7 “Reasons” Dentists Make Financial Mistakes That Delay Retirement

I read a post by Reese Harper, CFP on the Aquire Advisors blog about the 7 Big Mistakes Dentists Make That Delay Retirement. It’s a great piece for dental students and new dentists. I recommend you check it out first and then read this post.

You’re back? Ok, sweet.

My purpose in writing this post was to just add a few thoughts off the cuff on each topic from a new dentists’ perspective. I want to illustrate some “reasons” that new dentists make these mistakes, and hopefully by illustrating them you can see them for what they really are, which is a collection of excuses and possibly counterproductive worry.

1. Not tracking what you spend
There are two main reasons a lot of new dentists don’t track what they spend. The first has to do with debt. Education debt is getting out of control, and not just in dentistry, it’s in all fields. If you followed the career path of high school to college to dental school, you’ve never had a real job and you’re in your mid to late 20’s. When you’re borrowing hundreds of thousands of dollars for your education, money doesn’t seem real to you. It’s all just kind of fake when you’re spending someone else’s money or borrowed money. The value of a dollar is all distorted in your mind when every dollar you’ve spent for almost ten years is either given in a scholarship or borrowed. Let’s call it “money reality”. You lack it! Once you start working and getting paychecks, it’s like, sweet, money, let’s spend it. A few thousand dollars and I’m three hundred thousand dollars in debt? What does that mean? This takes some time to comprehend and for money to become a real thing.

Secondly, there’s an unbelievable amount of pressure coming from so many different sources for new dentists to spend money. Family, friends, sales people, and little voices inside your head start to voice their opinions. You’re a doctor, you deserve a luxury car! You’ve worked hard, treat yourself. You can afford it. You’ll pay it off one day, just throw it on the debt pile. The office manager at your office drives a Lexus. The hygienist has a Cadillac. You’re feeling left out of the party with your Honda Civic you’ve been driving since undergrad. Will people respect you or trust you if you don’t drive a nice car? Your friend who is a banker has a nice car and a nice house, why can’t you? She partied all through undergrad while you were studying hard and it’s just not fair! You should buy a fancy practice. You need to take this fancy CE course and buy this fancy equipment to be competitive in today’s market. You see your colleagues buying fancy cars and houses. It’s all going to work out in the end, right?

So many new dentists get caught up in all this kind of stuff, especially when they are the first professional school graduate in their family and they’ve never had any kind of relationship or understanding of money and how it all works. It’s really hard to turn these voices off and not succumb to all of the pressures to get deeper in debt. Earning your dental degree is a tremendous accomplishment and presents you with an incredible opportunity to make a difference in a lot of people’s lives and to live and work the way you want to. But it’s not a lottery ticket.

2. Eliminating debt too quickly
So while some people overspend and go nutso with money, others get obsessed with debt and have trouble managing what that means psychologically. They feel the weight on their shoulders and want to do anything and everything to get it off. For some people, it’s all they talk about, and they make career decisions based on it. Dentists are really goal-oriented folks. We create task lists and knock them out. We get OCD about almost anything, including debt. Being out of debt is a quantifiable number. You just look right on the piece of paper and it tells you how much money you owe. Seems easy enough, just work hard until that number is zero. Savings and wealth? What’s the number we want and need to retire one day anyway? We’ve never thought about it. It’s harder to define, it’s not on a piece of paper that comes in the mail every month demanding action. That stuff works itself out on its own, right? How can you talk about retirement when my career has just started anyway? This is the struggle we face as new dentists.  It took us four years of training just to get to the first day of our career and we already have to start talking about how we’re going to end it?  What a buzz kill!

Most of us dentists were the best students in our class, teacher’s pet, do-gooder types. It’s been a part of our identity since as far back as we can remember. Even if we’ve had internal or external mini-rebellions from this idea at times, we didn’t get this far in life by raising too much hell. We want to perceive ourselves as good and we want other people to perceive us as good. Debt is a negative word with a negative connotation. I think there are dentists out there that deep down feel that they are a burden on society or a bad person if they are in debt. Without seeing the big picture, this can eat away at some people and cause them to make poor big picture decisions.
3. No automated savings or investment program
Talking about money is tacky. You can’t just go up to a senior dentist that you don’t know very well and ask them how they became wealthy. It just magically happens, right? You work really hard and then the next thing you know you’re rich.

