Build these 2 income streams: When you have paychecks and “playchecks,” you have financial freedom

Most dentists make the same critical mistake: they fund their entire lifestyle from their business income. If you’re wondering how that could possibly be a mistake, bear with me. Your practice is your money machine. It’s where you create wealth, but it should not be how you maintain your lifestyle. Why? Because even the best practice has ups and downs. Equipment breaks, recessions happen, and patient volumes fluctuate. Ideally, the money you use to maintain your lifestyle should be coming from reliable, consistent income streams. The money you generate from your practice then gets reinvested back into the business, which becomes the vessel for multigenerational wealth.

Now, before I dive into the details, I want to make one thing clear: if you are currently living off your practice income, you are not doing anything “wrong”—especially if you’re starting out. Creating separate income streams to maintain your lifestyle, however, should be the goal. It is the best way to create multigenerational wealth.

Paychecks and “playchecks”

I teach my dental clients to build what I call paychecks and “playchecks.” These are two completely separate income streams that will generate money for you regardless of whether you show up to work or not.

Paychecks are assets that generate a guaranteed or highly reliable stream of income to replace what you earn as a dentist. This is your baseline—the income that covers your standard of living.

Playchecks are assets that generate additional income you can spend, save, or give away however you want. These are not responsible for keeping your lights on. This is your freedom money.

When you have both paychecks and playchecks, you have financial freedom. Your lifestyle no longer depends on you showing up to drill teeth, and all the money you generate from your practice goes to creating multigenerational wealth for your family.

The obvious question then becomes: how do I develop these two income streams?

Creating reliable paychecks

When it comes to paychecks, it’s all about reliability. Your paychecks should come from a reliable series of assets that are designed to generate consistent income whether the market is up or down.

Real estate is my favorite. Rental properties generate consistent monthly income, and if structured correctly, can often provide tax benefits.

Annuities provide guaranteed payments. Yes, they get a bad rap from people who don’t understand them. But when used correctly, they’re one of the few truly guaranteed income sources around.

Dividend-paying stocks from established companies are another good option. We’re talking about companies with decades of consistent dividend payments.

Structured notes and fixed-income investments can also provide predictable returns when properly constructed.

For obvious reasons, I can’t recommend one of these over the other. This is a discussion you’ll want to have with your financial advisor. There is no one-size-fits-all approach, but a good mix of the above will get you far.

Building your playchecks

Once you’ve created paychecks to cover your lifestyle, the next goal should be to generate playchecks. These can come from the same series of assets as your paychecks, or from different sources.

The main thing to keep in mind here is that because this income isn’t responsible for your bills, you have more latitude in how you invest it. In other words, you can take more risks. That is also the beauty of playchecks. There’s no pressure, so you can experiment with your investments. You can also feel good spending this money however you see fit. It might sound crazy, but it really is “play” money because your standard of living has already been taken care of, and your practice income is going to support your family for decades to come.

The real goal

If you’re just starting out or even if you’ve been paying yourself out of your practice for decades, moving toward paychecks and playchecks should be a long-term priority. Because the thing is, this is about more than just creating consistent streams of income. This is about keeping your practice forever.

Most dentists assume they’ll sell their practice when they retire, but that’s leaving massive money on the table. Multigenerational wealth doesn’t come from selling your business at age 65. It comes from keeping that business running, maintaining its tax benefits, and continuing to generate income from it well into your later years.

When your friends are worried about making their retirement savings last, you’ll still be a net saver. When they’re clipping coupons, you’ll be building wealth for the next generation. But that only works if your lifestyle isn’t dependent on you personally producing that income.

Getting this right matters

Setting up paychecks and playchecks correctly is not a quick project—hence why most dentists fail to achieve it. The asset selection, tax implications, and structural decisions are complex. If you can get it right, however, you’ll build the kind of financial freedom that most people dream about. You’ll not only have your financial bases covered, but you’ll be well on your way to building multigenerational wealth that will keep you living well into retirement and take care of your family for generations.

One of the best parts about all this is that once you have paychecks and playchecks, you get to decide when and how much you work. When your income no longer depends on your practice, you have even more control over your day-to-day lifestyle.

These are the types of things a qualified financial advisor will help you achieve. So, if you’re wondering where to start, there’s your answer. 

Editor's note: This article appeared in the April 2026 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.