Are you a dentist who wants to translate high income into net worth that sustains your lifestyle and provides for your family whether you continue to work or not? Financial planning for dentists is absolutely vital to ensuring the economic security of your present and future self. Let’s take a look at some of the top financial planning tips to suit your life and career as a dentist.
Understand How Much You Need
Most retirement strategies are based off of an accumulation model. Pile up as much money as you can, cross your fingers and “hope” that your nest egg lives longer than you do. That's not exactly a recipe for true freedom (or peace of mind). The first step in financial planning for dentists is to flip your approach and focus instead on cash flow. How much cash flow do you need (on a monthly or quarterly basis) to sustain you and your family's lifestyle needs?
Look at your situational finances and decide how much money will be adequate for you to live off of for the next years until your retirement, and then calculate how much you’ll need over the course of your retirement, including any medical or caregiving expenses that may appear with age. Be sure to include all your lifestyle needs including travel, taking care of aging family members, college tuition for your children, charitable giving, and more. Don’t forget to gross this number up for taxes. For a video training and worksheet on how to calculate how much you will need, check out our free retirement training guide. Financial planning for dentists should always start with an honest assessment of your wants, needs, and means.
Don’t Kick the Can Down the Road!
Maybe you’re young and think you still have plenty of time to plan for the economic goals of your practice and your personal life, but this type of thinking leads down a risky path. Financial planning for dentists should start as early as possible because it’s incredibly easy to let time escape you, leaving you with insufficient savings by the time retirement comes around the corner. The power of compounding can make time a tremendous ally. Regardless of your current income, you should be planning for your future economic success. You don’t want to be working double hours when you’re 80, so take the time now to make sure you can live comfortably in the future.
Look for Inflection Points
There are a few key inflection points in your life that can unlock exponential growth. When you are young, it's likely that your largest inflection points may be found in your practice. Your practice is the economic engine that should fuel your investments. Later in your career, there will likely be hidden or under-utilized net worth that should be working harder for you. Financial Planning for dentists should include a holistic review of ALL your assets (your practice, practice building, equity in your primary residence or vacation home, qualified retirement plans, etc.).
