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Month: August 2018

YFP 063: Intro to the Side Hustle Series

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Intro to the Side Hustle Series

Summary of Episode

On Episode 063 of the Your Financial Pharmacist Podcast, Tim Church, YFP Team Member, introduces a new segment called the Side Hustle Series to talk about ways pharmacists can create additional streams of income to reach financial goals faster and to highlight pharmacists who are doing this to help you get inspired. In previous episodes, topics about how to budget, limit and cut expenses, and being frugal have been talked about, but what hasn’t been discussed as much is increasing or maximizing income. As you may know, there is incredible buzz and interest around the topic of a side hustle for pharmacists and many have a side hustle to earn extra income and pursue other interests and passions.

Mentioned on the Show

Episode Transcript

Tim Church: What’s up, everybody? Welcome to Episode 063, which is all about side hustles. Now, those of you listening may be thinking, who is this imposter and what happened to the other Tims? Well, don’t worry. They will return. I’m just giving them a break. They really do an incredible job, which is evident by all of your positive comments and feedback, and we truly appreciate that. Well, I’m the other Tim and have made a few appearances on the show over the past year, but I decided to take the lead on this topic of side hustles. That’s something that really interests me. We talked a lot in many episodes about how to budget, limit and cut expenses, and just being frugal in general, but not so much about increasing or maximizing income.

As you may know, there’s an incredible buzz going around and interest around this topic of having a side hustle or side hustling. And there’s many pharmacists out there who are doing this to earn extra income and pursue other interests and passions. Some of our most popular episodes have been highlighting those who are working in some unique roles and pursuing non-pharmacy careers on the side — and I’ll definitely put those in the show notes. So because of this, we wanted to make this a regular series to continue to highlight these stories because we believe they’re truly inspiring and can help spark some creativity. So what the heck is a side hustle? Well, a very basic definition is a way to make extra cash beyond your main source of income. So really, that could be many different things that would fall under that. It could be something as simple as working a second pharmacy job besides your full-time gig, so working at a hospital while you’re working your full-time job as a community pharmacist or vice versa. Sometimes, people also refer to a side hustle as a passion project, something that they’re really called to pursue. And again, that could be something that’s not even pharmacy-related. For example, I know a pharmacist who has driven for uber on the side, and he absolutely loved the experience. Back in Episode 053, the other Tims interviewed Tony Guerra, and some of his side hustles include real estate, writing books, and podcasting. In Episode 009, we had Carrie Carlton on the show, and she discussed how she acquired 18 rental properties. So real estate has just been huge as a side hustle for her. My friend Alex Barker of TheHappyPharmD.com, who has been on the podcast a few times has been side hustling for a long time, doing many different things with providing career coaching to other pharmacists and creating online courses, just to name a few. He actually has turned his side hustle into a full-time job as he just recently had his last day at the VA hospital. So I want to shout out to Alex and just say congratulations. But the bottom line here is that there’s a lot of options out there.

So oftentimes, the questions comes up, why even pursue a side hustle? Pharmacists make a great salary, right? But I think a lot of people are interested in making more money, and that’s what it comes down to, what people really think about when that topic of side hustling comes up is I want to make extra money. There’s certainly nothing wrong with it, and that point is one of the major reasons why I pursued, started side hustles. But I think many times, it really goes deeper than that, and you have to ask yourself the question, Why do I want to make more money? I think there’s some current realities going on in our profession on why it really does make sense to consider a side hustle. Since 2011, the average debt-to-income ratio is rising as pharmacists’ salaries are not keeping pace with the rising student loan debt. And this means that more pharmacists are starting out in a worse financial position than pharmacists who have graduated in previous years. Traditional pharmacist positions also typically have a salary where it starts out high, but then small raises occur over time, typically based on some merit or time being spent there at the job or a combination of both. And furthermore, some companies are cutting pharmacists’ full-time hours. So instead of full-time being 40 hours or somewhere around there, it’s now down to 32 or something less. And that’s actually leading to some substantial pay cuts for pharmacists. So I don’t think you can ignore the reality of what’s happening with pharmacy jobs out there.

But besides that, I think a lot of people, the reason for wanting to pursue a side hustle is they want to accelerate their financial goals and get them done quicker. For example, student loans, obviously a big problem. And that was one of my main motivations is really getting these student loans out of my life a lot faster. A lot of people want to retire at an early age, and in order to do that, they have to save more money for retirement and invest more, and they have to get a side job in order to do that. Some people want to donate more money or help other family members and friends out financially. Perhaps you want to upgrade your lifestyle. A lot of people want to go out to better restaurants, go on better vacations, buy better clothes. There’s certainly nothing wrong with that. But as we’ve talked about many times, there’s a tendency to live up to and even beyond your means, and so sometimes making more money can actually make your financial situation worse.

