Smart Ways to Use Your Sign-On Bonus as a Doctor: A Strategic Guide to Build Wealth, Stability, and Peace of Mind

Every year when schools and residency programs graduate a cohort of doctors, without fail I get some questions - one of which is, “what do I do with my sign on bonus?”

Here’s how doctors, dentists, and healthcare professionals can wisely use their sign-on bonus to set a strong financial foundation and avoid common pitfalls.

When doctors, dentists, and healthcare professionals begin new positions (especially in hospitals, corporate dental chains, or large medical organizations) it’s common to receive a sign-on bonus. These bonuses are enticing, often ranging from a few thousand dollars to well into five figures.

But, what you do with your sign-on bonus can either set you up for long-term success or trap you in a cycle of financial instability and lifestyle inflation.

So let’s talk strategy. Before the bonus hits your account (or burns a hole in your pocket), here’s how to be intentional about using it.

1. Understand the Tax Implications First

Before you even start allocating, it’s important to understand that your sign-on bonus is taxed as income. This means the number you’re quoted is not the number you’ll actually receive.

Quick tip:
Set aside 25–35% for taxes, especially if the bonus bumps you into a higher tax bracket. If your employer doesn’t withhold enough, you could face an unpleasant surprise come tax season.

2. Pay Down High-Interest Debt

If you have any high-interest credit card debt, personal loans, or lingering consumer debt, this should be your first target.

Why?
Eliminating 18–25% interest rates is the equivalent of getting that same return on your investment—risk-free.

Student loans?
If they’re federal with low interest and currently on income-driven repayment, they may not be your top priority, but you can still consider making a lump sum payment if your bonus is substantial.

3. Start or Build an Emergency Fund

One of the biggest stress relievers in any career—especially healthcare—is knowing that you’re covered if something unexpected happens.

Aim for:
3–6 months of expenses in a high-yield savings account.

Why it matters:
Emergency funds protect you from unexpected job changes, illness, relocation costs, or surprise expenses without going into debt.

4. Max Out or Jumpstart Retirement Accounts

Use your bonus to contribute to your:

• Roth IRA (if eligible)

• Traditional IRA

• 401(k) or 403(b) (if your plan allows after-tax contributions or catch-ups)

Even if your employer already contributes to a retirement plan, your own contributions are what move the needle on long-term wealth.

5. Invest in Yourself and Your Career

Are there certifications, coaching, courses, or licenses that will help you command a higher salary or grow in your specialty?

Examples include:

• Board certification prep courses

• Dental CE (continuing education)

• Medical or business coaching

• Public speaking or leadership programs

• MBA or MHA programs if you’re pursuing admin or ownership paths

This is the kind of investment that has a long-term return—especially if you’re planning for ownership, private practice, or leadership.

6. Use It as Seed Money for a Side Hustle or Business

If you’ve been considering building a personal brand, starting a blog or podcast, launching a product, or even opening a practice or wellness brand—your sign-on bonus can be your startup capital.

Examples include:

• Paying for a website or brand designer

• Purchasing inventory for a small product line

• Hiring a business coach

• Registering your LLC or trademark

This is especially powerful for healthcare professionals seeking multiple income streams or exit strategies.

7. Put a Portion Toward a Big Goal

Once the essentials are covered, you can give yourself permission to enjoy a portion of your bonus guilt-free.

Ideas:

• Save for a home down payment

• Fund fertility treatments

• Plan a bucket list vacation

• Help family or give to charity

• Start a 529 plan for your child

Even allocating 10–20% for something meaningful can make your bonus feel impactful and intentional.

8. Avoid the Trap of Lifestyle Inflation

It’s tempting to immediately upgrade your car, move into a luxury apartment, or finance expensive gadgets. But that’s how many doctors and dentists end up living paycheck to paycheck—despite a high income.

Instead, let your bonus be the buffer between you and stress. The goal isn’t just to enjoy today, but to create peace of mind for years to come.

9. Bonus Tip: Read the Fine Print

Some bonuses come with strings attached. For example, if you leave before a certain time (often 12–36 months), you may need to pay part or all of it back.

Be sure you understand:

• The vesting period

• Whether it’s a loan disguised as a bonus

• What happens if you’re terminated or resign early

This is important especially if you're considering switching to private practice or entrepreneurship soon.

A sign-on bonus is a gift, but also a responsibility. With intentionality, it can help you:

• Build a financial foundation

• Relieve pressure

• Start investing

• Create multiple income streams

• Buy back time and peace of mind

You worked hard for your degree, your license, and your position. Now it’s time to make your money work hard for you.

Recommended Reading:

1. "The White Coat Investor: A Doctor’s Guide to Personal Finance and Investing" by Dr. Jim Dahle

This book is a foundational read for any physician looking to gain control over their finances, especially early in their career. It covers student loans, budgeting, insurance, and investing.

📚 Buy on Amazon

2. "The Physician Philosopher’s Guide to Personal Finance" by Dr. James D. Turner

Another great resource that dives deep into wealth-building strategies for new attendings, residents, and fellows.

Buy on Amazon

3. The White Coat Investor Blog & Podcast

Their site is full of in-depth blog posts and free tools that break down topics like what to do with windfalls, bonuses, and how to manage debt efficiently.

Visit Blog

Listen to Podcast

4. Physician on FIRE Blog

A financial independence blog created by an anesthesiologist, offering advice on smart spending, investing, and early retirement planning.

Visit Blog

6. Bogleheads Wiki: Windfall Management

A concise, objective breakdown of what to do when you receive a large sum of money — including bonuses.

Managing a Windfall

Top 5 Financial Tips for Young Professionals: Building Wealth and Security

This is a guest post by Bash Sarmiento

Young adults should learn money management skills as early as possible. Those who learn financial literacy earlier are more likely to build good financial habits. 

To be on track with building wealth, it's important to know various money saving tips. This article will discuss essential strategies to help you attain financial independence as a young professional.

Create a Realistic Budget

Creating a realistic budget is one of the first steps to building wealth and security. It helps you have a clear picture of your financial situation and live within your means.  When creating a budget, remember that inflation can significantly erode your purchasing power. To safeguard your financial goals, it's crucial to adjust your budget accordingly. 

This means increasing your savings rate to combat the decreasing value of money over time. For example, if inflation rises by 3% annually, consider increasing your savings rate to counteract the diminishing value of money over time.

Build an Emergency Fund

An emergency fund is a financial safety net that protects you from unexpected life events. It's a pool of money to cover unexpected expenses like job loss, medical emergencies, and natural disasters. Having an emergency fund prevents you from relying on credit cards or loans, which can lead to debt and financial stress. Remember to protect your savings from inflation and earn interest by using a high-yield savings account. By saving your emergency fund in a high-yield savings account, you maximize your money’s growth potential. 

But while it’s important to have a liquid emergency fund, consider the opportunity cost of holding cash. Consider allocating a portion of your emergency fund to low-risk investments like bond funds or high-dividend ETFs. This strategy allows your money to potentially grow while remaining readily accessible for unexpected expenses.

Review and Adjust Your Financial Plan Regularly

It’s unlikely that one financial plan will work for you forever. Regularly reviewing and adjusting your financial plan is crucial for long-term financial success. This helps you adapt to life changes and enhance your financial security.  Reviewing your budget regularly also helps you identify areas where you might overspend. This habit will enable you to make adjustments as you improve your financial discipline.

Finding different ways to save in everyday life is essential for boosting your financial health. For example, you can:

• Embrace smart shopping habits: When shopping for groceries and other necessities, take advantage of coupons, promo codes, and discounts. It’s also smart to purchase non-perishable items in bulk to save money over time.

• Enjoy alternative activities: Outdoor activities like picnics can be a fun and budget-friendly alternative to dining out. Simple yet delicious recipes can help you save money while enjoying quality time with loved ones.

• Cut back on subscriptions: Regularly review your subscriptions and memberships to ensure you're getting value for your money. Cancel those you rarely use or find alternatives that offer better value.

Learn About Investment Vehicles and Strategies

Learning about investing is one of the smartest financial decisions you can make as a young professional. Financial literacy helps you make smart money decisions and stay financially secure. One part of building wealth and security is to familiarize yourself with different investment vehicles and strategies. This includes learning the basics of the following:

1. Mutual funds: These investment pools combine money from multiple investors to purchase a variety of securities. They offer diversification and professional management.

2. ETFs (Exchange-Traded Funds): Similar to mutual funds, ETFs are investment funds traded on stock exchanges. They offer more flexibility and potentially lower costs.

   Retirement Accounts (401(k)s and IRAs): These tax-advantaged investment accounts help you save for retirement. Employers typically offer 401(k) plans, while you manage IRAs, or Individual Retirement Accounts, on your own.
   

   Understand the Psychology Behind Financial Decisions

Building wealth and financial security isn't just about numbers; it’s also deeply rooted in psychology. It’s easier to make more informed and rational decisions when you’re aware of these psychological factors. 

For instance, one of the most common psychological challenges is emotional spending. To combat emotional spending, you must be able to recognize triggers and implement strategies to manage impulses effectively. Mindfulness and self-awareness are incredibly helpful when it comes to combating emotional spending. A 24-hour rule (waiting a day before making any non-essential purchase) can also help curb impulse buying and ensure your spending is intentional.

Another possible psychological barrier to building wealth is the scarcity mindset. Some people fear not having enough resources, leading to financial decisions driven by a sense of lack. 

As such, it’s important to shift your mindset from scarcity to abundance. Instead of focusing on limitations, embrace opportunities for wealth growth through strategic investments and sound financial management.

The Takeaway

Financial literacy is crucial for young professionals aiming to build wealth and ensure long-term security. This article outlines four key financial tips to help young adults establish strong financial habits. These tips help you take control of your finances early on to achieve your financial aspirations.

Meet Bash Sarmiento

Bash Sarmiento is a writer and an educator from Manila. He writes laconic pieces in the education, lifestyle and health realms. His academic background and extensive experience in teaching, textbook evaluation, business management and traveling are translated in his works.

Find him on Instagram and LinkedIn

Navigating Your Finances in Challenging Economic Times

In recent months, the economic landscape has become increasingly complex, with rising costs impacting nearly every aspect of daily life. From the grocery store to the gas pump, prices seem to be climbing with no end in sight. For young professionals and families alike, managing finances during these times requires a thoughtful and strategic approach.

Understanding the Current Economic Climate

Before diving into financial strategies, it’s important to understand the broader context. Inflation has been driving up the cost of living, while interest rates are fluctuating, impacting everything from mortgages to credit card debt. These factors, combined with potential job market uncertainties, make it more crucial than ever to be proactive with your finances.

