Dentaltown December 2014 - (Page 90)

ﬁnance feature by Douglas Carlsen, DDS FOR ANY AGE DOC At what age should doctors do what and have what ﬁnancially? How do you judge your progress? I've consulted with over 300 doctors over the last six years and follow academic authors. The following provides general rules of thumb for a doctor wishing to retire by his or her early to mid-sixties with a lifestyle similar to what that doctor had while in practice. Doctors Late Twenties to Mid-Thirties The young dentist will often buy into an insidious mental framework of debt being a natural part of life. It isn't. If you tie your identity to debt, you'll end up needing to work 10 to 15 more years than the dentist that doesn't. This is the most important message in the series. Debt is never your friend. Many will tell you to use debt for leverage, tax advantage and other ploys. Nonsense! 1. Student Loans Young doctors now have between $200,000 and $450,000 in loans after graduating from dental school. There are 25-year and income-based loans that young doctors often take out. How does this pan out? I know doctors in their late 40s who still have a $1,500 a month student loan payment along with a mortgage of $3,000 a month, auto leases totaling $1,500 per month, a practice loan of $6,000 per month, and private K-12 school payments of $3,000 per month for two kids. This totals $15,000 per month or $180,000 annually without paying for taxes, food, clothing, utilities, insurance, home maintenance and upgrades, or DirectTV! What can the young dentist with onerous student debt do? Unfortunately, suck it up and live like a student for a few years after becoming a doctor. One who pays off student debt quickly will have real savings by age 50. Here are some tips: * Always pay off credit cards completely every month. If you can't, cut IT up and use a debit card. * Do not take out a car loan or lease. Learn to pay cash. * Do not buy a home before purchasing a practice. The stress of starting a practice is high enough without worrying about a mortgage. Wait at least two years. * Do not take out a mortgage for more than double your salary or net income. The banks will lend you much more, yet the large house is one of the two major blocks to dentist's real wealth. 2. Savings 3. Investing As soon as all debt except your practice loan and mortgage are extinguished, establish an emergency fund of six months of home expenses. This is normally $50,000. Put the money into money market funds. Retirement Savings: A good rule of thumb is 15 percent of your net income per year starting by your early 30s to retire in your early 60s and 20 percent to retire in your mid- to late 50s. Read one book before funding retirement savings, The Little Book of Common Sense Investing by John Bogle. For young dentists, the best investment strategy today is to invest in target date funds with Vanguard. Warren Buffett, Burton Malkiel, Rick Ferri, John Bogle, Larry Swedroe, and many other authors state that the best investment results come from two things. Having the lowest fees and investing in the entire world market. Vanguard target date funds accomplish this better than any other strategy. Do not get involved with a ﬁnancial adviser that does not use index funds. For complete ﬁnancial planning, look at LearnVest at learnvest.com. They have complete ﬁnancial planning solutions for a $499 setup fee and $19 per month. After starting a practice, look at the ﬁnancial advisers listed in the next section. continued on page 92 90 DECEMBER 2014 » dentaltown.com http://www.learnvest.com http://www.dentaltown.com

Table of Contents for the Digital Edition of Dentaltown December 2014

Dentaltown.com Highlights
Howard Speaks: Saving the World One Tooth at a Time
Continuing Education Update
Professional Courtesy: New Equipment Can Buy Happiness
What Is The Youngest Age That You Have Put Someone in Dentures?
Dental Tourism
I Love White Fillings Without Tints –Am I a Quack?
Townie Choice Awards 2014
The Pain of Broken Appointments
Financial Timelines for Any Age Doc
Bulk Fill Optional Restorations
Continuing Education: Simplifying the Denture Process with Gothic Arch Tracers
Are You Using the Best Cement for the Job?
Ad Index
Product Profile: LSK Chairside Shade Guide
Product Profile: SmartBox
Poll: Oral Systemic
Product Profile: Patient News
Industry News
Perio Reports
Dentally Incorrect

Dentaltown December 2014