Steph’s Note: This week, we’re taking a break from the clinical posts in favor of a life chat. I know I’m not that old (cough cough), but I’ve learned at least a thing or two about personal finance (in large part thanks to my superhero mom). So I’m hopeful that y’all can take away a couple pointers from this post to give you a leg up on life as you head for graduation in a couple of months (woot woot!).

A quick disclaimer: I’m not a finance expert. You will have to figure out what works for you in your individual situation. What I can tell you is that these are tips that have helped me achieve my personal goals, so perhaps you’ll find at least some of them useful.

How it’s gonna feel when you get that first paycheck. Just don’t make your money like Walter and Huell… (Image)

Pharmacy is a pretty unique career when it comes to finances. It’s a 4 year doctorate program, and when you graduate and find that *perfect* position (spoiler alert: there is no perfect position), you will likely be making 6 figures. Or at least very close to it.

How many other early to mid 20-something year olds can say that? Most young adults have to bust their @$$es for years to even begin to touch that kind of salary, OR they’ve been in school so long that they have tons of debt and can’t afford to even think about big play money.

Basically, we’re very lucky. Yes, pharmacy school is hard, and it is certainly becoming increasingly more competitive in the job market. But if you play your cards right, you can win big in a relatively quick manner. So what’s a young new grad to do with all that money in their pocket? How should you play the next cards to continue winning, while (of course) getting to reap some benefits from your hard work?

Here’s where tl;dr comes in. We want you to know the top 5 financial tips for new pharmacist graduates so you can start out your professional (and personal) lives on the right foot. Let’s dive in.

#1: Find a Trustworthy Financial Planner

I know, I know. Having a financial planner sounds like something that your 45 year old self should deal with. I get it - I didn’t want to think about that much adulting when I graduated at 23. But let me ask you this…

Do you follow the ups and downs of the stock market?
Are you willing to put in the time to learn how to pick stocks, decide on how aggressive to be with your investing, or how much you need to invest?
Do you know the difference between a regular IRA and a Roth IRA? Do you know what an IRA is?
Do you know the difference between index funds and target date funds?
Do you know how your investments will affect your taxes?

The level of bored I feel when someone starts trying to explain the stock market to me. (Image)

I sure didn’t at 23. And honestly, I still don’t know as much as I should, and I DEFINITELY don’t have the time to study the stock market every single day to figure out if I need to buy, sell, trade, whatever. Umm, I like my life, and that stuff sounds more boring than a pharmacy law lecture to me.

So if you’re not that person…you need to find that person. Because believe it or not, starting right when you graduate rather than waiting until you’re a fully responsible 45 year old can make a huge difference. Like millions of dollars difference! Research your options, which could span anything from a local recommendation from family or friends to a national investment firm.

Regardless of the route you take, your financial planner should be a fiduciary. This means they are legally and ethically bound to do what is financially best for YOU - not them. Fiduciaries should be able to produce credentials or documentation that they are designated as such. You should also investigate their payment structure. Fiduciaries often operate based on fees only rather than being commission-based, the latter of which could introduce bias into their investment recommendations.

On that note, when choosing a financial planner, you should inquire about how they are paid. Fees are generally in the 0.25-3% range, meaning you pay this financial planner a fee of 0.25-3% of the money they manage for you. Larger firms that require you to do more self-management are usually on the low end of the fee scale, whereas smaller, more personalized services may cost you more towards the 3% end.

For example, let’s say you invest $30,000 with a financial planner who charges a fee of 1% per year. You will pay them $300 for the year to manage your money. Sure it’s not insignificant, but relatively speaking, yes, I will pay you less than one day’s wages to manage my money for the whole year.

Now, of course, that fee is a percentage. So that means when you’re older and have that awesome investment portfolio worth $3 million, you’ll be paying that financial planner $30,000 per year. You have to decide what’s right for you, but personally speaking, if you can grow my investments like that so I can retire when I want to, I will absolutely pay you not to have to do it myself. I know it’s not my jam.

It’s all about perspective, right?

Plus, it usually doesn’t even hurt to pay this fee because it’s often paid out of the gains from your investments. So it’s not like you had that money physically in your checking account and then had to pay it out.

Alright, on to the next tip.

