Do you want to know a secret?
The financial decisions you make in your first 10 years of dentistry will make or break you financially.
Your decision on how frugally to live in dental school – is make or break.
Your decision on whether to buy a practice – is make or break.
Your decision on when to buy that first “dream” house – is make or break.
Your decision to pay down loans, or open your 401k – is make or break.
“Well, duh.” I can hear you saying, “Everybody knows that.”
No, they don’t. Let me show you what I mean.
New dentists must not know this, because we see their finances and almost no one knows and does this stuff. In fact, it must be a secret because so few people actually do it.
So, I’m letting you in on the secret right now.
Making good decisions is one of the most important “secrets” to a successful life. Most good decisions are always good decisions; for example, it’s pretty much always a good decision to choose the salad over the cheeseburger. With some decisions, however, the timing of the decision can be just as important as the decision itself. Having a baby, for example, can be the best decision you ever make. The same decision, however, made in the wrong timing, can make life very difficult for you and the baby.
Flossing is a good decision. How many people do that consistently?
This principle is true and critical in the world of your money. The financial decisions you make early in your career are critical to your financial success. Let me illustrate…
Let’s assume 30 year old Dr. Alpha buys a practice, and due to his personal frugality, is able to start investing in a 401k plan for him and his spouse the first year he owns the practice ($70,000 per year total investment). Dr. Alpha’s twin, Dr. Beta, buys a practice the same year, but instead of investing he buys a new Lexus (he’s always wanted one) and a bigger, newer house than even his parents ever had (they were tired of “throwing their money away” by renting). As a result, Dr. Beta is forced to delay his contribution to the 401k for two years. Due to his delay of only two years, Dr. Beta’s investment account is worth $2.3 million less at age 60 (assuming a 10% annual return). Put another way, Dr. Alpha could stop investing 15 years earlier than Dr. Beta and still end up with the same amount of money.
Dr. Beta, I hope you like your $2.3 million-dollar Lexus! Have fun working for 15 more years than Dr. Alpha!
In conclusion, before you buy the Lexus, young doctor, you would be wise to remember this adage: “if you live like no one else will for 10 years, you can live like no one else can forever.” If you’re already into your first 10 years, it’s not too late. We can help.