Do you remember the moment in pharmacy school when you had to convince yourself that all this effort and energy was earning worth six figures in the future? Remember the moment when you had to cajole yourself to study for another few minutes for that chemo exam by saying to yourself “six years, six figures, six years, six figures …”?
Pharmacy is a wonderful profession for making a living. Yes, we do have our downsides and our problems. But overall, we are paid very well for the work that we do.
There are too many pharmacists who are miserable at their jobs, living paycheck to paycheck and wondering why they made the decision to join this profession. Some feel trapped, like they can’t escape their day job. They can’t even think about taking a day job that would pay them half of their salary—say $60,000—in exchange for a happier life.
I once met a pharmacist who truly did not like what he did on a day-to-day basis (You could say he hated his job). I found out that he had a passion for painting. He loved to paint, not just his own drawings, but also painting houses. Yet he decided that it was better for him to be miserable at his job and earning six figures instead of taking a job he loves that pays less than half of what he currently earns. He would say, "I don't have a choice. I have to do this job."
This kind of lifestyle is something we do not promote at The Happy PharmD. We take a simple approach when it comes to money management. What follows is a philosophy and techniques to use money to create a lifestyle that is fulfilling—call it “lifestyle designing,” if you will. Here are three worldviews that will guide the rest of our discussion:
Minimalism purports that in order to be truly happy, we don’t need to fill our lives with stuff. We don’t need a better home or a better car or the next and newest gadget to fulfill our desires. Minimalism states that you only need the bare essentials to live a fulfilled and happy life; in fact, the less you have, the less distracted you are. And, the more focused you are, the more fulfilling your relationships will be.
Minimalism isn’t just about money. It’s about all of life, including your eating habits, exercising, what kind of car you buy and what kind of job you take.
I was first truly introduced to this approach to life when I read the book, The Life-Changing Magic of Tidying Up, by Marie Kondo. In this book, she talks about how creating a lifestyle in which you are truly decluttered helps you escape from the busyness of life.
A Long-Term Money Perspective
Another definition for wisdom is delayed gratification. If you are a parent or have a young child in your life, think about how that child acts when he or she wants something. Children want everything RIGHT NOW, right? It can’t be later, it can’t be in two minutes—it has to be NOW!
Here is a picture of my daughter crying because I told her I would get her pajamas “in a minute."
Children live in the here and now. They have a hard time conceptualizing the future. As adults, we’re taught this concept primarily through education. We go through education for a majority of our lives to prepare for our career. We are forced into this way of living because it’s what everyone does—and the government mandates it—but really, it’s a long-term perspective.
We are investing time now educating ourselves to achieve a degree, in hopes that it will pay off later. This is the same concept as pharmacy school: The median pharmacy student debt in 2016 is $150,000, and students pay that money (or incur that debt) in order to eventually reap the benefits of the pharmacy profession—and along with that, the salary of a pharmacist.
I take the same approach when I think about how I want to live my life and the investments I want to make. I try to adopt the mindset of long-term thinking when it comes to my money. I think about things like early retirement. I have no desire to work a 40-50 hour work week for the rest of my life in order to “do the things that I want to do” when I am 62. I’d rather live the minimalism lifestyle now so that in the future I can do the things I want to do with the time that I have—we’re not guaranteed life, so I don’t want to hang all my hopes on a retirement that may never come.
In fact, if you’re the kind of pharmacist who hates your job and are still working there every day, why are you suffering now? You don’t have to be a pharmacist for the rest of your life if you hate what you do. You can find a way to escape.
However, if you find yourself with an extravagant lifestyle and living paycheck to paycheck, you will never escape the endless cycle that is your life. You live paycheck to paycheck buying things you don’t need to impress people you probably don’t like—and you’re forced to work at a job that you hate. This is truly a miserable existence, and I want to encourage you to make small changes today to move away from that.
The long-term perspective we have on money is to use the majority of extra income to invest in things such as Roth IRAs, 401(k)s and business ventures so that we can retire early. My wife and I have adopted this mindset and we are aiming to retire by the time I turn 37. Will I actually retire from pharmacy when I turn 37? Probably not. But if I wanted to, I could. If we want to take a two-month sabbatical to Europe, we can. If I want to go part-time as a pharmacist, I can.
This is the lifestyle we want to create—a lifestyle of freedom as opposed to a lifestyle of being trapped.
Debt keeps you trapped. Imagine if all of your debt payments—mortgages, car payments, cell phone payment plans—were gone. How much extra income would you have per month? Take a moment and calculate it.
Now, imagine that you have that money in your hand.
What would you be doing with it? How would you spend that money? Would you save? Would you travel?
Guess what? If you are in debt, the reality is that your debts entrap you. Not only do debts keep you trapped, they fool you into thinking that you are getting a good deal. A $100,000 home at 4 percent interest over 30 years does not cost you $100,000. It actually costs $171,869.51.
Debt traps you and makes you a slave to a monthly payment. And, debt increases over time. What makes me so mad about my college loans is that every month I had to pay $500, and only $240 went toward paying the principal. The rest went toward interest, or, as I like to call it “stupid tax” (because I felt stupid for having to pay it).
Techniques and Strategies
We talked about the philosophies that inform our decision-making. Now let’s talk about the money-saving techniques you can use to live like a resident even after you are done with residency:
1. Low cost of living
When I graduated from high school, and the majority of my classmates said that they wanted to live near the big city. I thought the same thing when I was in high school. I thought I would never move back to my hometown, but that’s exactly what I did.
