[Editor's Note: This is another in our ongoing series aimed at dentists by columnist Doug Carlsen, DDS. The principles espoused are useful for high-income professionals of all persuasions.]
I’d like to provide figures on what a new dentist can expect to pay for various expenses with an average income. After interviewing young dentists over the last five years and cross-referencing to BLS income quintiles of those with incomes matching what young dentists may make in a corporate environment, we can understand better how some dentists are able to pay down student loans quickly and how others may struggle.
Douglas Carlsen, DDS
Dentist Income
Let’s look at income and expenses for the young dentist:
Income for young dentists in the corporate environment, according to glassdoor.com, averages $111,000 at Western Dental, $167,000 at Pacific Dental Services, and $138,000 at Heartland Dental. For this article, I used $125,000 income for all young dentists, whether working for a corporation or in an associateship. Of course, after owning a practice, either in start-up or after purchase, net incomes vary widely.
Sample Dentist Budgets
The table below has five columns: the single doctor with expenses average for his BLS quintiles, the married doctor with average expenses, the high spending single doctor, the high spending married doctor, and space for you to place your expenses and income. It is assumed that the dentist’s income is $125,000 annually and his spouse’s income (included in parentheses) is $50,000.
| Item | Avg. Single Dr. | Avg. Married Dr. Couple | High Spender | Married High Spender Couple | Your Amount |
| Autos (includes loan, depreciation, fuel, insurance, service) | 500 | 800 | 800 | 1200 | |
| Donations | 50 | 50 | 50 | 50 | |
| Clothing | 100 | 200 | 200 | 400 | |
| Hobbies (Sports, art, etc.) | 100 | 150 | 100 | 150 | |
| Entertainment: Dining out | 250 | 500 | 500 | 800 | |
| Entertainment: Night clubs, theater, sports, concerts | 100 | 150 | 100 | 150 | |
| Gifts: (50% is for holidays) | 150 | 200 | 200 | 300 | |
| Groceries | 250 | 400 | 400 | 700 | |
| Rent or Mortgage | 1000 | 1300 | 2500 | 2500 | |
| Household cleaning, maintenance, home improvements | 100 | 100 | 1000 | 1000 | |
| Hygiene (haircuts, nails, etc.) | 50 | 100 | 200 | 300 | |
| Utilities (cable, phone, internet, gas, electric, mobile phones, trash, water) | 400 | 500 | 600 | 700 | |
| Insurance: Medical | 300 | 400 | 300 | 400 | |
| Insurance: Life | 0 | 0 | 200 | 300 | |
| Vacation | 200 | 400 | 600 | 1000 | |
| Other | |||||
| Total Spending Per Month | 3550 | 5250 | 7750 | 9950 | |
| Total Annual Expenses (12 months) | 42600 | 63000 | 93000 | 119400 | |
| Income per year | 125000 | 175000 | 125000 | 175000 | |
| Total Annual Expenses (12 months) | 42600 | 63000 | 93000 | 119400 | |
| Federal Taxes, Social Security, Medicare | 34401 | 44561 | 26901 | 37061 | |
| State Taxes | 6000 | 9000 | 4500 | 7500 | |
| What's Left to Pay Off Loans and/or Save | 41999 | 58439 | 599 | 11039 |
Differences between the average spending dentist and the high spending dentist are listed below. It is assumed the spouse spends as does the doctor. Expense differences not commented on below reflect differences in overall lifestyle.
| Average dentist | High Spender |
| Owns a five-year-old used car | Leases auto and renews every three years |
| Dines out weekly at a nice restaurant | High spender spends double on dining out |
| Shops for groceries at a typical market | Shops at Whole Foods only |
| Rents an apartment | Bought a home with $600,000 mortgage |
| No cash value life insurance | $300,000 whole life policy |
| Vacations are all road trips | One resort trip and several fly-in get-a-ways annually |
Average Spender vs High Spender
The average-spending single dentist ends up with $42,600 annually and $59,040 if he or she is married, to pay down debt or save. The high-spending dentist ends up with near nothing annually and about $11,000 if married.
