Investing

The FIRE Prescription: How to Retire Early as a Pharmacist

Posted on by yfpadmin

The FIRE Prescription: How to Retire Early as a Pharmacist

The following is a guest post from Dr. Jeffrey Keimer. Dr. Keimer is a 2011 graduate of Albany College of Pharmacy and Health Sciences and pharmacy manager for a regional drugstore chain in Vermont. He and his wife Alex have been pursuing financial independence since 2016.

If you’ve started going down the internet’s personal finance rabbit hole, you’ve no doubt crossed paths with the FIRE movement. FIRE (financial independence, retire early) is a concept that’s been gaining a lot of traction lately. What was once considered a fringe topic, mostly covered by blogs such as Mr. Money Mustache or Early Retirement Extreme, has morphed into a widespread movement with mainstream coverage. Some are even calling it “the ultimate life hack.”

But what is it and why should it matter to us, pharmacists?

What is FIRE?

FIRE is based around the concept that it is possible to retire early (ie. before 65) by living off the income generated passively through investments. This is not a new concept. All throughout history, people have done this. You might think of this crowd as the 1%. So why all the buzz now?

Because it turns out, you don’t have to be a 1%’er to make it happen. Say what?!

How?

Because one of the core tenants of the FIRE movement is that the amount of money you need for retirement is purely a function of your expenses and NOT your income. You can control your expenses.

Should You Join the FIRE Movement?

But what about us? As pharmacists, we’ve sunk a lot of time and effort into getting where we are. So much so, that when people ask you what you do, you don’t respond with “Well, I work for company _____ in the _____ department,” you respond with “I’m a pharmacist.” What we do is embedded in our identities. So, you may ask yourself, why should I get into the FIRE movement? Surely, this whole retire early business is something only a cubicle worker who files TPS reports all day would dream about right?

Maybe, maybe not.

Maybe you feel burned out or you’ve just become disillusioned with our profession. That’s what one pharmacist, Jason Long of Tennessee, felt and decided FIRE was the way to go. In a NY Times article covering the FIRE movement, Jason cited burnout and job dissatisfaction as the primary reasons why he adopted a FIRE mindset and called it quits early.

He’s not alone in his feelings about the profession either. According to a recent article in Drug Topics, job satisfaction in pharmacy overall isn’t great with 29% of respondents to their survey indicating that they’d be looking for a new job in the next 12 months. Reasons cited: increased work volume and less help to do it. Factor in a more saturated job market, lower compensation packages, and the potential for Amazon to disrupt the whole industry with its Pillpack acquisition and there are plenty of reasons for a pharmacist to feel like their profession is on the ropes.

But maybe that’s not you. Maybe you love your job and love being a pharmacist. What then? Well, FIRE has something to offer you, too. In a word: options. Personally, I love being a pharmacist (I even work retail if you can believe it). Financial independence without the retire early angle can give you the flexibility to get more from your career. Mid-career residency? Part-time by choice? Want to start a business? In short, there’s a lot of power in not needing a paycheck.

How to Retire Early as a Pharmacist

Now that I’ve talked it up, it’s time to get down to brass tacks and layout a roadmap for FIRE. There are a few important concepts to understand, but before we get into that, I think it’s important to highlight some of the things that FIRE isn’t:

A get rich quick scheme
Some guru’s course
A set formula
Easy

That last one is the big one. FIRE is not something to go for on a whim or halfheartedly. It will not happen overnight. It will involve sacrifice and, probably, a fundamental change in your relationship to money. You need to have a good reason for pursuing FIRE if you’re going to be successful. In short, you’re going to need one heck of a WHY.

Got it? Great.

So how does it work? Like I said before, there are a few concepts that form the basis of the FIRE movement and here’s a good order to introduce them:

Safe Withdrawal Rates and the “4% Rule”
Reducing Expenses and Increasing Savings Rate
Investing
Drawdown

Safe Withdrawal Rates and the “4% Rule”

As mentioned before, FIRE philosophy focuses on expenses being the main variable in determining how much you need to retire. But the question remains: how much do I need? Luckily, the academics have provided that answer with what’s called a “Safe Withdrawal Rate” or SWR.

So what’s that? First, the long answer.

SWR refers to the rate (expressed as a percentage) that a retiree can realistically take out of their retirement portfolio, adjust for inflation every year, and never run out of money. Based on academic research, notably the Trinity study, this number has been said to be 4% when applied to a portfolio consisting of 50% stocks and 50% bonds. In that study, the authors looked at different mixes of stocks and bonds over different 30 year stretches from 1925-1995 to determine the probability of portfolio failure (ie. running out of money) when different withdrawal rates were applied. In all those scenarios, it was determined that a person who took out 4% of the portfolio and then adjusted their subsequent withdrawals for inflation going forward had a 0% chance of running out of money at the end of the 30-year period. From this, we get what’s known as the “4% rule.”

In short, if you divide your yearly expenses by 0.04 (or multiply by 25!) you come up with a portfolio balance (your FIRE number) that can provide a stream of income to cover your expenses for at least 30 years, if not indefinitely. Now, this is somewhat of an oversimplification, which is why 4% being a “rule” needs to be taken more as a guideline, but you get the gist. In today’s environment, SWRs might be lower, but for now, you can estimate your FIRE number like this.

Yearly Expenses*25 = FIRE Number

For perspective, that means $1,000,000 can provide you with a $40,000/yr (plus inflation) forever.

Reducing Expenses

Since how much you spend is what determines how much you need to save, cutting expenses really accelerates the whole process. Frugality is your friend. Just think, if you’re spending $100/month on cable and decide to cut the cord, that’s an extra $30,000 you DON’T need to save. What about a car lease payment? Or a McMansion? Then we’re talking in the hundreds of thousands to MILLIONS less.

Note too, that by cutting expenses, you also free up money to save. The rate that you save (taken as a percentage of income) is what really determines how long it will take for you to reach financial independence. To illustrate this point, we’ll use an early retirement calculator.

Assume Bob is a 24-year-old new practitioner making $120,000/year gross with no prior savings and a 5% rate of return on investments.
If after taxes and expenses, Bob can save $18,000 per year (15%), he will hit financial independence in about 43 years at the age of 67. This is pretty standard retirement savings advice, by the way.
However, if Bob can jack up his savings rate to 30%, he can now retire in 28 years at the age of 52.
And, if Bob goes all-in on FIRE and gets that rate up to 50%, he can retire in a little under 17 years. Just after he turns 40. Bob wins.

See, math can be fun!

But cutting expenses isn’t just about choosing to go without cable or driving a more sensible car, it’s also about getting out of debt. Debts are expenses just like any other and should be dealt with as part of your FIRE plan.

Unfortunately, this is the stage of the FIRE journey that involves the most pain. In a way, it’s like committing to losing weight. Your budget is your diet and you’re only going to get the results you want by sticking to it. Thankfully, maintaining a budget is easier than ever thanks to apps such as YNAB and Mint.

Speaking of debt, even if you’re not fully sold on FIRE, getting out of debt is transformative and something everyone should strive for. I don’t agree with Dave Ramsey on much, but he is right when he says, “the borrower is a slave to the lender.” Debt such as student loans, car loans, credit cards, etc., chains you to work in a way that’s just unhealthy. You can have the greatest job ever, but if you need your whole paycheck to service your debts, your relationship with your work is going to suffer and you’ll probably start resenting it.

That said, there’s one important caveat to getting out of debt that pharmacists should keep in mind. Bringing the full-on beans and rice diet intensity to your student loans may not be the best course of action if you can qualify for loan forgiveness. With FIRE, optimization is key. You may find it more profitable in the long run to forgo paying off your student loans outright if you qualify for some of these programs. Check out this YFP podcast episode on how to optimize forgiveness.

Another way to reduce your expenses could be refinancing your student loans or mortgage. Lowering your monthly payment on your mortgage or student loans will likely save you a lot of money each month. With these additional savings, you could put even more toward knocking out your debt! While student loan refinancing isn’t for everyone especially if you’re pursuing PSLF or non-PSLF loan forgiveness, you could earn up to $800 in a cash bonus from a reputable company YFP has partnered with!

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Investing

The umbrella of “investing” covers a wide range of topics but in this article, I’m only going to briefly touch on the two major types of investments most pharmacists will encounter on their journey to FIRE: paper assets and real estate.

Paper assets are those such as stocks and bonds that you can invest in using 401(k)s, 403(b)s, 457s, IRAs, and brokerage accounts. These are the types of assets that generate truly passive returns and, with a properly diversified portfolio, can make FIRE possible. That said, there’s no one way to go about investing in these.

Within the FIRE community, index investing strategies (aka. indexing), such as those advocated by JL Collins, are quite popular. Central to indexing is the focus on low-cost index mutual funds. What are those? Without getting too much into the weeds, they’re mutual funds that give investors a diverse basket of stocks or bonds (sometimes all of them) at little or no cost. In general, these strategies call for a gradual decline in the proportion of stocks (high risk, higher return) to bonds (low risk, lower return) over time. And, while this isn’t different from the conventional approach to investing, the emphasis on using funds with low costs can make the whole process more efficient. Is indexing the best way to go about FIRE? Maybe, maybe not. However, it is one of the most accessible and can get you started.

Beyond stocks and bonds, many FIRE devotees choose to invest in real estate. In addition to acting as an asset that isn’t correlated with either the stock or bond markets, real estate investing can provide a level of passive income that can decrease the amount of money you need to save in paper assets. While not necessary to FIRE, many investors find real estate to be a worthwhile pursuit and can accelerate your path.

