The Economy, Finances, and the Young Dentist

It is no secret that America is currently experiencing an economic recession. Furthermore, it may seem like the effects of that recession are magnified in the state of Michigan. While the general economic climate may not be treating people as well as it has in the past, fortunately, Dentistry has been more resilient to economic cycle than many other professions. However, I still encourage dentists, young and experienced, to keep prepared for the ebbs and flows of our economy. The following are some tips and best practices I strongly encourage you to consider.

Prepare a Budget and Stick to It:
It is important to have an idea of what it costs you to live. This is especially important in your first few years out of dental school as you are working on paying down student loan debt as well as other debt you may have incurred (mortgage, credit cards, auto loan, etc.). Find a system that works for you to track your expenses. This will help you to manage your living expenses and show you budget surpluses (or deficits) that can be used to help fund financial goals.
Knowing what it will take you to pay your day-to-day living expenses is particularly important in the process of evaluating practice opportunities. Since associate doctors are generally paid on a production basis, you will need to know how much dentistry you must produce in order to earn the amount of money you need to live.

Don’t Get Tempted By the First Big Paycheck:
Frequently, the first few checks a dentist earns from practice are the largest paychecks they have ever received, and it can be very tempting to spend recklessly. Frequently, a new doctor can fall victim spending recklessly on cars, boats, homes, or vacations. This can lead to a pattern of reckless spending and no savings. That pattern can be particularly dangerous in economic times like these when it may be more difficult to keep the dental practice schedule full, or patients aren’t accepting as high a level of treatment as they once were.

Make Growth a Priority:
In generations past, a dentist could open a practice in town with no patients, hang a sign in the window, and attract enough patients to keep themselves busy. This is not the case anymore. Gone are the days when dentists had to do little or no marketing to keep patients coming into the practice.

The world that today’s dental school graduate lives in is one where we must make a commitment to continually grow the practice. Be prepared to spend anywhere between 1% – 4% of production on marketing. The average dental practice loses 10% of its patient base each year. So in order to maintain even moderate growth, a dentist must grow by 15% per year.
In addition to external marketing like direct mail, website, and television/radio commercials, it is even more important to focus on internal marketing techniques like asking for referrals, addressing patients concerns and objectives effectively, and refined case presentation.

Remember the Relationship Between Supply and Demand:
As new or upcoming graduates, I encourage you to remember the relationship between supply and demand when you are considering where you want to practice. The dentists that generally suffer the most in a down economy are the ones that practice in an area that is already saturated with dentists. This makes for fierce competition and intensifies the adverse effects of economic downturn.

In a recessionary environment, patients tend to become more price and service sensitive. Given that is the case, it is more difficult to compete in areas where the patient base has numerous options for their dental care.

Success Starts With You:
In times like these, it is very easy to become pessimistic. We are being forever inundated with negativity by numerous mediums (network news, the internet, periodicals, etc) and it can sometimes be difficult to tune that distraction out and stay focused on success. It is for these reasons that it is so important to stay positive and focused even in tough economic times. The most successful dentists are the ones that have a clear vision and stay focused on whatever goals they have set out for themselves, regardless of what is going on in the rest of the world. Ultimately, one’s ability to stay positive and focused on growth and success will be the differentiating factor between the successful dentist and the unsuccessful one.

Michigan College Savings Plans: MET vs. MESP

Financing the higher education cost for children ranks among the top goals for many of our clients, and for good reason. As dentists, you understand both the value and soaring cost of higher education and have the wisdom and resources to plan accordingly. Fortunately, there are several ways to save for college; each strategy comes along with its own pros and cons, which need to be examined when deciding which is right for you.

For many people, the use of state-sponsored 529 Plans has been the way to go. The term “529” refers to the section in IRS code that provides tax-advantaged features in these plans. 529 plans are also referred to as “Qualified Tuition Plans.” In Michigan, there are two state-sponsored qualified tuition plans available:

· The Michigan Education Savings Plan (MESP)
· The Michigan Education Trust (MET)

The plan that we most often recommend to our clients is the Michigan Education Savings Plan (MESP). The MESP is an investment account established for purposes of paying higher education expenses. Money is contributed and invested in an age-based investment allocation for the future benefit of your student. MESP investments are subject to decline in down markets just like any other investment. When the student is ready to use the funds in the MESP, whatever has been accumulated is what they have to work with.

Funds accumulated using MESP can be used to pay qualified higher education expenses including tuition, room and board, fees, and the cost of books, supplies, and equipment related to enrollment. The MESP can be used at colleges and universities all over the country, and it allows for unused benefits to be transferred between members of the same family.

The Michigan Education Trust (MET) allows for years of college tuition to be purchased for the future use of a student at today’s price. For example, if you have a child that is 7 years old today, that will begin attending college at age 18 (in the year 2020), you could buy years of tuition now, at year 2009 prices, for that child to use when they enter college in 2020.

The Michigan Education Trust will cover tuition; however, it lacks the flexibility of the MESP to pay for other related expenses.



The following are a few things to consider when deciding whether to use an MESP or MET plan:

1. The MET is good for use if you know that your child is going to attend a public university or community college in Michigan. If your child chooses to attend an out-of-state school or a private school, the MET won’t work as well. It will, however, provide a refund of benefits to the ineligible school based on a weighted average formula.

2. When using the MET program, you are pre-paying tuition and fees. This still leaves books, travel expenses, etc. to be paid out of pocket.

3. Years of tuition purchased under the MET plan must be used with 15 years of agreed upon start date. Funds in MESP have no expiration date.

4. Both MET benefits and MESP account balances and can be transferred to other family members to cover education expenses.

5. Contributions to both the MET and MESP are eligible for a state of Michigan tax deduction.

6. Funds in the MESP are subject to market volatility and could decline in value during down-market periods. At this point, the MET is a guaranteed contract. However, it is important to note that some states have encountered insolvency issues with their pre-paid tuition contracts. So far, this has not been an issue in the Michigan plan.