Richard Low (00:21):

Welcome to the Shared Practices Podcast. I'm joined with me today by my co-host, Dr. Scott Leune. Scott, welcome back to the show.

Scott Leune (00:29):

Yeah, thank you. I'm excited to dive into this topic today.

Richard Low (00:33):

We have seen so many dentists, so many listeners at different phases of their career feel like their student loans are crushing them, like holding them back from doing what they want to do, forcing them to maybe even still be a dentist when they don't want to be a dentist. They think they don't have other options, they don't have a pathway to be free, they don't have a pathway to financial freedom, and it's these student loans that's getting in the way. And so today we wanted to address that head on because we've seen people with half a million of student loans or more successfully do very, very well in dentistry, in practice ownership in entrepreneurship. And that message almost can't be overstated because the ignorance of this of I can't own, I can't be successful, I can't do all of these things. I'm trapped is a crushing message that will hold people back. So where have you seen this shown up as you've talked with people and educated others?

Overcoming the Excuse of Student Loans

Scott Leune (01:35):

Well, I kind of think back to sometimes I take this approach if my son were this dentist I'm talking to, what advice would I give my son because I have the kind of relationship in my family where I can speak directly and honestly and we know that we're wanting to do the right thing for each other. And to me, that helps me kind of reframe how I answer some questions. So if my son were a dentist, graduated with crushing amounts of student debt and they were working for A DSO, what would my advice be? What would I tell that son of mine? I would say stop using your student loans as an excuse to procrastinate building wealth for yourself and your family. Stop using this big number as the reason to not move forward and do the right thing. Stop delaying financial success because you are allowing the student loans to weigh you down emotionally and you are now making illogical decisions about the business side of your career.

That's what I would say. And there's a whole lot of dentists that have just written themselves off. The first 10 years of their career are about building speed, about getting secure in your job, about maybe putting a little bit of money aside, and it's because they've got a lot of student loans. Unfortunately, it's so illogical. The best way to put money aside is to make the most money you can and we make the most money we can when typically we own the practice. So we can't let student loan debt stop us from becoming financially successful earlier. We have to go around it. We have to go around that obstacle, recognize it's there, make decisions to go around it and be financially successful sooner in our careers.

The Three Phases of Dealing with Student Loans

Richard Low (03:34):

Well, and that message also has the potential. If someone misinterprets this or someone comes at this from the wrong angle, their immediate next actions can actually put themselves further behind. If someone is saying, man, I don't want student loans to hold me back, this is the biggest fear for me to them is, well, don't tackle your student loans by paying them down before you own a dental practice and don't refinance them before you own a dental practice. Those are the two things that if you do those before you're in ownership, you've shot yourself in the foot.

Scott Leune (04:13):

Yeah, maybe let's call it the three phases here. Just let's get into this kind of outline way of thinking. Three phases of dealing with a student loan. Phase one, you have to go set yourself up to make as much money as you can. That's phase one. So you are have the student loans there, you're making the minimum amount of payments. You are basically using your credit, your money, your time to invest in the business side of your career. Let's grow. That's phase one, phase two, you're now there. You're probably a practice owner. Now we've got to maximize our income to be above and beyond anything we would ever need. So phase two, we're already now the owner, but now we're a very successful owner making more money than we ever would need, right? That's phase two, getting to that point. Then phase three says, okay, what do we do with the extra money now?

Do we put some of it towards student loans? That's kind of how I look at it, those three phases and the problem, one big problem I see is that dentists are procrastinating phase one. They're not starting that phase because they've just gotten into this trap of thinking that it's not the right time and they're using the debt as the reason and they suddenly get sucked into mediocrity of dentistry, mediocre income, mediocre job with the weight of the student loan in the back of their mind added to the weight of their mortgage and the weight of the family and of the relationships and their health. And it becomes a pretty difficult situation when you're stuck into that jail cell of a job and you just feel like you're going to be in there for a while. That's what I see. Maybe I'm being a little dramatic, but man, it's such a different story. It's such a different path compared to dentists that just get out of school or make a decision finally and say, you know what? I need to get to this next chapter of my life. I need to become an owner. I need to make money, and that's going to be the fastest way for me to deal with this issue of student loan debt.