People who are wealthy or on their way to wealth have an investment plan. A plan is the only way to prevent money from burning a hole in your pocket. If you see a bunch of zeros in your regular checking account, your imagination starts to run wild. Think about it this way. The bank that loaned you your money to go to school invested in your future. They made a profit for their investment which is the interest you pay. Now it’s time for you to become the bank that invests in your future. This time around, you get to keep the profits!

4. Too many insurance premiums
A lot of dentists just want to say “I don’t know anything about insurance, I’m a dentist. Just let me be a dentist.” The thing is, you’ve got to know your stuff in several different disciplines, insurance being one of them. You don’t have to read every page of every document you sign, but you need to seek advice and information on protecting yourself from certain risks. If you can, find an agent that works exclusively with dentists to handle all of your insurance needs. Get quotes and information from them and have someone else look at it. Get a working knowledge of all of this terminology, because for the rest of your career it isn’t going away.

5. Unnecessarily high practice overhead
But I need to have this fancy gadget to deliver the best care! I need to have the top of the line delivery unit and sterilization center and CAD CAM and hand piece, etc. This will pay for itself in time! Dentists are constantly being sold supplies, equipment, business solutions, gizmos and gadgets. Fancy towel warmers! The tough part is that so many of these things are awesome and seem like things you have to have. Dentists have a tendency to go to trade shows and make impulse purchases. Sales reps come in to our offices all the time and pressure us to purchase things with claims about how it can make us more efficient and productive and deliver better care. It’s so easy for sales reps to prepare for us because they know exactly what to say to us, to play into what they know we want to hear!   We get fatigued by all this crap and we just give in.

I have an unfair advantage over many in this category because I practice with my wife who is also a dentist.  Boys want to buy toys, and I’m no exception to this rule!  She really helps me to say no to things that we don’t really need that don’t necessarily improve our ability to provide excellent care to patients.  Just because something is cool isn’t a good enough reason to buy it.  When tens of thousands of dollars are flying out the door each month, it’s easy to talk yourself into a $100 toy here and there.  Don’t do it, it adds up fast!

You have to be smart with your spending on staff, too. It’s a huge expense in running a practice and staff can really help or really harm the growth of a practice.  Become familiar with the national averages for spending on overhead and staff. If your numbers aren’t in line in your practice, you have to get them right. You owe it to your staff, your patients, your family, and to yourself to make sure that your business is running efficiently.

6. Large losses in speculative investments
When all of your patients are praising you, your staff loves you, the community loves you, and everyone around you thinks you’re all great and successful, it can go to your head. You might get the feeling that you can do no wrong. But you can! Like Reese said in his article, oftentimes it is a friend or family member that you trust that leads a dentist into a bad investment. As health care providers our associations with the words “confidence” and “trust” have great meaning. We rely on it to help us build lasting relationships for years to come in the communities where we make our homes and build our practices. Not everyone out there works in this world of relationship building, trust, and confidence. Some people are out just out there looking for suckers! Don’t be a sucker. Being a quality health care provider and investing conservatively and wisely is your path to success. Get rich quick schemes are not your game, they are not who you are, so don’t try to pretend, because the people that really play that game will beat you at the game.

7. No written goals, or written retirement plan
When you’re in a tremendous amount of debt and you aren’t making as much money as it said you would when you Googled “how much does a dentist make”, it’s hard to have any idea what the future holds. Most of us have science degrees. We’re analytical, focused, driven, and don’t need daily motivation to bust our butts, it’s just engrained into who we are. Writing down goals in a little diary is just fluffy nonsense for teenage girls, right? We went to high school and did what we were told and made good grades. We went to college, followed the path, and were praised for our success. We went to dental school, where the curriculum is already all planned out, no planning necessary, just do what you have to do and graduate. So that’s twelve years at least of following a script that someone else wrote! We’re really good at learning and following the script. Now, it’s time for a new thing for us, writing our own script, writing our own goals.

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