When starting your career
So, you have finally finished your studies and are now embarking on the first step of your medical career. How does it feel? Exciting? Overwhelming? Different? Now you are starting to earn money, the key will be to managing it. Here we provide 11 tips to help you with your finances and tax.
This does not constitute advice and advice should be sought in all instances before acting on it.
1 – INCOME – Do you know your monthly take-home pay?
It is likely you have agreed a gross salary, but do you know how much will be deducted for Income Tax and National Insurance (NI)?
Basic rate tax is 20% and Higher Rate is 40%. Employees National Insurance will also be deducted.
Speak to your employer if you are unsure or suspect something to be mis-calculated when you get your first payment.
2 – COSTS – Work out your regular costs
Now you have an income stream it is important to manage it so you don’t overspend.
Having a clear understanding of your regular costs will help you keep out of debt and make trimmings so you keep more of your hard earned money in the bank.
It may be possible to make savings by cutting down your rent or mortgage payment, phone bills, gym membership or household expenses.
Your monthly costs will also include things like your GMC and BMA membership, it does all add up!
Write everything down so you know how much disposable income you have at the end of the month.
3 – DEBTS – Manage and work to clearing your debts
If you have debt on graduation, it is best to address this first, now you have a regular income.
Cutting back on small luxuries can go towards clearing down credit card and loan balances, and not carrying forward significant interest.
Always pay back the debt with the most expensive interest rate first. This is likely to be your overdraft, then your credit card, then loans, although this may vary.
4 – SAVINGS – It’s never too soon to start saving
It may be great to have your own income stream after years of student loans, or part time jobs, but it really is never too soon to start saving.
After you know your earnings and your costs, and have made a plan to clear your debts, allocating even the smallest amount to a savings plan creates the best mindset for your financial future.
ISA’s offer some great advantages over other savings accounts. Check out the new Lifetime ISA launching in 2017 – it’s designed just for young people to save for their first home or retirement.
Take advice from professionals that can advice where you money will earn the most for you.
5 – CONTINGENCY – Have a “rainy day” fund
For financial peace of mind, it always helps to have a fall-back plan. What if something needs fixing in the house? What if the car breaks down?
When you just start earning, an unexpected cost can leave you high and dry.
As well as your future savings plan, allocate some money aside for emergencies.
6 – PROTECT YOUR INCOME – Insure your Income Stream
Depending on your personal circumstances will depend if Income Protection Insurance is essential, or just suggestible.
If you have a home, a family and are the main earner, Income Protection Insurance can be considered essential.
If you are financially independent right now, then you just need to think about how you would pay any financial commitments if you were unable to work due to accident or long-term sickness.
7 – GET YOUR TAX RIGHT – Ensure your details are accurate
Now you are on the radar with the tax-man, it is important to ensure you are paying the right amount of tax by checking your tax-code. You can do that here.
If you earn other income from buy-to-let property, dividends and investments or other sources, you will also need to file a personal tax return following the end of the tax year, next April.
A specialist tax adviser can help ensure all your affairs are in order.
8 – BOOST YOUR INCOME – Claim back tax relief on work-related expenses
It is possible to file a form each year to claim back tax on some of your work related expenses.
This can include your subscriptions to the GMC and BMA as well as work related travel costs and working from home expenses.
An accountant can help with advising the tax-deductible items and filing the form.
9 – YOUR STUDENT LOAN – Make a plan to pay it off quickly
Now you have a salary it is likely you will need to pay contributions to your student loan.
There may be the chance to pay your debts off early and avoid interest charges.
Investigate your options.
10 – PENSION PLANNING – Find out about your pension options
Finding out about how the NHS pension works is always advisable as you can understand the benefits and the risks of joining.
Consider also the possibility of private pension planning, to support your long-term financial goals.
Speak to a professional financial adviser to work our your overall retirement plan.
11 – PLAN YOUR CAREER PATH – Aspire to great things
If you plan to specialise or open your own practice in the future, start to outline a plan to make it happen.
Fees can be expensive for additional study and opening your Private Practice can take many months, even years, of pre-planning.
Get ahead and keep track of your long-term goals in line with your short-term financial commitments.
Need help with financial planning? Darren can help
We help Junior doctors with financial, mortgage and tax advice from graduation through their career to retirement.
Tel: 01403 780 770