Should Dentists Be Afraid of Debt?

On this episode of The Dentist Money Show, Matt and Taylor explore the complex role debt plays in a dentist’s financial life. They break down the difference between good and bad debt, discuss how borrowing can be a strategic tool, and explain how debt can influence both personal finances and practice growth. They highlight how personality traits and individual risk tolerance shape financial decisions and emphasize the importance of dentists understanding how to evaluate their debt in the context of long-term goals and career trajectory.

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Podcast Transcript

Matt Mulcock: Welcome to the Dentist Money Show where we help Dentist make smart financial decisions. I am Matt and I’m joined today with the great, I don’t know what your nickname is yet, but the great Taylor Sutterfield. Taylor, how are you?

Taylor: I’m doing well. As long as my nickname does not become Taytay, I’m okay.

Matt Mulcock: We do need a nickname for you. okay. Well now you just opened up the floodgates. She can call you Tay-Tay. Okay. Well, I don’t know, man. You just kind of now it’s like, it’s like, don’t think about a bear. Don’t call me Tay-Tay. Now it’s like, it’s all I want to call you. We’ll talk about it later. You might’ve ruined it. ⁓

Taylor: I say that’s only reserved for my oldest sister. She’s the only one that calls me that. I might have ruined that. I’m sure I’m going to hear from a couple clients about this after the fact.

Matt Mulcock: You’re getting it. You’re going to get some emails now. As always excited to be here and talking about a very pertinent important topic for dentists, which is debt. But before we do want to do a couple of housekeeping items. So first we’ve teased this in the past, talked about it in the past. We want to make it an easier way for listeners to submit questions, submit feedback for the show, things they want us to talk about, or just questions they want us to hit. And so we want to make this really simple, remove the friction. we just haven’t, we have a mail back. We’re going to do a mail back episode. Yes. Like our, like our boy, Bill Simmons. ⁓ so we want to make this super easy. you can now submit questions, feedback, thoughts to the show, just email podcast@dentistadvisors.com And, ⁓ we will, that’ll allow us to do more Q and R episodes and improve our show based on listeners.

Taylor: Are we going to have a mail back? that what we’re doing?

Matt Mulcock: Um, and things that they want to hear. podcast@dentistadvisors.com speaking of Dentist advisors, Taylor, had an interesting conversation, uh, last week and I wanted to bring this up because I thought it was kind of interesting and funny. Uh, so had a consultation with a dentist. He, uh, we were, we talked for like 45 minutes, went through the situation, asked, he has a bunch of questions. We just kind of like, again, I was helping kind of pointing them in the right direction and he had a lot of stuff going on in his life. And then as we were, you know, kind of finishing up, he was like, like we got more into like what we do, how we can help, how we work with dentists. And I always ask people whenever we’re talking, like, how did you hear about us? Like, how did you even end up on this consultation with us? And he’s like, I just like Googled you and I just Googled like financial advisor for dentists. And it came up and I was like, that’s awesome. Glad we’re on the results for Google. So we’re just chat chatting about it. And he’s like, And so, I show, was showing, sharing my screen for, to show my website. I was showing them a couple of education things, some articles I was going to send them. And he goes, wait, do you guys know the Dentist money show? And I was like, I do know the, Dentist money show. I was like, that’s us. And he’s like, my gosh, I can’t believe that. So that I was caught off guard a little bit. Cause I was like, we clearly don’t do a good enough job of apparently connecting the dots for people that. This show is brought to you by dentist advisors. The dentist money show is dentist advisors and vice versa. When he said that to me, I was like, ⁓ we, he, he was like, I just thought you guys did like a really great, cool, like money show about for dentists. And that was awesome. But I didn’t know there was like this company behind it. And I was like, crap. So let me make that clear. We’re making a killing on this thing. Yeah, exactly.

Taylor: Yeah. Yeah. We make, we make a killing on our podcasts. You know, the ad revenue is insane.

Matt Mulcock: We are like literally up there with Joe Rogan ⁓ level of podcast. So, no, I, so I told him this, I was like, you know what? I’m going to call this out on the show and make sure that we’re ⁓ doing a better job at the beginning, telling people this show is brought to you by Dentist advisors. ⁓ we, you know, that is our business. That’s what we do. We work with hundreds of dentists all over the country. ⁓ if you are listening at any point to these shows and you’re like, I need help. I need help with the things you guys talk about. In your personal situation, you can always talk to us. You can go to denisadvisors.com, click on the yellow book free consultation button, and we will, we would love to talk to you. So, and then the last thing I wanted to bring up as we jump into this is the Dentist Money Summit. ⁓ we, we were so, we just had a meeting about this. We, ⁓ are so excited about this. third annual summit, change the venue, change the theme. This year it’s in Midway, Utah. Practice on your terms, my selling point right now, Taylor for this is that the professor himself, the great Rabih Dimachki is going to be speaking on stage this year. Main stage. feel like that’s enough to get people there. Like if that’s not enough, I don’t know what else is going to get you there. So cash GPT himself. So if you want more information on that, Dentist money summit.com, this will be June 11th through the 13th. We’d love to have you join us, ⁓ up in Midway, Utah. Okay. Calls to action housekeeping done.

Taylor: Mainstage Rabih. Yeah, cash GPT.

Matt Mulcock: Let’s jump into this, Taylor. This, we love repurposing things that we’re doing around content. We just feel like, you know, we do a lot of articles, we do a lot of webinars, and we want to always bring this to the podcast as well. You’ve been working on a project around an article specifically around top three topics for dentists, which is debt. And, you know, we only work with dentists. This is our wheelhouse. You know, you and I have done this for going on 10 years. I was a company been around for almost 20 years. think if you talk to just average people out there and I’ve had this happen, average non-dental people, and you told them, Hey, there’s a, some time in your future that you’re going to have multiple seven figures in debt in your, in your life. think most of those average typical people would probably think something went wrong or they would freak out. Like that’s not possible. No, no way. They would look at that as a total negative. I think if you told that to a dentist early on coming out of school, they’d be like, yeah, okay. That makes sense. Is that what were your thoughts about.

Taylor: 100%. Like I tell this to clients all the time is like, yeah, if you tell the average American you’re going to graduate within five years, have $3 million in debt, they’re going to look at you and say, what did I do horribly wrong? If you tell that to someone, they’re like, something horrible has happened. Whereas with the dentist, they’re like, that’s me. Actually, I’ve got five. So yeah.