Tip #2: Start Saving for Retirement NOW

Trust me…saving for retirement is one thing you don’t want to be late on. (Image)

So this kind of goes along with Tip #1, but seriously, you need to start saving money for retirement..like yesterday. Yes, you’ve been a poor college student and haven't really had the money to go on vacations or buy the sweet pair of skis you’ve been drooling over. I was there. I overdrafted my checking account on a $14 dinner at Texas Roadhouse the week before I started residency. (Blasted dessert charge! Knew I should’ve skipped it…).

But trust me, the difference a couple of years can make when it comes to investment growth is astounding. Plus, let’s not even talk about what they’re projecting we’ll need to retire! Actually, we should talk about it. (Because let’s be real - Social Security may or may not be around at that point, so you gotta CYA. If, by some miracle, it does still exist that far in the future, consider it a bonus in your pocket.)

I could be wrong, but I don’t think people are gonna trust this pharmacist… (Image)

First, I know you’re just starting your career, but think about it…you do want to retire someday, right? Pharmacy isn’t exactly the easiest of professions, physically or mentally. How long do you think you can do it comfortably and safely? (Maybe one day, the community pharmacy gods will figure out that pharmacists don’t actually need to stand 10-12 hours a day to do their job and they’ll put inserts into the freakin counters to allow for stools. Until then…I rant.) So let’s assume you don’t want to work until you die.

So then second, how old do you want to be when you do retire? Of course, everyone wants to be able to retire early at like 55 so you still have some life left in your knees to ski, run, ride horses, whatever. And if you can, all the more power to you! For most of us, that is likely not going to be feasible. We have kids, we take time off work, we change jobs or make moves that set us back financially. Shoot, you might get sick (sorry to say) and have bills that you hadn’t planned on. You never know. But right now, the projection is that we might get to retire around age 67. Maaaaybe our knees will still allow us to have some fun at that point, right?

How much money per year do you think you’ll need to live when you’re 67? Think of how the market and inflation have changed in just the last 5 years. Think of how your grocery prices have changed in that time while you’ve been in school. Now fast forward that 40-50 years. Unless something changes, the price tags for everyday living are only going to keep going up. Now, that’s at age 67…how long do you want to (or think you will) live? Life expectancy is increasing…think you’ll make it to 87? So that’s another 20+ years after you stop working that you need to have money to live on!

Taking all of this into account, the current projection is that you’ll need somewhere around $3 million in your retirement savings to retire at age 67, assuming you want to have about 70% of your annual income to live on. Maybe that’s a high estimate, but let’s be honest, you’re probably going to get used to a certain standard of living having the income you do. So how on earth are you going to get from broke and owing money to THREE MILLION DOLLARS?!?!

Check out this example:

This is just one example of a retirement calculator (from NerdWallet in this case). Assuming you’re early 20s, you have nothing in savings now, contribute $500/month, and want to have 70% of your annual income to live on in retirement, you’ll have a bit over $1.5 million for your retirement. Sounds like a lot…but remember that $3 million projection? You’re only at about HALF?!? (Image)

Now let’s play the game a little bit again. Assuming your salary is in the mid 90s, your monthly income will be around $8,000 before taxes. Let’s assume that after taxes, insurance, and other benefits, your take home pay is $6,000ish. So let’s up the amount you elect to put towards retirement because helloooo, you went from making basically nothing as a PY4 to like $6K a month! You can do it!

NOW we’re talking. By changing the amount you save from $500/month to $1000/month, you will be MUCH closer to the overall goal savings! (Image)

Ok, now that I’ve made the point that you need to save some of that hard-earned money for retirement rather than blowing it on a new Audi, I want to illustrate the importance of starting NOW. Check out how the example changes if we delay saving by just 5 years:

See how delaying just 5 years decreases your ultimate savings by *almost a million bucks*??!?! (Image)

Ok, so now that we’ve illustrated the importance of saving sufficiently and saving early, it’s time for a little more realistic view. I realize that, unless you are VERY VERY lucky, you will have student loans coming due after graduation. You’ll have bills you need to take care of. And it’s entirely likely that you won’t be able to dedicate $1000/month to retirement right away. Guess what..that’s ok!! But please PLEASE start with something.

I’m pretty sure I started out with $50 per month going into my retirement because I did have to pay off student loans. And their looming high percentage interest was more intimidating to me over time than worrying about retirement. But do you know how much that $50/month grew in that first period when I couldn’t spare much more?