Drawdown

Finally, after amassing your war chest, you need a way to get at it. Since the primary vehicle most people use is a retirement account, how do you get the money out before regular retirement age? Fortunately, the FIRE community’s good at finding loopholes. Between Roth IRA laddering, 72(t) distributions, or simply taking the money out at a lower tax rate and paying the penalty, there are ways to jailbreak your money in a way that makes sense.

How to Join the FIRE Movement

So how do you get started? First and foremost, make a commitment to taking control of your finances and making them a priority. Second, get your spouse or significant other on board (super important!). Third, take action in a way that makes sense for you. Lastly, join others in the FIRE movement by connecting with groups online. FIRE isn’t just a movement but a community.

So, if this all sounds good, I invite you to take charge and change your life.

Welcome to FIRE!

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5 Key Financial Moves To Make With A New Baby

Posted on by yfpadmin

5 Key Financial Moves to Make with a New Baby

The following is a guest post by Karen Berger, PharmD. Karen is a pharmacist and medical writer in Fair Lawn, NJ. Her husband has been trying unsuccessfully to put her on a budget for many years.

This post contains affiliate links through which Your Financial Pharmacist may receive compensation

In an earlier post, we talked about how to prepare financially when expecting. Once your little one makes his or her big appearance, though, the financial planning is not over – it has just begun. Continue to work on those important financial moves we talked about earlier, and start to incorporate these additional tips.

Nothing can prepare you for life with a baby. Whether this is your first or fifth baby, the first few months are exhausting. You walk around on a few hours of sleep every night – getting more than four hours of sleep in a row is cause for celebration. You might not remember the last time you showered or sat down for an uninterrupted meal. Although it is the last thing on your mind, financial planning for new parents is key to ensuring a strong financial position for the upcoming years.

1. Start Saving For College

With the average cost of college for 2017-2018 at $20,770 for in-state public schools and $46,950 for nonprofit private schools (including tuition, fees, and room and board), and prices increasing every year, it is never too early to start saving for college. Don’t forget to multiply these numbers by six (years), the average length of time students take to earn a bachelor’s degree, and also by the number of children you have.

Having a monthly savings goal is a fantastic way to help your children pay for college. NerdWallet estimates that saving $500 a month, per child, earning 5%, should be adequate for you to cover $50,000 of college costs per year for four years once your child turns 18. Obviously if you’re planning to pick up the tab for potential graduate or professional school, you’re going to need to save a lot more. You can find calculator tools online to tweak the numbers to your personal situation. Often, saving for college will involve a combination of several of the strategies below:

529 College savings plan: The 529 is the most popular savings plan geared toward education; there are two types. The first type is the 529 investment savings account. With this plan, you invest with the same risk/return profile of other stock investments. Check your own state for tax breaks or matching funding before looking into 529 plans offered by other states.

The second type is the 529 prepaid tuition plan. This method locks in tuition costs and avoids the yearly increase in tuition. Paying for 6 semesters now, at today’s cost, will pay for 6 semesters in the future, even if the costs are higher at that time. These plans are starting to have more restrictions.

Pros of the 529 include: high contribution rates (plans typically allow up to $300,000 in lifetime total contribution), the ability to change beneficiaries, and the benefit of tax-free growth. Also, if the parent is the account holder, the 529 is considered a parental asset and it will have a minimal impact on financial aid as compared to other education savings options.

On the other hand, there are a few cons of the 529. It is strictly to be used for education, so if your child does not go to college, the money may be unavailable for other purposes. However, depending on the plan, you may be able to change the beneficiary or pay tax and a 10% penalty on the growth of assets. There is also the inherent stock market risk.

Savings Accounts & Other Low-Yield Options: Savings accounts are flexible, but provide little in the way of interest. Using a regular checking/savings account with the intent to save for college may backfire, as money may be tapped into and not replaced. Not only that, but because of inflation which is typically around 2-3% per year, you may actually be losing money keeping it parked here. Certificates of Deposit (CD) and US Savings Bonds are other options, but these are mostly out of favor due to low interest rates. Sometimes, a very conservative contributor may favor this option.

Roth IRA: A Roth IRA can be used as a combination retirement account and educational savings account. It allows you to invest with after-tax dollars while the earnings grow tax-free. Although this is typically used as a retirement account with a penalty for early withdrawals on any growth before 59 ½, if used for higher education, distributions can be taken tax- free and penalty-free. The biggest downside to this is that it could significantly reduce your overall retirement projections. In addition, the distribution must be made in the same year that the qualified expenses are paid. Another item to note is this distribution is considered to be income to the student and could reduce eligibility for need-based financial aid.

Coverdell Education Savings Account (ESA): This is like a smaller version of a 529: it offers tax-free withdrawals, and you can invest in the market. However, one of the biggest advantages is that you will have a lot more investment options to choose from, since you won’t be limited to what’s available to what a specific 529 plan offers. Contributions are limited to $2,000 per year, and until the beneficiary turns 18. ESA’s may offer more flexibility, and qualified expenses may include educational expenses from Kindergarten all the way through graduate school (529 plans also now allow up to $10,000 per year to pay for private elementary and post secondary school tuition).

Important to note with a Education Savings Account is that income limits apply, and depending on your salary/combined salary, you may not be able to participate. Currently, the income limit for a maximum contribution is $190,000 for a married couple filing joint returns, and contributions phase out at $220,000 in 2018/2019. The limit is $110,000 for those not filing a joint return.

If you are indeed eligible to contribute to an ESA, the cool thing is that you don’t have to choose between an ESA and a 529 – you can do both!

Trusts: These are structured as UTMA or UGMA. Assets are transferred to the child’s account and invested on his/her behalf until the child reaches the “age of trust determination,” which is between 18-21, depending on the state. As soon as the beneficiary becomes an adult, he/she can use the money however he/she wishes. As a custodial account, these assets are considered to be assets of the child/student and are included in calculating financial aid. These funds will stay in the custodian’s taxable estate until the child reaches the age of trust determination.

2. Make A Will

This is the happiest time of your life – who wants to think about something depressing like a will? Although it seems sad, a will is a very necessary part of life. Just think about the recent, unexpected passing of 90210 and Riverdale star Luke Perry from a stroke at the young age of 52. That was a major wake-up call for many people to get their affairs in order.

In your will, you will clearly and concisely state your wishes for the distribution of your assets after death, and appoint guardians for your children if both parents pass away. You will designate an executor, who will ensure the provisions of the will are carried out.

You can either hire an attorney to create your will or do it yourself. I would recommend hiring an attorney if you can afford to do so. The attorney handles all of the intricate details, making sure nothing is left out and can keep a copy on file. Attorneys may charge a flat fee or hourly rate, with an average cost of $300-$1000 for an uncomplicated will, or up to $10,000 if you have complex assets and an estate, or the need to establish a trust.

Many companies offer a very affordable legal plan for employees, where you contribute a small amount per paycheck for legal representation by participating attorneys. At the time, my husband and I were able to do both our will and closing on our house, and we did not have to pay anything above the regular paycheck contribution.

If you would rather create a will yourself, you can use an online program or software to make a will for less than $100. Requirements for witnesses or other specifications vary by state.

Another thing you need to do that falls under the “no fun, but necessary” category, that goes along with your will, is to create a living will, or advanced directive. This lets you set the terms for healthcare providers about the kind of health care you want or do not want to receive, in the event that you are unable to speak or make decisions for yourself. The living will sets forth your wishes on resuscitation, quality of life, and end of life treatment. The Durable Power of Attorney for Healthcare is a designated, trusted person who will make medical decisions for you in an emergency situation, in cases where the living will may not provide a clear answer. This person is there to fill in gaps that are not clarified by your living will, and cannot contradict your living will.

3. Obtain or Update Life Insurance

Now is the time to get a life insurance policy, if you do not have one already. Life insurance ensures that your beneficiaries (spouse, children) are financially taken care of if you die.

There are two types of life insurance:

Term Life Insurance: This type of life insurance offers coverage for a specified period of time. It is less expensive than whole life insurance and has a predetermined guaranteed death benefit. Your premiums will increase at preset time intervals, such as every 10 years.
Permanent Life Insurance: A number of policies such as whole life, cash value, and universal life, fall under this umbrella. This type of insurance has a death benefit that never expires as long as you pay your premium. In addition, there is typically a saving/investing plan baked in, which is one of the benefits that agents use frequently as a marketing tactic. The rates of return vary, depending on the policy, and they are generally filled with many different kinds of fees. Plus, these policies are often much more expensive than term policies. Because of these issues, the YFP team recommends that most people should keep their savings and investments separate and go for a term life insurance policy.

Once you determine the term (usually 10-30 years) that works best for you, you need to decide the amount of coverage. Financial experts often recommend that your death benefit be 6 to 12 times your annual salary. However, this may not be enough and a number of factors will come into play, including what you can afford, homeownership, and number of dependents. For a more tactical approach, you can check out this calculator.

4. Obtain or Update Disability Insurance

Would you be able to support yourself and your family, pay bills, and achieve your financial goals if you became disabled and couldn’t work anymore? If your answer is no, then you need disability insurance.

Do you know your most valuable asset? Surprisingly, it is not a material possession such as your house, but it is the ability to earn a living. Disability insurance pays a portion of your regular income if you are unable to work for an extended period of time due to illness or injury.

Although it seems unlikely, more than 1 in 4 20-year olds will have a disability for 90 days or more by age 67. Often, people think of worst-case scenarios and assume that they are immune, but something as “minor” as a back injury can put an otherwise healthy person on disability.

There are two types of disability insurance – short-term and long-term coverage. Both replace part of your monthly salary up to a certain amount, such as $10,000, during a disability. Some long-term policies also may pay for additional services, such as training to return to work.

