How the dentist can establish a personal budget in 5 minutes per month

Dr. Doug Carlsen retired at age 53 from a 25-year restorative practice. He never produced $1 million, yet was able to be financially free at an early age. Now he is sharing some of his secrets with you. Today, he looks at how a dentist can establish a workable personal budget in 5 minutes per month.

Two percent of doctors actually keep track of spending via a personal budget.

Make sure your checking account is balanced each month. Quicken and Mint can balance for you. This is fine; yet check for any spurious entries.

More from Dr. Carlsen: The millionaire dentist Part 1Part 2Part 3

Credit Cards: Again, check for spurious entries.

Simple budget tracking comes next. Couples need to be aware of these “hot” problem areas:

Clothes: The average dental family spends $500 per month. If it’s higher, track it. If someone has unopened clothes in the closet, this is a sign of major trouble.

Personal hygiene: This area can go nuts. It includes haircuts, mani-petis, facials, massages, yoga, Tibetan bell therapy, and any other alternative way to settle you down. Yes, you need it, yet watch the price. The normal dental couple spends but $100 per month. I’ve seen spending easily top $1,000 per month. If over $100 per month, track it.

Home improvements: This is the biggest personal obstacle to dental family savings. The average for dentists is around $500 per month or $6,000 per month, yet for those with $1M+ homes; the total can easily top $60,000 per year. Given that the average dentist needs to save at least 15% of a $250,000 income, or $35,000 to $40,000 per year for retirement, that $60,000 presents a large impediment to savings.

Gifts: The average is $5,000 per year or about $400 per month. This amount can explode in doctors’ fifties and grandchildren emerge.

Dining out: This is another large problem area. The average is $500 per month, yet I know of those that dine out every night of the week, spending well over $2,000 per month.

Hobbies: Average is $3,600 per year. Carlsen’s weakness is mountain biking and skiing. These eat up $4,000 per year for him, yet he could spend up to $10,000 annually easily.

Vacations: Average is $12,000 per year. Doctors can easily spend over $50,000 per year. Vacation time is important, yet keep it to 8% or less of your personal income.

Finally, talk to your spouse about your personally hot spending areas.

More from Dr. Carlsen:

20 steps to building wealth, part 1

20 steps to building wealth, part 2