Student loans can seem overwhelming but taking a look at the big picture can help.
The average dentist graduates with $292,000 in student loans. The amount is staggering, and for a dentist just starting out, it can seem overwhelming to think about paying it off, let alone saving for retirement or to purchase a practice. As you begin your career, it may be tempting to spend your new income on something fun, like a shiny sports car. But before making a big, flashy purchase, consider what’s more important: a new car now or a financially secure future? Looking at the big picture today will make a huge difference in your ability to enjoy your golden years.
Setting Goals and Creating a Budget
Where do you want to be in five, 10 or even 25 years? That may sound like a standard interview question, but your answer shapes the choices you make today. Setting long-term goals and making a plan to achieve them is step one. Let’s assume you want to purchase a practice in five years that will require 10% down. Once you calculate how much you need for a down payment, we can help you develop a budget with a savings plan to get you to your goal. Having a budget can do wonders for keeping track of your spending, savings, and debt repayment. Budgeting apps, such as Mint or Simplifi, make this a painless process. Having a plan and a budget gives you vision and actionable goals.
Paying Off Student Loans
Tackling your student loans may feel daunting, but it’s doable. For loans with interest rates at 6% or less, an income-based repayment plan could be a good option. This plan sets your monthly payment at a percentage of your discretionary income, while factoring in the size of your family. You must recertify your income and family size every year for the loan servicer to calculate monthly payments. If your interest rates are above 6%, you might consider refinancing. This is an especially appealing option now with interest rates at a historic low around 3-4%.
Sacrifice and Reevaluation
Saving for your own practice and paying off your debt will require sacrifice. You may need to put off the purchase of your dream car for a few years, but it will be worth it. Keep your eye on your goals and revisit them regularly with your financial advisor. At Engage Advisors, we not only help build your practice and handle your business financials, we’re also here to support your personal goals and ambitions. Whatever your destination may be, we stand ready to create the roadmap you need to get there. Let’s put you in the driver’s seat – contact us today.