Here’s what I mean: Imagine you are a dentist running your own dental practice. Your business itself is the first point on the star. You help people have the healthiest teeth and gums they can possibly have, and they pay you for your knowledge and expertise. You have a thriving business. When considering the potential for wealth-building, this is just the starting point. This is an important mindset shift to make as we consider the many ways that you can build on what you are earning in the business itself.
The second point on the star is liquidity. Any business owner knows that to be successful you have to have ready access to cash. A large portion of the 95% of businesses that fail can attribute that failure to a lack of liquidity or access to capital. So, to unlock your savings and true compound interest we look toward our Uncommon Banking strategy. For this, you would establish a cash- value life insurance policy, which is 100% contractually guaranteed, tax-deferred and liquid for your flexibility and convenience while supporting a death benefit and rate of return on your money. There are other ways to maintain liquidity, but the benefits of Uncommon Banking make this our first suggestion in this category.
A business and liquidity are great, but we are just getting started. The third point on that star of wealth creation is home ownership. You and your family have to sleep somewhere, so home ownership is a logical step. Paying that mortgage builds equity within that home and is one more way to build wealth.
There are so many ways real estate can help you build wealth, which brings us to the fourth point on the star. Let’s say you own the building where your dental practice is located. There are two potential ways to benefit from rental income when you own the building where you run your business. If the building is large enough, you can rent space to tenants – a great source of wealth building. But even without tenants, you can take advantage of owning that building. We suggest paying rent to yourself through your own LLC, a separate entity that owns the building. There are tax advantages to setting up the LLC and paying rent to yourself this way. Let’s say your dental business is set up as an S-Corp, which pays rent to the LLC that owns the building. This is not considered wages, so it does not involve payroll tax. It is a way to get income out of your business and into your other pocket in a more tax-advantaged state. The building can be depreciated which can also help you on your tax liability.
These four wealth-building points are exciting on their own, but you should also have a fifth point on the star.
That would be a retirement plan. We don’t suggest putting all your eggs in this basket, but having money in a retirement plan does provide for a tax deduction, and it is one more resource for you as you age. Access is deferred until retirement age, but that money will be there for you, as another source of income when the time comes.
This 5 pointed star analogy demonstrates why business owners often build wealth faster than those that don’t own a business. You can literally be building wealth in five different ways at the same time, whereas most employees are typically only building wealth through a retirement plan and possibly their home equity.
I hope this gets your wheels turning as you consider your options. You have more wealth-building potential than you realized! Take full advantage of these 5 points for a bright and shining future.