Month: July 2018

On Episode 057 of the Your Financial Pharmacist Podcast, Tim Ulbrich gets practical to talk about why automation matters when it comes to achieving your financial goals and specific ways you can automate your own financial plan. We will hear from the YFP Community about different ways that they automate their financial plan.

Mentioned on the Show

• YFP Facebook Group
• YFP Episode 008: Developing a Millionaire Mindset
• I Will Teach You To Be Rich by Ramit Sethi
• YFP Episode 048: Mo’ Money, Mo’ Problems: Making the Financial Transition to New Practitioner Life
• YFP Blog
• YFP Podcast
• YFP Episode 026: Baby Stepping Your Financial Plan – The 2 Things to Focus On First
• YFP Budget Template
• 5 Steps to Creating Your Best Budget
• Script Financial
• Public Service Loan Forgiveness Program
• Student Loan Refinancing Resources
• Ally Financial Inc.
• YFP Email

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 057 of the Your Financial Pharmacist podcast. Not going to lie, fired up about this episode. When it comes to automating your financial plan, it’s so obvious, so effective, so easy to implement, but yet so many people are not optimizing this to achieve their own financial goals, and that would be myself included. I’ve made some recent changes to my own financial that I’m excited to share with you in this episode when it comes to automation. Whether it’s student loans, retirement, college savings, vacation, maybe it’s saving for a down payment on a home, setting goals and carving out money in the budget and automating those goals is powerful. And I know that I’m not alone that when I say that for some time, I was feeling that when you have multiple financial priorities that are swirling around, that can easily become overwhelming, and automation helps to put these goals into action and takes the stress out of wondering whether or not they’re actually going to become reality.

So let’s jump in as we’re going to talk about different ways of automating your financial plan. And as I was preparing for this episode, I couldn’t help but think back to Episode 008, Developing a Millionaire Mindset by YFP team member Tim Church, because when I think about automation, I think that’s a key piece of developing a millionaire mindset. For those of you that have not read the book, “I Will Teach You To Be Rich” by Ramit Sethi, I’ll link to it in the show notes. It’s just a great, quick, easy read, but one of the things he talks about in that book at great extent is this idea of automation and the power of automation and taking the decision-making out of the hands and taking some of the behavioral components where we tend to make mistakes and putting in processes to help to minimize those mistakes.

So before we dig into the weeds to talk step by step about exactly how to automate your own financial goals, let’s talk about why in the world you’d want to set up an automatic process for your finances in the first place. You know, the first thing that comes to mind — we’ve talked a lot about this on the podcast, throughout various episodes leading up to here now in Episode 057, and we’ve mentioned several times that so much of personal finance is behavioral decision-making. You know, I once heard about four or five years ago, about 80% of this whole topic of personal finance comes down to behavior and about 20% is really digging into the math and the numbers and the strategy. You know, as I’ve made more mistakes, had more successes along the way that on both sides of that, I would argue 80% may not be enough. That might actually be more like 90%.

And for me, when I think about automation, I think about out-of-sight, out-of-mind because I know at the end of the day, if all of that money is just sitting in my checking account and I haven’t automated it towards the goals that I’m trying to achieve, whether that would be getting out of credit card debt, whether that would be paying down student loans fast or retirement, college savings, vacation, home buying, repairs, whatever, I know that human nature and behavior is that I’m going to spend that money — I’m going to hope that something’s left over, but more often than not, nothing’s going to be left over, and I’m going to spend that money. And when I think about automating a financial plan, I think about intentionality. I think about paying yourself first and making sure you’re then really budgeting around the rest of it rather than hoping there’s something left over at the end of the month. So first off for me is that human behavior says that we’re better off taking the decisions out of our hand because we’re prone to making mistakes when it comes to finances. You know, one of the things that gets personal here for me is I think about my own retirement savings, I’m in the state teachers’ retirement system here in Ohio, so many of you know I work as a faculty member of Northeast Ohio Medical University College of Pharmacy, been here for about nine years, and in the state teachers’ retirement system, we essentially are forced to put in a percentage of our paycheck each and every month. And that number is actually I think now approaching 14% that we are forced, no decision in our hands, to put that money into retirement. We then also have an employer match, but as I think about where I am today, nine years later with my retirement assets, I think the only that is possible is because that decision was taken out of my hands. I cannot say that I would have had the discipline, that I would have prioritized putting 15+% of my paycheck each and every month into retirement, so I think that’s a good example as we talk about areas for automation, retirement is certainly one. But again, end of the day, if that money were in my checking account and that decision wasn’t made for me, I probably wouldn’t have achieved the success I have so far as it relates to retirement saving.

And so I think that’s a humbling moment to think that the only reason, the only reason my retirement is on track and ahead of progress is because that decision was put on automatic, because that decision was taken out of my hands. Now, we know that another reason automation is important, besides a behavioral decision processes associated with it, is that for many listening, whether you’re a student, if you’re a resident, maybe you’re somebody who’s transitioned out within the last five or 10 years, regardless of where you are in that spectrum, we know that you’re facing lots of different financial goals that you’re trying to juggle. You know, in Episode 048 we interviewed Dalton Fabian in the episode called Mo’ Money Mo’ Problems: Making the Financial Transition Into New Practitioner Life, and what stuck out to me about that episode with Dalton is he, like many others transitioning from student into new practitioner life, have all of these things that are coming at you at one time, student loans, emergency fund, retirement, down payment for a home, maybe kids’ college savings, lots of different things that are coming. And how do you strategically prioritize those and achieve those? And I think as we’ll talk about here in a minute, I’ll share some examples from those within our Facebook group, having a plan in place with a budget that’s executing those and then automating that plan each and every month is the key to success there.

So let me give you some quotes from those YFP members in our Facebook group, and this is what they had to say about automation in their own financial plan.

So Brianne from the YFP Facebook group said that “I automate as much as I possibly can, including savings, on the first of the month, all fixed bills and student loans as well. To me, that makes it easier to budget because I only ‘feel’ like I have whatever is left over rather than my whole paycheck.” I think there’s such wisdom there from the sense that when you pay yourself first, first of the month, you automate paying yourself towards your goals, all of a sudden, you get used to living on the rest rather than living up to your full income and hoping you can fund your goals after the fact.

YFP team member Tim Church says, “Love automating as much as possible — bills, everything, all bills, student loan payments, HSA contributions and TSP contributions.” That’s his retirement component with the VA. So when it comes to automation for Tim Church, he’s automating as much as possible.

