Protect your income for a more secure future

income protectionStepping back and analysing where you stand financially can lead to a more secure future, advises Magdelena Harding.

Many of us were probably hoping for a better start to this year than we’ve sadly had so far.

The cycle of moving in and out of lockdowns, and the instability and uncertainty that brings, seems set to continue, at least in the short-term.

On the plus side, dental practices have at least been able to stay open during the more recent lockdowns.

It seems that dentists are feeling more positive about the future than they were nine months ago. A quarter of practices say they expect to recover within a year. And 80% believe there is potential for growth, according to a survey by Frank Taylor Associates.

This level of optimism is fantastic to see and, to some extent, it’s unsurprising.

I have been hearing from dentists – mainly those working in private practices. They say that they are experiencing high volumes of new patient enquiries. If anything, they’re struggling to meet demand.

Feelings of vulnerability and insecurity remain

But, of course, not everyone is having the same experience. As the saying (which seems to have become the unofficial mantra for the pandemic) goes: ‘We’re in the same storm but not the same boat’.

For example, associates have arguably faced a harder financial struggle than practice owners. Many have had their rates reduced and they’ve been unable to see the same volume of patients as usual. While many NHS dentists remain concerned around the potential clawback they may face for 2020/21.

We may all be getting used to the reality of regular lockdowns. However, the insecurity they bring can still be unsettling. Any optimism still feels tinged with a level of caution. Especially when it comes to personal or business income.

It seems that many dentists are feeling this way. At Wesleyan Financial Services, we’ve started to see an increased interest in income protection. Particularly life and critical illness cover.

COVID-19 has really brought home to people that anything can happen to any one of us. In the past, people might have thought: ‘I’m young and healthy, I’ll be fine’ or ‘That’ll never happen to me’.

However, more of us are realising that we can’t predict the future and are feeling a bit more vulnerable.

For many, it has been a wake-up call to review their financial plans. To make sure their income is protected to the highest level possible, in order to safeguard their own, as well as their family’s and business’s, future.

Analysing your income puzzle

If you do decide to take that step back and analyse where you stand financially, and how you can future-proof your income, it’s important to take everything into account – not just the ability to cover your expenditure.

I find it helps to think of your financial situation as a big jigsaw puzzle. Every piece of the puzzle is needed in order to make it work.

Clearly being able to cover your expenditure if you’re unable to work is important. However, it’s also important to think about how your income can be affected by things beyond direct short-term costs and taking a longer-term view when it comes to protecting your finances.

For example, protecting your pension and having provision for covering locum costs if you’re unable to work can help you to ride out any future storms.

Pensions and retirement planning

People are starting to re-evaluate what is important to them. We’re seeing more associates and practice owners talking about retiring earlier than planned.

Are you planning your exit strategy into your retirement? You need to maximise your pension pot and make sure it is protected. Having the right life and critical illness cover can support those plans. Because, if you found yourself unable to work through ill health, you’d still be able to contribute to your pension.

Many dentists view their practices as their pension pots. However, if you’re a sole practitioner and you find yourself suffering a long-term illness, you may not be able to keep treating patients without hiring a locum.

Professional expenses insurance

However, being able to hire someone to treat your patients and keep your business running while you recover costs money. And if you’re not working, you may not be able to afford to do that.

Unless, you have a plan in place, such as professional expenses insurance. That will cover the costs of locum, potentially for 12 months.

Knowing you have that cover in place for 12 months gives you opportunity to fully convalesce without worrying about your business. But should you realise within that time that your illness is so serious that you won’t be able to return to work, by keeping your business running while you were sick you will have been able to protect your goodwill value should you need to sell as a result.

Unfortunately, I have seen real-life examples of dentists who didn’t have this kind of protection in place. They then became ill and ultimately had to close their doors and walk away without being able to sell their practice.

It really is important to consider all the various income streams you have and how various scenarios can affect them, in order to protect the kind of future you want to have.

Do you really know what you’re covered for?

Making sure you have the correct amount of cover available for these different kinds of situations that you hope never happen to you is vitally important.

As is knowing exactly what you are covered for. For example, if you’re unable to work as a dentist for any reason, some types of insurance will protect your salary while you can’t work. But others won’t if you’re still able to work in another role in a different industry, such as in a supermarket.

COVID-19 has made many people reconsider their vulnerability. Both in terms of physical health but also in terms of their future financial stability. The need to cover not just your expenditure but also have a bit extra to dip into if unforeseen crises do arise. This has really been highlighted during these difficult past months.

Reset your finances while you have time

While we’re all craving a return to normality, a positive take away from this experience would be that before you get stuck back into the regular routine of work, you take a moment to step back and press the reset button on your finances.

Make time now to protect your income as fully as you can. This will ensure that you, your family and your business will be well taken care of should the worst happen. And that kind of peace of mind is invaluable.

Reviewing and analysing your financial situation and the kind of cover you currently have in place might sound daunting. Especially if you are feeling time poor at the moment.

It can therefore be wise to spread the load and seek the help of someone who understands the complex income of dentists. Especially if there is a mix of private and NHS work being delivered. Someone who knows how to maximise the various permutations of the NHS pension scheme.

Make sure you are protecting the maximum amount of your various income streams in a way that best suits your unique needs now and in the future. Speak to a specialist dental financial consultant.

You can book a no-obligation 30-minute quick start chat with one of Wesleyan’s specialist financial consultants via Alternatively, you can call 0800 316 3784.

This article first appeared in Dentistry magazine. You can read the latest issue here.

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