Reassessing your Budget: Adapt and Adjust

The first step in managing your finances during challenging economic times is to reassess your budget. What worked last year may no longer be sufficient. Start by tracking your current expenses, paying close attention to areas where costs have increased. Then, look for opportunities to cut back or reallocate funds.
For example:
- Groceries: With food prices on the rise, consider meal planning and shopping with a list to avoid impulse buys. Buying in bulk or opting for generic brands can also help reduce costs.
- Utilities: Implement energy-saving measures at home, like using energy-efficient appliances or turning off lights and electronics when not in use.
- Subscriptions: Review your monthly subscriptions and cancel any that are non-essential or underutilized.

Building an Emergency Fund: a safety net

In uncertain times, having an emergency fund is more important than ever. If you haven’t already, aim to save at least three to six months’ worth of living expenses. This fund will act as a financial cushion in case of unexpected events like job loss, medical emergencies, or major repairs.
If saving seems daunting, start small. Even setting aside a modest amount each month can add up over time. Consider automating your savings to ensure consistency.

Managing Debt: Prioritize and Strategize

Debt management is another critical aspect of financial health during challenging times. With interest rates fluctuating, it’s essential to review your debt situation and consider options for minimizing interest payments.
Here are some strategies:
- Refinance or Consolidate: If you have high-interest debt, such as credit cards, look into refinancing or consolidating your loans at a lower interest rate. This can reduce your monthly payments and save money over time.
- Pay Off High-Interest Debt First: Focus on paying down debts with the highest interest rates first, as these are the most costly.
- Negotiate with Creditors: If you’re struggling to make payments, reach out to your creditors. They may be willing to work with you to adjust payment plans or temporarily lower interest rates.

Smart Spending: Focus on Value, not Cost

During times of economic uncertainty, it’s easy to fall into the trap of cutting costs indiscriminately. However, it’s important to focus on value rather than just the price. For example, investing in quality items that last longer can be more cost-effective than repeatedly buying cheaper, lower-quality products.
When making purchases, ask yourself:
- Is this a need or a want?
- Will this purchase add long-term value to my life?
- Are there alternatives that offer better value for money?

Seeking Additional Income Streams: Diversify Earnings

If your current income isn’t keeping up with rising expenses, consider seeking additional income streams. This might involve taking on a side gig, freelancing, or even exploring passive income opportunities like investments or rental properties.
While the idea of adding more to your plate might seem overwhelming, even small amounts of extra income can make a significant difference in your financial stability.

Planning For The Future: Stay Informed and Flexible

Finally, stay informed about the economic trends and how they might impact your finances. Regularly reviewing your financial plan and making adjustments as needed will help you stay on track. Flexibility is key—what works today might need to change tomorrow, depending on economic shifts.

Remember, the goal isn’t to panic but to be prepared. By taking proactive steps to manage your finances, you can navigate these challenging times with greater confidence and security.

Debt Consolidation Strategies: Streamlining Your Financial Obligations

A guest post by Myrtle Bautista

Debt: a tricky topic, but a must if you want financial stability. Managing various loans, credit card bills, and financial obligations often leads to stress and confusion.

Enter debt consolidation strategies, your ally in simplifying financial obligations. In this article, we’ll delve deeper into what debt consolidation is and share insights, tips, and strategies to empower you to regain control of your financial well-being.

What is Debt Consolidation?

Debt consolidation is a savvy financial strategy that revolves around the integration of multiple debts into a single, more manageable debt. This can be achieved in a variety of ways, like obtaining a consolidation loan, executing a balance transfer, or implementing a comprehensive debt management plan. The overarching objective is to simplify your financial life and alleviate the weight of high-interest debt.

Types of Debt to Consolidate

• Credit Card Debt

• Personal Loans

• Medical Bills

• Student Loans

• Other Unsecured Debts

Benefits of Debt Consolidation

Debt consolidation offers a host of advantages that can significantly improve your financial situation:

• Simplified Repayment: The beauty of a single monthly payment is that it streamlines debt management. No more keeping tabs on numerous due dates, which drastically reduces the chances of accidentally missing a payment. 

• Lower Interest Rates: Among the most appealing benefits is the potential for lower interest rates. Debt consolidation may secure a reduced overall interest rate, saving you a substantial amount of money in the long run.

• Reduced Monthly Payments: Debt consolidation often leads to lower monthly payments, freeing up more of your income for savings, investments, or essentials.

• Improved Credit Score: Paying your consolidated loan on time can boost your credit score, leading to better financial opportunities and lower interest rates on future loans.

• Structured Repayment Plan: Having a debt consolidation plan in place offers a structured and clear path toward achieving debt-free status. This, in turn, can alleviate the stress and anxiety commonly linked with managing multiple debts.

Debt Consolidation Strategies

Consolidation Loans

A consolidation loan is a straightforward approach. It entails acquiring a new loan to pay off your existing debts, effectively merging various high-interest debts into one. The key benefit is often securing a lower interest rate, which can lead to savings and more manageable monthly payments.

Balance Transfers

If you're grappling with high-interest credit card debt, consider balance transfers. This method allows you to move your debt from a high-interest card to a new one with a lower or even 0% introductory interest rate. It's a smart way to cut down on interest expenses, but do remember that introductory rates can expire, so understanding the terms is crucial.

Debt Management Plans

Debt management plans involve working closely with a credit counseling agency. Together, you create a structured plan to repay your debts over time. These plans often come with reduced interest rates, making it easier to manage your debt. It's a method that adds organization and expertise to your journey toward financial stability.

Choosing the Right Strategy

Assess Your Debt

Before deciding on a consolidation strategy, it's crucial to assess your total debt and the interest rates associated with each debt. This assessment provides the insight needed to determine which method is most suitable for your unique financial situation.

Credit Score Consideration

Your credit score matters when evaluating consolidation options. Certain strategies may impact your credit score temporarily, so it's important to be aware of these potential effects. However, with proper management, consolidation can ultimately have a positive impact on your credit.

Debt Consolidation Tips

Stick to Your Plan

Once you’ve chosen a consolidation strategy, commit to it, pay on time, and avoid more debt. Remember: consistency is success.

Avoid Scams

When consolidating debt, it's essential to remain vigilant and avoid insurance scams, identity theft, and phishing. Be cautious of offers that promise debt relief in exchange for upfront fees or personal information.

Here are just a few tips on how you can steer clear of scams: 

• Research Thoroughly: Investigate the company or organization offering debt consolidation services.

• Read the Fine Print: Scrutinize any agreements and contracts before signing.

• Consult a Professional: Consider seeking advice from a financial advisor or attorney.

Budget Wisely

Creating a realistic budget is extremely crucial. It should be designed to help you meet your financial obligations without relying on credit. A well-structured budget is your tool for financial control.

Seek Professional Guidance

Given the intricacies of debt consolidation, it's a prudent choice to seek guidance from a financial advisor or credit counselor. Small business owners can also benefit from the insights of an accountant. Their expertise ensures that you're making the best decisions aligned with your unique financial circumstances. The value of their guidance on your path to financial freedom is immeasurable.

Conclusion

Debt consolidation is a powerful tool that streamlines your financial obligations, slashes interest rates, and even has the potential to improve your credit score. With the right strategy and the wisdom you've gained from the tips above, you're primed to take the crucial first step toward a future free from debt!

For more finance advice, check out the UnOrthoDoc Blog!

About The Author:

Myrtle is a journalism major, a social media marketer and is now exploring freelance writing. She's fond of anything related to health and wellness, and when she's not writing, you'll find her doing long-distance cycling, ultramarathons, hiking, or in a local cafe enjoying a good cold brew

How To Become a 1099 Employee and Why It Is Beneficial

The landscape of the workforce is continually evolving, and traditional employment is not the only option for those seeking financial independence and flexibility. One alternative that has gained popularity in recent years is becoming a 1099 employee, often referred to as a freelancer or independent contractor. In this blog post, we'll explore what it means to become a 1099 employee and why it can be a highly beneficial career choice.

What is a 1099 Employee?

A 1099 employee is essentially a self-employed individual who works as an independent contractor. The name "1099" comes from the IRS tax form used to report income earned as an independent contractor, and it's different from the W-2 form used for traditional employees. As a 1099 employee, you are not on an employer's payroll; instead, you provide your services to clients or companies on a contract basis.

How to Become a 1099 Employee

Becoming a 1099 employee involves several steps, and it's essential to understand the process to make an informed decision about your career path. Here's how to get started:

1. Identify Your Skills and Services: Determine what skills or services you can offer as an independent contractor. This could be anything from graphic design and writing to web development, consulting, or even ride-sharing services.

2. Legal Considerations: Research the legal requirements and regulations for independent contractors in your area. You may need to register your business, obtain the necessary licenses, or adhere to specific tax laws.

3. Create a Business Plan: Just like any business, it's crucial to have a business plan that outlines your goals, target market, pricing strategy, and marketing plan.

4. Build a Portfolio: Develop a portfolio showcasing your skills and previous work. A strong portfolio can attract clients and help you stand out in a competitive market.

5. Find Clients: Look for clients or projects that align with your skills and interests. You can do this through networking, online job platforms, or by reaching out to potential clients directly.

6. Set Your Rates: Determine your pricing structure. Consider your expenses, market rates, and your desired income when setting your rates.

7. Contractual Agreements: Always have clear, written contracts with your clients. These should outline the scope of work, payment terms, deadlines, and any other relevant terms.

8. Financial Management: Be prepared to manage your finances responsibly. You are responsible for setting aside taxes and paying them as a self-employed individual.

The Benefits of Being a 1099 Employee

Now that we've discussed the process of becoming a 1099 employee, let's explore why it can be a highly beneficial career choice:

1. Flexibility: One of the most significant advantages of being a 1099 employee is the flexibility it offers. You have the freedom to set your own hours, choose your clients, and decide where you work. This flexibility can greatly improve your work-life balance.

2. Variety of Work: As an independent contractor, you have the opportunity to work on a variety of projects with different clients. This can be intellectually stimulating and help you build a diverse skill set.

3. Increased Earning Potential: You have the potential to earn more as a 1099 employee. With no fixed salary, your income is directly tied to your efforts and the value you provide to your clients.

4. Tax Benefits: There are various tax deductions available to self-employed individuals. You can deduct business expenses such as office space, equipment, travel, and more, potentially reducing your overall tax liability.

5. Professional Growth: Independence forces you to be responsible for your career and personal development. You'll constantly be learning, growing, and adapting to stay competitive.

6. Autonomy: You are your boss. You make all the decisions regarding your work, from setting prices to choosing projects. This level of autonomy can be empowering and fulfilling.

Becoming a 1099 employee is a viable and attractive career option for those seeking autonomy, flexibility, and the opportunity to earn more. However, it's important to approach this path with careful planning, a strong work ethic, and a commitment to continuous self-improvement. By following the steps to become a 1099 employee and embracing the benefits it offers, you can embark on a fulfilling and prosperous career as an independent contractor.