Matt from the Facebook group says that, “I automate most of it but still need help for the leftover. I auto-deposit 529 college savings accounts every 15 days, one for each kid, auto-deduct 401k every check, have a separate target date fund that comes out once a month. I pay my bills as soon as I get them from the mailbox because I like to actually see the balances, which is the only reason they aren’t on autopay.” And I think that’s an interesting point, Matt, that maybe some may say, you know what, I like to not necessarily automate all of my bills — maybe you do, maybe you don’t — but for Matt, he looks at that and says, you know what, if I get my bill, whether it’s water, sewer, cell phone, whatever it be, that he likes to see the balance in the process of it to make sure that everything is accurate.

Brian says that “We automate 401k contributions and savings account for sinking funds.” We’ll talk about sinking funds a little bit upcoming in this episode. “However, we don’t currently automate 529 contributions or IRA contributions. Still not sure which approach is better, but I do find that not automating everything actually requires you to think about it every month as opposed to a set-it-and-forget-it mindset. I think there may be some benefit to that, depending on how you’re wired.” Building off what Matt said, Brian says, you know what, for some things, set-it-and-forget-it is great when you think about 401k contributions, 529, IRA contributions, but for some other things, maybe not so much if you like to have that reminder of exactly what you’re doing.

And Brandon, the last one from our YFP Facebook group, says so when we don’t see it, the importance for him of automation is that “When we don’t see it in the checking, then we don’t spend it.” And Jess and I have noticed the same exact thing. First day of the month comes, auto-withdraw to a separate savings account, different funds, I’ll talk about those here in a minute, boom. Whatever’s left over, that becomes our monthly spending in our budget. But we have already funded our goals because we know the reality that if it sits in our checking account, we’re going to end up spending it. So if it sits in our checking account, we’re going to end up spending it.

So let’s now move into where exactly to get started with this process. We’ve heard from those in the YFP Facebook group. And if you’re not yet a part of that community, you’re missing out — great conversations, come on over to the YFP Facebook group, we’d love to have you a part of that group and a part of the conversation.

So where do you get started? For me, it comes down to two major things: goal-setting and budgeting. Both of which we’ve talked about in the YFP podcast as well on the YFP blog, and if you’ve heard us speak at a live event, you know for us, goal-setting and budgeting are absolutely critical to having a solid financial plan. Now, let’s take a step — and I think goal-setting can be an overwhelming process, but just like you were taught in pharmacy school, when it comes to setting your financial goals, they have to specific. They have to be measurable. They have to be action-oriented. They have to be realistic. They have to be time-oriented. You’ve heard of SMART goals before, right? And they also, in our opinion, they have to have a “why” behind them. What is the motivation for why you’re going to achieve that goal? Now, you all know as you’re working with patients, maybe you’re working with a diabetic patient, trying to get them to make a lifestyle change, achieve an A1C goal, whatever you’re doing, it’s the same thing when we talk about our financial plan. We have to put behavioral pieces, we have to make conscious choices, and we have to have those motivations, specifics, that measurable component, the time-oriented piece, we’re going to have a higher likelihood of achieving that goal. So whether it’s helping a patient with their diabetes or helping yourself with your own financial plan, goal-setting is a critical part. And the other piece of this, which I’ll mention here in a minute, is that when you work on your monthly budget, your monthly budget is simply an execution of your goals.

So for those of you that are listening to this — and I know many of you are sitting here right now, thinking, I feel so overwhelmed with all of these different competing priorities that are out there. I’ve mentioned several of them already. We’ve talked about emergency funds before, we’ve talked about getting credit card paid off before, we’ve talked about making sure you have a solid retirement savings plan in place. What about your student loans and kids college? And the list goes on and on. And you have to first put all of those things on the table and say, OK, I have all of these goals, all of these competing priorities, which of these are the ones that I’m going to go after first? Maybe you’re somebody that says, you know, I’m going to go all in on this one goal, and then I’m going to move to the next one because I know that if I tried to focus on many different things, I tend to get overwhelmed and really just end up spinning my wheels. So some of you may say, you know what, I’ve got credit card debt, and I’m going to go all in on my credit card, knock that out, and then I’m going to move on to something else. Now, others of you listening may say, you know what, I think I can handle more than one goal at the same time, so now I need to look at the top two or three or four goals to make sure that I’m achieving these things in the right order. And I would reference you back to Episode 026, we talked about baby stepping into a financial plan, specifically around emergency funds and credit card debt as the two areas that you want to — more often than not — focus on first. So if you’re hearing this thinking about, I don’t even know where to get started, go back to Episode 026, Baby Stepping into a Financial Plan, I think that will help you get along the path to coming up with how you could prioritize these goals.

So you lay out all of the goals on your paper, and you start to prioritize them. And I literally like to put a number by them. So maybe it’s credit card debt, 1. Emergency fund, 2. Student loans, 3. Whatever the goals that you’re working on. Then you move into the budgeting process. Now, I’m not going to go into detail here on this episode about the budgeting process because we’ve chronicled it before on previous episodes. I’d point you — we have a great budgeting resource at YourFinancialPharmacist.com/budget. Again, that’s YourFinancialPharmacist.com/budget where we have a template, an Excel template, that will walk you through step-by-step how to create a zero-based budget to achieve those goals that we just discussed. I also would reference you to, we have a blog post out there at YourFinancialPharmacist.com, “The Five Steps to Creating Your Best Budget.” So both of those resources we’ll link to those in the show notes, I think will be a great starting point to make sure you can execute your goals through that monthly zero-based budgeting process. Now, if you take the time to sit down and do a zero-based budget and really work through this process, what you will come to at the end of that budgeting process is you’ll determine your total take-home pay, you’ll determine your necessary expenses, you’ll determine your discretionary or nice-to-have expenses, and then you’ll come up with a number that is determined to be your disposable income. Essentially, what amount of money do you have left over each and every month, each and every pay period, that you can allocate towards your financial goal. So if we did the goal-setting process and then we worked through the budgeting process, you may say, OK, at the end of the month, I’ve got $1,000 left over after I pay all my necessary and discretionary expenses. I’ve got $1,000 left over, and here are the three goals that I want to work on. Boom. That’s where the automation begins to happen. So if you were to say, you know what, I’ve got $1,000 left over, and I want to start doing two things. I want to pay off my credit card debt, and I want to build an emergency fund. Maybe you take that $1,000, auto-withdraw the first of the month $500 goes to your credit card bill as one example, $500 goes into a long-term savings account to save for an emergency fund. That decision is now out of your hands, you’ve identified your goals, you’ve set the budget, and now your goals are on automatic. And that provides an incredible amount of peace and confidence when it comes to your financial plan.

