Set Yourself Up For Financial Success After Graduation

Your primary concern out of dental school is being the best dentist you can be.

There are many sacrifices along the way to becoming a dentist. Friends not in dental or medical school are entering the next phase of their lives while most med students end up putting some of these milestones — like buying a house, car, or getting married — off. The lost decade of earnings can be made up quickly if newly graduated dentists or doctors are wise enough with their money. There are some common missteps that can be avoided in order to improve odds of financial success after graduation.

Student Loans

The largest financial burden for a dentist and medical doctors are student loans. While in school, be as frugal as possible to minimize student loan burden. Periodically check on the total student loan debt. Avoid putting yourself in a situation where upon graduation, you suddenly come to realize that you’ve taken out $400,000 in loans with no plan on how to pay them off.

The biggest factor for financial success post-graduation will be your ability to do well in school, graduate, and enter into your desired field. The primary focus of dental or medical students should be becoming the best dentist or doctor possible. Money and a successful practice will later come with time.

Invest Early Into A Tax Advantaged Retirement Account

Depending on employment status, take advantage of tax advantaged retirement accounts such as a 401k/403b/ SEP IRA/ Solo 401k. These plans will vary depending on if you are an employee (401k), in a nonprofit (403b), or solo practitioner (SEP IRA/Solo 401k). Time is on your side upon graduation. Take advantage of decades of tax deferred growth in low-cost index funds.

There is one type of retirement account that resident physicians and dentist early in their career may qualify for. A Roth IRA is an individual tax advantaged retirement account. With this account, a person sets aside after-tax income up to $5,500 per year ($6,500 if less than 50 years old) and have an income of less than $118,000 per year if single. If you meet these requirements, look into opening up a Roth IRA before yearly earnings are too high to qualify for this account.

Don’t Act Like You’re Moneybags McGee

The day I graduated with my degree, it seemed like the flood gate for advertisements and people trying to sell me things I didn’t need opened up. I get weekly advertisements for new cars, realtors, wealth management companies, or expensive vacations from people I’ve never heard of before. After all, not every doctor or dentist drives a BMW.

The time spend in training is not a lost decade, but instead in preparation for a high level of income due to the advanced degree. After graduation, avoid the feeling of deserving something. Lifestyle inflation is very real and can eat away at financial wealth.

Many of your colleagues will go and buy a house, new luxury car, and take expensive trips. If they have the financial means to do so, then more power to them. However, if you are still establishing yourself, paying down debt, and building a practice, hold off on the things you want and focus on what you need.

Build A Foundation

Have a good financial foundation for your life going forward. Pay down debts, build up a three- to six-month emergency fund, and start investing to take advantage of compound interest. If your company has a match for a tax advantaged retirement account such as a 401k, be sure to at least take advantage of the match. Set yourself up for financial success early and you will potentially be able to be financially independent at a young age.

Be Cautious Of Entering Into New Business Transactions

Graduating from dental school may offer a chance for a new dentist to build their own practice. I love entrepreneurship, but if you have never created a budget or have any experience with business, I would be cautious of jumping all in. Loans from a bank to start up a new business will most often require a personal guarantee. Have a lawyer look over all contracts and do a lot of research before entering into your first business deal.

InvestingDoc is an attending physician who resides in Austin, Texas interested in personal finance and investing who runs a blog by the name of InvestingDoc. One year post-graduation, I was able to save up enough money to have the ability to pay off the $100,000 in student loans. You can follow along at http://investingdoc.com/ for investing and personal finance tips.