike: They wanna have financial freedom someday, where they don’t have to work because they need to, they work because they want to, or they can actually retire. People care about this stuff, they wanna do this sort of thing, but until they have somebody in their life who’s gonna be their guide and their leader, most people don’t have the financial success that they wanna have.

Recorded Intro: 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.

Sponsor: This podcast is sponsored by the Physician Group at Fairway Independent Mortgage. Fairway recently expanded their Physician Home Loan Program to encompass other medical professionals including CRNA, RN, nurse practitioners, physician assistants, veterinarians, dentists, and a host of other medical professionals.

Sponsor: Basically, if you have an advanced degree in the medical field you’ll likely qualify for our medical professional program and we’d love to hear from you. We invite you to reach out to us through our website, which is fairwayphysicianhomeloans.com, or you can call us at our direct line: 855 260 9932.

Sponsor: We’re here, and we’d absolutely love to hear from you.

 

Josh: Today we’ll be talking about Michael Schwartz and Alex Nosal, comprehensive financial strategists with Northeast Planning Corporation and they specialize in serving physicians and other medical professionals. So Mike and Alex, how are you guys doing today?

Alex: Doing well, thank you Josh.

Mike: Doing great here. Happy Friday morning.

Josh: Happy Friday morning. Alex and I serendipitously are in south Florida and just accidentally about 15 minutes away from each other. I’m out here on a family vacation so good to have you, and Mike, where are you out of?

Mike: I’m in New Jersey but I actually just came back from Florida myself on Tuesday, had a little vacation myself, but not as far south as you guys. We were in Destin on the panhandle. [crosstalk 00:02:29] Little bit of golf but not as warm and sunny as it is for you guys down there.

Josh: Well I’m glad you guys could make it for this fun little call today and podcast. Let’s just start out, I know we’ve got kind of a great, Mike you’re going to lead us on some exciting stuff with the living balance sheet, but I want to just start out understanding just a little bit about you guys. How you got started with financial planning and then eventually how did you start focusing on serving physicians.

Mike: Alex, why don’t you go first since your story’s a little better than mine.

Alex: Sure, sure, sounds good. Well I didn’t with Northeast now because that’s my 14th year of practice with the firm but before I had gone into the overall personal financial planning realm, I actually worked in a bank when I was finished college and basically worked with customers and kinda liked the idea of working with money and trying to help people put everything together what they needed to, but there was something missing.

Alex: So I worked with the bank for about 2, 2 1/2 years, wound up going on a number of interviews and wound up meeting with the owners of Northeast Planning and fell in love. And you know, this is exactly what it is that I want to do with my clients which is how I want to try bring value to the individuals that I work with. So when I started work with Northeast I didn’t have a market that I had worked with. I didn’t have individuals that I had worked with on a regular basis but I knew I wanted to have a certain niche to work with.

Alex: And actually when I was in college myself, I was on a pre-med track, I wanted to be a doctor. When I was in my late teens I had a procedure and I loved what doctors are doing and I felt like this is something I might like to do for my own career as well. Once I took organic chemistry and did some of the labs I realized it was not for me. I look at medicine as a calling and it’s not really a job but I just wasn’t called to medicine so I got away from that and I stuck with finance.

Alex: But yeah, so I started with working with Northeast. It was about a year or two years before I actually got into my niche, but I had lunch with my uncle one day who was actually a practicing physician in New Jersey and he unfortunately suffered a permanent disability himself. So he and I had spoken, he had a thriving practice for about 33 years and unfortunately he had a bad situation happen to him. So he just told me, he said, “Alex, you know, doctors we really are taught how to take care of everybody else but we’re not taught how to take care of ourselves, physically, financially.”

Alex: So he said work with the younger residents, fellows, early career physicians, they need this guidance. They need somebody to turn to so they understand what they should or should not do with their money. You know, they spend a hundred hours a week plus working as residents, as fellows, making no money and all of the sudden you have significant debt, and all of a sudden now they have a significant contract, more money coming in and there’s just a lot of uncertainty going on.

Alex: So he had had said, really just bring this idea of bringing value to physicians, to understanding, have them understand what it is they should do for their own personal lives with overall planning. So really he’s the one that kind of opened up the doors for me to work with the docs and then I guess 12 years later after that, now I’m working with a number of residency programs across the country. I do some business solutions talks with a leading oncology group in Dallas and you know, just really helps young docs educate the do’s and dont’s of overall financial planning.

Josh: Wow, that’s a great story.

Alex: Thank you.