Short-term disability replaces 60-70% of your salary, and pays out for several months up to one year, depending on the policy. It has a shorter waiting period, about 2 weeks, between the time of disability and the time when payments are made to you.

Long-term disability policies typically can replace up to 40-60% of your salary. With long-term disability insurance, benefits end when the disability ends. If the disability continues, benefits end either after a certain number of years or at age of retirement. There is a longer waiting period, usually 90 days, between the time of disability and the time when payments are made

Disability insurance can get pretty complex as there are a number of riders and definitions that vary between companies. Besides your age, occupation, term, benefit amount, and waiting period, these riders will play a huge part in the cost of your policy. To get a better understanding of these and what to expect, you can check out this free guide.

How do you sign up for disability insurance? First, look at your workplace. Often, employers include coverage and contribute towards the premium. Even if your employer does not pay towards your coverage, you can often buy your own coverage through the employer’s insurance broker at a discounted group rate. You can also check with professional pharmacist associations. Another way is to buy an individual plan through a broker or directly through an insurance company. Your Financial Pharmacist offers a helpful service through Policygenius that shops multiple companies to find you the best disability insurance policy.

5. Start or Continue Contributing Toward Retirement

Although retirement may seem far away, and college savings for your children may be at the front of your mind, it is an inevitable event that requires planning. I always remember Suze Orman telling callers on her radio show, “You can take out loans for college but you can’t take out loans for retirement.” The sooner you start saving, the longer your money has to grow. Be sure to contribute to your company’s 401(k) plan, and if your company has a match, try to at least contribute that much since it’s basically free money. The maximum 401(k) contribution limit for 2019 is $19,000 unless you’re over 50 in which you can add an additional $6,000.

Even If your company does not offer a 401(k), or you are self-employed, you can open up an IRA (individual retirement account). For 2019, your total contributions to all of your IRA’s cannot exceed $6,000 if you are under 50 years old, or $7,000 if you are age 50 or older.

Besides an IRA or 401(k), a Health Savings Account (HSA) is another great way to save for retirement as it has triple tax benefits. It lowers your taxable income, grows tax-free, and can be distributed tax-free if used for qualified medical expenses. Despite its name, your contributions do not have to sit in a simple savings account, but can actually be invested aggressively. In order to get access to an HSA, you have to have a high deductible health plan (HDHP).

These financial moves to make with a new baby may not be the most exciting things to do and they can come with a high cost, but they will help you sleep better at night, knowing that you are taking care of your family. Now, here’s to hoping your new bundle of joy sleeps through the night!

Financial planning for a baby, and in general, life events, can be overwhelming. Often it is best to bring in an experienced financial planner to help you plan and prepare. If you are looking for some extra help, you can click here to book a free call with the YFP Planning financial planning team.

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Why Most Pharmacists Should Do a Backdoor Roth IRA

Posted on by yfpadmin

Why Most Pharmacists Should Do a Backdoor Roth IRA

*Disclaimer – The following post is not tax or investment advice. It is meant to provide education on the subject matter covered and the ultimate decision to make any changes should be determined only by you and your designated financial professional(s).

Invest for retirement in tax-favored accounts. It’s one of the core financial recommendations you’re probably familiar with. While the 401(k), 403(b), or TSP is one of the best ways to do this, your contributions are limited to $19,500/year (for 2020). And if you’re someone looking to build a stellar retirement portfolio, that may not be enough to hit your goals.

As a pharmacist, you may have been told you make too much money to contribute to one of the best retirement accounts available, the Roth IRA. While that may be true, you may not have to settle for a traditional IRA or park your cash in a taxable brokerage account just yet.

That’s because there’s a legit strategy to work around this known as the “backdoor Roth IRA.”

While this retirement saving strategy does require a few extra steps, the ability to invest thousands of dollars with tax-free withdrawals can be well worth the effort. Plus, Roth IRAs have some other awesome benefits that are not available with traditional contributions.

When you’re eligible to take distributions at age 59 ½, you won’t owe any taxes on that growth.

Also, unlike a traditional IRA, there is no required minimum distribution and at any point you can withdraw any of your contributions you’ve made if needed tax free. Plus, if you have held a Roth IRA for at least 5 years, you can make early withdrawals on the earnings without penalty for a first time home purchase up to $10,000.

*Please note that the 5 year rule is different for a Roth conversion which allows you to move funds from your traditional IRA and place them in your Roth IRA. The 5 year holding period restarts for each conversion and any withdrawals during this time frame will result in a 10% early withdrawal penalty if you are under 59 ½.

Let’s go through why backdoor Roth IRA can be a great option and then how to actually do it.

The Issue with a Traditional IRA

IRAs or Individual Retirement Arrangements, are retirement accounts available to anyone who earns an income in addition to non-working spouses (covered later). No matter what company you work for or retirement plan they offer, you have the opportunity to contribute to an IRA. This is something you set up completely outside of work and can be done in addition to your 401(k).

Like your 401(k), IRAs also come in two flavors: traditional and Roth.

Contributions to traditional IRAs can lower your taxable income today with the amount growing tax-deferred resulting in you paying taxes at the time of withdrawal. However, because of the income limits to get the deduction, most pharmacists will never get this benefit.

Now the rules get a little tricky here because these limits are determined by whether you and your spouse have access to a retirement plan at work. But assuming you do, the ability to deduct traditional IRA contributions phases out completely at $75,000 if you file single and $124,000 if married filing jointly for 2020, hence excluding most pharmacists working full-time.

With this in mind, there is really is no question on whether a traditional or Roth IRA is better since there won’t be any benefit with the former. Therefore, either contributing directly to a Roth IRA or using the backdoor strategy will be your best move.

Roth IRA or Backdoor Roth IRA?

With the median pharmacist salary around $126,120, it’s very close to the income limits before you’re restricted from making standard Roth IRA contributions.

But rather than an all or nothing situation, the IRS begins phasing out your contribution limit once your modified adjusted gross income (MAGI) exceeds a certain threshold. These thresholds are listed below and depend on your filing status (single or married) and the tax year (2020 or 2019) you’re submitting your return for.

Single Taxpayers and Heads of Household

Single filers can make regular Roth IRA contributions when their income falls within these ranges for tax years 2020 and 2019.

One perk of being married is higher income limits to contribute. If your household income is below the amounts listed below, you can make Roth IRA contributions for tax years 2020 and 2019.

Married, Filing Jointly and Qualified Widows or Widowers

Before you think the backdoor Roth is your only option, glance at the income limits to see if you qualify to contribute directly to a Roth IRA first. No need to put in the extra work if it’s not necessary!

Even if your annual income falls within the IRS income phaseout range, you can still make partial backdoor Roth contributions. For example, if you’re a single taxpayer with a MAGI of $125,000, your maximum Roth contribution is $5,600 in 2020 and $4,800 in 2019.

This means you can contribute $5,600 directly to your Roth for tax year 2020 and the remaining $400 with the backdoor method to still contribute $6,000 annually. If you are able to make partial contributions and want to determine your limit, check out the IRS guidance for 2020.

Roth IRA Contribution Limits

The amount you can contribute to backdoor Roth is the same as the standard Roth IRA before the IRS phaseouts start applying.

You and your spouse can contribute up to the following amount to your Roth IRA:

Tax Year 2020: $6,000 ($7,000 if you’re 50 years or older)
Tax Year 2019: $6,000 ($7,000 if you’re 50 years or older)

To maximize your peak earning years, the IRS lets you contribute an extra $1,000 annually once you turn 50, something known as a catch-up contribution.

These are also the same contribution limits if you fund a pre-tax traditional IRA. Keep this in mind as you will need a traditional IRA to make valid backdoor Roth IRA contributions.

Make sure you only contribute up to the annual limit to your Roth IRA. In 2020, that’s either $6,000 or $7,000 per person. For non-backdoor Roth contributions, you can request a refund to correct the problem. If you don’t correct the excess contribution, you will pay a 6% penalty on the excess amount.

Open a Spousal IRA

If you file your taxes under married filing jointly (MFJ) and your wife or husband either earns a small income or doesn’t work, you can consider opening a spousal IRA to double your annual contributions. As long as your earned income is equal to the amount you contribute to your IRA and your spouse’s IRA (at least $12,000 if you each contribute $6,000), the spousal IRA contribution is valid.

In 2020, having a spousal IRA lets you and your spouse both contribute $6,000 ($7,000 if you’re 50 or older). That’s up to $14,000 of cash that grows tax-free until you withdraw it. Pretty cool right?

In order to take advantage of the spousal IRA option you will need to open up both a traditional IRA and and a Roth IRA in the spouse’s name. After contributing the annual contribution to the spouse’s traditional IRA you will then convert the balance to the spouse’s Roth IRA.

A Step-by-Step Guide to Making a Backdoor Roth IRA Conversion

Ok. We’ve gone through the benefits of a backdoor Roth IRA, why it’s a great move, and the contribution limits. Now let’s go through how to make this happen step-by-step:

via GIPHY

1. Make Nondeductible Traditional IRA Contributions

The first step is funding your traditional IRA with nondeductible income. If you’re making this contribution before April 15, you can either date it for last year (2019) or the current year (2020).

After the federal tax filing deadline (April 15 for most years), your only tax year option is the current year.

You’ll be completing an extra form, but this step is like making regular post-tax Roth IRA contribution. These contributions don’t reduce your taxable income for the current tax year.

The best way to fund your IRA contributions is from the checking account you use to deposit your paycheck. You must then decide if you want to make a lump sum conversion or dollar cost average as money becomes available.

Lump Sum Contributions

If you have $6,000 in idle cash and are close to the deadline for making your contributions, lump sum is the best option. With this strategy, you only have to make one contribution each year and your tax implications will be minimal if you make the conversion relatively quickly.

