In this article a pharmacist with significant experience in the area of finance identifies and discusses five common financial mistakes to avoid as a pharmacist.
Authored By: Timothy Ulbrich, PharmD
Co-Founder and CEO of Your Financial Pharmacist (YFP)
Article posted 21 June 2022
While financial mistakes may seem inevitable, some do not have to be. Try to avoid these five common financial mistakes pharmacists make so they do not impact your financial goals and plan.
Mistake #1: Not Maximizing Public Service Loan Forgiveness (PSLF)
When it comes to public service loan forgiveness (PSLF), the goal is to maximize forgiveness and minimize what you pay out of pocket. The formula used to calculate repayment in an income-driven repayment plan is based, in part, on the adjusted gross income (AGI) reported on your tax returns. To best optimize this repayment strategy, ask yourself, “What could I be doing to lower my AGI without making less money?” Using strategies to lower your AGI will allow you to pay less towards your student loans, increase the amount forgiven through PSLF, and hopefully move forward with other financial goals.
Mistake #2: Accepting Income is Fixed
Pharmacists tend to make a sizable income coming out of the gates, but depending on the area of practice they are in, that income may be relatively flat throughout their career.
With expenses (hello inflation!) and debt loads continuing to creep up, think about how you can maximize your income. Whether it is through a side hustle, starting a business, or diversifying your income another way, there are many options to consider.
Check out this blog post from YFP to dig into this more and get some ideas: 19 Ways to Make Extra Money as a Pharmacist.
Mistake #3: Prioritizing Non-Tax Favored Investment Accounts
Have you thought about the priority of your investments? If you are investing out of order, you could be missing out on low-hanging fruit from a tax advantage investing standpoint.
Although everyone’s situation is different, if you are contributing to a brokerage account but have not first taken advantage of an employer-sponsored retirement account (remember that an employer match equals free money), an HSA (think triple-tax benefits), or Roth IRA accounts, you may be losing out on some big tax savings.
Mistake #4: Tax Filing Without Tax Planning and Strategy
Tax preparation (aka filing because the IRS says we have to) is historical, limiting its impact on tax liability.
Tax planning is a forward-focused strategic approach to integrate the tax plan with the financial plan. Tax planning can help avoid common issues in advance, from adjusting withholdings and evaluating how to optimize savings accounts to maximizing child-related tax strategies and philanthropic contributions.
To learn more about tax planning, this YFP podcast episode may be of interest to you: YFP 233: Tax Moves to Consider Before 2022.
Mistake #5: Hiring a Planner Without Your Best Interest In Mind
When it comes to financial planning, financial advisors, wealth managers, and wealth advisers, there is a wide variety in education, training, and experience. At YFP we strongly believe in the CERTIFIED FINANCIAL PLANNER™ credential.
The CFP® is very robust in terms of the requirements in the educational portion, the rigorous examination, and the experiential component that’s similar to the APPEs in our pharmacy education. CFPs® also operate as fiduciaries, with an oath to keep the client’s best interest in mind.
ABOUT THE AUTHOR
Tim Ulbrich, PharmD, is the Co-Founder and CEO of Your Financial Pharmacist. Founded in 2015, Your Financial Pharmacist is on a mission to help pharmacists achieve financial freedom through fee-only, virtual comprehensive financial planning services via YFP Planning, plus three weekly podcasts, including the Your Financial Pharmacist Podcast, books, webinars, and numerous online resources.
Disclaimer: The information in this article is provided to you for your informational purposes only and is not intended to provide, and should not be relied on for, investment or any other advice. Read our full disclaimer here.
Editor’s Note: IDstewardship and YFP have collaborated for years as trusted resources for pharmacists. It is our pleasure to work together in this capacity.
REFERENCES & RESOURCES
1. Your Financial Pharmacist. “19 Ways to Make Extra Money as a Pharmacist in 2020.” Your Financial Pharmacist, 23 March 2019, https://yourfinancialpharmacist.com/14-practical-ways-to-make-extra-money-as-a-pharmacist-in-2019/. Accessed 25 May 2022.
2. Your Financial Pharmacist. “YFP 233: Tax Moves to Consider Before 2022.” Your Financial Pharmacist, 9 December 2021, https://yourfinancialpharmacist.com/yfp-233-tax-moves-to-consider-before-2022/. Accessed 25 May 2022.
3. Your Financial Pharmacist. “Disclaimer.” Your Financial Pharmacist, https://yourfinancialpharmacist.com/disclaimer/. Accessed 25 May 2022.
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