The Reality of Student Loans and Practice Ownership

Richard Low (06:24):

And there is a sense for dental students who I just lectured to three dental schools in the last three weeks and many of the students just, this wasn't on their horizon. They were like, okay, we're going to make a lot of money as a dentist. There's this naive early stage of, okay, I can take on half a million of student loans at a high interest rate and I'm going to make it all up as a dentist later, which is very true and very possible. But when you then graduate and go to a job where you're making a hundred twenty, a hundred fifty, two hundred K and your actual disposable income is after taxes, after expenses, after student loans, there's not a lot left over. It feels very scarce. It feels very scary. So you go from pie in the sky assumption of like these student loans are not going to be a big deal. All of a sudden they feel like a very big deal. They feel very crushing and it changes when you are making 500, 700, $800,000, all of a sudden that half a million of student loans the payment associated with it, your relationship to that changes. But if you're stuck in that mentality in between of I can't do anything, I am paralyzed by the weight of these student loans, it stops you from getting to the other side where you are able to make much different decisions because your disposable income shifts significantly.

Scott Leune (07:56):

I recently posted on my personal Instagram page, by the way, anyone can follow me if you want. You'll see dental posts, you'll see some of my family posts. It's Dr. Scott Leune. If you look on that, I posted recently this statistic that said owners, dentist owners after their debt payments for the practice, when you look at kind of their take home pay, the leftover take home pay, they make on average $93,000 a year more than dentists that don't own. That's the national average. And if you were to invest that 93 grand every year and make a modest 7% after a half career, 20 years a half career, it'd already be up to 4.2 million. And so what if we just agree on some truths for a second? What statistics tell us is that owners in general make more than non-owners. Okay, let's just agree with that fact first.

Alright, so now back to my son, my dentist son, my hypothetical dentist son who has debt. I would say the more debt you accumulate for school, the faster you need to become an owner and to do anything other than that would be irresponsible to the future version of yourself. The more debt dentists take on, the faster they must become an owner. Also, the faster they must invest in themselves in business and clinical education. That also increases their income as an associate. But for sure, the more debt we take on, the faster the earlier we need to be putting ourselves in a position of making money. If you think about a young college student, they've even gone to dental school, they're just in college, and let's say they don't really have much debt and they want to take a year off and go travel the world and go find themselves, they can do that.

They don't have a lot of financial pressures on them. They don't need a lot of money. They have this flexibility to do something that doesn't make much money, but now go tack on a half a million dollars of debt to that person and now go put 'em out in the world with these huge debt payments per month. They need to get into a lucrative financial position as soon as possible. Any advice that pulls 'em away from that path is probably really bad advice and I think a lot of professors in dental school are giving them what I would consider very bad financial advice.

Richard Low (10:32):

Someone had posted recently the question, what should they be teaching in dental school that they're not? And everyone was practice management, practice management, practice management, and I came on, I was not practice management because what is being taught in dental schools and those who are teaching it in dental schools are not out doing it right now and their experience is going to bias in color that advice that they're given. And so sometimes the wisdom that the crowd think of other dental students, of dental professors who are not out in the business world at this moment is not going to serve best of an individual who needs to move and make big changes, which I would say there is a spectrum of what is that half a million dollars doing to you? Is it causing you to stress so much that you can't make a decision?

You're so paralyzed by fear that you can't even fathom and educate yourself on the business side of things? Or are you blissfully just assuming this is all going to be okay? There's a sweet spot in the middle where the realistic picture of what your debt looks like and to pay it back is the fuel to do what you just said. Get into practice ownership soon. Get into practice ownership early. And so I think we should talk about this first phase of from graduation to being in a situation where you can make different decisions. That phase of what do I do? What are the steps in order to not let student loans hold me back from making more and being an owner?