Matt Mulcock: Yeah, what did I do wrong? Yep. Yeah, yeah, yeah. You’re like, only three? That’s amazing.

Taylor: So it’s just, it’s a very, very unique profession. You know, as everyone listening to this podcast can attest, it’s just dentistry is a very, very unique profession. And, you know, I have about 120 clients. So I work with a lot of dentists, but I also work with a lot of non-dentists, right? I mean, not every dentist marries another dentist. So we do work with other professions, ⁓ contrary to popular belief. ⁓ But,

Matt Mulcock: Yeah, it’s a good point.

Taylor: All of these other professions, regardless of what it is, they have unique things about them, but none of them have to deal with all of these challenging circumstances that dentists do. Like bar none. I’ve got doctors, attorneys, engineers, software developers, you name it, firemen. I’ve got teachers, professors, other clients, and by far and away, the most challenging and tricky things that I deal with on a daily basis are with my dental clients.

Matt Mulcock: Yeah, that’s a really good point. And we get, we get asked a lot. Yeah. Events or just, you know, people on consults or whatever, like, how did you choose dentistry? Why dentistry? And I think you just summed it up, Taylor, you know, our founder Reese long, long time ago realized this, this unique, the uniqueness, the unique complexity of a dentist and their life and the challenges that came from that and the level of help we could provide by being very specific in this profession. And debt is a huge part of that. The debt loads, it’s just so unique. You just do not see this in any other profession really, the debt load. And then from a business perspective, then being a clinician, both, know, equal parts clinician and entrepreneur, it just creates this perfect storm of complexity for dentists.

Taylor: Yeah. With debt being at the forefront, right? When you have $3 million in debt, it’s not like, I have a car loan and how can I save some money on interest? Right? When, when you have multiple different types and the amount of debt that dentists rack up, especially early on in their career, the decisions that you make around your debt management will literally have millions of dollars of implication on your net worth down the

Matt Mulcock: Yeah.

Taylor: And that’s not hyperbole. That’s like legitimate. It will have millions of dollars of difference in your net worth depending on how you choose to manage your debts. So it’s a, rightfully so, ⁓ debt is a very emotional topic when you bring this up with clients, probably more than anything else.

Matt Mulcock: No. Yeah. So true. Yeah. Yeah. And we’re to get into that part of it too. uh, you know, debt is, as we’ve talked about already, it’s structural. It’s part of the profession. It’s a requirement really for most people. But then there’s the emotional, psychological piece of this, the personality aspect, you know, your temperament and personality factors in here. Um, but you’re right between all the different types, you know, the student loans, the coming out, coming out of school with now, nowadays, a couple hundred thousand dollars in debt is. You know, I think the average is around 350 now. ⁓ and that’s just accelerated over the last several years. Jen, that’s just GP.

Taylor: And that’s just general dentistry, right? If you add any type of residency on top of that, you know, add another couple hundred grand.

Matt Mulcock: Yeah. ⁓ yeah. So you’ve got, you’ve got that. Then you come out of school with that as your baseline. You want to buy a practice at some point. You want to buy your building. Let’s say, ⁓ this particular dentist I’m talking, I was mentioning at the very beginning who didn’t know that we were dentist advisors. ⁓ he, one of the things we were talking about with him is it was, it was him. His, his wife was also in the medical space, not a dentist, but in the medical space. So she had student loans. The conversation we were having was all around, he, he wanted to buy a practice at some point in the next few years and they were moving States to do so. So then he’s like, we want to buy a house and he’s like, I’d loved to buy a building. He literally listed these things. We didn’t talk about like the details of the values of these things. Cause he didn’t know yet. was a couple of years away, but theoretically everything he listed. We’re talking three, 4 million bucks with the things that he was listing. So again, very, very common. This is. So commonplace for dentists. And I loved what you said, Taylor, the planning around this and the way you approach this truly has multi seven figure type implications over the course of your life. It’s really critical to get it right.

Taylor: And it’s very easy to overlook it. ⁓ Because, mean, we’re going to dive into this, but just because of that emotional, psychological component, you hear people all the time say things like, you can’t put a number on what it feels like to be debt-free. You hear that all the time. And my rebuttal is always, well, you can and you should.

Matt Mulcock: Yeah.

Taylor: You definitely should put a number to it before you just willy-nilly decide to attack your debts. Be a little more strategic than just like, don’t like debt, let me get rid of it.

Matt Mulcock: Yep. Yeah. I like that framing because I think a lot of times when it comes to money and finances and I mean, life in general, this happens a lot with financial planning. A lot of these like general things get thrown out, these general sayings, and that’s really a big one. And I think you were the first person that I can remember responding back with like, well, actually, no, you can put a number to that. And I think that’s a really good, thoughtful pushback and a new perspective for dentists to think about like, no, there really is a formula for this that you need to be considering for your own personal life. Cause another thing that you often say, which I love is that general advice is really bad to specific advice. So we’re saying there is a specific number you can put on that for your own situation that you should be thinking about when it comes to your approach to this topic. You, you, you set this up really well with a key question that I think is going to kind of frame the rest of our discussion here today, which is how do you know if your debt is actually helping you? And I think this kind of sets up this idea as we go through this around kind of the classic good versus bad debt. ⁓ I want to get your thoughts first, Taylor, around this concept when you hear someone say either all debt is bad, Dave Ramsey’s style versus like, no, there’s some nuance here. There’s actually good versus bad debt.

Taylor: Yeah, well, and that’s a great, I’m glad you brought up Dave Ramsey because there’s a lot of negative sentiment around debt just that exists. It’s part of this general advice. Like I remember when I bought my first home, my dad was like, make sure that you buy a home where you can pay twice the mortgage, know, pay twice what your payment is on that home. And I was like, why? And he’s like, well, you don’t want to pay interest. And I was like, well, I’m buying my home. mean, I was lucky. I recognize that this is not everyone’s first time home buying experience, but my first time home was at 2.875 % interest. Right. And I said, dad, I love you. And you’re an incredible father provider. You’ve done amazing things in your life, but respectfully, you’re completely wrong. this is, that is just terrible advice, which again, you know,

Matt Mulcock: Yeah. But shut up. Yeah. Yeah. With all due respect. Yeah. Yeah.

