6 common mistakes dentists make on personal finances


Be conscious of how you allocate income, adopt insurance, and those you include in your financial future.

Whether you're an established dentist running your own practice or a sleep-deprived student closing in on your white coat, balance is vital to your success.

For example, just consider the harm you can cause by:

  • Prescribing too much treatment (over studying).

  • Not prescribing enough treatment (under studying).

  • Prescribing the wrong treatment (studying the wrong material).

  • Not prescribing anything at all (not studying, period).

Just like the treatment you provide, finding the proper balance in your personal finances is key. And just as each patient is different, so too is the best financial solution for each dentist. 

With this in mind, here are six mistakes we see dentists make on their personal finances and how you can avoid them.

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1. Failing to adequately insure your income

Take a moment to consider the following difficult, yet important questions:

  • What would happen if you could no longer practice due to injury or illness?

  • What would happen to the financial obligations you’ve incurred and the lifestyle you enjoy?

  • How would the people who depend on you financially get by if you suddenly pass?

Of course, no one is expecting any of these scenarios to happen to them. But in your profession, you deal with individuals whose sense of invincibility leads to accidents and ailments all the time.

The average person should at least consider purchasing disability insurance. But for highly-specialized medical professional, a disability insurance policy with a true own-occupation provision is a must-have. It will protect your income if injury or illness prevents or limits your ability to perform the specialty you’ve dedicated your life to perfecting.

The same goes for term life insurance. If you have loved ones who depend on you, a term life insurance policy is crucial. It will cover outstanding debts, funeral costs and more if you pass unexpectedly.

Many medical practices offer group plans. But the benefits that employer policies pay out rarely equate to sufficient coverage. Although they can supplement individual disability and life insurance plans, you should never rely on group plan alone. Doing so increases your risk of losing coverage due to a change in jobs or membership status. 

2. Wasting money on insurance you don't need

Chances are you will hear a pitch for permanent life insurance at one point or another. And chances are, you will never need it - or the higher premiums that come with it.

Also known as ‘cash value life insurance’, these policies are far more expensive than term life. Examples of permanent life insurance include universal life and whole life. 

As many doctors near retirement, they owe little to nothing on their mortgage, and their children are typically grown and no longer dependent on their income. For these reasons, locking in to whole life insurance policy that lasts a lifetime is simply not necessary. 

Furthermore, be wary of agents pushing permanent life insurance as an investment. These policies are often sold as a tax-free investment vehicle because of their cash value component; however; life insurance is only worth purchasing for protection against the loss of life.

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3. Trying to manage it all by yourself

Doctors face two common realities that make it difficult to properly manage their wealth: 

  • A lot of assets to manage.

  • Not enough free time to do the job well.

Consider patients who try to treat their own ailments. They may find enough information online to get by, but that does not mean it's the right treatment option. They also risk using false information.

Trying to manage every aspect of your finances is similar to a patient trying to treat oneself. You need a team of trained professionals who understand the products that best fit your needs. Often times, this means separate individuals for investments, debt consolidation, insurance and taxes.

However, this is not to say that you should simply turn your financial decisions over to your team. The key is to leverage your professional resources to make smart financial decisions that are in your best interest. 

Related reading: Cash vs. Insurance -The latest trends in payment in the dental practice

4. Following bad advice from the wrong people

As a licensed medical professional, you expect patients to trust your judgement. But only to a certain degree.

You should employ the same attitude toward financial professionals. Given their credentials, you should be able to trust their judgment. But once again, only to a certain degree.

Unfortunately, doctors are a common target for unscrupulous financial advisers. That's why you need a reputable professional who values your needs above all else. In order to do so, this means listening first. If an adviser immediately begins selling you solutions before learning about your needs, that's a major red flag.

Be wary of advisers who claim they “always beat the market” or have a “guaranteed system.” If they are achieving high returns, chances are they’re also taking a lot of risk. Risk that is being taken with money that is not their own. What if they convince you to be more aggressive with your assets than you want to be?

To pinpoint your ideal adviser, ask for referrals from colleagues you trust. Then thoroughly vet them yourself before signing on.

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5. Depleting your wealth too quickly

As you ascend from dental school to full-time practice, your income will skyrocket.

When this happens, it may feel like you just won the lottery. While you’ve certainly earned it, this does not mean you suddenly have an endless stream of money to spend. 

From providing loans to gambling on high-risk investments, the opportunities are endless. But without proper planning and budgeting, your wealth can evaporate quickly.

Make a habit out of living below your means. Set aside a fair amount of your income to invest, save and pay down debt. After all, your student loans aren’t going to repay themselves; nor will that mortgage loan on your dream home

By prioritizing your long-term and short-term goals up front, you will ensure you continue to build your net worth over time.

6. Doing nothing to grow your wealth

Overspending isn't the only way to endanger your financial future. Plenty of risk also lies in doing nothing with your money. Simply setting it aside in a low-interest account may actually set you up to squander your assets down the road. 

Instead, focus on steadily building wealth over time. This will help you finance valuable endeavors in the future. From your child’s college education to your own retirement, long-term investments take time, patience and balance. It’s never too early to get started saving for your future self.

Read more: 9 ways to increase profits by controlling labor expenses

Key takeaways

Even as a highly-skilled medical professional, your financial future is anything but guaranteed. That’s why your long-term prosperity requires balance in:

  • How you allocate your earnings

  • What you protect with insurance

  • Who you trust with your financial future

By accounting for these six common financial mistakes we have seen doctors make in the past, you are preparing yourself for whatever life throws your way in the future.

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