Strategies for New Graduates and Associates

Scott Leune (12:10):

Well, okay, let's look at what student loans are doing to people doing to dentists. Student loans are number one, making it harder for a dentist to get a loan. Number two, student loans are eating away at that. Dentist's spendable money every month. Okay? Now in addition to that, student loans are creating this kind of emotional effect that pulls us away from rational decision making, this kind of weight and this fear about this big number that we have on a sheet of paper that says we owe that. So to me, those are three major things. It's harder to get a loan, it's sucking away or spendable money, and it's causing us to maybe react to things irrationally or make irrational decisions. Now how do we deal with that in this first phase, this first phase, which could be a new grab, but it could also be a dentist who's been out for 10 or 15 years.

It still hasn't dealt with this. It could be a dentist for 20 years. This hasn't dealt with us. They've just been an associate. So let's just call this the associate dentist face, right? What do we do with it? Well, number one, we got to own as early as possible and make the most money we can. That's the responsible conservative thing to do. The most conservative thing to do is to own to pay down that debt. So how can we own though if we have less ability to get a loan? Well, here's the wonderful situation we have on our hands right now. Yes, it's harder to get a loan than it used to be when debt levels weren't so high. But nearly everyone with high debt levels can get the loan. So sometimes you can't get it your first year out. Sometimes you have to be a dentist for two years first, or you might have to show proof that you're making money working for someone else while you're building a startup practice.

There's some hoops you'll have to jump through, but by no means are those hard hoops in life to jump through. They're just little hoops. So there's this disconnect happening. We assume as dentists that we can't get the loan because our debt is so high, but what we're not understanding is most people in our situation are actually getting the loan after they jump through a couple of little hoops. Those loans are even easier to get if you're buying a practice instead of starting a practice. They're even easier to get if you are making money in a job or if you have someone co-sign all the traditional ways of diluting risk for the bank apply. So we got to get that loan. It's not going to be hard for most people. The people, it's hard for though you can still get a loan as well. It's just going to be smaller. So you can still do a startup, it's just going to look different. You can still buy a practice. It's just going to be a different kind of practice. It doesn't stop you from ownership. So to me, that's one thing is like can we get the loan?

Richard Low (15:06):

And with that too, I give the example and I'm lecturing to dental students. People want to throw extra money at their student loans to feel like they're making progress. And if you're trying to do what you just said, which is get the loan having cash on hand, I give the example of say that you've got 500 K of student loans, you've got a hundred thousand dollars in the bank, you've saved, you've been diligent. If you were to pay down a hundred thousand of that 500,000, now you have 400,000 but you haven't refinanced the loan. Your monthly payment is exactly the same, and now all of a sudden banks don't want to touch you because you don't have liquidity.

Scott Leune (15:46):

Yeah. So here's another trapped way of thinking that people fall into, they have extra money, what should I do with my extra money? And they start thinking about what's the interest rates I'm paying on things? What are my tax write-offs? Where should I park that money? Should I pay down debt? Well, that's the correct way of thinking later in life. That's correct way of thinking. When you're earning more than you'll need, it's the wrong way of thinking in the beginning. What we should be doing in the beginning is hoarding the cash, not paying down debt, maximize our debt so that we can get into ownership. So if we are in a situation that you described where we've saved up 50 or a hundred grand in cash and we're wondering, should I pay down my student loan debt or my mortgage debt or my car debt with it?

My answer would be absolutely not. That cash is going to make it easier for you to get the financing approval to then become an owner. Your goal is to become an owner. Your goal is to not pay down debt, even if it's interest rates that are higher than you're comfortable with, your return is exponentially higher when you become an owner, then whatever interest rate you don't feel comfortable with. So that's a great point that you bring up because phase one is not about paying down debt. Phase one is about slow playing your debt while maximizing your cash and getting the loan you need to become an owner. Let's put a little fine print there. When I say maximize debt, I don't mean you're getting a cyber truck or Ferrari or anything like that because you can, I'm talking about maximizing the mandatory debt you have, which would be school debt and maybe we'd put some living debt in there as well. But let's not go into wasteful debt and I'm sure everyone in this podcast understands what I mean by that.

