[Editor's Note: Todays's guest post is from a regular reader dentist who blogs anonymously at Debt Free DDS. Debt Free DDS is passionate about personal finance, destroying student loans, and becoming financially independent. I'm behind that 100% and appreciate the shout out given to the White Coat Investor blog, book, and Fire Your Financial Advisor course. We have no financial relationship.]
Once upon a time, in a land far away from where I live now, I had been out of dental training for almost two years. I was still over $400,000 in student loan debt (mostly at 7.9%) and the balance hadn’t decreased at all. I was stuck. I was scared. And I didn’t know what to do. I wasn’t making any headway with my student loans let alone my net worth. I knew I had to make a change, and quickly.What I had done right to this point
- You could say buying my own practice was the right thing to do. I did make about $150k each of those first two years, which actually is the average income for a general dentist in the US. And higher than the average income for a new grad associate which is around $120k.
- Purchased a somewhat modest home. The home was about $270k. So it’s not like we purchased a big fancy doctor home.
- Drove paid off cars that weren’t overly expensive
- No credit card debt
- Had good term life insurance and good disability insurance
What I had done wrong to this point
- Practiced where I wanted to live instead of lived where I wanted to practice. It is much harder for a dentist to make good money where I lived.
- Only paid the interest on my student loans (almost $2k/month)
- Didn’t have a student loan plan
- I only put 3% down on my home using an FHA loan and had to pay PMI
- Didn’t have a written financial plan
- Hadn’t refinanced my student loans
- Didn’t save anything for retirement
- Hadn’t discovered the White Coat Investor
There were so many things going through my mind at this point. How was I going to pay off my student loans, let alone save for my kids' college? Was saving for retirement ever going to be possible for me? Was it possible to become debt-free?
At this point between my practice, house, and student loans, I was over $1,000,000 dollars in debt. That is a lot of zeros. And I’d argue none of those were bad purchases. But I was making $150,000/year. That Debt to income ratio was way too big. I was scared. And despite what most people tell you, fear can be a good motivator.
Fast forward 3 years after that point and my student loans were paid off, half of my practice was paid off, I had a 3-month emergency fund, and I had bought my “doctor home” with 20% down. How did I get there as a dentist? Let’s find out.
How I Paid Off My Student Loan Debt and Began My Journey to Financial Independence
Geographic Arbitrage
At that point two years after training and still in extreme debt with no concrete plan, I didn’t know exactly what I needed to do. However, I did know that where I lived was not a good place to make a lot of money as a dentist. The cost of living was high, and there were so many dentists that making a lot of money was hard. But it was near family and it was where we wanted to live. We couldn’t move, right? Wrong. We had to move.
I did some research on where dentists could make more money and on profitable dental practices I could purchase. We ended up finding a great opportunity in a state neither my wife nor I had ever stepped foot in. We didn’t know anyone there. It was a little frightening, but it was not as scary as staying in the same situation. So we did it. I moved my wife and children to a totally new place. I sold my practice and bought a new one in this state where we had no family and had no ties to at all.
You know what? We love it here. It’s still America. We have an airport, movie theaters, grocery stores. It’s not that different from anywhere else. And I am making a lot more money. We can afford to travel back home or to other places. My wife has good friends, the kids have good schools and friends. We wouldn’t take it back for anything. I believe moving outside of your comfort zone is good for any person or family to grow.
Finding The White Coat Investor
I was now in a new place and had a new practice. I was making more money and things were looking up. Now what? We rented a home at first to make sure we were going to like the new area. But other than that, I still didn’t have a financial plan.
I got a phone call from a certain company stating they could help me with my finances. I needed help, so I thought, “what the heck”. I signed up for a new term life insurance policy and a new disability policy with this company. I was also pitched that I needed to convert this new term policy to Whole Life asap. I was also being pressured to buy Whole Life policies for all of my children. He seemed like he knew what he was talking about, but something didn’t feel right. I was making more money now, but I had so much student loan debt still and had so many other places my cash needed to go. Whole life for myself and for my kids didn’t seem right.
At about this same time, I had a physician friend tell me I should check out the White Coat Investor blog. I took a look and was intrigued immediately and noticed he had a book as well. I purchased the book and it turned out to be one of the best purchases I have ever made.
The book was full of so much great information that it was almost overwhelming to me. Pretty much all of it was new to me. I had no idea what a mutual fund was. Because I was so overwhelmed I’ll be honest, the only thing that really stuck with me after the first time I read it was that I needed to destroy my student loan debt, I needed to start putting something away for retirement now, and I didn’t need whole life insurance now or probably ever. Additionally, I learned that the person who was wanting to “help me” with my finances was a commissioned salesman, not a financial advisor.
