January 17, 2025 • 19 mins
Questions? Thoughts? Send a Text to The Optometry Money Podcast!
In this episode, your host, Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, dives into the critical importance of your Savings Rate as a foundation for financial independence. We explore how incremental improvements—or marginal gains—can lead to exceptional results.
What You’ll Learn in This Episode:
- The Story of Marginal Gains: How Sir Dave Brailsford’s focus on 1% improvements led the British cycling team to Olympic gold and what that means for your financial habits.
- The Role of Systems in Financial Success: Why success is more about consistent habits and systems than lofty goals.
- Understanding the Savings Rate: What it is, why it’s a leading indicator of future financial health, and how to calculate and improve it.
- Practical Strategies to Improve Your Savings Rate: From automating contributions to identifying areas for incremental improvement in your cash flow.
- The Danger of Chasing High-Risk Investments: Why a strong savings rate is more reliable than speculative ventures in achieving financial independence.
Resources Mentioned:
- 📖 Atomic Habits by James Clear: Learn how habits and systems drive success.
- 📰 Eyes On The Money Newsletter: Check out the recent edition discussing the impact of your Savings Rate.
- 📅 Schedule a Free Consultation with Evon: Let’s talk about optimizing your savings and cash flow.
- The Optometry Money Podcast Ep 57: A Framework for Deciding Where to Save/Invest Next
Connect With Evon and the Podcast:
- Website: Optometry Wealth Advisors
- Email: podcast@optometrywealth.com
- Submit Questions: Use the link in the show notes to text a question directly to the podcast!
Thank You for Listening! Thank you for tuning in to this episode of The Optometry Money Podcast. If you enjoyed this episode, please subscribe, leave a review, and share it with your fellow ODs. Remember, small, consistent actions today lead to a financially secure tomorrow!
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evon (00:04):
Hey, everybody.
Welcome back to The OptometryMoney Podcast, where we're
helping OD's all over thecountry and make better and
better decisions around theirmoney, their careers, and their
practices.
I am your host, Evon Mendrin,Certified Financial Planner(TM)
practitioner.
And owner of Optometry WealthAdvisors, an independent
financial planning firm, justfor optometrists nationwide.
(00:26):
And thank you so much forlistening.
Really appreciate your time andattention.
And today we're going to diveinto a topic that's foundational
for long-term financial success.
And that's how do we increaseyour odds of hitting financial
independence specifically, byfocusing on habits and systems.
(00:47):
And in particular, your savingsrate.
And first, I want to start witha story a story about Sir David
Brailsford.
The man who revolutionizedBritish cycling.
And when Sir David took overperformance director in 2002 for
the British cycling team.
The team was pretty far fromdominant.
They had only one gold medal totheir name in nearly 80 years.
(01:10):
And they're trying to turn theship around, and this is a
pretty big ship to turn around.
And this is a huge undertaking.
So what was Sir David's approachto turn team Britain around?
Well, his approach revolvedaround the theory of marginal
gains.
And he believed that if youbroke down everything that goes
into cycling performance, Andimproved each area by just 1%,
(01:35):
the compounded effect wouldresult in significant
improvements over time.
And he meant everything fromredesigning bike seats to
improving aerodynamics frompainting floors white to spot
dust, effecting bikemaintenance.
To ensuring riders slept on thesame pillows every night to make
(01:55):
sure they got optimal rest.
I mean, he really broke downeverything they can think of
that goes into competing on abike and then improved each
element by 1%.
And these small seemingly minorchanges really added up.
at the 2008 Beijing Olympics.
So that is six years later.
(02:15):
His team won seven out of 10gold medals in track cycling.
Four years later, they repeatedagain at London Olympics getting
seven out of 10.
And his approach showed thepower of focusing on systems.
On tiny, consistent improvementsthat drive results over time.
And eventually they're honed inon core group of factors to
(02:38):
improve on.
As he told a Harvard BusinessReview in an interview, he said,
we realized that we had focusedon the peas and not the steak.
We tried so hard with all thebells and whistles of marginal
gains.
that our focus was too much onthe periphery.
And not on the core, you have toidentify the critical success
(03:00):
factors and ensure they are inplace and then focus on your
improvements around them.
Now think about your financialgoals, They may feel as far away
as the top of an Olympic podium.
for some of you, the point offinancial independence is coming
up over the next 10 years or so.
