Personal Finance Tips for New Dentists 

Kelly Brady, MBA 

Here are a few thoughts I hope are helpful for young dentists starting out in their careers. 

I Would Make Buying Disability and Life Insurance a Priority. 

I recommend that you have personal disability insurance and that you make sure it has own-occupation and guaranteed renewable features. Disability insurance protects you from the financial risk of losing your income if you become sick or disabled and you cannot work. Own-occupation policies allow you to claim disability insurance benefits even if you can earn an income doing something other than your most recent job. 

Personal disability plans have add-ons that vary from state to state and company to company. The most expensive add-on is the COLA or cost of living adjustment. That will nearly double the price of the plan. If you struggle with wanting to pay the premiums, then don’t get this add-on. The price can be kept low by buying a plan that has a 90-day period before coverage kicks in. 

If you have dependents or you expect to buy a practice, I recommend that you buy term life insurance. At some point in the future, you’ll probably need to pledge life insurance against the practice. If you do not own a practice yet, I recommend that you avoid whole life, permanent life, and universal life policies, as they are more expensive, loaded with fees, and the person selling them is making a large commission.  

If You Build an Emergency Fund, You Will Be More Secure. 

The next thing I recommend is to build an emergency fund that is not invested in the stock market but rather kept in a savings or money market account, or invested in government treasury bills that are short-term. This way, if there is an emergency, the money’s available and there are no surprises. A good rule of thumb is to have emergency savings that equal three to six months of your income. If you have a disability policy that won’t kick in for 90 days and are disabled, you will be glad you have this 

Take Advantage of an Employer Retirement Plan. 

If you have access to an employer retirement plan, maybe even in your own practice, make regular contributions. If you are employed by a dental practice that contributes a matching percentage, contribute enough to get the match. Dental practice owners can set up an employer retirement plan. A recent PankeyGram article by Dr. Mark Kleive provides great advice for doing that.  

Pay Off Credit Card Debt. 

It makes sense to pay off higher-interest credit cards first. Keep in mind that If the interest is the same, it makes sense to pay off the personal debt first because the business card interest is tax deductible, essentially lowering the rate of interest. 

What if paying down debt means you don’t have the ability to save for retirement? Ideally, you will maximize saving/investing in tax-advantaged accounts like IRAs and 529 college savings accounts. But if you are paying down debt, the 20% annual interest you are saving is like getting a 20% investment return with no risk.  

For some people, paying off debt or investing in retirement is a choice they must make. Some can’t sleep at night worrying about one more than the other. Because different people have different priorities and personal situations, I recommend that you get a second opinion to help you decide. 

What About Dental School Loans? 

Dentists can pay off student loans by sticking to a regular monthly payment plan, refinancing to pay them off faster, or consolidating with a personal loan.