Five Financial Planning Tips for Dentists
Most medical students enter their fields thinking that all of their hard work, schooling and student loans will end up being worth it. They'll have a lucrative career and be able to write their own ticket for the sweet life they're dreaming of. While it is true that the investment to become a medical practitioner should allow for a higher-than-average income, it can also lead to a cavalier attitude toward planning for the future. Too many practitioners begin to live the lifestyle they believe they have “earned” and in doing so chain themselves to a fast-moving hamster wheel. The problem with this mindset is that it severely lacks in planning. Previous generations could get by just saving on every paycheck and they'd be set to retire at 60 or earlier. But the world is changing. In dentistry, this is not guaranteed (in 2017, the average age of dentist retirement was almost 70). Dentist financial plan solutions should be diversified and reflective of today's market to make sure they get where they need by retirement.
Ignore Traditional Models
You're not your parents or grandparents and you're not investing in the same markets anymore, so don't save and invest as if you are. A 401K investment locks in your money for some generally safe profits, but that can actually work against you. Low yield investment strategies are statistically not the most effective use of your capital, especially with rising inflation threatening to reduce the purchasing power of wealth in the future and savings like 401Ks and RRSPs limit your liquidity, which can be critically important to take advantage of alternative opportunities. A dentists financial plan that maximizes your earning potential shouldn't be cookie-cutter, it should create financial Freedom – not dependence.
Invest in Your Network
Talk to any successful person you know, and they'll tell you that old phrase “it's not what you know, it's who you know.” This isn't just a humblebrag about the good ol' boys clubs. Networks give you connections and leads on investment opportunities. Surround yourself with people smarter than you, other young people who have made strong strides in business and other industries and learn from them. These people might give you direct advice or might inspire your own financial plan to move in directions that a typical dentist financial plan might not.
Invest in Yourself and Your Practice
A dentist's financial plan starts and ends with their practice. Your practice is your primary asset, and you can and should use it to fuel future wealth building. Invest and upgrade your practice, including quality marketing. It's not enough to just throw a smiling face with your practice's name on it onto a bus stop bench. Offering specialized services can increase your market share and lead to additional income.
Creating a healthy business in your practice can also help by acting as capital for you to use to further invest in areas such as real estate and other ventures!
Create Multiple Revenue Streams
Making a dentist financial plan means that you're probably coming at the problem with higher numbers than most, but that doesn't mean you should just sit back and ignore opportunity. Real estate opportunities are usually lucrative and a steady source of income, expanding or franchising your practice may be an option, or you may want to invest significant shares in competitive startup markets. Having multiple streams of revenue is a great way to stabilize your income and keep your money working for you.
Revenue into Retirement
The problem with retiring is that, for most people, when you stop putting in labor, people stop giving you a paycheck. Busting your butt for 60 years should earn you a comfortable retirement, but in reality that takes solid planning. Build your revenue streams, whether they be investments that create sustainable cash flow, retirement accounts, or keeping your practice running through partnerships after retirement. Have a flexible plan that lets you take advantage of opportunities as they come, but still aims towards the happy retirement goal. Ideally, continued revenue into retirement is definitely a helpful part of any retirement plan.
The simple truth is that today is not 30 years ago, and for a young dentist's financial plan, it's important to realize that today is also not 30 years from now. Capitalize on that understanding, pay attention to markets and don't let the opportunity to live your best life pass you by. Visit our website for more details.