Dollar Cost Averaging

If you can’t max out your IRA at once or prefer to take advantages of changes in the market, you can also considering dollar cost averaging. With a $6,000 annual contribution limit, you can contribute $500 a month if you want 12 equal monthly payments but you could also come up with some other schedule.

Besides doing this out of necessity, there are other benefits with this technique. By contributing an equal amount over a period of time, you will naturally avoid trying to time the market. You will buy more shares when the market is down and fewer shares when the market is up.

Where to Set Up Your IRA

You have a lot of options on where to fund your IRA including banks, brokerage firms, and mutual fund companies. Companies such as Vanguard, T. Rowe Price, or Fidelity allow you to open accounts without any fees or commissions but there may be a minimum initial amount depending on the investment you choose.

Now, when you make your contributions, you will have to decide how you actually invest the money. Remember, the IRA is not the actual investment but rather a tax-advantaged vehicle or shield for your money.

You will have thousands of options here and how you invest will depend on your goals and your risk tolerance.The one point to keep in mind will be to minimize the fees. Many index funds and ETFs exist with expenses ratios as low as 0.03-0.08.

However, keep in mind that by subjecting your contributions to market fluctuation, you could actually lose money prior to making your conversion. Therefore, the conservative approach would be to keep contributions in a money market account or other low-risk investment with little to no volatility.

2. Make a Roth IRA Conversion

Your next step is to convert your contribution amount into a Roth IRA. It can take several days for your traditional contributions to settle before you are able to convert them but by having your Roth IRA with the same broker, you should be able to easily schedule the conversion.

When making the backdoor Roth IRA conversion, your broker will ask if you want to withhold any income for taxes. Since you made a nondeductible contribution in the first step, don’t have your broker withhold anything.

Potential Tax Implications for Lump Sum Contributions

You will be responsible for any taxes when you file your return, but the amount should be minimal if the cash doesn’t sit in your traditional IRA long enough to significantly appreciate in value. This is your most likely tax situation when you make lump sum contributions and you don’t have an existing balance in your traditional IRA that converts first.

Potential Tax Implications if You Dollar Cost Average

If you convert money that has appreciated in value, let’s say 30%, you pay taxes on those gains. For example, let’s say for 2020, you contribute $500/month to get up to the max contribution of $6,000. But, because the market was on fire, you actually have $7,800. You would be responsible for paying taxes on the $1,800.

How Long Should You Wait Between Traditional Contributions and Roth Conversions?

One of the questions that commonly comes up when making the Roth conversion is how long to wait. Technically, as soon as your account is funded with your nondeductible traditional contributions, you can make the move.

However, doing this could cause some issues with something called the step transaction doctrine. It has to do with the overall result of a series of transactions where the IRS could essentially penalize you with taxes because you are exploiting a loophole.

There is controversy by financial experts on what the best waiting period is. Some advocate for one month while others recommend waiting a full year before making the conversion.

3. Report Contributions and Conversions on Your Tax Return

When filing your federal return, report the nondeductible contributions and Roth IRA conversions. Your broker will send you the necessary tax forms each year to properly report the information to your accountant or online tax prep software.

Although you’re contributing to a traditional IRA first, you will make nondeductible transactions. You will need to complete IRS Tax Form 8606 to report your total traditional IRA contributions for the current tax year. This lets the IRS know you’re not funding your backdoor Roth with tax-deferred contributions.

4. Repeat as Necessary

Follow the same steps if you have a spouse as you can each do a backdoor Roth IRA every year.

Backdoor Roth IRA Tax Implications

I discussed earlier that you likely won’t have to pay taxes on your traditional IRA contributions when you make the conversion assuming there is no growth during that time frame. However, in that particular case, it assumes this is first time you are doing a backdoor Roth IRA and that you only have other existing Roth IRAs.

It gets a little more complicated if you have existing funds in nondeductible traditional IRAs. Because of the IRS aggregation rules, they look at everything you have contributed in the past, not just what you contributed for the current tax year and it all becomes “aggregated.” Therefore, if you have a large existing traditional IRA balance, it may negate the benefits of the backdoor strategy.

If you are in this situation, you could roll the existing IRA balance into a 401(k)-type account if your employer allows. This can either be your employer 401(k) or a self-employed 401(k). This way you can fund your backdoor Roth with the income you earn in the current tax year and have a starting traditional IRA account balance of $0 and avoid a potentially hefty tax bill

When your current traditional IRA balance is small or doesn’t have large investment gains, it might be better to pay the taxes on the amount you convert instead of rolling it into a 401(k), especially if you have limited investment options or high fees.

Conclusion

The backdoor Roth IRA is a legal and easy way to maximize your retirement savings and can be a great option for pharmacists given many will not be able to directly contribute to a Roth IRA because of the income limits.

If you haven’t filed your 2019 income taxes yet, you have until April 15, 2020 to make IRA contributions. You also have all of 2020 and until April 15, 2019 to make the tax-advantaged contributions we’re discussing today.

If you need help doing your conversion or want some guidance on how to invest the funds within your Roth IRA, you can schedule a free call with our financial planning team to see you’re a good fit.

Also, If you’re looking for other ways to reduce your taxable income when investing, IRAs aren’t your only option. I recommend listening to this podcast episode to help determine your priority of investing.

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21 Financial Moves Every Pharmacy Graduate Should Make

Posted on by yfpadmin

The following post contains affiliate links through which YFP receives compensation.

It took me about a year and a half after graduating from pharmacy school to finally start making good decisions to improve my financial situation. I had some bad spending habits, very little personal finance knowledge, and wasn’t taught good financial principles growing up. This resulted in some unfortunate financial mistakes early in my career.

Most pharmacy schools don’t have mandatory personal finance education, some offer elective courses, and some provide some basic information before you graduate. Therefore, it will largely be up to you to be proactive in making sure have a financial game plan.

Check out these 20 moves that every pharmacy graduate should make to get a good start.

Depending on your personal situation, you may not be able to work on all of these at once. The key is to get them on your radar so you can develop a good foundation.

1. Create Solid Financial Goals

When I graduated from pharmacy school, my main goal was to survive an intense residency program. I fully admit, I wasn’t thinking very much about my finances and I hadn’t set any goals. Looking back, this should have been a priority.

Consider having specific, measurable, and timely goals that have a strong purpose behind them and lay out the steps you are going to take to accomplish. I recommend that you actually write your goals down and tell your friends as research shows these additional steps can increase your rate of success. Here is the basic framework you can use:

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>.

Example

By December 31st, 2018, I will save $5,000 for an emergency fund so that I can avoid the stress and anxiety when an unexpected expense occurs.

Consider having goals around these areas: savings, net worth, debt payoff, and giving.

2. Develop a Budget

Many people associate a budget with living frugally, eating ramen, and shopping at thrift stores. The truth is that a budget is just a game plan on how you will spend your money and execute your goals. You plan for your expenses in advance and then direct your disposable income (or money left over after expenses) toward your financial goals.

Personally, having created and stuck to a unique budget every month for the past several years has helped prevent overspending, given me a sense of peace, and also kept me on track to achieve my goals. If you want an easy four-step process, check out our free budgeting template to get started. After getting your budget set up, consider using one of the budgeting software/apps to track your progress each month. Some of the popular ones out there include Mint, YNAB, Mvelopes, and Everydollar.

3. Set up an Emergency Fund

If you’ve never had an unexpected car, medical expense, or another emergency, it’s only a matter of time. Life happens and you better be prepared. Having a good chunk of cash on hand can mitigate emergencies that have the potential to derail your financial plan.

The textbook answer is to have 3-6 months of expenses saved in a liquid account like a simple savings account or money market account. Ally bank has a great rate of up to 1.00% APY (Annual Percentage Yield) for their savings account which is significantly higher than what most banks offer. The CIT Bank Savings Builder is another option for a high yield savings account that currently offers an APY of up to 0.75% and requires a minimum deposit of $100. There are no fees to open or maintain the account, however, to get the maximum APY you have to either maintain a balance of $25,000 or more or make monthly contributions of $100 or more.

Some argue that this is too much money to be earning interest rates that can’t even beat inflation. Find an amount you are comfortable with and one that allows you to reduce your dependency on a credit card to bail you out.

4. Eliminate Your Credit Card Debt

No one ever plans to go into credit card debt. It’s often the result of either overspending or unexpected medical events or emergencies. Having credit card debt is really a financial emergency in and of itself given the typical ridiculously high interest rates.

If you’re in this situation, you should make it a priority to get rid of it as soon as possible. You want to take advantage of compound interest and not have it work against you. Do you need an emergency fund in place? Would a budget help prevent you from overspending? Find a strategy that will help prevent it from recurring in the future.

5. Calculate and Track Your Net Worth

This is a quick way to analyze your financial health. Your net worth is your assets (things you own) minus your liabilities (debt you owe). As a new pharmacy graduate, this is likely going to be a large negative number thanks to student loans. However, don’t let that discourage you!

The goal is to make strides to increase your net worth by building your assets and paying off debt. The trajectory is more important than the actual current number. With apps like Mint or Personal Capital, you can quickly check your net worth if you have all of your accounts synced. Tim Baker CERTIFIED FINANCIAL PLANNER™ on the YFP team also has a great net worth tool that’s easy to use.

6. Get Long Term Disability Insurance

You put in a lot of time, energy, and effort to be able to become a pharmacist and make a good income. That’s why it’s so important to protect it. Disability insurance for pharmacists is really income insurance. It provides you with money in the event that you become disabled and are unable to work. Personally, I have known pharmacists that have been unfortunately out of work for months to years because of head trauma and autoimmune diseases. What would happen if you were suddenly unable to work because of an accident or illness? How would you support yourself or your family?