It’s possible to live with expenses lower than the $42,600 found for the average single young dentist. $3,000 per month is not unusual for a single dentist; $4,000 for a couple. This implies that dentists, even without a great salary, can pay off $50,000+ per year in loans. The best pay down I’ve seen has been $9,000 per month on a $273,000 debt, which required 30 months of payments by a married dentist working in a corporate clinic in Texas.
Assumptions
If you like to dive into the details, here are the assumptions I used:
All expenditure figures are taken from interviews of young dentists under age 40, cross-referenced to BLS 2013 quintiles of income before taxes (top two quintiles). First column is average expenditures whether renting or owning home. Dentist in second column bought $600,000 home. Tax estimates provided by moneychimp.com. With home purchase, it’s assumed the couple will take itemized deductions. The interest deduction is assumed to save taxes of approximately 25% of interest paid on $600,000 home, or $7,500 annually for federal taxes and $1,500 for state taxes. State tax of 5% is used, but obviously can vary widely.
Your Own Budget
You can use the form above to estimate your own expenses. Use these links to estimate federal taxes and state taxes. Remember these tables may not include all of your expenses. You may need to add other insurance, pets, legal fees, country clubs, and other expenditures.
The difference between various budgets can be amazing, but controlling spending is a key to wealth accumulation. Earning a high salary while spending similarly to others at that high salary as illustrated above helps. It can be even more effective to earn a high salary while spending at the level of someone with a much lower salary.
What do you think? Are these budget numbers realistic? How fast do you think a dentist should pay off student loans? Comment below!
I’m sorry but this article reeks. It is so generic and missing the major component of most doctors (or dentists) I know: children. You even included “pets” but not one mention of kids. Very strange.
Just throw in a 50k job for every spouse…. um, no. Very difficult to take your pieces seriously as they lack reality and are filled with so many wild assumptions.
When in doubt, use a real case study.
I think these numbers are pretty accurate. I came out of dental school in 2011 with over $400,000 in debt. My yearly dental tuition was $74,000 a year. I currently pay $2000 a month to dental school loans. I fall in between the low and high spender dentist budgets you listed for various reasons, i.e. I have a 15 year old car with no payment, but I have 2 large dogs, etc. I think it will take a significant amount of time to pay off my loans because of the high interest rate. I can put $2000 a month into my loan but only a few hundred of that actually goes to the principal. Even if I were paying $50,000 a year to the loan, less than half of that would be paying down the principal. I put those numbers in a loan payoff calculator and it said it would take me over 17 years of paying $4000 a month to payoff the loan. That’s also assuming I didn’t want to eventually buy a house, new car, or a practice, or have a family. I do agree it is important to budget and pay down the loan as fast as possible, but it’s also important to get to live life and just take the loan payments as part of life. I didn’t want to spend 17 years of my life living like a student, so I’m going the Public Service Loan Repayment path with Income Based Repayment, paying $2000 a month and working 10 years for a public service organization hoping to have my loan forgiven after then. I didn’t think it would work for me any other way in order to be balanced and happy with finances.
What dental school cost 74K a year? For eg, out out state dental school in Iowa is 24K a year.
The University of Southern California in Los Angeles. I know NYU also has a similar tuition. The University of the Pacific in San Francisco has a higher yearly tuition but it’s a 3 year school so you come out with less in total.
I would also bet that since I’ve graduated, they’ve raised the tuition more.
A quick search on google shows the costs by line item:
Year 1 tuition = $81 180
Year 1 total expenses = $ 126 333
The following years are also listed ($118k, 115k, 79k)
Woah, you are SO wrong! Go ahead and check out google. In 2012, it was 24k.
For 2014-2015 school year the numbers are:
Year 1 tuition resident: 41 007
Year 1 tuition nonresident: 64 173
Total Year 1 expenses: 80 826
Total of 4 years….
resident 157 920
nonresident $250 584
(Univ Iowa, School of Dentistry)
Always fact-check before blowing smoke!
Speaking of fact checking, not everyone went to Iowa for dental school. Nor was an in-state student. Nor went to a moderately priced school. You just can’t go to one extreme to then chastise the other extreme, when they are both legitimate.
