Debt: Minimizing Stress and Maximizing Benefits

According to a recent study1, personal finances are the greatest source of stress for 22% of Canadians.  Could there be a relationship to the increase in lottery sales we’ve seen lately?2

Lottery wins aside, the odds to successfully managing debt, and your stress are better when you create a clear plan of action to pay it down and avoid feeling like you’re carrying a massive weight on your shoulders. It also helps when you reframe how you perceive debt.

Some people want to pay off debt as soon as possible and are conflicted by the fact that investing for the future is also important. But which takes priority? Dentists don’t usually have pension plans or other employee savings plans unless they start one themselves. Therefore, the responsibility falls on you personally—you’ll need to save for your post-practice life on your own and the sooner you start, the more you can save and earn on your investments—the benefits of compounding growth shouldn’t be ignored!

There’s a lot to consider:

  1. Should paying down a line of credit be my first priority?
  2. Should saving for retirement be started now even though I have less income?
  3. What about jumping on the property bandwagon with a home or my own practice?

If you're planning to buy a home or practice in the next few years paying down your debt will help free up your cash flow to carry a mortgage, start a family, buy a practice, and live your best life. However, you cannot put your life on hold for 10, 15 or 20 years while paying off your education.

If you plan to borrow money, you will be charged interest. So, it’s important to understand how interest rates can impact the overall cost of borrowing.

When you use credit, you pay back the borrowed amount, known as the principal, plus interest. An interest rate hike (increase) can make it more expensive to borrow money, meaning your loan payments could rise if you have a mortgage, line of credit or loan with a variable interest rate.

When prioritizing debt, the interest rates on the loan should be taken into consideration. A student loan might have an interest rate of prime minus a quarter and new debt might have higher rates. Debt to buy a practice might have interest that is tax deductible. It is recommended to consult a professional to assess your financial situation. Canadian dental students, and dentists now have access to preferred pricing on a wide variety of personal and business accounting and tax services offered through MNP. Read more about this exciting new partnership.

Good Debt

Did you know there actually can be such a thing as good debt? Many people mistakenly think all debt is bad, but there are certain types of debt that can be advantageous when it comes to your credit.

Lending rates vary, so you need to be strategic about which debt you pay off first and which you can leave until later.

Taking on debt can be a way to invest in yourself and your future. Debt that you're able to repay responsibly and has a financial reward can be considered "good debt," as a favorable payment history may be reflected in higher credit scores. Examples of good debt may include:

Student loans

Student loans and your dental student line of credit are notable examples of “good debt.” Taking on student loans or a line of credit to pay for your education and training is an investment in your higher lifetime earnings.

Effective April 1, 2023, the Government of Canada has permanently eliminated the accumulation of interest on all Canada Student Loans including loans currently being repaid. If you have a Canada Student Loan you will still be responsible to pay any interest that may have accrued on your loan before April 1, 2023.* 

Your mortgage

You borrow money to pay for a home or a practice in the hope that by the time your mortgage is paid off, both will have increased in value and when retirement rolls around you won’t be paying a mortgage and will be debt free. Home equity loans and lines of credit—may also be considered a form of good debt and the interest payments on these are tax-deductible.

It’s no surprise that credit card debt is considered "bad" debt because of its high interest rates and enticing low minimum payments, and the fact that it is not typically used to buy appreciating assets. Use your credit cards for the rewards and other benefits available—but pay the balance in full each month.

Your Credit Score

One of the biggest benefits of taking on debt is that it can help build your credit score. Your credit score is a measure of your creditworthiness, and it’s a key factor that financial institutions consider when deciding to lend you money. By taking on debt and making regular payments on time, you can demonstrate to lenders that you are a responsible borrower, which can improve your credit score. Then, when it’s time to buy a practice or a home, you qualify for the loan and get preferred interest rates.

Liquidity & Flexibility

Another benefit of taking on debt with a line of credit is that it can provide liquidity, or access to cash when you need it.

Taking on debt allows for flexibility in your financial situation by supplying funds to cover unexpected expenses or to take advantage of a new opportunity. By having access to credit, you can take advantage of opportunities that may not be possible otherwise.

Debt Stress

For some, debt is an emotional issue versus a financial tactic. You need to feel comfortable with your personal financial strategy. However, it’s no secret that everyone is feeling a higher level of financial and personal stress because of rising inflation and affordability challenges. Often, simply talking to someone and coming up with a plan to deal with it can be a real source of stress relief.

CDSPI offers a wide variety of resources, not just financial, for all members of Canada’s dental community, including you, your staff and your immediate family. Through the Membership Assistance Program (MAP), you can tap into a free and confidential support service to help you deal with life’s challenges — big or small.

To find out more about MAP or to speak with someone for more information, call the confidential MAP number at 1-844-578-4040 to get started.

Talk to Someone You Trust

Should you use your money to invest, to pay down debt — or both? Your answer depends on individual factors, such as your goals, your debts, and your approach to money. Over time, as your needs, priorities, and life change—your strategy can adapt with you.

Talking to someone you trust can help you develop a plan to move forward without being bogged down with worry. The Investment Planning Advisors at CDSPI Advisory Services Inc. have collaborated with dentists like you for over 60 years and they understand the challenges and the stresses you’re experiencing.

An advisor can help create a personalized strategy to help you organize your debts, give practical advice, and work with you on a financial plan to take control of your finances that creates a pathway to financial stability and success.

By managing your debt in a responsible manner, you can reap the benefits of debt without the negative effects of stress and anxiety.

If you have any questions about managing your debt, setting up a Financial Plan or investment strategy contact us at or 1.800.561.9401 or book a meeting online.

1 Source: Leger/The Canadian Press survey September 9-11, 2022.

2 Source: Canadian lottery's provincial and territorial sales 2021 | Statista

*This program only includes the federal Canadian student loans. Provincial loans are not part of this program and remain subject to interest charges.

The information contained in this article is of a general nature only and should not be considered as personal investment or financial advice. For specific advice about your situation, please consult with your financial advisor.