Starting Their Careers
Just Graduated
Fred and Freddie have just finished earning their Pharm. D from the University of Pharmacists.
First Job
Freddie and Fred have $200,000 in student loan debt and both got jobs at the Job Store for Pharmacists. Fred and Freddie are both super-smart.
The Fast Lane
Freddie wants to pay off her student loans, FAST.
Fred wants a car that goes FAST.
Living Arrangements
Freddie is okay with living in a basic apartment and having a roommate.
Fred is okay with living in a fantastic apartment, by himself.
FIRST PAYCHECKS
Let’s sneak a peek at how our friendly pharmacists spent some of their first paycheck.
Fred
How He Spent His Money- Car Payment: $800
- Rent Apartment: $2,200
- Total: $3,000
- Fred is living it up and spending some money!
Freddie
How She Spent Her Money- Car Payment: $0
- Rent Apartment: $1,000
- Total: $1,000
- Freddie is playing it cool and saving some money.
Paying Student Loans
Now, let’s see that spending when Fred and Freddie start paying down their student loans. Both, Fred and Freddie are spending $4,000 on transportation, rent, and student loan payments.
Fred
How Fred Pays Off His Student Debt- Car Payment: $800
- Rent Apartment: $2,200
- Student Loan: $1000
- Extra Loan Payment: $0
- Total: $4,000
- Fred is financially foolish and making bad decisions.
Freddie
How Freddie Pays Off Her Student Debt- Car Payment: $0
- Rent Apartment: $1,000
- Student Loan: $1000
- Extra Loan Payment: $2,000
- Total: $4,000
- Freddie is financially frugal and making good decisions.
Fred and Freddie – Six Years Later
Proud
Fred is proud of himself. He made six years’ worth of car payments and the luxury car is now his!
Freddie is also proud. Her college clunker is on its last legs but, she has paid off her student loans!
Feeling Fine
Fred feels fine. He has done a good job of living within his means. He has made $72,000 (72 months * 1000/month) in student loan payments and is about a third of the way toward paying them off entirely. He also owns a nice, if high milage, luxury car.
Feeling Free
Freddie is free. She has made $216,000 (72 month * $3,000/month) in student loan payments. Her entire student loan is paid off and she is ready to embark on her next financial goal.
hypothetical example
Now, this is just a hypothetical example. Not even real numbers ~ although they are pretty close to real.
We hope the image is beginning to come into focus. Paying off these student loans is a big hurdle but if you are aggressive and start early you can get them behind you pretty quickly!
Now let’s check back in with Fred and Freddie twenty years into their careers.
Fred and Freddie – Mid Career
45 Years Old
Fred is now 45 years old. He is having a very nice career at the Job Store for Pharmacists. He is now a pharmacy manager, he helps new pharmacists learn the ropes, and he is doing all of the right things financially.
Freddie is also 45 years old. She is having a nice career at the Job Store for Pharmacists as well. She is a pharmacy manager and helps new pharmacists learn the ropes. Freddie knows she is doing all of the right things financially.
Their Savings
Fred has finally paid off his student loans and now has an extra $2,000 per month to begin saving.
Freddie has been saving that same $2,000 every month for the last 14 years. She has invested a total of $336,000 ($24,000 * 14 years). And, Freddie earned an average return of 5% per year on her investments. She now has an account worth more than $450,000.
Fred and Freddie – Near Retirement
Age 60
We join our friendly pharmacists at age 60. Fred and Freddie each have a family, all of their children have gone to college and have careers. It’s time to start thinking about retiring from the Job Store for Pharmacists.
Happy & Healthy
We are happy to learn the Fred and Freddie have taken care of themselves and are in good health.
Fred is Fine
Fred is fine. He was able to save an additional $24,000 a year once his student loans were paid off. During the last 10 years, he has saved $240,000 and earned a rate of return of 5%. That saving has paid off and the account is now worth more than $316,000. Nice job.
Freddie is Fantastic
Freddie is fantastic. Just like Fred she has continued to save $24,000 a year for the last ten years and earned a five percent rate of return. Her $240,000 investment grew to more than $316,000. But remember, Freddie had $450,000 already saved up and that money grew by 5% every year for the last 10 years as well. That pile has grown to more than $733,000.
Between her two accounts, Freddie has more than $1,000,000 saved.
Who would you rather be?
Fred or Freddie?
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