How Much Money Do Pharmacists Make?

How Much Money Do Pharmacists Make?

In this post, I will explain why how much money a pharmacist make does not matter and what you should focus on instead.

First off, let’s acknowledge that money is important. Numerous studies have shown that in fact, money does bring happiness.

A study published recently found that among people age 30 and older, there’s a direct correlation between income and happiness.

We have heard of the old adage of “money can’t buy happiness” as a fact.

A 2010 Princeton University study found that the magic number to happiness is around $75,000 and a rise in income after that did not increase happiness.

The average pharmacist makes $128,090 according to the Bureau of Labor Statistics last updated on May 2019.

Pharmacist salary typically range between $129,016 and $145,840 with the top 10 percent earning more than $160,000.

How Much Money Pharmacists Make and Does it Matter?

There are various factors that contribute to these why I don’t think how much pharmacist make does not matter.

• Lifestyle Inflation
• Crushing Student Loan Debts
• Credit Card Debts
• Mortgage Debts
• Car Loans
• Living Paycheck to Paycheck
• Not Paying Yourself First
• Live Below Your Means
• Not Saving for Retirement
• No Emergency Funds
• Don’t Have Proper Insurance
• False Sense of Job Security

Lifestyle Inflation

You have heard of this moniker before. “The more money you make the more money you spending.”

There are various factors that go into this. One of which is deprivation. If you came from a middle-class family, you may have dreams of being rich.

You wanted to buy that dream house and that dream car since you’re in high school.

Now you’re earning $128,000 as a pharmacist, you got your first paycheck and the possibilities are endless!

The other reason is that you have to look the part. Have you seen a realtor showing you a house and is driving a beat-up Honda?

You automatically judge this person because he/she is not a successful realtor and you shouldn’t be working with this person.

Let’s flip the script and this realtor is driving a BMW, the car gives this realtor instant credibility.

Overall, lifestyle inflation is a significant upgrade to your current lifestyle. You bought that $500,000 home, the $80,000 car, and wears brand name clothes and shoes.

While you’re living in comfort, this does not bode well for your financial well-being and urge you to try to make more money then what you currently make.

Don’t prey for lifestyle inflation and the fear of missing out (FOMO) also known as keeping up with the Kardashians.

Crushing Student Loan Debts

The average pharmacist student loan debt is $179,514 according to the American Association of Colleges of Pharmacy based on surveys from the class of 2020.

Your student loan amount varies according to where you go to school.

Private pharmacy schools can set you back approximately $213,000 and $147,000 for public schools.

It’s a mistake ignore your student loan and pay the minimum especially if you’re on an extended repayment plan.

I personally know at least two pharmacist colleagues who are still in their 40’s and is still paying of their student loans.

You can look into different student loan strategies to help you paying off your loan early such as:

1. Public Service Loan Forgiveness (PSLF) if you’re working for a non-profit organization.
2. Standard 10-year repayment with additional payments using snowball, avalanche, or a hybrid approach.
3. Health Professions Loan Repayment Program, you can receive up to $40,000 per for up to three years of service.

Tackling your pharmacy student loan early and aggressively can pay dividends down the road in terms of interest saved and freeing up money for personal finance needs like saving up for a house down payment or increase your saving and investing rates.

Credit Card Debts

The average credit card balance is now currently $6,200 according to USA Today.

Credit card debts are especially damaging since the average credit card interest rate is 17.89% for newly opened accounts and 14.52% for an existing account.

Let’s put this into perspective if you had a balance of $6,200 today with an interest of 14.52 and only paying a minimum of 4 percent per month of $248. It will take 129 months or 10 years and 9 months for a total payment of $8,800.46.

Not only that you took over 10 years to pay off your credit card debts, you have paid over $2,600 in interests!

It’s okay to have credit cards because credit cards offer a plethora of benefits such as cashback bonuses and travel rewards. Plus using credit can build credit, especially if you keep your usage low and pay off the amount owed in full every month.

Mortgage Debts

Buying a house is an important purchase decision in anyone’s life.

When buying a house is an equally important decision. As a new pharmacy graduate, it may be advantageous to delay big purchases like a house. Why?

It may be best for you to rent an apartment in these instances:

• You’re a pharmacy resident and is not sure if you’re staying with your current company,
• You just accepted a job and you’re not sure if you’re staying in the same area for the next 5 to 10 years.
• You have yet to save enough money for a 20 percent down payment to avoid the private mortgage insurance (PMI)

When you are ready for a house you want to make sure that you’re able to afford this house.

Online calculators such as Nerdwallet and Bankrate can help you determine how much house you can afford.

It may be advantageous to delay buying a house until you’re ready to do so and focus on paying off your high-interest debts such as student loans and credit cards while saving for a down payment.

Car Loans

Buying a car is another big major purchase in your financial life. I wrote about how what kind of car you can afford in this article here.

Another point of contention is buying a used car or a new car.

Everyone wants to smell that new car smell.

In the class book, the Millionaire Next Door, the authors’ research revealed that a majority of millionaires drive cars that cost less than $30,000 and are three years old or older.

A car’s value depreciates a lot of time and especially so during the first few years of its life. Buying a used car that is at least three years old gives you a car that has already depreciated the bulk of its value but still is in a good condition.

Why three years old car? Right off the lot, a new car will depreciate around 20 percent per year for the first three years.

At the end of year three, 60 percent would have been lost. In other words, a car only retained 40 percent of its sale value after three years assuming normal driving of 10,000 miles/year.

Living Paycheck to Paycheck

According to USA Today, 59 percent of Americans are living paycheck to paycheck. Additionally, nearly half of the same people carry a credit card and are having trouble with payments.

A second article by Forbes, a 2017 survey found that 78% of American workers are living paycheck to paycheck.

