Is your lifestyle worth it?

By 28 November, 2019Uncategorized

I took my car in to have new tyres the other day.  The garage is owned by an ex-patient, so I’m known there, and it wasn’t long before I heard the comment “you never see a poor dentist”.

HMRC and most dental accountants might disagree.  The days when dentists could easily make large sums of money are over.  It’s still possible, but it’s a lot harder to make the income that was prevalent in the 80’s and early 90’s.  You know have to be very good at what you do, be well-liked by your patient base and be a good business person to make the kind of money the public perception insists dentists earn.

What’s the average income now?  £60-£80K.  It’s still not bad, but its not what the public think we earn.

So why is this?  Why has our perceived earning potential dropped?  Well, I have some ideas…

  • The cost of running a practice is so much more
  • The NHS income is capped
  • The materials are more expensive
  • The decent labs are more expensive,.  So even if you do the high emnd crown and bridge work, you have high end lab bills to pay for.
  • There is much more “opportunity” to buy stuff (dental equipment) you don’t actually need

The thing is, regardless of what we earn as individuals, dentists seem particularly adept at getting trapped by Parkinson’s law:

“Expenses rise to meet earnings.”

Time and again, I encounter dentists who have the illusion of wealth (nice car, nice watch, nice clothes, swanky practice, nice house etc etc) who then go on to complain that they are “skint”.  I look at their earning potential and find it difficult why they are so strapped for cash.

Parkinson’s law.  No matter what they earn, they end up spending it…and more besides.

Now some of the people reading this will have broken Parkinson’s law.  They will drive an average car, live in an average house and act with frugality when it comes to money.  Often this will depend on where they live (it is harder to do this in London compared to Newcastle for example) as well as the number of children they have.  But most of the time it’s about their approach to life and money.

Your lifestyle often determines how much money you have left at the end of the month.

And yes there will be those who spend big, but who also earn big to the extent that the money coming in is greater than their ability to spend.  These are the earning superstars of our profession…but even some of these people are navigating the fine line of bankruptcy.  If you want to get the true picture on this, just chat to your accountant.  The number of their clients who don’t have enough money to pay their tax year on year is often staggering.

If you have this money stress in your life, how do you think it affects you psychologically.  It wears on you, chaffing your mind and perhaps leading you into unwise decisions.

If you read the book “the millionaire next door”, the average American millionaire had one thing in common. They invariably broke Parkinson’s law.  Many of them weren’t particularly high earners, they just knew how NOT to spend money, and they knew how to invest wisely.

And what is the benefit of this?  Why does having money in the bank matter?

  1. Without a fighting fund of cash, you are constantly having to run on the hamster wheel to keep the bills paid
  2. Without a fighting fund of cash, you can’t invest.  Most of the wealthy became so via their investments, not their main income
  3.  If you are not financially independent you are working because you HAVE to not because you WANT to.  There is more to life than fettling with teeth
  4. What happens if you have a health crisis?
  5. What happens if you have a marital crisis?
  6. What happens if the country drops into the recession we are well overdue for
  7. If you are living off debt, do you think interest rates will stay this low forever?  Sooner rather than later they are going back up

I can’t tell you what to do with your money.  All I know is I would rather have money in a bank than to own an overpriced status symbol.

Just a thought