It’s Not About Getting Rich

 

Over the past six months, I have given a handful of talks to various groups of pharmacists and pharmacy students outlining how we (myself included) can better manage our money. One of my favorite questions to ask the audience is “How confident are you in your ability to become a millionaire by the time you retire?”

 

The typical response is one of silence.

 

So I ask for a raise of hands and just about every time a small handful will say they are “very confident” they can save a million dollars or more while the majority say they are not confident at all they can achieve this goal.

 

It is clear that talking about becoming a millionaire is not a comfortable topic for most.

For some, I get the feeling it is uncomfortable to talk about becoming a millionaire in a culture where we don’t openly talk about money very much. Separate conversation for another day but if we want to help each other and teach our kids how to handle money appropriately and wisely, we need to talk about this more often. For others, I think the mountains of student loan debt make it hard to see into the future of saving a million dollars. And for many, I get the impression that accruing a million dollars seems like a scary number that is out of reach.

 

In fact, most millionaires inherited their money, correct?

 

I thought the same until I read The Millionaire Next Door by Tom Stanley where his research shows that the majority (80-85%) of millionaires in America are 1st generation. That means that most millionaires are you and I that diligently plan for the future and save each and every month over a long period of time.

 

Here is the thing. We have to change the tone of this conversation about becoming a millionaire. It is not a bad thing, it is not greedy and it certainly is not impossible. In fact, I contend that most pharmacists that plan to retire at a reasonable age (say 65-70 years old), that will live into their 80s or 90s and desire to have a lifestyle that resembles their working years (or somewhere close), it is not a question of “Do you think you can save a million dollars?” but rather a fact that “You need to save a million dollars.”

 

The math doesn’t lie.

 

Here is an example to highlight this using a Nest Egg Calculator. I would encourage you to run the numbers yourself based on your personal situation. If a pharmacist is 30 years old and has $50,000 saved in retirement, plans to retire at 65, will live to 85, desires to live off of 80% of his/her current income in retirement and is modest in their investment approach, he/she will need to have approximately $5 million saved for retirement.

 

That makes sense when you think of inflation and the fact that there would be twenty years (after retirement) where savings would need to fund a lifestyle where there is no income. Certainly the variables can change such as working longer, living off a lower percentage of your current income during retirement, or assuming you will have social security benefits available. However, no matter what changes you make (unless you work until you die or close to you die), you ‘need’ to have $1 million dollars.

 

Therefore, we need to talk about the concept of becoming a millionaire much differently. It’s not about being rich.

 

So Why Save to Be a Millionaire?

 

There are five main reasons that motivate Jess and I to stay debt free, develop a plan for how money is spent each month and consistency save for retirement at the expense of spending today.

 

#1 – To be in a position to give away money in a way we have never been able to do so before. I firmly believe giving should be an important part of every financial plan from the beginning (even during debt repayment) but what I’m talking about here is giving at a much greater level and being in a position to meet the obvious needs we see each and every day.

 

#2 – Having a secure financial future for our family. As outlined above, saving a million dollars or more will be necessary to take care of our family if we want to retire at a reasonable age (even if we live off of 50% of our current income during retirement). Again, it’s not about being rich.

 

#3 – To leave an inheritance to our family that will have an impact for generations to come. Compounding growth is an amazing phenomenon…$3 million dollars left to the next generation can easily become $30 million dollars or more for the generation that follows. Lots to be said here about the pros/cons of leaving money to the next generation but for now, let’s leave it at this and assume the next generation will handle that money wisely.

 

#4 – To teach our boys how to work hard and that if you set a goal and work towards it, you can achieve it.

 

#5 – Getting to the point of having the flexibility to do what we want, when we want rather than working out of necessity. Don’t take this the wrong way. I love the work that I do. However, I think many (including myself) would prefer to be in a position to choose what work we do when we do it. That may mean doing the same exact thing as I am doing now but the difference is having the independence to make that decision beyond any salary influences.

 

Your Financial Homework: Do you believe you can become a millionaire? If not, what is holding you back? If you haven’t already, run you own calculations using the Nest Egg Calculator to see if you are on track for saving each month to meet that goal. Remember, saving for retirement is just one part of your financial plan and I would not recommend you focus solely on this goal at the expense of giving, paying down debt or building an emergency fund. There is great value in having a stepwise approach to balancing the competing financial priorities that are thrown at you every day.