Well, if you’re a pharmacist or a high income professional, you might think this section does not apply to you.

I got news for you, a Nielsen study found that one in four families making $150,00 a year or more are living paycheck-to-paycheck.

This is indeed alarming. How to stop living paycheck to paycheck? We’ll discuss this later in this article.

Not Paying Yourself First

One of the reasons why high-income earners such as pharmacists and other professionals struggle financially is not paying your self first.

When you get paid, did you really get to keep your money? First, you have to pay your income tax, social security tax, Medicare tax.

The gross income you get is then deposited to your personal bank account.

Do you finally get to keep your money? Well your money’s already earmarked for:

• Student loan bill
• Credit card bill
• Grocery bill
• Internet/cable bill
• Car notes

You’re finally left with maybe $500 to $1,000 but then guess what? You wanted to go eat out, you wanted to buy new clothes and shoes.

You get the idea, at the end of the month. You’d be left thinking where did all my money go? You’ve now joined the living paycheck to paycheck club.

You’re waiting for the next paycheck then rinse and repeat.

You’ve got to pay yourself first before anyone else. One of the best ways to do this to contribute to a traditional 401k. The money is gone before you even see it. You reduced the income tax you owe to the taxman, you get the company match and you’re saving for retirement.

Live Below Your Means

You might be a pharmacist HENRY if you don’t live below your means.

Yes there’s an acronym for everything. HENRY stands for high income earner not rich yet.

One of the reasons why you’re in this position is because you are not paying attention to where your money is going.

I don’t like to budget but having an app like Mint, Personal capital or You Need a Budget (YNAP) can be eye-opening.

These apps can show you where your money is going and therefore you can make a conscious effort to eliminate these expenses.

There are many different budgeting systems out there. You can try the 50/30/20 system, the envelope system, or the conscious spending described by Ramit Sethi.

The bottom line is this, if you’re a hyper consumer and you spend all the dollars that you earn then you’re stuck in the vicious cycle of debt-driven consumption and you won’t be able to get out.

In this scenario it does not matter how much money you earn as a pharmacist. It’s never going to be enough!

Live like a pharmacy student or a pharmacy resident. You’d be amazed how living like a pharmacy student or resident will have a positive impact on your financial life.

Not Saving for Retirement

As a pharmacist, when you graduated you’re already at a disadvantage because your debt load and time are not on your side.

You’re probably in your early 20’s or early 30’s and you’ve failed to take advantage of compound interest by investing and saving in your early 20’s.

The worst thin you can do to yourself is to allow your debts to balloon and save a minimum for your retirement if at all. ‘

No Emergency Funds

An emergency fund is an essential part in any financial planning. You need to have this fund in case of an emergency.

You should aim to have a least $1.000 and build up from there to a final amount that is equivalent to 3 to 6 months of your living expenses.

Some conservative personal finance experts have argued for 12 months of living expenses in your emergency fund.

MarketWatch reported that according to a study, only three in 10 adults have no emergency savings.

In fact, I have heard somewhere that a lot of Americans cannot afford a $500 emergency.

Don’t Have Proper Insurance

Another reason why it does not matter how much money pharmacists make is that they don’t have proper insurance coverage.

If you are the sole breadwinner in your family, you should look into term life insurance to provide for family in case an unexpected death happens.

Term life insurance offers much more value than whole life insurance and you pick this option if you need life insurance.

Another insurance pharmacists might need is professional liability insurance.

According to Drug Topics, the average claims against a pharmacist is $124,407. Hospital pharmacies’ average liability claims can cost up to $273,338.

Other expenseive claims may include:

• $544,600 for failure to identify overdosing
• $325,819 for compounding calculation and/or preparation error
• $275,092 for failure to provide instructions

Given these statistics, it may be easy to see why how much pharmacists make doesn’t really matter when a single lawsuit can wipe out your annual salary plus more.

According to APhA, practice environments that warrant your own policy includes:

• Community pharmacists (independent pharmacy owner)
• Consulting work, self-employed, contract work
• Medication management roles (ambulatory care, collaborative practice)
• Independent prescribing
• Dispensing roles (protect against medication errors)

Reasons for not having a professional liability insurance:

An article by pharmacy times argues that you may not need individual liability insurance since most employers provide liability insurance for each employee.

Whenever patients want to file a medical malpractice lawsuit against a pharmacist, their attorney will direct the suit against the employer. Why? Because they are the ones with financial resources.

On the other hand, if you carry your individual liability insurance then you might an additional target of the suit since you carry a policy that covers as much as one million dollars.

False Sense of Job security

We’ve been told that as a pharmacist you have job security because there’s a shortage of pharmacists and who doesn’t need medications?

That boat has since sailed. The Bureau of Labor Statistics are projecting jobs growth being flat.

A glut of new pharmacy graduates due to new pharmacy schools opening have caused fierce competition for jobs.

Currently, we have an oversaturation of pharmacists. Employers will not hesitate to lay off senior pharmacists for new graduates due to lower starting salaries.

Walmart in 2019 laid off approximately 40 percent of its pharmacists and 3% of its pharmacy staff nationwide.

Why How Much Money Pharmacist Make Does Not Matter

There you have it, a pharmacist job has its challenges and rewards. As a highly compensated healthcare professional, you shouldn’t be complacent thinking that you’ve set for life.

In order to build your nest egg to retire and achieve financial freedom, you need to be diligent about your income and expenses.

You need to earn more but spend less, practice paying yourself first by automatically maxing out your retirement saving accounts, and invest to take advantage of compound interest.

Invest early and often!

I recommend you follow Dave Ramsey’s baby steps to get started and follow how to get rich slowly guide for pharmacists.

These are actionable stepwise approach that will set your financial ducks in a row.