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I'm thinking way into future already as I've not entered dental school yet but I have the same fear of my financial security and came across this article which was a really interesting read...would you say you agree? I feel like there could be a risk in owning a practice right away but at the same time that evergrowing cancer of an interest...
There's an old maxim, "There are two ways to get rich in this world, either be born rich or marry rich". If you are rich you don't need to read this article, but if you count yourself among the less fortunate millions (not dollars but people), then this article is for you.
There's another maxim, "It takes money to make money". If you were not born rich nor married rich, then there are only two ways for you to get money, earn it or borrow it. If you graduate from high school and go out and get a job instead of seeking higher education, you can earn money, but in most cases, you will not earn a lot of money over your lifetime.
In order to earn more money over your lifetime you have to invest in yourself by getting an education. Yes, there are distinct parallels between the amount of education you receive and the amount of money you can make over your earning lifetime. However, education costs money, and you don't have money, so what do you do? You know mom and dad can't pay for it all, so it looks like your only option is to borrow money. You borrow money to invest in yourself through education, gambling that your future earnings will be enhanced enough to pay off this debt and allow you to live a better lifestyle.
If you choose to avoid the debt, your future earnings will suffer. So you choose debt in exchange for knowledge and future earning power. It's an investment.
The April 1999 (Vol. 130) issue of the Journal of the American Dental Association published an article about student debt, written by its editor, Dr. Lawrence H. Meskin. This article stated that the average dental student graduates with debts of $150,000 (today the average is more like $250,000).
Findings from an ADA study said that "Ninety-one percent of (student) respondents said "I could not afford to purchase a practice." In addition, "There has always been some professional conjecture that high student debt forced new graduates to select dental delivery systems outside of the traditional fee-for-service modality, that 23% of recent graduates derived more than 25% of their billings from PPO's, capitation plans'and these graduates don't see their debt disappearing in the near term. More than 75% say their student debt will have somewhat or substantial effect on them financially for the next 10 years."
The problem, however, is not student debt, nor the amount of that debt. It's what students do after graduation in their attempt to handle this debt. Ninety-one percent of these students are unfortunately misled into believing they cannot afford to buy a practice when just the opposite is true. THESE RECENT GRADUATES CANNOT AFFORD NOT TO BUY A PRACTICE!
These students have made an investment in their education and now are now in debt. They need income, and lots of it, more than they are ever going to get working for someone. Unfortunately, there are no jobs that are going to pay them more than a subsidence income. They will scratch around looking for that dream job thinking that it will pay them enough money to live on and retire that student debt. That job does not exist. They will get all kinds of promises from dentists who are willing to allow them to hang around their offices during off hours (evenings and Saturdays), hoping to snare some emergency patients or perhaps do some grunt work the current practice owner does not want to do, but it will never generate enough income to live on and pay off any of the school debt. Its always a commission job, so it does not cost the practice owner any money to have you in his/her office.
It usually takes two to three years for these naïve graduates to discover that there is no easy solution to this debt problem. Many of them spend two to three years going from place to place looking for that non-existent perfect job, and then find themselves deeper in debt (the interest has compounded on that education debt) and no prospects for making a decent living. I have been in the dental business for over thirty years and I have seen hundreds, if not thousands of cases that I have described here. The most frustrating part of it is it is so unnecessary.
If you are in debt, then you need a steady source of income that provides you with more money than any job will ever pay. You need to own a practice with a large enough patient base to generate an income sufficient to provide you with a reasonable income and the money needed to retire that debt (for the education loan and the loan for buying a practice). The irony is that being in debt requires you to go further in debt to invest in the one thing that will provide you with the income to ultimately get out of debt, and that is you need to invest in buying a practice.
All of our recent graduate/clients have educational debt. Once they understand that they cannot afford not to buy a practice, they are able to borrow the money needed for a practice acquisition. Some of them are smart enough to realize there are no dental jobs that are going to pay them enough money to live on and pay off that debt. These people are smart enough to invest in themselves once again, by purchasing a practice that will provide them with the income needed to get out of debt. They are not afraid of investing in themselves. They know they can do the work, they just need the patient base to work on, and the income will follow.
Education costs are high, but not at all out of line with any other investment that can pay a high rate of return. If a dentist will use his/her head and grasp the logic of this article, then they will not waste years coming to this conclusion. The JADA article said it took $250,000 to educate one dentist. Well, if that dentist chooses not to waste a lot of time and invests in a practice immediately, then that dentist's gross income should exceed $25,000,000 over his/her practice lifetime (35 years of practice, $715,000 gross per year, not adjusted for inflation). That makes the cost of that education only one percent of total future revenues, which is just slightly less than the telephone expense for that practice over that same time period.
The problem with the education is not the cost, but the misinformation provided to students relating to the business of dentistry. One percent of total future revenues for education is not an expensive investment, if anything it is a bargain. It's the hidden cost associated with the misinformation provided to these students, misinformation often supported by the instructors themselves and articles such as this that appear in the ADA. Students are not being told of the importance of time and income, of starting out their career as a practice owner, not an employee. Our first year practice purchasers have an average pre-tax income of $145,000, after all expenses and practice-related debt service. Compare that to any job offer.
Your education is a threshold expense. Financial success requires additional investment and therefore more debt. However, if that investment gets you in front of patients and provides you with a healthy six figure income your first year after graduation, then none of this debt will be a problem. Delay only costs more money. Get off to a good start and you can retire that debt within three years, not ten. It's time for someone to inform these students about the financial facts of life.