 

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For Richer or Poorer: Two Pharmacists’ Journey through the Valley of Debt

 

The following post was written by Kevin and Erin Fuschetto. Erin Fuschetto, PharmD is a 2004 graduate of Ohio Northern University. Erin is a staff pharmacist for Giant Eagle Pharmacy in Salem, OH. Kevin Fuschetto, PharmD, BCACP is a 2007 graduate of Ohio Northern University. Kevin is the Clinical Coordinator for Giant Eagle Pharmacy in the Youngstown, OH region. I was inspired by their story to become debt free and to take control of their finances. I hope you find their story inspirational as well!

Erin: My name is Erin and I am a debt-aholic. This is my first month without debt. My debt problem began when I decided to go to pharmacy school with $0 in college savings. 6 years, 5 credit cards, 2 pharmacy degrees and one wedding later, my husband and I had accepted over $305,000 of debt. I say accepted, because we willingly signed up for this disaster. We were both full-time pharmacists with our “own money” and separate checking accounts. He paid his school loans, car, credit cards and the mortgage and I paid my school loans, car, credit cards and the utilities. We could afford the monthly payments and still enjoy fancy vacations every year. We were living the life!

Kevin: My name is Kevin and I am also a debt-aholic. Looking back at our original list of debt, my initial thoughts are, how did we get to this point? We were both pharmacists! Where was our money going? I honestly could not remember how this happened. I do remember how easy it was to go into debt. A credit card here, a car loan there and don’t forget the extra private “student” loan to pay for the wedding. We knew we couldn’t fix this on our own. We needed a new way to live. We needed help.

Erin: One day my husband came home talking about a radio show he listened to that talked about getting out of debt. He would come in every day with a new pearl of wisdom. He was spouting jargon like “snowball”, “rice and beans”, “live like no one else”. I honestly didn’t think we had a problem, so I didn’t take his words to heart, but he kept talking. He made me listen to the show and finally something clicked. We signed up for Dave Ramsey’s Financial Peace University at a local church. The first lesson for us was to get a joint checking account. I hated this idea. It was one of the toughest parts of our debt pay-off for me. I am a hider. I had cash stashed in coffee mugs, secret savings accounts and a “cushion” of $500 in my checking account, not recorded, just there to feel more secure.

Kevin: My wife and I are perfect compliments for each other. She loved to save and I loved using her “saved” money to pay off debt. She finally agreed to the joint account, but only if we got Muppet checks. Kermit, Miss Piggy and Animal made a lot of payments to our creditors. Not only did this simplify our debt pay off plan, it also seemed like we had more money! No more, I’ll pay this, you pay that, transfer this money here. We were well on our way. We ran our credit reports and closed all of our credit cards (even those we didn’t even remember we had) the first month. Then we cut them up, even my beloved Best Buy MasterCard… no more new DVD Tuesdays for me. Debit card or cash only for this family. Can you believe it? Paper money still pays for things!

Erin: The next few months were a crazy crash course in how to live on a budget and say no to new shoes and eating out. Satellite radio was canceled. Magazine subscriptions gone. Lunches were packed. Coffee was made at home. Every dollar we made had a purpose and a name. We paid off the smallest debts first, then moved onto the cars! I had never owned a car without a payment! The student loans took a long time. We would get excited for our tax return, our yearly bonus or coin wrapping day, because all of that was extra money to help us hit our goal.

Kevin: Initially the budgeting process was not easy, it took many months and meetings to fine tune the budget. We built up a small emergency fund and learned to plan for expenses. When a bill or an unexpected expense occurred, it was a great feeling to know the money was already there. We learned to cash flow everything! We wanted to start a family so we planned, saved, and budgeted our son’s birth. To make extra money, I took a part-time job as a MTM consultant on the weekends and during the baby’s naps. We traded in our now paid-for car and bought a new (used) car. The salesman asked us what kind of payments we were looking for. My wife and I laughed and I said “We are writing you a check for the full amount today!”

Erin: Our last student loan was a whopping $90,000 consolidated loan at 9% interest for 30 years. April 21, 2016, 20 years early, we made the final payment on that loan! We changed our future! Now I get to do what I love most… save, diversify and relax!

Kevin: Now we are free to start the next phase of this journey, no more looking back at the mistakes of the past but forward toward the future. Now we can save for our son’s education so he will not be burdened with student loans. Now we can save for our retirement. Now we can give back to those people and organizations that have helped us. Now we can do whatever we want!

It was a long journey, 56 months long! We wish someone had told us growing up how loans and interest worked. We were raised that if we could afford the monthly payment, that was good enough. Now we know the myths about debt. You don’t have to build your credit. You don’t have to go into debt to succeed. What does a credit score say about you other than how much you love being in debt? You can’t retire on cash back, bonus points or air miles!

Erin: We are debt free and we will never go back! Hasta la vista Visa! See ya later Sallie Mae! Kiss my ACS!

 

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