Sponsor: So two big pieces to get started here: setting those goals and then getting that budgeting piece in place so you know what that disposable income is, and you know exactly where you’re going to put that money. Now, once we have those two pieces in place, we can then begin to think about the actual processes for automation, and we’ll talk more specifically about where you can put the money in different areas when it comes to automating your financial plan.

I want to take a brief moment before we jump into the second part of the show and to highlight today’s sponsor of the Your Financial Pharmacist podcast, which is Script Financial. Now, you’ve heard us talk about Script Financial before on the show. YFP team member Tim Baker, who’s also a certified fee-only financial planner is owner of Script Financial. Now, Script Financial comes with my highest recommendation. Jess and I use Tim Baker and his services through Script Financial, and I can advocate for the planning services that he provides and the value of fee-only financial planning advice, meaning that when I’m paying Tim for his services, I am paying him directly for his advice and to help Jess and I with our financial plan. I’m not paying him for commissions, I am not paying him for products or services that may ultimately cloud or bias the advice that he’s giving me. So Script Financial specifically works with pharmacy clients. So if you’re somebody who’s overwhelmed with student loans or maybe you’re confused about how to invest and adequately save for retirement, or maybe you’re frustrated with just the overall progress of your financial plan, I would highly recommend Tim Baker and the services that he’s offering over at Script Financial. You can learn more today by going over to ScriptFinancial.com. Again, that’s ScriptFinancial.com.

Tim Ulbrich: OK, welcome back. In the second half of this episode, we’re going to talk about the areas specifically that you can consider for automation, which builds upon the discussion we talked about in the first half of the episode of the goals that you’re setting. And then I will walk you through step-by-step exactly how I think you can set up your automation of your financial plan and more specifically, I’ll show you exactly what Jess and I are doing with our own financial plan when it comes to automation.

So let’s talk about the different areas that you can set up for automation. And lots of these came from personal experience, from Tim and Tim — I know that they do also, YFP team members Tim Baker and Tim Church, as well as what I’ve heard from other pharmacists and those within the YFP Facebook group. Now, one we already mentioned in the beginning comments from the YFP Facebook group, areas of automation of course would be your monthly bills. So this, for me, is more out of convenience than anything else, so I don’t look at automating my monthly bills as being a point of, say, strategy as I do that it’s one less thing that I need to work on in terms of writing a check, making sure that that’s all set and ready to go. And that’s automatically happening each and every month.

Now, to build on what Matt and Brian said in the earlier comments, I, too, am someone that does not automate all of my monthly bills. And the reason is when it comes to those bills that I know fluctuate — water, for example, could be cell phone usage if there’s potentially overage charges — any bill that I know may have variance based on usage, I like to see that and track that and to be able to identify any discrepancies that may occur. Now, if I have bills that I know are the same each and every month and that’s not necessarily going to change, then for me, automation on bills really becomes a point of convenience. So area No.1, of course, would be bills.

Area No. 2 is student loans. And one of the things that Brandon said in our Facebook group is that automation is a must when it comes to student loans if you’re going for the loan forgiveness program. There, he’s referring to the Public Service Loan Forgiveness Program. That way, you are for sure making on-time payments. And Brandon, I think that’s great wisdom there because when it comes to Public Service Loan Forgiveness — and really, in my opinion, any student loan payment — you certainly do not want to have delayed payments for a series of reasons. One, if you’re in Public Service Loan Forgiveness, those then will not be qualifying payments. And then otherwise, you just don’t want delayed payments to be impacting your credit score, your credit rating in any significant way. So I think automation with student loans is great. That’s one where I’m thinking a little bit more about strategy, making sure that I have a plan, I’ve worked through my goals, I’ve worked through the budget, I’ve determined that this much each and every month, I can put toward my student loans. Boom. I’m putting that on automation, and I’m paying my loan servicing company on-time, right out of my paycheck, first thing before I hope that I have that money left over at the end of the month. The other thing I think that’s important to note with student loans and automation is that when it comes to refinancing your student loans, you’ll notice that the various quotes that you’ll get from the refinance lenders, those private companies, is they will typically give you a quote with the assumption that they’re giving you some discount to automate those payments, to set up the autopay on that. So if you do not automate those payments, then you may not get that quote that they’re advertising. So if you need more information on refinancing or have questions about what I just said there, head on over to YourFinancialPharmacist.com/refinance, we have a great page, great resources about where to get started with refinancing, who it’s for, who it’s not for, and if you’re ready to get started, companies that you can pull quotes from that we recommend and that our YFP community gets cash bonuses for.

So area No. 1 was bills, area No. 2 was student loans, area No. 3, for me, is college savings. So here, I’m thinking about 529 plans. And similar to retirement savings, which would be the fourth area, whether that’s 401k’s, 403b’s, Roth IRAs, whatever that would be, now, we’re really talking about automating the savings for the future. So you may look and say, OK, I’ve got three children. I’ve determined that I really want to start saving for kids’ college, and I’m going to start at $50 a month, $100 a month, $150 bucks a month. And you can set up a 529 plan where not only does it auto-withdraw the money each and every month, which then also gives you a deduction on your state income taxes, but it also then will auto-determine where your money’s going in terms of the allocation. So example, for my Ohio 529 plan for my kids, I have I think it’s $100-150 per month that goes toward each kid. And then from there, that $100 or $150 is being distributed in five different investing funds that I have set up automatically. So not only is the money going into the account, but then it’s automatically being invested in those accounts. When it comes to retirement savings, Brandon from the Facebook group says, “I have my retirement set to take out 15% with the employer matching 5%. And what we know from some of the studies that are out there is that the average automatic deferral rate for an employee is only about 6%. And we talked on previous episodes about probably needing closer to 15-20%, depending on your individual situation, needing 15-20% over the course of your career to achieve your long-term savings goals. So 6% is probably not going to cut it. And I think what Brandon’s doing with 15% automatic withdrawal, out-of-sight, out-of-mind, employer matching 5%, obviously then he’s getting closer to that 20% or is getting to that 20% goal. And I think this is an important one because you think about the evolution of retirement savings over time. What used to be more of a traditional pension model is now almost — for most listening — is probably 100% on your back in terms of the responsibility, whether it’s a 401k, a 403b, a Roth IRA, some combination thereof. We have to take the ownership and the work, and I think automation of retirement savings is a great one.