Prioritizing Self-Care: A Must-Have for Entrepreneurs

This is a guest post by Marjorie Jones

Being an entrepreneur can be both rewarding and challenging. In the pursuit of success, it's easy to forget about self-care. However, taking care of yourself is essential to your well-being and overall success. In this article, we'll explore some tips to help entrepreneurs prioritize self-care.

Enjoy Breaks

As an entrepreneur, it's natural to get caught up in work and forget to take breaks. However, taking regular breaks can boost productivity and reduce stress levels. Taking a 15-minute break every two hours can improve productivity and creativity. During your break, engage in activities that relax you, such as reading a book or meditating. Stepping away from work and doing something else can help you come back with a fresh perspective.

Stay Focused With Mindfulness

Mindfulness is a powerful tool for reducing stress and improving mental health. It involves paying attention to the present moment without judgment. Mindfulness can help you stay focused on what's important and reduce anxiety. To practice mindfulness, set aside time each day to sit quietly and focus on your breath. You can also try mindfulness meditation, which involves focusing on your breath and bringing your attention back to your breath when your mind wanders.

Improve Mental and Physical Health by Walking More

Walking is a great way to improve both mental and physical health. It can reduce stress, improve mood, and lower the risk of chronic diseases. Instead of driving to a nearby store or coffee shop, walk there instead. If possible, aim to walk in an area with a Walk Score of 70 or above. A Walk Score is a number that measures how walkable a neighborhood is. Do what you can to incorporate walking into your daily routine.

Set Boundaries

As an entrepreneur, it's easy to let work spill into your personal life. However, this can lead to burnout and reduced productivity. Set clear boundaries between work and personal time. For example, avoid checking work emails or taking work calls during your personal time. Instead, set aside specific times during the day to check and respond to work-related messages.

Spend Some Time on Personal Development

Investing in personal development can help you improve your skills and enhance your overall well-being. Attend workshops, seminars, or online courses that align with your goals. You can also join a networking group or mentorship program to connect with other entrepreneurs and learn from their experiences.

Prioritize Sleep

Sleep is essential for physical and mental health. Lack of sleep can negatively impact productivity, mood, and overall well-being. Aim to get at least seven hours of sleep each night. To improve the quality of your sleep, create a calming bedtime routine and avoid using electronic devices before bedtime. You can also invest in a comfortable mattress and pillows to ensure a restful night's sleep.

Connect with Others

Entrepreneurship can be a lonely journey, but it doesn't have to be. It's important to connect with others to feel supported and motivated along the way. Whether it's making time for family, friends, or colleagues, joining a community group, or attending networking events, building connections can help you feel less isolated and more inspired.

Invest in Quality Products

Investing in quality products can help facilitate a healthier lifestyle. For example, a comfortable pair of shoes can make walking more enjoyable, while a high-quality blender can help you make healthy smoothies and juices. However, always read reviews before making purchases to ensure that you're investing in products that are worth your money.

Self-care is a crucial component of an entrepreneur's journey toward success. By taking care of their physical, mental, and emotional well-being, entrepreneurs can achieve their goals without compromising their health. From getting enough rest to walking more often, prioritizing self-care can lead to a healthier, happier, and more productive life as an entrepreneur.

Visit The UnOrthoDoc for professional and financial development advice while maintaining work-life balance.

About The Author:

Marjorie Jones created Working Class Wow because she knows you don’t need a big budget to make your business look like a million bucks! From a well-designed logo and a carefully-crafted website to grammatically-correct copy and professionally-printed marketing materials, it is entirely possible (and surprisingly affordable) to bring a little “Working Class WOW” to your small business to build your brand, improve relationships with customers, and benefit the bottom line. WorkingClassWow.com can show you how.

Why You Need An Accountant Fo Your Side Hustle Business

By now, almost everyone has a side hustle. If you didn’t have one before the pandemic, you certainly have one now or are working on it. They’re an outstanding way to make extra money, to spread your occupational wings, and to build the foundation of a full-time business. But it’s also easy to get sloppy.

Here are seven side hustle accounting mistakes to avoid:

1. Not keeping accurate income records

Since side hustles are typically second occupations, it’s very easy to be casual with record-keeping. This is very likely to happen in the first year of operation. You might simply be looking for some extra money, so you don’t bother to track the actual dollars and cents.

This habit has a few bad side effects:

• Though money may be coming in, you’ll never be entirely sure how much.

• Since you’re not really sure how much is coming in, you don’t really know if the business is truly successful.

• Though you may be making money, you won’t know if what you’re earning is justified by the time and effort you’re putting out to earn it.

• When tax filing time comes, you’ll be forced to estimate and guess how much you actually made. That can be a disaster if the IRS doesn’t agree.

Solution: Set up a dedicated bank account where you will deposit all of your side hustle income payments. At the end of the year, or the end of each month, you can simply total up the deposits to determine your income.

2. Not keeping accurate expense records

New side hustlers may be even more casual when it comes to recording expenses. This is particularly true if the expenses are small.

There is an equal number of issues with this practice:

• You’ll never know what your net income is—that’s your income after deducting business-related expenses.

• If you focus only on the income side, and ignore expenses, you’ll never know if your side hustle is truly profitable.

• You’ll miss out on valuable tax deductions against your side hustle income.

Solution: Purchase business accounting software or hire an accountant - record all of your expenses—as well as your income—as they occur. Alternatively, you can set up a dedicated business checking account, that you run all your expenses through. That will provide you with an automatic written record of your expenses. You can also deposit your side hustle income into the same account.

3. Not determining the connection between expenses and income

We’ve already talked about how not accurately recording your income and expenses can lead to not knowing your true net income. But there’s an even more specific problem. Without keeping records, you can’t know how cost-effective your expenses are.

The primary purpose of business expenses is to generate business income

Without keeping accurate records, you’ll have no way to measure the income benefit provided by any particular expense.

In order to maximize profits, a business owner has to know which expenses will produce the most “bang for the buck”. Without keeping accurate records, you may be incurring expenses that generate little or no revenue. You may also miss an opportunity to determine which expenses produce the highest revenues.

Solution: Using accounting software or an accountant, you should be able to match expenses incurred with the relevant income produced. You can then look for inconsistencies. Are there expenses that produce little or no benefit? Are there others that result in increased income? Properly allocating between the two will keep your side hustle going in the right direction.

4. Not separating business and personal transactions

This is a mistake that even side hustle veterans make. If you’re running your side hustle income and expenses through a personal checking account, separating business and personal could be so complicated that you don’t bother to do it.

Until tax time.

That’s when it becomes a certified nightmare. Trying to separate business and personal transactions out of 12 months bank statements can take days. That’s especially true if you make personal purchases from the same vendors you make business purchases through. It will also be a problem if you don’t have a record of side hustle related income deposits.

Solution: Once again, the most effective solution is to have a dedicated checking account for your side hustle. Use that account exclusively for your business so there’s no possibility of mixing with personal transactions.

5. Not keeping track of debts and obligations—in both directions

This includes debts you’ve incurred for business purposes, or debts owed to you in connection with your side hustle. It also includes accounts receivable—income earned, but not yet collected—and accounts payable—expenses incurred, but not yet paid.

If you don’t keep track of debts and obligations, you could lose side hustle income, or fail to make timely payments. The latter could result in damage to your credit, as well as your reputation.

Solution: If using an accounting software it should have general ledger capability, that enables you to set up individual accounts. They can be set up for debts, receivables and payables. If you have terms set up with multiple customers or vendors, this will be the only way to keep accurate records of what you owe, and what’s owed to you.

6. Not collecting (adequate) sales tax

This is a definite problem if your side hustle involves selling a product. But in many states, sales tax also applies on certain services performed.

Whether you actually collect sales tax from your clients and customers may not matter. But the state sales tax division will want their cut anyway. You’ll have to keep accurate records of your business income, as well as your sales tax liability. In fact, sales tax is a payable, just like an account payable due to a supplier or vendor.

Solution: Accounting software will be a must if you are required to collect and pay sales tax. If the software has an invoicing feature, it will automatically include sales tax in customer invoices. And as payments come in, the sales tax will be credited to the sales tax payable account. At the end of the month, you’ll know exactly how much sales tax you owe. Pay it when required—sales tax divisions are notorious for being unforgiving.

7. Not making your estimated tax payments

If you don’t make estimated tax payments on your side hustle, you’ll owe money at the end of the year. This could leave you with a very large tax bill at filing time. Like thousands of dollars. If your side hustle is particularly successful, it could even be tens of thousands of dollars.

If you fail to make those payments in a timely fashion, you’ll owe interest and penalties on top of the basic tax. It’s a Catch-22 situation you can never win.

Solution. This gets down to why you need to keep accurate records of both income and expenses. If you do, you’ll be able to determine your net income at any time (net income is also generally your taxable income). You’ll need to make estimated tax payments to the IRS during the course of the year. Those tax estimates are due on April 15, June 15, and September 15 of the current year, and January 15 of the following year—all for the current tax year.

Once you determine your net income for the quarter, you’ll have to apply your marginal tax rate to the income. But you’ll also have to pay self-employment tax, which is the FICA tax for the self-employed, and those who have side hustles. 

The rate is 15.3 percent of your net income.

If you’re in the 15 percent marginal tax bracket, you’ll have to allocate roughly 30 percent of your net income for estimated tax. If you don’t know how to calculate this, consult with an accountant. You can make your tax estimates online, using IRS Direct Pay.

Summary

When you have side income, taxes can get complicated quick. These are seven common side hustle accounting mistakes to avoid, but your best bet is to get some good accounting software, or a good accountant.

For more information on the business side of your side hustle, tax and accounting resources join The Climb community:

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The Rise Of Crypto-Friendly Businesses: Opportunities And Challenges

This is a guest post by Myrtle Bautista

Cryptocurrencies have emerged as a powerful force in the global economy over the past decade. Businesses and enterprises of all sizes are realizing the potential of cryptocurrencies in their operations. Initially, Bitcoin and other cryptocurrencies were viewed as a niche asset class, limited to a small group of tech-savvy individuals. However, the use cases of these digital currencies are transforming the business landscape. 

This article will discuss the opportunities and challenges presented by the rise of crypto-friendly businesses. But before we dig into it, let's know precisely what cryptocurrency is.

What Is Cryptocurrency?

Simply put, a cryptocurrency is a digital currency that uses cryptographic systems to make online transactions safer and quicker without any mediators. It means that cryptocurrencies are not regulated by any central bank, making them immune to any third party intervention. Investing in cryptocurrencies can be very lucrative if a proper strategy is built before jumping into it. Some of the most popular cryptocurrencies nowadays are Bitcoin, Ethereum and Ripple. 

The Rise Of Crypto Friendly Businesses

Crypto-friendly businesses are companies that have integrated cryptocurrencies into their operations by accepting crypto payments or providing services related to cryptocurrencies. These businesses have recognized the potential of cryptocurrencies as a viable payment option and have taken steps to accommodate this growing trend.

