On Episode 48 of the Your Financial Pharmacist Podcast we spotlight Dalton Fabian, a soon to be pharmacy graduate from the Drake University College of Pharmacy & Health Sciences. We ask Dalton about his current financial situation and help him think through how he and his wife can prioritize multiple competing financial priorities when making the transition from student to new practitioner.
About Our Guest
Dalton Fabian is a soon to be 2018 graduate of Drake University College of Pharmacy & Health Sciences. In addition to obtaining a PharmD, Dalton has a minor in Data Analytics. His career interests include health data science and using technology to make patient care more efficient and effective. During his time at Drake University, Dalton was heavily involved in various leadership opportunities focused on advocating for the profession, including serving as the Chapter President for APhA-ASP and planning health fairs for the Des Moines Community.
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Mentioned on the Show
- The Total Money Makeover by Dave Ramsey
- The Dave Ramsey Show
- The Pete the Planner Show
- YFP Episode 026: Baby Stepping Your Financial Plan – The 2 Things to Focus On First
- YFP Episode 032:Find Your Why with Tim & Jess Ulbrich – Part 1
- YFP Episode 033: Find Your Why with Tim & Jess Ulbrich – Part 2
Episode Transcript
Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 048 of the Your Financial Pharmacist podcast. Tim Ulbrich here, alongside YFP team member and owner of Script Financial, Tim Baker. We’re really excited to have on today’s show a soon-to-be, literally this week, 2018 graduate of Drake University College of Pharmacy and Health Science, Dalton Fabian. I had the pleasure of meeting Dalton at APhA annual in Nashville in March 2018, and when I heard a little bit about his financial story and his interest in personal finance, my first thought was, we have to have him come on the show because his story is going to resonate with so many new or recent graduates that are making this transition from student to new practitioner. So Tim Baker, excited to have you back on the show, I know you were in the weeds for a couple weeks on wrapping up the student loan course, right?
Tim Baker: Yeah, something like that, Tim. So good to be back and contributing to the podcast again. It’s a labor of love with the student loan course, but the course is out there. Our beta testers are hard at work, hopefully, testing everything out and making sure it does what the course says it’s supposed to do. But yeah, glad to be on the podcast and glad to talk to Dalton today.
Tim Ulbrich: So before we jump into hearing from him, I’m curious from your perspective, from the planning perspective, obviously you work with so many new graduates or recent graduates. What are the challenges that you’re seeing that they’re facing in terms of making this transition from student to new practitioner? Where are they getting stuck? And obviously, why is this transition so important?
Tim Baker: Yeah, I think this time period in the course of the career of a pharmacist new practitioner is so critical because it really sets the stages for their financial life now going forward. And it’s funny because you know, I have a lot of meetings last week and this week with clients or prospective clients similar to Dalton, and I’m hearing words like “terrified,” “unsure,” “uneasy.” And I think a lot of the backdrop is how do I handle this behemoth that is the student loans. And hopefully the course fills in some of the gaps there, but that’s one part of it. And I think that to set sound behaviors and to kind of have a plan going forward is going to be vitally important because if you just leave this thing kind of on autopilot, it can get away from you fairly quickly. And that could be in the form of just your spending going awry or just not being intentional with, you know, your student loans or whatever goals that you might have. And we’ve talked about being intentional in the past, but I think that this part of the pharmacy timeline is crucial, especially depending on what your goals are. So I’m definitely interested to hear more about Dalton and his story, and I think it’s going to resonate with a lot of our listeners out there.
