E544 | My Simple Financial Strategy

Today, I will walk you through the very basic financial approach I have been following for about the last 5 years. I'll give you an idea of what I was doing before I started my practice and how I changed it up to what I am doing now.

• How I tackled debt early in my career
• Why I stopped investing in an IRA
• Investing in rental properties

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Podcast Transcript

Danny: So there's all kinds of hidden fees within your business that are just part of doing business. One of those is credit card. Processing and for us, we didn't even realize how much we were paying in credit card processing with the first management software we were using for our practice. And when we switched over to PT everywhere, we just realized we were saving literally hundreds of dollars a month with credit card processing with their partner with Card point versus who we were using with our prior.

Software. This has made a massive difference. It's more than paid for itself. It allows us to decrease our overhead. It allows us to have more cash flow to reinvest in our people, in our technology, in our facility, in marketing and everything that's gonna drive the business. So don't get abused by credit card processing companies.

Make sure you're paying what you should pay. And if you're looking for a management software, highly recommend PT everywhere directly integrates with a. Processor makes it very easy and their rates are super, super competitive. So it's saved us a ton of money and it probably will do the same for you if you don't know what you are getting charged.

So head over to PT everywhere. Take a look at what they've got. I think you really like it. So here's the question. How do physical therapists like us who don't wanna see 30 patients a day, who don't wanna work home health and have real student loans create a career and life for ourselves that we've always dreamed about?

This is the question, and this podcast is the answer. My name's Danny Matte, and welcome to the PT Entrepreneur Podcast.

What's going on guys? Doc Danny here with the PT Entrepreneur Podcast and today I'm gonna walk you through my very basic financial approach that I've been taking now for the last basically, I guess five years. It hasn't been quite as long as I've had a business. I started business in the middle of 2014.

June of 2014, basically. And I'm gonna give you an idea of where I was at before, and then what we did before we started this approach. And then what we've been doing now, just as a very straightforward, simple. Financial approach for anybody that's watching this, because I think it can be very confusing.

And for me I tr I'm trying to keep this as simple as I possibly can because I'm not like, I don't consider myself a phenomenal investor. I don't really know the complexities of a lot of things as far as that is concerned. So I try to keep it very simple and I try to follow in the footsteps of people that I know that are that are wealthy, but are also they have very secure wealth, which is very important to me as well.

So let me give you a quick backstory. So in 2007, I joined the Army through the US Army, Baylor Physical Therapy Program. So that program, what is unique about that program besides the fact that I was commissioned as an officer to enter that program? So you basically commission, you go through your basic training and then you start school.

So basically from like August. Of 2007 to the end of the year, I was doing training, and then in the beginning of 2008, I started the Baylor program, which is a bit condensed. They actually load you up with a bunch of classes because it's your job to go to school. So my job, I got paid as an officer to go to school.

I. We also had no student debt associated with that because it was our job and this program was part of it. So after school I had no physical therapy debt. We had undergrad student loans that we carried with us into that, and we moved to San Antonio for that program, but I had no student debt from that.

And we had an income. While I was in PT school, so it's a very unique program and it helped us significantly set the stage for our financial sort of security going forward. But when we were there, the intent of our time there financially at least, was. A couple things. Number one, we wanted to pay all of our debt down, so we followed the Dave Ramsey envelope system, which if you want to like really strain your relationship, go ahead and try that.

It's a, it is a very restrictive Budget where you basically have envelopes but has cash in it for specific things that are consumables and just things you need in life, right? So like groceries, gas, imagine that. Ha, instead of using a card, which is so convenient, you have to go in and pay somebody $20 for gas or whatever.

So obviously my wife and I hated doing it, and we did it for I don't remember, maybe six or 12 months, something like that. Really just get us on track from a budget standpoint and then we're able to really have a better idea of what we're spending on things. So very uncomfortable, but I thought beneficial in the long run.

If you do it too long, I think it can actually create a lot of scarcity problems for you. So just to be aware. So during that time, our goal was to pay our Our loan's down. So we had an auto loan, we had student debt that we had, and we even had some credit card debt from, some furniture that we had bought.