What Can Crypto Do For Your Company?

To spark your company's thinking about crypto, below are mentioned some of the rationales behind why some businesses are currently using crypto:

• Introducing cryptocurrency now may help raise internal awareness of this new technology in your business. It also may help the business position itself in this vital growing field for a future that could include central bank digital currencies.

• Certain options are available with cryptocurrency that are simply not with fiat currency. Programmable money, for example, can enable real-time and precise revenue sharing while increasing transparency to facilitate back-office reconciliation.

• Cryptocurrency provides a new avenue for improving a variety of more traditional Treasury tasks, such as making money transfers simple, real-time, and secure, helping strengthen control over the enterprise's capital and managing the risks and opportunities of investing in digital investments.

Cryptocurrencies have gained popularity over the years, attracting businesses and individuals who want to invest or accept it as a form of payment. Crypto-friendly businesses have emerged and are exploring the opportunities that come with it. However, this new technology also poses some challenges. Let us take a look at the opportunities first.

The Opportunities

Increased revenue

Companies accepting cryptocurrencies as payment are able to boost their revenue by reaching a new market of clients who use digital assets. They can potentially attract crypto users searching for new ways to spend their digital assets.

Global accessibility

Cryptocurrencies are not restricted by borders and can be used by anyone from anywhere. Cryptocurrency users can securely store and access their holdings from anywhere. For example, anyone who invests in Bitcoin, can manage bitcoin anywhere in the world. Businesses that accept cryptocurrency can simply transact with international consumers without worrying about currency exchange rates.

Lower transaction fees

Cryptocurrencies such as Bitcoin or Ethereum have lower transaction fees than traditional payment methods such as credit cards. Accepting Bitcoin can potentially reduce transaction costs and increase translation speed, making it a very practical; choice for enterprises.

Security

Since transactions are encrypted and cannot be altered, they provide high levels of security. Accepting cryptocurrencies can help businesses avoid fraudulent activity like chargebacks and identity theft.

Early adopter advantage

 As cryptocurrencies become more widely used, organizations that embrace the technology early on may have a competitive advantage over those that do not.

The Challenges

Volatility

Cryptocurrencies are widely known for their high volatility, which puts businesses that accept them as payment at risk. Cryptocurrency price fluctuations can influence the value of a company's revenue, which can be difficult to control.

Lack of regulation

 The cryptocurrency industry's lack of regulation might be a hurdle for businesses who wish to accept it as a payment method. The legal status of cryptocurrencies varies across countries, making it difficult for enterprises to navigate the legal landscape.

Technical expertise

Since cryptocurrencies are a complex technology, businesses must have the technical expertise to properly integrate them into their operations. Small firms, in particular, may lack the resources to invest in the technical skills required to accept cryptocurrency.

Limited acceptance

Despite their growing popularity, cryptocurrencies are not yet widely recognised as a means of payment. Businesses that take cryptocurrencies may not have a big number of customers that utilize them, limiting their earning potential.

Security risks 

Cryptocurrencies are susceptible to hacking and other security breaches, and businesses that accept them as a form of payment must have robust security measures in place to protect themselves and their customers.

Conclusion

In conclusion, crypto-friendly businesses have the potential to benefit from increased revenue, lower transaction fees, global accessibility, security, and early adopter advantage. However, they also face challenges like volatility, lack of regulation, and technical expertise. Businesses that want to embrace digital currencies must weigh these opportunities and challenges and develop a strategy

Meet Myrtle Bautista

Myrtle is a journalism major, a social media marketer and is now exploring freelance writing. She's fond of anything related to health and wellness, and when she's not writing, you'll find her doing long-distance cycling, ultramarathons, hiking, or in a local cafe enjoying a good cold brew.

How I Made Over $12K In March 2023 With My Blog

At the top of the year I wrote an article in which I outlined my blogging income and mentioned that one of my goals for 2023 was to seriously monetize and increase the income from my blog. If you’ve been with me for a while you know what happens when your girl has a goal.

With all the financial uncertainty in the air, we all could use some extra cash whether it’s to cushion against a rainy day (as they are sure to come), to invest, to safe guard against a potential layoff or for whatever reason. For me, blogging is one of my great loves. It has long surpassed being a hobby and something I genuinely enjoy and spend a lot of time on, and thus I want to see how far I can take it. Perhaps one day it may even replace the income of my 9-5. I have seen it happen with other people so I know it is possible.

In this article I am going to outline the few ways I make money on my blog and how you can too.

For the month of March 2023, I made $12,164.73 from all the ventures I will list below. In February that income was $3012.56 and in January it was $1766.52. Year to date the total extra income made is $16, 943.81. All the income reported here is through my blog and social media (Instagram). Here is the breakdown:

If you're interested in learning more about how I made money through my blog and Instagram, I encourage you to sign up for my paid community. You'll get access to exclusive content and resources that will help you grow your online presence and monetize your platform. Plus, you'll be part of a supportive community of like-minded individuals who are also on the same journey as you.

Making money through your blog and social media is possible, but it takes time and effort. If you're willing to put in the work and stay true to yourself and your values, the possibilities are endless.

Thank you for reading, and I hope to see you in my paid community soon!

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9 Ways To Make Extra Income Online

More and more, people are finding different ways to either increase or supplement their income especially with current financial uncertainties. With a lot of people securing jobs that are either remote or location independent, there is now a level of flexibility that has made it easier to leverage your wifi connection to make some extra money. Whether you're looking to supplement your income or start a new career, there are a variety of ways to make money online. Here are some of the most popular methods:

1. Freelancing: Freelancing involves providing services such as writing, designing, coding, or social media management to clients online. Platforms like Upwork, Fiverr, and Freelancer.com connect freelancers with clients and offer a wide range of job opportunities. I recently hired a VA on Upwork to help me with a few admin tasks and pay her weekly. In the past I have used said platform as well as Fiverr to hire for several small jobs.

2. Affiliate marketing: Affiliate marketing involves promoting products or services through an affiliate link and earning a commission on any resulting sales. Amazon Associates, ShareASale, and Commission Junction are popular affiliate marketing platforms. You can then promote these on your social media or website.

3. Sell products online: You can sell products online through platforms such as Amazon, eBay, Etsy or your own website. You can either sell products you create yourself, or source products from wholesalers and sell them for a profit.

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4. Online tutoring: If you have expertise in a particular subject, you can offer online tutoring services through platforms such as Tutor.com, Chegg, or Wyzant.

5. Virtual bookkeeping: If you have experience in bookkeeping or accounting, you can offer virtual bookkeeping services through platforms like Bookminders, Belay Solutions, or AccountingDepartment.com.

6. Online content creation: If you are creative or have a talent for creating content such as videos, blogs, or podcasts, you can monetize your content through platforms like YouTube, Patreon, Instagram, TikTok or Substack.

7. Online coaching: If you have expertise in a particular area, such as fitness, nutrition, or business, you can offer online coaching services through platforms like Coach.me, Teachable or Udemy.

8. Online market trading: Online market trading involves buying and selling stocks, currencies, or commodities through online trading platforms like eToro, Robinhood, or TD Ameritrade.

9. Online surveys: There are many companies that pay individuals to take online surveys. While the pay is typically low, it's an easy way to make some extra cash in your spare time. Some popular survey sites include Swagbucks, Survey Junkie, and Vindale Research.

Making extra money online is easier than ever thanks to the plethora of opportunities available. Whether you're looking to earn a little extra cash or start a new career, there's a way to make money online that's right for you.

Want specifics on how to make money with any of the above, join my community below.

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Exploring the Future of Digital Money: Trends, Technologies, and the Role of Financial Development

This is a guest post by Katie Pierce

Digital money is revolutionizing the way we use and think about our finances. As a result, the use of this innovative currency is growing at an unprecedented rate. A recent report by the World Bank estimated that there are currently around 1.7 billion unbanked adults worldwide. Digital money could change this by providing them with access to financial services, reducing the costs of financial transactions, increasing efficiency, and enhancing security.

And today is a pivotal point in history as we witness how its future is shaping up. In this blog post, we’ll unpack the factors that are making a critical impact on the trajectory of digital money.

Trends

While there are countless possibilities for how technology might define the future of digital money, some clear trends are beginning to emerge. 

1. Real-time payments

One key direction in the development of digital money is the shift toward “real-time” payments. This means that transactions can be completed almost instantaneously. As a result, people no longer have to wait days or weeks for a bank transfer to go through. 

Such real-time payments offer consumers convenience. In the past, they had to plan ahead when making purchases or transferring funds—but not anymore! Today, they can conduct their transactions in a micro-fraction of the time that they used to spend on previous financial arrangements. 

2. Open banking

Yet another important development is open banking. This refers to a system where banks allow customers to share their financial data with third parties, such as app developers or payment service providers. 

Open banking can make managing finances easier by enabling users to access all their accounts from one place. This results in the quicker completion of transactions. Thus, both individuals and businesses alike can enjoy incredible convenience, with the new technology facilitating faster and more secure payments for goods and services. 

3. The rise of cryptocurrency

Cryptocurrencies like Bitcoin have gained popularity in recent years and are now widely used for online transactions. However, cryptocurrencies face regulatory challenges, and their use is still relatively limited.

4. Mobile money transfers 

Another significant trend in digital money is the increasing use of mobile wallets and mobile banking transactions. Mobile payment systems, like Apple Pay and Google Wallet, are increasingly becoming mainstream. Alongside this are the development of technological innovations that enable heightened convenience and security in their use. Mobile payments are thus expected to continue to grow, with the global mobile payment market projected to reach $494.5 billion by 2030.

Technologies

Several technologies are driving the growth of digital money, such as:

1. Blockchain technology

Blockchain technology, which underlies cryptocurrencies, is one of the technological waves that aren’t likely to break anytime soon. Blockchain is a distributed ledger system where transactions can be recorded securely and transparently. It can disrupt the financial industry by delivering benefits like improved efficiency, more cost-effective dealings, and bolstered security. 

In fact, this cutting-edge technology has been hailed as a way to reduce risks associated with digital payments. However, as digital money becomes more popular, developing more advanced safeguards against fraud and other potential risks will be essential. 

2. Artificial Intelligence (AI)

AI or artificial intelligence is also a major catalyst (if not the primary one!) in the shift towards digital money. It refers to the ability of machines to perform tasks that typically require human mental processes, such as image perception, speech recognition, decision-making, and language translation. With computer algorithms, this technology can learn and improve from experience and perform tasks that could only be previously performed by humans.

Today, AI is being used to automate financial transactions. These include fraud detection, risk assessment, and customer service improvement. AI systems are also being used to develop personalized financial products and services, such as robo-advisors, that provide low-cost investment advice to consumers.