I immediately fired the commissioned salesman. Luckily this had all happened so quickly that I hadn’t canceled my old disability and term life policies, so I still had them intact. I then came up with my plan. It wasn’t a full financial plan. I still didn’t really know what that was. But here was my plan at that point:
- Make as much money as I could ethically and honestly
- NOT get Whole Life insurance (and not deal with a commissioned salesman at all)
- Start maxing out IRAs for my wife and I (I didn’t have an employer 401k or anything like that, and wasn’t eligible for an individual 401k)
- Pay off my student loans
- Have a 3-6 month liquid emergency fund
- Save up for a 20% down payment on a “forever” home.
How I Implemented My Debt Payoff and Savings Plan
#1 Bought a Second Dental Practice
Even though I was making more money at my new practice than I had before, I had the opportunity to buy into a second practice. This would mean more working hours and more headaches, but it also meant more income. I sold out of the second practice after 1.5 years and made some money on the sale as well. So this second practice increased my income substantially for a time. I couldn’t do it longer than that because of symptoms of burnout, but I am glad I did it for as long as I did. It was a huge boost financially.
#2 Refinanced Student Loans
There are many private companies that refinance student loans. I happened to use Laurel Road. I got a much better interest rate than I had with my federal loans. This is a no brainer to do so that more of your money is going towards principal rather than interest.
#3 Lived Like a Resident
This is another concept that stuck with me after reading the White Coat Investor book the first time. I knew that medical residents and the average American family can live on about $63,000, and so we could too. We paid ourselves a little more than that, but for the most part, we lived like residents and the rest went mostly towards paying off the student loans, our IRAs, an emergency fund, and a house down payment.
Our vacations were mostly driving to grandparents’ houses. We didn’t eat out very often. I took (and still take) my lunch to work everyday. We got a lot of hand-me-down clothes from friends and family. We wanted our kids to be dressed with clothes that were clean and without holes but we weren’t going to go to Nordstrom to do it. We upgraded one of our cars, but we did it with cash and it was not a luxury car. Our kids go to public schools. Our schools are pretty good but honestly, that’s not what is most important. The most important thing is that we are involved with our kids’ education. We make sure they read a lot of books, and they don’t get a lot of screen time. I believe the education of our kids has more to do with what happens in the home than with what happens at school. I always went to public schools and I turned out just fine.And Then it Happened…
Three years after moving and sticking to my “mini” financial plan, I paid off my student loans. I bought my “doctor” home with a 20% down payment, and I had maxed out mine and my spouse’s IRAs for three years straight so at least we had something saved for retirement. Half of my practice was paid off, and I had 3 months of liquid cash in an emergency fund. The day I paid off my student loans was one of the best days of my life. I would rank the best days of my life like this:
- Wedding day
- The days each of my kids were born.
- The day I graduated Dental School
- The day I paid off my student loans
After I had paid them off I reflected on where I had been just three years before. At that time I had honestly hoped that I would magically get a windfall that would pay off my student loans. I was desperate and didn’t know what to do. But now I felt in control of my life and finances. I felt like being debt-free and financially successful was possible. And to be honest, I felt like a better dentist. Not having such a huge loan burden helps me focus on being a better practitioner.
More Financial Work To Do
My student loans have now been paid off for about a year. The giddiness of paying them soon wore off (just a little). I knew there was much more to being financially successful. So I decided to read The White Coat Investor again. This time because I was less overwhelmed, more things from the book stuck with me. I knew I needed a full comprehensive financial plan but I didn’t know enough to do it myself. And I had been soured on financial “advisors” from my past experience. I knew I needed a financial education.
My Financial Education
I started off by taking White Coat Investor’s Fire Your Financial Advisor course. And I will tell you, it’s worth 100 times what he charges. I was taught so many things. I did the course a second time to make sure I hadn’t missed anything.
I also learned that continuing financial education is important. I started listening to all of the WCI podcasts, read his book “Financial Bootcamp”, and also read at least 15 other financial books in this past year. By that time I had a complete financial plan, and I also had the knowledge and ability to manage our finances myself. [Others are finding the new and improved WCI Forum, White Coat Investors Facebook Group, WCI Reddit, and other social media to also be valuable in improving their financial literacy and goal support. — Ed]
I have learned so much. This past year I have increased my emergency fund to 6 months liquid cash and I have been saving 30% of my gross income towards retirement and am sticking to a very detailed and full-fledged financial plan that will hopefully have me financially independent in the next 10-15 years.
Because I understand what it feels like to be in financial and student loan despair, and also what it’s like to get a financial education, pay off massive student loans, and be on the path towards financial independence, I have now started my own blog. This is not to compete with anyone else, but just to help those who find themselves where I found myself just 4 years ago. Please check it out and contact me there if you have any other questions about my journey.
