The transition from pharmacy student to new pharmacist can be difficult. Showing up for your first day at a new Residency at a hospital or clinic, new retail setting, or other pharma job is intimidating. Getting familiar with new dosing protocols, work flow, work culture, even bathroom locations are all really important. Spending any time on your finances might seem like a lower priority.
“I’ve got plenty of time to sort my finances. I’ll be working forever and I’m making waaaay more than I was. It’ll be fine!”
Do your future-self a favor. Take a few minutes and read through this post. Considering these 6 things will get you moving in the right direction. And then maybe, after a few months of your new pharmacist life – you’ll be able to take a longer look at some specifics.
Or maybe you’ve been working for several years and never really sat down to think about what your financial health should look like. This is the perfect post for you too.
First Thing To Do
Commit to becoming the best Pharmacist you can be.
Seriously… all the financial planning in the world isn’t good enough if you can’t do your job well and help the patients you serve. You got into the profession to help people improve their health, so make sure you commit to staying up on the relevant literature for your area, pay attention during your training or on-boarding, and strive to be a positive influence on your work environment. It is hard to become financially healthy if you aren’t able to do your job well, for a long period of time.
Second Thing To Do
Figure out a plan for your Student Loans
Student loans deserve a post just for themselves (but I haven’t finished it yet!), so these high-level recommendations will need to suffice for now.
1) If you qualify for Public Service Loan Forgiveness (PSLF), get going on the paperwork. And be ready to get organized. Traversing through the bureaucracy will not be easy since the various Loan Servicers aren’t incentivized to help you through the process (or keep decent records for you).
2) If you aren’t going for PSLF (or another loan forgiveness program) – you need to get your loans refinanced and develop a budget to get them paid off. No 20-year or 30-year repayment plans (even if your loans are $150k) – make the effort to get them gone in 5-10 years, tops. You can limit your lifestyle creep a bit early on to get this done. Your future self will thank you and you’ll have more freedom than most when they are gone.
Third Thing To Do
Establish a Cash Management Plan (AKA a budget)
No way to avoid this. We have to have a cash management plan if we want to take control of our finances. Creating a budget is rarely fun, but it is worth the exercise. You will feel empowered when you know you are addressing your student loans, retirement saving, and other financial needs – and since we tend to make a good income we can still budget money specifically for fun/frivolous things too (and that is ok!).
I hit budgeting hard and even provide an example worksheet to use in this post.
Fourth Thing To Do
Save at-least enough to get your employer’s retirement 401k or 403b match
Most employers now will contribute some amount of money to your retirement 401k or 403b as long as you do. This amount they put in for you is called a “match” and is truly free money your employer will give you to help entice you to save for your own retirement. This is basically part of your wage or salary that you don’t get unless you also contribute to your retirement account.
It’ll depend on each employer, but the match is usually referred to as:
“50% match up to 5% of your salary”
This means the employer will match 50 cents for every $1.00 you contribute up to 5% of your salary. So if you make $100,000 per year and you contribute $5,000 to your 401k – your employer will contribute $2,500 for free! But if you contribute closer to my recommendation of $15,000 (15-20% of your income) – you still only get $2,500 (since it’s capped at 5% of your salary).
So even if you are just starting out and have high student loan payments or other high interest debt to pay off – saving enough in your retirement to get the match is very important. You need to save for retirement anyway and you can’t get this money back if you don’t save enough to get it in the first place.
Fifth Thing To Do
Pay off Credit Card or other high-interest debt (>8% Interest Rate)
Pretty self-explanatory, but this is important. No one making six-figures should be carrying credit card debt – end of story. Credit cards are a tool to help you safely and efficiently make purchases, not to spend more money than you have. The killer part? The 12-24% (or more!) interest rates that will chew you up and spit you out.
The final point I’ll make about credit cards is this. Even if you are a student or have minimal income – you have to at least make double the minimum payment. This great picture from http://www.myjourneytomillions.com/articles/horror-of-just-paying-monthly-minimum-payment-credit-cards/ demonstrates why:
Now imagine if you owe $15,000 or $20,000 on those credit cards? Pay it off.
Sixth Thing To Do
Subscribe to this blog!! (just kidding)…
Don’t immediately inflate your lifestyle expenses after graduation!
This might be the trickiest one of all. You’ve likely been living on <insert cliche cheap food item here> for 8-plus years. You’ve been wearing the same hoodie and two pairs of jeans since your mom bought them for you Christmas, years ago. The nicest thing you have is a television you shouldn’t have purchased last year. Oh wait, I’m just describing my college-life.. not sure if that still resonates.. =)
Anyway, you’ve been living like you don’t have any money (because you didn’t) and now you have a substantial income. It is perfectly natural to want to spend some money – you’ve earned it after all. What I am suggesting is you don’t immediately start spending like you make $100,000+ per year. Imagine going from broke (which you were and technically still are) to spending like you make $50,000/year. That is still a ton of money and is basically the median family income in the U.S.A. (the richest country in the world, I might add).
Two things to definitely avoid immediately after graduation: 1) a fancy car, and 2) a fancy house. Give yourself some time acclimate to your new income and life as a professional. Car and home are probably the two biggest purchases you’ll make – so don’t rush them. I spent a whole post about budgets trying to dissuade new pharmacists from buying a big house (and don’t worry… the car version is coming!).
Just give it a try. There is nothing to lose. If it turns out I don’t know what I’m talking about – you still have the money you didn’t spend and you can blow it on a Benzo easily. But I’m telling you it is far easier to relax your spending habits than it is to make them stricter.
Not so bad, right?!
Lots of people try to make personal finance really difficult. There is strong incentive to make it hard. Just like Law, or our income taxes – if it seems hard, we’ll be more apt to pay someone else to help us deal with it. You made it through 8 years of college and through the paperwork of graduating from college (possibly twice) – you can get the basics done now – and I’m here to help when there is a question.
Becoming financially independent and healthy really is simple. It just isn’t easy and only the people with enough earning potential (e.g. pharmacists) and the discipline/super-power to save aggressively can make it happen. But if you do – you will reap significant optionality in your life and high likelihood of happiness.
What do you think? Anything I missed that you think new graduates need to do? Tell me below! I read every comment and email.