The impact of financial development 

The role of financial development in shaping the future of digital money can’t be ignored as it makes the following possible:

1. Financial inclusion

One way financial development can support the growth of digital money is by promoting economic inclusion. This refers to the provision of affordable and accessible commercial and banking services to underserved populations. Through digital money, customers can now easily send and receive money regardless of where they live and their financial status. And this can go a long way in enhancing their social mobility and giving them access to more opportunities. 

2. Regulation

Governments around the world are investing in policies designed to facilitate innovation in the payments sector while still protecting consumer interests. One fine example is their initiatives that support safe and secure offshore banking jurisdictions that enable individuals and companies to enjoy lower taxes outside their own country base. Also, regulatory changes, such as open banking, have already had a major impact on how businesses operate. 

Yet there is still a ton of work to be done before we reach a truly seamless and secure global payments system. Regulatory devices must be flexible enough to accommodate new technologies and equally robust to prevent financial instability and protect consumers.

The bottom line

While the future of digital money has many exciting possibilities, it also presents some serious considerations regarding financial stability and consumer protection. Through advances in technology and supportive government policies, we can ensure that the global payment system is secure and accessible for all. So, let’s do the work and wait with bated breath as digital money continues to evolve and, hopefully, become a greatly beneficial instrument for future generations. 

For more tech-savvy insights, news, and information, visit the blog of The UnOrthoDoc today!

Meet Katie Pierce

Katie Pierce is a teacher-slash-writer who loves telling stories to an audience, whether it’s bored adults in front of a computer screen or a bunch of hyperactive 4-year-olds. Writing keeps her sane (most of the time) and allows her to enjoy some quiet time in the evening before she walks into a room of screaming kids (all of whom she loves dearly) the next morning

7 Things I Learned From Creating a 7-Figure Business

When I first started out in business, I had no idea what I was getting myself into. After years of hard work and dedication, I am proud to say that in 2022 I have achieved 7-figure success. It was quite possibly one of the most challenging yet rewarding goals I have accomplished yet. I spent the last week in 2022 completely spent and exhausted with much time to reflect. From this journey, I have learned a great deal about what it takes to be a successful entrepreneur and millionaire. In this blog post, I will share seven key things that I have learned from creating a 7-figure business. I will provide tips on mindset, personal, professional, and financial development that have helped me reach my goals. . Here are 7 lessons I learned on the way to 7-figures:

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Retirement Planning for Young Professionals in 2023

2023 RETIREMENT CONTRIBUTION LIMITS

If you’ve been a reader here for a while you know that financial development is one of my favorite topics, especially when it comes to retirement planning. It is never too early (or late) to start saving towards your retirement! The past several years have made saving and investing a bit challenging but if I had any advice for a place to park what little money you may have left over for investing, it would be in a retirement account.

It is no secret at all that we are heading into a recession, if we are not already in the middle of one. The US government is trying to tighten up to decrease spending across all boards to combat our current inflation crisis. This could mean higher prices for goods and services which will trigger less spending but we could also see a smaller amount left over on our paychecks. It is imperative now more than ever to dump whatever money you may have into a safe place like a retirement fund. Now is not the time for gambling and high risk, in my opinion.

When speaking of saving for retirement, it is very important to have some knowledge of compounding interest to fully understand the benefits of starting early. This post will cover some retirement basics, contribution limits and what to do with extra money should you find yourself so lucky.

I must remind you that retirement planning is a long term investment. In most cases you will not be able to access these funds until around age 59 1/2 without severe ramifications (taxes + penalties). So, if you are investing and need to access your funds sooner than this, you may have to think of other types of investments. Take a look at other investment vehicles here, here and here.

There are many different accounts and plans available and choosing the right one is very important as they each have different benefits and advantages, especially when it comes to tax planning. Here are a few to help you get started:

Simple IRA (Savings Incentive Match Plan for Employees)

For the year 2023, participants can make employee contributions of up to a maximum of $15,500 per year if you are under 50 years old and $19,000 if you are older than 50. This is a retirement plan that is usually available to self-employed individuals, however both employee and employer contribute to this account. Contributions are non tax deductible.

Traditional IRA

Anyone can open a traditional IRA account - but honestly, if you are a dentist or physician (like most of my colleagues are), then there really is no use for this type of account. During residency you have the option to open a Roth IRA (more on that below) because your lower salary allows you to stay within the income restrictions. Later as you start your career and your salary increases you will most likely surpass the income caps and will have the ability to deduct your traditional IRA contributions. However, it’s worth understanding as it forms the framework for all other types of retirement accounts. A Traditional IRA is set up by you (not an employer) and the maximum contribution to this type of account is $6,500 if you’re under 50 years old and $7,500 if you’re older. The contributions are tax deductible and grows tax-free.  If you withdraw the money prior to age 59 1/2, there will be ramifications of a 10% tax (penalty) as well as any income tax which would be owed on the money.  After age 59 1/2, you just have to pay the income tax based on your tax bracket at that time.  At age 70, you will be required to start withdrawing part of the money each year, the “Required Minimum Distribution (RMD).”  This is age based and starts out at about 3.6% and increases to about 8.8% at age 90.  

Roth IRA

I absolutely love a Roth IRA. However, there is a contribution income limit. If you make more than $153K (single) or $228K (married), you cannot contribute to a Roth IRA. However, there are ways to get around that with Roth IRA conversions, which we will discuss in a subsequent post. Anyone with earned income can open a Roth IRA and contribute up to $6500 per year. If you’re over 50, those limits are raised to $7500 per year.

The reason I love a Roth IRA is because you contribute with after-tax money, but it is never taxed again!  You don’t pay taxes on capital gains and dividends as the money grows, and it comes out tax-free in retirement.  You generally can’t access the money before age 59 1/2, but unlike a 401K or Traditional IRA there are no required minimum distributions beginning at age 70.

401K

If you are an employee of a company and your employer offers a 401K retirement plan, there’s absolutely no reason why you should not be participating. It is even more important that you participate if said company is offering a match. A match is basically free money! Do not leave free money laying on the table. The contribution maximum for the year 2023 is $22,500 and the great thing about a 401K is that you are investing pre-tax dollars. The not-so great thing is that when you go to retrieve your money (after age 59 1/2), you will be taxed on this (unlike with a Roth IRA).

If you're an Independent Contractor (not a W2 employee), you’re considered to be “running your own business.” In this case, you can also make an employer contribution of 20% of your net income up to $55,000.

SEP IRA (Simplified Employee Pension)

If you have your own practice, a SEP IRA may be a good option. This allows you to contribute 25% of your business profit or $66,000 per year, whichever is less. The contributions are tax deductible, and investments grow tax deferred until retirement.

IF YOU FIND YOURSELF WITH SOME EXTRA CASH, HERE’S WHAT YOU CAN DO WITH IT:

Fund a Traditional Brokerage Account

Traditional brokerage accounts don't offer any sort of tax benefit for the money you put in, unlike IRAs and 401Ks. However, they offer flexibility in that you can withdraw funds at any time and for any reason. If you decide to retire early, like my husband did, you can use the money in your brokerage account to pay your living expenses. There are no income limits associated with funding a brokerage account.

Fund a Health Savings Account

HSAs are funded with pre-tax dollars, like traditional IRAs and 401(k)s. Withdrawals can be taken at any time, and they're tax-free as long as they're used to pay for qualified medical expenses. Any money not used immediately can be invested, just like in an IRA or 401(k). If withdrawals are taken for non-medical purposes, they will be subject to a 20% penalty.

However, once the contributor reaches the age of 65 funds can be accessed for any reason without being penalized. At that point, your HSA can serve as a general retirement savings account.

This is not a comprehensive list of retirement vehicles but certainly a great place to start. Everyone, as early as possible, should start contributing to one of the above. Speak with your financial planner or accountant for more clarification about which plan is best for you. If you need more info on this visit, the IRS website. Hope this helps in getting started.

How To Set Short-Term Financial Goals for Yourself

This is a guest post by Bash Sarmiento

Your lifestyle and risk tolerance with money is different from everyone else’s. How you approach your finances is entirely unique. Regardless of how you spend and save money, it’s helpful to establish short-term financial goals if you want to achieve financial security. 

Without short-term financial goals, you have less guidance in handling your day-to-day finances. You may end up overspending and taking on debt, putting your long-term financial goals in stagnation. In a nutshell, short-term goals are the result after you break down your long-term financial goals, making them easier to achieve.

What are short-term financial goals?

Short-term financial goals are goals that you can achieve in a relatively short time frame. Ideally, a short-term goal can be achieved within three years. These goals can contribute to your progress towards long-term goals such as retirement and paying off a mortgage. Examples of the most common short-term financial goals are paying off credit card debt, saving for a vacation, and saving for an expensive gadget.

Follow the SMART criteria

Standing for specific, measurable, actionable, relevant, and time-bound, SMART is a criterion created to guide people in establishing goals and objectives. By following the SMART criteria, you can set clear goals that have specific steps towards their achievement and a definite indication of success. 

For instance, a goal not following SMART will just say “save money”, not indicating what the money is being saved for and how much should be saved at a given time. On the other hand, a SMART goal will say “Save $50 USD per month to afford a week-long vacation next year”. 

Short-term financial goals for everyone

How you set short-term financial goals should center on following the SMART criteria. The following are examples of SMART goals that everyone can set for themselves.

• Start saving for an emergency fund

Nobody wants disasters and tragedies, but life is unpredictable and the only thing we can control is how prepared we are. This is why everybody needs a safety net, a pool of money you can take from in times of emergency. Building an emergency fund should be at the top of your short-term financial goals.

Your emergency fund's size depends on your income and risk tolerance. The more you earn, the bigger your emergency funds should be. The general rule in building an emergency fund is “out of sight and out of mind”, meaning you should automate depositing into it and only access it during emergencies.

• Track your spending

It’s hard to set short-term financial goals if you don’t know how much exactly are you spending in a given time. Having no sense of your spending habits is synonymous to being cavalier with your finances. You will be prone to overspending and it will be a lot harder to save money. 

To start tracking your spending, you can choose from the best budgeting apps available today. Most of these applications link together all your accounts and place your credit and debit card transactions under budgeting categories. On the other hand, you can track your spending manually by gathering receipts and billing statements and organizing them in an electronic spreadsheet or on paper.

Once you’ve got a good grasp of your spending, you can set a realistic budget that can help you make better spending decisions. It can be a weekly or monthly budget, just make sure you aren’t setting it too low or too high.

• Improve your financial literacy

Among the biggest roadblocks to financial wellness is the lack of financial literacy. Many people get overwhelmed by financial jargon they don’t understand so they fail to take control of their finances. By improving your financial literacy, you will gain the competence and confidence to manage, save, and invest your money. Financial literacy enables you to implement strategies such as taking personal loans to save money or open opportunities like investing in bitcoin and other cryptocurrencies.

There is no shortage of resources for improving your financial literacy. You can subscribe to financial newsletters, listen to podcasts, read finance books, or hire a financial expert. Whichever you prefer will work if you open yourself up to learning.