So all in all, during that period of time, our goal was to pay that down and it was about $60,000. Total that we were paying down during the time we were there, and we were able to do that. So by the time that we left San Antonio, which was a little under three years later, we had paid down all of the debt that we had.

So we had no student debt left, we had no card debt at that point. Paid the credit card off the first thing that we did actually, and it put us in a place where we. Didn't have any debt. So life's a lot better whenever you don't have a massive amount of debt. I know for a lot of you, you have a lot of student debt, right?

More so than I did because for me, my program, like I said, was paid for. I didn't pay for to go to school. Now granted, I also owed the army, four and a half years after that. So my debt was a time debt. It was different than your debt, which was a dollar debt. But either way you're carrying that around, probably many of you.

As you look at the student debt that you have, as you look at the financial position you find yourself in, what we see, with the community that we work with at least, is that a lot of people will start a business, maybe a side hustle, and that eventually turns into a full-time thing.

But oftentimes a side hustle cause they're trying to help pay down some of the debt that they have. The stats are in, are, they are interesting with the A P t A. They say it's about $120,000 is what people come out of school with in terms of debt to become a physical therapist. And I know people that are way higher than that.

Way lower than that. But it's typically around six figures. So it's quite a lot. And depending on your interest rate, it can be quite a lot. So we'll see people start a side hustle and imagine, let's say you can make an extra $3,000 a month with a side hustle and you start just dumping that onto your student debt.

Like you can start to really chip away that pretty fast. If you were able, if you were going to take all that and put it towards your student debt. But for a lot of folks, they start that way. And then what happens is, They have more success than they think. So they end up going up to five, $10,000 a month.

They decide, all right, all I'm all in, I'm gonna start my practice full-time. They go all in. They're able to bring that up, 15, $20,000 a month. And. These are the same people that we're, in most cases, making probably $80,000 or so, give or take, some, depending on how long you've been outta school and where you live.

But let's say about that much. And now all of a sudden, they're making 140,000 a year. So there's a $60,000 difference there in terms of what they were making and what they're making now. So here's the key with this. Once you decide, okay, I'm gonna increase what I'm making. At the same time, you have to maintain your lifestyle.

Okay? This is the most important thing that I can. Get across to you, okay? If you are going to increase your income, which I fully, would like everyone to do, increase what you're making, but keep your lifestyle where you're used to it be. If your lifestyle is that of somebody that makes 80 grand and you make 140 and you can take the rest and you can put that towards.

Financial goals you have or paying debt down to get yourself into a better financial position, you're gonna win this game, this financial game. What most people do, and this is why most people are broke and are in debt, up to their eyeballs, is that as most people start to make 140,000, they start to live.

Like they make 140,000. It's called economic creep. You have $140,000 of income and all of a sudden you're like, oh shit. I'm about to get that new truck I wanted. I'm about to get, I'm about to go on that real nice vacation to the beach and I'm not gonna stay in that shitty of little condo. I'm renting the house out for the family.

And as cool as some of these things might be, you gotta realize you are part of economic creep and you're moving your way up to now you are meeting what you make and now your lifestyle. It's dependent on you doing really well in your business to be able to have that same income so you can sustain the new lifestyle that you have.

So if you don't move the goalpost, you're gonna put yourself in a better position to where you have cash flow. So with a lot of the businesses that we work with, and if you're listening to this and you have a business, number one, Don't change your lifestyle. Don't move the goalpost. Don't move the goalpost until you put yourself in such a good financial position that you have no student debt, you have no auto debt, no consumer debt.

The only thing you have left is a mortgage. All right? If all you have left as far as debt is concerned is a mortgage. Then you can do some other stuff Until then live like you're making the same amount of money you're making as a staff clinician somewhere. All right. And set yourself up for success generations down the road.

Don't be selfish and just go by that B m W right now put that off and develop the foundation to actually be able to put yourself in a better spot. So here's where we come to today, and this is where we were at in 2000. Man, what year was that? Probably 2019. Okay. So in 2019 this is where we had been reinvesting almost everything in the business, so we'd been growing our practice.

We were at a place where we were making probably three times what I was making when I was a captain in the Army off of our practice. And we hadn't changed really anything. We were living in the same house, driving the same car. We didn't have any debt. But what we were doing is we were taking that money, we were.