Now, the last one that I want to talk about, which I think is a really tangible for the listeners to get started today is setting up a series of what we call sinking funds. Now, these are established based on the set of goals that you have. So examples of sinking funds that I would throw out there could be an emergency fund, maybe it’s vacation, it could be setting up a sinking fund for purchasing a car or a car repair fund. It could be a gifts fun, so whether that’s birthday gifts throughout the year, Mother’s Day, Father’s Day, Christmas gifts, etc. It could be a sinking fund for a home down payment. Maybe it’s a separate sinking fund for home repairs. Maybe if you’re somebody who has significant medical expenses, you have a separate sinking fund for medical expenses. So what I’m trying to drive home here, the point with sinking funds, is that once you determine the areas and the priorities, instead of having all of this money in one lump sum in a checking or savings account, you start to separate out these funds into separate accounts, and you name them for specifically the goal that you’re trying to achieve: emergency fund, vacation, car, gifts, down payment, home repairs, medical expenses, etc. And what we know when it comes to behavioral finance is that once you name a fund something, you’re more likely to achieve the goal because it’s not in a general pot or pool of money that you lose track of in terms of where it’s going, and then obviously, you’re more likely to spend that money.

So what does this actually look like? And I mentioned before that Tim Baker, owner of Script Financial, helped Jess and I get this set up just a few months. We actually have several of these funds that are set up with an Ally, Ally.com, which is one example that you can use, many others you could do, even with your own banking institution. And so once we set a prioritized list of our goals with the dollar amounts, which, of course, came from the goal setting and the budgeting process, we then — after the budgeting process — we came up with and said, OK, each and every month, we have this total amount of discretionary, disposable income that we can assign to our goals. We then listed our goals out on paper and then based on that total dollar amount, we then said, OK, each and every month, we’re going to put x dollars toward giving, x dollars toward gifts, x dollars toward vacation, x dollars toward home maintenance. And so then what happens is each and every month on the first of the month, those dollar amounts are auto-withdrawn from our paycheck, and the rest of our income becomes what we spend for the rest of the month on groceries and all other expenses for the month out of our day-to-day checking.

So for me, there’s four basic steps here. Is No. 1, Step No. 1 is you have to have a list of prioritized goals with dollar amounts attached to them. No. 2 is you have to be able to know what that disposable income is that you have available each and every month so you can assign those dollar amounts to the goals that you’ve listed out. No. 3 is you then need to create and set up a long-term savings sinking funds account. So for us, what this looked like and it only took about 10-15 minutes for us to set this up is if I log into my Ally.com account, I have an interest checking account, which is basically the base account that we use where we need to spend money out of and then have a debit card if I need to use it. And then I have a series of separate sub-accounts. I have an emergency fund account, I have a giving account, I have a gifts account, a vacation account, and then we have a home maintenance account. And then Step No. 4 is you put those on auto-withdraw. So once you identify the list of goals with the dollar amounts, once you set up the separate sinking funds and you know exactly how much you’re going to put towards those, then you can set up the auto-withdraw so your paycheck into your checking account, once it hits your checking account, it’s an auto-withdrawal into your long-term sinking funds and those sinking accounts.

So that’s the process that we use to put our financial plan on automation, and as I began the episode and talked about why, for us, it’s about the intentionality. It’s about knowing that when it comes — when push comes to shove, if that money’s just sitting in our checking account, more likely than not going to spend it. So it puts our financial goals on automatic, and it allows us to be on the path towards achieving those goals each and every month.

One last point I would make here is that for me, the importance here of automation also comes to an important point of having accountability throughout this process, whether that’s a spouse or significant other, whether that’s a friend, whether that’s a financial planner, somebody that can keep you accountable each and every month, each and every quarter, whatever it be, to check in and say, Hey, we said these were the goals. What’s changed? What’s different? How is the progress going in terms of achieving those goals?

So I hope this episode has been hopefully a moment of inspiration, maybe even empowerment to say, think about your goals, what are those goals, how much do you want to put toward those goals each and every month, what’s the prioritization of those goals? And then setting up the sinking fund accounts to automate those goals each and every month.

So as always, thank you so much for joining us on today’s episode of the Your Financial Pharmacist podcast. We appreciate you listening each and every week, and as always, we would welcome any ideas that you have for future episodes. So you can shoot us an email at [email protected] or jump on over to the YFP Facebook group, and we would love to hear your ideas and input for future episodes of the Your Financial Pharmacist podcast. That’s for today’s episode. Have a great rest of your week.

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On Episode 055 of the Your Financial Pharmacist Podcast, Tim Baker and I talk about the variety of ways in which financial planners get paid and why you should care about how a financial planner charges (Hint: It can impact the quality of the advice that you are getting).

Mentioned on the Show

• What to Look For in a Financial Planner and Nuts & Bolts Guide to Hiring a Financial Planner
• Script Financial
• YFP Episode 054: Why Fee-Only Financial Planning Matters
• YFP Episode 049: Ask Tim & Tim: Should I Pay Off My House Early or Invest?
• Unshakeable: Your Financial Freedom Playbook by Tony Robbins
• YFP Blog: Are You Making This $1 Million Dollar Mistake?
• How a 1% Fee Could Cost Millennials $590,000 in Retirement Savings
• Bankrate Simple Savings Calculator
• YFP Episode 032: Find Your Why (Part 1) – 3 Life Planning Questions
• YFP Episode 033: Find Your Why (Part 2) – The Path to Success
• YFP Facebook Group

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 055 of the Your Financial Pharmacist podcast. Excited to be here again with the one and only Tim Baker. Tim, did you see the love Jess was giving you on the Facebook page today? I mean, seriously.

Tim Baker: I know. It’s pretty awesome. Like I said, I finally got to meet Jess for the first time in California when we went out to speak to USC, and it was awesome. And yeah, thanks, Jess, for the shoutout. I know you’re an avid listener of the podcast because I think you guys are en route to puppy-ville, that was the bet. So yeah, it was pretty awesome.

Tim Ulbrich: Yeah, puppy is coming here in a few weeks. So we were just talking last night, actually, about getting excited for puppy to come. And last time I had a real puppy was back growing up, I had a golden retriever. That’s what we’re getting this time, so excited. I think we’re probably underestimating work related to puppy, but so be it, right? You can’t be rational in these situations. Well, what we’re going to do here in Episode 055, we’re going to build off of last week’s episode where you and I talked about your old financial planning firm that you worked for and why you made the jump in 2016 to start Script Financial, obviously a fee-only financial plan for pharmacists. Why fee-only financial planning matters is a lot of what we talked about last time, and so if you haven’t yet done so as a listener, check out Episode 054 because I think that’s a great precursor for what we’re going to talk about today in our conversation here as well. So Tim, why don’t we just bridge that episode and this episode and kick it off with the idea of why somebody should care about how a financial planner charges. And we talked a little bit on the episode last week of, you know, often it can feel like smoke and mirrors, and there’s so many different models that are out there, and we’ll talk through those on this episode as well. But at the end of the day, why should our listeners care about how a financial planner is charging them and how it may impact the advice they’re receiving?