A LOT. Check out the illustration below:

Obviously you don’t want to stay at a contribution of $50/month forever, but this is purely for illustrative purposes… Assuming you never increased your contributions, even if all you put away for your entire working career was $50/month, compound interest and investments can grow that into almost $160K! That’s literally $600/year x 44 years of working (67-23) = $26,400 out of your pocket that magically grows into SIX TIMES that with investing. So when you think that it’s not worth your time to set up the retirement account for a mere $50 (heck, even $30!) per month, hopefully this should help you to think again! (Image)

I can’t stress enough the importance of saving something…anything…starting ASAP. For the amount of money that you spend on streaming services month (or shoot, a single evening out with your friends), you can have a nice little nest egg growing for your future. And remember, you don’t want to work forever.

Alright, I’m getting off that soapbox and heading for another tidbit that I certainly didn’t know or think about when I was applying for my first pharmacist position. Each potential employer should review their benefits package with you, and even though you might just want to focus on that lovely, lovely wage number, you should also pay attention to their retirement savings offerings.

Many places have a standard investment opportunity (like a 401K or 403b option) that you can contribute to from your pre-tax paycheck. Along with that, they may talk to you about how they “match” your contributions. Here’s what I didn’t know - not all matches are created equally. Some places may match your contributions at 50%, meaning they’ll add 50% of what you contribute into your account. Sweet, right? Free retirement money! And it is sweet, but did you know that some places offer 100% matching!?!? Even sweeter!

Now most of those matches have caps on them, so they’re not truly going to go dollar for dollar all the way with you. A lot of places may match each year up to a max of 4% of your salary, but others may do 5% or 6% as their max. So it’s important to assess a job offer carefully in terms of what they offer for your retirement because some packages really can sweeten the deal over others.

Tip #3: Money Management and Budgeting

Probably shouldn’t take some random hippie dude’s word that it’s totally fine to jump off the rock…but I did. My parents were just thrilled to see this one, let me tell you. Which, now as a mom who has to behave, I sympathize with far more.

At this point, you may be thinking to yourself, “Gosh, Steph must be this super boring loser who never does anything fun because she just wants to save all her money for when she’s old and decrepit.” But I promise you, I had plenty of adrenaline-junkie fun in my young, new grad, single with no kids, and a good salary days! It wasn’t all saving money - it’s just that I made sure I did that, too (thank you, Mom!!).

So how did I manage to pay off student debt while still saving for retirement AND exploring the world? Here are a couple tips I’ve found useful:

I know it sounds basic, but really you have to review your spending and at least have a loose idea of your budget. I’ve never been a down to the penny type of person, but I do recommend sitting down and fleshing out money coming in versus money going out for all regular expenses. Then you can decide how much you want to be a responsible adult and put away in savings versus how much you have to play.
Assess how your interest rates on loans (student, car, etc) balance against any savings or investments. If your student loan has an interest rate of 7% but your investments are only gaining 5%, it may make sense to focus more energy and money on paying down the debt aggressively. Plus, it’s always a good idea to pay off debts ASAP.
Don’t overextend yourself, and pay off your credit card every month. Those interest rates will KILL you if you let them compound. Who on earth can get their head above water when you’re battling 20-25% interest every month?!? Worst way to spend money…EVER.
If you get a pay raise, don’t take the extra money. Obviously, I don’t mean turn down the raise. What I mean is just treat it like it never happened and put that extra money towards your debts or retirement savings. You’ll never miss that money because you never had it burning a hole in your pocket to be spent.
Here’s one that I didn’t really do a good job of because I moved several times when I was younger… If you think you’re going to be in the same location for a while, consider buying a place to live rather than renting.
When you rent, it is absolutely WAY easier to have an exit strategy (for you location-commitment-phobes like me). You don’t have to worry about that leaking faucet because you can just call the office, and it’s generally fairly worry-free. BUT you are literally throwing money down the drain. If you buy, at least the money you pay towards your mortgage gets you equity in the home that you can get back when you sell it.

Also, don’t forget to reassess your money management strategies as you progress in your career and your income versus expenditures changes. It can be really easy to fall into a comfortable savings amount and forget to adjust that when life happens.

Tip #4: Spend Money Where You Need To

With all this talk about saving money for retirement and paying off debts, you’re probably wondering about the other side of the coin: spending. I want to spend (harrr) just a little bit of time talking about the importance of strategic spending. There are certain areas where you should spend money, even if things are tight early on after graduation. So let’s take a moment for a couple of those areas:

First, you’re graduating, you’re going to get licensed (because of course you are going to beast the NAPLEX and MPJE with tl;dr’s tutelage!), and you’re going to get your first pharmacist job. You HAVE to keep that license active and in good standing, so you’re going to need to pay registration fees and complete continuing education (CE).