Tim Ulbrich: Yeah, I think overwhelmed is the one word we hear over and over again of you know, I’ve got all these competing priorities. Where do I start? Where do I go? And when I had a chance to talk with Dalton, obviously he’s got a lot of things going on that we’re going to hear about in the show, but I also love his passion for learning about this topic, and I think that’s really going to help him set a sound plan for the future. So here’s how the format of today’s show’s going to work. Tim and I are going to interview Dalton, we’re going to ask him a series of questions that’s going to allow him to share his financial story, and in turn, we’re going to discuss various strategies about how he could think through this transition. Now, important disclaimer here is that obviously, we’re not intending to give Dalton financial advice. So we acknowledge everyone’s situation is unique. We aren’t necessarily going to gather every piece of information about Dalton and his story. So we’re going to help ask some questions, get him thinking about it. But ultimately, we recognize and acknowledge for each person listening to this show, it’s going to an individual, unique decision when it comes to your own financial plans. So without further ado, let’s jump into today’s interview with Dalton Fabian.
Tim Ulbrich: So Dalton, welcome to the Your Financial Pharmacist podcast. We’re excited to have you.
Dalton Fabian: Thanks for having me.
Tim Ulbrich: And by the way, congratulations on completing your final year of pharmacy school. And knowing this is the week leading up to graduation, thank you for taking time to come on the show, I’m sure it must be somewhat a busy week. And didn’t you just finish your rotations last week?
Dalton Fabian: Yep, so we finished them last week, have a week off, and then graduate on Saturday.
Tim Ulbrich: Awesome. So thank you for taking the time to join us in the midst of all that craziness. And as I alluded to the introduction, we’re going to pepper you with some questions to learn more about your financial situation, some of the challenges you’re facing, maybe some of the decisions that you’ve already made during this transition period from new graduate, obviously into new practitioner life. We know that, as I mentioned already, we know many of our listeners are probably in a very similar, if not somewhat the same boat that you are, either making this transition, going to be making this transition or recently making this transition. So why don’t you, to get us started here, why don’t you tell us a little bit about you, where you grew up, why you chose pharmacy as a profession, what some of the career goals and interests are that you have.
Dalton Fabian: Sure. So I’m originally from Waukesha, Wisconsin, which is a suburb of Milwaukee. I’ve been going to Drake — did undergrad and pharmacy school at Drake. Drake has a two plus four program. Immediately when I get on campus, I knew that’s where I wanted to be. The professors were friendly and all of that, so I just knew that that’s where I wanted to do my pharmacy school. I chose pharmacy — kind of first, I was interested in you know, helping people, interested in learning more about medications. But as I got through pharmacy school, I think that kind of transitioned to just seeing how progressive the profession was, and that made me motivated to go through pharmacy school with immunizations and all those different sorts of things. And then while I was in pharmacy school, I got introduced to informatics and programming. I got really interested in that, and that’s where I plan to pursue additional training.
Tim Baker: And that’s news, right? Dalton, you recently got accepted to — what is it, a Master’s program?
Dalton Fabian: Yeah, so I got accepted to a Master’s program, so it’s the Master’s of Science and analytics. Interested in kind of getting into the Health Data Science and Data Science career path. So yeah, just found out a couple weeks ago that I got accepted there at Georgia Tech.
Tim Baker: Oh, very cool. Very cool. Congrats on that. I guess the question for you, Dalton, is, you know, when you were going through pharmacy school and you know, you were looking at the loans that you were accruing, when did you start really thinking about the whole idea of personal finance? Or when did you get interested in learning more about it? Can you walk us through kind of that discovery for you?
Dalton Fabian: Yeah. I really didn’t focus too much on my student loans until I got interested in personal finance. So I’m a big runner, and got in — couple years ago, got into audiobooks and podcasts and came across “The Total Money Makeover” by Dave Ramsey. I had heard of it before, but came across it as an audiobook, listened to it. Dave Ramsey’s the one who narrates it, so it’s kind of cool to have the author and kind of a well known person narrate the book. So that kind of got me excited about just personal finance in general. And then it kind of made me realize that with being a pharmacist, having a high income and high student debt, that I would need that information in the future. So after that, got into some other personal finance podcasts to kind of get different perspectives on personal finance.
Tim Ulbrich: So for our listeners, Dalton, that are personal finance nerds out there, obviously, we hope they’re listening to the YFP podcast, but what are some of the other personal finance podcasts that you like?