Mike: Awesome. Yeah, my story’s not as direct as Alex’s but this is I think similar to Alex. The only sort of career and calling that I’ve had in my life, so I went to a school called Duke University down in North Carolina, moved back home after graduation and I really had no clue what I was going to do. I knew what I didn’t want to do because my Dad was an attorney and I knew I didn’t want to go down that path because you know, he did that, my sister ended up doing that so that wasn’t my calling.

Mike: Got introduced to a financial planning firm and saw it as a way to not just, you know, make a living but also to be involved with the general public and give back to the general public and what I’ve learned over the, you know, 12 plus years I’ve been doing this, is that the work we do is really all about helping people and providing somewhat of an intangible resource the to the general public out there.

Mike: And what we find, and what I’ve really learned over time, is everybody wants to have financial security, they wanna have financial success in their future. They wanna have financial freedom someday where they don’t have to work because they need to, they work because they want to or they can actually retire. People care about this stuff, they wanna do this sort of thing, but until they have somebody in their life who’s gonna be their guide and their leader, most people don’t have the financial success that they wanna have.

Mike: And that’s led me a lot of times to work with a lot of doctors where Alex and I have a lot of clients together who have that sort of physician background and what I always see is physicians know what they know, either their specialty and they’re, you know, highly trained in their field. They also recognize they didn’t go to school for personal economics and that’s the role we play in their life and that’s really our passion is to be that resource, be that almost, kind of, family CFO for our clients and you know, that’s kind of where we’ve gotten to where we are today.

Josh: Yeah, I think that’s a great point, you know. It’s I guess interesting to me that we can get so sidetracked on medicine or family or business or what have you and not really take the time out to think about where do I want to be financially in 20 or 30 years? When do I not want to have to practice medicine or when do I not want to have to work and I do it because I love it or I want to, and what’s the plan that’s going to get me there?

Josh: And I think it’s a great point that you brought up. Oftentimes it takes a mentor, a family CFO, as you put it, that take somebody by the hand and say, “Look man, we’ve got a finite number of years between now and when your economic lifespan is over and we gotta have a plan and we gotta get movin’ down that path.” So I think that’s a critical role and I think you articulated it really well.

Mike: Yeah, absolutely. We joke a lot of times with our clients or in our office that you know, we’re all running a million miles an hour every day during the week between business and family and then we get to the weekend and we’re running two million miles an hour. I know, Josh, you have a couple of kids, Alex and I have young kids and they control our lives and there’s just no free time.

Mike: And so it becomes inherent in our society where it becomes hard to kind of keep track of our financial lives. And it’s not just setting the time to do it but there’s so many financial decisions we’re making over time that have a ripple effect not just in our life today but over the next 30 to 40 years.

Mike: Actually yesterday, I actually sliced off like an hour of my time in my calendar, like I booked a meeting with myself, to make sure I got all my tax documents together, I got it over to my accountant’s, and if this is what I do for a living and I still need to schedule into my meeting, into my calendar, I can only imagine how it is for all of our clients and everybody else to try to figure this stuff out.

Josh: Yeah, no doubt. Well, with that, let’s kind of set the stage for today’s show ’cause we’re going to do it a little differently than normal. As I mentioned, we like to try to pack these into 30 minutes. We get a lot of value for our position of medical professional listeners with the shortest amount of time expenditure.

Josh: So what I thought we would do is turn the show over to you and Alex and you can share your screen whenever you’re ready, Mike. You guys have given me a demonstration before of the living balance sheet and I’d love you just to kind of explain that, and I think you’re going to do it in such a way where you actually tell a few actual real life physician client stories.

Josh: So with that, if you want to take over, Mike, and then I’ll ask as many questions as I can come up with to make sure that it’s really easy to understand on the other side.

Josh: By the way, guys, this is a podcast format but we also film this in video so if you’re on our podcast site you should see a link to the video where you can get the visual but we’ll try and articulate it in words so that even if you’re not looking at the video you’d be able to understand as well.

Mike: Awesome, sounds good. So, Josh, I just did the screen sharing. Looks like you guys can see what I’m looking at now?

Alex: Mm-hmm (affirmative). Yes, Mike.

Josh: Perfect.

Mike: Awesome, great. Great, great. So as we mentioned one of the things that becomes, I think, really difficult to deal with over time, is the coordination of all parts of our financial picture and the way we kind of think about it with our clients is they have all these different financial institutions that they work with but all those institutions really make up their personal economy, okay?

Mike: So Josh, you have a personal economy, Alex has a personal economy, myself and my family, we all have a personal economy and the only way we can optimize the wealth that we’re building and the utilization of those dollars is by having really maximum efficiency of all those pieces of the puzzle, okay?