• Reduce spending

Once you’ve tracked your spending and become financially literate, you will better understand your expenses and determine which ones are unnecessary. Reducing your spending is a great way to make ends meet and help increase how much you can save every month. In times of inflation, furlough, job loss, or other setbacks, it will be critical to prioritize your spending in order to keep expenses to a minimum. 

• Pay off debts one at a time

Among most people’s long-term financial goals is to be debt-free, and the best way of achieving that is to pay off debts one at a time. If you have multiple debts, focus on paying one before moving on to the other. You can approach paying off debt in two ways:

1. Snowball Method, in which you pay off smaller debts first so you can see your progress. 

2. The Avalance Method, in which you prioritize debts with higher interest rates so you can avoid paying compounding interest and save money.

Conclusion

Short-term financial goals are the building blocks of your long-term financial goals, and by extension, your long-term life goals. You’ll have no trouble finding financial advice on the internet and once you’re financially literate, you’ll be mostly fine on your own. However, what your short-term financial goals should be will depend on your circumstances and priorities. Always remember that how you handle your finances is unique and you shouldn’t go out of your way to imitate others.

Meet Bash Sarmiento

Bash Sarmiento is a writer and an educator from Manila. He writes laconic pieces in the education, lifestyle and health realms. His academic background and extensive experience in teaching, textbook evaluation, business management and traveling are translated in his works.

Find him on Instagram and LinkedIn

Books I Read in 2021

I love a good book! I am an avid reader and for as long as I can remember one of my favorite hobbies has been curling up on the couch with fuzzy socks on and a great book. Forget Netflix! For a while now every year I set a goal to read at least one book per month (12 books per year). Sometimes I can get two or three in depending on the size of the book and the amount of time I have, but at the end of the year that number should at least be twelve (never less). In 2021 I read 14 books and I am sharing with you some of those with you, along with a few that are on my current on my reading list.

1.The 4 Hour Work Week // 2. We should all be Millionaires //

3. Set Boundaries Find Peace // 4. Influencer // 5. Believe It //

6. 18 Minutes

1.The Vanishing Half // 2. Your Time To Thrive // 3. Think Like A Breadwinner //

4. Beyond Entrepeneurship // 5. Simple Be. // 6. Get Good with Money

1.What happened to you // 2. Play Bigger // 3. Between Two Worlds //

4. Superfans // 5. Super Consumers // 6. Scrum

Want to read along with me every month? I created a book club for book lovers like myself. It’ll be a place to discuss each month’s read as well as a place for networking and community. Join the club and grab this month’s read. See you inside!

Setting Financial Goals in 2022

At this point we have become very good at setting new year goals or resolutions. However, setting financial goals for the new year is a very different kind of ambition than working out, losing weight or making our beds every day. 

Yes, it may be important to cut down on carbohydrates or increase the number of trips you make to the gym each week (of course, you can still do those things), but harnessing the power of focused financial discipline can provide you with practical habits that can serve you for a lifetime.

Here are seven straightforward and achievable practices for helping to improve your financial future. 

Set Up a Budget & Track what you spend

A great first step is taking note of your monthly net income. That would be your take-home pay or any other income you have, after taxes. Next, list all of your expenses, including fixed items such as housing, utilities, transportation, and any regular debt payments, such as loans, credit cards, insurance, etc.

Include and track your average grocery costs, out-of-pocket medical fees, and discretionary personal spending. Hopefully there’s enough room left in the budget for saving and investing. The important idea here is to make a budget that works for you and to stay on track.

Set Up an Emergency Fund

It’s easy to feel confident when everything is going fine, but having a rainy day fund set aside in an accessible account could mean the difference between getting through a difficult stretch or falling into a much more dire situation. Th rule of thumb is to have 3-6 months of living expenses put aside. Some people opt to have a more hefty cushion, like 12 months. If you lose your job, encounter a serious health issue, or are met with any number of other unexpected financial challenges, having an emergency fund could make all the difference to your financial wellbeing. 

Pay Off Credit Cards

Getting a handle on credit card debt is critical in creating healthy New Year’s resolutions you can actually stick to and follow through on. The credit card companies are very adept at convincing people that spending is easy. Try to pay off the entire credit card balance whenever it is used.

If you’re unable to pay the entire balance and have multiple credit cards consider credit card consolidation. This can allow you to get on a fixed payment schedule with a target payoff date, potentially lower your interest rate, and possibly improve your credit score. 

Saving X Amount of Dollars

I am not a big proponent of having money sit in a savings account because the interest rates on average are really low. Unless you’re putting money towards your emergency fund or putting money aside for a big purchase like a downpayment on a car or home, your money is better placed in investments where the returns are much higher.

Saving for Retirement

It is never too early (or late) to put money away for retirement. Opening a 401(k) or an IRA should be a top priority. Hopefully, your employer will offer to match your 401(k) contribution up to a certain percentage. This can be especially beneficial because your contributions aren’t taxed on the way in.

Alternatively, if your job does not offer a 401(k) plan, you can set up your own IRA. If you already have one, you can make it a New Year’s resolution to contribute the maximum amount. Currently, 401(k) plans and IRAs have a maximum limit of $20,500 and $6000 for 2022, respectively.

Start Investing

Deciding on what investments to make can be a part of your overall financial strategy. Most likely you have goals spread throughout all the stages of your life plan and your portfolio should reflect those priorities. 

For example, your short term goals (fewer than three years) may include an emergency fund, travel plans or buying a car. You may want these funds to be liquid in order to access them more quickly. For medium and longer term investments (saving for a down payment or retirement etc), you may be able to take some risk, thereby increasing the opportunity for greater returns. It’s always helpful to have some guidance as you establish your investment plans. Speak with your financial advisor to see the options that are best for you and your situation.

Here are some Investment topics and strategies to dive into:

Investing 101: Invest In Yourself

Setting Up Your First Investment Account

How To Start Investing In The Stock Market

6 Questions To Ask Before Investing

6 Tips on Getting Into Real Estate Investing

5 Ways To Invest in Real Estate

Investing in Cryptocurrencies

Up Your Investing Game with NFTs

Long Term Financial Planning

While it may seem like y­ou have plenty of time before you need to focus on long-term financial goals, there can be more to it than just saving for retirement. It’s never too early to imagine where your life is headed and what you want to achieve in the future. 

This can be anything from owning a home, to raising a family, to starting a business, to becoming debt free, to maximizing your earning power. Envisioning what’s possible can enable you to set practical goals to get you there. Once you’ve outlined a plan it is equally important to revisit your plan regularly and make adjustments as needed.

All of these options provide a practical way to rethink your financial activities so you can begin developing an overall strategy for building wealth. And the earlier in your career that you start—especially in your 20s and 30s—the more power your money can provide you over the long run. 

Of course it’s never too late to start adopting practical habits for spending, saving, investing and planning. And if you set your mind to it, there’s no limit to the possibilities you can uncover—while maintaining that resolution to go to the gym regularly, too.

Tax Write-Offs For New Business Owners

As a new business owner, you may not know all the tax write-offs available to you. I sure did not, but with the help of my trusted CPA I am getting more and more familiar the more seasoned I become. I am going to share with you a few that I have come to know quite well over the last several months.

But first, What is a write-off anyway? A write-off is an accounting action that reduces the value of an asset while simultaneously debiting a liabilities account. It is primarily used in its most literal sense by businesses seeking to account for unpaid loan obligations, unpaid receivables, or losses on stored inventory. Generally, it can also be referred to broadly as something that helps to lower an annual tax bill.

Here are 5 Write-Offs to take advantage of if you’re a business owner:

1. Startup And Organizational Costs

As a new business owner, there are certain costs associated with getting started in business called startup and organizational costs. Be sure to keep a record of these deductions because the IRS allows you to write off up to $5,000 worth of startup expenses made in the first year of business. If you spend more than $5,000 in your business the first year, the amount in excess would be considered amortized expenses and is able to be written off over the course of 180 months. So until your business is considered “operational” you are not able to take 100% of your expenses but are limited to $5,000 worth of expenses.

2. Equipment Costs 

As a business owner, you have the ability to write off your equipment. This is a no-brainer if you are a dental professional. Even If you purchase items through Amazon or other stores of the sort for products and equipment, as long as those expenses are considered business equipment costs and not personal expenses, you can receive a tax deduction for it. At the beginning of my business, what became really important to me was that anything eligible I spent my money on was being written off by my business.

3. Business Meals 

Thanks to the Tax Relief Bill that was implemented by the Trump administration as well as the Biden administration you are able to deduct 100% of your meals in the year 2021 as long as there was a business purpose for the meal. So, if you choose to conduct business in a restaurant or you are ordering food for the office, your business-related meals are now 100% deductible - hello dinner team meetings! Make sure that you keep a record of your business meals as well as the purpose of the meal. 

4. Your Vehicle 

If you saw this post you know that I am writing off my vehicle since I use it for my business. If you have a vehicle that you are using for a business, it's so important to understand how to take a vehicle deduction and how to properly depreciate your vehicle. There are two ways to go about writing off your vehicle, you can

1. choose to depreciate your vehicle (e.g., taking the purchase amount of your car and writing it off over the course of five years) or you can

2. choose to take mileage - the mileage is helpful if you drive frequently since there is a set amount, 57.5 cents, that you can deduct per mile of a business-related trip.

When you are depreciating your vehicle you are also able to write off all the expenses associated with that vehicle. When it comes to purchasing new vehicles, you might want to look at buying one that meets specifications (such as weighing more than 6,000 pounds). If a vehicle meets the criteria, including being used for business purposes more than 50% of the time, you may be able to deduct the entire purchase price of the vehicle – financed or not – in the year the car was purchased. What this means is, if you are someone who is in need of a new vehicle for work, you can purchase it and write off 100% of your vehicle purchase amount, whether you make a down payment on the car to finance or if you paid cash. Lastly, you can also write off a leased vehicle's car payments through the business. However, when you are leasing a vehicle you are not able to take the depreciation deduction.

5. Place Your Children On Payroll

Braxton is not of age just yet, but when he is I will definitely be putting him on payroll. If you have children that can do tasks that are ordinary and necessary for your business, this is a great time to grow money for your kids tax-free. Many of us know the benefits of having a Roth IRA and that children can have Roth IRAs, but many taxpayers aren't sure as to how to go about growing tax-free dollars for their children while leveraging a business. When you decide to put your children on payroll, there are no payroll taxes you have to pay on the amounts. You can pay your child up to the standard deduction, which is $12,400, without your child needing to file a tax return. Now as a business owner, you get a $12,400 deduction for putting your child on payroll, without having to file a tax return, and no payroll taxes get paid. On the backend, you can also set up a Roth IRA for your children, place them on payroll and fund the Roth IRA through the payroll #WIN. 

