Protect your Cash Flow to Protect your Dreams

Upon graduation, a lot of changes will occur.  You will go to C.E conferences where individuals will treat you different because you are no longer a dental student.  You will have individuals pulling at your new income that you are still becoming familiar with.  Everyone will come out of the woodwork to try to sell you disability insurance and yes, the dreaded whole life insurance policy.  Thinking about where you spend your money and how that affects your future is crucial.

I can easily tell you, that whole life insurance is a bad deal, and that no young dentist should consider it, however I feel it is more important to walk you through the thought process I go through to reach that conclusion.  

You have many financial obligations that will pull at your purse strings.  At the top of the list is your monthly student loans.  These can easily run $1,000-$4,000 a month. You will have disability insurance that will run anywhere from $1,000-$4,000 a year depending if you know how to correctly structure it.  Then you add in additional C.E courses. (Because we all know you have a lot to learn after graduation. Yes we know you only did 4 endo cases in school.)  Your $100,000-$200,000 annual salary starts looking smaller and smaller.  Adding wasteful spending to this equation and over buying whole life insurance, instead of term Insurance is a common mistake.

I get tons of questions revolving around Whole Life Insurance.  I always say “it is often sold, and not bought”.  If you are looking to start your own dental practice or buy into an existing practice.  Protect, Protect, Protect, your cash flow to the essentials.  The more you obligate yourself to financial burdens and debt the more likely your career aspirations are delayed or never achieved.

After you maximize and structure your career earnings, this is where you will want to optimize what to do with your excess cash flow from an investment perspective and debt repayment strategies.  Most times a balanced approach is most reasonable considering where your risk tolerance is at.  Very few times do these advanced life insurance strategies make sense for high-income earners.

As a new dental graduate, it is very common for you to trust the first so called “financial advisor” that comes across your path.  Take the time to do some homework and ask the questions most dentists are not asking.  How do you make money?  Is it by commission off the products you sell or is it by the fees I pay you directly? Do you always act in my best interest or are you under a different standard of care?

Full disclosure:  My wife who is a dentist and I do not own whole life insurance policies.  Plain and simple it is wasteful to spend your cash flow on such a mediocre product. Especially when you have a lot better investment options to optimize your cash flows.  You can purchase a 20-30-year term policy, and by the time that policy is ready to lapse you should be able to self-insure your own life.