And you might already startthinking about how to turn your
(03:22):
assets, your practice value,your retirement accounts, your
real estate properties.
Whatever it may be.
And all these different sourcesof income you might have into
lifelong sustainable income.
That window for you might bepretty close.
For others it's decades away.
I mean, this is a financialindependence too, too many of
(03:43):
you may be this big.
Unknown goal in the distantfuture with whole lot of
uncertainty around what thatlooks like.
but like, Sir David's teamsuccess doesn't have to come
from one big grand action.
It's really about consistency.
Consistently improving yourfinancial systems and your
habits over time.
(04:04):
James Clear the author.
who was pretty popular with hisbook, Atomic Habits.
writes in Atomic Habits that"youdo not rise to the level of your
goals, You fall to the level ofyour systems".
You can have the grandest goals,the most ambitious goals.
But if you don't have the stepsin place.
(04:25):
The consistent actions that getyou on track.
You're never going to hit thosegoals.
In fact James Clear speculatesthat you don't even need goals
to be successful.
As long as you have the rightsystems and habits.
Which is pretty interesting tothink about.
I mean, so much around ourbusiness, our family, Our
finances revolve around goals.
What do we want to attain?
What are we working towards Ithink that carrot, that
(04:47):
motivation is important.
What are we aspiring toward?
But it's not as important ashaving the steps the actions
needed to get there.
And thinking about financialplanning, financial planning is
really just aligning yourdollars towards priorities.
It's making the best decisionyou need to make today.
And then regularly watching.
(05:08):
And making adjustments andimprovements as you go.
goals are great for giving youdirection, but systems are what
create momentum.
today we're going to dive intohow you can create systems to
make financial independence anatural outcome of your daily
actions.
So to you, Sir David'sterminology here.
If we're planning for futurefinancial independence.
(05:31):
What is our steak?
What are the most importantfactors for success?
Well, to me, it's how you useyour cashflow.
Specifically, and maybe mostimportantly, it's your savings
rate?
This is the percentage of yourincome that you're setting aside
to positively impact your networth.
this includes your contributionsto retirement accounts.
(05:53):
Your 401ks, your simple IRAsprofit sharing.
If you're owning the practiceand doing profit sharing
contributions.
If you own a cash balance plan,it's even greater opportunity.
it's your Roth or traditionalIRAs.
It also includes deposits intotaxable brokerage accounts.
So non-retirement accounts aswell.
(06:14):
but it's also going to includeyour deposits to bank accounts.
So if you're adding to savingseach month on a regular basis,
If you're building up liquiditytowards a cold start or practice
purchase, if you're building upto buy that next rental property
or that commercial property foryour practice.
Those dollars are a part of yoursavings rate.
(06:35):
And I tend to include 529account deposits as well.
It's not necessarily for yourretirement.
But it's invested dollarstowards a future expense.
That would otherwise have to bepaid out of assets or cashflow.
And you do technically havecontrol of the funds.
So you could withdraw thosefunds if you actually needed to.
(06:55):
So we want to track all dollarsgoing towards something
somewhere.
that will positively impact yournet worth.
And a part of the start of everyclient relationship that I work
with we'll dive into cashflowboth personally, and for the
practice what's coming in,what's going out and if there's
any leftover, what should we bedoing with it?
(07:18):
What's the next best step foryour dollars.
And we track different healthvital signs, different health
measures in terms of how wellyou're using your cashflow.
We track a debt rate, which isthe percentage of dollars that's
going towards debt payments.
Spending rate, which is yourlifestyle expenses.
What percentage of your incomeis going to that?
Your tax rate and then thatsavings rate.
(07:39):
which is maybe your best leadingindicator.
Your savings rate is probablyone of the most powerful
predictors of future financialindependence.
Or future financial health.
Those actions that you take toregularly, habitually add
dollars to your net worth overlong periods of time.
that is going to have thebiggest impact on future growth
(08:00):
of your net worth.
And I believe that if you have astrong savings rate, If you
aren't taking on additionaldebt, so your debt rate's not
increasing.
If you have a strong savingsrate.
Everything else in terms of yourcashflow will fall where it
needs to fall.
And that's why I like reversebudgeting so much reverse
budgeting is really about.
Prioritizing those dollarstowards saving and investing.
(08:23):
And once you've tackled yourtarget savings rate, everything
else can be spent however youwant to spend it.
