Part of an ongoing series on the questions we hear most from dentists.
You’ve been putting money away for years, and much of that probably comes down to instinct: save as much as you can, or save whatever is left over at the end of the month or year, and trust that it will all add up. Some dentists know they’re saving more than they need to and can’t bring themselves to ease off. Many more simply aren’t sure where the amount they’re saving is taking them, and quietly wonder if it’s enough. If someone asked you today whether you’re saving the right amount, how sure would you be of your answer?
Until we go through it with them, most dentists have never had their savings rate measured against the life they actually want. That’s a hard question to answer on your own, because the right number depends on more than what you save. Investment returns, inflation, and taxes all move it, as do other assets that can support you later, like a practice or real estate.
This is the first topic in our series, The Gap Between a Great Income and a Great Financial Life. Here are the questions we help dentists work through:
· Am I saving the right amount, and if I’m off, in which direction?
· Could I be oversaving, going without things that would improve my life and my loved ones’ lives now, and that I could comfortably afford, for a future that’s already well-funded? We’ve worked with dentists who were well ahead of where they needed to be and still hesitated to book a family trip, because no one had ever shown them what their income would look like once they hang up the tools.
· Or am I undersaving, with a strong income that hasn’t turned into the security I assume it has? The flip side is a decade of strong billings, but RRSP, TFSA, or corporate accounts that have never kept pace, because cash flow always found somewhere else to go.
· How much is truly enough, and how will I know if I’m on track? That number is different for every household, and it’s rarely the round number people carry in their heads.
· If the numbers say I have room, what could that look like now: a bigger trip, more time away from the chair, a place at the lake?
· And if the numbers say I don’t, how much more do I need to save, or how much later does that push the day I can step back?
Most people can’t tell from an account balance whether they’re saving too much or too little, and that’s not a knock on anyone. It takes running the real numbers against the future financial lifestyle you want, and it’s worth revisiting at least every couple of years, and more often as you approach the end of your career. If you’re interested, we’re happy to review this for you. Just give us a call or respond to this e-mail.
Next up in the series, in a few weeks: if you were off work for six months, what happens?
