Pharma professionals will undoubtedly face many unique challenges throughout their careers. From high student loan debt and other educational expenses to job changes and challenges faced by those reliant on funding to keep research projects or startups afloat, maintaining financial resources is a way to avoid uncertainties inherent in the field.
While pharma employees are generally well-paid, there are no guarantees. Sound financial planning may provide the confidence needed to focus on doing the best work possible without worrying about what’s around the corner.
Understanding Emergency Funds
Having a well-funded emergency account is essential for pharma professionals. Sudden job changes, projects ending, companies merging or changing direction, or any number of personal scenarios can happen, and having sufficient funds to carry you through will ensure you are psychologically, physically, and financially ready to step into your next challenge.
Your emergency fund is, essentially, a savings account. You’ll allocate a portion of your earnings to build it up and, ideally, will not access it unless absolutely necessary. The less you think about it, the better.
Should you lose your job for any reason, have unexpected medical expenses, or need to cover a family emergency, you’ll have the money you need to take care of it without having to borrow or dip into your investments.
How Much Should You Save?
So, how much should your emergency fund cover?
Generally, most financial advisors recommend saving enough for three months of expenses. However, as a pharma professional, there are other factors to consider.
Job stability is typically less reliable than other industries. If you’re in sales or have an incentive-based pay structure, you may be subject to market changes, trends, or your company’s public status.
You must also consider natural disasters and other things beyond your control. Even if you feel a situation is improbable, there are no guarantees, and insurance doesn’t always cover everything.
People with large families or many dependents may also require more of a cushion. Ultimately, in these situations, you would also have to consider others’ well-being and medical status. Planning to save at least six months of expenses would not be out of line.
Steps to Build an Emergency Fund
Getting started involves a little planning and simple math.
- Assess your monthly expenses. Use actual numbers to calculate these numbers. Check your bank statements to ensure you don’t miss any recurring fees. Include miscellaneous expenses, such as food, gas, entertainment, and recreation. Get as detailed as possible; you might even identify expenses you can eliminate or accounts you can cancel to increase your savings.
- Set realistic savings goals. Decide how much you can afford to put into your emergency fund account. You don’t want to put yourself into financial hardship, but it should be enough to make it worthwhile. Once you’ve got a final number from step one and know how much you can reasonably contribute each month (or each paycheck), you’ll know how long it will take to build the account to your goal amount.
- Automate your contributions. Online banking platforms will allow you to automate deposits from one account to another. Set up regular deposits to ensure consistency.
By taking a systematic approach, you’ll reach your savings goals in no time!
Maintaining Your Emergency Fund
Ideally, you won’t need to look at your emergency account unless there’s an actual emergency. However, it’s always a good idea to review your expenses and check them against the fund to ensure your plan is still viable. If you need to adjust, do it quickly so you are never at a disadvantage.
Avoid unnecessary withdrawals, and don’t use the fund for anything other than emergencies. If you need to access the funds, top it up as soon as possible. The money is there to use when needed, but you should never stop paying into it. Sticking to your plan will ensure you always have what you need, no matter what happens.
Tips for Pharma Professionals
Pharma professionals and pharma employees can tap into various industry-specific benefits, such as bonuses, stock options, and profit sharing. For example, if you receive a bonus twice annually, you could allocate half (or all) of that money to your fund. If you do not need it for any other reason, use those funds to top up your emergency account.
Another way to help keep your emergency fund healthy and growing is to keep it in a high-yield savings account, a GIC, or another low-risk investment. The key here is low risk. You want to ensure the funds are there for you when you need them, so taking unnecessary risks is not advised.
If you are unsure about what type of investments or accounts are most appropriate, speak to us about your plans, and we’ll help you make informed decisions for your needs.
Final Thoughts
We’re living in an uncertain world. Financial preparedness is essential, not just for survival, but to ensure you thrive in your field. Many pharma professionals will experience periods of unemployment. Having adequate emergency funding allows you to be more discerning about the jobs and projects you take on.
Don’t wait for disaster to strike get started on your emergency funding plan today. Not sure where to begin? Work with us to discover strategies to help solidify your financial future.
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[i] https://cache.hacontent.com/ybr/R515/00472_ybr_ybrfndt/downloads/ARPSPD.pdf
[ii] https://cache.hacontent.com/ybr/R516/00472_ybr_ybrfndt/downloads/GreenRetirementGuide.pdf