Disclaimer: The statements made in this post are the opinion of the author. They should not be viewed as financial advice. Please consult with a financial specialist before making any financial decisions.
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The Pharmacist is a job that a lot of us take for granted. I mean, all they do is hand you some medicine, right?
Wrong, it takes years of training and a lot more than that to become a pharmacist.
Any yet, they aren’t well compensated, especially not to begin with, for their training.
The Pharmacist is a unique case which will give us a glimpse into other problems that many people face despite having “above average” salaries.
That makes it a great next step in the budget deep dive segment.
The budget deep dive will look at different low paid professional and other jobs to show those that work similar jobs a path to financial security and independence on a doable budget.
My first deep dive was into a teacher’s budget. Check out others as well: EMT, Social Worker.
Calculating an Pharmcist’s Take Home Pay
The average Pharmcists take home pay is about $128,000. That is substantially higher than average, but quite low considering the amount of training needed to become a Pharmacist.
But, what I want to focus on specifically is the low end of pay for pharmacists that are just starting out. Some of whom make only $88,400 per year.
While that may sound like a lot of money to some people, a pharmacist faces some unique challenges, at least initially, that need to be addressed.
That is why I want to focus on a starting out pharmacist that makes $88,400.
First, it is important to calculate your gross pay. This is how much you make before anything is taken out. For a pharmacist making $88,400 that would be $7,366 each month.
Please note that in no situations is your gross pay how much money actually hits your bank account. So let’s start chipping away at it.
First, you have federal payroll taxes for social security and medicare. This tax rate is currently 7.65%. A pharmacist who is just starting out then will pay about $563 a month (yearly gross pay, times .0765 divided by 12).
That leaves us with $6,803.
Now you have federal income tax. Not counting other deductions and rebates, that depends on your tax bracket. To figure out exactly how much you’ll pay, use this calculator.
Our pharmacist would owe $1,042 per month! That leaves $5,761.
Next we have state income tax, which ranges from 0% in places like Texas and Alaska, to 4.4% in New York. So let’s go with the median number of 2.2%. Just know that yours may be higher or lower.
So at 2.2% the starting out pharmacist owes $162 per month, leaving $5,599.
Now that taxes are out of the way, you have deductions from your employer. Some of these are still your money, you just don’t have it to live on each month, like contributions to a 401(k). We won’t deal with those right now in this budget.
The other big expense that comes out is your medical costs. This ranges wildly from $100 for singles (or less on medicaid), to $500 for families, to over a $1,000 for more specific coverage.
We’ll stick with basic coverage for this pharmacist.
So just to have a realistic budget we’ll go with $500 (which is a straight expense regardless of your income), just know that your situation will differ.
That $500 expense leaves $5,099 for our pharmacist.
While other expenses and taxes are possible, these are the most common, so these are the numbers we’re going to work with. This is your actual take home pay, also called your net pay.
How Much Can a Pharmacist Spend on The Big Three?
The big three are also known as the three biggest money suckers. These are the places that most of your money goes every month if you’re an average American.
The three biggest money suckers are housing, transportation, and food.
The percentages I reference for how much you can expect to spend on each item can be found on howmuch.net.
Let’s look at each in turn.
Housing is by far American’s biggest expense taking up an average of 33% of American spending.
That is entirely too much. 33% of your take of home pay leaves you with too little wiggle room, especially for a lower income earner.
Still, you need a place to live, so I would recommend about 20-25% of you net pay and certainly no higher than 30%.
If you can get lower and feel comfortable, even better.
At 25%, the starting pharmacist is paying at most $1,275. Remember that that includes taxes and insurance if you are buying a home, so be careful.
That probably sounds low for a pharmacist who should be able to afford a bit nice house. But remember that one of the easiest ways to make sure you have enough money is keeping your housing costs low.
That leaves the starting pharmacist with $3,824 per month.
You might see that number and wonder why you can’t have a bigger house, but trust me, we’ve got a lot of hidden expenses left to account for.
Transportation is another biggie. But mostly because people make it big on purpose.
The average amount spent on transportation in a budget is about 16%.
That’s $816 per month for a pharmacist. But gasoline is only 5% of the budget, and insurance is somewhere between $100 and $150 most likely.
So what is the bulk of that cost? Your expensive car payment!
Car payments are the most expensive part of owning a car, so the sooner you get out of a car payment the sooner you have more room in your budget.
Just do it!
But let’s assume that you have a car payment just so we have a realistic budget. Remember to adjust accordingly.
That leaves us with $3,008 per month.
You might still think there is no problem, but trust me, we’ll need every dollar.
Food is the big expense that nobody seems to think about. You have to eat, so we just buy things. But that is not how it should be.
There are ways to lower your large expenses in housing and transportation, but they take time and a lot of commitment.
Food on the other hand is a variable expense, so it is easy to make a change in the next two to three months or sooner.
In other words, if you are tracking your spending for the first time and trying to create a budget, look to food as the first line to cut at for wiggle room.
That being said, food still costs money so don’t underspend and miss out on the nutrition you need to thrive.
If you want to know how much to spend on food, I have a whole post about food spending.
But assuming you’re an average person with a partner or a kid, then the maximum you should spend on food each month is $625 at this income level.
