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The four financial mistakes dentists regularly make - and how to avoid them

By Magdelena Harding, Senior Financial Consultant at Wesleyan Financial Services

The four financial mistakes dentists regularly make - and how to avoid them

For most people, financial planning is not the most exciting way to spend their time. I understand that, although as a specialist financial consultant I obviously feel otherwise!

On top of that, if you're time poor, as many dentists are, the small amount of free time you have will probably be earmarked for other activities like spending time with friends or family, or simply enjoying your rare down-time.

But, even if financial planning isn't your favourite way to spend your time, it is vital if you want to maximise and protect your earnings, and achieve your business goals.

Fortunately, there are two pieces of good news. Firstly, there are specialist dental financial consultants who can work with you and relieve a lot of the time and effort needed to plan and manage your finances effectively.

Secondly, I've created a short list of the common financial mistakes that dentists make and how you can avoid them. You can read that list below; it will only take a few minutes and could help ensure you don't make the same errors.

Mistake 1: Not starting early enough

There is no such thing as 'too early' when it comes to financial planning. It's just as important - if not even more so - to plan ahead and take control of your finances at the start of your career, as it is when you're mid-way through or close to the end of your working life.

Often, people take more interest in their finances when they have accumulated a few assets or they're about to make a big decision, such as buying a practice or retiring. But the earlier you begin planning, the better off you'll be in the long-run.

You can begin planning at any stage, even if you're still in Vocational Training. The first step is to take time to review where you are now and what you want to achieve. You need to create a financial snapshot of your current position, so that you can put the right measures in place to help you reach your goals.

To create that snapshot, ask yourself: what benefits do I already receive? What assets do I have? What investments do I have? What loans do I have? What income protection do I have?

Mistake 2: Forgetting that you are your biggest asset

This is particularly common among younger dentists, who think that because they're at the start of their career they have no assets. However, more experienced dentists can also make this mistake.

When people think about assets, they tend to think about bricks and mortar, such as your home or dental practice, should you own one, or investments. But even if you don't have any of these things, you still have your biggest asset - yourself.

To become a dentist, you've undertaken years of training and maybe additional specialist courses after graduating. Your whole career and ability to continue earning income is based on you being able to use that knowledge.

Which means that it's key to protect yourself. Having income protection means that, if you have an injury or illness and are unable to work, you can still earn money and continue paying bills or adding to your savings. It can be particularly worth considering if you are self-employed.

The earlier you secure this protection, the better. When you're young, fit and healthy, you can feel indestructible, but there is always a risk of unexpected illness or injury and if you leave it until after something happens, you may find it harder and more expensive to access the right kind of cover.

Mistake 3: Only investing when the markets are performing well

When and how to invest will be influenced by many factors such as your appetite for risk and the timescale you've set for your goals.

It's understandable that people often think the right time to invest is when the markets are performing well but there's never a right time or wrong time.*

It's also important to remember that there is a cyclical nature to the investments market - they dip and rise. As long as you're prepared to give your investments sufficient time to ride out any fluctuations and meet your objectives, exactly when you invest isn't a big issue.

You may need to be prepared to wait out short-term drops in order to gain long-term rewards, so you need to consider how much risk you can tolerate in order to achieve your objective. 

When it comes to your goals, it's a good idea to set some for the short, medium and long-term. Once you've done that, you can start to visualise a plan for what you need and when you need it, which can help you to decide on an investment plan.

Mistake 4: Not regularly reviewing your position

Creating a financial plan is a brilliant idea. However, circumstances can alter - COVID-19 was a very sharp lesson in just how quickly that can happen - and your plan needs to be updated regularly to account for such changes.

The plan you created will be specific to and correct for your situation at that time, but your priorities and goals may change as you get married, divorced, have children, buy/sell a home or practice, become a practice partner, etc.

There can also be changes in legislation, tax allowances, pensions or medical advances that might mean you need to adapt your existing financial set-up.

To make sure your plan is still appropriate for what you want to achieve, you need to review it every 12 to 18 months.

It may be that some changes are needed to make sure your finances are on track and working well for you. But even if everything can stay the same, at least you will have that extra level of reassurance that your finances are in good shape and you are operating from an informed position.

If you want to begin creating a financial plan or want some help reviewing your situation, you can book a 30-minute quick start no-obligation chat with a Wesleyan Financial Services Consultant or call: 0800 316 3784.

*Keep in mind that investment values can go down as well as up, so you could get back less than you invest.

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