Tim Baker: Yeah, well I think what’s surprising to a lot of people is that majority of advisors out there can put their own interests ahead of their client’s, which — you know, like you said, as someone in healthcare and you’re working with patients, you would think that inherently, that position of trust whether you’re someone in medicine or an attorney or even a financial planner that obviously you’re looking at a very intimate part of someone’s life, that they would be legally bound to act in their client’s best interest. And what a lot of people don’t know is that that’s not true. There was a lot of noise — and it would be noise for financial nerds like me that happened recently with the Department of Labor where they basically wanted to push through this fiduciary role, which basically would force advisors that manage retirement assets — because that’s their jurisdiction is like 401k’s and IRAs — it would force advisors acting in that capacity or advising in that capacity to follow that fiduciary, that best interest standard of care. And a lot of people just don’t know that that’s not — and to be honest, like when I said last episode about not knowing that I wasn’t in the best model, I thought that the suitability standard of care was the best thing. And it’s not. So I think oftentimes, you know, you have to follow the money. And there’s a lot of conflict out there. We referenced that the last time we had done an episode was when we answered Michael’s question — you know, before last episode. His advisor — not that this is right or wrong, but I think there’s a little smoke there — wanted him to basically take the equity in his house, lower his payment and refinance and really invest that. Well, the problem with that is is that because of the way advisors get paid, investments stir the drink in a lot of ways. So you know, most advisors are not going to care about the credit card debt that you have or the fact that you have student debt or that you want to invest in things other than the stock market. They’re really going to care about how can I look at, you know, Tim Ulbrich, the $300,000 or $400,000 that you have in assets and how can I get in, how can I position it so I can benefit — not necessarily benefit — but get them where I can make a profitable business out of working with this particular client. And that, again, that’s not to say that everyone is like that. But I, even myself, you know, when I would look at clients in my own firm, I was like, OK, they have no real assets. They have some cashflow, so maybe I could put them in A Share mutual fund that would pay me 5 — so obviously, like inherently, I want to do what’s in the best interest of my client. But at the same time, I’m like, I also need to earn a living. And for me, it’s like, why even have a system that does that? And I think separating — like going back to that separating the scale of product with the advice that’s given — that has to be the way you go because anything else, human nature’s going to take over. Even if I’m doing well, it’s like, well, we want to add on to our kitchen or whatever. So maybe I sell this annuity to a client that pays me that 8 percent. And I think these are just things that advisors don’t really want to admit. It’s just kind of something that we talk about in closed circles, but it’s human nature, you know? It’s just how it is. And to me, if you can separate the sale of those products with the advice that you give, to me, you’re setting yourself up for success both on the advisor end and the client end, in my opinion.

Tim Ulbrich: Yeah, I agree wholeheartedly. And to me, that’s the whole point of why this fee-only thing matters. I mean, why take on those extra biases if they don’t have to be there?

Tim Baker: Right.

Tim Ulbrich: And you said last time, and you articulated well, there is no such thing as bias-free advice. But why not do everything you can to minimize those biases? If I’m a consumer, I really want somebody helping me to look at my best interests across my entire financial plan — not necessarily pick out one part of it because maybe the pricing model of how they’re getting paid, whether that’s insurance, investments, or whatever, may skew their attention in that direction. And you know what stuck out to me? You read “Unshakeable” by Tony Robbins, right?

Tim Baker: Yes.

Tim Ulbrich: So he talks about it at some point in that book — and we can link to “Unshakeable” by Tony Robbins in the show notes — at some point, he gave a percentage. I’m going to say it was less than like 3 or 4% of all financial planners that are actually acting in a fee-only fiduciary-only type of way. Do you remember what that number was? It was low, right?

Tim Baker: I think he used 3%. I typically will say 5 because I’ve heard different. But yeah, I think it’s like 3-5% is that. 3-5% are legally bound to act in their client’s best interest.

Tim Ulbrich: Which, to be honest, as I said last time on the show, as a pharmacist is just mind-blowing. So the statement I usually lead with is most of you that are listening to this podcast right now or attend a talk that we do, whatever be the case, if you’re working with a financial planner, more likely than not they legally are not obligated to act in your best interest. Now, that doesn’t mean they’re bad people. It doesn’t mean they’re giving terrible advice, it means you need to be really vetting that advisor, in my opinion, in a significant way and really asking yourself and taking a step back, ‘Is this person really giving me the best, holistic, as close as can be non-biased advice that I can get?’ And for those that don’t yet have a planner and will ultimately seek one, making sure you’re asking the right questions, which we have in the guide that I referenced there at the beginning of the show — YourFinancialPharmacist.com/financialplanner — asking those questions to make sure you’re finding out whether or not they have that fiduciary type of responsibility. So we really, I hope, made the case in Episode 054 that fee-only matters. So now, let’s work under the assumption that we’re buying into fee-only. But the reality is there’s a whole other layer then of pricing models within even a category of fee-only advisors. So let’s for a moment assume that, you know, commissions are out the picture, so people if they’re fee-only, they’re not getting payment via insurance products or not getting payment via investments. But still, even in terms of how the client is charged, there’s a variation of models. And we touched on these a little bit last time, but I want to lead into and start with the most common one, Assets Under Management, and then work into what you’re doing in terms of net worth and income. And I first want to lead with — and jump in here, Tim, as well — I first want to lead with I’ve talked with so many pharmacists who think they’re getting financial planning for free. And I’ll hear things like, well, I met with so-and-so from, you know, X Big Box Financial Firm, and they offered a financial plan for free. There is no such thing as a free financial plan, right? The money is coming from somewhere now or later, and so now let’s assume fee-only most common pricing model that’s out there is Assets Under Management, at least that I’m familiar with. So talk us through exactly what Assets Under Management is and how that charge works.

