In this video, we are going to talk about 5 money traps to avoid in your 20s as a new pharmacist. I made many of these mistakes, find out which ones later in this video.
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Hi, I’m Jessica and I love talking about financial freedom after experiencing burnout early in my pharmacist career. We talk passive income and simplifying on this channel to combat stress and burnout. If you haven’t seen my burnout story or our debt-free journey while in residency/fellowship, please click those video links below.
Before we get started on these 5 money traps, remember it’s not about how much you make. It’s about how much you are saving. When I say saving – that includes, saving into your checking account, high-yield savings account, retirement accounts (401k, Roth, HSA) and taxable brokerage account.
#1 MONEY Trap – Student Loans
Treating student loans as monopoly money and taking out more than you need. You can watch our full video on how we paid off over $375,000 in student loans during residency and fellowship in just over 6 years.
#2 MONEY Trap – Status and lifestyle inflation
When you graduate with your doctorate degree, it’s easy to fall into the status trap. You are a pharmacist or physician or other healthcare professional and now you want to celebrate and reward yourself for years of training. But hold on. Living like a student right after you graduate can be a virtue. That new car is not needed. That new handbag is not needed. That new luxury suit is not needed.
A car will lose 20-30% after the first year. At year 5, it will lose 60% of it’s value. Cars are not assets, they are liabilities. I still drive a 2000 Camry for this reason.
I did fall into the luxury handbag and clothing trap. I spent over $5,000 on clothing the first summer I had a full-time job. Those clothes are worth nothing to re-sell. See how I decreased my clothing budget in this video.
#3 MONEY Trap – poor financial education
Growing up in the United States, you would assume we have the best education system and financial well-being. But you would be surprised to find the number of people who cannot come up with $1,000 for an emergency. Financial education is not a requirement in many programs. From basics of how to budget to how to invest, it’s important to invest your time and effort to learn for yourself. That means reading books, watching videos like this one, hiring a coach and more. I read over 20 financial books within a couple months, learned how to login to check basics like retirement and social security, and then applied it to my life. You can see all my financial education books linked below. It’s 10% education and 90% implementation.
#4 MONEY Trap – Not investing early enough
Yes, it’s important to start your retirement fund as early as possible. Even $25 a month could have significantly changed the trajectory of your investment portfolio. Take this chart for example. Starting at 20 versus 25 versus 30.
It’s important not to time the market. Compounding is marvelous. Time in the market is more important than trying to time the market.
#5 MONEY Trap – Patience
Building wealth and paying off debt is not an overnight process. I know that is hard to swallow. In healthcare, we want a quick fix. But building generational wealth is long term. Paying off student loans is long term. We took just over 6 years to pay off over $375,000 in student loans – watch that video here. We would never have gotten to the end without having patience during the process.
Patience will help us tremendously. It’s not an immediate gratification we see.
The same goes with investing. Investing in low cost index funds and seeing them grow slowly over time 5, 10 , 20 years from now will benefit us. Compounding starts slow and then snowballs.
Warren Buffet made the majority of his wealth after age 65 after
Time is your most valuable resource and asset. Use it well in your 20s and 30s and you’ll be on a path to financial freedom with us!