Student Loan Spotlight: 4 tips for managing your finances as a new dentist

Once you’ve completed your training and finally become a practicing dentist, you’ll face many important decisions when it comes to your finances. As a new dentist, there are a few intentional steps you can take to develop a clear financial plan. Here are four pieces of advice to help you get on the path to healthy financial planning.

1. Budget and live like a dental student for just a bit longer
As your dental career progresses, you’ll likely see financial advice regarding lifestyle inflation. Lifestyle inflation, or lifestyle creep, is when higher income leads to higher discretionary spending, and as a result, the more you make, the more you spend on experiences and purchases that you may not need. It’s a trap that prevents many high earners, including dentists, from achieving their financial goals, such as planning for retirement, paying off their student loans or investing for the future. Fortunately, lifestyle inflation is also a cycle that can be avoided with an early focus on planning and budgeting.

First, you need to understand how you’re spending your money now and how you want to spend it in the future. Then find a budgeting method that works for you.

For example, the 50/30/20 budget rule helps you calculate your expenses and savings potential. This method suggests breaking up your monthly income, after taxes, into three categories: 50% of your income goes to needs, 30% goes to wants and 20% goes to savings and investments, including retirement and emergency funds. Note that the minimum payment for your student loans should be part of your 50% required needs, and any additional student debt payments would be part of your savings category. 

Once you have your budget in place, you’ll want to prioritize your financial goals. Start with your short-term goals for the next one to five years and then look at your longer-term goals, such as retirement or college savings plans. Evaluate your goals and make sure they can realistically fit into your budget. After you set up a contribution, be sure to automate it. Then when you reach a savings goal, immediately begin applying the payment/savings amount toward your next goal.

2. Build your emergency fund
You might feel like you don’t need an emergency fund as a dentist; however, situations can still arise where you might need more liquidity than a single paycheck can afford. Dentists may also have to deal with out-of-pocket costs for conferences, including registration, airfare and lodging. There are also other expenses such as licensing exams and continuing education. These can all lead to cash-flow issues, so having an emergency fund for these “planned” emergencies can help you stay on track.

Ideally, you’ll be able to save the equivalent of three to six months of expenses for your emergency fund. To reach this goal, start with smaller obtainable increments. We recommend focusing on growing your savings in $1,000 increments as you progress toward this savings goal.

3. Develop a student loan repayment plan
Next, you’ll want to take stock of your student loan debt and ensure that you have a repayment strategy in place. Since the average dental school graduate owes $296,500 in student loan debt, student loan repayment will likely be an important part of planning, but this doesn’t need to be overwhelming. 

Dentists who took out federal student loans for their undergraduate and/or graduate degrees may qualify for student loan forgiveness through federal programs like Public Service Loan Forgiveness or income-driven repayment. If you’re wondering if you qualify for student loan forgiveness, you can access dedicated student loan counseling through Laurel Road, an ADA Member Advantage-endorsed partner, to understand your repayment or forgiveness options. Head to laurelroad.com/ada today to schedule your free student loan consultation.

Another way to tackle dental school debt is by refinancing your student loans. This path could help you pay off your debt sooner and potentially save you money with a lower interest rate or shorter loan term. You could refinance federal and private student loans — even if you’ve consolidated or refinanced before — but each lender has different rates and criteria for eligibility. A student loan specialist can help you understand how to qualify and if refinancing is the right path for you. Just keep in mind, if you refinance federal student loans, you will lose access to federal benefits programs, including forgiveness. 

4. Focus on specific, attainable financial goals
Finally, you’ll want to focus on setting your financial goals, including SMART goals that are specific, measurable, attainable, relevant and time based. Your financial plan should include short- and long-term SMART goals. Sometimes it may seem like your goals compete with each other, so you’ll need to regularly evaluate and prioritize what’s most important to you, whether that’s paying off debt now or saving for future investments. 

If you need some inspiration as you create your list of goals, here are a few ideas to begin: pay off your student loans or other debts; build emergency savings; protect your income and family through disability insurance and life insurance; save for retirement; save for a home purchase; and plan for college.

For dentists who want to build their wealth, retire comfortably and set up their family’s financial future, getting an early start on planning is vital for your financial health. Make sure you take advantage of the benefits of compound interest to help your savings and investments grow. Unlike simple interest, which is typically calculated once a year, compound interest is calculated periodically — either daily, monthly or quarterly — and then added back to your account balance. Make sure you don’t miss out on the potential passive growth of compound interest, particularly when it comes to your long-term goals.

Ms. Schaefer serves as the general manager and chief experience officer of Laurel Road. She oversees all aspects of the business, including marketing, operations, risk, and profit and loss management, with particular attention to its digital products and customer experiences. Laurel Road is a brand of KeyBank National Association.