Reducing Debt...Especially Bad Debt
Sep 27, 2022
Dentistry is an expensive profession. It’s costly to go to dental school. Then to either open or purchase a practice is another significant investment. It’s very likely that debt will be incurred in this process.
Most dentists I work with are still paying on debt. These monthly payments can become drudgery in a short time. It can seem never ending! And on top of practice debt, there’s personal debt. Whew! The pressure to produce is real.
With the profit first model, debt can be factored in when considering profitability. What I mean is this. A portion of the Profit Account distributions may be used for some additional debt reduction if that is the goal of the owner. A system may be put in place with a plan to eradicate debt sooner.
First, begin by taking stock of all debt. What exactly are you paying out in payments every month? What percentage of collection is this? Is any of this bad debt, like credit card debt that you’re carrying every month and not able to pay off?
Get a handle on spending. It doesn’t make sense to continue to spend using a credit card if you’re not able to pay it off each month. This is an indication there is a cash flow problem. If your debt payments are too many and too much every month, you may want to talk to your banker and consolidate some loans. This is a last resort because now you are extending out the loan for a longer period of time. It would be good if a lower interest rate is available but that is not always the case.
Above all else, don’t beat yourself up! There is a way to get a handle on debt. There is a way to restore cash flow. There is a way to reduce the debt load. Find the best out there to help you review your situation and help you with a plan. Profit First is a great plan and can be the road map you’re looking for. It’s simple and easy to follow.
Cheering you on to Increased Profits and Decreased Debt!
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