Mike: And this is where we find with clients who are when they first come to us a lot of times they tell us, you know, “We’re making good money, we feel like we’re doing a lot of the right things, but we just don’t feel like we’re moving as fast and developing the way that we’d want to.” You always feel like you’re almost a step behind. And the reason that occurs a lot of times is because the way most people manage their financial picture is very transactional, it’s very kind of just kind of checking off the box, okay?

Mike: And so we aim to really flip that paradigm so that every financial decision that our clients make is fully integrated and coordinated with all parts of their personal economy to allow them to know they’re doing the best that they can for themselves and that they can verify that they’re on track to create their best financial future, okay?

Josh: Great.

Mike: And that’s where what you see here on the screen becomes, you know, a key component of how we work with our clients. This program called the living balance sheet that acts as kind of a, a couple different roles, but on one hand is kinda what you see here in front of you, it’s just a financial organizational system, okay? And a lot of times client comes to us with their first meeting and they’ve got almost 10 different files. It’s almost like a junk drawer type of approach where they’ve got their investment statements, they’ve got their insurance statements, they’ve got their benefits through work and they’re just kind of pulling out the files and saying, “Here’s what I’ve got” and they haven’t actually had a conversation of how it all fits together, okay?

Mike: And that’s the first thing we always try to do, is help them get organized, see where everything stands together in one kind of neat, secure location and then from there this becomes almost our laboratory. This is where we go to stress test all the different financial decisions that they make over time, okay?

Mike: So I want to pull up here, Josh, and I know on this screen sharing hopefully this works but as you mentioned, I’ll do a lot of talking but I will also talk a little bit with my pen here so those of you who are watching on your phone or your iPad or your computer can kind of see some, you know, real life examples here. So this really coordinates in with I think a lot of the work that you do, Josh, where a lot of the times we have clients who are trying to buy a home, okay? And it’s a big financial decision that has humongous kind of ripple effects both today and going forward for themselves, okay?

Mike: So what I mean by that is if they’re buying a home they’re now adding an asset down here in real estate, okay? They’re coming up with a down payment or they might be taking money from their savings or their investment accounts, okay? So they’re transferring money from one bucket to another. So they’re now buying a home but now they’re losing perhaps a rate of return that their savings or in their investments could have been earning because it’s now in their home, okay?

Mike: At the same time, they’re working with you, Josh, to take on a mortgage, okay? So there’s a mortgage decision involved. Should they have a 15 or a 20 or 30 year mortgage? And now because they’re taking on that mortgage there’s a debt showing up on the liability side here. They have now, during the process, they’re going to be buying some homeowner’s insurance up here and so now they’re making an insurance decision. That insurance decision is now also affecting their cash flow because now they’re having some sort of insurance cost involved.

Mike: They’re making a decision a lot of times, I’m sure you see this a lot too, Josh, on the fly, okay, they’re calling up their insurance provider saying, “I need to buy a home, need to get something to qualify for my mortgage.” They put something in place and never think about it again, okay?

Josh: Right.

Mike: Since they’re buying a home now they’re also getting, adding a cash flow liability cost, a new debt on their balance sheet, and that debt could be favorable for them. Sometimes in some areas it’s actually more cost efficient to buy than rent in high rent areas. A lot of times though we find that they’re paying a thousand a month in rent and now their mortgage is going to be three thousand a month, so that’s changing their cash flow but it’s also now giving them a little bit of a tax deduction so it’s changing their tax structure, alright?

Mike: So all this sort of stuff is happening at the same time and that’s why when we think about what our clients are doing we want to have this overall coordination of all parts of their financial picture and that’s where the living balance sheet really comes in. To be this kind of home page so we can see this ripple effect, see the pros and cons of every decision our clients make, and make sure we’re able to stress test and verify that what they’re doing is going to put them in the best possible solution.

Josh: Well, and just one other thought as you’re going through this, the mortgage is one thing because you’ve got an asset and of course it offsets what you were paying in rent and maybe there’s some tax deductibility, but where I can really see this being, I think using the words that you said, a great stress test type of tool. And Alison and I are in South Florida so let’s use the idea of buying a boat or a yacht because we’re surrounded by million dollar yachts down here.

Josh: I think what’s really neat about this is I think people are pretty good at looking at what they’re monthly impact is of a buying decision. I buy a boat, I amortize it over 15 years, it’s gonna cost me whatever, 500, 1000, 2000 dollars a month. Well, that fits within my monthly cashflow or disposable income so let’s go ahead and buy the boat.

Josh: But what you’re showing here is I think giving clients an ability to look at a longer term perspective and say, okay, what does that 1000, 2000 dollar payment have in terms of longterm impact on your net worth and what’s it really going to cost you? Or where could it even potentially push you back from your financial goals and the age at which you want to be working because you want to, not because you have to.