Taylor: Saying something like that your father is, you get more comfortable with it, but the first time it does sting a little bit, right? And I was like, I will never pay an extra penny in debt on this loan ever, right? And I think again, that there’s just that sentiment, like in a vacuum, interest is bad, don’t pay interest, right? I mean, we can literally pull up a quote from Dave Ramsey that says, debt is not a tool, it is a method to make banks wealthy, not you.

Matt Mulcock: Yeah, yeah.

Taylor: The borrower truly is a slave to the lender. Like that’s, that’s a pretty strong language against that. And that’s not unique to Dave Ramsey. You know, he’s a champion of that, but that’s, that’s a sentiment that exists out there. And one thing I try to like work with my clients on is just to help them understand that debt itself is not good or bad, even though we use that all the time. Right. That’s like a sentiment that exists. There’s good, there’s bad debt. It’s like, but debt itself.

Matt Mulcock: Yep. Yep.

Taylor: inherently is just a tool, right? And like any tool, if it’s used properly, it’s actually very, very helpful. But if it’s used improperly, it’s incredibly harmful. Right?

Matt Mulcock: Yeah. Yeah. It’s so true. I think this applies to this framework applies to so many things. I remember having a conversation with Rabih the great professor, Cass GPT about social media one day. And for those of you that don’t know Rabih is from Lebanon, completely different perspective than me growing up in Salt Lake City, Utah. This is why one of many reasons I love Rabih and I value our friendship a lot, one of the main reasons being he helps me shift my perspective on a lot of things. But I remember a year or so ago, he and I got into a conversation around social media. And I’ve always had this take around social media is a net negative for society. I think it’s horrible. I can point out some of the good things, but I was like, I think overall it’s really made us worse as a society. And he had a completely different take. He was like, absolutely not. He’s like, let me tell you all the reasons why it’s actually been net positive. Like it’s led to revolutions in the middle East that have led to the freedom of all these people. gave me all these examples. And I was like, Holy cow, to your point, totally different. I think like social media, to your point, debt is a tool and your perspective and standpoint and how you use it is what the use of that tool is what makes it quote unquote, good or bad for you in your life. Just that, that perspective really matters.

Taylor: Yeah, well, and you know, I’m like you with the social media takes like I just it’s not for me. But, you know, that’s where we have Rabih. So expanding our vision.

Matt Mulcock: Yeah. Yeah. That’s right. Exactly. He’s always spreading my, yeah, he’s opening up my world. I still don’t use social media, but I can see his point and same thing with here when it comes to debt. So I think, I think one of the key questions here again, that you reference in this article to take this further that I love is a question to ask yourself as a dentist and thinking about the use of debt and how you’re using it in your life. You frame this really well, which is, this debt getting you somewhere or getting you something. You want to talk about that a little bit, Taylor, expand on that.

Taylor: Yeah. Well, and honestly, this came from, you know, we’ve developed a process over the years working with clients. And one of the favorite things that I look, that we do with clients is when we first bring a client on board, we do what we call a discovery call. Right. And on this discovery call, we just try to ask questions to get to know our clients. Right. And one of those questions, I think, Matt, that you put it on there originally was just, how do you feel about debt? Like just really open ended. I want to hear your perspective when it comes to debt. And this question that I now use with clients literally came word from word from a client of mine. And they said, when I look at debt, I try to look at does this debt get me somewhere or does this debt get me something? Right. And I was like, why are you a client? know, perfect. And so it was just like, wow, that is such a great line.

Matt Mulcock: So good. Yeah. Come join us. Come do a content with us. Exactly. Yeah.

Taylor: Right. I’m going to use that. I’m going to steal it and I’m going to claim it as my own. Yeah, never. No. But it really is so good that like, you know, debt is something like you need to check yourself on as like, am I doing this because I want something or am I doing this because I want to go somewhere or better my life in some capacity? Right. And so if we want to use labels like good and bad,

Matt Mulcock: and never give you credit, yeah.

Taylor: I would definitely say good debt is going to be stuff that is debt that is tied to earning power, ownership, equity, right? It can be debt that is getting you your first home, right? Something that’s affordable. ⁓ Things that are getting you somewhere in life, right? They’re allowing you to progress and more than anything, accelerating your net worth by going into this debt, right?

Matt Mulcock: Yep. Yeah. Yeah. Let’s give really specific example. This will resonate with a lot of listeners, I think in dentists in general, you talk about real estate investing. That is a huge topic for dentists. Debt when used properly when investing in real estate, the term that a lot of people would use is leverage. allows you to, ⁓ increase your leverage, your buying power. And, ⁓ you know, there’s things like your cash on cash return, like how much cash that I actually put into something versus using someone else’s money. This is like a very rich dad, poor dad framework. But I think that when used properly to your point, ⁓ and it’s getting you somewhere and you’re disciplined about it. That can be a really, really powerful tool when it comes to, again, even building a portfolio of investing or buying your building, buying your practice. Like these things get you somewhere. I’d even say student loans. that you couldn’t be a dentist.

Taylor: And I love that you said it that way specifically, because it implies a negative connotation to student loans, which I think a lot of people have. I think for the most part, people, when they think of buying a home, they’re OK with that debt. When people buy a practice, they’re kind of OK with it. They can touch the walls of their home. They can see the practice. They can see that piece of real estate. But with student loans, time and time again, I’m again.

Matt Mulcock: Yep. Yep. they see the physical thing. Yeah.

Taylor: I got my undergrad and master’s in accounting. So my one joke is I got my undergrad and master’s. My one joke that I have is that I got my undergrad and master’s and not having a personality, right? So I am always perplexed when people are so against student loans and they hate them, right? Like I cannot tell you how many dentists just hate their student loans, right? And they just look at them as this like evil thing that they had to do. And it’s like,

Matt Mulcock: Nerd. Nerd.

Taylor: They have this bad taste in their mouth when they talk about it. And more than any debt that they own, I find dentists are the most motivated to get rid of student debt as quickly as possible. Right. Which I try to, you know, again, it’s just a mindset shift, but I try to give a tangible asset to those student loans. When I work with clients, like more than that building that you own or the home that you’re in or the practice that you’re practicing in.

Matt Mulcock: Agreed.