Since becoming a business owner, my mindset towards money and taxes have completely shifted. When you are a business owner, you should always be thinking about how you can leverage savings on the things that you are already spending money on. You should definitely speak with your CPA or trusted tax advisor to ensure you are leveraging your business the right way.

Next Investing Step: Cryptocurrencies

Updated January 3, 2022

If you’ve been here for a while you know Investing is one of my favorite topics. I did a mini series of blog posts a while back and many found them quite beneficial. If you missed them here they are:

Investing 101: Invest In Yourself

Setting Up Your First Investment Account

How To Start Investing In The Stock Market

6 Questions To Ask Before Investing

6 Tips on Getting Into Real Estate Investing

5 Ways To Invest in Real Estate

Before diving in, I want to preface by saying that I am by no means a cryptocurrency expert or any kind of investment advisor. I will try to keep this short and sweet with some actionable steps I used to get started with investing in crypto. The information shared are my thoughts and based on my personal experience on the topic. I’m only sharing these because I feel that if you’re not on board with crypto at this point i.e if it’s not part of your investment portfolio, you’re seriously missing out on an opportunity to build wealth.

What is Cryptocurrency?

According to nerdwallet, cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions. They work using a technology called blockchain, which is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security. The most popular cryptocurrency at the moment is, you guessed it, Bitcoin.

I will admit that several years ago when cryptocurrency was being introduced I was, like many, quite skeptical. It sounded highly volatile, very risky (aka scammy) and sometimes the returns sounded too good to be true. Fast forward several years later after spending quite a bit of time educating myself on the topic and speaking in depth with my financial advisor, crypto educators and other professionals, my only regret is that I didn’t invest in them a lot sooner.

Bitcoin is the world’s first digital asset, is slated to be the currency of the future and as as such, supporters are racing to buy them now in hopes that it will be more valuable later. Just like the internet changed the world many years ago, Bitcoin is expected to usher in a similar change.

My first real introduction to Bitcoin was at the beginning of the pandemic when there was a lot of time to devote to learning something new (the good old days). My husband and I dabbled in a bit of investing and trading during those times with some really good returns. During that time Bitcoin was under $10K. Today (at the time this post is being written) bitcoin sits at around $65K and is predicted to get to upwards of $80K by end of November and north of $100K by December.

There has been a lot of developments lately in the crypto space - major banks around the world and some politicians have sent out pro-bitcoin sentiments. The SEC has approved a Bitcoin ETF, New York’s mayor will be receiving his first 3 paychecks in bitcoin, so are athletes like Aaron Rogers and podcaster Joe Rogan, and El Salvador has made Bitcoin its currency (with more countries to follow suit). It sounds like Bitcoin is here to stay. In my opinion, it would be unwise to not invest, if even a small portion, in cryptocurrency.

How To Invest in Crypto

At the time of writing this, Bitcoin sits at about $65K. If you have that kind of cash to spare you can go ahead and purchase an entire bitcoin. However, you do not need to. You can purchase fractions of bitcoin, whatever dollar amount you can afford. One of the most popular platforms (and what I use) to purchase bitcoin (and other crypto) is Coinbase. However, there are other places where you can purchase bitcoin such as Paypal, Cash app, Venmo and if you use Robinhood for investing you can purchase there too. If you’re a Paypal user, grab my referral link to buy your first $5 of crypto and we can both get $10 (use it to buy even more crypto).

What is Coinbase?

Coinbase is a secure cryptocurrency trading and investing platform that offers users the ability to buy, sell, and exchange over 100 tradable cryptocurrencies such as Bitcoin, Ethereum, and more. It is very user friendly and an account is easy to set up. By using my referral link you will receive your first $10 in Bitcoin after buying or selling $100 of any cryptocurrency you want.

If I were you, I would start investing ASAP as Bitcoin is predicted to get to upwards of $80K by end of November 2021 and north of $100K by December 2021.

*This prediction has changed as the markets changed due to the new COVID-19 strain, Omicron*

If you are very risk averse or still think putting your money in crypto is scary you can earn crypto in other ways. I no longer use my regular debit card for purchases. I now use the Fold debit card where I earn satoshis (a small portion of bitcoin) with my everyday purchases.

What is Fold?

Fold is a bitcoin app and debit card that gives you free bitcoin for qualifying purchases.

Fold lets you earn free bitcoin while you shop. It works just like a regular debit card from any major bank where you would earn rewards (like cash back) on purchases but instead earn free crypto. The average purchase provides 25% cash back in bitcoin. Downloading the app and signing up for a Fold debit card is really easy and there’s benefit in getting both. The app is available in the App Store and if you use my referral link to sign up you can earn 5000 satoshis or sats for short. Satoshis, what’s that? The name is a moniker for bitcoin’s founder Satoshi Nakamoto and is a fraction of bitcoin. In the app, you will also have the opportunity to win additional bitcoin daily with the spinwheel. They have a range of prizes with the ultimate being an entire bitcoin. Read more about that here. There are two different types of debit cards, the Spin or the Spin+. The spin has no annual fee but has a $21 activation fee, while the spin+ has an annual fee of $150 but no activation. With the latter, you are able to earn more rewards and up to 100% cash back. Personally, I have the spin card - I get the benefit of getting fractions of bitcoin (which over time will add up to a large sum) with all my purchases without paying an annual fee. Plus, I am already investing in Bitcoin elsewhere so I don’t feel the need to try to get 100% cash back. After you’ve accumulated at least 50,000 satoshis you can transfer your crypto to a wallet, such as the coinbase wallet (there are others but this is what I use). Ultimately, if you’re looking for a relatively easy way to join the world of cryptocurrencies without investing your own money this is a great option.

There you have it! I have touched on my experience with investing in crypto and hopefully it gives a little insight on making it a part of your investing portfolio. It is very easy to get started, but as with any investment vehicle, do your due diligence, speak with your financial advisor, take caution and be aware that any form of investing is risky.

Next Investing topic will be on NFTs. Be on the look out for that.

Corporate Dentistry vs Private Practice

An opinion piece by Travis Hornsby of the Student Loan Planner

Corporate dentistry wants your student loans to make you afraid of taking risks. I’m not accusing DSOs of anything devious but there are pros and cons of corporate dentistry. Like any business, the owners want a reliable pool of labor that’s perfectly happy with good benefits, a predictable income, and the illusion that working for someone else is safer than working for yourself. 

Decades ago, there were 3,000 graduating dentists a year. Today, there are more than 6,000 new dentists each year. Dental student loan balances have also skyrocketed.

Regulations and declining insurance payouts have drastically reduced the income of an average dentist as well. In 2005, that average stood at almost $220,000. In 2015, the average dentist salary had fallen to about $180,000.

Here’s what I’ve learned from making student loan plans for hundreds of dentists. The higher your student loan balance, the more you should want to own your own dental practice.

What About Student Loans Makes Dentists Afraid of Running their Own Practice?

Most dentists tell me the first time their loans got real was in the first month or two after graduation when their loan servicer sent them their statement. Interest rates as high as 8% on Grad Plus loans are ridiculously high. You probably have tens of thousands of accrued interest, too.

If you owe over $300,000, your payments need to be higher than $3,000 a month just to make a meaningful impact on the principal balance. A typical new grad starts their career as an associate working for someone else earning around $120,000. Many dentists think about paying back their loans, but how do you do that when you’d be paying about 40% of your take-home pay?

Since you receive a letter in the mail every other week from a bank telling you to refinance, you might be tempted to pull the trigger. Thus, your big payments get locked in. Can you take the refinancing risk and then borrow to buy a practice too?

It makes many of my clients terrified. Instead of buying a practice, they might work for years at Heartland, Pacific, Aspen, Comfort, etc. as an associate just to have a guaranteed income to pay down their student loans. 

Why Student Loan Repayment Benefits from Corporate Dentistry Make You Too Comfortable

Remember that the goal of any employer is to give you just enough that you won’t want to leave. That can lead to complacency on the part of employees. One of the fast-growing ways to make new grads feel attached to their jobs (in general not just in dentistry) is student loan payment benefits.

As humans, we are prone to the fear of loss. It’s why we hold onto a bad investment even though the rational action might be to sell it. Fear of loss is why we keep a lousy house, car, or vacation property even though we know we should get rid of it.

I just saw a case of a doctor on Facebook who was having a really hard time getting out of a $600,000 house he knew he shouldn’t have bought. The reason? He didn’t want to lose $15,000 on it. That’s extreme loss aversion. He’s cool flushing tens of thousands down the toilet rather than downgrade to a more affordable house just because he doesn’t want to psychologically admit the mistake and take the financial hit.

Likewise, there is a negative psychological impact when you leave a job with a student loan repayment benefit. If your employer offers $20,000 a year towards your student loans, it hurts to give that up for an uncertain ownership path.

Other Ways Corporate Dentistry Profits from Dentists

Corporate dental groups use other methods to make employees not want to leave. They realize that many dentists would get restless without a seat at the table in their practice, so they’ve invented a lot of hybrid ownership structures.

Pretend Dave is a new grad and associates for a practice in a random part of the country. His starting salary is $120,000 with a 10% to 30% bonus based on how the practice does. His office produces $1.2 million after three years on the job. 

The dental practice does not want to lose Dave, so they show him this amazing projection of income that tops $300,000. All he must do is buy 50% of the practice and stay for 10 years. 

He’ll be a majority owner, and the DSO will handle all the marketing, hiring, billing, and operations. They want him to pay at a valuation of 75% of revenue, and they’ll have him take out a loan for 50% of this price to purchase 50% of the shares.

Why Do I Dislike Joint Ownership Ventures with Corporate Dental Groups? (for the Dentist)

Dave has a lot of student loans, so he really likes the idea of having the DSO handle all these business functions for him so he can focus on dentistry. The high projected salary they show him makes him feel confident that he’ll be able to pay his loans off one day.

Why is this not a great deal financially for Dave? 

Here are a few reasons:

1. He’s spent years building the valuation of the practice by increasing its revenue and now must pay a higher multiple for the business

2. Anything less than 100% ownership of a practice is harder to sell

3. He could get 100% financing on his own without the corporate dental group

4. He could procure the business services much cheaper than equity financing by paying for them directly

Building the Valuation for Someone Else

Many new associates are hungry to prove themselves, which often results in much higher practice revenue within a few years. 

Many dentists turn around and take an even bigger loan out to buy this increased production from themselves basically. You can prevent this with an option to buy a practice at an agreed upon % of revenue at your start date.

Don’t Pay 40% of the Business Valuation for 40% of the Practice 

Another common pitfall happens like this: an accountant tells you that the whole dental practice you’re looking at is worth $1 million. The ownership group then offers you a 40% stake for $400,000. While this sounds fair, it’s not. 

If you had to sell a minority interest on the open market to someone not affiliated with the dental practice, you would have to accept a discount on the price because they’re not getting full control.