Josh: Is that right? Am I getting that correctly?

Mike: Yeah, yeah, exactly. The bottom line, the end game of everything that we do in our financial life is really based around here. It’s trying to build our maximum wealth potential. To increase our net worth as much as possible. But it’s also around how we can utilize our net worth too. So as we build money we want to make sure we’re protecting our assets and our wealth building capability from any sort of threats or risk or erosion factors over time and we want to make sure that we’re kind of basing our decisions in science and factual information, not just hoping and praying.

Mike: And so Josh, it’s exactly what you’re saying. A lot of times we find a client buying a car, buying a boat, making lifestyle decisions to go on vacation, which are things that are I think really important for us to be able to all enjoy our life today and not just always be worrying about tomorrow, but there’s always some sort of consequence both either good or bad, to these financial decisions we make.

Mike: So a consequence that could be negative is if my car that’s just going to cost me too much a month and it might be adding a liability over here that’s reducing their net worth. They might have a big debt cost that’s reducing their ability to save every month now and because they had to buy that souped up Mercedes and it’s hurting their financial future, okay?

Mike: Vice versa there might be a decision where a client’s now investing in a business and it could create a lot of wealth for them if the business value increases or they could start their own business or start their own medical practice, let’s say, and now they not only have a business value here but they can substantially increase the income that’s coming in the door, allowing them to not just live a better lifestyle but to be able to save a lot more, put a lot more money onto their assets and their balance sheet over time.

Josh: And potentially reduce their tax burden if they move out of a W2 status, right?

Mike: Exactly, yeah. 100%

Josh: So what I’m gleaning from this is this gives you a way to take a holistic approach of stress testing or analyzing a financial decision and having a sounding board as a financial advisor to discuss the longterm implications of any of those decisions, whether it’s buying a house, a car, a business and really think through how it impacts all of the pieces of the puzzle.

Mike: Exactly. Yeah. What this allows us to kinda look at is these four kind of interconnected financial domains that we all have in our personal economy. So be able to list all of our different assets on the left here in lieu, subtract out all the different liabilities to show our net worth. As we mentioned, the goal is always to increase that net worth as efficiently as possible with as minimal risk as possible.

Mike: And that net worth, really wherever we stand today, it’s the accumulation of all the different financial decisions we’ve made to date. And that’s where the kind of balance sheet kinda concept arises where accountants a lot of times put together balance sheet for their business clients, and we do the same for our business and personal clients.

Mike: Why it’s living though is that net worth is always changing. It’s different today than it was a month ago. It’s going to be different a month from now. And because our personal economies are living, breathing organisms that are constantly changing, we need to almost over-engineer these economies to make sure we’re maximizing the assets that we’re building.

Mike: And that’s why we add this kind of cash flow foundation here in green since our cash flow is what’s going to build our assets over time and help us to pay off our liabilities. And then we want to have this kind of protection roof overlooking everything in gold so that we almost have a bulletproof force field around our personal economies so there aren’t any unexpected events or unplanned scenarios that could take money off our balance sheet or add a new liability to our balance sheet.

Mike: And that’s really where our work comes in is you know, the people we meet with, especially doctors who are working hard and they’ve gone through a lot of schooling and they have all of these different moving pieces of their personal economy without a way to really figure out how it’s all kind of coordinated together. And that becomes our job, our role, to kind of sit with them at the table, hold their hand to figure out where do they stand today? What’s working, what’s not working? And then we use the living balance sheet as kind of our financial x-ray system to stress test what they’re doing today, what’s working, what’s not working, where can they make improvements, where are there threats that could prevent then from getting to where they want to go, where are their opportunities that they can capitalize on.

Mike: And then behind the scenes, this becomes our laboratory. This is where we go to kind of stress test everything our clients do so that they know the decision they make today is going to be what’s best for them now but also be best for them 30, 40, 50, 60 years from now.

Josh: Great. Love it. You said that you had a couple of real life clients before and afters I think that you were going to show us. Can we talk about those?

Mike: Yeah, absolutely. So I’m going to pull one up now here. It’s kind of a sample client that we looked at here and kind of give you the before picture and then show you the after picture in a minute. Kind of quick background, this client came to us when they were just finishing up their residency, husband and wife, husband’s a doctor and the wife’s was a salesperson for a hotel company.

Mike: When we first sit with people we like to really learn a lot about them and not just their financial picture but what are their goals and objectives? What are they trying to do, you know, where do they want to be 5, 10, 15 years from now, 30 years from now? How do they make financial decisions? What kind of experiences have they had, good or bad, in the past? We ask a lot of questions and really get to know then as people and then we kind of dive in with more of the data here and that’s what we’ve kinda pulled up here.