Taylor: The biggest asset on your books early on in your career. And when I say books, it’s really in air quotes is earning potential, earning power, your ability to make a paycheck for the next 20, 30, 40 years of your career by far and away. And if you were to assign a debt to that earning potential, it is your student loans. Right. And honestly, I don’t care what student loans we’re talking about. It is such that debt is such a small portion. if we truly quantify the earning potential that dentists have when they first start their careers.

Matt Mulcock: I think it’s such a good way to look at it and framework. think it’s hard to your point. It’s harder to tangibly accept the equity you’re building in your career. Like you’re pointing out the human capital aspect is an asset on your balance sheet, even if it’s seems invisible where you compare it to the business loan or the, you know, the loan on your building and you can see the equity growing with the value and all that, even your home. I love this framework. think this is a really, really important thing that we need to keep repeating to dentists that your earning potential, your human capital as you’re coming out of school is the asset. the more, and by the way, we want to be careful. We’re not saying you shouldn’t attack your student loans for your specific situation. There is times to do that. We again, very specific to you, but just, I think we’re highlighting the framework here of like, you do have an asset that’s attached to your student loans, which is you and the income potential you’re creating over the course of your career.

Taylor: Yeah, my hope by doing that is just allowing them to be more open to the idea that it is okay to not have your student loans paid off immediately. It’s okay if you carry student loans for 20 plus years, right? Which feels wrong for most people. Like, again, the natural instinct, the natural inclination that I find Dentist most likely or most often come across is I got out of school and now I got to attack these student loans aggressively. Right. And I’m not, again, I won’t say that that’s a bad decision. I never would. Right. But if the question is, is this the most efficient thing that I can do with my finances? Unequivocably, it is not. Right. Like it is not the most efficient thing that you could be doing with your debt. Right. And so that’s why I like to pair this as like, Hey, is this debt getting me somewhere? Well, your student loans did get you somewhere.

Matt Mulcock: Yeah.

Taylor: It got you something important and that’s good debt, right? Your student loans were actually a great investment in your career. And because of that, it is okay for you to go into that debt, contrary to what a Dave Ramsey may say, right? It’s okay. And I’ll tell you, I mean, how many times have we discussed like, man, should we just go be a dentist? Right? You know, we’re in this profession now we’re working with dentists and we’re like, should we go be dentists? Right?

Matt Mulcock: Yeah. Yeah, yeah. Nope.

Taylor: And I can’t just go do that tomorrow. I can’t just change professions. I have to, if I want to do that, go take an extra four years, $300,000 in debt to do so. Right? And that would be a good decision if I wanted to. Right?

Matt Mulcock: Yeah. I’m not smart enough, but yeah, for sure. I would, that’d be great. It is for, yeah. We talk about it all the time. Like from our perspective, we see it and it’s such an incredible profession. You know, we’ve made jokes before in the past, like Ryan’s made jokes around like ortho two locations. ⁓ but yeah, you know, I’m, nearing 40. I don’t think that’s going to be in the cards for me anymore. Taylor. yeah, I think that’s really good framing. I really do. And, ⁓

Matt Mulcock: It comes to mind for me when you say like, this is not the most efficient use of your capital coming out of school, like generally speaking and being super aggressive with it. think what you’re referencing there is the opportunity cost of that. You know, of that effort and that money and the attention and energy you’re putting in the time you’re putting towards that. Generally speaking, we’re going to say early on in a career, a more efficient way to do that is to increase equity in that asset, that invisible asset, which is your earning potential. So you’re much more efficiently, you’d be much more efficient by focusing on early on, how do I grow my income as much as I possibly can, whether you’re an associate or whether you’re a new practice owner or a practice owner, mid-career practice owner.

Taylor: Yeah. Which can feel really counterintuitive again, because it’s like, man, I’m $350,000 in the hole. I need to go another million in the hole to do this. know, and like, that’s where a lot of people are like, I want to get my loans paid off. And then I’ll do that. Right. And so they’ll aggressively attack that versus, you know, being okay with the fact that you have a payment, right, getting on the right plan. And, you know, that’s a conversation for another day, right? Student loans is its own big

Matt Mulcock: Yeah. Heard that a lot.

Taylor: giant mixed bag of what makes sense. But the premise and the idea there is like, Hey, a lot of times it actually makes way more sense for you to prolong those student loans. As you’re saying, invest in the equity in your profession, a practice or invest in CE, increase your ability to build that earning potential over time. Right. And nine out of 10 times that is going to be such a better decision.

Matt Mulcock: Yep. Yep, totally.

Taylor: than attacking your student loans aggressively early on in your project.

Matt Mulcock: Early on, totally agree. And we’ve said this many, many times, but I think when we talk about debt, it’s worth hitting again, which is, I think there’s a big misconception, especially around student loans, but just in general debt, that dentists coming out of school or along the way dentists connect or think that the direct connection between stress and their balance sheet is their debt load. We actually have seen this time and time and time again. It’s actually not the debt. It’s your lack of liquidity and that that’s the variable that you should be focused on first. And I I’ve yet to hear a dentist refute this. Please again, podcast, the dentist, revise.com. You can totally refute this if this is you, but a dentist who said, okay, I’m going to focus on liquidity first and build up some liquidity. I’ve yet to hear a dentist tell me that that didn’t immediately reduce their stress levels, even with the same debt load. So even on the balance sheet, like we’ve talked about earning potential, but even focusing early on a building liquidity, you’re going to be better off from a stress perspective in almost every case.

Taylor: 100 % agree. When you have a couple hundred grand in the brokerage account, the couple hundred grand in student loans really feels different.

Matt Mulcock: So Feels a little, yeah, doesn’t feel as bad. Yeah. Let’s talk about, Taylor, though, these, ⁓ let’s talk about where we would categorize maybe as bad debt or let’s frame this differently. Cause I liked your framing earlier of like this tool analogy. If we’re saying this kind of debt’s either getting you something or getting you somewhere, sorry, getting you something or getting you somewhere. Getting you something, let’s talk about that category of debt, all the things that would fall under like getting you something. And some people might call this bad debt.