Dalton Fabian: In addition to YFP, love the Dave Ramsey show, so it’s on a podcast also. And then probably one of my other favorites is Pete the Planner, really like his podcast.
Tim Ulbrich: Yeah, good stuff. OK. Cool. So Tim Baker, before we start rapid firing Dalton with some questions, where do you typically start from the planning perspective with a client like Dalton? I mean, what are some of the things that you’d want to know? And how would this typically play out, you know, when somebody signs on to work with you in terms of getting some of this information?
Tim Baker: Yeah, I think when I first meet with a prospective client, basically, the things that we’re going to talk about are like, what are the main pain points or what are things that are kind of top of mind for you? And we kind of just go down that process of discovering, say ‘OK, what are the things that are of concern?’ Whether it’s student loans, whether it’s retiring at a decent age, building a real estate empire, could be credit card debt, could be how to cash flow a certain financial goal. So to really kind of uncover those things that are providing some discomfort. And then just to see if we would be a good fit to work with each other. You know, I think that type of relationship, you’ve got to have obviously trust, but the way you communicate and the way that recommendations are shared I think are vitally important. So I think we would kind of come to that type of period where we say, ‘Hey, does it make sense to go forward based on here are the things that you’re looking at?’ And if we kind of get that, yeah, let’s do this, the client would get into that get organized phase, which we talk about in the student loan course. But this would be the get organized phase of everything, so this is where, Dalton, we would look at all the things financial for you, whether it’s you know, your checking, your credit cards, any student loans that you have, car loans, all that stuff we would basically go line-by-line and basically build out that dynamic net worth statement. And I think that, coupled with a look at a retroactive budget, just to see where cash flow is going, those are kind of the basis for the relationship that I build with clients initially.
Tim Ulbrich: So speaking of pain points then, you kind of mentioned that you start with some of the pain points, Dalton, I’m assuming just from our previous conversation, student loans is top of mind or at least close to the top. So talk us through a little bit about your student loan situation. And if I recall, both you and your wife have student loans, correct?
Dalton Fabian: Yeah. So we both do have student loans. My student loans, just alone, are a little bit over the national average for pharmacists. So I’m about at $190,000 in student loans. So that’s definitely a major financial priority.
Tim Ulbrich: What about for your wife?
Dalton Fabian: Hers are about $90,000.
Tim Ulbrich: OK. So I remember, I think when you and I talked, about $280,000 all in is what we were talking about.
Dalton Fabian: Yes.
Tim Ulbrich: Yes, OK. And remind me — I mean, one of the things I think we’re thinking of, especially as we’re in the context of the student loan course and trying to think through strategies of, is it loan forgiveness? Is it refinancing? Is it keeping them there and paying them off? Tell us a little bit about the interest rates of those loans.
Dalton Fabian: Sure. So I went through and kind of created a weighted interest rate, and so for that $190,000, it’s about 5.9% for my interest rate.
Tim Ulbrich: OK. 5.9%, and then for the $90,000, for your wife, do you have the same thing?
Dalton Fabian: Yeah, similar. Yep.
Tim Ulbrich: OK. So Tim Baker, obviously we’ve got one big variable, one big pain point on the table, about $280,000 in student loan debt, which I think as Dalton, as you mentioned, for you, that’s a little bit above the national average, but not too far off, so I’m guessing many people listening are facing a similar situation, especially if they’re in a relationship with somebody else for their shared student loan debt. What else, Tim Baker, what else are you thinking about besides student loans here when you think paint points?
Tim Baker: Well, I guess before we come off of the student loans, I would just ask the question — Dalton, and what’s your wife’s name, Dalton?
Dalton Fabian: Elizabeth.
Tim Baker: Elizabeth. So when you and Elizabeth talk about the student loans and what that looks like for your financial picture, I guess what are kind of the feelings that are centered around student loans? Is it confusion? Is it anxiety? Is there — you know, how do the loans make you feel?
