A TOOL YOU NEED - My Financial Calculator for DENTISTS
I made this tool because I realized that I needed a tool to view my debt, income and dental investments (practice info) in ONE location. I wish there were a tool like it when I first bought my practice...but there wasn't. I hope this tool helps you organize your finances!
TOP TIPS - Building Wealth as a NEW Dentist and New Practice Owner
Building wealth as a new dentist starts with organizing and understanding your finances...I've worked with so many young dentists who don't even know how much TOTAL DEBT they have! You have to know where you're starting from...How much debt you have? How much cash flow does your family need to operate each month? Can you afford to buy a practice purchase and do you understand HOW it will affect you bottom line?
Here are a couple tips to help you along the way...
ALL debt is a burden...but some debt is better than others. Your goal should be to eliminate all debt (EVENTUALLY). But, you should be strategic in how you eliminate debt, and tactical in how you utilize NEW debt to help you BUILD WEALTH. Your mortgage and your practice debt (even more so...) are actually tools to help you build wealth...this debt is LEVERAGE that helps you build wealth by purchasing an APPRECIATING ASSET. Dental school debt should be seen as an INVESTMENT you have made in your future...It got you the training you need to make money...But, after you graduate...it's NOT great to keep it on your books. When I graduated dental school the cheapest rate available on my federal loans was 7%...considering I got my first mortgage for 3.5% (@ a 30 year term)...dental school debt soon starts to look expensive! BUT, worse than dental school debt = debt on worthless/depreciating assets...like credit card debt, auto debt (unless it's zero percent interest), etc. Prioritize debt payoff according to type and interest rate...meaning concentrate first on debt that's NOT building you equity and debt that has the highest interest rate.
Cash is King. Having a cash cushion (in the bank) will help you sleep well at night. It will also allow you to position yourself well for FUTURE investment opportunities. The goal - to create EXCESS cash flow (meaning cash left over after everything is paid) in the realm of 20-25% of your income. Yes, start saving a quarter of your paycheck...and keep it liquid - easily accessible investments or cash. Without a cash cushion you'll have the added stress of living paycheck to paycheck...any disruption to your normal work schedule may result in an inability to pay the bills. What should your cash cushion goal be? Six times your monthly expenses should be a good place to start!
Everyone likes to talk about practice production...BUT what matters most is NET INCOME to Owner. Whether you're buying your first practice or evaluating your existing practice - what matters MOST is your take home paycheck. Would you rather work your butt off to produce a MILLION dollars and take home $200,000...or work 40% less (produce $600,000) and take home $400,000? It all comes down to controlling your expenses and managing your OVERHEAD and systems. Build a practice you love...one that pays you well for the work you love to do! Your practice must be a well run business...with all the dials tuned in perfectly. Here are a couple targets to aim for: 30+ new patients a month, an overhead target of 52-62%, 90%+ reschedule rate.
Hope That Helps!
~ Dr B
CLICK BELOW TO DOWNLOAD MY FREE FINANCIAL PLANNING TOOL
(Open this file with Google Sheets to use in proper format)
Hope that helps!
~ Dr B