11 Essential Financial Tips for Associate Dentists
Arun’s 11 tips that can lead to Financial Freedom
It shocks and saddens me when I see many young, energetic dentists excited about their careers but really managing their hard earned cash through poor advice.
It’s well known upon University graduation, Dentists are amongst the highest earners, but I have seen with my own personal eyes the poor judgement that many dentists use in managing their money.
A flash car, or a new fancy handbags may give short term satisfaction, but within a week or two, many wonder why they have bought the item in the first place and quite possibly regret trying to keep up with the Jones’.
My name is Arun Mehra, and for almost 20 years my accountancy firm has been working with Dentists. I married a Dentist, Smita Mehra (owner of the The Neem Tree Dental Group) back in 2001 and since then I have helped 1000’s of dentists across the globe with their business and finances.
I have been around the block a few times, and just like you, I do like to enjoy what life has to offer, but never at the cost of keeping up with the Jones’s. In this blog post I have put together some financial tips for associate dentists.
Financial Freedom for Dentists
The key to serious financial freedom is investing in opportunities that build you a passive income, and not wasting money on pointless things that have no real impact on your life. Earning money is hard work, so why waste it so frivolously?
This blog post is all about what you should be, and shouldn’t be doing in terms of your money.
Rule 1 – Never try and keep up with the Joneses.
Who cares if your colleagues or friends have the latest car or newest piece of tech, don’t judge your situation on what they have or are buying. Look at your own finances, and then make the judgement of, can you afford it? And if you can, what will it bring to you?
Rule 2 – The curse of Instagram.
If we all believed what we saw on Instagram, it would appear that everyone is a billionaire, living the high life everyday.
They are not, it’s simply them trying to show off to others that they have made it. Some may have, but most haven’t.
Ignore what you see people buying on Instagram, or better still turn it off. If you do want to use it, don’t believe the hype, do your own research and take everything you read or see with a pinch of salt!
Rule 3 – Flash cars
There are various forums across Social media that show the latest flash car that your mate or colleague is buying.
Don’t be tempted unless you are a serious car dealer as buying the latest flash car is tantamount to financial nonsense.
Yes, the cars look lovely and shiny, but its not a financial investment and once you have driven it out of the fancy showroom it will lose at least 20% from what you paid for it.
I appreciate you may need a car, but does it need to be over £75,000 with all the trimmings? Probably not.
Rule 4 – Tax is inevitable
Don’t believe the hype that you can drastically reduce or eliminate your tax bill. My firm has picked up the remnants of many a dentist who has been easily persuaded to invest in various schemes over the years to reduce their taxes.
In truth, most never work, and be careful who actually advises on such schemes. Tax schemes very rarely work and often come back to bite – with a vengeance.
Rule 5 – Pay for proper professional advice
You may find this difficult, but pay for the best advice possible from the right professionals – if you pay, you will get the right advice on most occasions.
I happily pay lawyers, tax advisors, surveyors and others when I need them, so I get the best result for whatever I am trying to do. If you need some support from our professional dental accountants click here.
If you don’t pay, and try and take shortcuts, it usually comes back to bite.
Rule 6 – Cut your coat according to your cloth
Yes this old Chinese proverb still stands today, with the free availability of credit to all.
Don’t get sucked in (see rules 1 and 2 above) and apply a degree of sense when spending your hard earned money.
Rule 7 – Save every month
Yes I know it’s boring, and interest rates are low, but always save something every month.
Set up a direct debit that goes into a hard to reach bank account so you cannot access it, and if you ever need cash for an urgent situation or say a deposit for a house or dental practice, you have it and you don’t have to go asking elsewhere for help.
Bottom line, start saving.
Rule 8 – Get onto the property ladder
If you can afford to, and assuming you have enough savings, try and get on to the property ladder, either as a homeowner or an investor. Over time, assuming the market is rising, you should build equity in your properties which can help in many ways over the long term.
Use your income to pay off the mortgage, whilst regularly re-financing every few years seeking a better deal.
Rule 9 – Pay off expensive debt
If you use a credit card pay the balance off EVERY month, DO NOT just pay the interest, pay the whole balance off.
Don’t get yourself into a situation where the interest keeps accumulating each month, this is a recipe for financial disaster as the interest rates charged are compounded each month increasing the amount you need to pay each month. At such high rates, the financial situation can get dire – so don’t’ get into such pickle in the first place by only spending what you need to spend (see rule 6)
Rule 10 – Tax Free Saving
Yes, again it sounds dull, but utilise you annual ISA allowance, it’s a great way to save in a tax-free wrapper and you should try to use this every year.
Rule 11 – Buy or build your own practice but be SMART
Many Dentists I meet entered the profession so they could run their own business. I strongly advocate becoming a business owner, but don’t rush it and most definitely seek advice from the right people (see rule 5 above) who can help you achieve your goal.
Keep your emotions at the door, and make a sensible purchase rather than one that is based on the emotion having to have a practice at any cost. I have seen too many dentists buy at too high a price and regret it for many years.