Tim Baker: So typically with Assets Under Management, this is where basically, the client has investable assets, meaning, you know, they can roll it over from a 401k or an IRA that they are currently managing or maybe their present advisor is managing. Or maybe it’s an after-tax investment account. So it’s basically divorced or outside of a typical 401k or a 403b. So those are the investable assets. So what the advisor often does is this where you typically will say, you’ll see advisors say, ‘Hey, I have a minimum of a quarter of a million or a half a million.’ So if you don’t have that amount of investable assets, I can’t help you. And typically, what happens is that, you know, in that model, they’ll say, you’ll get a financial planner or maybe sometimes it’s just investment advice. It just depends on what they actually offer, but they’ll say, ‘Hey, for a set fee, a percentage of what I’m actually managing, you can be my client,’ essentially. And that can range anywhere from, you know, .5% on kind of the low end to 2% and up. You know, as an example, if you have $200,000 and you’re moving it over to your advisor to manage, he might do that for $2,000. Now, sometimes that includes comprehensive financial planning, so you’re looking at things outside of just the investment management like insurance and maybe debt management and estate planning and retirement planning and that type of thing. But sometimes it just includes that. So the problem with that model is that especially for a lot of young professionals, you don’t have $100,000 or $200,000 — now, some people will take you no matter what you have, they’ll have no account minimums, but again, that kind of goes back to you have to follow the money. So if you are working with an advisor that works predominantly with people that have half a million and more, and you have $50,000 with your advisor, you’re probably not going to talk to him or her very often. So again, this is kind of because of the advisor is paid based on the investments, they’re investment-centric. So what the Certified Financial Planning Board says is a financial plan are your fundamentals. So that’s going to be your debt, your cash flow, your emergency fund, insurance, investment, tax, retirement, estate. So if they are paid based on the investment, although it’s a big part of the financial plan, it’s only a piece of the financial plan. And sometimes, that investment can really drive the boat. And especially for younger people where they’re just not, they’re not there, it kind of can degrade other parts of the financial plan that they should be focusing on now to get to the point where they have a larger portfolio. So that’s the problem is that typically, there’s not enough there for a younger client to be profitable for that particular advisor. And then I think that the advice is just skewed a la — I think the question with our Ask Tim & Tim with Michael, I think it’s skewed in a sense because the advisor benefits anytime the client puts more into those investments. So what I say when I talk about it is, you know, in an AUM model, Tim, if we record this podcast and you trip and fall over $100,000 walking to your car to go home, that would be great. And it’s more akin to the wealth transfer that’s going to happen from baby boomers. But if you’re working with a financial advisor that charged you based on AUM, it’s in his or her best interest for you to invest all $100,000 in, you know, a mutual fund that he’s managing or that she’s managing.

Tim Ulbrich: Yeah.

Tim Baker: And that might not be your best interest. Maybe you want to buy that cabin that you and Jess were talking about. Or maybe you guys want to go on that vacation or pay off some debt or pay off the house, you know what I mean?

Tim Ulbrich: Yeah, what if I had loans, right?

Tim Baker: Exactly. If you have loans. Or if you’re one of the pharmacists out there that have — I’m seeing a lot more pharmacists with credit card debt, the advisor is not incentivized for you to pay off the credit card debt. They’re incentivized for you to really get as much in the investment, which is not necessarily a bad thing, but they’re incentivized for you to get into the investment so they can raise kind of their percentage of what they’re managing.

Tim Ulbrich: Yeah, and I think one of the challenges, building on what you said there, one of the challenges I really see, back to your point about the younger clients, as we know, the YFP community, I would say the vast majority of people are within 10 years of graduation, graduating students or making this transition out into this first career phase of the pharmacist life and career. And in my opinion, that’s probably where the most help is needed. You’ve got student loan debt, you’ve got all these transitionary items. I was thinking about all the things you were talking Jess and I through, and we’ve been out 10 years. You know, you’re balancing now that we’re post-student loan debt, we’re balancing investing and life stuff and kids college and savings and all types of things. And if the pricing model is not such that it incentivizes somebody to work with that individual because you may not necessarily have a lot of assets, who is helping that group? And obviously, we believe at YFP very strongly that getting a quick start during that transition period is so successful to being successful long-term with your finances. And so if the industry is built in a traditional AUM model where it’s like, hey, we’ll see you in 20 years, well, what about from now until that point? So and I think your point is so spot-on that if somebody has cash or they’re balancing multiple things, credit card debt, student loan debt, maybe they need a good emergency fund, and AUM model does not incentivize an advisor to build a good emergency fund.

Tim Baker: Right.

Tim Ulbrich: It doesn’t mean they won’t give them that good advice, it’s just again, the model is not built in such a way that it does that. So when I think of AUM, talk us through typically what you’ll see. I mean, is it pretty standard somewhere around 1-1.5% of assets?

Tim Baker: Yeah. You know, it’s funny. I was evaluating a client’s, actually his mom’s portfolio, and her money was a couple hundred thousand dollars was at kind of a broker dealer, independent where I was previously. And the fee that she was charging, she had literally no idea. It was like 1.75.

Tim Ulbrich: Wow.

Tim Baker: On top of the 1+% expense ratio. So the expense ratio, we’ve talked about in the past. It’s basically the funds that she is invested in has a mutual fund manager somewhere on Wall Street that’s managing that fund, takes a percentage out basically to pay himself and to pay the office space on Wall Street and the analyst and all that kind of stuff. So basically, on two counts, she was paying — in my opinion — way more than she needed to. So, you know, I was saying like, in my models, you know, from an expense ratio standpoint, she was paying 1 — I think 1.25. I think you can build a very good portfolio, if not a better portfolio, for less than .1% versus 1.25%. And then she was paying another 1.75 on top of that. So you know, generally I see — and I’ve seen some well-known firms out there charge kind of in that 1-2% area. Typically, in the fee-only world I see more of the kind of 1% is probably pretty prevalent. Now, what a lot of — you know, I mentioned XY Planning Network. What a lot of young planners will do is they’ll charge kind of a flat fee for planning. So they might say, hey, it’s $200, $300, $400 for planning. And then we’ll charge you maybe .5% or even less for AUM investment management. So they kind of delineate their two. And I still think that there is a conflict there, in my opinion, that’s why I don’t do it that way. But then you can kind of go all the way down, you know, the ladder to a service like Betterment, which is the roboadvisor that charges .25% basically, you know, manage it with algorithms and things like that. And by the way, Tim, that is up for Script Financial.

Tim Ulbrich: You’re live!

Tim Baker: Well, I wouldn’t say we’re live. We have the robo that’s set up for us, and I have to figure out — but yeah, it’s pretty close. But for those individuals that — we get a lot of questions about, hey, how do I manage my student loans? And then how do I open up a Roth IRA? We kind of have a solution for that now, that they can do it within 15 minutes and fund it — even less than that. So more to follow on that, but yeah. But you can see anywhere .25% all the way to 2%. But again, it just depends on what you actually get for that because sometimes that 2% includes full financial planning, maybe even tax work, I don’t know, but all the way down to the .25%, which is just kind of the algorithmic, you know, investment model.