Richard Low (17:51):

Yeah, and I'll add, I mean the point you just made, I think sometimes this is the hardest for the financially savvy pre owner because they feel so strongly that if my money's not invested in the market, if there's not growing, if it's not in crypto, if it's not doing something for me, I'm wasting my money. But the statistic you gave us earlier that was on your Instagram page of owners make on average $93,000 extra per year. Let's just round up and say that we'll have a slightly above average owners here. So let's say a hundred thousand dollars extra per year you would take home as an owner. That means the a hundred K that you set aside and don't throw against your student loans actually has a hundred percent return on investment if you can get into practice ownership. So that is the best money you could ever invest in your career is stockpiling that in some dumb money market account That doesn't earn you any more than just the basic that you could in a money market account that is the best invested money you have if it allows you to get into practice ownership.

The Long-Term Benefits of Practice Ownership

Scott Leune (18:56):

Well, there's also a couple other layers to that. Not only is that the best investment like you said, but you're also earning equity in that practice that you now own. That's going to be worth something. But here's the biggest point, the biggest point of getting into that ownership position is that once you own the one and you have the ability to have that higher salary, that a hundred thousand dollars salary that's higher, it leads you down a new path where your salary becomes a million dollar take home pay path, or you now will own three or four because you made the decision to own the first you see. And so we're really delaying all of that part of our financial life as well when we don't earn, when we don't own the one, excuse me. So I think we have to remember what could our life look like moving forward if we're an owner?

So if I'm talking to my son again, I'm like, son, I know that you are scared about this big number. You have a student debt and I know that you've been told by your professors go work in some stable group practice or DSO situation. But what that combination does erodes away your success, your lifetime success. The most conservative thing you can do is to earn as much money now as possible as a dentist job and spend the least amount feasible while you're planning and signing on the dotted line to be an owner. And that's phase one. You don't pay down your debt. You make as much money as you can with your two hands and you do not have wasteful spending. And you go sign on the dotted line to start or buy a practice and you become an owner, and that's phase one. Then phase two says, alright, now you're an owner.

Now what? Now you are going to leverage your ownership position to exponentially grow your salary, your take home pay. So you're going to go from a typical owner salary to an atypical owner salary. In phase two, you are going to become financially successful and that will put you eventually into phase three where your take home pay is more than you need. It's just plain more than you need. And only then do we say, should we pay down debt? Because only then are we in a position where we've kind of gotten the big returns from investing in ourselves. Now it's about, okay, should I get returns investing in other places, other things, or should I pay down the debt interest that I am having to get hit with? We invest in ourselves first. I think that that's this big journey that dentists need to be on, and every year you wait is a mistake and it adds risk. Every year you wait. You've kind of done the wrong thing to put yourself in a position to deal with your debt

Richard Low (22:03):

With that as well. This question of refinancing, you addressed it in this phase three, but this is something very often that people upfront are thinking, the interest rate the payments, I want to refinance it to five years or 10 years and be really aggressive. If you have access to one of these income-based repayment options, you are doubly worse off if you have refinanced it before going into practice ownership because often in that early owner growth phase that you've just talked about of phase two, your income can fluctuate on paper quite a bit because there's a lot of depreciation and if your payment fluctuates based on your IRS reported income, all of a sudden you've got even more flexibility to invest in the flywheel of your practice. And so waiting to get aggressive or doing anything creative or refinancing it to a shorter term with a bigger payment, that is what the bank cares about is how big is your payment in relation to your income that you're going to be taking home as a potential owner.

That is that phase three decision. Now we refinance. You can get creative with it, you can pay it down early on a 10 year schedule, or you can say, you know what? I think the market or another dental practice or real estate, I have another vehicle that I think will beat paying down my student loans. Or you could do the typical thing of don't invest that extra money and don't pay your student loans and just crank up your lifestyle and deal with the consequences. So there are options at that point, but you have realistic options, some of which are better than others.

