Money Matters - NPX Newsletter Winter 2018

Ten Worst Money Mistakes by New Pharmacists

By Eric Croak

As a newly practicing pharmacist you’ve probably realized that you have some advantages that your friends over in business school haven’t quite attained yet.  At the same time, however, you might have some lingering student loans that seem impossible to pay off and the immediate burden of making financial decisions without the time to dedicate to learning the difference between a Roth IRA and a 401(k).  As your wealth increases, the terms and complexity will increase as well, but here is a list of the 10 worst money mistakes to get you started on the journey:

10. Using a Savings Account as a Retirement Account
Bank accounts – great for emergencies and spending, bad for growth. Savings accounts are averaging less than 0.1% per year of interest, well below the rise of inflation. Your savings account should be for spending and emergencies – with at least 6 months of salary stashed away. After you reach that threshold it’s time to put your money to work for you.

9. Not Knowing What Investments You’re In
You have an old 401K from your last job and you don’t know the investments in your current 401K.  You also have some CD’s from ten years ago and a stock your grandma bought for you.  Finances are confusing for a lot of people, but in ten years I promise you will wish you didn’t ignore your investments. The difference of just 1% per year could mean over $100,000 at retirement. That’s your grandkids’ college or a new boat. Take the time to sit down for at least an hour and study up on what investments you’re in.

8. Insurance is for the Elderly
You’re young and invincible - I understand that. Millennials tend to think they are Superman in a world without kryptonite - but your parents/spouse/kids won’t think the same way when you leave them with your debt and without your income. Insurance is like a plunger – if you don’t have it the moment you need it, then you might be in deep...trouble.

7. Being as Safe as Possible
Kids take risks every day.  Have you ever seen a ten-year old skiing? They have zero fear because they know when they fall it won’t hurt too bad. You can afford to fall in the stock market too. Don’t listen to the news talking about a financial apocalypse because it doesn’t concern you yet. On average, the stock market has made over 10% per year, ignore the circus and focus on the end goal.

6. Ruining their Credit Score – or not having one at all
We’re raised to believe that credit cards are bad - they’re not. But as every parent, professor, or financial advisor has once said: moderation is key. Get a credit card, pay it off in full every month. You can even get two credit cards if you feel so inclined. Having good credit is a cornerstone to accumulating wealth, and if you don’t have credit history then you won’t have a credit score. What’s that mean? Higher student loans, higher mortgage, higher debt – and less cash in your pocket.

5. I’ll Give When I’m Rich
There are a million things to do with excess cash.  Maybe you’re not Bill Gates and you can’t throw money at every charity of your choosing – but giving to those in need is an essential part of money management and it’ll make you feel nice and cozy along the way.

4. Over-concentrating on Debt
Chances are you came out of school with some debt and we understand the thought of paying loans feels a lot like watching a tidal wave forming on top of you. You already know it’s going to ruin your day when it finally hits. The average student is leaving school with over $35,000 in student loan debt with pharmacy students being much higher. The good news is that you’re not alone. Soon you’ll realize that the tidal wave is more like a thousand small waves - easy to handle as long as you stay above water. Keep paying off above the minimums but don’t ignore your retirement in the process.

3. Forgetting to Invest in Themselves
The only way to make more money is to be the absolute best at what you do.  You can be a great saver but that will never replace higher income.  Look into a new academic designation, residency program, or personal trainer and it might pay dividends to your future that investing can’t.

2. Not Saving Enough
You might think all saving is good saving and, for the most part, that’s true.  But putting 3% into your 401K every month simply isn’t enough.  If you’re spending 97% of your income, it’s time to take a serious look at your budget and cut your spending. Anything less than 10% might lead you into hot water and the longer you wait the worse it will get.  Pick a percent that you want to save and treat saving like another bill to make it easier.  

1. Thinking I’m Too Young for This
Ask anyone over the age of 45 and they will agree with me here – you are never too young.  If I could go back in time and teach my 5-year old self to invest, I’d do it.  The best time to plant an apple orchard was 20 years ago, and the second-best time is right now.  Your first 5 years of practice will set the foundation for the next 35 years and, by many accounts, these are the single most important financial years of your life.  With that in mind; it’s important to take an hour or two and look at what’s going on with your finances to make sure you aren’t looking back wondering what happened to all the time. The long-term effect of one or two decisions today just might surprise you.

Eric Croak is an Investment Advisor Representative with Creative Financial Partners in Perrysburg, Ohio.  He has his Series 7, Series 66 and his Life and Health Insurance Licenses.  He can be contacted via email at ecroak@cfpohio.com or through phone at 419.873.8500 ext. 1033.

Securities and investment advisory services offered solely through Ameritas Investment Corp. (AIC).  Member FINRA/SIPC. AIC and Creative Financial Partners are not affiliated.  Additional products and services may be available through Eric T Croak or Creative Financial

Partners that are not offered by AIC.