You've got total freedom becauseyou've already tackled the most
important stuff.
And so where should that savingsrate be?
What does a healthy range?
How much should you be saving?
Well, there's no right numberfor everyone.
I do think a healthy savingsrate is somewhere between 15 and
(08:44):
20%.
If I'm talking with a client,our north star, our goal.
Is trying to get that To 20%.
And if you can get your savingsrate to 20% average, I think
you're putting yourself on areally fantastic path forward.
The higher your income, thehigher, the savings rate is
going to need to be.
(09:04):
For those that are of relativelylow income.
you might not need to have ashigh of a savings rate, because
social security is going tocover much more of your pre
retirement income.
But for you for the optometrist,especially as your income is
increasing through your career.
You're going to need to increasethat savings rate so that in
retirement, and you can maintainthat increasing level of
(09:26):
spending that you're going toget used to over your career.
Increased spending increasedlifestyle tends to come with
increased levels of income.
And you may not be able to getthere immediately.
Due to other cashflow needs orpriorities, or just where you're
at in your career.
Other lifestyle expenses.
And you also may not be able toget there every year.
(09:48):
Things come up in life,priorities change.
You might have kids with theextra expenses and the other
priorities that come with that.
Or within the first few years ofa cold start or a practice
purchase.
You might not have the cashflowto do it and that's okay.
Those dollars.
You know, the dollars and theenergy you're putting into your
practice.
That's essentially your savingsrate.
Your first investment has to beyour practice.
(10:10):
But that 20% rate or so can bethat north star.
Can be that guiding goal thatyou're trying to get to, at
least on average.
And then based on yourparticular circumstances, you
can adjust.
For example, if you're lookingfor a really early retirement,
that's going to require a muchhigher savings rate.
(10:31):
And leaner spending to allow forit.
On the other end.
If you have a healthy pension inthe household, for example,
maybe your spouse workssomewhere that allows for a
pension, or maybe you're workingwith Kaiser or the VA, then you
can take a little pressure offthe savings rate?
So your personal circumstancescan adjust the most appropriate
savings rate for you.
But this is one thing you canlook at and track consistently
(10:53):
to see.
How healthy that vital sign isbecause your savings rate.
the amount that you're puttingthe side towards the future.
Is going to be that bestindicator of what the future net
worth looks like.
Debt rate helps.
You're paying debts off thatdoes positively impact net
worth, but your investing overtime is going to have that much
higher impact.
And sometimes you get thequestion.
(11:15):
Well, why do we include thematch in there?
Like your employer match.
I don't.
And the reason why is because Iwant this savings rate, vital
sign to be a measure of yourhabits, your actions, the things
that are within your controldirectly.
So for an employed optometrist,the associates out there, I
typically won't.
For the practice owner I do, andthe reason I do is because it is
(11:36):
quite literally your own dollarsthrough the practice that you
are adding to your account as amatch.
And you could choose to notcontribute to a 401k or a simple
IRA.
And instead take those dollarsafter tax and do something else
with it.
So for the practice owner I dofor the associate, I typically
don't.
but if you're doing it on yourown, you have to track that the
(11:57):
way you feel is mostappropriate.
So that's where I feel a healthysavings rate should look.
That's kind of the vital signmeasure I'm looking at somewhere
between, you know, 10 to 20%,preferably 15 to 20%.
And the next question I usuallyget is where should it be going?
Which accounts?
Right?
What assets should you beputting those dollars toward?
And.
(12:18):
I've offered before a set ofsteps, like an order of
operations to contribute to.
I've done a past episode aboutthis, that I'll link into the
show notes, but.
Really at the end of the day,it's pretty personal to your
situation.
I might have two optometristsfamilies.
both trying to put aside thesame savings rate, but the
actual accounts or assets thatare putting those dollars into
(12:39):
maybe different between the twoof them.
You have to start with yourpriorities.
And put dollars towards thosepriorities.
First, get that emergency fundfunded, buildup cash for
upcoming expenses and goals.
what are you planning to spenddollars on in the near future?
I, I was just talking withclients about an upcoming house
purchase and separately, anupcoming home remodel.
(13:01):
And setting aside dollars forthose things.
We're a pretty big chunk ofthese families savings rates,
but they were the priorities,right?
They were the top of the list.
They were the things that neededto be tackled first.
