Latest / The Chiro Money Show / 050 | Doing Nothing and Random Acts of Finance
Transcript
- Chris Scheele: Welcome back to the Chiro Money Show, where we help chiropractors make better financial decisions so they can build stability in their finances and a lifestyle that they love. We're your hosts Chris Scheele and Scott Campbell, financial planners with Align Wealth. Scott Campbell: Hope you all enjoyed. If you haven't listened to the previous two episodes with Dr. Laurence Tham, they were awesome episodes. But the reason why I bring Dr. Laurence up is that he was a professional podcaster. He had a beautiful setup, like the nice background, great microphone, and he gave us a little bit of a hard time for having less than ideal tech. I know for me when I was recording that, I was not in my usual spot, and that was a bit not ideal. But we jumped on the opportunity to say, all right, we'll get some professional microphones. So we're halfway through our goal of of getting to a hundred episodes. We're this is episode fifty, Chris. So now Chris Scheele: Sold fifty. Scott Campbell: we're professional fodcap podcasters. We got professional mics. Chris Scheele: Can't believe we waited fifty episodes to get to get podcast equipment. Scott Campbell: Well, I I've had I've had one. I just sometimes don't use it. Chris Scheele: Yep. Interesting. Any Scott Campbell: Yep. Anyways, yeah. Chris Scheele: anyways. That kind of Scott Campbell: So yeah. Chris Scheele: that delay of taking action is kinda similar kid segue. Yeah. Scott Campbell: Good segue. Good segue. In action. you know, taking no action has its consequences. Right? Chris Scheele: That's right. So we had fifty less than ideal audio quality episodes. We are so sorry, people. Scott Campbell: I don't know. I think I think we could we could say that AI helped with that a bit. I don't think our listeners probably notice too much. We're we use a platform called Riverside to record and edit and host all of our podcasts and there's this beautiful little button that I just click and it takes all of our audio and makes a sound the way you're hearing it in your earbuds right now. And it's been pretty good without these professional microphones. So hopefully today's episode sounds that much better. Chris Scheele: even even more crisp and clear. Yeah. Yeah. Love it. Scott Campbell: even more crispy today. We we we're going for crispiness moving forward. All right, Chris, w what are we what's what's what are we talking about today? Chris Scheele: What are we talking about? Limboland. Scott Campbell: Yeah, I came up with this term limbo limbo land. Like work where chiropractors can ultimately get a bit stuck in the mud with the with their finances. Chris Scheele: Yeah. Yeah. Yeah. Really it's just this idea that like doing nothing or like doing less sometimes feels or can can feel responsible because the alternative to like taking action, you know, there can can be some pretty big consequences and it's also pretty scary to take some of those next steps depending on on what, you know, topic we're discussing. But oftentimes, especially with it being, you know, a I'm sure the element of unknown with a lot of financial decisions, like you know, it's not like we most most of our clients don't go and get disability insurance every year. So like the one time you talk about disability insurance or you think about getting it, like that's probably Scott Campbell: You wanna make sure you're making a good decision. Chris Scheele: that's the one time in your life you're you're gonna get it. So yeah. It's like Scott Campbell: Yeah. Yeah. Chris Scheele: like a mortgage too, right? Or buying a house. Like not like you can do that every year. I mean some people do, but you know, sane people usually only buy a house every five to ten years, so it might it might only you know, be a handful of decisions. So it sometimes can just feel easier to avoid making a decision and and do nothing. but today we're gonna talk about some of those downfalls and yeah, why that option that feels the safest is is probably pretty risky over Scott Campbell: Mm-hmm. Chris Scheele: over that long term, like twenty year time frame. Scott Campbell: Should start with a with a story? Let's talk. Chris Scheele: Yeah. You should you should you should tell it. Scott Campbell: Let's talk about a doc that we'll we'll say that he is when he was in what we would call a bit of a limbo land. So brought this client on last year. He had a lot of good things going on. The practice was crushing it, like really high revenue. That was good. He was paying himself really well, but and he was he was working with an advisor, so we're not here to to bash the advisor and like There was some good work going on. He was investing. Like there was some things going well. And if we didn't come into the picture, I think we could both agree that he was still on a good trajectory to reach a lot of his goals and he'd he's comfortable, right? Chris Scheele: Yeah, yeah, pretty decent. Yeah. Scott Campbell: But on the flip side, when we came in, we said there's a there's a lot of inaction happening as well. Like the first thing I think of, Chris, is he was sitting on a ton of cash inside of his corporation. high six figures, a lot of cash, just kind of paralyzed of what to do with that money. So the easy decision was do nothing with it. And I think the other thing that we saw happening, or could like kind of look back into his past and kind See what we kind of like to call random acts of finance. Like I think of some