Are you worth as much as you think?

2015 05 29 14 55 32 976 Harper Reese 200

Dentists and specialists are some of the highest paid individuals in the U.S., frequently appearing on the list of best paying jobs in the country. However, almost half of dentists (49.3%) believe they will have to postpone retirement, according to the "Dental Economics/Levin Group 2014 Annual Research Report."

Reese Harper, CFP.Reese Harper, CFP.

So, if dentists are making such great money, why do so many struggle to build a successful, secure retirement? Most dentists are forced to make a bunch of complicated financial decisions, without any formal training.

For example, my team just finished spending the last several hours analyzing many refinance proposals to see which made sense for a client. We compared each bank's prepayment penalties, yield spreads, interest rates, terms, and fees. Then we reviewed the client's income, tax rate, existing loans, cash flow, and retirement projections to determine which bank to select. And that's just one decision.

Dentists also have to analyze practice acquisitions, personal spending, expansion plans, new equipment purchases, real estate purchases, employee benefits, taxes, overhead, and much more. It's a ton of work and difficult to do when you studied dentistry, not finance, in school.

The misconception is: "The more I make, the more successful I am." The truth is, a good income doesn't guarantee a successful retirement. In fact, in many ways it can make it even harder to retire successfully.

High income doesn't equal high personal net worth

One beautiful spring afternoon in 1984, Bill and Jim graduated from dental school. They were very similar -- exceptionally talented, personable, and filled with ambition. Thirty years after graduating from the University of Maryland, they got together to catch up on old times.

“A good income doesn't guarantee a successful retirement.”

In many ways, they were still very much alike: happily married with four children and a great reputation in their communities. But there was one big difference: Jim was thinking of adding a fifth workday to improve collections, while Bill was happily retired, spending his days fishing, traveling, and skiing with grandkids.

What made the difference? They both had similar incomes since starting their practice. So, how did Jim end up with such a different result? It wasn't intelligence, talent, or dedication, and it certainly wasn't a lack of ambition.

The difference is this: Bill is worth more money -- plain and simple. During his career, Bill made better financial decisions regularly and incrementally, resulting in a higher personal net worth at an earlier age.

It wasn't just one financial decision that delayed Jim's retirement; it was a combination of several factors. Perhaps Jim paid a little higher interest rate on his real estate loans, bought a slightly more expensive home, spent a little too much on vacations, kept a little too much money in his business checking account, and delayed important decisions, such as maximizing his retirement contributions.

Each decision you make has an effect on your personal net worth. If your personal net worth is high enough, you can achieve financial freedom and retire on time.

Remember this: What you earn is not what you're worth, and your personal net worth is more important than your income. Bill and Jim earned the same income, but they ended up in two entirely different places.

To have a secure retirement, you need to strategically, consistently grow your personal worth, and you need a plan of attack so you avoid making decisions that undermine your worth.

How do I determine my personal net worth?

Your personal net worth is calculated like this:

Your stuff (assets) - Your loans (liabilities) = Your personal worth (net worth)

The first step in figuring out your personal net worth is identifying your assets. Assets include, but are not limited to, the following:

  • Cash
  • Mutual funds
  • Retirement
  • Real estate
  • Practice value

Now, subtract all your debts, such as the following:

  • Student loans
  • Equipment
  • Practice
  • Mortgages, building, etc.

The difference between the two figures is your personal net worth.

If you want to prepare for a successful retirement, you absolutely need to know what you're worth, and review this figure on a regular basis. By doing this, you'll naturally make decisions that increase your worth over time.

More important, you need to measure how much your personal net worth is increasing or decreasing over time. This will help you make small, regular adjustments early on to avoid spending time in the hurt tank.

Protecting your personal net worth

The key to making intelligent decisions with your money is having an awareness that all financial decisions either increase or decrease your net worth. For example, your net worth grows when you pay off debt, accumulate cash in your business accounts, or make wise investments. On the other hand, it decreases when you take out an equipment loan or buy a new car.

I'm not saying all financial decisions must increase your personal net worth; sometimes we incur expenses simply because we can afford it. However, earning a great income has a way of making people feel too comfortable about their ability to retire securely. We've seen it many times. An experienced financial advisor will make sure your retirement is secured by helping you calculate and keep track of your personal net worth and protecting it for a successful retirement.

Reese Harper, certified financial planner (CFP), is the founder of Aquire Advisors, a financial advisory firm for dentists. To learn more about how to make smart decisions with your money, sign up for helpful tips at

The comments and observations expressed herein do not necessarily reflect the opinions of, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.

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