And then once we check thosepriorities off the list, We're
going to keep that same savingsrate, but we're just able to
redirect those dollars to thenext most appropriate place.
(13:23):
Then there's the investmentaccounts.
you definitely want to at leastget your company match.
In the retirement account atwork Though again, if you own
the practice, it is your ownmoney that you're matching with.
From there.
It's a pretty personal gameplan.
For some families filling up the401ks are a perfectly fine
option.
that's the approach that makessense for you.
(13:43):
For others, we're prioritizingliquidity and flexibility a bit
more.
So maybe we're leaning moreheavily on a taxable investment
account first before filling updollars into a retirement
account.
We can talk all day about Rothversus pre-tax IRA versus HSA
versus 401k and all of that.
But the most important thingreally is that you're starting
the habit of setting moneyaside.
(14:05):
You're setting the habit with ahealthy savings rate.
That's really what we want tofocus on.
And then we can start tooptimize from there.
A really big help here a big keyis automation.
Set up systems that take thatmakes saving effortless and
consistent.
The 401k contribution is sogreat because it's automated.
(14:27):
You don't see it.
You set the percentage, maybethe dollar amount.
But you don't have to thinkabout it every paycheck, it just
happens behind the scenes.
And you don't even have to gointo the account and invest it.
It's really automated.
As a behavioral tool it'sfantastic.
And you can do the same withother deposits into your
savings, into investmentaccounts.
You can start to automate thoseon a monthly or quarterly, or
(14:50):
maybe even annual basis.
And the more you can take thingsout of your hands and off of
your brain to have to thinkabout and deal with the more
likely you are to stayconsistent with it.
And.
Having someone to keep youaccountable helps that
accountability partner, thatcoach, that advisor that can
help you think through where tosend these dollars, but also to
(15:12):
make sure that you are stayingon track.
that accountability can be sohelpful.
And whether that's coming from apeer of yours, whether that's
coming from your spouse, whetherthat's coming from your partner
in the practice, whether that'scoming from me, your advisor.
sometimes we need someone to bedangling that carrot in front of
us and making sure that we arestaying accountable to the
(15:33):
things we say are important tous.
And then take a look at yourspending to identify
opportunities, to save more, ofcourse we want to balance living
for today with saving fortomorrow, there has to be a
balance.
your values, your priorities aregoing to change over your
lifetime.
And so you definitely want tosee that balance play out as
best as it can, but a strongsavings rate.
Isn't just a goal.
(15:54):
A strong savings rate is proofthat your financial system is
working.
And then lastly, I want to talka little bit about the investing
side of it, because while.
smart investing matters.
No investment strategy can fix aweak savings rate over a long
period of time.
You can't out return a savingsrate problem or a cashflow
problem.
(16:15):
It's really easy to get suckedinto shiny objects when we're
trying to catch up or get ahead.
Chasing high risk investmentslike speculative or lottery
ticket stocks or risky privateilliquid real estate ventures,
or sketchy crypto offerings.
Which are a lot of timesclaiming to offer higher return
(16:36):
for less risk.
But I've seen too many times intoo many stories, even with OD's
over the last couple of years,that chasing after returns often
does more harm than good.
Instead focus on building thatstrong system with a high
savings rate.
And that's, what's really goingto set you up for success and
even with lower than expectedreturns.
(16:56):
We invest into an uncertainfuture and we have no control
over what the day to day, monthto month, year to year, or even
decade to decade returns aregoing to be like, Or in what
order the declines are, thepositive years are going to
come.
And while we have history, Wecan project out expected returns
into the future.
(17:17):
We don't know how investmentsreturns are going to unfold over
your lifetime.
And nothing helps buffer againstunexpectedly poor returns or bad
timing, like a strong, healthy,consistent savings rate.
and I put a little bit of mathto this I'll link to a recent
newsletter I did.
To try to see how much yoursavings rate can compensate for
(17:37):
very low returns.
And so wrapping up, remember,this markets are unpredictable.
It's something that's on thelist of things that are entirely
out of our hands.
But your habits and yoursystems.
are completely within yourcontrol.
Progress starts with smallconsistent actions, like
automating your savings andfocusing on savings rate.
(17:58):
And your savings rate isn't justa number.
It's the best leading indicatorof your progress towards
financial independence.
If there's one healthy vitalsign to track, it's going to be
your savings rate.