Compared to other types of insurance, long-term disability insurance for pharmacists can be more expensive depending on your health status and coverage options. But can you afford not to have it? You may have a policy through your employer but many times they are not as robust a private policy and may not offer own occupation coverage.

You can learn more by checking out our disability insurance page. When you are ready to shop around for a policy, check out Policygenius, an online broker we recommend where you can quickly shop multiple reputable companies to find coverage that’s right for you. They have a very user-friendly interface and offer incredible service.

7. Develop a Student Loan Payoff Strategy

86% of pharmacy graduates borrowed money to pay for school and the average student loan debt is now over $160,000. With debt loads continuing to rise and salaries being somewhat stagnant compared to inflation, you need a solid strategy to tackle your student loans.

If you’re lucky enough to work for a company or institution that offers a tuition reimbursement/repayment program, this should be your first strategy to consider. There are some well-known federal programs offered by the government and military and some state programs, too. Beyond these, your options are to pursue loan forgiveness through the Public Service Loan Forgiveness Program or forgiveness after 20-25 years or to pay them off in full.

If you’re not pursuing forgiveness and don’t need an income-driven repayment plan, a great option can be to refinance student loans. Reducing your overall interest rate by 1% could result in thousands in savings. You can even get a nice bonus up to $800 through one of our partner companies. If you need help finding the best strategy, you can take our free student loan quiz or download our Quick Start Guide.

8. Start investing in your company’s 401(k), 403(b), or TSP

When you’re flooded with student loans and other debt, it can be hard to balance other goals such as investing. While you may feel you can put off retirement savings for a few years, the reality is that you want to take advantage of compound interest, and the earlier you start contributing, the better.

Many companies offer a match program where they will put in a dollar amount equal to your contribution up to a certain percentage, such as 5%. This is essentially “free” money. For most people, taking the match is going to be the best play, even while paying off student loans. Beyond the match, how much you contribute to your retirement savings plan depends on your financial goals.

9. Get Liability Insurance

Even as a highly trained professional, mistakes can happen which could jeopardize your license and even your career. If you work for an employer, they likely offer some protection if you’re functioning within your scope of practice. However, their main concern is protecting the organization, not you.

Besides actual damages, liability or malpractice insurance can help cover litigation costs, costs for representation for the board of pharmacy hearings, and lost wages. Coverage is relatively inexpensive (~$12-$20/month). Proliability, Pharmacist Mutual, and HPSO offer policies for pharmacists up to $1 million in liability coverage per incident and a $3 million aggregate limit.

10. Get Term Life Insurance

Not everyone needs life insurance, but, if you have a family that depends on your income or someone would be responsible for your debt if you pass, you should have a policy in place. There are two major types of life insurance: term life insurance and permanent. Term is the way to go for most people because it’s less expensive and not flooded with fees.

The amount of coverage required will depend on your needs including existing debt, income support, and future expenses. Future expenses include things like funeral costs, childcare, and college tuition. Check out Episode 44 of the YFP podcast for more information on figuring out your life insurance needs. You can get a free quote in two minutes through Policygenius without putting in your personal information.

11. Set up a Health Savings Account (HSA)

If your employer offers a high deductible health plan (HDHP), then you’re eligible to contribute to an HSA. This can be a good option, especially if you’re relatively healthy and rarely use health insurance because your premiums will generally be lower than traditional plans.

An HSA allows you to save money pre-tax into an account designated for health expenses. But, here is the best part, it doesn’t have to stay in a savings account. The money can be invested aggressively just like an IRA. Furthermore, these accounts grow tax-free and distributions can be taken tax-free if used for qualified medical expenses.

However, you don’t have to use the money for medical expenses that occurred in the same year. You can reimburse yourself for medical expenses that you paid out of pocket in previous years. For 2019, you can contribute up to $3,500 per year if single and $7,000 if married or have dependents.

12. Start Contributing to an IRA

Like a 401(k) or 403(b), an IRA or Individual Retirement Arrangement is another great way to save for retirement in a tax-efficient manner. This is something you set up on your own outside of your employer through a mutual fund company or brokerage firms such as Vanguard or iShare.

While your investment selection will vary based on your personal situation, consider using low-cost index funds or exchange-traded funds (ETFs). You can do this completely on your own or use a robo advisor where portfolio options are already established and your asset allocation is automatically rebalanced.

Meeting with a financial planner to help you choose investments and your overall portfolio is another great option. You can set up a free discovery call with YFP Director of Business Development, Justin Woods, PharmD, MBA to learn about how YFP Planning can support your investment strategy.

You have the option to contribute to a traditional IRA, Roth IRA, or a combination of both. Contributions to a traditional IRA can lower your taxable income, but you likely won’t be able to take advantage of that benefit if your adjusted gross income is $63,000 if single and $101,000 if married filing jointly.

Although you may not be able to contribute to a Roth IRA directly because of income limits, you can contribute to a traditional IRA and convert to a Roth (known as backdoor Roth IRA). Any gains prior to the conversion will be taxed. For 2020, the contribution limit is $6,000 per year.

13. Get a Will in Place

This is probably one of the last things on most people’s financial to-do lists but it’s something you don’t want to overlook. Having a will in place will ensure your property goes to whoever you decide, give you the ability to name an executor who will enforce your will, and to name a guardian for your children if this applies. If you die without a will in place, this will be decided by probate court according to your state’s laws and regulations.

Along with a will, you want to have a living will which is also called a health care declaration or an advanced directive. This outlines how you would receive medical care and who you want to make decisions in the event that you are incapacitated. Depending on how complex your estate is, you may want to hire an attorney to help. Otherwise, you can download state-specific estate documents for free or at a very low cost from many sites.

14. Get Clarity on How to Get Raises or Promotions

Your raises will typically be based on time worked, merit, or a combination of both. If you can increase your salary through achievements, do you know exactly what those are? Some organizations will give raises if you obtain board certifications or other medical credentials.

What about publications, presentations, or positions within state and national pharmacy organizations? If you are already doing things to promote and advance your career, knowledge, and experience, you should definitely take advantage of the financial benefits if available.

15. Set Your Withholdings to Break Even

When you first start working for an organization, you will fill out an IRS W-4 form. This tells your employer how much in federal taxes to withhold on your paycheck and is designated by a number.

The lower the number, the more money they withhold. To maximize your net pay every month without owing a tax bill, you will need to determine the optimal withholding based on your projected income and deductions. If your taxes are relatively easy, you can figure this out using the IRS Withholding Calculator. Otherwise, consider seeking the help of an accountant. You can adjust your withholdings multiple times throughout the year if needed.

16. Consider Hiring a Financial Planner

Having a good financial planner on your team can help you achieve your goals, manage your investments, and put together a comprehensive plan. Beyond the financial benefits, a planner can give you peace of mind knowing someone is looking out for you. The key is finding someone you can trust that has your best interest in mind.

While there are many types of financial planners and advisors out there, consider a Certified Financial Planner (CFP®). They have the most rigorous education requirements including thousands of hours of experience. Be sure they do comprehensive financial planning and not just investment management (unless that’s all you’re interested in). The team at YFP Planning works virtually with pharmacy professionals across the country for one-on-one fee-only, certified financial planning. You can set up a free discovery call to see if YFP Planning is a good fit for you.

17. Start Educating Yourself

Before graduating from pharmacy school, I received about two hours of financial information. Since I didn’t make it a priority to learn about money while in school and didn’t have any good examples to follow, I had a very weak foundation. That resulted in some big mistakes in my first year and a half as a practicing pharmacist.

You don’t need a master’s degree in finance to be successful with money, but you should have the basic knowledge that helps you make good decisions and develop good habits. Some of the YFP team’s favorites include Money: Master the Game and Unshakeable by Tony Robbins, and The Millionaire Next Door by Tom Stanley. If you want more education that is focused on pharmacists, check out our book Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt, and Create Wealth and the YFP Podcast.

18. Consider a Side Hustle

Side hustles are ways to make extra cash beyond your full-time job. This could be moonlighting at another pharmacy or hospital or could be something completely outside of your training. Having an additional stream of income can help you achieve your goals faster and reduce the risk of relying solely on your main job.

If you want some ideas, check out this post 19 Ways to Make Extra Money as a Pharmacist in 2020. You can also check out the podcast as we frequently have pharmacists on the show who talk about side hustles they started.

19. Set up Systems to Avoid Lifestyle Creep

Lifestyle creep is one of the biggest threats to a pharmacy graduate. This is when your expenses meet or exceed your income no matter how much you earn. With incomes starting out high, there is a tendency to get comfortable and maintain a certain lifestyle.

Spending the majority of your money on things that bring you pleasure and happiness today and the need to compare yourself to those around you are the main contributors to lifestyle creep. So you have to protect yourself from yourself. Many pharmacists have recommended, “living like a student” for the first few years following graduation. This is a great way to avoid upgrading your lifestyle and making large purchases too quickly.

Another strategy is to automate your contributions toward savings and investments so you never “see” certain money. If you can divert a percentage of income before it hits your checking account, you won’t be able to spend it. Increasing your savings in step with your raises is another great way to prevent lifestyle creep.

20. Connect with the Your Financial Pharmacist Facebook Group

Surrounding yourself with people on the same journey is a great way to help you achieve your goals. We have some great discussions on the Facebook group and you can post your own questions at any time. Join over 7,000 pharmacists and students for some extra motivation and inspiration by clicking here.

21. Use a high-yield savings account or money market account for big purchases

When you consider inflation, money sitting in regular checking or savings accounts can lose a lot of purchasing power over time given most interest rates are essentially next to nothing.

