After dedicating several years to the study of medicine, it can be quite frustrating that you’re also meant to be knowledgeable of finance as well. But even though you need to take responsibility for your financial situation, you don’t have to do it alone.
Here are financial tips for consultants, but they are also applicable for most other doctors and dentists.
Pay the correct amount of tax and be aware of the marginal rate
Understanding what tax you pay and why is essential. You might need to make corrections to your tax code, so learning what deductions are being taken from your payslip and what tax bracket you’re in could save you money.
When you know the effective tax rates, you’ll know at what point your allowances will start to reduce for both personal tax and pensions. There are also a number of tax reliefs and rebates to take advantage of – you just need to know what they are.
Don’t forget to keep your paperwork in order to take advantage of any relief and to pass along to any professional you might employ to assist you with your finances. This means you will need to hold on to your P60, P45, TRS, and payslips.
Plan for the future
While it might not be your number one priority at every stage of life, if you start contributing to a pension as soon as you can afford to, the more it grows thanks to compound interest.
Check your state pensions, your workplace pensions, or any other personal pensions you have periodically to track their value and adjust your plans accordingly if any changes are necessary.
Spend less than you earn and beware of lifestyle creep
It seems like fairly simple advice but all too often people get caught up in the need to keep up with the latest and greatest editions of everything and that can often lead to living beyond their means. Create a budget and stick to it. Simply put, don’t spend more than you earn.
Beware of lifestyle creep as well. A phenomenon that occurs when you spend more on your standard of living, former luxuries start to become perceived as a necessity.
Build and protect your wealth
Other than just generating income through your job, ensure you have additional sources and ways to save for the future. Build a diverse investment portfolio, contribute to a pension, and create a robust retirement plan that builds and preserves your wealth.
Don’t forget to protect the wealth you’ve worked hard for – consider income protection, critical illness, and life cover plans to safeguard your family’s future.
Plan for the future with a will and inheritance tax
Part of wealth protection and preservation is having a plan for the future. If you want to pass down any of your assets to family and loved ones, you’ll need a will that dictates your wishes. When drafting your will and inheritance plan, keep inheritance tax (IHT) in mind and be sure to make use of allowances that save you and your family tax.
Get a financial plan and good advice
Remember, you don’t have to go it alone! Trust a professional who specialises in helping medical professionals. Not only can they help with building a financial plan and advising on investment strategy, they can help you with any other financial needs too.
For more discussion about these tips for consultants, listen to the podcast here.