Dalton Fabian: Sure. I mean, there’s a little bit of anxiety just with when you see that number, $280,000. But we both know that we have both have good careers and high income earning potential. So kind of anxious about the amount but know that with dedicated effort, that we can kind of control the student loan debt and pay it off quickly.
Tim Ulbrich: And Dalton, as a follow-up to that, you know, we’ve had people on this show that you know, have kind of gone all in over two or three years and really just minimalist lifestyle, paid off all their loans, and then obviously others — I took a little bit longer — and others say, ‘We’re going to get this done, and we’re going to get it done quickly. But we also potentially want to be balancing some other priorities that we’re thinking about in the future,’ whether that’s family priorities, home buying, etc., travel, vacations. You know, where do you and Elizabeth stand on that spectrum of wanting to get these paid off?
Dalton Fabian: We probably fit somewhere in the middle. So one of the kind of interesting things of being married during your P4 year is that you’re living on that one spouse’s income. And so kind of how we framed that the whole year was kind of let’s learn how to live on this income, and then once I would get a job, all of my income would be going towards student loans or other financial priorities. So that was kind of an interesting dynamic throughout rotations.
Tim Baker: When you talk about the other financial priorities, Dalton, is there other things on your balance sheet, like on the liability side. Do you have credit card debt or car debt or anything? What does that picture look like?
Dalton Fabian: So no credit card debt or car debt. The main other financial priority, which I’m sure we’ll talk about, is buying a home since we rent right now and we’re interested in buying a home at some point in the future.
Tim Baker: OK. So no credit card debt, no car debt. So are both cars paid for, then?
Dalton Fabian: Yes.
Tim Baker: OK. Winning, right? We talked about this on last week’s episode, so that’s great. So no credit card debt, no car debt. We talked about the student loan debt, we talked a little bit about kind of your feelings, philosophy toward paying that off. Other thing I’m typically thinking about, which we talked about before on this show is emergency fund. So you know, we’ve talked before about 3-6 months of expenses, roughly is what we’re shooting for. Where do you and Elizabeth stand in terms of your emergency fund?
Dalton Fabian: So, right now, we’re at about two months. And we definitely want to increase that amount, though, up to the 3-6 months.
Tim Ulbrich: So as we’re starting to formulate a list of goals, Tim Baker, I’m hearing a plan around student loan debt and paying that off. I’m hearing a plan around increasing or building the emergency fund. And then obviously, Dalton had also thrown in there some aspirations around home buying. So what else and other variables or questions are you thinking at this point?
Tim Baker: Well, I think the big one is I think the big elephant in the room is — we alluded to it a little bit — but the, you know, getting the Master’s and how are we going to — is that more student loans? Are we cash flowing that? What does that look like? That would be another big part of this that I would press Dalton on and say, ‘What does that look like for you? And what do you envision?’ So I guess Dalton, what does — in terms of paying for that part of your education, how do you envision that happening?
Dalton Fabian: Sure. So the goal is to pay for that program in cash. So aside from the prestige of Georgia Tech’s like computer science, data science program, that was also one of the considerations was that it’s a very affordable program. So the goal would be to pay for that one in cash.
Tim Ulbrich: That’s awesome. And what is that program roughly going to cost you?
Dalton Fabian: So over the whole program, which I’ll probably complete over two years, it’s $10,000.
Tim Ulbrich: That seems like a good deal.
Dalton Fabian: Much better than pharmacy school tuition.
Tim Ulbrich: Right? I know, I’m thinking of — I don’t know why I was thinking, oh it’s $30,000 or $40,000 to do that Master’s program, so cool. So $10,000, and you kind of also snuck in there the reality that one of the things that you guys have learned obviously while you’re — you got married while you were still in pharmacy school is that you’re living off of your wife’s income, so you kind of put yourself in a position that as you start thinking about achieving these goals, you’re going to try to do them largely on the back of your income, correct?
Dalton Fabian: Exactly.
Tim Ulbrich: OK. And your wife, remind me, is she an accountant? Do I have that right?
Dalton Fabian: Yes. She is.