Scott Leune (23:44):

Yeah. Phase three, I think we all kind of fall on, maybe I'll call it a spectrum of loan sensitivity, and in phase three, we now deal with that loan sensitivity. Some of us are on one extreme, we're like, I just want to pay off all my debts. I know it might not be like the rationally financially beneficial thing to do. I could make higher interest here or there, but I just want this gone. That's on one side of the spectrum and the opposite side of the spectrum says, oh, I only want to put my money where I get the very highest returns, and so if I'm not getting the highest returns by paying off my debt, I'm putting my money somewhere else. That's the other spectrum. Both sides of that spectrum also have disadvantages. On that first side, I just want to pay it all off no matter what.

Well, the no matter what means you're having less lifetime wealth because you could have made more money somewhere else, but also you're taking away some of your risk in the down cycles of life. You have less debt payments and that's good. On the upside of the spectrum, you're like, no, I just want to make the most money I can. I don't know if I want to pay it off early in phase three here, I'm just going to put it wherever I can that makes the highest return. Some of those risks are that you end up spending your money on illogical things instead of paying down debt with your money. So you have this extra money and now you start investing in things that make no sense or high risk things or you start buying Ferraris or whatnot. That's one risk. Another risk, of course, is you have some sort of life implosion, health implosion or economy or something happens where your income goes way down and you could have paid off your debt when you were wealthy earlier.

Now you're got the burden of these payments. So as I describe all of that, it probably sounds complicated to some people, but what I think is going to happen with most people in phase three is when we are finally in a position where it might be okay to pay down the debt, we should probably take our money and allocate it. We should say, okay, I'm going to allocate a portion of my now wealth that I'm just bringing in from being an owner to paying down my debt a bit early because financial, there's reasons why I want to do it, but I'm going to also take a portion of my wealth and put it on the middle side that says I'm going to park it where it's relatively low risk. I'm got going to have stable returns, and then I'm going to allocate the rest of my money into some of the maybe higher risk investments and maybe even into my Ferraris and my other stupid stuff.

I'm just going to buy myself. And that way we get all these things, kind of all these thirsts or quenched and we're not extreme about any of it. That's all like a phase three conversation. I own a practice. I make more money than I would ever need. Now what am I going to do with that extra money if we're not at that point yet, the very best thing we can do with our money and with our time is invest in ourselves to get to that point. So if I look at my son again and pretend like he's a dentist and I look at one of his classmates, if my son made the mistake of working for A DSO for the first five or 10 years of his career, those five or 10 years by the way, are not easy working for someone else with someone else's vision, someone else's patience, someone else's staff and technology and equipment.

It's not easy. It's not what we're passionate drawn to. That's hard. If I compare that hypothetical son to a classmate who said, you know what? I'm going to get a loan the most I can get to buy the best ownership position, I can start a practice. Those five years of ownership aren't easy either, but it's a different struggle. It's a struggle where you're on a journey that's going to lead you to the promised land. You can make the decisions and become passionate about what you're doing. They're both hard. But what happens five or 10 years later when you compare those two people, the one that owned is in a very conservatively safe position and the one that didn't, man, that's rolling the dice, that's playing Russian roulette. That's not very conservative. Does that make sense?

Phase Three Decisions and Financial Freedom

Richard Low (28:09):

Yeah. You're not in control of your own fate. I mean, to put a point on this, people ask me all the time, I did six years in the Army. I did the HPSP scholarship. I didn't take out 400 to 500 K of student loans from a private university that I could have. And people ask me now, knowing what I know based on the podcast, based on everything I've learned, would I do that again? And my answer is absolutely not. If my only motivation was financial, and that's the reason I was making the decision to serve and get that scholarship, I know without a shadow of the doubt that I would be better off finding and buying a dental practice within the first two years out of dental school growing that not only would the income be higher, we haven't even talked about the equity that's built in the practice and then the options that you have when you have a large cash flowing practice or multiple offices and that student loan payoff can be part of a sale of things if you wanted it to be. There are so many options, and I've seen my wife to her dismay, has seen people that have graduated after us, listened to the podcast, applied the principles, gone to our courses, hired coaches, and now they have these large cash flowing assets that surpassed that whole journey of six years in order to not have student loans.