I’m a Pacific grad and loved the school, but tuition is expensive. My favorite line was that they hadn’t raised tuition in x number of years. “Fees” on the other hand went up significantly.
They were great about getting 4 years of student loans packed into a 3 year program, which makes it possible to get all the loans, for better or worse.
I did a quick search to see what tuition is now, looks like tuition is almost $99,000 and first year fees are almost $20,000. I also know from experience that the fees they list are a bare minimum and don’t include many of the things that are also required, but not listed in their fees. Makes me think back to a couple classmates that had to repeat that first year…ouch.
Let’s look at two dental schools, one public, one private.
University of Washington School of Dentistry’s projected cost for four years starting in 2014 for a Washington state resident is $290K. For a non-resident it is $392K.
http://dental.washington.edu/prospective-students/financial-aid/projected-costs/
For Tufts University School of Dental Medicine, the total is $403K for four years.
http://dental.tufts.edu/admissions/financial-aid/general-financial-aid-informationcost-of-attendance/cost-of-education/
Long term lurker; really appreciate your blog! I have a couple of small issues with your model.
1. Your $600k mortgage for the “High Spender” scenarios only work assuming a 3% 30 Year FRM, which is way below market. My wife and I took out a $417k 4.25% mortgage which works out to be, including escrow for insurance and property insurance, slightly less than $2,500 / month.
2. We do spend about $300 / month on life insurance, but that’s all term. Perhaps we got them a few years after residency which is why they’re “high”, but I think even a “Low Spender” scenario should include some term life.
Remember it’s my blog, but Doug’s article. I agree that 3% fixed 30 years are hard to find these days (although you can still get 3% for a 15 year).
The most important budget isn’t one you see on the internet but the one you actually use for your family.
I’ve been in heavy-travel mode for the last four days so am late to reply. Sorry!
In any financial scenario, assumptions must be made. And they definitely affect the outcomes.
In the case of the $600K mortgage, there were assumptions made:
First of all, why did I choose $600K over $400k or $1M? $600K is what I hope most MDs and DDSs would consider a “moderately” priced home.
The mortgage payment:
A $600K home is normally in the jumbo class, so mortgage rates may be higher than non-jumbo.
According to Market Watch on Jan. 2. 2014:
“Some lenders permit a one-time upfront payment to cover this fee, which for jumbo loans can total roughly 1.2% to 5.7% of the total loan amount.
“Another, often costlier, option is to tack on the fee to the monthly mortgage payments; that typically ranges from 0.40% to 2.13% of the total loan amount. On a $1 million loan, that is roughly $333 to $1,775 a month. Several insurers say borrowers have these payments for an average of five to six years before they refinance the loan or build enough equity in their home.”
I did not take any of the above additional payments into account as the mortgage industry is in transition regarding extra payments this year.
Next, would the buyer make a down payment and at what mortgage rate? Today’s rate, which is at about 4.2% according to Bank Rate, the late 2012 rate of 3.3%. or somewhere in between?
How much was the down payment? None, 10%, 20%?
I decided to take the middle route of 10% down and a 3.8% rate, which comes up to a little over $2,500 per month. BTW, at today’s rate and nothing down, the mortgage is about $2,900 per month.
AND, I didn’t look at physician loans, which may have altered the rates again.
Bottom Line: The point is that there are docs out there that are paying $2,500 a month for mortgages, whether the home was bought three years ago for $700K, this year for less than $600K, or in two years for possibly $450K.
That $2,500 per month significantly erodes a doc’s ability to either pay down debt or save.
One component of a budget not mentioned specifically is “investing in oneself”, or dental CE. As a young dentist, I have spent considerable amounts of time (and money) at CE courses early on. Granted, I do have well below the average graduating dentist’s loans, yet I cannot stress the importance of continuing education enough. It has allowed me to practice comprehensive dentistry and build treatment for the long haul, not just until the next hygiene appointment. Concerning the numbers, it increases my monthly production/collection in numerous ways, the biggest being implant placements in my specific practice. Invest in yourself early on and reap the long term benefits of offering better dentistry, more types of procedures, and bringing in more green. Lastly, patient’s truly will talk about you in the community when you advertise and let your patient base know how much you have invested in staying up to date to provide them the best care.
