The pitfalls of too much credit

Hussein Hassanali looks at how to maximise and make the most of your earnings while ensuring you maintain a safety net.

As a young dentist, the hard work soon can pay dividends, leading to riches and rewards. The average annual wage of someone in the UK is £26,000, so you’re already above this even as a foundation dentist. It’s a position to be envied by many and immediately after the years of studying puts you in a very secure financial position.

Recent news has been littered with talk of inflation, another looming recession, difficulties of getting on the property ladder and spiralling debts. By getting a high grip on the financial ladder so early, it’s no wonder that some might get jealous. Much of what I earn goes into paying mandatory GDC and indemnity registrations, CPD and towards building my collection of dental tools and instruments and of course my student loan, but they don’t realise that.

Planning early on

In the financial world, you’d be known as a Henry (high earnings, not rich yet). It affords a lifestyle that is more than comfortable along with the opportunity for luxuries, within reason. I know for me I was lucky enough to have a nice rented flat in my early career, afford to run a car, eat well, and generally buy things from the shops without worrying how to afford it.

Now though, I’ve got car payments, a mortgage, increasing indemnity costs, and the upkeep and refurbishment of a house. Those early luxuries that I once took for granted are something that I’ve started to think twice about. When adding up all my debt, it’s staggering when I realise the total. Add to that my credit card and I’ve easily got outgoings of a few thousand pounds a month. Suddenly, that pay cheque doesn’t look like anywhere near enough.

Of course I know that a lot of these are long-term loans and will be ones that I will securely be able to pay back over time. But there is a risk that having too much credit could mean not being able to get something when you most want it in the future. There are many things that require credit checks before being approved for both cards and finance packages.

My advice is to save a little aside and not to be reckless. Being self-employed, it’s worth saving three to six months’ income so you know you’re covered in the position that you can’t work or haven’t got work. Income protection is essential in the situation that you get injured or aren’t able to work for whatever reason. Plan early for retirement as no matter what age you start, an advisor will tell you that it’s never early enough. Put money into your pension as this has benefits in your tax returns.

Most importantly, get good advisors and accountants who will help you maximise and make the most of your earnings while ensuring you maintain a safety net.

For advice on how to maximise and make the most of your earnings, please visit the Young Dentist page next week for an article from mortgage and insurance adviser Sarah Grace.

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