A guide to dentists’ finances
Part 1: Students and foundation dentists
For most people starting out on a career in dentistry, one of their first financial concerns will be how to deal with their student debt.
After five years of studying, dental students already graduate with greater than average student debt because of the length of their studies and other expenses accrued in the course of their clinical training. Now many universities have introduced the full £9,000 a year tuition fees from this autumn, this debt could rise to more than £60,000*.
Clearing student debt can take years and the figures involved can be daunting, but the key is to manage it effectively.
Start by making a list of everything you owe, including unpaid bills, money owed on credit cards and loans from family and friends, then prioritise. This doesn’t mean repaying the biggest debt first – which at this stage of your career is likely to be your student loan. Instead focus on those with the largest penalties or charges, for example mortgage or rent arrears, and then those charging the highest rate of interest.
Saving for the future
One of your first saving priorities should be to build up a reserve of cash that will keep you going in the short term, for example, if you are unable to work for any reason or have an unexpected expense, such as car or house repairs.
The amount you save will depend on your lifestyle and circumstances, but we usually recommend the equivalent of three months’ net income. Keep this money where it is easily accessible, for example in a bank or a building society account.
For longer term savings or something with a more defined goal, like saving for a deposit for a house, Individual Savings Accounts may be more suitable. There are two types of ISA – cash and stocks and shares. Because of the tax advantages of an ISA, there is a limit to how much you can invest each year, currently £11,280. The full allowance can be invested into a stocks and shares ISA, or up to half into a cash ISA, with the remainder in stocks and shares
Protecting your most important asset
When you consider how hard you’ve worked to get where you are today, taking out income protection should be an integral part of any financial plan as it will enable you to maintain the standard of living that you currently enjoy should anything happen to you.
Without an income protection policy, you would have to rely on state benefits, such as Employment Support Allowance once your NHS sick pay stops. However, this pays out a maximum of £105.05 a week.
Income protection policies meanwhile are generally based on your full earnings and will pay you a regular benefit, typically up to 50% of your pre-incapacity earnings until you return to work or are no longer suffering from a loss of earnings.
It is never too early to start thinking about your pensions.
Anyone who works for the NHS can apply to become a member of the NHS Pension Scheme. As you will start paying pension contributions immediately, it’s important to understand what you get for your money.
Although you can opt-out at any time, the scheme provides three main benefits that are expensive to replace and it’s likely you will use at least one of them at some point in your life.
The government has proposed a number of changes to public sector pensions and the NHS Pension Scheme will be one of those affected. Nothing has been confirmed yet, but it will still be a very good scheme.
This is just a snapshot of some of the most important financial matters that might affect you in the early part of your dentistry career. For more information and to ensure you are prepared, talk to a financial adviser who has expertise of working with those in the dental profession.
* British Dental Association Student Futures Report 2012
The above information does not constitute financial advice. If you would like more information or need specialist financial advice call Wesleyan Medical Sickness, which specialises in financial services and products for dentists, on 0800 980 5462 or visit the website at www.wesleyan.co.uk/dentists.