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There's an old maxim, "There are two ways to get rich in this world, either be born rich or marry rich". If you are rich you don't need to read this article, but if you count yourself among the less fortunate millions (not dollars but people), then this article is for you.
There's another maxim, "It takes money to make money". If you were not born rich nor married rich, then there are only two ways for you to get money, earn it or borrow it. If you graduate from high school and go out and get a job instead of seeking higher education, you can earn money, but in most cases, you will not earn a lot of money over your lifetime.
In order to earn more money over your lifetime you have to invest in yourself by getting an education. Yes, there are distinct parallels between the amount of education you receive and the amount of money you can make over your earning lifetime. However, education costs money, and you don't have money, so what do you do? You know mom and dad can't pay for it all, so it looks like your only option is to borrow money. You borrow money to invest in yourself through education, gambling that your future earnings will be enhanced enough to pay off this debt and allow you to live a better lifestyle.
If you choose to avoid the debt, your future earnings will suffer. So you choose debt in exchange for knowledge and future earning power. It's an investment.
The April 1999 (Vol. 130) issue of the Journal of the American Dental Association published an article about student debt, written by its editor, Dr. Lawrence H. Meskin. This article stated that the average dental student graduates with debts of $150,000 (today the average is more like $250,000).
Findings from an ADA study said that "Ninety-one percent of (student) respondents said "I could not afford to purchase a practice." In addition, "There has always been some professional conjecture that high student debt forced new graduates to select dental delivery systems outside of the traditional fee-for-service modality, that 23% of recent graduates derived more than 25% of their billings from PPO's, capitation plans'and these graduates don't see their debt disappearing in the near term. More than 75% say their student debt will have somewhat or substantial effect on them financially for the next 10 years."
The problem, however, is not student debt, nor the amount of that debt. It's what students do after graduation in their attempt to handle this debt. Ninety-one percent of these students are unfortunately misled into believing they cannot afford to buy a practice when just the opposite is true. THESE RECENT GRADUATES CANNOT AFFORD NOT TO BUY A PRACTICE!
These students have made an investment in their education and now are now in debt. They need income, and lots of it, more than they are ever going to get working for someone. Unfortunately, there are no jobs that are going to pay them more than a subsidence income. They will scratch around looking for that dream job thinking that it will pay them enough money to live on and retire that student debt. That job does not exist. They will get all kinds of promises from dentists who are willing to allow them to hang around their offices during off hours (evenings and Saturdays), hoping to snare some emergency patients or perhaps do some grunt work the current practice owner does not want to do, but it will never generate enough income to live on and pay off any of the school debt. Its always a commission job, so it does not cost the practice owner any money to have you in his/her office.
It usually takes two to three years for these naïve graduates to discover that there is no easy solution to this debt problem. Many of them spend two to three years going from place to place looking for that non-existent perfect job, and then find themselves deeper in debt (the interest has compounded on that education debt) and no prospects for making a decent living. I have been in the dental business for over thirty years and I have seen hundreds, if not thousands of cases that I have described here. The most frustrating part of it is it is so unnecessary.
If you are in debt, then you need a steady source of income that provides you with more money than any job will ever pay. You need to own a practice with a large enough patient base to generate an income sufficient to provide you with a reasonable income and the money needed to retire that debt (for the education loan and the loan for buying a practice). The irony is that being in debt requires you to go further in debt to invest in the one thing that will provide you with the income to ultimately get out of debt, and that is you need to invest in buying a practice.
All of our recent graduate/clients have educational debt. Once they understand that they cannot afford not to buy a practice, they are able to borrow the money needed for a practice acquisition. Some of them are smart enough to realize there are no dental jobs that are going to pay them enough money to live on and pay off that debt. These people are smart enough to invest in themselves once again, by purchasing a practice that will provide them with the income needed to get out of debt. They are not afraid of investing in themselves. They know they can do the work, they just need the patient base to work on, and the income will follow.
Education costs are high, but not at all out of line with any other investment that can pay a high rate of return. If a dentist will use his/her head and grasp the logic of this article, then they will not waste years coming to this conclusion. The JADA article said it took $250,000 to educate one dentist. Well, if that dentist chooses not to waste a lot of time and invests in a practice immediately, then that dentist's gross income should exceed $25,000,000 over his/her practice lifetime (35 years of practice, $715,000 gross per year, not adjusted for inflation). That makes the cost of that education only one percent of total future revenues, which is just slightly less than the telephone expense for that practice over that same time period.
The problem with the education is not the cost, but the misinformation provided to students relating to the business of dentistry. One percent of total future revenues for education is not an expensive investment, if anything it is a bargain. It's the hidden cost associated with the misinformation provided to these students, misinformation often supported by the instructors themselves and articles such as this that appear in the ADA. Students are not being told of the importance of time and income, of starting out their career as a practice owner, not an employee. Our first year practice purchasers have an average pre-tax income of $145,000, after all expenses and practice-related debt service. Compare that to any job offer.
Your education is a threshold expense. Financial success requires additional investment and therefore more debt. However, if that investment gets you in front of patients and provides you with a healthy six figure income your first year after graduation, then none of this debt will be a problem. Delay only costs more money. Get off to a good start and you can retire that debt within three years, not ten. It's time for someone to inform these students about the financial facts of life.
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