If you’ve just completed dental school, congratulations! You’ve put in a tremendous amount of work, and a promising career awaits...
If you’re like most dentists in this stage of their career, money is certainly on your mind. With hefty student loans and a modest starting salary to live on, most new dentists aren’t able to reach the same savings levels as some of their peers in other fields.
Now, as you enter a whole new income bracket, you’ll need to prioritize how you allocate your finances.
What’s the best approach?
As a student, you’ve had to live within your means. You’ve been doing it for years. And it probably hasn’t been easy. But if you can keep living modestly, at least for another few years, it will have a transformative impact on your finances.
As tempting as it may be, this is not the time to change the lifestyle you’ve become accustomed to by adding a bunch of new expenses. Instead, address the financial hardships that came with four expensive years of dental school and perhaps another one to three as a resident.
There is some ground to make up, and now is the time to do it.
The foundation of your financial wellness starts with budgeting. You need to understand where you’re spending your money now and how you want to spend it in the future. And you don’t want to live beyond your means. (Read more about budgeting here.)
Next, is emergency preparedness. Build an emergency savings account with three to six months of living expenses to cover everything from an unexpected car repair to losing your job.
After that, make sure your income is protected through disability insurance and, if you have a family, life insurance.
Finally, set your priorities. Your priorities likely include paying off your student loans and credit cards, saving to buy a home, and setting money aside for the future. You need to decide which comes first.
As you start to build your plan, if you’re not self-employed, your employer-sponsored retirement package may include contribution matching. For example, if you put 6% of your income into your retirement account, your employer may match it. Regardless of market performance, this translates to a 100% return on your investment. And that’s hard to beat.
Eliminate a payment. With this approach, you’ll focus on debts you can pay off relatively quickly, so you can free up money to use on some of your other priorities.
Eliminate high rate debt. Focus on paying off your highest interest rate debt first. That way, you can reduce the interest you’re paying and have more of that money for yourself.
Take a balanced approach. With this strategy, you’ll chip away at all your debts at the same time while still setting money aside for savings.
Focus on your investments. With this approach, most of your extra funds are applied to long-term investments, like retirement, with an understanding that the compounding effect of your investments will be substantial.
In providing this information, neither Laurel Road nor KeyBank nor its affiliates are acting as your agent or is offering any tax, financial, accounting, or legal advice.
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