There are two components to building an equity account…income and capital gains.
Income is money you earn from your practice and interest or dividends from other investment vehicles like stocks, bonds, real estate, and retirement accounts. How has that worked for you?
Capital gains are the tax-advantaged growth in the value of an asset, i.e. stocks or real estate. How does that work for you?
In recent years, stocks, bonds, mutual funds, and real estate have not been very profitable investments, nor have they brought significant rewards to your wealth account.
The best return on investment has been gold recently, but nothing lasts forever. The stock market grew 1% over the last 10 years…real estate? Well, you probably know the history of real estate.
But, the only source of income and wealth is your practice. By far it will dwarf most other wealth producing schemes.
On average, for every $10,000 your practice raises, you earn $5,000 in pre-tax dollars and earn 70% or $7,000 more in principal when it comes time to withdraw.
Essentially, for every $10,000 you increase your collections this year, you’ll be adding $12,00p to your estate account!
Now, that’s a wealth building program that you can control and not be subject to the ups and downs of the markets.
Every dollar you put into a retirement account is a dollar you couldn’t use to build your practice. Oh, you say, but it’s tax deferred and when I withdraw, it will be taxed at a lower tax rate. Swill! First, taxes will never go down, and who wants to enjoy retirement in a lower tax bracket?
Grow your practice and you’ll earn higher revenues and bottom line profits and build your capital in the practice when it’s time for your exit strategy to kick in.
Here’s an example: You take the maximum contribution to your 401K Plan of $22,500 and invest in marketing your chiropractic brand. In both cases, you can deduct the $22,500, so it doesn’t affect your lifestyle or profit and loss statement.
But, in the 401K your contribution will “grow” whenever the market is good…10-15% in a good year. And, the growth is also tax-deferred until it is withdrawn.
Spend the $22,500 on marketing and add another $100,000 to your collections in the year and you:
1. $100,000 increase in fundraising.
2. $70,000 increase in your equity account subject only to capital gains tax when you sell/exit from practice.
3. You continue to receive the income, plus next year’s increase, etc., until you retire.
If you increased your practice by $100,000 each year for 10 years over the previous year, you would have a million dollar practice, earning $500,000 or more per year, and a capital value of $700,000!
Compare that to a retirement account. Look at your plan statements and then compare the end results. Only people on fixed incomes should worry about a poor-yielding retirement account. Chiropractors can grow wealth much faster with larger numbers if they focus on growing their practice and not waiting to see if the market works out.
Oh, you say, you have to pay taxes on the increase in income… it’s not tax deferred. True, as long as you don’t REINVEST your increased income into more marketing for faster growth or expand with additional offices…and do it all over again two, three or more times!
You have the greatest wealth building plan… your practice. Max it out and you’ll retire with a real wealth account and the ability to enjoy the lifestyle of the rich and famous.