Investing in Your Future: Managing Your Finances Before and After Graduation
According to the American Association of Colleges of Pharmacy 2014 Graduating Student Survey, 89.2% of 2014 graduates reported borrowing money to pay for pharmacy school. On average, students borrowed $144,718, an 8.2% increase compared with 2013 graduates.
The increasing burden of loans can leave many students with negative feelings about their financial futures, while the promise of 6-figure salaries can give others unrealistic expectations about their postgraduation lifestyles. These misconceptions can have a significant effect on both financial and professional decisions—decisions that Michelle Chui, PharmD, PhD, realized many of her pharmacy students were ill-prepared to make.
“I had several students approach me with financial concerns,” Chui said in an interview with Pharmacy Times. “Some didn’t know how to manage their money after graduation, while others were avoiding residencies and other postgraduate education opportunities because of the amount of debt they were in.”
Addressing the needs of her students, Chui approached the administration of the Midwestern University College of Pharmacy to develop a course in personal finance in 2004.
“I developed the course during the ‘golden age’ when graduates were getting 3 to 5 job offers and companies were essentially throwing money at them,” she said. “They were in a very unique situation, going from near poverty as students to having a very large salary after graduation. I had to convince some of my colleagues that it was necessary and important to speak to their specific financial situation.”
The course was focused on providing students with the information and tools needed to navigate financial decisions during the first 5 years after graduation, including looking for the right job, handling expenses, buying a car, buying a home, and planning a wedding. Another main goal was to help students learn how to achieve their career goals and pay off their loans in a reasonable amount of time, Chui said.
Grounding Financial Expectations
The project began small with a group of students in a workshop setting completing personal finance exercises. Chui had students develop a budget based on their plans to work or pursue a residency after graduation. She then had them create a list of their top 5 financial goals. The goals students listed tended to be general and ambitious, and as Chui required them to be more specific and crunch the numbers, students realized that many of the goals were unrealistic.
“Most students had this assumption that there was going to be plenty of money to do everything they wanted to do,” she said. “When you’re eating ramen every night, $100,000 is so much money. So the exercise really helped to bring that lofty salary down to earth.”
After the initial realization that they would not be able to achieve all of their goals immediately, students reorganized and prioritized their financial objectives. This time around, they accounted for expenses they had neglected at first, including the building of an emergency fund.
Although pharmacy graduates are no longer bombarded with job offers, the concepts taught in the course are still relevant and extremely important to pharmacy students today.
“The most unfortunate thing I hear from pharmacists in the community is that they are stuck in a job they’re not happy in,” Chui said. “Pharmacy is such a beautiful career because there are so many things to do in the profession. But many don’t get to explore other areas because they are financially strapped.”
Taking control of personal finances is the key to career freedom, Chui said, and pharmacy students can start taking steps toward financial and professional success now. The first step is learning.
“Students need to just read and familiarize themselves with financial terms and concepts,” she said. “But a lot of learning comes from experience, so they can start taking baby steps to being in control of their finances.”
One such baby step is taxes, and Chui suggests that students start filing their own after graduation. As new graduates, filing taxes will be simple, allowing students to start building their financial literacy. As their families, possessions, salaries, and savings grow, the process becomes more complex, and students’ knowledge will grow along with their situation.
“You won’t have a clue if you pawn off your taxes on your parents’ accountant,” she said. “Embrace control of your own personal finance so you can grow your understanding as the financial aspects of your life become more complex.”
Students and recent graduates can tap in to a wealth of trusted resources to start becoming financially literate and self-reliant. Some schools do offer a personal finance class, and many offer financial planning resources, programs, and seminars. Students also can use online resources, and ask their parents for pearls of financial wisdom.
In addition to becoming financially literate, Chui suggests that students and recent graduates begin spending conservatively while saving aggressively to prepare for their future lives and careers.
Building a strong financial future begins with choosing the right job—a difficult financial decision in itself. Feeling the weight of their student loans, many graduates will take the first job offered to them or the job that offers the highest salary, with little concern for other components of the contract.
“A contract is more than what they’re going to pay you by the hour—so much more than just the dollar amount,” Chui said. “But that’s what many students glom onto.”
Understanding how to compare job offers side by side and knowing the difference between benefits such as employee retirement match, profit sharing, and 401k plans can make big differences in achieving short- and long-term financial goals.
For students considering residencies and other postgraduate learning opportunities, Chui suggests students pursue these programs, despite large student loans, to ultimately achieve their career goals.
“Some students want to do residencies because they don’t know what to do after graduation, and that’s a waste of money because there’s no end goal,” she said. “But for students who have a clear idea of why they need that training and where they want to be, they should absolutely pursue additional education. You have to have your eye on the prize and make sacrifices for what you want.”
Preparing for the Future
Avoiding the pitfalls of money management requires strategic planning and continual assessment of financial goals and priorities. Although the process may seem daunting, taking small steps can help pharmacy students to start planning for their financial futures. Starting early can set students up for a secure future and a more fulfilling career.
Trusted Financial Resources
Mint allows users to automatically track and analyze their daily spending habits across many devices through their free mobile apps. The service links securely to all accounts, helping users to set and manage goals and budgets—and discover savings opportunities.
For more information: www.mint.com/t/hzpc/
Bankrate provides free rate information from financial institutions on mortgages, credit cards, car loans, checking and ATM fees, and online banking fees.
For more information: www.bankrate.com
BillPin helps users avoid the awkwardness involved when loaning and borrowing money between friends. The social app allows users to monitor, pay off, and cash in IOUs that accumulate between friends.
For more information: www.billpin.com
Abogo can help pharmacy graduates evaluate the location of job offers by calculating the cost of transportation. To give an accurate estimate, the service accounts for public transportation, cost of car ownership, and gas prices within a certain location.
For more information: http://abogo.cnt.org
Slice makes online shopping easier and helps users save money. The free app tracks prices of desired items, alerts users when the price drops, keeps a record of and organizes digital receipts, and tracks spending habits. Slice also tracks shipping and automatically notifies users on the status of their goods.
For more information: www.slice.com