Taking the cash flow from the business, the difference of what we were living off of and what we were making, and we were putting that into hard assets, into real estate in particular. So as you look at what's behind me, I'm gonna walk through this, really quickly and just show you what our approach is and where we're at now.

Step number one, get your financial house in order. Pay your debt down as best you can, unless you have a stupid low interest rate on your student loans. If it's like couple percent, maybe you ride that out. But if it's six, 7%, 8% definitely try to pay that down faster, right? And then once you're in that place, building a business like this is key.

Building a business that is going to increase what you make. Is one of the fastest ways to increase your financial security, to increase your net worth, and to create the opportunity for generational family wealth, not just you being, there's difference between somebody being rich and somebody being wealthy.

You're rich, you make a lot of money, you're wealthy. Your money makes money. And it's put together in a way in which it's intelligent and it can be transferred to nonprofits. When you die, it can be transferred to family members. It can be, passed on along the way. Many different things, but you gotta get yourself in a place to do that first.

So when you build a business, the number one thing that you can invest in, the number one thing is in yourself. And your business, which I put those together. So the top two things, let me reiterate that. Top two things yourself and your business. Now granted, they go hand in hand If you don't have the skillset or you don't have a strong network of people that you can leverage to help improve the business, then you gotta get your skillset and your network upgraded.

And that's typically through mentorship, coaches, masterminds, courses, all kinds of stuff. Like you're dumping that into yourself and it can seem like a lot. Because I, I've invested a lot of money in those things. Like a significant amount more than most people would think is worth doing like over a hundred thousand dollars.

Okay? But the r o ROI on that is massive. Massive. And it's something that can never be taken away from me. No one can ever take the ability to do some of the things that I know how to do now, away from me no matter what. No matter if I move, no matter if I lose everything that I have. And I have to move somewhere else, like I'll just start over with a massive skillset and a network of people I can leverage to reach out to.

That's really important. If you don't have that, you need that. But number two is your business. So for the first four years that we got out of the army, I didn't put a dollar. Not a dollar, into any sort of retirement account. And you're talking to, this is a, I'm a guy at 18 years old, I started a Roth ira, like a little weirdo.

I. Just, I was actually trying to not pay taxes. I went to, at the time it was Wacovia and I think, I forget who bought them. Maybe it's Wells Fargo, but Wacovia doesn't even exist anymore. I go there with my lifeguard money. Okay. I'm a lifeguard. My senior year in high school, I got a couple thousand bucks from being this lifeguard, and I go to the bank and I'm like, listen, I wanna put this into a.

Into a retirement account. I wanna put this into an IRA cuz I don't want to pay taxes on it. And the lady of the bank laughed laughed out loud and she goes, listen, you didn't even make enough money to pay taxes, so if you're gonna put this into anything, you should put it into a Roth IRA because you're not gonna ever have to pay taxes on this ever again.

She told me. Great advice. Actually shout out to Wacovia, but. When I look back on that, it's, it was something, a habit that I actually developed early on and I started to con to contribute to a Roth I r A every year, even though it wasn't a lot of money, but every year from the time I was 18 until we got outta the army when I was 29 years old.

So I stopped contributing anything to. To an or an IRA or a retirement account that I had diligently been doing for 11 years from the time that I was, 18 years old. And that was based off the advice of entrepreneurial friends of mine that were like, listen man, that is not gonna get you where you're trying to go.

You gotta invest in your business. You gotta put that back into people and space and scale in your business. And then scaling your skillset. So I stopped in investing any money into that, and I started pouring everything back into myself and into our business. In a matter of a couple years. Our business grew and it grew past myself, and it grew past another provider.

And we had a handful of providers in a standalone space, doing, at the time, I guess we were like five, $600,000 a year in top line revenue with really healthy profit margins. And by the end of those four years, we were making more money than we had ever thought that we would make. And we didn't really know what to do with it.

So we decided that we would take the extra cash flow and we would start putting that into property, into real estate in a number of different ways. And for us, this made a lot of sense because as I started to get around other entrepreneurs that, that I. Just had a lot in common with, but they were a few steps ahead of me.