Sure you avoid market risk or the risk of keeping cash in other investments but there are other options that are less risky and can yield at least some return. These include high yield savings accounts and money market accounts.

If you are sitting on a bunch of cash that’s for an emergency or you are saving for a big purchase such as a car or home within 5 years or less, these can be good options to earn a little extra money. Now if your savings amount is relatively low and you aren’t adding anything to it then it may not be anything substantial, but remember it’s better than 0.001%.

I did a review of my experience with CIT Bank which offers competitive interest rates from 0.85-1.40% for their high yield savings and money market accounts.

Financial Planning for Pharmacists

While these are some great tips to get you started on your journey, everyone has a unique situation. Whether you want to pay off your student loans, make the right investment decisions, or simply build a solid financial plan, YFP Planning can help you get your income working for you (rather than the other way around). YFP Planning offers fee-only financial planning for pharmacists. You can book a free discovery call to learn more!

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One Pharmacist’s Journey Towards Becoming Financially Fit

Posted on by yfpadmin

The following post is sponsored by the American Pharmacists Association (APhA). APhA has been committed to improving medication use and advancing patient care since 1852. APhA is the largest association of pharmacists in the United States, with more than 62,000 members. Your Financial Pharmacist is excited to be partnering with APhA to deliver exclusive personal finance education to its’ members. You can learn more about what APhA has to offer to help you expand your knowledge, strengthen your voice, advance your practice and build your community at http://www.pharmacist.com/join-now.

By: Deeb Eid, PharmD

Walking through the gliding grocery store doors, white coat in hand, scrubs, and a granola bar, I arrived for my first day. With the expectation of jumping right into workflow, my preceptor greeted me at the entrance to the pharmacy and he said something very unexpected. “Welcome to your first day of rotations. Today’s assignments include researching the 30 companies in the Dow Jones, explaining what they each do, and heading to the brokerage firm down the street to open up your first investment account.”

Talk about an interesting first day to my final year APPE rotations!

Bulls make money, bears make money, pigs get slaughtered

Throughout my time in pharmacy school, I never really gave much thought to “personal finance” beyond getting my first credit card to “build good credit”, opting in to my employer 401(k) plan because my manager helped me set it up, and handing my W-2 tax papers to my father in hope for a return to buy something new and shiny that Summer. It was not until my first day of APPE rotations and this interaction with my preceptor that I really started to get into the “financially fit” mindset.

During that APPE rotation, I learned a lot about management in community pharmacy, but the lessons he taught me about financing, budgeting, and investing have been the most impactful on my career and personal life. We talked about stock market indexes such as the Dow Jones, S & P 500, and others, but what really got me interested was learning about the companies themselves, how they operated, and how they impacted regional, national, and global economies.

I started investigating “bull markets” versus “bear markets”, EFTs (Exchange Traded Funds), and REITs (Real Estate Investment Trust). My preceptor would always use the phrase “bulls make money, bears make money, pigs get slaughtered” to stress the importance of doing my “homework” before investing and to avoid becoming a “pig” (warning about excessive greed). Slowly, but surely, I was starting to speak and understand “financial” language. In addition, I gained the courage to open up my first investment brokerage account and even made my first investment (which by the way did not go so well). As I continued through my P4 year, the knowledge continued to grow, so did the conversations, curiosities, and investments made to my account.

After some reflection, one major takeaway from this experience is that simple encouragement and challenge by someone I looked up to, allowed me to start taking ownership and hold myself accountable to becoming “financially fit”. I also learned that similar to developing pharmacy knowledge, it takes time and patience to build financial education and there is a wealth of information available to choose from. A third lesson is that you can not be afraid to take risks and it takes courage to do so, but once you learn the critical importance of building your “financial muscles” on a consistent basis, it starts to become second nature (just like knowing brand and generic names).

I started to look at my future career options, the practice of pharmacy, and decision making from a different lens. Understanding personal budgeting and applying this concept to pharmacy budgeting, I started to compare and contrast the effects this could have on practice. In addition, starting to understand how to allocate money in my personal life allowed for investigation of how pharmacies might allocate and maximize their investments of resources for better patient care and health outcomes.

A breeze to the East

Shortly after completing my APPE rotations, I found myself moving from rural Southeast Michigan to the nation’s capital, Washington, D.C. to begin my one year Executive Residency. I was excited to begin the new journey, and to continue growing my “financial muscles” throughout the process. This would not be my first time living outside of my parents house, but it was the first instance I would primarily be handling some of the financials of the apartment with my new roommate. Learning to pay the rent and utilities through an online portal, navigating a lease agreement, and budgeting for the move itself were all brand new challenges. In addition, moving to a new city came with additional costs one may not think about ahead of time such as transportation (metro, Uber, taxi, bus), grocery delivery (not having a car), or travel (plane tickets back home).

From a personal budgeting perspective, there was a shift in how to allocate funds and a lot of small lessons that I learned to manage throughout the process. One difference was that I now had a constant stream of income on a bi-weekly basis and I also had a variety of bills to pay each month alongside of goals for investing, spending, and saving. Some expenses such as getting a plane ticket back home were easy to plan for ahead of time, but others such as getting an Uber on a rainy day (versus taking the metro/bus) were not.

Through the process I learned that automating with tools or apps such as Mint, Mvelopes or even an Excel sheet to keep track of spending, investing, and allocations really made this process much easier. Utilizing auto pay for bills also helped to decrease some stress. Another lesson learned was to find what already had been working in my life and apply the same concepts to finance. I realized that I loved using my Google calendar to keep track of a lot of my work and personal related activities so I started using the same calendar to mark when bills were due, set reminders, and give myself a “monthly” view of financial related activities. Keeping information in a singular and easy to use access point can be critical to making this as least of an annoyance or hassle as possible.

As I mentioned before, it takes patience and time to figure out what works best for your situation and preferences. I certainly had a lot of failures along the way, but eventually became much more comfortable because I had the courage to keep trying different methods and tools until I found what worked for me.

One at bat

Thinking back to some milestone moments (similar to my first day of APPEs) that influenced my journey, one that sticks out in particular was attending APhA’s Day of NP Life event which usually takes place on a weekend in mid July. As I started my career in D.C., this was one of the first meetings I attended and heard YFP’s own Tim Ulbrich passionately share great information about finance topics. A key part of this meeting was that there were other APhA New Practitioners in the room who had similar questions and relatable experiences. We were able to learn from each other’s experiences, talk at the meeting, and continue to stay in touch after the meeting. It also reinforced that I was not alone in the journey to become more “financially fit” and had others to lean on for help along the way.

Photo Caption: On the terrace rooftop of APhA’s HeadQuarters in Washington D.C., a group of New Practitioners at Day of NP Life.

Overall, each of us have unique pathways and experiences that influence our financial decision making. We also interact with others along the way that help to shape our perspectives of how we view personal finance and economics in general. The biggest takeaway I have learned thus far on my financial journey is that we each only live one life in which time can not be slowed down. While I personally do not believe money should be the biggest priority in life, I also realize the opportunities that can open up, and the impact it can have on everyday living. We all have a choice to learn about finance, educate ourselves and those around us, and help to leverage this knowledge to make a positive impact in the world as a result.

As entrepreneur Gary Vaynerchuk said: “Time is the one asset none of us are ever going to get more of.” Knowing this, my outlook is that if we only have “one at bat”, why not hit a grand slam?

About the Author:

The following post was written by Deeb Eid, PharmD. Deeb is a 2016 graduate of The University of Toledo College of Pharmacy and Pharmaceutical Sciences. He currently serves as an Assistant Professor/Experiential Coordinator at Ferris State College of Pharmacy in Grand Rapids/Big Rapids, MI. He also served as the first Executive Resident at the Pharmacy Technician Certification Board (PTCB) in Washington, D.C this past year. Deeb’s vision of social and interactive education for all audiences about the profession of pharmacy has led to inception of Facebook and Twitter pages branded as Pharmacy Universe. For any questions, please contact him at [email protected].

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Are You Making This $1 Million Mistake

Posted on by yfpadmin

I’m going to get straight to the point with this post. I don’t want this important and potentially game changing message to get lost in any fluff. So, here it is.

You could be making a $1 Million (or maybe even more) mistake and aren’t even aware it is happening.

What?! There aren’t many things you read that can result in you making a small change for some BIG wins…this is one of those.

Whether you are saving for the future in a 401(k), Roth IRA or some other investment vehicle, I’m guessing that with the exception of some financial nerds reading this post, you don’t have a good idea of the ONE THING that is having a significant long term impact on your wealth building success….the fees associated with those investments.

In Tony Robbins’s books Money Master the Game and Unshakeable, he makes a very strong argument for how detrimental these fees can be to your overall financial success. If you haven’t read either of those books, I would suggest doing so as it will get you fired up to take action.

Even if you are not paying a financial advisor to manage your investments, when you account for expense ratios, transaction costs and other types of random fees that you and I aren’t really aware of, many funds (depending on the type of account) have fees that are north of 2%.

Is 2% a big deal? That’s the problem…2% can have a creeping effect that doesn’t make you realize the damage in the short term but will certainly have a significant negative long-term impact.

Check out the table below which highlights two different portfolios, one with a 1.5% average annual fee and the other with a 0.2% average annual fee. This calculation assumes the investor is receiving an 8% average annual rate of return less the annual fee.

Did you see the $1 Million mistake?

The investor with the lower-fee portfolio (0.2%) has a nest egg that is worth $1 Million more than the investor with the 1.5% fee portfolio.

Here is the amazing thing…the only difference in this example is the fee!

To compound this mind blowing reality, this difference may even be more for a lot of people reading this blog post over their saving years because their total fees may be even higher than the example used!