Tim Ulbrich: Yeah, and I think to your point too, to the listeners. Don’t forget about it’s not just the fee to the planner here in an AUM model, Assets Under Management. It’s also the fees on the funds. So if you’re not doing due diligence to make sure you’re in well performing, low cost funds, you could be — I’m sure you’ve seen this in clients — upwards of 1.5% to 2% on advisor fee and then you’re maybe getting hosed another percent on top of that or more on a fund fee. And so we’ve written a couple articles, and we’ll dig them up and link to them in the show notes on the impact of fees. And we’ll also link to in the show notes just a simple savings calculator from BankRate. Just run some examples to see and feel the impact of those fees. I mean, if you were to save $100 a month for 30 years and say it’s 7% and another example, you only got 5% because of somebody’s fees and other things, that’s a big, big deal when it’s all said and done. So everything you can to obviously maximize and hold onto those returns, you want to be doing. So let’s transition here then into your planning model because I remember when you and I met, and I really feel like you’re trailblazing looking at pricing in a different way. I think you tend to trailblaze, that’s just how you roll.

Tim Baker: Mic drop.

Tim Ulbrich: That’s how you roll. But I think it’s really pushing the industry to think differently, and as I think about our group and the YFP community, I think it really is obviously allowing for model that’s in their best interest is a fee-only model, but I also think it’s charge and charging in a way that really makes a whole lot of sense. So talk us through this idea of charging based on net worth and income and how you arrived to that point.

Tim Baker: Yeah. So I would say probably outside of the actual like logo and branding of Script Financial the firm, when I had that epiphany to unapologetically go after pharmacists or design a business that is catered to pharmacists, probably after the branding and maybe even moreso, I spent time thinking about how I would charge, what my pricing model would be because I’m very sensitive to conflict of interest and transparency. I think you have to be — because this is the one career that I can think of — and maybe there’s others out there that I’m missing — but it’s the one career where like my compensation kind of directly flies in the face of like the client’s ability to kind of achieve their goals. It’s kind of like — you know, and I think obviously, the value that you get working with a planner, working with Script Financial, I think exceeds the fee. But to me, I’m super sensitive to those types of conversations and that outlook. So you know, again, I think this was on a podcast that I heard one firm doing it in the Midwest that says, hey, the fee is based on income and net worth. And I think once I kind of wrapped my head around it, I really didn’t — again, I was unapologetic about it. I really didn’t look at any different model because to me, it makes the most sense to me because if I am incentivized to help the client grow their income and net worth and protect their income and net worth, to me, that’s an alignment of interests. I think if we’re both in agreement that those are the two things that kind of show progress and overall financial health, then it’s in my best interest for you to do that while kind of keeping your goals in mind. So I think it — for one, I think it reduces the conflict of interest because, again, in that example, if I’m an AUM type advisor, I’m trying to — whether I want to believe it or not, I’m trying to get the client to invest as much as I can because that’s how my compensation is affected. But for me, the net worth — so when we talk about net worth, to kind of back up, the net worth is all of the assets, so the things that you own, subtract all of the liabilities, the things that you owe. So a quick example — if you have $100,000 in a 401k and you have $200,000 in student loan debt, then your net worth is technically — and that’s all of your assets and your liabilities — technically, your -$100,000 in net worth, which is very typical of how my clients or most of my clients are in that negative net worth area. So I am incentivized to help them dig out of that and get to positive because that’s one of the components in which I charge. So to me, it aligns interest. And I think it’s overall best aligned to comprehensive financial planning. So if an AUM model guy, and I say, ‘Hey, Client, I got you 15% return, theoretically a return on your investment year over year,’ that’s great. But I’m not smart because I believe the market has a mind of its own. I think over the long term, the market will take care of you. But I’m not out there beating the S&P 500 or anything like that. I think that’s foolhardy in the grand scheme of things. So I’m not out there saying, hey, I can beat the market or anything like that. I’m saying, hey, I’m going to help increase your assets, lower your liabilities, while keeping your goals in mind. So I think year over year, if you have a -$100,000 net worth, then the next year, I want that to be -$80,000. Then the next year, I want it to be -$40,000 and then we’re in the positives and we’re getting that snowball rolling in the right way. So those are some of the reasons why I think income and net worth are really the big — I think the best way to do it.

Tim Ulbrich: Yeah, I couldn’t agree more. And I think when I heard that from you, it just, it hit me instantly that makes so much sense. And again, as we think about our audience and the holistic planning and assistance that I think they need, just as you gave in that example, it allows you the flexibility to do everything from, hey, we really need to spend time on budgeting, build a foundation, an emergency fund. Or maybe we are ready to jump to that investment stage. But just to give the listeners an example — and Tim, I don’t know, you may not even realize this. So we, Jess and I started working with you I think it was actually November because we just got back from our anniversary out in Napa November 2017. Here we are, almost in July, and we are really now just starting to get in the weeds on the investment side to make sure we’ve got low-fee options, performance is aligned, risk tolerance is right. And to me, that’s so refreshing and speaks to the pricing model because we had all these other things that we wanted to talk about in terms of you getting to know us. We talked about the finding your why episodes and making sure we really understand long-term goals and priorities, and I don’t know if other models are designed in a way that allows that relationship to be built and that trust. And obviously, as you appreciate and I appreciate, if this is going to be a 30-, 40-, 50-year relationship, like that’s well worth that time to invest in it whereas if I may have shown up with, you know, Joe Schmo’s office with a few hundred dollars of assets, I can guarantee that conversation would not have been delayed for so many months until this point.

Tim Baker: Yeah, and obviously you’re in a different stage of life than a lot of the clients that I’m getting straight out of pharmacy school, you know. So, you know, there are assets there that we need to be attentive to. Some clients, we don’t even look at — outside of just making sure that they’re asset allocation is good for their 401k or 403b, we don’t really focus on it too much. And you know, and again, in an AUM office, that might be all they focus on. So it’s like, hey, your retirement looks good. I’ll see you in 10 years when you have something actually for me to manage. And to me, I’m looking at it, OK, how can we adjust behavior? How can we execute the strategy that we’ve picked out for them for student loans? You know, how can we protect, you know, the balance sheet and their income through, you know, insurance policies that are, again, in the best interests of the client? It could be if they have little kids, you know, and a home or something like that, it’s making sure that the estate plan documents are in place. So there’s just so many other things that, you know, to focus on. And again, the investments are just one piece of that. And I think, again, with a lot of advisors out there, they’re so hyper-focused on that because that’s what most people think of when they think of a financial advisor that stirs the drink in terms of compensation and things like that. And that’s, it’s kind of, I guess it’s like the cool kid or the bad boy in the room is the investments because a lot of people just think of, you know, maybe the movies or just it’s confusing to a lot of people. So that’s what they think of first.

Tim Ulbrich: So are there any challenges, downsides that you’ve seen to the model thus far? Or tweaks or things that you’re thinking about?