Mike: So I mean it’s very similar to, I went to my doctor the other day and I said, “Well, here’s what’s going on with me, here’s, you know, I’ve been exercising more, haven’t been eating as well as I should, I know that’s the case but I feel pretty good, you know. My cholesterol should be down, I’ve been taking medication.” And then he asks me a lot of questions, took a lot of notes and then he said, “Okay, let’s take a little bit of blood. Let’s check your height and weight and that stuff.” And that’s the same thing we do is ask a lot of questions, learn about them, and then get the hard data information.

Mike: So this is what their balance sheet looked like when we first met them. They had a negative net worth because they didn’t have much in the bank. They had some money in retirement accounts here. I’m going to pull up the link here. On the assets side not too much to speak of. They were living pretty much pay check to pay check. The wife had a little bit of a retirement account through her job and if you look over here they had a ton of money in student loan debt and as a result that was one of the biggest concerns they had where they were really worried about, you know, how are we gonna manage this? How are we gonna pay this? Are these student loans going to be prevent us from being able to buy a house, to be able to do other things in life.

Mike: And Alex and Josh, I’m sure you guys see the same thing, but $150 ,000 in student loan debt is not out of question for a lot of physicians. I’m sure you guys have seen much worse cases than that to start off.

Josh: I’ve seen over a million. What about you, Alex?

Alex: My biggest is 1.3 combined [crosstalk 00:27:14] but I’ve not seen one million for one person.

Josh: Wow. No, this was a dual family and a million. So 150, 000, I think they made it out pretty well.

Mike: Exactly. You could have easily have added a zero there and I don’t think any of us would have been surprised here.

Mike: So we look through when we first sit down with a client is we’re examining where do they stand in a couple different areas that really going to gear them to have a financial success plan. So the main things we look at first are okay, what does their protection look like? The reason being is before we think about 30 years from now we want to take care of today. We want to make sure there aren’t any unexpected events or unplanned scenarios that could throw them off. So making sure in all these different areas, if they got sued, if they got sick, their estate planning if they die, that they have optimal protection full replacement value of their assets and their income, okay?

Mike: That’s something that especially with doctors we find a lot of times is that when we look at their disability insurance, it’s only something they know about and something we talk a lot about, and Alex talks a lot about when he does a lot of presentations, is making sure they ensure their greatest financial resource, which is their income, their ability to earn that income and generate wealth over time.

Josh: Right.

Mike: So there’s definitely some gaps with where they stood today, some huge exposure today.

Mike: Next thing we look is on their cashflow and we want to make sure they’re saving at an optimal rate, at least 20-30% of their income each year. A lot of times that sounds like a big number to people, especially when they have, you know, some student loan debt or they might have a big mortgage. What we find is people want to save they just don’t necessarily have the discipline or mechanism to figure out how to do it and they have a lot of inefficiencies that are preventing them from doing it.

Mike: So with this client, they’re only saving into their retirement accounts and we came up with a couple of different strategies on how they could reduce some taxes, reduce some insurance costs, reduce some of their debt costs so that they didn’t have to necessarily stop going on vacation or stop going out to dinner to be able to save more.

Mike: Third thing we always want to make sure we can do is we can optimize their liquidity so that they can meet their objectives and commitments today. That was one of their big concerns where they said we want to make sure we can buy a house sometime soon, you know, the husband was thinking about starting a business, they were thinking about if we have kids. He was starting, he wanted to think about opening his own practice. They were thinking about if they have kids perhaps the wife might stay home. So that was a big concern and that was something that we also brought to their attention is where we’re saving needs to be more liquid here.

Mike: The fourth thing we always look at is addressing debt situations and ideally we could go through life without having any sort of debt but a lot of times it’s required.

Josh: Good luck.

Mike: Whether, and it’s also a lot of times Josh, you know, you probably say the same thing is having a mortgage, having student loans allows you to own and operate and utilize something that you might not be able to buy all at one time yourself and may not actual make financial sense to do it one time yourself.

Mike: Like if you’re buying a million dollar home, writing a cheque for a million dollars, if you have it, may not be as efficient as actually taking it out a mortgage because of all the benefits that the mortgage could provide as well as the ability to keep the million dollars investing growing elsewhere too. So we talked about that.

Josh: No doubt.

Mike: Yeah. And the fifth thing was we want to make sure they have both capital growth assets such as a retirement accounts, investments, real estate but also have protected growth assets. Money that’s not gonna be exposed to the market or to taxation. It may not give us our best rate of return but it’s gonna be protected and not be exposed to a lot of risk.