Taylor: Yeah. Well, and again, this list could be, you know, it could be as big as you want it to be. Right. But if we’re going to categorize these in broad terms, basically any consumer debt, right. Credit card debts, you know, things that you’re paying for that you don’t have the money right now today in your account to pay for. Right. That is 100 % the definition of debt that you’re just using to get you something. It’s to get you more of a product or a vacation or a lifestyle that probably is not living within your means. So any type of credit card debt, consumer debt, lifestyle purchases, and again, we’re not talking about the couch that you bought at 0 % financing that you’re going to pay off within the 12 months. We’re talking about debt that carries a revolving balance and you are accruing interest on. Right? ⁓ Equipment purchases can sometimes be this, which again, kind of a controversial take if you just look at it in a vacuum. But when we say equipment purchases, we’re specifically talking about purchases that sometimes dentists make at the end of the year because their CPA says, hey, you can save some money in taxes if you buy this piece of equipment. Right? Now, inherently, that’s not good or bad. But a lot of times, if there’s no business reason or business sense behind it, you just paid 200 grand for what, $80,000 tops in tax savings? It still cost you 120, right? So if we’re not gonna see that 120 come back in the form of cost savings or increased revenue, you just lost $120,000 you could have used somewhere else.

Matt Mulcock: Yeah. Yeah. I love that example. And this speaks to other things we’ve talked about around taxes and these are so related. ⁓ and I think the general theme here, we did a podcast with Tom, who’s our head of a, one of our heads of accounting. and it fits the same discussion here, which is every decision you make, whether it be around debt, whether it be about how you would know what you do with your tax strategy. It should be around how do we increase our overall wealth, right? And then part kind of in parallel to that is like, does this align with my values? But if we’re just talking like the spreadsheet part, does this actually move, help me kind of, ⁓ make progress in my after-tax wealth overall, you know, my overall net worth and the example you just gave, especially if you’re going into debt for that thing. for that equipment that you don’t need to save taxes. Like it’s kind of a double negative for you in a lot of ways. If that thing is just gonna collect, it’s just gonna collect dust. Now you’ve got a debt on the balance sheet for something you don’t need and you just spent money on something that yeah, I saved you on some taxes, but was a net negative to you. So I think it’s a really good example to bring that up.

Taylor: Which is a great, again, use this exact same framework when you’re dealing with an equipment purchase. Is this equipment purchase actually getting me something? Or is it getting me somewhere or is it just getting me something? And what do we mean by that? It’s just a piece of equipment. But the idea is, hey, do we have a supply problem? Are we way over on our supply spending?

Matt Mulcock: Yeah.

Taylor: And we can actually get that down because we bought this piece of equipment or lab fees are too high. And if we buy that, it’s going to reduce our costs, right? There’s a business reason, there’s a business purpose. We are going to see cost savings or increased revenue because of this purchase. Or are we just doing it because the sales rep came in and was like, you can save some taxes and it’s a new shiny toy for you to use in your office. Right. Which is uncomfortable. You kind of have to have some realistic conversations with yourself, but sometimes that five-year-old piece of equipment is doing just fine, right? And you’re doing great and you have a great profitability. Why do we need to necessarily buy that now?

Matt Mulcock: Yeah. Yeah. You’ve got to make the business case for it for sure. Everything should be led by that. We have a core belief that your, your practice, your income potential, your earning power through your practice is your key to building wealth and eventually becoming financially free. So everything should be viewed through that framework. You’re kind of hitting on something I think important here, Taylor. We’ve talked a lot about people. think this tends to be a theme for us where we talk about, dentist, being afraid of debt. And I think it’s really important to hit because I think a lot of times we talk, we, we, we encounter those types of dentists, like don’t be afraid of debt, but I want to hit the other side of this too, and be thoughtful around. a lot of this, we talk about this, the psychology of this and personality, but we also need to talk to the dentist who is the opposite end of the spectrum. Who doesn’t think like, not only do they not think that’s a problem, it actually is a major problem for them, right? And so we need to, I think, hit both sides of this, that it can, again, depending on how you use this tool, it become a problem. And we, talked about this in the article, but this idea of looking at the entire system, looking at everything collectively, that not any one of these things is individually an issue. But as you talk about student loans, practice acquisition, your building loan, your mortgages, this thing, this can stack up.

Matt Mulcock: And it’s really critical to be organized around this and understand, like I was just talking to a client yesterday. Uh, we were talking about his cashflow and all this stuff and he’s been feeling some liquidity pinch and we were looking at his debt and he’s like, man, he does really, really well, but he’s like, man, it’s just going to be so like, I’m just looking at this and I’ve got almost $200,000 in debt payments every year from everything like that. That’s really, really common. So I want to speak here for a moment and get your thoughts around. Again, the other side of this kind of spectrum of making sure you’re looking at the entire being organized around the collective of your debt. And I think it’s easy for some dentists who have that personality to just kind of add debt along the way. Cause they look at it kind of in isolation, like, it’s just this. It’s just that it’s just another 15,000, just another 20.

Taylor: I’ve already got five million what’s another 200 to gram.

Matt Mulcock: Yeah, exactly at some point we again we need to kind of hit this from both sides

Taylor: Well, and such a good point, Matt, like, and, you know, I said in my article, like, this is the problem that nobody talks about. Right. And it’s because individually, all of these debts can be categorized as good debts. Like you may be paying off all your credit cards. You may not have any consumer loans, but you may still have a debt problem because you have student loans, practice loans, building loans and a mortgage, which in a vacuum,

Matt Mulcock: Yep. The stakes are higher. The stakes are higher. Yeah.

Taylor: Right? In a vacuum, all of those things can be good debts. Right? If we’re just using the general broad, I it’s just going back to good general advice can be horrible, specific advice, right? All of those things in a vacuum could be good things. And if you’re talking to a mortgage lender, they can say, Hey, you can afford X amount of house. This is totally fine. And you’re talking to the practice lender and they’re like, you can afford this much of the practice. And then you’re talking to the practice building. you know, loan officer and they’re like, yeah, you can do this, right? And then your student loans. But when you put them all together, right, suddenly it can be a huge problem. Because if we’re going to the max of what you can afford, right, in air quotes, on every single one of your debts, you’re no longer going to be able to, it’s no longer going to be what you can’t afford, right? And so, and that’s like a great one with with the mortgage particularly, you I asked you guys in our advisor chat when I was writing this article, are there any rules of thumb that you use with your clients? Right. And you and Jake both, you know, opined and sent in a couple of things, but Jake always takes it a step further and, you know, speaks in absolutes. That’s why we love Jake. And he was like, and he was like, I have never ever come across a single person whose mortgage is more than 20%.

