Financial planning for pharmacists requires a basic understanding of types of financial professionals, fee structures, and values.
Q: What should I be looking for when searching for a reputable financial adviser to work with?
Also, look for someone who is willing to specialize in you and knows the concerns of someone in your profession and income bracket. If you had a heart condition, you wouldn't seek the care of a general practitioner - you would look to a cardiologist, right? Finally, understand how the advisor gets paid.
Q: At what point does it make sense to save versus pay down debt?
A: Generally speaking, follow an 8 percent interest rate rule. If the debt you are carrying has an after tax net cost of 8 percent or less, typically student loans and home mortgages, this can be "friendly debt" and you may be better off paying the minimum payments toward that debt and saving or investing the difference.
If the interest rate on the debt is more than 8 percent or the debt is tied to a depreciating asset, such as an automobile, it is generally advisable to pay down that debt more aggressively. With friendlier debts, you can effectively pay down the balance as well as address important issues like building an emergency fund and/or start retirement savings.
Try to work toward and maintain a liquid emergency fund of 3 to 6 months of living expenses. This will allow you to "survive" for an extended period of time in the event of illness or injury or even a job loss. Also, having friendlier debts affords you the cash flow to take advantage of any free money offered by employer-sponsored retirement plans, giving you a head start on your longer term goals. The sooner you start, the better your chances of achieving your goals.
One of the benefits of finding an advisor to help you is that he or she can point out some of these options - options that can give you better control of your finances. Take time and find someone who specializes in you. (84560 D.O.F.U. 8/09)
Have a professional or personal financial question? Send it to Rick at email@example.com and cc us at firstname.lastname@example.org
Rick Schultenover is a financial adviser associate vice president and associate partner with North Star Resource Group, Minneapolis. He can be reached at (612) 617-6030, or e-mail: email@example.com The information in this article should not be construed as specific investment advice. Consult a reputable adviser for insight into your particular situation.