Pharmaceutical employees are highly educated and excel in their demanding career. Like most Americans, however, they might not feel as confident when it comes to managing their personal finances.
Each employee's financial situation is unique, so there's no such thing as one-size-fits-all guidance for employees in Pharma. Even so, across a wide range of employee demographics, geographies and life stages, many are asking about the same topics. As a Certified Financial Planner™️ at LearnLux, I see high-level trends and FAQs unite even the most diverse workforces.
To help your employees tackle their financial goals in 2021, here are the 5 questions I get most from employees at Pharmaceutical companies (along with the guidance I give, too.)
How much cash should I keep in my savings account?
First, earn a little extra by keeping your cash in a high-yield savings account.
As to what you should do with your cash - it depends.
Have you saved at least $1,000 or one month’s income for an emergency fund yet? If you’re already there, aim to save 3-6 months of income total for emergencies.
Employer tip: Being prepared for the unknown means your employees can handle a surprise medical bill, trip to the vet, or car repair without interrupting their goals or piling up debt.
Once you’ve hit your emergency savings target, use extra cash to make progress with other goals like investing, paying off debt, and even vacation. If you’re unsure where to start, work with a CFP to create a plan that makes the most of your cash.
Should I invest now or wait for the best time?
Investing is a double-edged sword. It’s the best way to grow wealth and reach your long-term goals, but it also comes with the risk of losing money. Naturally, we try to avoid losses by looking for the perfect time to invest our cash.
Employer tip: Humans have proven to be bad at predicting the short-term direction of the stock market. When employees try to get in at the ‘right time’ it usually hurts their investing goals more than it helps. This can lead to stress, distraction at work, delayed retirement and more.
Here’s the good news - the stock market has historically gone up over the long-term, doubling your money about every 10 years (assuming a 7% annual return).
So instead of worrying about short-term market movements (which matter very little when you’re investing for a goal that’s 10+ years away), focus on two things that have stood the test of time for long-term investors - start early, and save often.
One of the best ways to put these into practice is dollar-cost averaging. By investing the same dollar amount at regular intervals (usually weekly or monthly), you can avoid putting all of your cash into a market at its peak.
How much do I need to save for retirement?
Employer tip: Pharma employees are often curious how their 401(k) balance stacks up against their peers. But how much each individual needs to save depends on which version of retirement they choose.
Do you want to retire at 45 or 65? Will your lifestyle in retirement cost more or less than it does now? Do you plan to retire completely, or would you prefer an interesting part-time gig?
The younger you are, the harder it is to look into the future and answer these questions.
So if you’re wondering how much of your paycheck to save or what your 401(k) balance should be by now, here are some helpful guidelines:
- Contribute at least enough to get your company’s full match (free money!).
- If you can afford to contribute more, aim to save 15% of your income to stay on track for retirement.
- How much you need to save for retirement is personal, but there are rule-of-thumbs that can help you assess your progress thus far.
If your numbers don’t line up perfectly, that’s okay. Set yourself up to reach your version of retirement by doing three things - start now, have a plan, and adjust along the way.
What’s the fastest way to pay off my student loans?
Employer tip: Pharmaceutical employees with student debt know the feeling of being held back from other goals. That’s why there’s a collective interest in finding ways to pay them off asap.
The best strategy depends on each individual's situation, but here are a few worth looking into:
- Make extra payments. Paying more than the minimum can save you thousands in interest and shave years off your loan payments. Use calculators on LearnLux to create an early-payoff plan that fits your budget.
- Consider refinancing. A refi can save you money and help pay off your loans faster, but it’s not the right move for everyone. Use calculators on LearnLux to research if this is a smart decision for you.
- Ask your employer for help. More companies are offering to help pay off their team’s student debt as an employee benefit. It’s usually a monthly benefit - say $100 - over a certain number of years, or up to a lifetime maximum.
- Take advantage of cash windfalls. Being smart about using cash windfalls - like tax refunds, bonuses, or that $20 check from Grandma on your birthday - can help you pay off your student loans faster, but it comes with obvious trade-offs.
Are CFPs worth the money?
Employer tip: We could all benefit from working with a financial expert, but many Pharmaceutical employees hesitate because of the cost or fear they'll be sold products that aren't right for them.
It’s common to think “I don’t have millions, so I probably don’t need a financial advisor.” But thanks to financial wellness programs that marry human advice and tech, working with a financial advisor is becoming more accessible for budgets of all sizes.
Just make sure you find someone who relates with your goals and the challenges you’re tackling.
For example, if you’re a new hire looking for help with your benefits and stock options at your Pharmaceutical company, you wouldn’t hire an Advisor that specializes in working with wealthy retirees.
I talk about this more in my article - “I’m an independent Financial Advisor. Here’s what that actually means.”
So when does hiring a financial advisor become a solid investment for yourself or your employees?
In my experience, the value of expert advice, guidance, and accountability are most helpful in two general scenarios:
- You want confidence going into big decisions, like saving for retirement, getting married, buying or selling a home, and having children.
- You want a balanced financial plan that helps you reach your goals and still allows you to enjoy life right now.
So there you have it - the 5 most frequently asked questions I get from Pharmaceutical employees as a CFP with LearnLux.
If you think your employees may have some of these same questions or could benefit from financial guidance overall, check out what my team and I are working on here.