Dentists' Provident UK

Planning your finances for the year ahead

14 March 2024 | News

As a young dental professional, have you taken time to review and plan your finances for the year ahead?

With more dental professionals making the move to private dentistry¹ along with significant financial and cost-of-living challenges – it’s important to regularly review your finances - now, more than ever.

Data from the BDA Benevolent Fund shows that the younger generation of dentists are especially concerned about their finances, with around a half (48-50%) of all 3rd, 4th, and 5th year students reporting to be ‘very worried’. The Fund’s survey also suggests ‘pressures are contributing to poor mental health and causing anxiety’².

“Many of my clients are increasingly looking at planning their personal finances as they do more private work or when their NHS contracts change,” says John Timoney, Financial Adviser from Thinqviser, who specialise in financial planning for the dental profession.

“It’s not an uncommon picture. It’s a stressful job and in my experience, we are actually seeing increasing amounts of recently graduated dentists, who are opting to just do private work from the beginning of their career. The most commonly asked questions about financial planning include when they can achieve life milestones such as buying a house, or setting up their own practice, as well as other considerations such as day-to-day business operations,” says John Timoney.

Some of his top tips for dental professionals include:

Budget wisely

The Financial Lives Survey shows that that one in four adults in the UK had low financial resilience³, with 77% of all UK adults felt the burden of keeping up with their domestic bills had increased. In the 6 months to January 2023, almost 6 in 10 (57%) UK adults had either stopped saving or dipped into savings and investments, including pension savings, due to the cost of living challenges⁴.

Sensible budgeting can improve your financial resilience. A comprehensive budget can help you understand where and how you spending your money and take action is necessary. You can also set short, medium and long-term goals to help work towards your longer term plans.

Protect Your Income

Set up an income protection policy, which will provide a safety net should you be off work through illness or injury. Unexpected loss or reduction in income can wreak havoc with your financial plans if you do not have adequate protection.

“Financial shocks come in many forms. One example is loss of earnings through sickness, and employer sick pay is fading,” states the ‘Building Resilient Households’ report commissioned by the Chartered Insurance Institute⁵. More than 185 million working days were lost in the UK due to sickness absence in 2022⁶, but only 6% of adults in the UK had income protection⁷.

“When I speak to young dentists, I always talk about the importance of taking out income protection while you are young and healthy and the benefit it has for you in the long run,” says John Timoney.

If you cannot work because of an illness or injury, your income protection insurance plan helps you maintain your lifestyle without depleting your savings, relying on your family or the welfare state for financial support, by giving you a regular benefit to help replace the income you lose.

As a Financial Adviser, John has worked with income protection provider Dentists’ Provident for more than a decade, seeing first-hand how they have supported his clients over the years.

“Dentists’ Provident is unique, in the way they focus on income protection only and they fully understand the dental profession. What my clients really like is that Dentists’ Provident understands the sometimes complex earnings of dentists, so financial assessment at the time of claiming is much smoother.

“Clients often associate income protection being needed for something happening within their day-to-day dental practice. Not many of my clients have tripped or had a fall in their dental surgery, it is usually something completely unexpected and outside of work that has affected their ability to work. It’s most often an accident, which is of course unexpected by its very nature. I’ve seen anything from sporting accidents, car accidents to a client who sliced his hand on a cafetiere before he went to work. In such a physical career, it’s so vital to protect yourself against the unexpected,” he says.

Don’t forget about tax

Stay informed about tax regulations relevant to your profession and your status as a self-employed sole trader or limited company.

Unlike many other professions, there’s a steep trajectory in dentists’ earnings after qualifying, and young dentists often see the money, but don’t always appreciate how much is needed for tax.

“My experience when presenting to young dental students is many ask day-to-day business questions; from accountancy needs, to how they should plan for tax,” says John Timoney.

Start saving early for the future

Whilst you may just be at the start of your career, nothing should stop you thinking about the end of it! There are huge benefits to setting aside funds for your future retirement early.

Investing your income into a qualified retirement plan from an early stage of your career can provide you with the advantage of compound growth for longer. This means that not only does your initial investment generate returns, but the reinvested returns also generate their own returns over time. Starting early maximises this effect, allowing your retirement savings to grow substantially over time.

As an example, if you plan to retire at 65 but delayed contributing to age 35 instead of 30, and assuming your pension fund increases by 5% a year on average, you would have to save an additional 35% each year because you delayed contributing. So, while you may not be able to set aside much to start, even small amounts ensure you don’t lose out on the pension growth and have to save much more later.

What next

Where can you go from here?

Take professional advice from a qualified financial adviser, and accountant, to set you on the right track from the beginning
Ensure that you protect your greatest asset – you! Speak to your financial adviser about income protection insurance
Don’t forget to ask you advisers how much you should put away for tax each month
In the earlier part of your career, talk to your senior colleagues in your practice about who they use for professional advice and don’t be afraid to ask them questions.

References