I’m in a similar situation, a new dentist with 450k in debt at 6.9% interest. Nothing would make me happier than paying off my debt as fast as possible but I’d like to know what others think of my math on PAYE vs a 10 year repayment plan.
1. Pay 5000/mo to loans for 10 years, then 5000/mo invested at 6% for 20 years for a total of 2.2 million in 30 years.
2. Pay 1600/mo under PAYE (using 200k income) for 20 years and invest the difference of 3400/mo at 6%. Pay off a lump sum tax burden of 340k for forgiven loans at the 20 year mark, and then invest 5000/mo at 6% for the remaining 10 years for a total of 3 million in 30 years.
The PAYE numbers seem to remain ahead of the 10 year repayment plan up to 320k/yr income. Would very much like to hear others thoughts.
I would say you have more of a safety net if you go with the PAYE. For example, if you have any kind of emergency or catastrophe (car break down, death in the family, etc) and can’t make the $5000/month payment, PAYE would give you some wiggle room until you can get back on your feet.
You are just assuming that you will get 6% return?
Do you have a guarantee for that somewhere?
Could you swing $8000/mo for 4.7 years to just be done with it? You would still be living on $100K of your $200K income.
Sorry. 5.7 years.
I did a post on this recently.
https://www.whitecoatinvestor.com/the-moral-hazard-of-loan-forgiveness-programs/
It’s all about your debt to income ratio. Yours, as a dentist with $450K in debt, would probably show that PAYE is a wise move, even with the lump sum tax bill.
Please take a close look at WCI article listed above. It’s the best treatment I’ve seen on PAYE.
Also, from the article, Jim provides real wisdom:
“I also don’t like what happens to our behavior when we drag out our loans. It’s the same issue in the pay down debt vs invest question. Sure, investing is often the better move, IF YOU ACTUALLY INVEST. But the problem is that once we take our eye off the ball (the debt) we often spend the money instead, and paying down the debt is better than spending. So I fear that someone going for student loan forgiveness may become entirely too comfortable with debt (like mortgages, autos, and credit cards) and end up worse than he would have been had he just paid it off.”
As an “older” doc, I see the “comfortable with debt” scenario played out over the years, with many docs sacrificing savings for that “comfort.”
Budget not accounting for liability and disability insurance, professional membership, ce’s.
Both dentists are assumed to be working in a corporate office. Liability and disability insurance, along with professional memberships and CE payments were not listed, as these payments are either covered by the office or would be similar for both doctors. Those expenses, if paid by the doctors personally, would lower both doctor’s last lines somewhat.
Thanks for bringing the issue up!
Via email from Doug Carlsen:
Tristan Thompson on October 22, 2014 at 1:00 pm said:
One component of a budget not mentioned specifically is “investing in oneself”, or dental CE. As a young dentist, I have spent considerable amounts of time (and money) at CE courses early on. Granted, I do have well below the average graduating dentist’s loans, yet I cannot stress the importance of continuing education enough. It has allowed me to practice comprehensive dentistry and build treatment for the long haul, not just until the next hygiene appointment. Concerning the numbers, it increases my monthly production/collection in numerous ways, the biggest being implant placements in my specific practice. Invest in yourself early on and reap the long term benefits of offering better dentistry, more types of procedures, and bringing in more green. Lastly, patient’s truly will talk about you in the community when you advertise and let your patient base know how much you have invested in staying up to date to provide them the best care.
Carlsen response:
Good point, Tristan. Dentists in private practice normally will spend over $1,000 a year on CE. In some cases, over $20K. For the doctors in the article, they work for a corporate group, which normally provides at least some CE. Any paid out of pocket payments would cut back on their debt payments or savings.
The long-term benefits of CE are numerous. I’d like to point out that study clubs are a great way to increase knowledge and receive CE credit. The national organizations, such as Seattle Study Club and AACD provide wonderful courses.
Local study clubs, often organized by specialists, are also valuable and not as expensive. I participated in local groups for years and found them to be the most valuable part of my career.