Four Tips to Help Doctors and Dentists Avoid Financial Ruin
Were you ready for the pandemic? Very few business owners were. No matter what, the pandemic may have still hit you and your practice hard. How did your current financial plan help you through it? Did you have any alternate streams of income to rely upon when your practice was shut down? If you’ve been relying on traditional methods of financial planning for dentists and doctors, there’s a strong possibility that you did not have any cash flow from outside your practice during the shutdown. That is a scary, vulnerable feeling. Are you taking steps to better prepare for the future? (Hint: next time may not be a pandemic, it may be a natural disaster, or a personal crisis such as an injury or other personal matter than renders you unable to practice). Do you have a financial “Plan B” in the event that you are not able to generate income from your practice? Most traditional financial planning for dentists does not offer a reliable source of cash flow outside your practice. At Freedom Founders, we like to take a different approach to the traditional methods. Here are four tips to help you avoid financial ruin and gain financial freedom instead.
What are you currently doing to avoid financial hardship? Are you saving for your retirement or investing in a 401k? Perhaps you’ve spoken to financial advisors who have promoted some of the more commonly known ways of investing, like building a stock portfolio. A lot of the advice given by financial advisors today is outdated. It may have worked years ago, but with the way the world works today, it’s likely not the best option for financial planning for dentists and doctors. The first tip is to simply review what you have. Figure out where your money is and think about whether it’s really helping your reach your financial goals.
2. Find the right mentors
Tip number two is to find people to learn from who have successfully created the financial freedom you are seeking. How is this relevant to financial planning for dentists and doctors? Why would you take financial advice from someone else who is on the same treadmill as yourself? Who are you currently following? Do they have a proven game plan that has successfully weathered the unexpected? Start following people who are more successful than you and start looking at what they’re doing. Learn from them and build new relationships.
3. Invest – in a new way
The best way to invest for the future is in a 401K, right? Well, think again. The 401K was created in the 70s to help Americans save for retirement by leveraging tax incentives. America, the way we work, our savings needs, and retirement goals have changed a lot since then. Now, having more liquidity and choice in your investment can make it grow faster than locking it into a 401K. When you focus on dynamic investing for your current cashflow instead of relying on your money to slowly make traction while locked away in an account, you harness the potential of (a) having your money work harder for you and (b) investing in a way far more appropriative to our times and your needs.
This step may seem obvious but it’s a step many miss. Earning is important for everyone, not just in financial planning for dentists and doctors. Everyone needs cash flow to have financial freedom, right? That makes sense, but where is this cash flow coming from? When you fail to diversify and rely on one income stream to cover your present and future needs, you put yourself at high risk. What if your single income stream fails? What if you are unable to physically do your job? When you diversify your income streams, you have a safety net that helps you reach your financial goals even if setbacks occur.
Financial planning for dentists and doctors can be complex at the best of times. I want to help you get to a place where, if ever you encounter something unexpected, or if you need to step away from your practice for any reason, you will not end up financially ruined. Remember, you’re not alone in this!