Mike: So that’s where they kinda stood. We went through it and they, candidly, probably felt a little bit overwhelmed at the beginning because there was a lot of gaps in their planning, a lot of concerns they had. We talked to them about, you know, this doesn’t necessarily happen overnight. We can’t necessarily go in and say, okay, let’s fully revamp and change the balance sheet but over the course of probably like, six almost seven years and the work, here’s kind of what their balance sheet looks like today.

Mike: So much different. As he came out of his residency program, started practicing and he’s working at a hospital. You can see he’s earning pretty well on the bottom line on the cash flow. They’ve bought a home, they’ve had a child and over the course you can kind of see how they’re balance sheet’s change.

Mike: The first thing we looked at again was on the protection. And over time we’ve made sure they have full protection if they get sued so that they never have to worry about a car accident blowing up their assets. Full replacement of their income if both of them get sick or injured. Their proper estate planning, wills, trusts, living wills, power of attorney and then made sure they have full replacement on their life insurance.

Mike: If you look down at their assets now, as mentioned they bought a home here. It was their dream home. They were really excited about it. They were a little bit nervous when they were buying it but we made sure, you know, they made the right decision as far as like, how much of a mortgage to take. Made sure they didn’t stretch themselves too much but at the same time got into the home and the town they wanted to be in. The retirement accounts have grown.

Mike: But the big thing here, and one of the things I think they’re most proud of, is the fact that their liquid savings has grown. And it’s one of the keys is they’ve been able to do a lot in life such as buy a home, such as feel comfortable with the wife now staying home with their little baby because they’ve had the liquid savings that’s coming around.

Mike: Now one of the things we’ve been talking about with them, as I mentioned, one of their goals was to not just be a regular employee but have some sort of business ownership whether it’s starting a practice himself but what he’s also been talking about is maybe instead of having that stress on his end, maybe invest in real estate or a friend’s company, a startup or something like that.

Mike: And then the other thing here just to kinda point out, is there savings rate. There’s saving at at least that 28, 25% clip every year and they’re doing it while taking multiple locations a year and that’s kind of the key. They ask us that a lot of times. “Are we saving enough, like, can we go on this vacation? Can we buy this car?” And you know, every time we have those sort of conversations together we make sure that hey, if you’re saving the right amount every year, nothing else really matters as far as what else you’re spending money on.

Mike: And that’s kind of the keys I think with a lot of the conversations we have with clients is they want to make sure they can live their life today. They wanna have the nice house, the nice car, send their kids to the best schools without having to compromise their financial future. And that’s why we focus so much on savings rate, you know, that 20-30% a year because if we can do that, we’re living the right lifestyle, we’re saving enough to help outpace inflation, new costs over time, things coming up and that’s gonna be a big driver of their wealth success over time.

Josh: Awesome.

Josh: A couple of quick questions for you if you don’t mind.

Mike: Yeah, absolutely.

Josh: You know one thing that you mentioned that I think I wrote down here in the notes was when these clients came to you they felt a step behind financially. And that’s a dangerous place to be because what it does is it makes you more likely to take a big risk with an unproportionate amount of your wealth to try and hit a home run so that you can catch up financially to where you feel you should be.

Josh: And I think that comment of being a step behind financially is common place for physicians because they come into the workforce, if you will, later in life than do many of their friends and peers that they may have gone to undergrad with. They then have to go to a residency with lower income, maybe a fellowship, and then even early in their attending years there’s certainly going to be a ramp up maybe as they move through their salary early years to a production based model and are eventually self employed.

Josh: So I think there is, not only with physicians, I think this is any highly educated medical professional, they feel a step behind and that can put them psychologically in a dangerous place. So I love that you were able to get them via the living balance sheet from a feeling of step behind to a feeling of no, we’re on the right track, we just need to keep marching up the hill and we know where we’re going to get to at the end of this thing. So that to me might be one of the most beautiful things about this overall plan.

Mike: Yeah. Yeah, that’s 100% true, I think. One of the first physician clients that Alex and I worked with together back in the day, one of the first things he said to us was, you know, “I know what I know in my world. I know I don’t know anything about the financial world and I know all my colleagues who are much older are way behind because they didn’t plan things out until they were 45, 50 years old.”

Josh: Right.

Mike: He actually told us a story about how one of his colleagues whose been very successful in his world but is living pay cheque to pay check in his fifties because he went through life, where okay, I’m behind. Now I want to have a house because I have some earnings. Started a family, bought nice cars. He’s like, “I’m a physician, I should have …” that sort of thing. And realized all of the sudden, when he’s like, 50, it kind of hit him, “I’ve been living a good life but I’ve got nothing saved for retirement, I’m living pay check to pay check. You know one thing goes wrong …”

Josh: I’m off track.