Tim Ulbrich: Tim, what else? So we have kind of four goals that we’ve set up there — student loans, emergency fund, home buying, cash flowing the education here, the Master’s degree. What else are we trying to get in the pot? Or other questions we have.
Tim Baker: Yeah, I guess the other things would be just, you know, I would probably press about like what are some other things like in the future like major purchases. So it could be a car purchase, maybe having a baby or expanding your family could be some other things that are on the docket. But I mean, typically, typically — and we’re kind of doing this in a very much accelerated mindset, which is great because I think we can kind of compress a lot of the conversations that I have with clients is alright, you know, if we’re a good fit to work together, and we have a nice, clean snapshot of your balance sheet, kind of where your spending is and then we have a nice, clean snapshot of your goals. So obviously, the missing piece here would be to bring Elizabeth in, and similar to what we did in Episode 032 and 033 where it’s kind of find your why that I did with Tim and Jess Ulbrich, we would basically go through and say, what is important to you? What is your why? And then start to build kind of like a success timeline. So you know, over the next two years, if we were to blast forward to May 2020, and we look back over the last two years, what does success look like? Is that, you know, having the emergency fund completely funded? Is it having school paid off completely and not worrying about that? Are we being aggressive towards the loans? So you kind of start to build a picture of success and then begin to work our way through it. So that’s kind of what we do. So obviously, the big missing piece here is having Elizabeth’s voice here and having her be part of this. But ultimately, when we’re building a financial plan, you know, — and this is something that we talked about in Episode 026, which was baby stepping your financial plan, the two things that I look at first is what is the consumer debt look like? And it sounds like for you, Dalton and Elizabeth, that looks good. There’s no consumer debt. We’re not paying high credit card interest fees, we’re not paying that type of thing. And then secondarily, what does the emergency fund look like? And you know, you cited correctly, Dalton, that you know, typically, with a dual-income household, which you soon will be, right?
Dalton Fabian: Yes. Yep. While I’m doing the Master’s program, I’ll be working part-time as a pharmacist.
Tim Baker: OK. So as a dual-income household, you need three months of nondiscretionary monthly expenses, which basically means expenses that go out the door no matter if you work or not, so things like your rent or your mortgage, groceries, utilities, student loan payments, all that stuff needs to be calculated. So if you guys have $5,000 of that that goes out the door no matter what, times that by 3, you need a $15,000 emergency fund. If you’re a single income earner, it’s basically times that $5,000 by 6. You need a $30,000 emergency fund. Now, you can, you know, for me, and it depends on what the strategy that you take, I think there are different areas or shades of gray for that. Typically, you know, we can kind of talk through that in terms of what, you know, you need for your particular situation. The textbook basically says, 3-6 months. So if the credit card and the consumer debt looks good, and the emergency fund is in place, then we can start to look at how can we fund or how can we support the goals that you have of buying a home, paying for Georgia Tech and then have a good strategy in place for the student loans. So everything is kind of built on that foundation of, you know, basically funding your goals moving forward.
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Tim Ulbrich: So one thing I wanted to dive into a little bit deeper, Tim, is I mean I’d love to get even more specific about, you know, a potential plan of attack for Dalton on these. So he mentioned he’s got two of those three months, we obviously know the student loan figures. What we haven’t really addressed is, you know, one of the things I like to think about home buying is what would actually be that dollar amount or figure that is needed for down payment. And then how many months do we have until that goal is going to be realized? And then on the education, you mentioned $10,000. Dalton, when would actually those bills come due if the goal is to pay cash for those?
Dalton Fabian: So it would be at the start of the fall semester, spring semester, and then again the next year.
Tim Ulbrich: OK. So roughly $2,500 over each of those four installments?
Dalton Fabian: Right. Exactly.