Becoming Debt Free and financially literate and eventually financially independent is possible for every dentist and every high income professional. It takes hard work, discipline, and a good financial education. Anyone reading this has already discovered the White Coat Investor and so you are in the right place to get started on this path if you already haven’t. Living a full and rich life, free from student loan debt, is possible and it doesn’t need to take a lifetime. I’m living proof.
Are you a dentist that as paid off significant amounts of debt? How did it feel? What steps are you now taking toward financial independence? Are you likely to ever go back into debt? Comment below!
Fantastic story. I think it is important to see examples of people doing things that others consider impossible. Moving away from family, paying down debt quickly, taking charge and improving your job situation. I looked at your blog and noticed your comments on the forum you have a good message. All roads may lead to Rome but in the world of personal finance it seems that all roads are leading back to WCI. I think linking people into this information is important. I am sure you will reach a bunch more. Keep up the good work!
Thank you. I learn a lot from your comments as well. This whole community has been a huge blessing for my life. Thanks for your contributions.
What was your new income?
If you are making a lot plus have hired more dentists etc that obviously makes it easier. What was your net profit on the practice sale?
This is a great message. It truly takes a conscious focused effort to get out of debt despite having a high come and making reasonable financial decisions. Thanks for your honesty!
Thank you
This is a great story, thank you for sharing! It is particularly inspiring to me, as I am currently where you were probably 1.5 years ago. I have about 6 months left on a 2.5 year journey of paying off my student loans of about 460K. It is finally so close that I can see the light at the end of the tunnel. I had the same feeling of fear and panic after paying nothing more than the interest on my student loans for my first 3 years as an attending. The fear and panic eventually lead me to WCI and others, and has truly changed my life. It was certainly difficult to change behavior and rein in lifestyle staying in the same city, much less the added stress of moving, selling and buying practices, etc. Thanks again for sharing your inspiring story DebtFreeDDS!
Thank you. Congratulations on almost being done with such a huge student loan burden. That is no small feat.
Great to hear from a fellow dentists!
I would have graduated with over 400k but did the math and received a 3 year Air Force scholarship. Came out of dental school with 82k in loans (for one year of school!), we were Dave Ramsey people back then and paid it off in 13 months. My wife got into pharmaceutical sales and has done great. Found wci while still active duty and have been hooked ever since. After the Air Force I went back to school and became a pediatric dentist. Through the wci podcast got hooked up with aptus financial and have a plan. Fast forward 3 years post residency and we should hit the 1 million net worth mark before I’m 36 (by saving over 60% of pay). We live a low cost of living area and I did a start up in an area that really needed a pediatric dentist and practice is doing every well. Thanks for sharing your story
Wow. You are a rock star. I wish I would have been as smart as you when I started school. I was financially illiterate until two years after training. Luckily I found WCI or I’d likely still have a huge student loan burden.
Where did you end up opening up to hit it out of the park like that, how did you find an area like that? I am a pediatric dentist struggling to pay my loans, trying to figure out what to do. I feel like there are pediatric dentists on every corner.
Find an pocket that needs a pediatric dentist. I’m in an under severed area that people were driving over and hour to see a pedo before my practice. Break away start up course was my cook book, it took about 6 months to become profitable.
That’s great, Dr. Baby Tooth. KidsToothdoc, talk with a dental recruiter to find out what’s out there. The earnings potential is quite varied, but it’s valuable to know what your time can be worth if you are willing to work hard and/or move.
Hello Dr. BabyTooth!
I have been researching and trying to formulate a plan for financing D school for a few days now. I happened to stumble upon your comment here by chance. It just so happens that what you accomplished is eerily similar to the plan I started to roughly formulate in the past few days. Is there some way we could communicate about your experience with the Air Force, dentistry, debt and peds? I’d love to see if you have any input regarding my specific circumstances. Thanks!!
Yes
Not sure the best way for us to get connected. But I would love to help you if I can.
emailed you both, connecting you.
Congratulations on being debt free and getting to where you are now financially. That “debt free” moment is a really good one.
It was great to read that you went looking for a profitable practice to purchase with location in mind. Financially speaking this is so often overlooked with new doctors, at least in dentistry, and can really make a big difference with that income to debt ratio (and savings to income ratio too).
It may take more time and effort searching for the right practice opportunity but it is usually well worth it.
I was also 1M in debt at one point (signed on house and practice in the same month, + student loans). Debt free 2yrs ago, have been saving 35-40% and basically FI as of now. Maybe it is silly, but I also feel like a better dentist now that I stress less about numbers.
Baring an unexpected emergency, I have no plans to ever go back in debt.
Great blog too!
I agree a debt free doc (or at least one without financial stress) is a better doc. It’s better for patient care. Wish I could prove it.