of these, this particular client had some private equity deals that got proposed to him. So he he said, All right, that's that sounds good. Maybe in the moment, like let's take some immediate action and and and do the thing. you got a real estate deal proposed to him by a friend. I think he got a little bit of FOMO, so he just pulled the trigger and now kind of regrets that. So kind of a combination in Limboland of standing still and doing nothing, in this case, kind of thinking about. this huge amount of cash that was sitting in this corporation sitting idle and and the cost or the cost of doing nothing. And then sometimes by not having any sort of clear plan and strategy, we end up partaking in these random acts of finance that lead to potentially suboptimal decisions and how that is going to kind of play out over the years ahead. Anything to add that to that story? Chris Scheele: Yeah, just the one one other piece, the the tax bill, the the big surprise every every spring. Like how much how much do I owe this year? so Scott Campbell: Off often tied to those random acts of finance. Chris Scheele: Ex exactly right. Like when you when you gotta pull an extra two hundred K in dividends to do that land deal or buy that real estate, like there's tax in on a whim. There's tax consequences Scott Campbell: On a whim, yeah. On a whim. Yeah. Chris Scheele: there. And if we don't plan for that, it can lead to a lot of unknown and what your coming tax bill is. All of these things, you know, client and advisor had the ability to plan around and prepare for. But it was not happening. Scott Campbell: Think when I think about a lot of the chiropractors that we're working with and and and this just professionals in general, so many of them are are very smart with with money. Like they're doing a lot of good things. I don't think there's a necessarily any sort of like financial literacy problem when it comes to a lot of the chiropractors that we meet and are working with, but there is also there's an abundance of information now in today's world. But if you if you want an answer, you know, you're Constantly being bombarded with information in your in your newsfeed on social media, quick quick question to an AI agent and and you get some answers, right? But there's also with with that is I think there's a huge undersupply and discipline of taking action and making sound decisions. Would you agree? Chris Scheele: Yeah, a hundred percent. The the the quantity of information that's available often is, you know, directly leading to the inaction that we take. Right? Like you can get AI to give you any answer you want. I mean, I I even relate this back to like I have a good friend that, you know, we'd often talk talk with each other about big big decisions we're making and you know, through I th I remember one time him talking about buying a new vehicle. And he's like, Yeah, I'm really selling myself into this, aren't I? Like, yeah, you are. Like, you're you're just giving me all the positive reasons that you should do this and like all the backup of like, you know, this is a good decision because of XYZ and like not looking at the other side of it, but like I I think that's human nature to do that in when we're excited about something. And so I think it's no different with AI now, right? If you wanna if you wanna hear a certain answer, you can you can like kind of sway, you know. the the way you ask it, you know, the the context you give, you're gonna get the answer you want. And if you don't, Scott Campbell: Yeah. Chris Scheele: just keep on asking until you do. So Scott Campbell: Even if you get the right answer though, you know, an hour or two later you could be on on on your phone and scrolling through social media and then you get bombarded with other forms of information, content, ideas, strategies that, you know, I I can think of an example just the other day where a client sent us a piece of content from Instagram and say, Hey, that this is pretty interesting. Is this applicable? First of all, it was like something to do that you could only do in the US, even at that even at from that standpoint, I don't know if it's something that you could legally do in the US, let alone here in Canada. But we get bombarded with these pieces of information and then we get paralyzed of like, well, that's interesting. And then we end up in most cases just doing nothing because that's often cases the easy choice to make. Because we're all scared of making a bad financial decision. There's a lot of there's risk in making a bad decision, but there's also risk in taking an action, right? Chris Scheele: I actually got an example, Scott, of a s a a situation in my own life where I was maybe taking some, you know, inaction or thinking about something for quite a long time before before taking action and yeah, as our listeners might know, we you know, re recently moved, so we sold our house and then moved and yeah, had basically the the proceeds of that house sale. sitting around and they didn't sit around for too long, but I know I was thinking about it well ahead of like the transaction going through and you know for weeks after the transaction went through and finally I you know I asked you to sit down with me and just talk it through and that's what I needed. Like I Scott Campbell: Are you saying are you saying a financial planner could sometimes use another financial planner's guidance and collaboration? Interesting. Yeah. Chris Scheele: Yes. Yes, absolutely. Yeah, we're we're no different, right? Like Scott