When you are a pharmacy student, passing your classes and graduating seems like the biggest obstacle between you and your career goals.
I am not trying to take away from the major accomplishment that is successfully receiving your Doctor of Pharmacy degree, but the challenges do not end upon graduation.
By far the biggest challenge for young pharmacist is finances and money management. I know from seeing first hand how other young pharmacists and pharmacy students struggle with making sound financial decisions. Here are 3 simple ideas that will help you, as a pharmacist take care of the money you are making.
1. Budget Your Income
This step is really a must for any working adult. When you graduate pharmacy school you immediately jump into the top 10 percent of income generated in the United States. As far as money management goes, it is extremely difficult to go from being a poor pharmacy student to a pharmacist making over $100,000 per year.
The big question is how are you going to handle this large amount of money? This is where that dreaded BUDGET word comes into play.
I recommend that you choose a monthly budget because most expenses and payroll follow a monthly plan. Write down on paper or electronically exactly how much each of monthly expenses will be (this is the tricky part).
It is very easy to leave expenses out because of lack of “real world” experience. Some expenses that you might forget about include clothing, medical, insurances, and charitable donations. It is also a great plan to have a miscellaneous expense fund and an emergency fund factored into your budget. I learned the importance of preparing for miscellaneous expenses the hard way when I forgot to include them and ended up blowing through my planned budget.
Remember that your first budget will not be perfect and it is okay to make the necessary adjustments as you go along. The lack of a good budget either ends in overspending or under utilization of funds.
While overspending is the more common issue of the two and leads to debt, under utilization of funds can also be costly. We have all heard the phrase “time is money.” If you are not properly using your extra funds then you could lose big down the road.
2. Find a Trusted Financial Advisor
Most pharmacists took mainly science and math classes throughout their educational journey. There is absolutely nothing wrong with this, but we need to realize that this could leave us short of being experts in the area of business and finance.
When you have created your budget, subtract all of your expenses from your after tax monthly income. Hopefully this will leave with a pretty good chunk of change.
Now that you have a good idea of how much investing/saving money you have to work with it is time to get a financial advisor. Choosing a financial advisor is a decision that should not be taken lightly.
You should either choose someone that you completely trust or someone who was recommended by someone you completely trust. For me, I chose to work with a longtime friend who went to high school and college with me. This was a great decision because I trust my financial advisor and feel very comfortable having financial conversations with him.
If you don’t have any knowledge of financial advisors in your area, then I would recommend you visit a couple and treat it as if you were interviewing them. Ones who are pushy and intimidating have no right to be your advisor.
Always remember that this is your hard earned money and a financial advisor should only be there to advise! Some areas of advice that you may benefit from an advisor include strategies for saving, paying off school loans efficiently, getting the right insurance coverage, and deciding how much house you can afford.
3. Buy a Home (When Feasible)
Please do not take this advice as me recommending that you buy a home as soon as you have your diploma in hand. There is no doubt in my mind that there is a time and a place to purchase a home.
When you graduate from pharmacy school you are likely low on savings and high on school loans. This is not a great situation financially to purchase a home.
Keep in mind that when you are renting you are paying for a service, and when that service is over you are left without any ownership or equity. That being said it is good to start building a down payment fund as your rent early in your career as a pharmacist.
My wife and I rented a small home for a year before we made the jump to purchase our first home. I remember how painful each rental payment was because I knew that it was money that I would never see. Now when I make a mortgage payment it is comforting to know that I am building equity which contributes to my overall cash value.
Keep in mind that everyone’s renting time may be a little different. You may have to rent for a couple years to get to a good financial position. The important part to remember is that you are preparing yourself to purchase a home/condo/townhouse or whatever it may be. A major caveat to this home buying experience is that you make a purchase that is sensible to the budget!
Todd Johnson, Pharmd, MBA
Todd Johnson graduated with his PharmD and MBA degrees in 2014. He has since began working as a pharmacy manager and is passionate about helping pharmacists make wise financial decisions.