Most dentists never become financially free because everything we are taught about money and investing is designed to make others wealthy and us poor. Here are some examples that keep us poor: Pay yourself first and save and invest; why pay off a 4% interest loan when I can make 7% investing; buy term Life insurance and invest the difference; get a 529 plan early to fund your children’s college; you need a mortgage to save taxes; to get the best returns you need a financial advisor to invest for you; and maximize your 401k plan early. What they don’t want you to know is that you can make over 100% return on your money guaranteed just by paying off debt early and become financially free in 5 to 10 years.
The advantages to paying off debt first are; Easiest and simplest to do and understand; you make over 100% return on your money, guaranteed, without risk or tax consequence and once debt-free, you have three times the amount of disposable income (previously, two thirds of your disposable income was paid toward debt) to spend on investments while enjoying your family and life. Let us look at the following example.
Consider a $310,000 mortgage at 4.5% for thirty years. The big lie is that you think the interest on your $1,599 payment at 4.5% that month would be $71.50. In reality, your first month’s loan payment of $1,599 only $400 goes to principal, but $1,188 goes to interest, which is lost forever to you. This is a 277% loan, not a 4.5% loan. Below, you can see that of the See Figure 1 below.
| Year | Interest | Principal | Balance |
| 2020 | $1,188 | $400 | $309,599 |
| 2021 | $1,187 | $402 | $309,197 |
Over the first year’s loan payment of $18,849, only $5,001 goes to principal, while$13,848 goes to interest, which is lost forever to you. . The bottom line: When you pay an additional $5,001 toward the principle that year and made $13,848, which is a guaranteed 277% return without risk. With this great return, why would you invest your money anywhere else until you are debt free. Check your loan rate out at: https://www.drcalculator.com/mortgage/old/
How to Make 1000% Interest
Interest rates for dental school loans can average anywhere from 6% to 8% per year. Look at an actual 30-year, $300,000 dental school loan with an interest rate of 7.9% for which the doctor pays $2,180 per month. During the first year of repayment, only $2,556 goes to principal and $23,608 goes to interest. The doctor must earn around $30,000 and pay tax on those earnings, to cover that amount of interest each year. This is more than 1000% interest. Understand that for every $10,000 a Student borrows, initially they will have to pay $100,000 in interest back to the bank which does nothing to pay back the loan and is gone forever.
| Year | Interest | Principal | Balance |
| 2020 | $23,609 | $2,556 | $297,444 |
| 2021 | $23,399 | $2,766 | $294,678 |
In this example, by making one additional principal payment of $2,766 that year, you will eliminate (save) $23,399 that you will never have to earn and give the bank, allowing you to make over 1000% return on your money. This is a no-brainer. Where else can you get 1000% return on your money guaranteed, without risk? All dentists who have student loans must focus on paying off this debt quickly— especially those who are paying high interest rates. If you paid an additional $3,888 per month, your payment would be $6,068 and you would pay the loan off in five years, thus saving $420,835, or about $550,000 before taxes. This is the best deal ever.
Everyone needs to focus on what investment of your time and money produces the greatest returns. Paying off debt is just one of four strategies in Dr. Ace Goerig’s new book “The Dentist Money Guide to Creating Personal and Financial Freedom” available on Amazon and Audible. When these strategies are instituted correctly, you will quickly become financially free allowing you more time, money and choices in your life,
CV: Dr. Ace Goerig graduated from Case Western Reserve University Dental School in 1971, joined the US Army and retired as a colonel in 1991 after 20 years. He has been in private practice for 28 years in Olympia, Washington. Dr. Goerig has presented at every major national dental meeting and in 1996, co-founded Endo Mastery, a coaching program for endodontists. Dr. Ace has established two free websites to help dentists and their teams become financially free. They are DoctorAce.com and Debtfreedentist.com. He and his wife, Nancy, were married in 1969 and have five children and 13 grandchildren.
I hope this has encouraged you to look at a debt free life as the important first step in becoming financially independent. Ace has been a great friend and mentor to me and I wanted to be sure that you had the opportunity to avail yourself of his life-long passion. This is how you Summit.
Michael Abernathy, DDS
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