Tim Ulbrich: OK. OK. So Tim, take us down into the weeds here, then. Like what would you be doing with Dalton or a client in terms of, you know, we’ve got the detail here that he’s going to be working part-time, so we obviously could get to a rough budget of OK, what is that dollar amount? And then how are we going to allocate it? You know, how would you walk through a client of OK, I’ve got these student loans, I’m going in the grace period, do I cue up the emergency fund? You know, do I start a sinking fund for home buying? Do I make sure I have that cash for that tuition bill? I mean, how do you help somebody actually prioritize those, No. 1, and then 2, what I’m thinking about is the processing you really helped Jess and I implement with the sinking funds and actually putting that on automation. Can you talk us through a little bit of that?
Tim Baker: Yeah, so part of it is again, it’s a conversation that we would have in that why meeting. So part of it is, once we kind of get through what are the things that are most important to Dalton and Elizabeth, then — and a lot of the themes are going to be very similar. And that’s one of the things that’s actually cool is that, you know, I think in our world, you know, it seems like everyone, you know, can be — there’s a lot of division there. But I think when we zero in on the things that are important to, you know, a family or an individual, a lot of it is life experience, it’s giving, it’s basically providing for people close to us. And I think once we kind of zero in on those things, then, you know, one of the things that we’ll talk about is kind of what you said, is OK, what are the major purchases that are kind of going to be up on the horizon? And what’s the timeline? So we talked about the $10,000 for the education, the home purchase. So one of the things I would say is, you know, what would you guys expect to pay for a home if you’re staying in Iowa? Are you doing this remotely, Dalton? Or are you actually going to Georgia Tech?
Dalton Fabian: Yeah, so this is an online program. That’s one of the reasons it’s $10,000.
Tim Baker: So we would kind of drill down into like what do you expect to pay for a home? What kind of down payment do you expect to provide? When’s the timeline for that? And basically back into that. And obviously, a big part of this is, you know, Dalton, when you’re working full-time, what do you expect to basically take home from that? And then if that number is, you know, if we say that number is $5,000 — and I’m just making a number up — basically our goal here would be to divide and allocate that $5,000 among the goals. And if you know, that kind of would be what this looks like. So if we look at your particular sets of buckets, you know, obviously I would say, you know, plussing up the emergency fund to three months I think would be the first thing that I would tackle. So get that, put that into high yield savings account, and then call it a day. Obviously, a near term goal would be let’s basically run the $2,500 into a savings account, get that money in place, and then you know, figure out how much we need to save per month to get to the next $2,500 push. So that would be part of this. And then, you know, in terms of — Dalton, what do you guys anticipate in terms of your home buying timeline? Is that something that’s going to happen next year, 2020? What do you guys anticipate for that?
Dalton Fabian: We’re expecting probably in the next five years or so to make that type of purchase, so looking at potentially reapplying for residencies next year, so that would be a couple year process. And that potentially lead us out of Iowa, but then planning on coming back to the Des Moines area. In terms of pricing — so out here in west Des Moines, the real estate is a little bit more expensive than other parts of the metro area, so probably housing would be $300,000-350,000.
Tim Baker: OK. Is the expectation to kind of come to the table with the 20% down, which would be about $70,000 if it’s a home for $350,000? Or what’s your thought there?
Dalton Fabian: Yeah, so our goal is definitely to do the 20% down to kind of avoid the PMI.
Tim Baker: OK. So obviously, so looking at that, one of the things that we would consider is do you look at with a five-year kind of timeline, you know, horizon, do you save that in, you know, a regular high-yield or do you actually go and, you know, open up a brokerage account and invest and you know, take some, you know, risk with the market and see if the market can return something a little bit better than 1.5%? So that’s obviously one of the questions, you know, or things that we would talk through is does it make sense to go that route? Or does it just make sense to, you know, take the 1.5% over the next five years and go with that? So that would be probably one of the things that we would talk about. And then finally — and again, this is going to figure out, we would have to determine where this fall on the timeline is, you know, what is the overall strategy with the student loans? Is it, you know, is it a forgiveness play? What does that look like for PSLF or non-PSLF? Is it an aggressive strategy where we start knocking through some of these goals and then we become more aggressive in the future so kind of a Phase One or a Phase Two plan? So for you guys, you know, when you guys — you said initially that you kind of fall somewhere in the middle. Are your loans currently in repayment now? Or no? Your wife’s.
