Dentists and Money

Dentists and Money

February 01, 2021

I was recently approached by a young dentist who was feeling overwhelmed about his student loan payments. He had many other questions about his personal finances in regard to purchasing a home closer to work, whether or not to receive a 1099 over a W-2 at a new position and how much to save for future goals including retirement savings …but the big overhang was “I’m paying 40% of my paycheck to student loans”. Ouch!

The reality for many new dentists who try to navigate both their busy career and personal finances is that they get overwhelmed and this can lead to procrastination on important financial decisions. Thanks to the internet, information is abundant, but financial wisdom is knowing what applies to you and when to actually act on it.

And then there is the time factor: We all have 24 hours in any given day, so the ability to do all things and well is tempting, but you’ve heard the saying “A jack of all trades is a master of none”. I find many dentists love figuring things out and managing their personal finances on their own, but forget to factor in the worth of their time. How many hours are you spending on your finances and what is your hour worth? It’s not uncommon to spend 10-20 hours a year on your financial plan and if your hour is worth $200 that means the opportunity cost of your time is between $2,000 and $4,000 per year. So the question is what would you rather do with the hours you can save by hiring a financial planner? 

 As we dug into this dentist's personal finances, we discovered several important items for action:

  1. After going through the pros and cons of 1099 vs. W-2 for his situation, he decided W-2 would work best for him to start. His new employer never gave him a written contract, only a verbal contract was agreed upon. Upon an investigation of his paystubs, we found a 20% discrepancy between his agreed upon base salary and his actually paychecks.

I know what you are thinking-I’d never make that mistake! This has happened to more people than you think.

  1. Regarding his student loan debt, he had the default standard debt repayment plan. This is what all graduates end up with and will pay off the loan in full over ten years.   Although this can be a good option for dentists who have a manageable student loan balance, live at home or have low living expenses, this is the highest payment option. His student loan payments were clearly not affordable at 40% of his income.  We reviewed the payment options available to him to determine what was an affordable debt repayment plan. His debt payment went from $4,000 a month to about $1,000 per month based on his income.

  2. With the lower debt payments, he is able to contribute to his new 401(k) plan and is on track to be financially independent by age 55 while also saving up for a house down payment to be closer to his dental practice.

It’s one of my favorite client cases because with the right financial plan and guidance the possibilities are endless. I know it took many years of schooling and hard work to become a dentist, and with a well thought out financial plan addressing all the pieces of your financial situation you can feel more financially secure.

Some financial experts advise everyone with student debt to pay their student loans as quickly as possible, but that fails to address all your other personal and professional goals. At Emerge Wealth Strategies we believe you deserve better than blanket recommendations based on the general rules of thumb. If you wish to discuss your unique situation and see if we’re a good fit schedule your free, no obligation consultation by clicking here: Schedule a Consultation


This is meant for educational purposes only and not meant to represent any other particular client situation or experience.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.  (02/21)