Five Financial Blunders of a First-Year Associate

You did it! You proved all those haters wrong and finished dental school. Now what do you do as a first year associate dentist? How do you avoid mistakes that you have heard about from others? There are a couple monsters looming around the corner that can hurt you if you aren’t careful. We see it every year with new graduates. While most dentists eventually learn from their mistakes, we want to get you started on the right track. Give you a head start on a few things that can save you from future regrets.

Here are the most common “first-year mistakes” of a new dentist:

1. NOT Assembling Your Dream Team
2. NOT Creating a Tax Strategy
3. NOT Planning for Your Student Loans
4. NOT Preparing for a Future Practice
5. NOT Living Within Your Means

Assemble Your Dream Team

Whether you are a fan of the 1992 USA Basketball Team or the old cartoon Captain Planet, you probably appreciate the power of a good team. The same goes for you in your dental career. You will make better decisions and have greater confidence if you surround yourself with people who understand the road ahead. It is never too soon to find your Dream Team, even if you are still in dental school; you can start assembling a team of mentors and peers. Every year, we see dentists make silly mistakes that could have easily been avoided if they would have found professional help. Eventually, you will need to fill the positions of an accountant, attorney, insurance agent, consultant, banker, wealth advisor, and mentor. However, we feel that an accountant and mentor are some of the first positions to fill to help you avoid any first-year mistakes.

Create a Tax Strategy

After spending years as a starving student in the lowest tax bracket, you probably forgot that most normal people pay taxes. Don’t wait to wake up to this reality by getting a big tax surprise. It is common to underestimate the amount of taxes you will owe as a dentist. When you see a big tax bill from the IRS, it will make you question your accountant, the IRS, and the Constitution of the United States. Before you get to this point, it might be a good idea to proactively plan for your taxes. For most first-year graduates, you need to understand what to do if you are a W-2 Employee or an Independent Contractor receiving a 1099. Depending on your situation, you may want to track certain expenses, contribute to a retirement plan, or make estimated tax payments. You can try this alone or hire a Dental CPA. Either way, planning for your taxes today will prevent you from having big regrets on April 15th.

 Plan for Your Student Loans

As a first-year graduates you can hurt yourself over student loans in one of two ways.  For some dentists, they become so overwhelmed with the idea of owing $300,000 they can’t sleep at night. The stress of knowing you owe so much can consume you into thinking only about paying down your debt and eventually you will stress so to a point of making yourself sick. For others, they take the opposite approach. They have become desensitized to debt and completely forget about their loans. Proceeding with life as though their student loans are a crazy ex they sometimes remember. We recommend finding a balance between these approaches. Organize your student loans and know your monthly payments, loan balances, and interest rates. Seek professional help to know if and when you should refinance. Understand that investing in your career will do more good than immediately paying down debt. Your dental student loans and taxes are related, getting the correct help now can minimize your tax burden for years to come.

 Prepare for a Future Practice

Do you plan on eventually owning a practice? Do you want to start your own practice from scratch? What about buying out an existing practice? Do you want to join a dental group or partnership or maybe start your own corporate dental group? If you answered yes to any of these questions, it is never too soon to start preparing for your future practice.

Because you will likely work as a dental associate before owning a practice, it is a great opportunity to learn from your current employer.  Learn what you love and hate, realizing your current employer must be doing something right if they are able to hire you as an associate. When it comes time to own a practice, you will likely be able to get 100% financing from many of the banks that specialize in dental loans. However, these banks want to see a good credit score and that you will be able to maintain your current lifestyle. They will expect you to have a nice cushion of cash in the bank. Begin today at improving your credit score and not taking on more debt than you can afford. Lastly, it is important to research the market of where you want to own a practice. How long will it take you to find the right practice? What else do you need to be a successful dentist in that market? Planning for these things can take years. Don’t begin this process when you finally “feel” like it’s time to own your own practice. You would be amazed at how long this can take.

 Living Within Your Means

Let’s not sugar coat it, many people first become interested in dentistry because of the earning potential. There is no shame in wanting to provide well for yourself and your family. However, don’t mistake expectations for reality while you are a young dental associate. Between taxes and student loans, you won’t see half of what you make. Understand how much cash you bring home each month, and create a reasonable budget. Spend less than you make and learn to save. It’s not sexy, but it will save you from disaster. Once you adopt a luxurious lifestyle, it’s extremely difficult to scale back. Stay conservative and invest in your career before investing in your wardrobe. . Please! Don’t buy a Tesla Model S in your first year out of dental school.  Purchasing a practice and/or a home may also be on the 5-year horizon, which will only add to your debt load. Expectations can trick us into feeling secure. Don’t be discouraged. No one is in a better position to conquer the world than you.

Do not waste your first year out of Dental School, you worked so hard to get here. Take the time to think about your future and all that you want to accomplish in the coming years. You owe it to yourself to stay focused and plan for your success. We look forward to seeing you get there.

2018-07-13T10:14:53+00:00 June 15th, 2018|business, General, new dentist, strategy|Comments Off on Five Financial Blunders of a First-Year Associate

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