When building your own business, one GIANT piece of the puzzle is to learn how to be profitable as a sole proprietor. Before dropping everything to pursue your entrepreneurial pharmacy (pharmapreneurial) dreams, you need to focus on your personal financial health; learning to treat your personal financial life just as you would a business.
There is profit (income), loss (expenses), insurance (disability, life and liability), debt (student loans) and assets (retirement savings, etc.)
Before ever starting your own business, one should have a personal financial health check up. Some pharmacists, like myself, prefer a DIY approach to personal finance.
For others, working with a FIDUCIARY certified financial planner is also a good idea. Remember, a fiduciary adviser is required by law to act in your best interests; unlike some financial advisers that are actually life insurance/annuities salespersons.
Whether you are interested in starting your own business or not, every professional should treat themselves as a business. That includes investing in yourself physically, financially and personally.
Getting your financial health in order is just as important to your sense of well-being as being physically active. These are my Top 5 most important personal financial categories.
TOP 5 FINANCIAL CHECK POINTS FOR PHARMACISTS
- Student Loan Debt
- Personal Health Insurance
- Disability/Life/Liability Insurance
- Low Cost Index Fund Investing
- Budget Software
1. Student Loan Debt
If you are a recent grad, student loan debt is probably a huge financial obligation. Just months after graduation, my loans were consolidated at 6.3% , which ended up being about $415 per month.
Of that $415 payment, about $300 went towards my interest and the other $115 went towards my principal…sickening I know.
In March 2015, I refinanced my entire loan through CommonBond (affiliate link) and received a much lower interest rate. I chose this company because of its commitment to global education and social causes that I strongly believe in.
(SoFi is a company that is also offering low interest student loan refinancing, but I have not personally had any experience with them.)
CHECK OUT THIS FREE LEND-EDU RESOURCE to DETERMINE THE BEST REFINANCING OPTION FOR YOU.
I ended up with a 1.92% interest rate on a 5 year variable-rate loan (they have longer terms and fixed options also). The monthly payment was a bit higher at $523 per month, but after refinancing only around $25 of that was interest and the rest all goes towards lowering my principal!
CommonBond changed my life by giving me a light at the end of a very deep tunnel.
Knowing that my loans will be paid off very soon gave me the courage and freedom to take risks in my career, like starting my own business. I highly recommend either CommonBond or SoFi for student loan refinancing.
Tax Consequences
One thing that holds some people back is the interest on government student loans that is tax deductible. This is something that you should ask your CPA about, but for us it was actually costing up more money to keep the governmental loans. We were only being allowed to deduct $1200 per year because of income limitations.
So this means I was paying roughly $3600 in interest each year, but only deducting $1200. So I went from $2400 ($3600-$1200) in interest per year to $300 (based on $25 per month) per year.
That is a savings of $2100 per year!
Not too bad return on my investment.
The refinancing application took about an hour total between filling out the paperwork and gathering all the information needed.
Again I would HIGHLY recommend CommonBond for customer service, their dedication to bettering the world through education and easy to use refinancing process!
Still Too Complicated?
The guys over at Your Financial Pharmacist just launched The Student Loan Course for Pharmacists to help you take control of your student loan debt and formulate a plan to help you start building wealth ASAP.
(I have gone through the course content and wish I had I gone through the recommended steps about 2 years before I actually did. It definitely beats my post-graduate debt repayment strategy of sticking myhead in the sand and hoping the problem goes away! – HA!)
2. Personal Health Insurance
“Obamacare” was a really good option for self-employed pharmapreneurs. If you cannot get covered through a spouse’s insurance plan, then you will have to purchase it through the Affordable Care Act’s website.
If you are currently employed and have private insurance through your employer, I suggest that you make yourself very aware of all of the deductions.
How much you currently are paying for your employer-sponsored health insurance plan?
Don’t feed bad if you don’t know, I didn’t until I lost my job.
Here is how to find out.
Start by getting your pay-stub and figuring out exactly how much your employer-sponsored health plan is costing you each pay period. Then extrapolate out your monthly costs, then your annual year costs of coverage. Now you know exactly how much you pay each month.
Do you know how much your deductible is or what level plan you are under?
Call HR and find out. Get in touch with your insurance plan, find out exactly what type of coverage you have and know exactly what you are paying for. Once you have an idea of how much health insurance is, then go to the HealthCare.gov website and start shopping for coverage.
Buying private insurance through the government website averaged around 30% more than what we were currently paying through our employer-sponsored plan. This is something that self-employed pharmapreneurs must keep in mind because it is a big expense.
3. Disability/Life/Liability Insurance
…to be continued in Part 2.
