Easing financial stress in dental practice with effective budgeting

After gaining a qualification and graduating, many young dental professionals have large education loan debts which loom over their heads. Without proper financial education and management, this can leave early career dental professionals vulnerable to the traps of lifestyle inflation, with some possibly increasing personal debt and experiencing financial stress.

The best remedy to financial stress, one of the worst experiences that someone can face, is effective budgeting. As a disclaimer, the following budgeting information is based on my personal experience as a dentist. If you want professional financial advice, you should consider consulting with a relevant financial or accounting professional appropriate to your individual situation.

Put simply, a budget is an action plan that gives you a clearer picture of where your money is ending up each month. It’s also a system in which you can track your finances on a regular basis (monthly or otherwise) to help reach your money goals. These goals could be to eliminate debt or to save for a house deposit or holiday getaway. Being deliberate with every dollar that goes in and out of your account allows you to spend intentionally and without guilt because you have pre-planned for it. You may even surprise yourself by finding extra money you never knew you had! 

1. Record your income – make a list of all the money coming in including how much, where from and how often it comes in. This money could be coming in from your dental income, government benefit or payment, or even income from investments.
2. Record your expenses – these can be broken up into three main expense categories: fixed, variable, or debt

• Fixed expenses are generally expenses that tend to be fixed costs on a general basis. This can include rent, utility bills, insurances, subscriptions etc.
• Variable expenses are generally expenses that tend to vary on a monthly basis. This can include groceries, eating out, travel, shopping, grooming, car repair or pet costs. 
• Debt expenses are generally expenses that are owed to a financial institution or creditor that loaned you the money. This can include HECS/HELP debts, loan repayments to education providers, personal loan repayments, mortgage repayments or credit card repayments.

3. If your business structure is practising as a sole-trader with an Australian Business Number (ABN) or Australian Company Number (ACN), be mindful that business expenses related to your career are tax deductible which helps with your end of year tax return. However, always remember that expenses still affect your upfront cash flow and don’t fall prey to spending things on business for the sake of it. 
4. Set your spending limit – the money you have left after all expenses have been paid for is either your savings or spending money. To ensure you don’t accidentally spend more than you can afford to or put yourself in future financial stress, it’s best practice to set a limit on how much money you can spend on discretionary items such as entertainment, shopping, eating out or hobbies. That way when you do spend, you can do so guilt free.
5. Set your savings goal – if you have a savings goal, you can use a budget to work towards this. It’s also good practice to set some money aside as emergency savings in case of unexpected events or leave without pay so you can keep afloat with your expenses. A good rule of thumb is to work towards having three to six months of income saved as an emergency fund. This can give you a buffer during tough times, ultimately giving peace of mind because you planned ahead.
6. Adjust your budget – it’s important to regularly review your budget to ensure it matches your current lifestyle and needs. As dental professionals this can be financing for owning your first practice, funds for expansive continuing professional development courses, fellowships or even a new home or car. As things change, it’s a good idea to adjust your budget accordingly to focus on reducing debt or increasing savings. It’s good practice to set a date each month to review your budget to ensure you are on track towards your financial goals. 

• Whether you track it on an app, Excel spreadsheet or otherwise, keep your budget simple but complete so that you can easily see where each dollar goes in and out. Accountability with every dollar is key to peace of mind.
• Learn more about different budgeting styles from podcasts and books such as The Barefoot Investor by Scott Pape or My Millennial Money Podcast. The more you learn and financially educate yourself, the better you’ll get with your finances.
• For private practice dental professionals on Service Facilities Agreements (SFAs) or Professional Service Agreements (PSAs), be sure to also put money aside for GST and tax as the income you earn tends to be gross income before tax. You can create additional bank accounts to set this money aside so when it’s time to pay the tax office, you don’t need to stress. To find out exactly how much you need to set aside, speak to an accountant. However generally speaking, 40 per cent for tax and 10 percent for GST works well for six-figure incomes. 
• It’s a great idea to focus on getting debt free as quickly as you can because debt repayments tend to make up a large chunk of monthly expenses. Once you are debt free, life gets easier as you now have more money that you can put towards growing your savings goals.
• Get savvy to take advantage of the different ways you can reap benefits from using a credit card or by opening savings accounts which give you rewards (e.g. frequent flyer points) for spending on everyday expenses.
• Consider other ways you can create additional income streams passively through investments or side hustles in your spare time which can also give you more cash flow towards your financial goals. While a career as a dental practitioner offers a secure income stream, it’s nice to have options in the future or methods of making money even when you are not seeing patients. 
• Use free resources developed by the Australian Government such as www.moneysmart.gov.au to learn more about getting your finances stable. 
• If you are experiencing financial stress, make sure you also get the help you need. The Dental Practitioner Support 24/7 hotline, 1800 377 700, is a great service that provides an ear to listen to your frustrations, stresses and woes so that you can feel seen, heard and understood while also giving you access to more resources to get your mental and financial health back on track.

Always remember, money and finances don’t have to be scary beasts when effective budgeting is put in place. Importantly, be kind to yourself. No one automatically knows how to manage their finances. Just like in dental practice, how to improve your finances is a skill to be studies and learnt.

If you have read this article but still feel a bit stuck, it might be a good time to call Dental Practitioner Support. The team is happy to chat and can provide support on a wide range of topics including when you are considering making changes to your life and career. Give them a call now on 1800 377 700.

Kaejenn is a dentist based in Darwin. He graduated in 2018 and has spent his career working for a Bupa Dental Practice. Outside of clinical life, he is Treasurer of the Australian Dental Association (ADA) Northern Territory Branch and, also sits on multiple ADA Federal subcommittees including the Oral Health Working Group and Recent Graduates Advisory Panel. In 2020 he launched The Limitless Dentist (@thelimitlessdentist), which aims to help dentists overcome burnout and raise awareness of mental health in dentistry through mindset tools and motivational coaching.