Matt Mulcock: He doesn’t do that. That’s why we call him Hot Take.

Taylor: of their income, their mortgage payment is more than 20 % of their income payment that is able to save money. Which again, if you go talk to a mortgage lender, they will lend you a lot more than that. They’ll go up to 40%. And Jake’s hot take was, I have never met a single person whose mortgage is north of 20 % that is able to save money. And instantly when Jake says something, I kind of want to push back and be like, you’re wrong.

Matt Mulcock: They’ll go up to 40. Yeah. The internal rivalries we have are the best. Yeah.

Taylor: But I thought about it and I went through a couple of my clients and I was like, you know what? He’s kind of right. Right? Like you can go all the way up to 40 % on your mortgage, but if you want to add the practice loan and the practice building and the student that’s on top of it, guess what’s the first thing to go? That’s savings rate.

Matt Mulcock: Yeah. always, always. Yeah. It’s a really good point. And Jake does talk in absolutes, but a lot of times he, comes from a place of experience and things that he’s seen. And I love what I love about it is it always gets, gets you thinking like, maybe is that true? And then you, know, like you said, your instinct is to push back, but that is a good thing because it forces us to really think about it. And I think it’s important to highlight here all the kind of. the incentives of the people giving you those loans may not always be aligned with your incentives as the borrower because as we highlighted, just take the mortgage as an example, a mortgage, a bank will go up as high as 40%, I think 42 % of your income, which is crazy, but because they’re not.

Taylor: which a lot of us listening to this podcast right now have done. And this is a safe place. If you’ve done that, you know what? You’re not alone because the home is a very emotional decision. And you, when you start house shopping and you see what 20 % can get you versus 40%, big difference.

Matt Mulcock: Yeah, safe place. It’s okay. Yes. Yeah. You start to, you start to maybe break, bend on some rules for sure. And I think to that point, Taylor, one thing that I had mentioned in that thread was we were all going back and forth. I stand by this. So both things can be true. I agree with Jake that it’s pretty hard if you go above that 20 % free to be able to have excess cashflow to actually save and invest for your future. I think that’s probably true with everything else that comes with being a dentist. So yes. And. I also think it’s okay in certain situations for a dentist to go above that depending on where they’re at. So the one thing I mentioned there was I’ve actually advocated for a younger dentist. talk about this earning potential that we know is there and there’s some level of like predictability with a dentist that’s different from other professions. And so I’m actually okay bending on that and just being like, yeah, if you’re younger, you’re… Though this is the lowest your income’s ever going to be, we can kind of project out what that income is going to look like. I’m okay going above that 20 % in some situations. Context matters there. ⁓ So I think that that can totally be true.

Taylor: Yeah, and your definition, if you’re listening to this, definition of young needs to also be Matt’s definition of young, right? Because again, you’ll meet people in their 40s, which again is young, but they’ll be like, I’m still young, I can go all the way up. And it’s like, well, I wasn’t really talking about you, right?

Matt Mulcock: And you’re like, yeah, it’s like, you’re not, let me tell you this. I’m only 40 this year. 40 is not, it’s young in some context. Not so it’s not as young as let’s say 30 when it comes to your career. So yeah, that context matters. thought you were just taking a dig at me because you always call me old.

Taylor: No, no, no, no, you are very, you’re younger than I am and I’m younger than you are.

Matt Mulcock: Yeah. Um, but so coming back really quick to the point of incentives, I’m glad you brought this up because it’s important to understand that the incentives of someone trying to give you a loan, a bank or otherwise, you know, whoever, um, they’re not sitting here thinking about your holistic picture. They’re not sitting here thinking about what constraints has just put on your ability to build wealth. All they’re looking at is risk analysis underwriting when it comes to loan to value and can they actually pay this? I don’t care if they don’t have another dime leftover as long as they can make this payment. that’s really important. And I like what you also brought up around the emotional aspect of some of this stuff ⁓ can get you in trouble if you’re not taking a step back and finding some middle ground there. You’ve got to kind of bring together the balance sheet aspect or the spreadsheet aspect of this, along with how does this debt serve you in the life you’re trying to fund and trying to create. think it’s both need to come in here.

Taylor: Yeah. And that’s the biggest thing, you I don’t care what it is, any financial topic is like you have to put everything in context of your individual, you know, circumstances and situation, right? Even your best friend that could have also been a dentist, been to the same school as you, similar loan situation, your right answer can be very different than their right answer, right? Because your specific situation can be very different than theirs, right? And so while there is a lot of great TikTok advice, talking heads out there that give really good general advice, when it comes to debt, you need to be really careful, right? Don’t just use general rules of thumb, right? Please, please put it in context of your financial picture and make it make sense, right? Because there is, I mean, and we’ll talk about this here in a bit, but like,

Matt Mulcock: Yeah.

Taylor: there’s an opportunity cost when it comes to your debt and your debt management and the decisions you make around it. And what you can be doing with your debt versus what you could be doing with those dollars somewhere else, it will have giant major implications down the road on your long-term network.

Matt Mulcock: Such a good point, Taylor. I really like this concept of be careful of comparing yourself. ⁓ The example I would give here, so we’ve seen, we have personal experiences with dentists who were super aggressive with debt and they ended up being just fine. But in every single one of those cases, it has nothing to do, at least the ones I can think of, their success and where they’re at now has nothing to do with them being aggressive with their debt early on. In fact, I would argue that it still was not an optimal thing to do, but they still ended up being okay because because the X factor was they had the luxury with what the business they had built, the income they had created. They were still able to pay off that debt and get to where they were. But other dentists might see that and be like, they are where they’re like, they attribute the wrong factor. And I, the example I would give to this is, know, those are exactly, um, but you know, those articles that you see around, like, the one I’m coming to mind for me is like Taylor Swift is invested, you know, is a real estate is worth a hundred, her real estate portfolio is worth like X number of dollars. And people attribute like, Oh, I must need to be getting into real estate because I’ll be as rich as Taylor Swift. It’s, it’s reversed. It’s like, no, no, no, no, no. Taylor Swift became a multi, a billionaire.

