Avoid Debt Regret

Two years after obtaining his degree in dentistry from Western University, Dr. André Tam took out a significant loan to purchase his dental practice. From the get-go, he implemented a plan to “aggressively” repay the money (debt!) in order to avoid debt regret.

Dr. Tam followed that aggressive debt-repayment strategy on the advice of his accountant. While it meant having to make significant financial sacrifices in the early part of his career, he’s happy he stuck to the plan. He was able to pay off the massive debt in seven years. “Having a good accountant was huge for me,” said the 2001 dental school grad. “I’m glad I took his advice. It was for the greater good in the long term,” he said. Dr. Tam recently purchased a second dental practice and is now in the process of amalgamating it with his existing office in Waterdown, ON.

As Dr. Tam’s story illustrates, new dentists contending with significant debt can benefit enormously from professional financial planning advice to effectively manage debt.

When examining strategies to help reduce debt, here are some examples of issues your financial professional can explore with you:

  • Establish a budget. List all your revenues and keep track of your expenses. This will give you a better idea of how much money you’re spending on different activities and whether or not you can sustain your current spending habits. There are several smartphone apps that can help you keep track of where your money goes.
  • Develop a plan. Making small adjustments can have a big impact on how quickly you can pay down your debt. Consider paying off high-interest rate debt first (e.g. credit cards) and consolidating your student loans for a more favourable interest rate. Changing your payment frequency from monthly to weekly can save you in interest costs in the long run. Don’t forget to be ready for the unexpected by having life and disability insurance to help repay your debts in the event of illness or injury.
  • Don’t put off investing. It’s natural to want to get out of debt as quickly as possible. However, without allocating even a small percentage of your income to retirement investments in the early part of your career, you could end up missing out on many thousands of dollars in savings over the long term. To see how, check out CDSPI’s video for new dentists: How to Lose $100,000.
  • When borrowing in the future, favour “good debt” over “bad debt”. Good debt involves borrowing money for something that will contribute to your financial strength in the future (e.g. funding a dental practice purchase). Bad debt includes debt you’ve taken on for things you don’t really need and can’t afford (an expensive vacation, for example).

“My biggest piece of advice for dentists starting out: Don’t overburden yourself with unnecessary debt,” Dr. Tam says. “That, combined with smart investment choices, will pave the way to success through to retirement.”

Newly practising dentists can obtain professional advice to help reduce their debt ─ and assistance to address a wide range of other personal financial planning issues. Just contact a certified financial planner at CDSPI Advisory Services Inc.