And if you want to learn more,check out our latest Eyes On The
Money newsletter, which I'lllink to in the show notes.
just did a newsletter about thistopic specifically.
(18:18):
if you want to learn more abouthow I help ODs get on track with
their savings rate.
And game plan, what to do nextwith extra cashflow, both in the
practice and at home.
head over to my website,www.optometrywealth.Com.
Or check out the link in theshow notes and you can schedule
a no commitment, no pressureintroductory call.
And we can talk about what's onyour mind financially and how I
(18:41):
help ODs navigate those samedecisions, all over the country.
And with that really appreciateyour time and attention.
If you've enjoyed these episodeswould really appreciate you
leaving a review.
wherever you listen to podcasts,it's always helpful for me to
see that feedback and see how wecan improve this show more and
more.
reach out if you have anyquestions and we will catch you
(19:01):
on the next episode, in themeantime, take care.
Hey, everybody.
Welcome back to The OptometryMoney Podcast, where we're
helping OD's all over thecountry and make better and
better decisions around theirmoney, their careers, and their
practices.
I am your host, Evon Mendrin,Certified Financial Planner(TM)
practitioner.
And owner of Optometry WealthAdvisors, an independent
financial planning firm, justfor optometrists nationwide.
(00:26):
And thank you so much forlistening.
Really appreciate your time andattention.
And today we're going to diveinto a topic that's foundational
for long-term financial success.
And that's how do we increaseyour odds of hitting financial
independence specifically, byfocusing on habits and systems.
(00:47):
And in particular, your savingsrate.
And first, I want to start witha story a story about Sir David
Brailsford.
The man who revolutionizedBritish cycling.
And when Sir David took overperformance director in 2002 for
the British cycling team.
The team was pretty far fromdominant.
They had only one gold medal totheir name in nearly 80 years.
(01:10):
And they're trying to turn theship around, and this is a
pretty big ship to turn around.
And this is a huge undertaking.
So what was Sir David's approachto turn team Britain around?
Well, his approach revolvedaround the theory of marginal
gains.
And he believed that if youbroke down everything that goes
into cycling performance, Andimproved each area by just 1%,
(01:35):
the compounded effect wouldresult in significant
improvements over time.
And he meant everything fromredesigning bike seats to
improving aerodynamics frompainting floors white to spot
dust, effecting bikemaintenance.
To ensuring riders slept on thesame pillows every night to make
(01:55):
sure they got optimal rest.
I mean, he really broke downeverything they can think of
that goes into competing on abike and then improved each
element by 1%.
And these small seemingly minorchanges really added up.
at the 2008 Beijing Olympics.
So that is six years later.
(02:15):
His team won seven out of 10gold medals in track cycling.
Four years later, they repeatedagain at London Olympics getting
seven out of 10.
And his approach showed thepower of focusing on systems.
On tiny, consistent improvementsthat drive results over time.
And eventually they're honed inon core group of factors to
(02:38):
improve on.
As he told a Harvard BusinessReview in an interview, he said,
we realized that we had focusedon the peas and not the steak.
We tried so hard with all thebells and whistles of marginal
gains.
that our focus was too much onthe periphery.
And not on the core, you have toidentify the critical success
(03:00):
factors and ensure they are inplace and then focus on your
improvements around them.
Now think about your financialgoals, They may feel as far away
as the top of an Olympic podium.
for some of you, the point offinancial independence is coming
up over the next 10 years or so.
And you might already startthinking about how to turn your
(03:22):
assets, your practice value,your retirement accounts, your
real estate properties.
Whatever it may be.
And all these different sourcesof income you might have into
lifelong sustainable income.
That window for you might bepretty close.
For others it's decades away.
I mean, this is a financialindependence too, too many of
(03:43):
you may be this big.
Unknown goal in the distantfuture with whole lot of
uncertainty around what thatlooks like.
but like, Sir David's teamsuccess doesn't have to come
from one big grand action.
It's really about consistency.
Consistently improving yourfinancial systems and your
habits over time.
(04:04):
James Clear the author.
who was pretty popular with hisbook, Atomic Habits.
writes in Atomic Habits that"youdo not rise to the level of your
goals, You fall to the level ofyour systems".
You can have the grandest goals,the most ambitious goals.
But if you don't have the stepsin place.
(04:25):
The consistent actions that getyou on track.