Taylor: They judge the results, not the ⁓ Thank

Matt Mulcock: Because she’s Taylor Swift and everything she’s done in music and all that stuff. Cause she’s a pop icon, but she happened to get rich and then invest in real estate. I think it’s something similar. Be careful what you’re attributing that success to. And is it, you’re like to your point, is it the result or the process? Cause I would, again, every single one of my clients or the client, the dentist we see who still found success and they say, well, yeah, I paid off my debt early. I’d still argue wrong decision, even though you ended up being successful.

Taylor: because she’s a pop icon.

Matt Mulcock: So just be careful with that context.

Taylor: When I’m also just to clarify, because I agree with you 100%. I agree with you 98%. Right. Because I think again, it’s not necessarily the wrong decision. It just wasn’t the most efficient decision. Right. And that’s what I always tell my clients like, hey, if you want to pay down your debt, it’s not the wrong decision. It’s not a bad decision. It’s actually a good decision. Right. But I like to frame it in the context of

Matt Mulcock: okay. We’ll take that. I’ll take that. Yes. Yeah. Yeah. Yeah. Good. Good distinction.

Taylor: good, better, best, right? Because a lot of this, you know, we’ve talked a little bit about opportunity cost and specifically what we’re discussing here is, you know, interest rates, right? What interest rates can I pay versus what interest rates can I earn, right? Or what rates of return can I earn, right? And that’s really the biggest opportunity cost when it comes to debt decisions is like, hey, I have a hundred grand. I can either chuck this at my loan that is accruing interest at 6%, or I can put this in, let’s say, the S &P 500 in a diversified portfolio that’s going to earn 10. And again, it feels good to pay down debts. So a lot of times people will be like, 6 versus 10, it’s only 4%. Not a big deal. I want the emotional benefit of putting that towards debt. But again, if you take that 4% and you compound that 4 % over the next five, 10, 15, 20, 30 year career, right? Because again, a lot of times you’re doing this early on in your career. That 4 % compounded over the course of that long will literally be millions of dollars of difference in net worth, just a 4 % spread. And the thing about that 4 % spread is a lot of times it’s it’s even better than a 4 % spread, right? Because the nice thing about debts, right, is that in most situations, that interest is tax deductible, right? Student loan interest, tax deductible. Mortgage loans up to $750,000, right, is tax deductible. Practice debt, tax deductible. Practice building, tax deductible. The vast majority of your debts will be tax deductible.

Matt Mulcock: Yeah, the interest cost there. Yep.

Taylor: Right? And so even though you have like a 6 % interest rate, it might actually only be 4.5, right? Tax effective. And then not only that, is if we do have a 20-year student loan, a 25-year practice building loan, a 30-year mortgage, just because the interest rate’s 6 % when you start, doesn’t mean it’s gonna be 6 % over the life of that loan. Right? It’s actually way more likely that you’re gonna be able to refinance that loan several times down from that initial 6%. And so more often than not, this opportunity cost is four, five, 6 % difference each year. And when you compound that each year, it is tens, hundreds, millions of dollars of difference down the road. And so what happens is like, hey, is it a good decision to pay down debt? 100% you’re getting a 6 % rate of return guaranteed. That’s a great decision. Is it the best decision you can make? No. Just flat out, no, it’s not. Right. But the problem here is a lot of times people hear this and they only hear the first part, which is Taylor saying, don’t pay down my debts. Right. They don’t hear the second part, which is take that money that you didn’t pay down your debts with and invest the difference, whether that be in the market.

Matt Mulcock: Yeah, don’t go add more debt. Yeah.

Taylor: Right, which a lot of people will just not pay that and then they’ll just increase their lifestyle and spend more and that would be the wrong decision right, so That’s the only caveat I would make to your statement there of like hey they Did they make the wrong decision? No, right? They’ve become successful They made a lot of right decisions along the way, but they could actually be a lot more successful than they are even now had they made different ones

Matt Mulcock: Yeah. Yeah. Yeah. Yeah. I think it’s a really good distinction to make. And I think it encompasses what we talk about all the time, which is the two sides of money, which is there, which is the quantitative and qualitative. And we need to be, we need to be careful. that’s, think we’ve kind of, kind of threaded, I hopefully walked this line of not good or bad, but you can look at it and say efficient or inefficient, or like what you said, kind of good, better, best. Uh, you don’t live in a spreadsheet. So We can give you the spreadsheet answer and talk about the efficiency of capital use. Like where’s the best use of your money from a, and a lot of this, by the way, is, we’re playing probabilities, right? So we’re just saying, ⁓ w what’s the probable growth of this capital invested in the markets, let’s say over the next 30 years versus paying off this fixed, this fixed interest rate on this debt. It’s, it’s really not always. Easy because you’ve got a variable here you can’t control for every single year versus a variable, know. Uh, and, and one other thing we’ll mention as you’re highlighting this opportunity costs, not to get too nerdy, but I’m sitting across from a master’s in accounting. So we’re going to get a little nerdy. But when you talk about inflation, you talk about cost of capital or the, um, what happens with your money. When you are a debt holder over the course of five, 10, 20, 30 years, your actual debt becomes cheaper every year when you’re a debt holder. again, we’re not saying don’t pay off your debts and go spend frivolously and keep adding debt. I like your distinction you’re making. I think at its core, we’re saying you got to be thoughtful about this. There’s a lot of different things to consider in your personal situation. It’s not necessarily good or bad. It’s a tool and you need to be considering this in your specific context around. What kind of life do you want? What kind of practice you trying to build? ⁓ you know, what’s your vision for your life, your core values, your personality as well. cause that’s also important, Taylor. can sit here and talk about opportunity costs all day long and be like, no, I’m going to convince you with this spreadsheet to not pay down your debt and go invest this money. But the second we see a 20 % correction in the market, certain personalities are going to freak out and compound their issues even more by selling out and then now I’m gonna go pay out my debt and Then paying the debt so personality matters as well.

Taylor: It’s selling out, losing that 20 % and then bang the debt. Such a great, such a great point. Yeah.