Mike: Exactly. “I’m in trouble.” That’s a lot of the guidance we really try to provide is let’s create a personal economy that’s going to be based upon economic principles that are proven to work. That aren’t gonna necessarily have to be, aren’t going to be hoping and praying. We’re not gonna have to try to aim for an exorbitant rate of return to be successful and to be able to retire. We can be safe, we can be secure and do the right things by following some of these principles that we’ve talked about today.

Josh: Yeah. And I want to just make a quick recommendation for anybody who might be listening that is young in their investing career and trying to just philosophically, trying to increase their financial acumen so they understand these concepts. There’s a couple of books I jotted down a few notes as you were chatting that I would recommend.

Josh: One of them is The Automatic Millionaire. It’s such a cool book. It just talks about you don’t have to hit home runs to retire very, very comfortably, even affluent. You just have to consistently, like a clock, contribute to some sound plans that they have a decent return and let the miracle of compound interest and dollar cost averaging, which many of our listeners may not even know what that means, but just allow consistent deposits to work it’s magic. So I would recommend The Automatic Millionaire.

Josh: The Millionaire Next Door is another phenomenal book that takes a lot of these same principles into, tells some great stories of people who become millionaires that you would never expect because they drive around in Toyota Corollas and they have a $300, 000 house but they become really, really wealthy by applying these kind of modest practices in how they live their lives.

Josh: And then the last one is Richest Man in Babylon. One of the coolest fables of all time just creating wealth.

Josh: But if you read those three books. If you’re a listener who’s young in your financial career and you just want to learn, those are three really interesting books and I think you’re financial acumen would be incredibly elevated by spending a little time with those.

Josh: Any others you guys would recommend?

Mike: No. Those are, the last two books especially we actually recommend those to our clients all the time so we’re obviously operating on the same wavelength here. 100%, Josh.

Mike: One of the things we find in the world today with the financial media and Googling all these different financial topics is it can be like 10 different opinions on the same topic, you know, when you look into it, and it becomes very overwhelming for clients a lot of times. Very tough to make the decisions they want to because they’re getting 10 different opinions from 10 different people.

Josh: Right.

Mike: So that’s where we try to separate that and say look, we don’t want you to make decisions based upon an opinion or rhetoric or what we think might happen. We want to base the planning in principles that are going to work under all circumstances. That’s kind of key and that’s what those books highlight, is it’s not necessarily about getting the best investment rate of return. It’s about having a prudent lifestyle, saving at the right rate, putting money away in different types of buckets over time and that’s you know, I think, one of the key and core principles we talk about that, you know, is always going to be important whether it was 200 years ago, whether it’s 200 years from now, you know, the principles aren’t going to change. They’re always going to be the same.

Josh: That’s right and that doesn’t surprise me that you recommend those books because just looking at the way you’ve constructed the living balance sheet it aligns with the principles of those books and that’s probably why those books came to mind.

Mike: Yeah.

Josh: Guys, I know it’s a great podcast when we run out of time and we are there. But I’d like to leave just a closing comment to you, Alex, or you, Mike, on any other wisdom that you want to impart. And then if someone wanted to run their financial, their personal economy, that’s the word I was looking for. If they wanted to run their personal economy through the living balance sheet, how would one go about doing that or contacting you for [inaudible 00:42:47]?

Mike: Yeah, absolutely. So I’ve done a lot of talking here so I want to make it quick on my end but the one other thing I like to point out that you might notice while looking at this screen is a lot of these numbers kind of end in random figures and part of that is because the living balance sheet allows us to be an aggregation tool, too, where we can sync in and aggregate different financial accounts that our clients have. So their banking, their checking, their savings, their investments, retirement accounts, their mortgage, student loans, etc. etc.

Mike: So instead of having 10 different websites to go to we’ve got one website, one homepage to view everything and that’s key too, is, especially with this client, as we commit to them and kind of continue to update and monitor their planning, every couple of months when we have meetings and phone conversations, instead of having to have them gather all the documents again, we have everything here and in a secure, airtight location here.

Josh: Well and Mike, let me just say one thing about that. I’ll tell you from personal experience, you know, I’m 20 years into learning about finances and experimenting and you know, everything from real estate to index funds and options and back and forth I’ve experimented and played with. But I’ll tell you what’s one of the most motivating things for me to make good financial decisions. Not buy the boat, do buy the other investment property. Do invest in the other business, right? Is to be able to track the progress you’re making on your net worth.