You're never going to hit thosegoals.
In fact James Clear speculatesthat you don't even need goals
to be successful.
As long as you have the rightsystems and habits.
Which is pretty interesting tothink about.
I mean, so much around ourbusiness, our family, Our
finances revolve around goals.
What do we want to attain?
What are we working towards Ithink that carrot, that
(04:47):
motivation is important.
What are we aspiring toward?
But it's not as important ashaving the steps the actions
needed to get there.
And thinking about financialplanning, financial planning is
really just aligning yourdollars towards priorities.
It's making the best decisionyou need to make today.
And then regularly watching.
(05:08):
And making adjustments andimprovements as you go.
goals are great for giving youdirection, but systems are what
create momentum.
today we're going to dive intohow you can create systems to
make financial independence anatural outcome of your daily
actions.
So to you, Sir David'sterminology here.
If we're planning for futurefinancial independence.
(05:31):
What is our steak?
What are the most importantfactors for success?
Well, to me, it's how you useyour cashflow.
Specifically, and maybe mostimportantly, it's your savings
rate?
This is the percentage of yourincome that you're setting aside
to positively impact your networth.
this includes your contributionsto retirement accounts.
(05:53):
Your 401ks, your simple IRAsprofit sharing.
If you're owning the practiceand doing profit sharing
contributions.
If you own a cash balance plan,it's even greater opportunity.
it's your Roth or traditionalIRAs.
It also includes deposits intotaxable brokerage accounts.
So non-retirement accounts aswell.
(06:14):
but it's also going to includeyour deposits to bank accounts.
So if you're adding to savingseach month on a regular basis,
If you're building up liquiditytowards a cold start or practice
purchase, if you're building upto buy that next rental property
or that commercial property foryour practice.
Those dollars are a part of yoursavings rate.
(06:35):
And I tend to include 529account deposits as well.
It's not necessarily for yourretirement.
But it's invested dollarstowards a future expense.
That would otherwise have to bepaid out of assets or cashflow.
And you do technically havecontrol of the funds.
So you could withdraw thosefunds if you actually needed to.
(06:55):
So we want to track all dollarsgoing towards something
somewhere.
that will positively impact yournet worth.
And a part of the start of everyclient relationship that I work
with we'll dive into cashflowboth personally, and for the
practice what's coming in,what's going out and if there's
any leftover, what should we bedoing with it?
(07:18):
What's the next best step foryour dollars.
And we track different healthvital signs, different health
measures in terms of how wellyou're using your cashflow.
We track a debt rate, which isthe percentage of dollars that's
going towards debt payments.
Spending rate, which is yourlifestyle expenses.
What percentage of your incomeis going to that?
Your tax rate and then thatsavings rate.
(07:39):
which is maybe your best leadingindicator.
Your savings rate is probablyone of the most powerful
predictors of future financialindependence.
Or future financial health.
Those actions that you take toregularly, habitually add
dollars to your net worth overlong periods of time.
that is going to have thebiggest impact on future growth
(08:00):
of your net worth.
And I believe that if you have astrong savings rate, If you
aren't taking on additionaldebt, so your debt rate's not
increasing.
If you have a strong savingsrate.
Everything else in terms of yourcashflow will fall where it
needs to fall.
And that's why I like reversebudgeting so much reverse
budgeting is really about.
Prioritizing those dollarstowards saving and investing.
(08:23):
And once you've tackled yourtarget savings rate, everything
else can be spent however youwant to spend it.
You've got total freedom becauseyou've already tackled the most
important stuff.
And so where should that savingsrate be?
What does a healthy range?
How much should you be saving?
Well, there's no right numberfor everyone.
I do think a healthy savingsrate is somewhere between 15 and
(08:44):
20%.
If I'm talking with a client,our north star, our goal.
Is trying to get that To 20%.
And if you can get your savingsrate to 20% average, I think
you're putting yourself on areally fantastic path forward.
The higher your income, thehigher, the savings rate is
going to need to be.
(09:04):
For those that are of relativelylow income.
you might not need to have ashigh of a savings rate, because
social security is going tocover much more of your pre
retirement income.
But for you for the optometrist,especially as your income is
increasing through your career.
You're going to need to increasethat savings rate so that in
retirement, and you can maintainthat increasing level of
(09:26):
spending that you're going toget used to over your career.