Matt Mulcock: I don’t, I don’t know if we give enough credit to the discussion around personality when it comes to these topics and telling people like, it’s okay, but you got to know yourself. You got to know how you’re actually going to react to these situations. And when you’re young and let’s be honest, uh, we, we haven’t seen, I guess COVID, but that we haven’t had a ton of opportunities to really test someone’s metal when it comes to like true market turmoil, like an 08, 09. So maybe you don’t know how you’re going to react. but I just think personality is a huge factor here that needs to be considered as well.

Taylor: I think about this all the time. You know, just the timing of when I started my career, I’m like, my clients really have not had it bad yet. Right. And I haven’t had it bad as an advisor. You know, I haven’t had to deal. I mean, there were small moments, like you mentioned in COVID and then you, you know, last year in April, right.

Matt Mulcock: Even COVID, the markets were actually killed. They crushed. Yes.

Taylor: But like there was this initial downturn, but it was so fast. It came back up so quickly that it really wasn’t a prolonged, like the entire year was down 20%. Like that’s a whole different thing than a month. COVID was the fastest recovery we’ve ever experienced. And then in April we had, again, I remember it because I was in Hawaii with my wife, right? And then all of sudden the market, we had a top five worst day in the market. And so we’re losing our minds.

Matt Mulcock: Yes, of all time.

Taylor: And then within the same week, we had a top 10 best day in the market. so it, we really have not, you know, a lot of people listening to this podcast right now have really not experienced a market downturn and that personality trait has not been tested. Right. But it’s coming. Right. It’s coming. We’re not saying don’t invest, but we’re letting you know, Hey, we’re predicting it now. We’re predicting it now. There will be a recession.

Matt Mulcock: It’s always how it goes. Yep. yeah, at some point. We’ll talk. We’re going to. Yeah, we’ll do a prediction show. We’ll do a prediction show at some point.

Taylor: That’s such a good point though. going back to personality, if we just expand on that, the same personality that allows these people to pay extra on their debts is the personality that allows them to monitor their spending, have extra leftover. And when they get those debts paid off, they turn it to other things because they’re doing the hard part of not overspending in other areas.

Matt Mulcock: Yep. That’s a really good point. That’s a really good point.

Taylor: So probably if we’re judging the process, the process is that they had a great personality that allowed them to be successful, right? And it wasn’t necessarily that they paid down their debts, right? Had they had the same personality and invested the difference while paying the minimums, they would have been successful because of their personality traits.

Matt Mulcock: They were disciplined. Yeah, so true. So true. ⁓ so let’s wrap this up, Taylor, I think to summarize, ⁓ everything we’ve discussed, I think the answer here is that there is no universal answer. ⁓ there, there really isn’t. And again, you’ve said many times, we’ve said on the show already that there’s just no general advice that is going to be good specific advice. It’s really, really critical that you understand your specific situation and

Taylor: Yeah.

Matt Mulcock: all the different factors and where your career stage, season of life, your values, your goals, ⁓ you know, just comparing like a dentist five years out of school, who’s building a business and like just bought a practice and they’re trying to, know, they’re, they’re at the, just at the precipice of like expanding on their overall earning potential compared to a later stage dentist who is on the latter part of like the final decade, let’s say. The way you approach debt in those two situations, just those two like general situations is completely different how you would, how you’d approach that. And that’s not even factoring in again, the individuals that in that hypothetical personalities and all the other qualitative aspects of their lives. So it’s probably the ultimate like horrible way to answer a question or end a podcast, but it’s like the answer is it just completely depends.

Taylor: I tell my clients all the time, I know every single answer to any question you’re going to ask me. And it’s always two words. It depends. Right. So the answer is always two words. depends. Unfortunately, but the thing is the hard part is knowing why it depends. Right. And if you can understand why it depends and then act on that, that’s where you will be successful. And honestly, if we’re talking young dentists, like I think a lot of people

Matt Mulcock: Yep. We’re going to make, we’re going to make t-shirts. Yeah. Yeah.

Taylor: hire financial advisors for investments. Right? Like that’s what you think. You think financial advisor, you think investments. I literally was just at a gathering on Sunday and someone asked me what I was doing for my career. And I said, I’m an advisor. And they’re like, so you help people with investments and saving on taxes. And I didn’t really want to go into it with them, right? Didn’t want to engage. I was like, but honestly, early on in your career, I think we had way more value around debt management than investments.

Matt Mulcock: engage. It’s like, boy.

Taylor: expect for a younger dentist, right? And making these smart decisions early on in their career will probably save them millions of dollars later on, right?

Matt Mulcock: Yeah, so true. And a theme of this discussion is none of these decisions can or should be made in isolation. And so, you know, we, we talk about this idea of like the comprehensive nature of our work. You know, there’s ripple effects of all these decisions around what you do with debt, how that impacts things like taxes or how that attack or how that ⁓ relates to insurances that you have, or how that relates to investing or liquidity. It’s so many different moving parts of this, which is why that’s kind of at its core. Why general advice doesn’t work is because it’s really hard to know the ripple effects in your personal situation. So, and I agree with you, all of this does come down to it depends, but I’m just the key here. Being thoughtful. The first with your situation, get someone who can help you, who can actually be objective third party, separate themselves from the emotions and help you create a plan for this around debt and all the things that relates to your life, ⁓ in your, know, for your overall long-term plans. Like I think that’s really critical to have an accountability partner in this.

Taylor: So, amen.

Matt Mulcock: Any other words of wisdom, Taylor?

Taylor: All my words of wisdoms are gone. It’s just, they’re gone. I’ve spent them all. Yeah.

Matt Mulcock: Okay. We’ve exhausted all of them in this discussion. well, ⁓ hopefully helpful discussion. This is such an important topic for dentists around debt, how to approach debt, and something we do every single day. So as I mentioned, to start the show, ⁓ we do this, ⁓ this is, this is what we do. Dentist advisors is a huge part of, ⁓ how helping dentists understand how to approach their debt in their overall financial life with their goals, their values and what they’re trying to achieve. So if that is you listening and you’re like, I need help. are here, dentistadvisors.com Book on the consultation button there and you can talk to one of our friendly advisors If you’re still here, still listening, you’re one of the cool ones. Taylor, thanks for being here and sharing your words of wisdom. Everyone. Thanks for listening till next time. Bye bye.

Keywords: dentist debt management, good debt vs bad debt, financial planning, dental practice finance, student loans, real estate investing, debt strategy, financial independence, dentist finances, wealth building.

Debt & Financing