• Mitchell Walmsley

3 Financial Decisions that will shape your future as a Dentist or Doctor

In this week’s blog I wanted to highlight some of the key financial decisions that will shape your financial future as a doctor or dentist.

These thoughts are based on my experience in working with healthcare professionals from all ages and different financial successful levels.

1) BUYING A HOUSE

Spending too much on your primary residence has to be the biggest financial mistake made by too many medical and dental professionals. It is unfortunately not uncommon for us to see healthcare practitioners in their mid to late fifties with million dollar mortgages. Almost invariably they experience high stress levels because of their debt position, as it affects their lifestyle and retirement options.

Whilst some advisers to the medical industry advocate buying the most expensive home you can afford to buy, I sincerely believe this is one of the quickest ways to financial ruin.

High amounts of non-deductible debt are a serious obstacle towards building wealth due to the opportunity cost of bad debt, which is compounded by the risk of investing millions of dollars into a single asset. It is also one of the greatest sources of financial stress.

2) DECIDING WHETHER TO GO INTO PRIVATE PRACTICE

Do I believe that doctors and dentists need to be in private practice to be financially successful? Not at all. I have worked with plenty of doctors who exclusively work in the public sector, and dentists or GPs who are contractors, who are in much better financial shape than their colleagues who own a private practice.

Nevertheless, there is no doubt though that going into private practice can be a real wealth creation accelerator for the following reasons:

  1. typically you earn a higher income, which gives you a greater capacity to repay debt, save and invest;

  2. there may be tax planning opportunities that allow you to split business income in a tax-effective way with lower-taxed beneficiaries;

  3. you may be able to build a saleable practice and build ‘goodwill’ value, which can provide a boost to your retirement savings.

3) SEEKING ADVICE

Whilst it may seem obvious that I am a big believer in the value of specialist tax and financial advice for doctors, this belief is based on my experiences in working with many different doctors and dentists, and having seen firsthand the benefits we have achieved for our clients, the opportunities we have created/seized and the risks we have eliminated or mitigated.

It is a cliché, but the sooner you start planning your financial future, the better, as compounding can some of the hard work for you.

If you believe that you are currently not achieving your desired tax and financial outcomes, or if you would just like to talk in confidence about your current position and your goals, please feel free to contact me via mitchell@affluenceca.com.au. I would love to help.

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