They all had a similar approach that I noticed. They were, they had a successful business that was building enter enterprise value, meaning they could sell it, but they weren't banking on the sale of their business because what was happening is they were developing a business that was spitting off a bunch of cash flow and they were taking that cash flow and they were actually putting it into an asset that was gonna generate passive income for them as well as have an opportunity.

To grow and in and increase in value as the market increases in value. And there's a lot of Just differing opinions out there of what people think you should and shouldn't do. So just take this as, this is mine. I'm very conservative in a, in most ways when it comes to financials.

So you sure there's plenty of people that'll tell you need to do many other things, but for me, this is what works. So I wanna share it with you cuz it's pretty simple. And I've actually shared this with a lot of people that we work with within our within our coaching programs.

So business number one. Start that. Increase what you're making. Okay. Pay down your bad debt. Pay down your debt that you don't want to have, minus like your mortgage or whatever it might be like fixed low interest, long-term debt like a mortgage. If you have a 3% interest rate on your house for 30 years like you're doing, great.

Hold on to that. It's the debt is actually valuable in that scenario. I don't have time to get into why, but in this case, that's the last thing that you want. Build your business up to where you have dramatically increased your income capacity. But do not change your lifestyle. Your lifestyle stays the same.

Don't move the goalpost. Stay where you're at. Take the money from the business that you need for your lifestyle. That's why this is red, cuz this is actually a negative. You need this for food. You need this for groceries, you need this for clothes, you need this for all the stuff that you need to do. That supports your life, the business supports your life.

All of the additional cash flow that you have, minus the safety net you have in the business. So your cash reserves in the business. Make sure you're keeping three to six months cash reserves in the business in case you have things that you know happen. Or a P pandemic, for instance, like that was a hell of a great resource.

Whenever businesses got shut down. You don't know what's gonna happen. So keep three to six months cash reserves in your business, but the rest of that money, that's yours, you're gonna get taxed on it one way or another. So whether it's in your personal account or your business account or whatever, it doesn't matter.

That's your money. You're gonna get taxed on it. Take that extra money, save it up, and when you have enough money to put a reasonable down payment on a property that you can buy that is going to cash flow. This is really important. Meaning, and this is the simplest strategy. Let's say it's a house we just closed on another house.

Yesterday. So this house, for instance, this house is gonna cost us about $2,500 a month. Okay? So we had to put a down payment on this house of about $80,000. So the down payment was $80,000 on this house. It's gonna cost us to carry this the month, the mortgage is about $2,500 a month, and we should be able to rent this for about 32 to $3,500 a month.

Okay? So we should be able to make 700 to a thousand dollars a month. If we outsource it and somebody else manages, it'll be a little bit less than that. It's not a cash flow monster by any means. It's not, we're not retiring off of this house, but it is a safe, secure place where we can put our money.

It's tax advantaged. It appreciates over time it's hedged against inflation because it will go up as inflation continues to go up as well. It'll keep up with the pace of that, or at least rents will keep up with the pace of that, and that is something that we can use to improve cash flow as well as we have tenants paying down the interest that we have on that.

On that mortgage. So somebody else is paying the loan, basically, plus some money and we get the difference. So it's a really solid place for us to continue to put money into, so for us to date, like we, when you look at investing, I'm not a massive real estate investor by any means, right?

We only have a few of these. But our goal with these. Are to get really quality properties that we want to have in areas we think are gonna get better over the next five to 10 years. That cash flow, meaning I can buy them and rent them out for more than what it costs me to run or for me to actually pay for it every month.

So that comes from the difference in what our life would be and the business, right? So you obviously have to pay tax in ownership to take that out as well, but the difference can be a significant sum of money if you are. Doing a good job of maintaining your lifestyle. And I'm not telling you not to celebrate, right?

We've increased what our lifestyle looks like over the last few years in particular, but that's also because we've put ourself into a place where we have a lot more passive income that comes from things like this. And we've put ourself in a bus, a place with business where our business is significantly bigger as well.

But in comparison, we live off of a small amount of what we make. We probably spend 20, maybe 25% of what we make. A quarter of what we make is what we actually spend. And we have fun, man. My, me and my family do some fun shit. Like it's, we're not living like the paycheck or we're not living in the envelope system anymore.