Campbell: I think it's great. Of course. Yeah, we're we're no different. We're we're just as human as our listeners are, like when it comes to making Chris Scheele: Yeah. Scott Campbell: informed decisions with our finances. Yeah. Chris Scheele: Right. We all have blind spots. We all have the the emotional attachment to our stuff and our decisions and our tendencies that we need to be aware of. And yeah, I as much as I I have the information, I have the ex access to the AI, not only AI, I have access to like the financial planning textbooks and knowledge that I've developed over the years. It still was not comfortable for me to make a decision. before talking about it with you and talking through the options and, you know, just going through it. As soon as we did that, I was able to take action and, you know, get that next step executed. Scott Campbell: And for yourself, a big part of that was getting some of that in a position to potentially buy a house down the line, get some of it invested, right? Chris Scheele: Yeah. Yeah, exactly. Scott Campbell: Where on the flip side, I can see that playing out for listeners who have maybe gone through that process of whether they get an inheritance or they've sold a property and there's proceeds that now land in their bank account, potentially a very large sum of cash now there. They're staring it in the face. But they again they don't want to make a poor decision. So the easy choice is do nothing, right? But waiting and doing nothing isn't necessarily free, right? doing nothing does not equal free. Easy does not equal free. Chris Scheele: Right. Yeah. Yeah, 100%. It's almost the exact opposite. Like, you know, it's easy it would have been easy to just to wait and not get that cash allocated and properly invested for our next goals. there would have been a cost to waiting. It's not certainly Scott Campbell: For sure. Chris Scheele: not free, right? Scott Campbell: And it's something that you can't see. When you when when you make oftentimes the easy decision, the inaction, whether it's getting money deployed and invested, or getting an estate document properly prepared and in place, or getting all the right insurance in place to cover you and your family adequately, if it can feel good, it can feel fine, I should say. Easy, because there's no there's no pain in making no decision. But we can see that there's a cost to that as well. You know, when when you think about like estate planning or insurance, ideally, hopefully nothing happens between the time of inaction to actually making a decision. But on the contrary, when we think about investing, say you're sitting on a whole whole bunch of cash, you don't visually see the impact of that indecision. Right? Chris Scheele: No, you really don't, right? You see it. Scott Campbell: Like can can we I want to think about this client here that we that we took on last year and he was sitting on a fairly significant amount of cash. let's just use an example. say he had a hundred thousand dollars sitting in cash, and we knew that this client had been sitting on a fairly large sum of cash for a number of years. He had he had cash in the corporation for a a fairly decent period of time. But let's just be conservative and say five years. If you just have a hundred thousand dollars in your corporate bank account, earning half a percent in interest, maybe a percent if you're lucky, but let's call it a half percent. After after five years, your hundred thousand dollars is going to grow to about a hundred, a hundred and two thousand five hundred. You've made twenty five hundred dollars in interest over that, over that five year period of time. This is not investment advice, but if I just think about the broader global equity markets, obviously we can't we have to factor in recency here, but if we just look back in the last five years, the global equity markets have done exceptionally well. And this particular client was was invested, like he had money in the market. He just could have had a fair bit more in the market with the right plan and strategy in place. So let's going back to that example. $100,000 sitting in the bank account, earning half a percent would make him a couple thousand dollars over the course of five years. Over the last five years, the global equity markets, including a down year, I think it was in twenty twenty-two, if I'm not mistaken, has averaged about fourteen percent or so. In the last three years, it's been closer to like twenty percent, give or take, right? So if we use that rough number of call it 13.5%. $100,000 over the last five years would have grown to nearly $200,000, $195,000 in change. That's Chris Scheele: Even if even if we had a normal, like you know, normal returns of like maybe like a sev Scott Campbell: Yeah. Normal returns. Chris Scheele: seven percent, you know, over five years that's still forty thousand of growth. That's Scott Campbell: For sure. Chris Scheele: seven percent. Scott Campbell: Yeah. I'm not trying to inflate it by by using recency returns here. Like we'd when we're doing these projections, you we're usually using some of those long term conservative numbers, Chris Scheele: Very, very conservative numbers. Scott Campbell: five, six, seven percent in that range, right? But just thinking about recency, like what's happened with in the last five years, like there can be a significant cost to not making a decision. And that was one of the key things. Again, going back to this client, he was in a good spot, great, great net worth. Very comfortable, a