If you’re a young dentist in the early stages of your career, a world of possibilities lies ahead of you. You can anticipate building your patient list, perhaps buying or starting a practice in the near future, and then expanding that practice into a successful, long term business that is both professionally fulfilling and financially rewarding. But what about student debt management?
In this context, the sizeable debt load that you may be carrying is not necessarily that burdensome. You will survive. Everything is going to be fine… provided you do the right kind of planning ahead of time.
One of the first questions that needs to be answered is whether to pay down student debt as quickly as possible or start saving for the future.
Ideally you should do both. 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 investment in the early part of your career, you could end up missing out on many thousands of dollars in savings over the long term.
For example, even a relatively modest investment of $250 per month, with an average rate of return of 6%, would grow to over $250,000 in thirty years. As you get older you would likely increase your investment, and use a variety of options to minimize your tax, but the key is to get started early.
An often used term in financial planning is “pay yourself first”. This means: establish a budget that starts with paying off debt and saving (for a down payment on a house, or buying a practice, or putting aside money for retirement), add the insurance coverage you need to protect yourself and your practice, then determine what you have left for living expenses.
Of course, this may require some sacrifice on your part at first. We don’t need to give you a lecture about driving an older car, or eating out less often… you can figure out what to do. The upside is that a little bit of discipline early in your career may pay huge dividends later on as you watch your investments grow.
The licensed investment and insurance planning advisors at CDSPI Advisory Services Inc. can help you make informed decisions about your insurance and investment portfolios as your needs evolve. For personalized service, give us a call or send us an email.