But if you could do that early on and develop that skill and set yourself up to be able to do many other things later in life, you're in a lot better spot. So this is the simple approach that we really like. This is what we talked to a lot of people about. The thing that throws a lot of people off is that, This can be daunting.

It's a significant sum of money. There's there's a learning curve. What should you do? What should you not do? This is another place where you can get mentorship. It's another place where you can get professionals in your area that are, this is what they do for a living. And there're realtors that specialize in that, where they can help you find investment properties and you don't have to have many, right?

I think that's the big thing. And for us, we don't actually really want that many. What we want to do is we want to get maybe a couple more properties and then we just wanna start to pay all of them down. And we want to own 'em all outright. And it's not the most leveraged way. Like people are gonna be like, no, dude, you don't wanna do that.

Like your cash on cash return is gonna go down. I got it. I know, but there's a lot of peace in mind. Peace of mind in us owning property that is gonna cash flow every single month. And if we have something that pops up, we gotta replace the roof, whatever. Like we have plenty of cash flow to do that without it creating a, a problem for us where we have to, use cash reserves somewhere else.

So this is the strategy. Get your business at a place where it's humming, it's spitting off a bunch of cash flow. Live like a physical therapist that's a staff clinician like you were before. Don't raise your living standards to your income standards. Don't let economic creep come in. And then from there, put it into assets that are gonna cash flow for us.

This makes sense for you. It might be a commercial building for your clinic. It could be that you could have cash flow from that. As you pay that building off, you have other tenants that are. Paying you, and there's cash flow and tax advantages that come from that, right? It could be getting involved in something like a real estate syndication.

This is where people buy bigger buildings and people pull money together. Just be careful, who the operators are and who you're working with. You wanna make sure that you're not just giving your money to some stranger, you have no idea who they are. You want to make sure you're those people in these legitimate businesses.

And then you can just go the old fashioned way and just. Just buy a house, that's in your area or an area that you think is gonna improve in the city you live in. And I think if you can drive to it, it's easier. If you don't wanna invest where you're at, that's cool too. But I don't know how much experience with that.

We, all of our properties are within driving distance because it's just simple for us to do it that way. So that's it guys. This is my entire financial strategy. Okay. That's about it. There's a couple other things that, that we have that are, that as far as like equities are concerned with mutual, not mutual funds, but ETFs just like broad based index stuff, but it's very small.

This is the vast majority of what we do. Open book, wanna share it with you guys? I hope that this makes sense If you're listening to this on the podcast and you wanna see the video. Head over to the Facebook group, head to Facebook, and just search for PT entrepreneurs. We'll have the video up in there.

You can take a look at it if you wanna see my little diagram that I drew. And if not, hopefully you can figure this out. Logically, draw it out yourself and visualize what I'm talking about. It's pretty straightforward. I wish someone had taught me this and told me this years ago I wish I would've known this 10 years ago instead of just, Three years ago, right?

But I didn't. And that's cuz I wasn't really actively learning this stuff. So hopefully I can shorten learning curve for you and this will help you as well. So guys, as always, thank you so much for listening and we'll catch you next week.

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If you're doing the work and you're getting. Information put down and getting yourself ready to take action in a very organized way, you will have success, which is what we want. So head to physical therapy biz.com/challenge and get signed up today. Hey, real quick before you go, I just wanna say thank you so much for listening to this podcast, and I would love it if you got involved in the conversation.

So this is a one one-way channel. I'd love to hear back from you. I'd love to get you. Into the group that we have formed on Facebook. Our PT Entrepreneurs Facebook group has about 4,000 clinicians in there that are literally changing the face of our profession. I'd love for you to join the conversation, get connect with other clinicians all over the country.

I do live trainings in there with Yves Gege every single week, and we share resources that we don't share anywhere else outside of that group.So if you're serious about being a PT entrepreneur, a clinical rainmaker, head to that group. Get signed up. Go to facebook.com/groups/ptentrepreneur, or go to Facebook and just search for PT Entrepreneur. And we're gonna be the only group that pops up under that.