lot of things going well. But by making by having a plan, taking action could have led to a more optimal decision that could have potentially helped aid the conversation of saying, Hey, we could potentially retire a couple of years sooner if we were making these conscious decisions Chris Scheele: Yeah, and that number only grows like we just looked at, you know, an initial lump sum of a hundred thousand. Like if we could take action and actually contribute and save consistently more, you know, starting in year one, right? Like you know, I just think of someone that has say, say we've got like a fifteen year runway, right? We're we're forty five and we're gonna we're gonna try to retire at sixty. Well if you if you miss that That first year of compounding growth on a hundred grand, you know, it equates to about eighteen, eighteen thousand dollars in year fifteen. So like you that's what you're giving up. And now if we can also have the discipline to regularly save and invest and start start that a year or two years sooner, that compounding effect, you know, it's gonna be two, three, four, five times. what it would Scott Campbell: Mm-hmm. Chris Scheele: be would have been on just like that lump sum investment. It's the the more the longer we project it out, the bigger the impact of that compound and growth. So it feels like, you know, you're feels feels like you're making a safe decision. It's like I'm not gonna invest, not gonna put my money to work. Like we'll just we'll just wait. We'll just wait until it's a better time. Scott Campbell: Mm-hmm. Cause the old saying, like you hear this all the time about cash in particular, cash gives me options, right? Like people have cash is king, cash gives me options. Like I have flexibility when I'm sitting on a fair bit of cash, right? Chris Scheele: Yeah. Yeah. And I mean there is there is something to be said for that. Like we our favorite words are flexibility and options. That's what we that's what we love for our clients. We want them to be in a position where they they have flexibility and options. And cash does allow that. And so there is you know, we we do have to factor that in and adjust financial planning accordingly. And it's gonna be different for each client. What amount of cash gives them that comfort and that ability to have fli flexibility and options? but you know, it's not it's not all cash. That's that's taking it too far, right? Scott Campbell: That's right. Yeah. Going back to that client example when w when all was said and done and after we had a plan in place for him and his practice and what he had going on on the personal side, he still had like great emergency funds on the personal side. In the business he had two, three months worth of his compensation set aside in cash, his overhead set aside in cash. So like we're not fully against having cash and buffers, But there was still a substantial amount of money above and beyond that that could have been safely deployed and put to work for him. Chris Scheele: Again, I think it like the easiest way to do that, like if you've been running a business, your your practice for ten years and you know, you've got comfortable in the way you do things and the the numbers, you you just i like seeing those numbers increase and increase and like you got more and more corporate cash available, you know, that can be good. But as soon as we create a plan that shows how how you are trending and you know, the direction you're going and you know the we're we're on track to achieve our goals and we now have a very clear picture of what our monthly operating expenses are and we've put aside three to six times your monthly operating expenses in your OpEx account. We also have a vault for emergencies. We've also got your pay, three to six months of your pay set aside. You know, once you've done those things, it gives you the power to deploy that cash without without taking risk. Right, because you know, hey, I'm good. Even if revenues drop a bit, we got money. We got money to pay the bills, we got money to pay my salary, my staff's salaries, like we are solid. Scott Campbell: Yeah. Yeah. Ultimately I think what this whole conversation comes down to is we hate to see chiropractors in a spot where they are not moving forward and growing wealth with confidence and clarity due to a lack of a plan and a strategy. And we're not necessarily coming at this saying, Hey, that our our plans and strategies are the best and only way to go to grow wealth. The key here, I think, is that you have a clear plan and strategy and a strategy that you can stick to. And that's often paired with do you have the right people in your corner, accountability partners, someone that you can help talk through, kind of like your, your, your example, Chris? Need to have someone that you can bounce ideas off and collaborate with so that you feel confidence, confidence to move out of inaction and take action on moving forward as the best way you possibly can. It does not mean that you're you're not going to make mistakes. Right? That's the mistakes are going to happen from time to time. That's okay. Obviously we want to we want to avoid the mistakes that are gonna completely you know, take the shirt off our back, make a make a pretty bad impact, but Chris Scheele: D yeah. Yeah. Yeah. Scott Campbell: taking the information that we have at hand and making a a reasonable, you know, thoughtful decision and and keep us moving Chris Scheele: Mm-hmm. Yeah. Scott Campbell: forward. Chris Scheele: Yeah. Yeah. The other