Tim Ulbrich, PharmD, is the co-founder and CEO of Your Financial Pharmacist.
Disclaimer: The information in this article is provided to you for your informational purposes only and is not intended to provide—and should not be relied on for—investment or any other advice. Read our full disclaimer here.
When you’re a student pharmacist, personal finance might not always be top-of-mind. Between attending class, studying, and being active in your local APhA–ASP Chapter (wink wink!), you’ve got a lot on your plate. However, the reality is that the financial choices and mistakes you make as a student will affect your future. That’s why building a strong financial foundation as a student is so important.
Check out these 10 common financial mistakes you should avoid as a student pharmacist.
1. Not having a student loan payoff plan
It can be hard to think about making a plan to tackle your student loans while you’re in pharmacy school, but with the average student loan debt at graduation soaring to over $170,000, it’s important to give it some thought.
Start by taking an inventory of your federal and private student loans so you can see what your balance is now and where it might be at graduation. Then, get familiar with parts of student loan repayment like refinancing and repayment plans so you can develop a strategy for how you’ll tackle your loans after graduation.
2. Not developing a budget
Creating and sticking to a budget is the key to preventing overspending.
A budget helps you plan for your expenses in advance, allowing you to direct your disposable income (that is, any money left over after expenses) toward your financial goals.
Check out our free budgeting template to help you get started. After that, consider tracking your progress each month with a budgeting app like Mint or EveryDollar.
3. Not having an emergency fund
A car or medical expense can easily knock you off your financial track unless you have an emergency fund ready to help cushion these blows.
An emergency fund is generally 3 to 6 months’ worth of expenses saved in an account that you can use to cover unexpected bills. Saving that much money as a student may be tough, so find an amount you are comfortable with putting away so that you don’t have to depend on a credit card to bail you out.
4. Accruing credit card debt
No one ever plans to go into credit card debt, but it still happens sometimes. As a student, you can avoid credit card debt by creating and sticking to a budget and having an emergency fund in place.
If you’re in credit card debt now, make it a priority to get rid of it as soon as possible and find a strategy that will help prevent it from recurring in the future.
5. Falling victim to lifestyle creep
It’s easy to fall into the trap of comparing your lifestyle with that of your peers and other pharmacists, but this can quickly lead you down a path to expenses that eat into your future earnings.
Avoid upgrading your lifestyle and making large purchases that you can’t afford. As one of my preceptors told me, “When you are a student, live like a student.”
6. Not creating solid financial goals
Setting financial goals can be impactful, even if you aren’t making a lot of money as a student.
Consider having specific, measurable, and timely goals that have a strong purpose behind them, then lay out the steps you can take to reach those goals.
Here is a basic framework you can use for goal setting: “By [date to achieve goal], I want to [financial goal you want to achieve] so that [why you want to achieve the goal]. To accomplish this, I will [steps you will take to make the goal become a reality].”
7. Not financially planning for the final year
The final year of pharmacy school is busy with rotations, a job search, and—for some—applying for postgraduate training. This year can also bring additional expenses, including transportation costs for getting to and from rotations, housing for out-of-area rotations, and the expenses associated with applying for and interviewing for positions. Furthermore, tuition and fees are typically higher during the final professional year and there are fewer hours available to earn income through internships.
Anticipating these changes in income and expenses for the fourth year can help minimize the debt you will incur. This way, you can confidently make the financial transition from student to new practitioner.
8. Not investing in your company’s 401(k), 403(b), or TSP
It can be hard to balance financial goals like investing when you are flooded with student loan debt. While it may feel like you can put off retirement savings for a few years, the reality is that you should take advantage of compound interest—meaning the earlier you start contributing, the better.
As a pharmacy intern, you likely have the option to contribute to an employee-sponsored retirement plan. Many companies offer a match program in which they will put in a dollar amount equal to your contribution up to a certain percentage of your pay. For example, if you made $100,000 a year and your company matches up to 5%, if you invest up to 5% of your paycheck (in this case, $5,000), your company will also contribute that amount to your employee-sponsored retirement plan. (You can certainly add more, of course; employers just won’t match beyond their stated percentage.)
This matching contribution is essentially free money. For most pharmacists, contributing up to the match percentage is going to be the best play even while they are paying off student loans. The amount you contribute to your retirement savings plan beyond the match percentage depends on your financial goals and situation.
9. Not tracking your net worth
You can quickly measure your financial health by calculating and tracking your net worth, which is your assets (things you own) minus your liabilities (things you owe).
As a student pharmacist, this is likely going to be a large negative number thanks to student loans, so don’t be discouraged! Keep in mind that the trajectory of your net worth is more important than the actual current number.
10. Not educating yourself
Although it may feel overwhelming at times, you don’t need a master’s degree in finance to learn how to get your financial house in order or to start making smart money decisions.
Your Financial Pharmacist (YFP) is on a mission to help pharmacists achieve financial freedom through fee-only, virtual comprehensive financial planning services via YFP Planning as well as 3 weekly podcasts, including the Your Financial Pharmacist Podcast, books, webinars, and numerous online resources.
There are many steps you can take as a student to build a strong financial foundation. For more financial tips, resources, and information, check out YFP’s book Seven Figure Pharmacist (use coupon code APHA at checkout for 15% off), visit our website, and listen to the podcast.