All other factors remain constant meaning that you, the investor, can make the same contribution with the same variables yet have a $1 Million greater result by ensuring you are in well-performing, low-fee funds. A Good example is an index fund. These are funds that track a specific market index (such as the S&P 500) rather than try to beat the market.

If you’re looking for some extra help with investing and choosing specific funds, you can book a free call with the YFP financial planning team.

A Simple But Powerful Philosophy for Achieving Wealth (Part 3)

Posted on by yfpadmin

The following post was written by Tim Church, PharmD, BCACP, CDE. This is third and final post in a series about developing a net worth mindset.

If you haven’t already done so, make sure to check out last week’s episode of the Your Financial Pharmacist Podcast where Tim Baker, CFP and I interview Tim Church to talk about what he learned from going into $200,000 in debt, his work around co-authoring Seven Figure Pharmacist and his advice for pharmacists and pharmacy students on how to develop a millionaire mindset.

Tim is a clinical pharmacy specialist in primary care at the West Palm Beach VA Medical Center and is the author of When Eating Right Isn’t Enough: The Top 5 Medications to Control Your Type 2 Diabetes.

As many of you already know, Tim is my co-author on Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth.

A Ramsey Solutions Master Financial Coach, Tim is passionate about helping people with their finances. You can follow him on Twitter @TimChurch85.

In Tony Robbins’s book Money: Master the Game, he describes the amazing story of Theodore Johnson, a UPS worker who never made more than $14,000/year during his career. Despite his meager salary, Johnson never saw this as a setback for achieving wealth.

Remarkably, at the age of 90 he had accumulated over 70 million dollars!

He didn’t accumulate this fortune by winning the lottery or receiving an inheritance. All he did was commit to contributing 20% of his paycheck and every Christmas bonus to his company stock. This enabled him to donate over 36 million to educational causes and set up a scholarship fund for children of UPS employees.

Theodore Johnson had a net worth mindset.

In Part 2 of this series, I discussed how present bias and the need to compare contribute to the phenomenon of lifestyle creep. While these are powerful forces against a net worth mindset, there are some strategies you can put in place to stay focused.

Strategies to maintain a net worth mindset

#1 – Create goals with a strong why.

Having specific, measurable goals with a deadline are important but if you don’t have a strong why behind them, they aren’t very meaningful. Suppose you want to become a millionaire by age 45. Why do you want to achieve that? Do you want the option of retiring early? Do you want to be able travel frequently? Do you want to start a scholarship fund? You may have a net worth goal in mind, but if you can’t determine why, it will be tough to stay motivated to achieve it. Here is a simple template you can use for writing your financial goals:

By <date to achieve goal> I want to <net worth or other 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>.

A hallmark of a net worth mindset is having goals that are bigger than your daily desires. When these are in place you will have ammo against the threats of present bias and comparing yourself to others.

#2 – Break unsupportive habits.

F.M. Alexander said “People do not decide their futures, they decide their habits, and their habits decide their future.”

Most of what we do on a daily basis is on autopilot through habits. This includes how we spend money. If you’re making daily trips for lattes, frequently eating out for lunch, having weekend shopping excursions, or participating in other activities that require spending, you may need break these habits. Check out this short video from Charles Duhigg, bestselling author of the book The Power of Habit, for information on how to break habits.

#3 – Automate contributions toward debt or savings.

You now know that present bias is your biggest threat to becoming wealthy. The longer you have access to money from your paychecks the more likely you are to spend it. Therefore, you need to protect yourself from yourself! The easiest way to do that is make your net worth contributions automatic.

If you want to make sure that a certain percentage of your income is going toward paying off debt or investing, have it automatically deducted from your paycheck or auto-debited from your checking account the same day your paycheck is deposited. This is really a great strategy if you want to allocate “extra” money toward debt that you typically would otherwise have in your hands after covering all of your living expenses.

You can fight lifestyle creep with this strategy by increasing contributions toward debt or savings any time you receive a raise by the same amount. If you never “see” the additional income and continue to have the same net paycheck, you will help fight the temptation of increasing your spending.

Net worth or live-for-today mindset?

If you want to live for today, are comfortable living with debt, and don’t care about securing your financial future, then a net worth mindset is not for you. However, if your goal is to build wealth, then it’s important to analyze how you are spending your money. Having a net worth mindset requires you to make good, consistent financial decisions that support growing your net worth.

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A Simple But Powerful Philosophy for Achieving Wealth (Part 2)

Posted on by yfpadmin

The following post was written by Tim Church, PharmD, BCACP, CDE. This is the second post in a 3-part series about developing a net worth mindset.

Tim Church is a clinical pharmacy specialist in primary care at the West Palm Beach VA Medical Center and is the author of When Eating Right Isn’t Enough: The Top 5 Medications to Control Your Type 2 Diabetes.

As many of you already know, Tim is my co-author on Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth.

In Part 1 of this series, I discussed the idea of having a net worth mindset and how it can help you be successful with your finances.

Although I portrayed this as a simple philosophy, if you’ve always had a live-for-today type of mindset, it can be a tough transition. In addition, there are barriers and challenges that make it difficult to keep your net worth in focus.

Barriers to a Net Worth Mindset

In Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt, and Create Wealth, I wrote about a pharmacist in her 30s named Serena. In 2012, with the help of a side job, she was earning an incredible income of over $140,000 per year, well beyond the national average salary at the time. From the outside it looked like she was doing well financially. She had a nice three bedroom townhouse, drove a newer Mercedes Benz, and was traveling all over the world. However, the reality was that she was broke. She had outstanding student loans, credit card debt, a 401(k) loan, and the value of her home was less than what she owed. Barely able to make all the minimum payments, she suddenly lost her side job, and her home went into foreclosure.

Lifestyle Creep

Parkinson’s Law is a well-known principle that basically says work will expand to fill the available time for completion which is why having deadlines are so important. When applied to personal finance, it translates to: your expenses will rise to the level of your income. In other words, no matter how much money you make, you will spend it.

Many people, like Serena, tend to adjust their lifestyle in step with their income. Instead of putting more money toward savings when income goes up with a raise or additional job, they buy bigger, better things and experiences. That’s why this application of Parkinson’s Law has also been referred to as lifestyle creep.

This is the big reason why many pharmacists, despite making a great income, are living paycheck-to-paycheck. When you’re living like that, it’s very difficult to contribute to your net worth.

There are two big reasons why lifestyle creep occurs: present bias and the need to compare.

#1 – Present Bias

Would you rather buy a $398 Kate Spade Cameron Street Marybeth handbag that you get to have today or put that same amount of money into a Roth IRA that you won’t see again until 30 years from now? (If you don’t like Kate Spade handbags, just substitute it with something you like). Which option is going to bring more happiness today?

By nature, we are very impulsive and make decisions that will make us feel good in the present instead of ones that promote some larger reward in the future, especially with our finances. This phenomenon has been to referred to as hyperbolic discounting or present bias. Although many have the goal to attain financial freedom, their behaviors often don’t align.

Paying off debt or saving money is not going to give you the same feeling you get when you purchase things off Amazon or bite into a burger (fun fact: Tim Ulbrich has never eaten a burger). There’s no dopamine surge when your employer automatically takes money from your paycheck and puts it in a retirement account. That’s why it can be tough to maintain a net worth mindset and why present bias is your biggest threat.

#2 – Comparing Yourself to Others

How many times a day do you get bombarded on social media by people in your network showcasing their exotic trips, new cars, exclusive restaurant outings, or how amazing their life is in general? Does it ever feel like they are trying to do everything bigger and better than you? How does this influence you?

There’s a lot of pressure to maintain a certain image, especially among your network, and many have a desire to impress and announce “I’ve made it!” typically through the demonstration of status symbols or experiences. As a result, people focus on upgrading their lifestyle to match or exceed others instead of their financial future.

This so called “keeping up with the Joneses” mentality, or in today’s society a Kardashian, is associated with the live-for-today mindset and can be very counterproductive to growing your net worth.

If you’re not reaching your goal percentage of income going toward net worth, identifying the barrier in your way is the first and most important step.

In part 3 of this series you will learn some tips and strategies to overcome these barriers.

What barrier(s) is(are) preventing you from increasing your contributions toward your net worth and why is it so tough to overcome?

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A Simple But Powerful Philosophy for Achieving Wealth (Part 1)

Posted on by yfpadmin

The following post was written by Tim Church, PharmD, BCACP, CDE. This is the first in a 3-part series about developing a net worth mindset.

As many of you already know, Tim is my co-author on Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth.

A Ramsey Solutions Master Financial Coach, Tim is passionate about helping people with their finances. You can follow him on Twitter @TimChurch85.
I’m pumped to announce that Tim Church will be joining the Your Financial Pharmacist team! You will be hearing a lot more from Tim on this blog as well as on the podcast and other exciting initiatives we have coming during the second half of 2017 and into 2018.

When I made the commitment to answer yes to one simple question, my financial picture changed and improved dramatically.

I went from feeling frustrated, overwhelmed, and uncertain about my finances to having a sense of relief and clarity. It helped me pay off my car 3 years before the term of the loan was up and has allowed me to live without car payments for over 4 years. It’s what set the stage for my wife and I to pay off $200,000 of student loan debt in only 2.5 years.

Have you ever wondered if you’re on the right track with your finances? While this whole money thing can seem complicated and confusing, the reality is that it’s quite simple. To be successful, you just need to be able to answer yes to one question. If you can answer yes to this one question then you’re on your way to not only achieving financial freedom but also some serious wealth.

Ok enough suspense.

The Question…

Do the majority of your financial decisions promote or grow your net worth?

If you answered yes, then you have a net worth mindset!