point I want to make as well is that like once we once we settle into a plan and have a clear kind of trajectory, like here's what we're aiming for, here's where we're going, like this is how we're gonna set up set out about achieving this, we wanna stick with that. Right. It doesn't mean we can't adjust and modify over the years, but you know the It it is so easy to be swayed by whether it's the the crisis of the day or the investment opportunity of the day, it's so easy to be swayed and put our money into things that maybe don't actually contribute to us achieving our goal because of all of the pressures that we are constantly under every day. So if we can have that plan as that guiding, you know, that that post that like goalpost that we're aiming for, you know, the net that we're aiming for. Should not we don't want to aim for the post. You don't want to hit the post. You want to be bar down or, you know, at least kind of top corner. but when you have that that in that in mind and and in the back of your mind that you can reflect back on okay, this is my plan. Okay, yeah, I could modify it. I could adjust it. We can do that for sure. But like, When when SpaceX IPO comes out and and your friends are telling you about it and we go back to the plan and realize that there's no there's no place for SpaceX and we don't need SpaceX to to achieve our goals or be successful, cool. Let it go. Move on. Scott Campbell: y you can take action and that action is just simply saying, No, that doesn't fit into my plan and my strategy to help me accomplish my my goals. Chris Scheele: Yeah, exactly. Scott Campbell: versus the alternative of taking no action at all or making a again, what we like to call a random act of finance saying, Yeah, sure, why not? Let's buy a little SpaceX IPO. Might not be a mistake, but it could also be a mistake. Time will tell. Chris Scheele: Yeah. Time w time will tell. Scott Campbell: Time will tell on that one. Chris Scheele: Yeah. Yeah. Haven't been following. I know it was Scott Campbell: No. Chris Scheele: off to a hard st ho hot start and then not so much after that. Couldn't tell you where it's at today. Scott Campbell: No, tell you. Chris Scheele: Yeah. All right, what else we want to touch on here, Scott? Scott Campbell: Should we just c wrap up this conversation with maybe just a couple couple takeaways? Chris Scheele: Yeah, let's do it. Alright, so first one I'll say there's two options, right? Like you can you can do nothing or you can take it or you can take action. The random acts of finance can feel like taking action, but I think with without having that clear say say I'll I'll say it differently. When we have that clear direction that we're heading, it can avoid help us avoid these random acts of finance that often are more detrimental than they are helpful to our overall financial planning. Scott Campbell: Agree with all those. I think the only thing that I'd really add is I think it oftentimes just starts with getting organized. We could all use more of that more often of doing a bit of a reset when it comes to everything that is going on in our financial lives, just getting organized of where we're at, you know, whether that be from a net worth standpoint, understanding cash flow in the practice, cash flow on the personal side, bringing that all together so you can kind of see everything clearly. And then maybe identify the areas. Maybe they're already top of mind for you. Maybe there's already some some low hanging fruit of things that that you've been thinking about as Chris and I have been talking about. I've been thinking about that. I've been putting that off for a while. I've been thinking about it, but I don't know who to ask to inquire more and ask ask some questions. Get organized first and foremost. Jot down some things that that that you think you need to take some action action on, or at least start the process on, and pick one, you know. Take some steps to move forward. Chris Scheele: Yep. And back to previous conversations we've had, rely on your team. You know, you as a practice owner, you should have your team of financial professionals that are there to support you and guide you. You gotta use them, right? Y whether it's your financial planners like us or it's your bookkeeper, it's your CPA, you know, maybe it's a mentor, right? Use those people in your life that, you know, we we all need those people. Scott Campbell: Yep, for sure. Chris Scheele: Even me, right Scott? Scott Campbell: Even you, Chris. Glad I could help. Yeah. I'll send you the bill. Chris Scheele: Yeah. Cool. Essentially Should've asked. I should have signed that engagement letter first. Scott Campbell: Yeah, that's right. All right, Chris. Well, good conversation. Thank you all for tuning in for another episode. Episode number fifty. We're you know, we're we're cruising. We got our professional microphones now. Hopefully, yeah. Looking forward to the next fifty. Chris Scheele: May maybe that means fifty fifty more. Yeah. Scott Campbell: Yeah, well last last no hope hope for all the parents out there that the first week back to to school, getting the kiddos back into routine. Hope that's gone well for for everyone. And yeah. Any closing thoughts there, Chris? Chris Scheele: yeah, if you're listening to this and you feel like you're it's time to time to start getting organized, we would invite you to take the financial clarity assessment. you can find that at alignwealth.ca. Scott Campbell: Sounds good. Thanks for the time, everyone. We'll see you next week.