Increased spending increasedlifestyle tends to come with
increased levels of income.
And you may not be able to getthere immediately.
Due to other cashflow needs orpriorities, or just where you're
at in your career.
Other lifestyle expenses.
And you also may not be able toget there every year.
(09:48):
Things come up in life,priorities change.
You might have kids with theextra expenses and the other
priorities that come with that.
Or within the first few years ofa cold start or a practice
purchase.
You might not have the cashflowto do it and that's okay.
Those dollars.
You know, the dollars and theenergy you're putting into your
practice.
That's essentially your savingsrate.
Your first investment has to beyour practice.
(10:10):
But that 20% rate or so can bethat north star.
Can be that guiding goal thatyou're trying to get to, at
least on average.
And then based on yourparticular circumstances, you
can adjust.
For example, if you're lookingfor a really early retirement,
that's going to require a muchhigher savings rate.
(10:31):
And leaner spending to allow forit.
On the other end.
If you have a healthy pension inthe household, for example,
maybe your spouse workssomewhere that allows for a
pension, or maybe you're workingwith Kaiser or the VA, then you
can take a little pressure offthe savings rate?
So your personal circumstancescan adjust the most appropriate
savings rate for you.
But this is one thing you canlook at and track consistently
(10:53):
to see.
How healthy that vital sign isbecause your savings rate.
the amount that you're puttingthe side towards the future.
Is going to be that bestindicator of what the future net
worth looks like.
Debt rate helps.
You're paying debts off thatdoes positively impact net
worth, but your investing overtime is going to have that much
higher impact.
And sometimes you get thequestion.
(11:15):
Well, why do we include thematch in there?
Like your employer match.
I don't.
And the reason why is because Iwant this savings rate, vital
sign to be a measure of yourhabits, your actions, the things
that are within your controldirectly.
So for an employed optometrist,the associates out there, I
typically won't.
For the practice owner I do, andthe reason I do is because it is
(11:36):
quite literally your own dollarsthrough the practice that you
are adding to your account as amatch.
And you could choose to notcontribute to a 401k or a simple
IRA.
And instead take those dollarsafter tax and do something else
with it.
So for the practice owner I dofor the associate, I typically
don't.
but if you're doing it on yourown, you have to track that the
(11:57):
way you feel is mostappropriate.
So that's where I feel a healthysavings rate should look.
That's kind of the vital signmeasure I'm looking at somewhere
between, you know, 10 to 20%,preferably 15 to 20%.
And the next question I usuallyget is where should it be going?
Which accounts?
Right?
What assets should you beputting those dollars toward?
And.
(12:18):
I've offered before a set ofsteps, like an order of
operations to contribute to.
I've done a past episode aboutthis, that I'll link into the
show notes, but.
Really at the end of the day,it's pretty personal to your
situation.
I might have two optometristsfamilies.
both trying to put aside thesame savings rate, but the
actual accounts or assets thatare putting those dollars into
(12:39):
maybe different between the twoof them.
You have to start with yourpriorities.
And put dollars towards thosepriorities.
First, get that emergency fundfunded, buildup cash for
upcoming expenses and goals.
what are you planning to spenddollars on in the near future?
I, I was just talking withclients about an upcoming house
purchase and separately, anupcoming home remodel.
(13:01):
And setting aside dollars forthose things.
We're a pretty big chunk ofthese families savings rates,
but they were the priorities,right?
They were the top of the list.
They were the things that neededto be tackled first.
And then once we check thosepriorities off the list, We're
going to keep that same savingsrate, but we're just able to
redirect those dollars to thenext most appropriate place.
(13:23):
Then there's the investmentaccounts.
you definitely want to at leastget your company match.
In the retirement account atwork Though again, if you own
the practice, it is your ownmoney that you're matching with.
From there.
It's a pretty personal gameplan.
For some families filling up the401ks are a perfectly fine
option.
that's the approach that makessense for you.
(13:43):
For others, we're prioritizingliquidity and flexibility a bit
more.
So maybe we're leaning moreheavily on a taxable investment
account first before filling updollars into a retirement
account.
We can talk all day about Rothversus pre-tax IRA versus HSA
versus 401k and all of that.
But the most important thingreally is that you're starting
the habit of setting moneyaside.
(14:05):
You're setting the habit with ahealthy savings rate.
That's really what we want tofocus on.
