As a new dentist, you have a lot on your mind. Maybe you’d like to purchase an existing practice or build one from the ground up. At the same time, you may be preparing for a major life event that will demand a lot of your time and money. All of these scenarios will impact your financial saving and planning goals.
We know that making the right decisions when it comes to your financial future can be difficult. That’s why we’re here to help. Below are answers to some of your commonly asked questions. Consider this a starter’s guide and contact us to find out what’s right for you.
- How do I budget for my life as a new dentist?
The first step to budgeting for your life as a new dentist is creating a monthly budget and tracking your spending. List your monthly income versus your expenses. Use the remainder to pay down debts. Paying down good debt, such as student or practice debt, and not incurring bad debt, such as car and credit card loans, are key to maintaining a budget.
The second step to budgeting is developing a financial plan that identifies your short-, medium- and long-term goals. A short-term goal might be paying off debt, while a medium-term goal might be saving for the purchase of a practice. When you want to retire and with how much money is an example of a long-term goal.
You might also want to consider how you can reduce your expenses. Food, housing and transportation are your largest expenses. So, if you can live with a roommate or your parents a little longer and drive a used car or take public transportation, you’ll minimize your day-to-day expenses. These lifestyle choices can free up extra income to pay off student and other debts faster.
- Should I incorporate as an Associate or when I have my own practice?
By completing a comprehensive financial plan, you’ll determine your short and long-term objectives, which will help answer this question. Your objectives can be anything from purchasing a practice to getting married. However, Incorporation is not for every dentist. It may be effective when you have a certain income level and potential income splitting opportunities. You also need to consider if you qualify for a small business tax rate in your province.
- When does it make sense to open or buy a practice?
Although the idea of opening or buying a practice might seem like an exciting and lucrative opportunity, consider your life circumstances first. How much student debt do you have? What’s your credit history like? Are you planning other life events?
If your student debt is heavy, you might want to consider beginning work as an Associate to accumulate the money and skills required to run your own practice. However, if you choose to purchase a practice with a business loan, then set a deadline for when you can begin to pay more than the minimum on your student debt.
Another important financial consideration is your credit history. Prior to purchasing a practice, ensure you have a credit history showing you pay bills on time and that any outstanding debt balances are well below the authorized credit limits. A strong credit score will work in your favour when you need to apply for a business loan for your practice.
Whenever you decide to open or buy a practice, ensure that your practice debt doesn’t interfere with your ability to either pay off student loans quickly or ideally save 15-20% of your gross income per year towards retirement.
As a new dentist with a steady and growing income, it’s important to make decisions that will help you achieve your financial goals. We invite you to get started today by booking a meeting with one of our Investment Planning Advisors.*
*Investment Advisory services are provided by licensed advisors at CDSPI Advisory Services Inc. Restrictions may apply to advisory services in certain jurisdictions.