Scott Leune (29:29):

That's a great point because so on my Instagram page, I'll typically repost some of the people that have been through my training seminars or coaching, especially if there's a success story and they're celebrating something. So many of those people could pay off their debt in one year's profit just one year once they've gotten to that point, debt isn't even taking up emotional space.

I had to ask my wife, by the way, I've been through ups and downs. I made a lot of money in my career. I had asked my wife, by the way, Hey, I can't remember. Do we still have student debt? I couldn't even remember because, which is kind of a funny question to ask when you've done well financially, but you see, that's the point. I don't want to pay it off until I've done well financially. And at that point it's insignificant. It's completely insignificant. And when we were talking about our student debt earlier in my career, I wanted to pay mine off when we had excess money because, excuse me, let me take that back. I said that wrong. I wanted to pay hers off when we had excess money because if I ever passed away, she'd have the burden of her student loan debt still, and I was the one that had the higher income potential.

So we took the approach to pay hers off early. Now, I say early, that's only after I owned, and actually after I sold a practice, after we had way more money than we needed is when we decided to pay off hers early. So whether a dentist is listening to this that it's brand new dentists or they've been out 10 years, they all could be in a different financial position if they bet on themselves, if they brush aside the irrational fears that sometimes control us and brush aside their lack of discipline and said, you know what? Now's the time for me to step forward. That's the first step of this path. The first step of the path is I'm going to own. I'm not going to use these excuses anymore. I'm going to own because I know that I want to see my future end up in a spot where I could pay off my student loans in one year's profits if I felt like it because that's how good I'm doing financially.

That's the same dentist, by the way, that could only work one or two days a week if they wanted, or they're just going to work from nine to noon. They're the dentist that could own multiple locations and not even pick up a handpiece. Or maybe they're only doing full arch cases and that's all. They have so much freedom of choice when they get into that third phase that while this is an episode about student loans, man, that's just one of the freedoms of choice to pay it off earlier or not. There's so many other life freedoms of choice that happens when we become a wealthy, successful owner. It's so rare to find a wealthy, successful associate. It's so rare. That doesn't mean you can't be one, but let's just use logic. Let's just use statistics. Let's just use facts and say that's not factually the most conservative successful path someone could choose. Factually, it's actually the least successful path someone could

Richard Low (32:56):

Choose. So if someone is listening to this and this has not sunk in, and you've got student loans that are holding you back from practice ownership, listen to this episode on repeat until it sinks in because this changes your life for the rest of your life. Your relationship to your student loans will either hold you back or accelerate you on the path to financial freedom to success in practice ownership. So Scott, thank you for showing us these phases, having this discussion around how people can reframe the way that they're thinking about their student loans to really give them the leverage and the power to do something different.

Scott Leune (33:37):

Yeah, I hope this helps someone. If I have a few closing words for just a second.

Unfortunately, I hate to admit the fact that we need to stop listening to a whole lot of people in dental school that tell us what to do with our money and our career. We just need to stop listening to a whole lot of dental school professors. They're wonderful in other ways, but not when it comes to those seeds that some of those professors have planted into. Our minds have caused people to waste away 10, 15 years in the beginning of their careers, doing the wrong thing financially. The most conservative thing we can do is put ourselves in a position to be wealthy financially. That's the most conservative thing. That's the safest thing we could do for our families. That's the best way we can handle the student loan crisis. It's in front of us today. So we need to get on that path. If we're not on that path, we need to throw away the excuses that you're using that aren't impacting the other people, but you're using them. Throw 'em away and know that this is very feasible. You can get a loan. You can have the income to make these payments. You can become wealthy. You can do this, and you will end up in a position in life where you have so many choices in front of you to benefit your life instead of becoming a victim of your student loan payments and your lack of confidence and initiative to invest in yourself.

Richard Low (35:06):

That's it. And if you want the outline of how to get there, listen to this episode again, don't let it hold you back. Scott, thank you so much. We'll talk to you all next time on the Shared Practices Podcast.