Dalton Fabian: So my wife’s, yes. Hers have been in repayment since November 2017 because she went back to grad school to get her Master’s.
Tim Baker: OK. And then is she currently in like a standard plan? Or one of the income-driven plans?
Dalton Fabian: She’s in the income-driven plan.
Tim Baker: Do you know which one she’s in?
Dalton Fabian: Pay, I believe.
Tim Baker: So and then typically, those are, you know, pay or revised pay-as-you-earn is going to be typically the two income-driven that we like, just depending on what the strategy is. So we would basically do a, you know, kind of a student loan analysis and figure out, basically match your strategy with the goals that you’re trying to achieve. So that could be anywhere from keeping the loans in the federal system and driving down your adjusted gross income just so you can have, you know, the least amount paid toward the loans. Does she work for like the government or a 501c3 or anything like that?
Dalton Fabian: No, she does not.
Tim Baker: So do you guys anticipate, you know, seeking forgiveness or anything in the future?
Dalton Fabian: No.
Tim Baker: So if that were the case, then I would probably look at probably staying in — and similar with you, Dalton, you know, as you get through your grace period, enrolling in a income-driven plan and probably drive the payment down as much as possible. And for your loans, the income-driven plan, if you’re at, for $190,000, your loans are probably going to have a payment around $900, $900+, so that would probably be part of the equation. And then what we would do is stick with that until some of these other goals are funded and then with the potential to pivot out and be more aggressive, either through a refinance or something like that in the future. So you know, given your situation — and we did a few case studies with this in the student loan course, it would probably be a two- or a three-phase where we would say, OK, between now, you know, year, for Years 1 and 2, as you go through school or if residency is in the future, stay in this particular repayment plan. And then Year 4 or 5, let’s look if it makes sense to refinance and save and maybe be a little bit more aggressive on the loans at that point in time. So that’s essentially where we would look for, you know, funding those particular goals.
Tim Ulbrich: I would agree. And just to build on that, Tim, especially you mentioned the residency piece, and since there’s kind of these variables in play that he may end up going back and doing residency, which may mean, Dalton, a move right? Potentially that has other variables of moving expenses or costs or unknown variables. I think longer term, you know, depending on the situation, a refinance may be the play. But obviously giving yourself that flexibility to see how that shakes out, knowing that you can go into an income-driven plan, pay extra, pay down the loans and then seeing what happens in the next year or so, especially as you navigate some of the grad school options and whatnot. So Tim, it’s kind of taking me back to the, you know, at the end of Module 1 and into Module 2 of the course where we come up with this idea of finding your number. How much can you put towards your loans each and every month? And then you’re really just executing the plan. And as I hear Dalton’s storyline, kind of the way I’m starting to think through this obviously, and we want to get Elizabeth’s input as well, is that they’ve identified his income is kind of going to be the portion for these various goals. So what that dollar amount is, and then you start dividing it up between, OK, we’re going to finish off the emergency fund, we’re going to save for the education, you know, maybe x dollars per month over five years goes toward a down payment, and then we’ve got this chunk of money that’s available and ready to go towards student loans. And then that repayment strategy may pivot as income changes and residency does or does not come into play. So talk through, just briefly, I felt like it was a huge win for Jess and I — we, Dalton is getting into this point 10 years sooner than I did. So Dalton, No. 1, that’s awesome. But you helped Jess and I get to this point, Tim, where we kind of were able to finally articulate what these things were, put a dollar amount to them, and then you really helped us establish this idea of sinking and sort of automating it. Can you talk through that for a minute?