And then we can start tooptimize from there.
A really big help here a big keyis automation.
Set up systems that take thatmakes saving effortless and
consistent.
The 401k contribution is sogreat because it's automated.
(14:27):
You don't see it.
You set the percentage, maybethe dollar amount.
But you don't have to thinkabout it every paycheck, it just
happens behind the scenes.
And you don't even have to gointo the account and invest it.
It's really automated.
As a behavioral tool it'sfantastic.
And you can do the same withother deposits into your
savings, into investmentaccounts.
You can start to automate thoseon a monthly or quarterly, or
(14:50):
maybe even annual basis.
And the more you can take thingsout of your hands and off of
your brain to have to thinkabout and deal with the more
likely you are to stayconsistent with it.
And.
Having someone to keep youaccountable helps that
accountability partner, thatcoach, that advisor that can
help you think through where tosend these dollars, but also to
(15:12):
make sure that you are stayingon track.
that accountability can be sohelpful.
And whether that's coming from apeer of yours, whether that's
coming from your spouse, whetherthat's coming from your partner
in the practice, whether that'scoming from me, your advisor.
sometimes we need someone to bedangling that carrot in front of
us and making sure that we arestaying accountable to the
(15:33):
things we say are important tous.
And then take a look at yourspending to identify
opportunities, to save more, ofcourse we want to balance living
for today with saving fortomorrow, there has to be a
balance.
your values, your priorities aregoing to change over your
lifetime.
And so you definitely want tosee that balance play out as
best as it can, but a strongsavings rate.
Isn't just a goal.
(15:54):
A strong savings rate is proofthat your financial system is
working.
And then lastly, I want to talka little bit about the investing
side of it, because while.
smart investing matters.
No investment strategy can fix aweak savings rate over a long
period of time.
You can't out return a savingsrate problem or a cashflow
problem.
(16:15):
It's really easy to get suckedinto shiny objects when we're
trying to catch up or get ahead.
Chasing high risk investmentslike speculative or lottery
ticket stocks or risky privateilliquid real estate ventures,
or sketchy crypto offerings.
Which are a lot of timesclaiming to offer higher return
(16:36):
for less risk.
But I've seen too many times intoo many stories, even with OD's
over the last couple of years,that chasing after returns often
does more harm than good.
Instead focus on building thatstrong system with a high
savings rate.
And that's, what's really goingto set you up for success and
even with lower than expectedreturns.
(16:56):
We invest into an uncertainfuture and we have no control
over what the day to day, monthto month, year to year, or even
decade to decade returns aregoing to be like, Or in what
order the declines are, thepositive years are going to
come.
And while we have history, Wecan project out expected returns
into the future.
(17:17):
We don't know how investmentsreturns are going to unfold over
your lifetime.
And nothing helps buffer againstunexpectedly poor returns or bad
timing, like a strong, healthy,consistent savings rate.
and I put a little bit of mathto this I'll link to a recent
newsletter I did.
To try to see how much yoursavings rate can compensate for
(17:37):
very low returns.
And so wrapping up, remember,this markets are unpredictable.
It's something that's on thelist of things that are entirely
out of our hands.
But your habits and yoursystems.
are completely within yourcontrol.
Progress starts with smallconsistent actions, like
automating your savings andfocusing on savings rate.
(17:58):
And your savings rate isn't justa number.
It's the best leading indicatorof your progress towards
financial independence.
If there's one healthy vitalsign to track, it's going to be
your savings rate.
And if you want to learn more,check out our latest Eyes On The
Money newsletter, which I'lllink to in the show notes.
just did a newsletter about thistopic specifically.
(18:18):
if you want to learn more abouthow I help ODs get on track with
their savings rate.
And game plan, what to do nextwith extra cashflow, both in the
practice and at home.
head over to my website,www.optometrywealth.Com.
Or check out the link in theshow notes and you can schedule
a no commitment, no pressureintroductory call.
And we can talk about what's onyour mind financially and how I
(18:41):
help ODs navigate those samedecisions, all over the country.
And with that really appreciateyour time and attention.
If you've enjoyed these episodeswould really appreciate you
leaving a review.
wherever you listen to podcasts,it's always helpful for me to
see that feedback and see how wecan improve this show more and
more.
reach out if you have anyquestions and we will catch you
(19:01):
on the next episode, in themeantime, take care.
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