Becoming a dentist is a huge investment. Dental school is one of the most expensive graduate programs around, and that’s just the beginning. By the time you properly equip and build your practice, you could have over a million dollars of debt.
Although you received a great education, dental school didn’t prepare you for life as a business owner. In many ways, your long-term success is as much dependent on your ability to understand money and finance, as it is to place an implant. I’ve seen many excellent dentists in a world of hurt at retirement because of poor financial decisions.
When you make good money, it’s easy to rush big financial decisions without thinking through the details. In general, having extra money can lead people to become passive and procrastinate financial planning because they don’t feel any short-term pain. They wait years to get organized and make improvements to their financial plan because it’s easier to put it off until they have to do something about it.
But this leads to long-term pain. Making poor financial decisions can have a huge impact on your family, lifestyle, and financial security. Financial lessons can be learned in many different ways—some easy, and some are hard and very painful.
No matter how you choose to learn financial lessons, there is a cost.
PICK YOUR COST
Your time. You can read books, take courses or talk to experienced friends and colleagues. Some of these things cost money, but all of them take time. Your time can cost in excess of $500+ per hour or even $1,000 per hour for some specialists. Not only is your time valuable, it’s probably scarce, and I’m sure your family would love to have more of it.
Opportunity cost. Opportunity cost is the benefit you can receive by taking a different path. The person who makes “okay” decisions will simply not be as successful as the person who makes the “best” decisions. For example, a dentist who pays 1% interest more each year than another dentist on his practice loan will incur opportunity costs that roll over to retirement, cash flow, kids’ education, and tax planning.
Cost of big mistakes. The costs of financial mistakes are common in any industry, but they tend to hurt those with the least financial education the most. One big mistake can wipe out years of positive progress.
Cost of financial education. Gaining financial education is a huge endeavor, similar to becoming an expert in dentistry. There are so many avenues and specialties that most financial professionals spend their entire career continuing their education, and still never learn it all. It can also take many forms—graduate degrees in accounting, finance, business administration, or professional credentials like CPA, CFA, CFP®, etc.
Cost of hiring a professional. Hiring multiple people to help you is by far the most common choice among dentists. Most dentists will be best served by hiring someone early in their career to help educate and guide them toward making more informed financial decisions. It takes years to develop the financial knowledge to navigate through good and bad decisions. The earlier you can start gaining financial expertise, the more successful your long-term trajectory. The most efficient way to pay for financial education is to hire an experienced financial advisor, accountant, and attorney.
DON’T LET PRICE RULE THE DECISION
Some dentists don’t hire a financial advisor because they see an advisor as a cost/hurdle to reaching their financial goals. This paradigm is damaging, especially to people with very little financial knowledge.
Hiring a financial advisor at a reasonable rate is just like paying for education to become a dentist. Initially, the cost of dental school seems expensive and daunting, but as your wealth increases, the cost of the education shrinks and becomes less significant compared to the income and profit you are earning from your successful practice. Consider hiring a financial advisor as part of your ongoing education. The best education comes from the most competent teachers, and you can’t expect to hire the best teacher for the lowest salary.
Thinking a lower priced accountant, attorney, or financial advisor is always the smarter choice is like saying a Toyota Corolla is better than a Lexus, because it’s cheaper. The features and benefits are not comparable; of course there is a difference in the price. While both vehicles serve a useful place in the market, they just don’t do the same thing.
Additionally, there are a large number of financial advisors who charge approximately 1% for investment consulting services, but if you compare the different range of services provided at the same cost, you will see they don’t all offer the same value.
Financial advisors come in many forms. Unfortunately, because dentists don’t have a strong financial background, they don’t always know how to evaluate competent professional advisors. Sometimes advisors with the most aggressive or exciting pitch tend to come out on top. Because of the varying titles and services financial advisors offer, price can also vary significantly. While you want to avoid paying too little for a financial advisor, you also don’t want to pay too much. Here’s a list of questions dentists can use to help select a qualified, personal financial advisor.
You went to school to become an excellent dentist, so BE an excellent dentist, and HIRE an excellent financial advisor. Hiring the right financial advisor protects the significant investments you’ve made thus far in your career and prepares you to make the right decisions that will continue to affect your life and family.