Dental Professionals A Prescription for Your Financial Health
The demands on dental practitioners today can seem overwhelming. The dental landscape has become increasingly competitive and this is the new reality going forward. In metropolitan areas, gone are the days where you can start a practice from the ground up and succeed in a reasonable period of time. Therefore, it is imperative for dentists to practice some preventative medicine – planning their business and personal lives to operate effectively in this competitive environment.
Like many of your colleagues, you may have transitioned from dental school with little formal preparation for the substantial financial issues you now face. You now spend your day caring for your patients while wearing many different financial hat at the same time. It's no wonder that many dental practitioners look forward to the day when they can relax and enjoy the fruits of their labours.
Unfortunately, substantial demands on your time can make it difficult for you to accurately evaluate your financial plan, or monitor changes that can affect it. Just as patients need periodic checkups, you may need to work with a financial professional to make sure your personal finances receive the proper care.
Maximizing your personal assets
Much like dentistry, the field of finance has been the subject of much scientific research and data, and should be approached with the same level of discipline and thoughtfulness. Making the most of your earning years requires a plan for addressing the following issues.
Your years of advanced training and perhaps the additional costs of launching and building a practice may have put you behind your peers outside the healthcare field by a decade or more in starting to save and invest for retirement. You may have found yourself struggling with debt from years of university and later, the cost of purchasing a dental practice. On top of this, there is the ongoing juggling act between making mortgage payments, caring for your parents, paying for tuition and weddings for your children, and maybe trying to squeeze in a vacation here and there. Because starting to save early is such a powerful ally when it comes to building a nest egg, you may face a real challenge in assuring your own retirement. A solid financial plan can help.
Getting a late start on saving for retirement can create other problems. For example, you might be tempted to try to make up for lost time by making investment choices that carry an inappropriate level or type of risk for you. Speculating with money you will need in the next year or two could leave you short when you need that money. And once your earnings improve, you may be tempted to overspend on luxuries you were denied during the lean years. One of the benefits of a long-range financial plan is that it can help you protect your assets--and your future--from inappropriate choices.
Many dental professionals not only must pay off student loans, but also have a strong desire to help their children with education costs, precisely because they began their own careers saddled with large debts.
Once the lean years are behind you, your success means you probably will be exposed to more taxes. You will need to pay more attention to tax-aware investing strategies that help you keep more of what you earn.
Using preventive care
The nature of your profession requires that you pay special attention to making sure you are protected both personally and professionally from the financial consequences of legal action, a medical emergency of your own, and business difficulties. Having a well-defined protection plan can give you confidence that you can practice your chosen profession without putting your family or future in jeopardy.
Your income depends on your ability to function, especially if you're a solo practitioner, and you may have fixed overhead costs that would need to be covered if your ability to work were impaired. One choice you'll face is how early in your career to purchase disability insurance. Age plays a role in determining premiums, and you may qualify for lower premiums if you are relatively young. When evaluating disability income policies, dental professionals should pay special attention to how the policy defines disability. Look for a liberal definition such as "own occupation," which can help ensure that you're covered in case you can't practice in your chosen specialty.
To protect your business if you become disabled, consider business overhead expense insurance that will cover routine expenses such as payroll, utilities, and equipment rental. An insurance professional can help evaluate your needs.
Practice management and business planning
Is a group practice more advantageous than operating solo? When does it make sense to hire an associate, or another hygienist? Should you own your own dental building? What are the pros and cons of purchasing an existing practice compared to starting one from scratch? Should you purchase a second or third dental office? If you're considering expansion, how should you finance it?
Questions like these are rarely simple and should be considered in the context of an overall financial plan that takes into account both your personal and professional goals.
If you have your own practice, you may find that cash flow management, maximizing return on working capital, hiring and managing employees, maintaining secure technology and financing equipment purchases and maintenance become increasingly complex issues as your practice develops.
Transitioning your Practice
Especially with the ability for dentists to incorporate, selling a dental practice requires careful planning and advice. Not only are there significant financial and tax consequences to a sale, but there are many non-financial issues as well. How do you transition with minimal disruption to your staff and your patients? What are your goals after selling your practice? How do you spend your time? You have worked extremely hard to build a practice you are proud of. It is important to get the right advice in order to optimize your transition.
Estate planning, which can both minimize taxes and further your personal and philanthropic goals, probably will become important to you at some point. Options you might consider include:
- Life insurance
- Buy-sell agreements for your practice
- Charitable trusts
You've spent a long time acquiring and maintaining expertise in your field, and your patients rely on your specialized knowledge. Doesn't it make sense to treat your finances with the same level of care?
This article is brought to you by Raymond James Ltd. (RJL), for informational purposes only. Statistics and factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. This information is furnished on the basis and understanding that RJL is to be under no liability whatsoever in respect thereof. It is provided as a general source of information and should not be construed as an offer or solicitation for the sale or purchase of any product. Securities offered through Raymond James Ltd., member - Canadian Investor Protection Fund. Insurance offered through Raymond James Financial Planning Ltd., not a member - Canadian Investor Protection Fund.