Josh: In other words, if you have a net worth of minus 100 and your goal is you’re going to get to a break even point on your net worth and you hit that break even point it’s a huge endorphin rush. It’s a huge confidence builder. And then you say, okay, now I want to get to a hundred thousand, and now I want to get to five hundred thousand, and now I want to get to a million. And if you’re seeing that progress that you’re making, it enables you to have the fortitude to make good financial decisions versus bad financial decisions because now all of the sudden I don’t need the endorphin rush of the Porsche Cayman S because that’s a certain, certainly that’s an endorphin rush, right?

Mike: Yeah.

Josh: But also an endorphin rush is, “Yes! I made it to a net worth of a million bucks, or 750, 000” or whatever that is, whatever that growth is. You don’t need the external approval. You have the internal approval of yourself but if you’re not tracking that and you’re not watching that, you’re more likely to make the wrong decision. Would you agree?

Mike: Mm-hmm (affirmative). Yeah, yeah, absolutely. That’s where it is a compromise always internally of live for today versus live for tomorrow and why we try to really allow our clients to do both.

Josh: Yeah.

Mike: Sometimes, you know, there is a conversation where we need to talk to them about, “Hey, maybe we shouldn’t buy that big car or maybe this house is too big, that mortgage is too big” and that’s where we work a lot of times hand in hand with you, Josh to say “hey, what you qualify for may not be what’s gonna best for you.”

Josh: Amen.

Mike: That’s where this sort of stress testing and just overall coordination really helps people to verify those decisions and we always aim to try to provide a lot of education. Lead them and guide them and hold their hand. At the end of the day it’s their economy. They’re the ones who are making the decisions on what to do and we often find that they end up becoming just more responsible by being more aware and cognizant of how these things work and you know, we’re in a conversation with two spouses and one spouse is like, “Yeah, I really want to get the Tesla” and the other one’s like, “No, maybe we should get the Honda Accord because we’ve to make sure we’re saving at least 20% a year” and he’s like, “Oh yeah, yeah, that’s right, that’s right, we need to do that.”

Mike: And that’s great when that happens and we don’t have to say anything, we just get to sit there and say, this is good, you guys are definitely learning. We’re doing something good here.

Josh: Awesome man. Alex, bring us home, buddy. What would you like to close with?

Alex: You guys already hit upon everything. Like we said, doctors, you guys spend, your entire careers, basically, treating everybody else and taking care of the sick and the people who don’t know how to take care of themselves and what they need to do. And that’s where Mike and I come in to really kind of tie everything together, you know, hold you’re hand and do everything accordingly.

Alex: We try to be that main go to, you know we kind of equate that idea of being an overall specialist. If you guys look at your own careers and you look at what a primary physician does, they have specialists and individuals they reach out to and they kinda use it as their overarching connecting to this. Let’s say they need a cardiologist, they need a pulmonologist, they need other professionals. We have the same thing. We have the ability to kind of be the main go to and then we quarterback everybody else.

Alex: We have individuals like Josh, we have accountants and attorneys. So this way your entire plan is coordinated and all working on all cylinders. So this way we know where everybody is. We know where the goals are and where everybody wants to be. And like I said, there’s no guess work there. We see everything on the screen, we see everybody is like Mike said earlier on this phone call, you went to your doctor and talked about your cholesterol. If you simply said, hey this is what cholesterol is and that’s it and you didn’t put the numbers in front of you, the whole feeling would be probably completely different. But when he actually shows you where you are, where you should be, it kind of puts everything into a different perspective.

Alex: So we hope everybody learned something today from this and we look forward to hearing from everyone.

Josh: Awesome. Great way to close.

Josh: Mike, why don’t you just let us know how folks can reach out to you and anything else that you might want to offer.

Mike: Yeah, that’s just what I was writing here. Our contact information. We are always happy to have conversations with anybody who is looking to obtain financial security and success. If they are open minded, coachable, responsible people, caring people, they can get in contact with us at any point.

Mike: I’ve listed my information here. My number is 908 709 0020. My email’s michael_schwartz@nepcusa.com.

Mike: Alex, what’s your phone number? I’ll put that down right here.

Alex: Sure, I like to give my doctor’s my cell phone. I always like to tell them I’m the always on call advisor. I talk to clients at 11:00 at night on a Sunday or you know, 5:00 in the morning on a Tuesday.

Josh: Call me when you’re in the Tesla dealership and I can advise you.

Alex: That has happened many times before.

Alex: My cell phone is area code 201 207 5295.

Josh: Guys, thanks for sharing so very generously with our listeners and we’re gonna put some links down below so they can get a hold of you and get a live demonstration of how the living balance sheet works. Appreciate you being with us today and hope to connect with you both again real soon.

Alex: Great. Thank you so much Josh.

Josh: Thanks, Josh.

Alex: You have a great day.