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  • New Dental Practice Owner

    • Recently married, no kids. Late 20’s and a new dental practice owner in a LCOL area
    • Came out of school during the end of the pandemic in August 2020. I wasn’t as busy as expected and also did not have a guaranteed minimum salary (mistake, but a story for another day). I planned on leaving or at least working part time to increase income, but ownership was on the table and I really liked the practice, so I stuck around. I made around $25,000 in the 4 months of 2020.
    • I became an owner (multiple doc practice) in November 2021. It’s truly a great practice. I’m in the area I want to live in and I don’t plan on leaving the practice or moving to a different area until I retire. This practice is well established and has been in the area for 35+ years. I bought out another doctor, so my workload is fine now.
    • Again, I wasn’t busy enough in the beginning of the year and my salary for the year was around $131,000. However, income doubled once I became an owner.
    • I conservatively expect to make around 230K in 2022. Anyways, I’m trying to make sure all my ducks are in a row financially moving forward.
    • Household income: $295K
    • Student debt: $450K at 6.7% (yikes)
    • House mortgage: 280K at 30 year 3.5%.
      • Monthly mortgage payment comes out to around $1350 a month.
    • No car payments.
      • Both are paid off and both around 5 years old and in good shape. We both plan on driving them until the wheels fall off.
    • Retirement accounts. These are all my numbers, as I’ve only been married for a few months. Wife has been maxing her employer 4% match in her 401K and I believe there is around 25K in that account.
      • Roth IRA: $4100
      • Vanguard Brokerage: $8300
      • HYSA: $27,000
      • All of these are in VTO ETF’s on Vanguard.
    • Now for the kicker: my practice loan is around $540K amortized over 10 years at a 4.5% interest rate
      • Monthly payment is around $5600 a month.
    • Household monthly expenses are around $6000, which includes mortgage and all insurances ($1M Term life, disability, health, malpractice, etc).
      • This bumps to $11,560 a month with my new practice payment.




    Obviously, the COVID loan deferment has been nice to allow me to build up a little bit of savings (albeit not much). I know my student loan obviously is going to weigh heavy on me. When payments resume I plan on enrolling in the PAYE method and paying 10% of my AGI. Ideally, I would refinance the student loans to a lower interest rate. However, I just don’t see how it's possible to do that while I have my practice loan.


    I met with a Studentloanplanner advisor right out of school who advised that I try and lower my AGI as much as possible, pay as little as possible on the loans and save X amount in a brokerage account for the eventual tax bomb at the 20 year forgiveness date. Also, begin using the difference between the PAYE monthly amount vs private refinance amount to save for retirement.


    Any advice on a plan moving forward? I believe I made the right call on ownership so soon out of school, but also beginning to get a little spooked with the debt I’ve accrued. I know my income has increased (and I also believe I can bump that number above even more by adding procedures that were not done by the previous doctor), but I’m a little nervous nonetheless. Alright, enough rambling…


    Tentative plan for now:
    1. Pay monthly practice payments
    2. Invest around $1000 monthly in a brokerage account to account for eventual tax bomb.
    3. Invest excess cash I have leftover into a SEP-IRA to lower my AGI, which in turn lowers my monthly loan payments
    4. ???
    5. After practice is paid off, re-evaluate if it would make sense to aggressively pay off student loans or continue on PAYE method.
    6. ???


    Any thoughts or advice would be greatly appreciated.


  • #2
    I am assuming it is too late for this, but could you have the practice finance your practice purchase (reduce your monthly pay by the loan payment) in order to reduce your AGI?

    Comment


    • #3
      Total Debt $1,270k
      Gross Income $295k
      D/I ratio 4.3x
      The ducks are lined up, but it does not look great. The only solution is raise income or get rid of the debt. The $450k student debt you have looked at options.
      The only other debt is the practice loan and the mortgage. No solution I would suggest. Limited options unless you change the facts.

      Comment


      • #4
        I’m not familiar with dental practices but can you expect your income to go up even more in the future? That seems like a steep buy-in for that expected income. You’d better check your lug nuts often to make sure those wheels stay on as long as possible.

        Comment


        • #5
          Originally posted by CordMcNally View Post
          I’m not familiar with dental practices but can you expect your income to go up even more in the future? That seems like a steep buy-in for that expected income. You’d better check your lug nuts often to make sure those wheels stay on as long as possible.
          Income is 2x loan. Sounds reasonable.

          You need to make more money, which will come in time but can you weather the storm until then? You're making 14k a month after taxes with 11.6k a month not including your student loan repayment.