Tim Baker: Yeah, so the downside — and this is where I kind of have to really work on my communication skills is I think, if I’m perfectly honest, I think that I care more about the pricing model than the client. Typically, the client’s just like, Tim, shut up, just tell me what the fee is, and I’ll pay it. That’s fine. But I’m more like, no, no, no. But seriously, this is like, if we do this, you know, it’s kind of tailored to you, it accounts for complexity because it’s not just your fee is $258 because we did this formula and that’s what it is. And most people are like, just shut up. But for me, it’s telling a story of why I do it. And sometimes, you know, especially from a business perspective, it’s a lot easier just to say, hey, client. Hey, prospective client, it’s this. And the messaging, you know, is super clean and easy. Because I believe so much in this, my conviction has kind of stood in the way of just saying, hey, it’s just going to be whatever, x amount per month and that’s it. Because I believe to my core that this is the right way to do it. But from a messaging standpoint and getting the prospective client to say, OK, I kind of understand what you’re doing, takes some effort on my part to kind of tell that story as I’m explaining what we actually and how we do it. So that’s probably part of it. The other part of it is because it’s based on — and it’s a double-edge — because a lot of my clients pay me through cash flow versus an investment account, in the AUM world, it’s typically just — the fee that you pay is just a line item in your investment. So it’ll just say “Script Financial, -x amount of dollars for this month or quarter” and for a lot of clients, it’s kind of like an out-of-sight, out-of-mind. They don’t look through their statements, they have no — but the way that I do it, I leave, for the most part, I leave the client investments unadulterated. We don’t bill towards the investment accounts if they have them. So it’s all cash flow, so they get an invoice from me that says, hey, thanks for working with Script Financial. And then it’s kind of a regular draw. And you know, you know, the fee is the fee is what I say. But the fee is the fee, meaning it’s not out of sight or out of mind. You’re getting that invoice every month that says, thank you. And for me, I live with — we were talking off-mic beforehand, I live with a healthy level of paranoia because I want to make sure that my clients are receiving the value that I think they should with working in this model. So to me, where in most models it’s kind of out-of-sight, out-of-mind, I don’t really know what I’m paying. It’s full transparency, this is it. And for some people, that can be a little uncomfortable, especially if they’re working with their parents’ firm where they’re paying them who knows what. So I think that’s the big drawback for me is communicating what the value is and also showing them that it will be a cash flow strain on them, but I think that the value they receive outpaces that, especially over the course of 10, 20, 30 years.

Tim Ulbrich: Yeah, and even just like to counter that a little bit. I think one of the downsides of an AUM kind of out-of-sight, out-of-mind model is it waters down the quality of the advice from the planner because I don’t think the client is necessarily has the same expectation. I mean, we know that if I’m writing a check every month or I see it coming out of the account or I get the email reminder from Script, I’m more likely to be an engaged advisee, right? Which ultimately means at the end of the day, if I’m a more engaged advisee and I’m knocking on your door and you’re feeling that accountability like just the cumulative effect of that of 20, 30, 40 years of the quality of the planning advice, I think is worth noting. So as we bring this full circle and connecting this back to Episode 054, one of the things that I mentioned — and Tim, you elaborated on — was the reality that as I was starting YFP and I went out and interviewed a bunch of different financial planners to try to understand the industry, I left many of these meetings really not having a good idea of ultimately how they were going to get paid. And that, obviously, felt frustrating and as I learned more about the fee-only industry, and then I learned more about your pricing model, there is such clarity in when you think of a pricing model of income and net worth, there is no smoke and mirrors about where the cash flow is coming from. There’s lots of transparency in that model, and I think, again, obviously there’s a lot to feel good about that in terms of the fee-only approach and knowing where those dollars come from.

Tim Baker: Yeah, and I would say, you know, I would say this too is you know, a lot of planners even, you know, fee-only planners, they might say, hey, for this $300 a month in this AUM, you get two or three or four means a year, and that’s what’s included. But for me, like if I’m hiring a professional — and again, I’m looking at this from the client side of it — if I’m hiring a professional, I want access. So if I have a question about money, I want to be able to say, hey, let me get Tim on the horn or in an email or a text or something so I can basically work through this. So I don’t limit the — you know, this is kind of what you get — I don’t limit what the, you know, the interactions with clients because the more about clients and what’s going on with them, the better I can serve them. So you know, again, it’s on me to build a business that makes it, you know, where I can scale that and everything. But you know, I don’t limit that. And when we say the fee is the fee, but the fee is the fee, like the transparency there is that includes everything, includes filing their tax return. The only thing that really — it includes all the meetings, a lot of financial planners, they don’t focus on budget, and I’m a big proponent of that. So like, you know, I tell clients, you know, some clients will say, the fact that we meet every month to go through a 30-minute budget call is worth it itself because I know that you’re there to be my accountability buddy. And a lot of advisors overlook that because again, when you have minimums of $250,000 of $500,000, it’s just like there’s an assumption of wealth there, right? So to me, outside of hiring attorney to work on estate plan documents, which I’m a big believer in, especially if you have little ones, or buying a life insurance policy, a disability policy, the fee is basically inclusive of everything. It’s the investing, it’s the tax return and planning and all that kind of stuff. It’s all the meetings, the budget meetings. And I think that, to me, is kind of a warm blanket for clients because like I said in the previous model, I would say, oh, this year, I’m going to charge ou x% for selling you a mutual fund or you’re going to pay me a commission for an insurance policy or whatever it is. So it’s super confusing. So for here, it’s pretty much black-and-white. It’s based on a formula. And what I do is I reassess it every two years, so the idea is hopefully we grow together and not have these huge spikes like some of the other models do. And you know, we’re in it for the long haul, I guess. So yeah, transparency, I think, for my own perspective, is something that the industry needs to get a lot better at. And I’m trying to in my own corner of the world here to lead that a little bit, and I think in this model, it’s best served.

Tim Ulbrich: So as we wrap up this two-part series on why fee-only matters and how financial planners get charged and why you should care, don’t forget to head on over to YourFinancialPharmacist.com/financial-planner to get information on what to look for in a financial planner, to download our free guide, “The Nuts and Bolts to Hiring a Financial Planner,” and to learn more about the financial planning services that’s offered by YFP team member and fee-only Certified Financial Planner, Tim Baker. So next week on the show, we hope you will join us. We’re going to go rapid-fire Q&A on student loan questions — those that we’ve received via email and those that are inside our YFP Facebook group. So if you’re not yet part of the YFP Facebook group community, head on over there if you have a student loan question, throw it out there, and we’d love to feature several of those on next week’s show. So until then, have a great rest of your week.

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