The study to prove this would look at free cash flow and debt compared to the amount of unnecessary or questionable procedures performed by the doctor (I know…not an easy study to design). The results would be a scandal. I don’t need such a study to know that your website improves the lives of healthcare providers and their patients; I’m certain of that!
Yes WCI and other sites like Bogleheads are worth their weight in gold by educating everyone, not just docs and dentists
How were you able to pay off 400k in three years; Assume your income was well over 250k/yr
Great job
Spread the word about WCI
Thanks for your story.
It sounds to me like your spending habits were pretty under control, but that the main change you made was increasing your income (and moving out of state is a worthy takeaway). In fact, had you not found a way to increase your income, you probably would be stuck long term with student loan debt… no? I mean, even with a newly acquire financial IQ, it would have taken at least a decade to pay off $1M+ debt on 150k annual income.
Just helps to recognize that an extreme debt-to-income ratio can complicate a long-term financial outlook. Thoughts?
Totally agree that the main solution for these dentists with crazy debt is to get that income up ASAP, even if it involves taking out a little more debt for a residency or to own their own practice. So much easier with $400K of income than $150K of income.
Yes you are right. You can have the best financial habits in the world but if you make $150k gross and have over $400k in loans, it will take a while to pay back. Finding a way to make more money (own a practice, move, start a business) is key to financial success.
PS. Is the crazy debt-to-income ratio especially common/unique to dental school? I finished my dental training almost 10 years ago now and I was worried then… and I just continue to be more and more concerned for the profession because of the wild debt burdens. The success stories like this one typically involve higher than average income. But I really worry for the average dentist and wonder what that life looks like 10+ years from now… and how long the “live like a resident” period must be.
It’s definitely work for DDS/DMD than DO which is worse than MD. Averages of course.
Debt to income ratios typically are worse still for veterinary school and lower tier law schools.
Yes, Vets may have it the worst. But at least they can get a job, unlike the lawyers.
Yes the debt to income ratio is getting insane. It worries me. A lot of my success was because I found a way to make 3x the average general dentist. It’s not just controlling spending on eating out or whatever. With such high debt, we have got to find a way to make more money. Ethically and honestly of course.
Thanks for sharing the story. Job well done.
Owning a dental practice is A great way to make more money. You have tons more control over the assets as long as there are assets to control….. gotta be a healthy practice. It’s good for the profession to have owner providers…. watch out with what has happened to pharmacy and medicine with many if not most docs / practitioners as employees instead of business owners. Business owners make more money with way more upside potential. Employees cap their own wages. Corporate dentistry is growing. I love being a small business owner and provider.
My last student loan payment a couple years ago was in my first year Of ownership after three years of being an associate. I’ve never written a check for $174k in my life like that last student loan payment…. I was sure broke after that payment but you don’t look back. Currently with $1M in liquid assets 6 years out of school.
4 years ago came across WCI. Changed my life. Compare the financial education available for free on this website with the dental education you get in dental school… tough to say which is more valuable. Good news is you can get them both. Keep up the good work WCI and good luck debt free dds. 🙂
Thank you. And yes, being a practice owner comes with its challenges, but the rewards are worth it. I could never be an employee.
Congrats! I could swear that was me telling the story. I also ended up moving to a “less desirable ” area in order to increase my income and it paid off within two years. I was just keeping my head above water where I was and at one point I had $7 in the bank. The loans were being paid back but slowly. I had slightly more debt than you because I specialized, but the added income from specializing was supposed to take care of that. Not the case in the area I used to live. I am now a partner in a well run and highly profitable practice and I paid off all of my loans last month. It felt great. We have been renting a townhouse for the last couple of years and it is working out great. We now have extra money every month to put towards savings and investments. I am hesitant to even buy a home at this point because things are going well so why bother.
Thank you for writing your piece. I am sure there are many other people stuck in the same position in a high COL area that need to read this and see that relocation isn’t a bad thing and that life can be just as good or even better. It takes three flights to see the grandparents now, but we can easily afford it. It was worth the move.
Thank you. Yes, it really works. Glad you are doing so well. Keep up the good work.
Great job on debt reduction, the only thing I would caution for anyone reading is about buying a second practice, that is far from a slam dunk usually, and can actually end up costing you alot more money in the end, buying a second practice brings a whole different set of issues and landmines and many dont anticipate. Again great job on the student loans
Thank you. And I totally agree about the second practice. It worked out for me. But not a sure thing.
Great inspiring story! Congrats to you for a job well done!
Thank you very much.
Congratulations! Great post and great work.
WCI/Jim, I wanted to say something direct to you too — this post is really a testament to what you’ve started and what you continue to do. I hope you take the post for the ‘feather in the cap’ that it is. Thank you for all that you have done. Sending much gratitude your way. You’ve had quite the positive impact on lots of us.