Please spend less than that if you can and be healthy.
This includes eating out to, so be careful!
The lower you can get your food budget, the more money you have for things that matter to you beyond just surviving.
If our pharmacist only spends $625 then we still have $2,383 in our budget.
Extra Pharmacist Expenses
This is a small one, but it is important to note that a pharmacist needs to have insurance. That can cost about $60 per month. That leaves us with $2,323.
Next, and most importantly, is the likelihood of student loan debt.
I know that student loan debt is something I haven’t addressed in my other deep dives, but considering that the average student loan debt is about $30,000 while the average pharmacist student loan debt is $128,000.
That is a big deal!
The debt payment for that much debt will be about $1,300 per month.
That takes us down to $1,023 which is about where an average teacher without student loan debt is at this point.
The combination of high debt and a relatively lower pay (compared to doctors who have similar debt load but up to two or three times the pay) puts a starting pharmacist in a difficult financial position if they aren’t careful with their spending.
Dealing With Other Expenses
Now, after you’ve paid for the big three, you have other expenses. These include your utility bills, internet, cell phone, entertainment, clothing, widgets, electronics, and anything else you want to buy.
How much you spend on each of those is up to you, but if you need help lowering some of those costs, I have a few suggestions.
If your utility bill is high, try taking drastic steps to lower it.
If you aren’t satisfied with you phone bill, don’t buy a new phone every year and switch to a cheaper provider. I use Reach Mobile and I’m enjoying it. You can get a bonus using my referral code K0D6L5CH if you’d like.
Try to negotiate your internet bill at least yearly.
Look into free or cheap forms of entertainment like outdoor activities and more.
Buy clothing second hand and electronics second generation.
Cut out anything that isn’t bringing value to your life.
And EMTs, don’t spend money when you’re bored on the job!
Check out this link for more ideas on being frugal.
Now, please remember that you do not have that whole $1,023 to spend here.
For reasons I’m about to explain, the budget for these items should be at most $518.
See the example budget below for a break down of each item.
The reason you should avoid spending all of it is you also need to be setting aside money for retirement.
|Budget line Item||EMT Budget|
There are ALWAYS more expenses than you plan for. Have wiggle room in your budget.
How Much Do Pharmacists Need to Invest to Retire?
Retirement may seem like a long way off, but it is never too early to start saving for retirement.
There are a variety of factors that determine how much you need to save for retirement, most of which I don’t have time to get into here.
Those include how much you plan on spending, how much you’ll get from a pension, will your partner continue to work, how late you will retire, the expected inflation, and so forth.
If you want to learn more about preparing for a retirement as a Pharmacist check out this blog. They will be able to guide a Pharmacist better on what steps to take.
For the purpose of this post, however, I’m going to go with a much simpler answer, and that is to give the advice from the Richest Man in Babylon by George S. Clason to “pay thyself first” a sum of 10% you income.
If you consistently pay yourself ten percent, over the course of a career you could save a substantial amount.
This is especially true as you income goes up over time as a pharmacist.
Now the more you can put in the better, but if you need a place to start–start at 10%.
The best way to handle this is to take half of any raise you get and immediately invest that. You’ll never miss it and it will grow until you are able to retire.
At 10% a pharmacist should be investing $513 at minimum each month.
But remember, do as much as you can!
If you want to be a millionaire investing in your 401k over 30 years then you’ll probably need to invest over $1,000 a month.
That is no problem once you pay off your student loans!
The Pharmacist Advantage
Every profession has an advantage of some kind that can be used to become more financially stable. These are things like high income potential, ability to get overtime, flexibility in schedule, or commission based work.
For a Pharmacist it is the ability to increase your income through getting better work and paying down debt.
A pharmacist shouldn’t have any problem investing for the future after student loans are paid off if you don’t tie yourself down to other debts.
Let your income grow, actively find better paying work, and attack those student loans. Then, invest all that money you were putting towards debt towards investments.
It isn’t exciting or complicated for a pharmacist, it just takes discipline in those lean years which will make all the difference.
I’m not a pharmacist though so there may be another benefit that I don’t know about. Use that awesome brain of yours to find your advantage!
What are other advantages that pharmacists have? What other jobs do you want me to review? Tell me about it in the comments below.
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A list of definitions used on this blog can be found here.
Gross Pay: Your total pay before any money is taken out from taxes, insurance, or retirement investing.
Federal Payroll Tax: Tax that is paid on running payroll (paying employees) half of which is paid by your employer and the other half is paid by you. This tax pays for social security and medicare. Please note that if you are self employed you are responsible for the entire tax.
Federal Income Tax: Taxes paid to the federal government based on your taxable income (income that isn’t protected by tax shelters like a 401k or deductions). The more money you make the more you pay in a graduated or bracket system. This is where deduction and rebates come in that create tax returns.
State Income Tax: Taxes paid to the state government based on your taxable income. Each state has different tax rates and rules what is taxed.
410(k): An account offered through your employer that is not taxed upfront, but it is taxed taxed when you pull it out. (See retirement accounts on the definitions page)
Net Pay: Your actual take home pay after taxes and other deductions from your paycheck such as insurance premiums.
Variable Expense: Monthly expenses that are not consistently the same amount. Examples of this are food, your utility bill, and gas.