Net Worth

People often associate things like income, homes, cars, or clothes with their own or someone else’s financial state. Many pharmacists have the perception that their income alone qualifies them as “doing well” financially. However, income and visible assets only depict part of your financial picture, and unfortunately, in many cases, actually portray an illusion of wealth.

A good indicator of your overall financial health is your net worth, which is defined as:

Total value of your assets (things you own) minus your liabilities (things you owe).

Assets include anything of value such as savings, investment accounts, and real estate. Liabilities include credit card debt, car loans, student loans, or the amount owed on a mortgage.

A Net Worth Mindset

What is the lens through which your decisions with money are made? Is it one that’s completely focused on experiencing instant gratification or one that promotes attaining wealth? Having a net worth mindset means you are keeping your net worth in focus when making most of your financial decisions. It means your financial decisions are either helping you acquire and grow assets or crush debt.

How to Know if You Have This Mindset

On the surface, it may seem subjective whether or not most of your financial decisions are promoting your net worth. Answering yes to these two questions can objectively confirm a net worth mindset:

Is your net worth increasing every year or trending up over time?
Is the percentage of your yearly income spent growing your net worth more than the percentage you spend on nonessential expenses (e.g. clothes, eating out, vacations)?

The first question should be fairly easy to answer with some quick calculations. If you need a little help, Personal Capital is a great app that can help you determine your net worth and determine how it changes over time by consolidating all of your financial information.

You may argue that things you can’t control like the stock or housing market will affect the value of your assets thereby affecting your net worth. While that’s certainly true, more importantly is how much money you are putting toward saving/investing or paying off debt.

Question #2 may seem like an incredibly daunting task to determine. The good news is that you don’t need to go through all your bank transactions to get the answer.

One of the best things my wife and I did to better manage our finances is categorize all of our purchases with the help of the Mint app. By doing this consistently, the app is able to breakdown your spending for any time period. Seeing this breakdown over a month will give you an idea, but looking at a year or multiple years really illuminates your spending habits. From that breakdown you can easily determine the percentage of spending that promotes your net worth. Of note, if you have money that is taken directly from your employer and going to a retirement account such a 401(k) then you would need to add this into the calculation as well.

What a Net Worth Mindset is Not

I’m not suggesting that a net worth mindset means you have to only eat rice or Ramen noodles, shop exclusively at thrift stores, and never go on a vacation your whole life. I’m not suggesting it means you should just hoard money. That would be incredibly depressing and potentially detrimental to your health. Living an enjoyable life where you spend a portion of your money on food and entertainment in addition to your financial future can co-exist with a net worth mindset. That’s why the question asks if the majority not all of your financial decisions promote your net worth.

Based on how I described a net worth mindset, you could argue that it’s best to focus entirely on building assets (placing less emphasis on debt elimination). Although that’s one strategy, I truly believe getting rid of non-mortgage debt as quickly as possible is the fastest way to free up money and build wealth. Always remember that paying off debt will effectively increase your net worth.

In Part 2 of this series on net worth, you will learn the common barriers to having and maintaining a net worth mindset.

In the meantime, answer the following question by commenting below:

What is the one thing you can do that will help promote a net worth mindset?

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Two Mobile Applications to Leverage for Personal Financing

Posted on by yfpadmin

The following post was written by Deeb Eid, PharmD. Deeb is a 2016 graduate of The University of Toledo College of Pharmacy and Pharmaceutical Sciences. He recently completed an Executive Residency at the Pharmacy Technician Certification Board (PTCB) in Washington, D.C. and is transitioning to Ferris State College of Pharmacy as Assistant Professor/Experiential Coordinator in July 2017. Dr. Eid’s vision of social and interactive education for all audiences about the profession of pharmacy has led to an ongoing startup development of Facebook, Twitter, and YouTube pages branded as Pharmacy Universe (Feel free to Follow/Like, but still under construction). For any questions, please contact him at [email protected].

Tim Ulbrich (Your Financial Pharmacist) and Deeb Eid have no financial tie to either one of the applications mentioned in this article.

From Your Financial Pharmacist (YFP): There are lots of apps out there that can help you automate your savings goals and invest your money (such as the ones noted below in this article). While automation is a great idea to help you achieve your goals, don’t forget about (1) appropriately balancing investing with your other goals (e.g., debt repayment, saving for an emergency, etc.) and (2) maximizing the use of tax-advantage retirement accounts (e.g., 401k, 403b, Roth IRA).

When smartphones were first introduced, I recall being fascinated with many mobile applications and the usefulness in daily activities. While some were very practical and useful (eBay®, Gmail™), others were simply entertaining and handy for those long car rides (Paper Toss, Temple Run). I found myself excited to learn about applications that made everyday life tasks more efficient. It was even more refreshing to refer friends to certain apps, if it felt like the “right fit” for their scenario. Somewhere along the way came bank accounts, personal finances, budgeting, and many other financial responsibilities that we all deal with each day.

During pharmacy school, I observed that many of my classmates, colleagues, and personal friends loved using their smartphones, but were often unfamiliar with many of the great personal finance mobile applications available. After reflecting, two common areas I’ve identified that we as pharmacy professionals commonly ask about or struggle with include saving and investing. The following mobile applications are both easy to use and provide alternative tools to utilize. They will help to address some of these commonly asked about areas and hopefully make your financial success that much easier!

Acorns

Acorns is a seemingly effortless tool to help with saving as well as investing your money. On initial setup, you’ll be asked to connect to a checking account and a series of questions (since you are setting up an investment account, this is the usual). Don’t worry, Acorns encrypts and protects all of your data with bank level security. One of the main concepts within this app is to round up each purchase you make with the linked debit card/checking account. For example, say you go to get a cup of coffee and the total is $3.50. Swipe or pay with debit or the linked checking account and you will get charged $4 to your account, but $0.50 of that that will go into your Acorns account and be saved/invested. Some will find it necessary to turn this feature to “manual” which allows you to only round up those purchases if you choose to within the app.

My personal favorite feature is recurring investments. This allows the ability to schedule a daily, weekly, or monthly investment from your checking account into your Acorns account. You would be surprised how quickly saving and investing $10 every Friday could add up! Acorns also simplifies investing. It allows you to pick an approach (1 of 6 available) to your portfolio with how you’d like to invest (from Conservative to Aggressive) (Figure 1). In addition, you can view the projection charts for each portfolio approach to gauge the predictions of how much money you can potentially save/earn based on the amount you put in over a period of time. If you are interested in exactly where your money is invested, Acorns also breaks down the percentages, funds, and sectors in simple and colorful fashion. Overall, Acorns provides a simplistic and easy way to start investing and saving, without all of the complicated financial terminology!

Figure 1

Robinhood

Finally, a stock brokerage that does not charge those pesky commission fees on every trade! For those of you looking to invest your money or who already do and are looking for an alternative broker, this app is worth checking out. Contrary to most other brokers (Schwab, Scottrade, E*Trade..etc.) Robinhood does not require a minimum deposit to get started, but does need your bank account to be linked for transferring money. The interface of the app itself is clean, colorful, and easy to navigate.

Additionally, Robinhood has two upgrade options (Instant and Gold) that have some friendly features for more experienced investors, including the recent addition of margin accounts. The app itself does not feature many of the extras you will find with other brokers (such as in-depth data or news) but serves more as a platform to trade instead.

When you click on a specific stock or EFT, you will find some basic statistical information, a trend chart, and a short informational piece on the company (Figure 2). You are not able to transfer funds from another brokerage account into Robinhood, but can transfer them out for a $75 transfer charge. In addition, with the regular account, funds from transfers and trades take around three days to process, which can be limiting. Robinhood Instant has included a feature to eliminate this waiting period, but you might have to be placed on a waiting list to be upgraded.

Figure 2

Overall, Robinhood is a simple way to get started with investing or an option for more experienced investors, looking to for an alternative platform with no commission or account minimum. I’d recommend giving it a shot!

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The FIRE Prescription: How to Retire Early as a Pharmacist

What is FIRE?

Should You Join the FIRE Movement?

How to Retire Early as a Pharmacist

Safe Withdrawal Rates and the “4% Rule”

Reducing Expenses

Investing

Drawdown

How to Join the FIRE Movement

5 Key Financial Moves to Make with a New Baby

1. Start Saving For College

2. Make A Will

3. Obtain or Update Life Insurance

4. Obtain or Update Disability Insurance

5. Start or Continue Contributing Toward Retirement

Why Most Pharmacists Should Do a Backdoor Roth IRA

The Issue with a Traditional IRA

Roth IRA or Backdoor Roth IRA?

Roth IRA Contribution Limits

A Step-by-Step Guide to Making a Backdoor Roth IRA Conversion

Backdoor Roth IRA Tax Implications

Conclusion

1. Create Solid Financial Goals

2. Develop a Budget

3. Set up an Emergency Fund

4. Eliminate Your Credit Card Debt

5. Calculate and Track Your Net Worth

6. Get Long Term Disability Insurance

7. Develop a Student Loan Payoff Strategy

8. Start investing in your company’s 401(k), 403(b), or TSP

9. Get Liability Insurance

10. Get Term Life Insurance

11. Set up a Health Savings Account (HSA)

12. Start Contributing to an IRA

13. Get a Will in Place

14. Get Clarity on How to Get Raises or Promotions

15. Set Your Withholdings to Break Even

16. Consider Hiring a Financial Planner

17. Start Educating Yourself

18. Consider a Side Hustle

19. Set up Systems to Avoid Lifestyle Creep

20. Connect with the Your Financial Pharmacist Facebook Group

21. Use a high-yield savings account or money market account for big purchases

Financial Planning for Pharmacists

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