Always Know Where Your Money Should Go

My husband and I got married almost two years ago. Combining income, checking accounts and reconciling our spending habits was daunting. And I’m a financial planner with an accounting degree.

After a few months of what felt like chaos, we had to take a step back and become intentional with our spending and saving. I couldn’t stand not feeling in control. I didn’t like having to log into our checking account every day and review the transactions just to get the barest possible picture of our spending habits. Clearly, the first step we had to take was to determine where our money should be going. Our personal financial situation, I’ve learned, is much like a smaller-scale version of what many dentists face every day.

As the owner of a dental practice, if you recently have uttered the words, “I don’t know where my money goes,” then you also should take a step back and evaluate. Begin by talking about where your money should go. From a practice standpoint, there are benchmarks for each expense category in your dental practice. Have you reviewed them? For a general dentist, dental supplies typically range from 5-7 percent of gross production. How do yours compare? In an orthodontic practice, employee-related expenses can run approximately 22 percent of gross production. How does your practice stack up? Review the appropriate practice benchmarks for lab, facility, marketing, minor expenses and discretionary expenses so you know, generally, where your money should be going.

From a global cash flow standpoint, your needs, wants and savings should all be properly aligned. Your needs, which are taxes and all personal and practice loans, should consume 50 percent of your practice’s profit. Your wants, which are large purchases and lifestyle spending, should account for 30 percent of your practice’s profit. Your savings, both retirement and education, should be 20 percent of your practice’s profit. Of course, these figures are all guidelines. We have helped some dentists structure their loans so that their needs drop to below 50 percent of profits and their savings increase to above 20 percent. We have found that when expenditures in a given category (most often needs or wants) are way out of alignment, typically that’s what prevents dentists from paying themselves first.

After a few harried months of constantly checking our bank account, my husband and I regrouped. One of the first steps we took was to review our savings. We definitely were not saving 20 percent of our income. So at the start of the year, we each increased our 401(k) deferrals. This bumped our annual savings to approximately 16 percent of our gross income. We barely felt the change at home (which is typical). And while we aren’t quite hitting that 20 percent target, it made me feel a lot more in control of our finances. I knew that we were intentionally saving for our long-term goals, and it took the pressure off feeling like we had to monitor every $5 transaction. But we never would have gotten to this point unless we intentionally sat down and talked about where our money should start going. I’ve found that dental practice owners can benefit greatly from having the same conversation.

This commentary originally appeared August 9 on


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Katie Collins, CFP®

As a practice integration advisor, Katie works directly with clients to develop a financial plan personalized for their specific situation and goals. She quarterbacks the entire financial picture, often for clients who have never put all the pieces together with one advisor. Katie joined Buckingham Strategic Wealth through the 2014 merger with Indiana-based Hufford Advisors, where she spent more than 10 years working in various financial planning roles, most recently as a senior planning consultant.

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