I received a great offer from a hospital during my residency to live in my hometown with a great salary and benefits. One reason why I chose to live in my hometown was because of the low cost of living. Houses here are extremely cheap, and to get a 2,000-square-foot home for less than $100,000 isn’t unheard of—in fact, it’s common. If you live anywhere near the big city, you’d be hard-pressed to get a two-bedroom, one-bath home for under $100,000.
Cost of living influences what you can do with your buying power. Buying power is the extra income you have to pay off your debts. Another great thing about rural areas is that you might find additional benefits or even higher salaries because few professionals wish to live in these places. I was lucky enough to be offered college loan repayment as part of my current position. I would have never found this had I applied in an urban pharmacy setting.
2. Low expenses
After you start receiving a salary of $115,000 out of nowhere, it can be very tempting to adopt an extravagant lifestyle. After you have all this money, businesses will find ways to allow you to spend it on anything from a nicer home to a nicer car to fancier groceries. Ultimately, we believe that we don’t need those things in order to be happy. What makes us really happy is having the bare essentials and having great friends and family.
When I was a resident, my wife and I figured out that our bare minimum expenses totaled around $1,600 per month. Yes, that includes things like food, rent and insurance. After transitioning from residency to full-time pharmacist, our expenses did increase. We bought a home, which had a higher mortgage payment than our rent, and we also had to start paying off my student loans. After we transitioned, we kept our expenses around $2,500 expenses per month. This allowed us to use about $3,000 per month as our buying power, and we paid off a car loan, my wife’s college loan, my loans, and our house. In fact, we paid off our house 27 years early. Now we have all this extra income to use as we wish because we kept our expenses so low.
3. A cheap house
It pays to buy a cheap home. If I could do this again, I would buy a really cheap duplex and rent out the top. I would do this because it would create extra income for our family over time. The other tenants’ rent would pay for the mortgage, so we literally would be living in a home for free. This is a great strategy for any resident who eventually wants to build multiple streams of income—and multiple streams of income is the way to achieve the freedom lifestyle.
4. Rent, don’t buy (at least at first)
I recommend that most residents and new pharmacists rent. If you don’t know for sure that you are going to stay in an area for at least five years, you shouldn’t buy a home. The hassle, the payments and reselling the home are too much to take on if you aren’t committed to staying in one area for a while. Based on current statistics, people transition from job to job much more quickly than they did once upon a time. There’s no reason for you to settle down and buy a home if you can rent—at least temporarily.
5. No new cars
A new car is one of the worst investments you can make. Why? As soon as you drive the car off the lot, it loses approximately 10 percent of its value, according to CARFAX. Its value significantly depreciates over time and you can’t get that value back. You can save significant amounts of money by getting a quality car with a few years and miles on it.
6. Nix subscription services
Let’s face it. You don’t need Netflix. You don’t need Hulu. You don’t even need Internet, truthfully. People have been living without these things for thousands of years. However, if you are like me and you feel like you have to have Netflix because you love a certain series, join in with other people. Make a family plan so that the cost of these services is cut in half, at least.
7. Low-cost phone
Did you know that with Google’s Project Fi, you can spend about $25 per month for cell phone service? Yes, you read that correctly. One line = $25. Technically, you don’t even need a fancy cell phone. You can get a TracFone and be OK; you just can’t do all the cool things like play Angry Birds or surf the Internet whenever you please.
Habits of the Happy PharmD
Committing to these changes is difficult. I won’t sugarcoat: If you are trying to make these changes overnight, it won’t be easy. It’s like a smoker trying to quit cold turkey. These are a few habits I recommend that you adopt so that you can see the full benefit of these changes over time:
1. Monthly budget meeting
Whether you are single, married or in a relationship, a monthly budget meeting can help you review your expenses and make necessary adjustments as you go along. A monthly budget meeting involves you (and your partner, if applicable) sitting down and going over your expenses and your budget. Although I am not a huge fan of a budget, it’s extremely important for you to know how much you are spending on things each month so you can keep track of your expenditures and hopefully, keep them low. This isn’t a huge commitment and should take about an hour of your time.
One of the best ways to track your expenses without having to create a giant, ugly spreadsheet, is to use my favorite money management tool, Personal Capital. Personal Capital is a free tool that connects you to all of your financial accounts and tracks expenditures that you make.
2. Continue the hustle
Residency felt like I was extending school another year for significantly lower pay—I still had to hustle, complete extra projects, work late and live on a tight budget. What I recommend is not adjusting to your new pharmacy salary. I see a lot of people who finish residency adjust to “normal” life and stop pushing themselves.
One of the best ways to become a minimalist and apply that long-term approach to money is to continue the hustle by going above and beyond your job and creating an extra revenue stream through real estate, consulting or another side business. You can use this extra income to save for the extra things you want in life (or pay off debt, I paid off $50K in 2015 using this strategy). By hustling outside of your job, you create a drive and energy for you to push. I found that whenever I didn’t have a hustle—something on the side that I was working on—I found myself getting lazy at home and at work.
By following these tips and strategies to live like a resident, you can set yourself on a path to happiness and fulfillment. I know this sounds difficult, and you will definitely have some bumps in the road. But whenever the going gets tough, just imagine how great it will feel when you find personal and financial freedom.
Alex is the Founder of The Happy PharmD. He loves anime, his family, and video games, but not in that order.