How To Set Yourself Up for Financial Success as a New Dentist

Becoming a dentist is an exciting and rewarding experience. Unfortunately, it is not without its fair share of challenges. Your first inclination may be to learn additional skills to attract more patients right out of the gate, but you should also consider your long-term finances. 

The problem is that financial planning for new dentists isn’t something that is taught in dental schools. And making matters worse is that you may be setting yourself up for economic hardship without it. After all, the choices you make now will shape your career for years to come. 

Nevertheless, there are a few key points to consider. The following 5 tips will help you manage your personal and professional finances well and set up you for success:

1. Understand your student loans.

New dentists graduate from dental school with upwards of $290,000 in debt on average. That’s nothing to scoff at, of course, but the good news is that up-and-coming dentists can handle that debt by developing a personal financial strategy. 

Repayment Plans & Interest Rates

It’s important to understand the terms of your student loan(s). For example, some plans require full payment in 10 years. Other plans are more lenient, spreading the payments over 20 or even 30 years.

There are four plans you can follow when repaying a federal loan. You may choose a plan that has a lower interest rate or one that has lower monthly payments. Both have advantages, so make sure to select the plan that’s best for your financial situation.

Interest Rates

Another thing to consider is the loan’s interest rate, the cost of borrowing the money in the first place. You may be more familiar with these rates being represented as percentages, but in any case, interest accumulates on your unpaid balance throughout the loan’s life.

Refinancing

Refinancing is when you take a new loan from a different lender to pay off the old one. This may give you a lower interest rate or more time to repay the new loan, which can make doing so (and thus preparing for the future) easier.

2. Create a budget—for your practice and your personal life.

As your skills and practice grow, you can add new services and invest in new technology. However, it’s crucial to set and stick to reasonable budgets.

A good financial plan is to save 20% of your personal income. You can divide it however works for you, but a good way to do so involves setting aside one portion for retirement and investments and another for an emergency fund.    

Another budget you must consider is a professional one. You need supplies and equipment to run your office, but the most lavish equipment isn’t always necessary. At the same time, investing in continuing education (CE) courses will be required to maintain your license and expand your skills.

3. Establish an emergency fund.

Your dental office should have some money saved to handle emergencies. Technology is amazing and has changed the ways patients receive treatment, but it’s only good when it works. You may have to replace an X-ray sensor that was dropped too many times or purchase something larger, like a new air compressor. But if the extra cash isn’t available, replacing these things strains your budget and makes it harder to provide the best care. 

Most financial experts suggest saving at least three to six months’ worth of expenses. For new dentists, these include living and business expenses.

4. Plan for retirement early. 

You’re a new dentist and have a long way to go before hanging up the handpiece for good. But there’s no time like the present to get ready. Starting a retirement plan early on can affect how much you can save overall.

The first step in beginning a retirement plan is picking an account that best helps you reach your goals. Traditional accounts you can choose from include the following:

• 401(k)
• IRA
• Roth IRA 

Understanding how these accounts are taxed and their rules for moving money around is vital. Compound interest, for instance, refers to how much interest a financial institution will pay you on the interest you’ve accumulated. It will help your savings grow faster and protect your investments from inflation.

5. Get professional financial advice.

While numerous websites may offer guidance on financial planning for new dentists, it’s still a task you shouldn’t take on alone. Your personal and professional finances are simply too important. 

Talk to a financial professional who has worked with those in the dental field before. Their understanding of dentistry will pay off, as they’ll be able to devise a financial plan that fits your unique goals.

Create new ways to increase profits.

Financial planning doesn’t have to be another stressor to deal with. Instead, you can approach it as an exciting part of your new career. Remember to include ways to help your business grow, like incorporating orthodontics in a general dental office. You can take a weekend CE course from the American Orthodontic Society and begin providing a new service to your patients. The organization offers straight wire courses to general dentists who want to bring something new to their patients. Sign up today and expand your skills!