December 2007

Achieving financial independence

by Dr. John Madeira

Every summer as a nation, we proudly celebrate Independence Day, a very special holiday for our country. We celebrate the joys of freedom and liberty. We rejoice for the day we were given the right to pursue happiness and live our dreams.

Though we are free in that sense, there's another freedom that we all need to experience. Let's make this personal. When will you celebrate your own Independence Day? This is the day you are free from the significant financial stresses that burden most chiropractic professionals ‑‑ the stress and the weight of DEBT.

How would it feel to practice just because you wanted to and not because you felt like you had to? What would your life be like if you were completely debt‑free, every need met, having more than enough to take care of your personal and business expenses? I believe we all want to reach the place of financial independence. It has taken me years to put into practice the principles I'm about to share with you. If I had understood these truths sooner, it would have saved me a great deal of financial stress.

The greatest mistake you can make when building a successful practice is living off your business checking account like it was a bank! As your practice grows, your income grows. And as your income grows, you raise your lifestyle too quickly, i.e., bigger houses, cars, boats and other debt instead of maintaining a leaner personal lifestyle until you get your debt levels under control. I know firsthand how great this temptation is, but you must avoid going down this road at all costs.

Have you ever wondered how or when you were going to get out from under the pile of debt you have amassed between the $100,000 school loans, $100,000 business loan to start your practice, $300,000‑500,000 home mortgage, car loans, equipment leases... the list goes on? It may seem overwhelming. It may look impossible and even unattainable, but right now, you're going to learn how.

There are no "quick‑fixes," but these are a few effective ways to whittle away at the mountain of debt that most of us have accumulated and in time, become... financially independent.

Three steps to financial independence

1. The first step is to keep your personal and office expenses separate. The most common mistake I see chiropractors make is living out of their business checking account. If there is money there, they spend it. As their income grows, so does their lifestyle.

Not having a plan is a plan to fail. So, start your debt reduction plan by keeping your personal expenses and budget separate from the office. Know exactly how much you need to live on every month to meet all your personal bills and expenses. Things to include are mortgage/rent, utilities, personal insurances, grocery, car expenses, children's schooling, clothes, etc. You get the picture.

2. The second step is to know what your monthly costs or budget is for your practice. Include office rent or mortgage if you own your building, salaries, payroll taxes, business‑related insurances, such as malpractice coverage, fire, theft and liability, etc. Also include utility costs, advertising, cleaning, maintenance costs, etc.

Once you have those figures established, you know your bottom line... how much income you need every month to stay in the black.

3. Last, I want you to establish a payment priority. This is the master key to bulldozing away that financial mountain and getting out from under that vice‑grip of financial stress you feel.

Weekly payment priorities

I suggest strongly that you pay your bills every week.

Each week:

*** Write a tithe check ‑‑ one‑tenth of your income from the previous week, minus expenses ‑‑ to your church, synagogue, temple or other spiritual community.

*** Write a second check to your personal account for the amount needed to cover one‑fourth of your monthly expenses.

*** Write your third check to deposit in your tax account. Figure this amount by adding up all of your expected federal, state, local and payroll taxes and calculate that as a percentage of your total income (call your accountant if you can't figure it out). Write the check for an amount equal to that percentage of your income, minus your expenses for the previous week. This must be a priority because the government always comes for its money ‑‑ always!

*** Fourth, pay your office bills for that week.

*** You're almost done. Next, build a float in your business and personal checking accounts. Build the float amount up to $25,000 in your office account and $10,000 in your personal account. The purpose of this surplus amount is to always have money. That way, if you have a slow collection month or two, need to replace the air conditioner system or buy a new table, you have the money.

*** After you have your floats built, take any extra and pay half to personal savings and half to debt reduction.

Other strategies

a) Debt‑reduction. To pay down debt quickly, list all your debts, lowest amount owed to largest. Every time you have extra money, apply it toward the smallest debt first.

b) Mortgages. As soon as possible, change your 30‑year mortgage to a 15‑year mortgage. You will pay off your home in no time.

c) Investments. Finally, as you begin to accumulate savings and are ready to begin investing, only invest in what you know. Steer away from any investment that you don't have thorough knowledge about.

If you follow this pattern consistently, you will be amazed at how fast you lower your stress, accumulate cash and pay off your debts. As the stress and debt goes away, your confidence, fun and enjoyment in life will all go up substantially.

(John Madeira, DC has been in private practice in Hershey, PA for more than 25 years. He is also the founder of Madeira Success Strategies, a professional consulting firm serving chiropractic professionals from all over the US, providing Christian‑based success coaching, seminars, resources and workshops. Dr. Madeira is the author of "Setting Things Straight," an outstanding book on how to achieve spectacular health the natural way. For more information, please visit www.MadeiraSuccess.com .)