          Comment


          • #6
            Originally posted by RDB View Post
            I am assuming it is too late for this, but could you have the practice finance your practice purchase (reduce your monthly pay by the loan payment) in order to reduce your AGI?
            I hadn't thought of that; seems like it's probably too late. It's a 4 doc private practice. FWIW.

            Comment


            • #7
              Originally posted by ArkansasDentist25 View Post

              I hadn't thought of that; seems like it's probably too late. It's a 4 doc private practice. FWIW.
              Probably NOT too late, given you just started. Level with your partners and if they are willing to go that way, why not lower your AGI? Maybe a benefit to them too, rather than one big bolus cash purchase?

              Good choice on joining a nice PP, rather than being an employee...

              Comment


              • #8
                Originally posted by Craigslist View Post

                Income is 2x loan. Sounds reasonable.

                You need to make more money, which will come in time but can you weather the storm until then? You're making 14k a month after taxes with 11.6k a month not including your student loan repayment.
                I believe I can make more money in time. I'm not really having problems making ends meet or anything like that. It just seems like majority of my income will be going to either practice or student loan debt (which I guess should've been obvious). I'm just worried when it it comes to retirement. Obviously, selling the practice be a portion of that.

                Comment


                • #9
                  Originally posted by Marko-ER View Post

                  Probably NOT too late, given you just started. Level with your partners and if they are willing to go that way, why not lower your AGI? Maybe a benefit to them too, rather than one big bolus cash purchase?

                  Good choice on joining a nice PP, rather than being an employee...
                  Thanks. Yeah, that was pretty important to me. Partly the reason I stuck it out when I was making crap money. They have had multiple offers from various DSO, but we all feel pretty strongly about not ever going that route. I will mention it to them and see what their thoughts are.

                  Comment


                  • #10
                    Focus on the practice. You can double or triple+ that income with some business smarts. and a lot of work.

                    Comment


                    • #11
                      As a husband to a dentist, just wanted to say good luck. Keep fighting the good fight and keep the DSO/corporate slime balls out of your field.

                      Comment


                      • #12
                        Originally posted by RDB View Post
                        I am assuming it is too late for this, but could you have the practice finance your practice purchase (reduce your monthly pay by the loan payment) in order to reduce your AGI?
                        What makes you think the IRS would allow this? Phantom income of $540k is attributable to the purchaser regardless of whether cash changes hands.
                        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                        Comment


                        • #13
                          2018 dental grad. I purchased my practice in 2019. You are in the trenches and I salute you!

                          Looks like you're doing a pretty commendable job keeping your household expenses lower. You'll need to delay your lifestyle inflation to get out of this.

                          You need a bigger shovel. I would focus on being a dentist above all else. As the owner of your practice now you are in complete control of how big your shovel is. Focus on making more money. How many production columns do you run. What's your procedure mix. How can you be more productive. How are your treatment planning and case presentation skills. Etc. Etc.

                          You already are doing most of the financial stuff the best you can. There's only so much you can improve there.

                          But you can definitely improve as a dentist. Focusing your attention there will make a much bigger difference than anything else right now.

                          My two cents.

                          Comment


                          • #14
                            Originally posted by Molar Mechanic View Post
                            Focus on the practice. You can double or triple+ that income with some business smarts. and a lot of work.
                            Is it common that a dentist (and a practice owner, as in this case, of course) makes $600k - $900k? Just didn't realize that was very typical. Or maybe it's an outlier on the high end but you're just pointing out it's possible?

                            Comment


                            • #15
                              Originally posted by Ameloblaster View Post
                              2018 dental grad. I purchased my practice in 2019. You are in the trenches and I salute you!

                              Looks like you're doing a pretty commendable job keeping your household expenses lower. You'll need to delay your lifestyle inflation to get out of this.

                              You need a bigger shovel. I would focus on being a dentist above all else. As the owner of your practice now you are in complete control of how big your shovel is. Focus on making more money. How many production columns do you run. What's your procedure mix. How can you be more productive. How are your treatment planning and case presentation skills. Etc. Etc.

                              You already are doing most of the financial stuff the best you can. There's only so much you can improve there.

                              But you can definitely improve as a dentist. Focusing your attention there will make a much bigger difference than anything else no right now.

                              My two cents.
                              I salute you as well! Congrats.


                              Yeah, that’s what I figured and I plan on doing. I currently refer quite a bit. Basically only doing bread and butter restorative, pre molar forward endo and few extractions. I’ve only been working with 1 assistant, so only one column (I have 2 ops with 1 overflow op if needed). That will change in time, but I don’t necessarily want to be running around like a mad man juggling multiple columns.

                              I’m trying to decide on what route I should go next to increase production. We’re heavy in the PPO game, which limits things somewhat.

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