When ownership agreements include the exclusive right of a corporate dental group to provide business services (like marketing, HR, operations, etc.), you reduce your pool of buyers. Who wants to be saddled with a contract from the previous dentist? Perhaps the best buyers own the other shares, and thus they can offer you less for your shares.

Another thing to keep in mind is that majority control is often worth more than you think. If you control 51% of a dental practice, you have the power. You would not want to pay 49% of the practice valuation for 49% of the practice.

I could give more examples, but the point is that if you’re even thinking about entering a partnership agreement, you should run the contract by an accountant used to valuing dental practices. Otherwise, how can you know that the agreement is fair to both parties?

When you’re dealing with a sophisticated organization like a corporate dental group, any agreement you sign is likely to be biased against your interests without someone equally sophisticated in your corner.

Why Dentists Will Get All the Capital They Need to Become Owners

Another concern I see with dentists who partner with DSOs is that they don’t want to take on so much debt to own a practice. They look at the $600,000 to $800,000 price tag of many solid practices and get squeamish.

In terms of securing a practice loan, banks will be happy to give you most of what you could want, even with a bunch of dental student debt. The only issues I’ve seen are with loans for jumbo-sized operations (more than $2 million in revenue, then it might get tricky).

Of course, you need to have a track record of at least a year with solid production history for a bank to feel comfortable. That said, getting capital to buy 100% of the practice you want will not be a problem.

In terms of the fear of taking on more debt, I get it. You’re already feeling nauseous that you owe over $300,000 from dental school and you’d like to keep that debt as low as possible.

However, dental practice loans are a different animal. Almost all the loans get paid back. In the rare case that the dentist defaults, the primary culprits are alcohol and drug abuse, not bad business results according to the bankers I’ve spoken with. 

While $800,000 of business debt can look very intimidating, a dental practice is going to pay for itself over time. The profits of the business pay off the practice loan, and eventually, you own an asset in full. The tens of thousands you had to pay towards your business loan you will recoup one day as additional income once the loan is gone. The bigger the practice that you buy, the bigger income number you will have all things equal.

How Dentists Drastically Overpay For Business Services For Their Practice

Finally, pretend you’re the kind of dentist who likes to turn off the lights and go home. This is one of the biggest reasons I hear from dentists who choose to be associates long-term or partner with DSOs.

As a dentist, you’re doing most of the work to keep the practice humming from a revenue perspective. Yes, corporate dentistry might bring in the patients, help with staffing, and run marketing, but what are these services truly worth? 

What I find is that many dentists do not realize that they don’t have to do it all by themselves as practice owners. There is a huge industry of practice consultants and dental professionals that handle everything from collecting bad debts to billing to websites and more. They’ll run your marketing, assist with staffing issues, and even help with compliance. I heard of one company on the Millennial Dentist podcast the other day that even customizes chatbots for practice websites.

Many of these professionals might charge $10,000 or more for their services. While that seems steep, many dentists pay much more than that by partnering with a corporate dental group. Pretend the practice net income is $500,000 and you’re a 50/50 partner with a DSO that handles business functions.

We know that in more than 99% of cases, dentists successfully pay back practice loans. That means that the dental practice will pay for itself in time. Hence, the dentist is paying about $250,000 a year for the services the corporate dental group offers. What kind of team could you build to support your practice with that kind of money? Furthermore, many expenses might be front-loaded in set up costs.

If you set up the website, social media, and operating systems well, they might need only occasional maintenance for example.

While I understand the appeal of turning the lights off and going home as a fellow entrepreneur, you might as well capture the full benefits of your labor. Groups that help you outsource business-related tasks that take an ownership percentage are essentially doing the easy stuff while you do all the bread and butter dentistry that keeps the lights on.

The Simple Truth about Dental Student Loans and Working for Corporate

If you have no debt and want a flexible lifestyle with good benefits, working for a corporate dental group might be a great decision. If you absolutely cringe at the thought of talking to anyone about business, then perhaps you should work for a DSO as well.

I beg you though, please do not let your student debt influence your decision to become an owner or not. It shouldn’t deter you from the advantages of starting a private dental practice. 

You should consider buying a practice as soon as you feel comfortable doing so if your goal is getting a good return on your educational investment.

Bankers consistently tell me the default rate in their dental practice loan portfolio is extremely low. That means there are big profits to be made in dentistry, even with the increasing number of graduates. 

The headwinds of big student debt and ever declining insurance reimbursement rates make ownership scarier than it used to be, but too many dentists are not confident enough to take the leap and live the dream of ownership. The math is still stacked in your favor.

You can do this, especially if you owe a ridiculous amount of debt from dental school. If you know you’ll eventually refinance, use REPAYE and make prepayments until you’re firmly established in your practice. This will keep payments low and allow you to show a healthy cash flow profile to bankers.

If you want us to create a custom student loan plan for you that incorporates your career goals, we can do that for you. Click here.

If you know you’ll owe more than double your income for most of your career, the tax breaks and income optimization from practice ownership are invaluable. You can increase the financial security of your family while minimizing your taxable income and increasing the amount of loans forgiven.

I have nothing against corporate dental groups. They have contributed to innovation in the field and have provided a predictable stream of jobs for new grads to learn the ropes. 

I just want to look out for the interests of my dentist clients exclusively when they compare corporate dentistry vs. private practice. As a solo practice owner, you can have a high, stable income with a degree of autonomy that’s rare for healthcare professionals. 

Cede that autonomy with great caution to a DSO for an illusion of safety and security.

While I share some of the views and opinions in this article, they are not my own. Click here for the original and full article by Travis Hornsby - The Student Loan Planner.

Travis has helped thousand of dentists with customized plans to pay down their student debt and gain financial freedom. Visit his site here for a consultation.

7 Steps to Smashing Your Goals in 2021

Beginning a new year is such a hopeful time. Whether we break out an unblemished calendar or merely scroll over to the month of January on our smart phones, there’s the sense of being given a fresh start every January. We make notes, either mentally or on paper, of New Year’s resolutions we’re determined to accomplish. Goal setting is a powerful process for thinking about your ideal future, and for motivating yourself to turn your vision of this future into reality by smashing your goals in 2021. The process of setting goals helps you choose where you want to go in life. By knowing precisely what you want to achieve, you know where you have to concentrate your efforts. You’ll also quickly spot the distractions that can, so easily, lead you astray.

With that said, as we optimistically set out to achieve great things at the beginning of the year, we must break our goals down into small manageable, attainable and realistic ones. Setting new year resolutions has been a long time tradition but did you know that statistics show that only about 10% of people actually stick to their new year resolutions past the month of January?

I am a huge proponent of self improvement and and an even bigger proponent of setting goals that are actually measurable and attainable. With that said, let’s make 2021 the year we actually accomplish our goals with these 7 steps:

1. WRITE YOUR GOALS DOWN

A sure way to make things happen is to write it down. It sounds strange, but there is enormous power in putting things down on paper, and according to research you become 42% more likely to achieve your goals and dreams when it’s written. I always keep a physical (paper) planner even though I use the planner on my smartphone as well. After years of not being able to find the perfect planner, I have decided to create a goal planner and to share it with my readers.

2. PRIORITIZE YOUR GOALS

Identify the top priority areas that you want to work on. Is it health? Finances? Career? It could be all of the above, but pinpoint specific things in each category to work on. For example, if it’s finances a realistic goal would be to increase your monthly savings by 5% or to save $X amount for an emergency fund by X-date. This process of narrowing your goals down helps to weed out the ones you just aren’t that committed to. 

3. MAKE YOUR GOALS S.M.A.R.T

So how exactly do you set intentions that you will actually stick to? Be SMART about it.

Before you set a goal, first figure out your “why.” By figuring out and articulating the reason you want to achieve something you are more likely to remain motivated to stick to it, rather than it being something you think you should do.

S - Small and Specific: Break your goals into smaller, more specific ones. For example, if your goal is to eat healthier in 2021, be more specific by making it about adding 1 fresh fruit or vegetable and a bottle of water per day for the month of January.

M - Measurable : All your goals must be measurable, that means you should be able to describe the physical manifestation of the outcome of your goal. Example, losing 2lbs per week by adding one fruit or vegetable and a bottle of water to our diet each day.

A - Attainable and Accountability: Is your goal attainable? Can you realistically achieve your goal? Another great way to stay on track is to find an accountability partner. Example, someone who will check in to make sure you had your fruit/vegetable each day or someone who will ensure you meal prep.

R - Relevant and Realistic: Is this goal relevant to you or even realistic? Ensure you’re not setting a goal that you really don’t care about and hence not realistic. Example, I dislike running. If i make it a goal of mine to incorporate running 1 mile/day I know I will fail. Instead, I ensure I get my cardio in by getting on the elliptical, bike or taking a Zumba class.

T - Timely: Make a tentative plan for everything you do. Don’t just make it a goal to exercise once per day. You know your schedule, you know if you’re a morning or late night person. Instead of saying you will work out once per day, say you will work out at 5:30 each morning for 1 hour before work/school.

4. FIGURE OUT HOW YOU WILL ACHIEVE YOUR GOALS

This is where we sometimes lose focus. We may know what goal(s) we want o accomplish but the steps in how to accomplish them might get blurry.

Say you want to increase your savings this year. As in the example above, you would start by committing to an extra 5% of your biweekly salary. To make this actually attainable would be to automate it. If 5% of your biweekly salary is $350 then automate that amount to go into your savings vehicle twice per month. A “set it and forget it” approach works well in this case.

5. TRACK YOUR PROGRESS, REFLECT AND RE-CALIBRATE

Resist the urge to freestyle your goals and actually check your progress as you go along. What can you improve? What isn’t working? At the end each month, take time out to analyze what you have achieved, what you failed to achieve and how to improve on this. Journaling as you go along and circling back at the end of each month can really help you to stay on track.

6. ADJUST TO LIFE’S LEMONS

Life gets in the way and can derail you. Things such as illness, family commitments, work, life emergencies etc can impact your goals. Take note of these things and adjust as you proceed. 

7. ASK FOR HELP

Lastly, get an accountability partner. Have a friend or loved one you can lean on  for moral support and encouragement, you will need it from time to time. If you need specific help, reach out to those who can offer any guidance or assistance. The internet and social media is a great way to make connections.

Bonus: Be your own D**n Cheerleader and eliminate self doubt. Figure out what keeps you motivated and inspired. I love quotes! I keep them everywhere - my phone’s wallpaper, sticky notes around the house, on my desk at work, on the bathroom mirror, etc. I listen to music, books and podcasts that are uplifting. I tolerate no negativity and try to stay away from it at all costs.

Remember, a goal without a plan is just a wish. By breaking down your goals into bite-sized, manageable actions and writing them down, setting goals and intentions for the new year that you can actually stick to becomes a much easier process.

Grab your planner and let’s smash our 2021 goals! Remember, a sure way to make things happen is to write it down.