Tim Baker: Yeah, so, I mean — and I think that’s really the missing piece here is not having Elizabeth and her input. I think ultimately, I don’t really do anything special except ask the question. And a lot of us, either we feel uncomfortable, you know, talking to our partner about this or it’s just not a conversation that is naturally brought up. It’s kind of the same thing of like, you know, estate planning or like who’s going to take care of our kids if something were to happen to us? Or how much life insurance? It’s just not something that comes up in the natural course of conversation. So I think for me is to ask good questions and really get out of the way. But, you know, I think once we kind of identify those buckets, I think for a lot of this is to identify or try to put a number to it in terms of what is the most important thing? So if it’s more important to be in a home in five years versus being aggressive on the student loans, then you know, if I’m doing some quick napkin math, if you’re student loan payment for at least Dalton, if I look at yours, it’s say $900, and then we know that it’s going to go out every month, and then if you want to save $70,000, which is 20% of $350,000 in five years, if we don’t account for any type of interest at all, that’s basically $1,167. So if you combine that with your $900 payment, that’s $2,066. So depending on what your pay looks like, that’s where the conversation will begin and end. Now, essentially, I probably would say, start with the emergency fund. Get that plussed up, and then basically turn that off. But when we talk about basically setting up the emergency fund and sinking funds, what I like about having multiple sinking funds is although money — and we talked about this term before — money is fungable, meaning it’s interchangeable. So we look at money differently depending on like the sources. So if I find $20 in my couch, I’m probably more likely to spend that money on something frivolous, you know, and similar to like a bonus that we get versus if that is something that’s just income. So although money is interchangeable, for clients that I see have the best success is be able to say, OK. This is my emergency fund. It’s labeled emergency fund. I have $15,000 or $20,000, whatever it is. If something happens, if it hits the fan, I have that money. But then I think it’s also equally powerful, whether it’s an investment account or it’s a high-yield savings account, a sinking fund, that it says, this is Dalton and Elizabeth’s first home purchase fund. And every month when I log in, I can see, OK, that account is worth $20,000, $25,000, $30,000. It’s the same thing with, you know, your cash, the cash for your home. So we probably would set up an education fund that would probably just be a sinking fund for that that every quarter, we know that we need $2,500. So we’ll basically infuse the cash, pay it out of that fund, and then basically backfill that with the $2,500. And then when that goes away in two years, then we have that money to basically either throw it towards the house or whatever. So I like the idea of basically having an allocation sheet towards these savings to say, OK. What is the target? What’s the target amount that we need? Where — how much is the monthly deferral? So is that $250 a month of the $3,000 worth of income? And basically, work through it very systematically like that because I think if you’re kind of willy-nilly, you don’t have set figures, then the money gets lost. You know, if you say, oh, just throw it into a sinking fund, and that sinking fund is partly for education, partly for an emergency fund, partly for the down payment for a house, then we can’t really see straight lines. So that would probably — we talk about setting up buckets, those would be the buckets that we would set up, and we would basically just try to figure out how much to fill that, you know, every month. And that’s the purpose of the sinking fund.
Tim Ulbrich: Yeah, what I love about that too is just hearing you talk and thinking about the work you’ve done with Jess and I, I mean, part of the plan is prioritizing and articulating goals, but then the whole other part of this I’m thinking about even looking at Dalton’s situation, is helping execute the plan and the accountability of the plan. And I think there’s so much power and value in having somebody help you through that. And Dalton, I just love that you’re thinking about this, that you and your wife are talking about it. I love that you’ve articulated these goals of tuning up the emergency fund, paying cash for school. You know kind of what you’re looking at home buying, you obviously have inventoried your loans, so you know the details. And I think for those that are listening that maybe aren’t at that point, that’s really step No. 1 is kind of knowing what you’ve got. Obviously, debt-wise, knowing your current financial position and then getting organized with what those goals are and then obviously, at that point, you can start to prioritize and put a plan of action around them. So Dalton, really appreciate you coming on the show and appreciate you being willing to share your story. And I think many others listening are going to value from hearing the position you’re in and just hearing the thought process of how we went about this episode and asking the questions that we did. So thank you so much for coming on today’s episode. We appreciate it.
Dalton Fabian: Thank you for having me.
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