Perhaps you’re lucky and work somewhere that you can get all of your CE for free by attending residents’ presentations, but for those of you who are less fortunate, it’s gonna take some bucks. My advice is to shop around. Even if you don’t work at one of those places that offers free CE, sometimes you can virtually attend sessions at those places for a reduced fee. Sometimes you can pay for a 12 month CE subscription that encompasses 2 calendar CE years (wink wink).

If you’re going to pursue BCPS certification, plan on that being a rather hefty expense as well. Even if your employer reimburses you the cost of taking the exam, you’re still going to have to do the recertification credits, which aren’t cheap.

Licensing is also expensive, and depending on how many states you want to be licensed to practice, December can become an expensive month when you renew all of them! That being said, once you’re licensed in a state, it may be prudent to keep that license in place rather than letting it go since the renewal fees are a lot cheaper (and WAY easier) than getting that license back from scratch. So think carefully about whether you might want to ever live or work somewhere in the future before you pursue a license or let it lapse.

Next, you need to think about professional liability insurance. Yes, your new employer has liability insurance that is supposed to cover you in the event of a mistake or a harmful occurrence. But no matter how chill they seem when you’re interviewing or signing that employment contract, how much do you trust that they’ll still be that cool when it’s their neck on the line for you in a lawsuit?

For me, there are a select few people in my personal life that I think would stick out their necks for me when it comes down to them potentially losing huge sums of money. Professionally? Nah, I don’t trust that I wouldn’t get axed for some reason or another in that scenario and left hanging out to dry on my own in a lawsuit.

Plus, when it comes to bang for your buck, professional liability insurance for a pharmacist is peanuts. The policy I’ve had since I started working is a little over $100 per year. So again, for a couple hours’ worth of work as a pharmacist, I have the peace of mind to know I’m covered for the year. Seems like a worthy investment, right?

Finally, I’m going to go a little mom on you here. Purchase life insurance and cancer insurance while you’re young. Again, your employer likely offers some form of life insurance as part of your total benefits package, but what if - what if - you lose that job or change jobs and don’t have coverage in between? You likely have some debts that need to be covered so your family isn’t left with them. Plus, when you’re young, life insurance is much easier to obtain and sooooo much cheaper!

The same goes for a cancer policy. Did you know it’s estimated that ~40% of men and women will be diagnosed with cancer during their lifetimes? So unfortunately, the odds are not in our favor, and you may end up needing those benefits. And we’re talking a cheap monthly expense when you’re young…like the price of going out to dinner one time. So worth it.

Tip #5: Reward Yourself in Small Ways

Now that we’ve had a section about spending and you’re like, “Man, Steph still sounds super boring spending money on life insurance,” I’d like to have one last ditch effort to convince you of my coolness. The truth is this: there is a lot of adulting that you need to do when you get your first real pharmacist paying position. But don’t forget that you’ve worked really stinkin’ hard, and you do deserve to reward yourself.

I just encourage you to do it in small (-er-ish) ways.

Consider each purchase that you make and whether it’s necessary. What will it add to your life and your happiness? If it’s something you truly want and can afford within your budget, by all means, go for it. See some places you haven’t been able to while you had your nose glued to your laptop (because it’s probably going to be hard to come by PTO for the first bit of your professional life).

Just don’t forget to put your future first while you’re out adventuring. Even though it may seem like you’re making the world with that first salary, trust me when I say things change when it’s no longer just you in the mix. You’ll be grateful that you planned ahead!

The tl;dr of Personal Finance for New Pharmacist Graduates

There you have it. My top 5 tips for succeeding financially as much as you have educationally. In case I soapboxed too much for you and you just want to know the tips, here you go:

Find a trustworthy financial planner.
Start saving for retirement now.
Manage your money and follow a budget.
Spend money where you need to.
Reward yourself in small ways.

I hope you will find at least some of this useful. I don’t know what I would have done if someone hadn’t been there to give me advice on how to start managing my finances after graduation. So if you haven’t heard it from anyone else yet, well, now you have! Good luck learning about money management, and remember to keep your future at the top of your priority list.

5 Essential Financial Tips for New Pharmacist Graduates