The other reason for wanting to pursue a side hustle or why you may consider it is that relying on one source of income can be risky. Although many pharmacists’ jobs are thought to be secure, with the changing job market, things are not what they used to be. And so the demand is not as high as it was. There’s still definitely a demand out there, but everybody is susceptible to losing a position. And so having a second stream of income or multiple streams of income can give you that additional layer of security.

Beyond some of the monetary reasons behind pursuing a side hustle, I really think the big one is passion. So something you truly feel passionate to work on that’s meaningful, that gives you the results or feeling of happiness and self-satisfaction. And oftentimes, that’s a great combination, that you’re working on a project or doing something that the end result may be that it provides you with some additional income but is something that really fires you up, something that gets you up in the morning.

So I want to spend a few minutes talking about my personal experience with side hustles. By no means am I the expert on this; there’s definitely a lot of pharmacists who I mentioned earlier that are bringing a lot more money and are a lot more successful, but I want to just give you a few tips on kind of how I started with this.

So why did I start exploring side hustles? This was a couple years after I started my full-time job and after I finished residency. And initially, my main motivation was getting extra cash so I could get in a better financial position. I came to this realization that I was broke and that student loan debt at the time was totaling about $200,000, which is a combination of undergrad and graduate school. And I had to make some changes to get myself in a better position. Now, of course I scaled back on spending. I got on a tight budget. But I was looking for some opportunities to maximize my income. So I really wanted to reach my financial goals faster, that was my main motivator, that’s why I wanted to do it.

Now, my full-time job is working as an ambulatory care specialist at the VA hospital, where I have clinics to manage, chronic diseases, diabetes, high blood pressure and a number of others. My schedule is 7:30-4 Monday through Friday. Most of the time that I have available for side hustling is in the evening and on the weekends. Sometimes I’ve heard in books people who do a lot of their side projects on the weekends, they’re called “Weekend Warriors.” So that’s kind of how I viewed myself during some points of time when I’ve been doing this. The easiest thing that I came across on what I could do to earn some extra income was just do some staffing, some in-patient staffing at the VA after I would finish my day as an am-care pharmacist. And so that was a really easy thing to do because literally, all I had to do was press a button and go down an elevator a couple floors and really start my side hustle there. So that was a really easy, very convenient way to get some extra cash. It wasn’t always that consistent but definitely was a great opportunity early on.

The other thing that has come up is some special projects where I was able to get overtime. And still occasionally, this happens. But the opportunities don’t come about as much as they used to. So while those things were definitely great, they weren’t consistent. So I wanted to get something where I could have a more reliable extra income coming in. And for the first year and a half, I didn’t have a Florida license because I had graduated from a school of pharmacy in Ohio, and so that kind of limited my other options of what I could do working as a licensed pharmacist in other areas. So eventually, I became licensed in Florida, and I started looking at other opportunities that I could do working at another hospital or community pharmacy nights or weekends. And it took me a couple months, but eventually, I was able to find an opportunity at a local hospital. And this was really great because they were very flexible with my schedule, as soon as I was done at the VA, I could come in and work for a couple hours in the evening. And really, weekends were available too. And so this was a great way to really put a big chunk of extra money every month towards my student loans. So I was easily bringing home an extra $1,000, sometimes $1,500 a month. And I thought this was just a great opportunity.

But what started happening was is after about a year and a half, I really was getting burned out by all these extra hours. So sometimes, I was working close to 60 hours a week. And the other thing was I wasn’t getting really excited about the work that I was doing. The other element that came into play was I got married during this transition when I was doing the extra staffing. And so it’s another element that came into it and made it a little bit more challenging because I was spending so much time working. So at that point, I kind of said, what else can I do? Or what are some other opportunities where I don’t have to physically be present and work all these additional hours but still try to figure out how to get some additional income?

Well, after I finished my residency program and through this time that I was working the hours at another hospital, I really became a voracious reader, focusing on the areas of personal growth, business, psychology and personal finance. And really, because of that, I developed an interest in trying to pursue other things than just a traditional pharmacist’s role. And that led me to my first side hustle sort of outside of just a traditional pharmacy role, which was book writing.

And so after I read a couple books on how to write books because the technical aspects were a little intimidating for me, I felt like I could give it a try. So given diabetes management is one of my specialties, I thought writing a book for patients was a great idea since I can only reach a limited amount of patients in my full-time job. I was so excited about this and thought I was going to sell this thing like crazy through Amazon, I wouldn’t have to do anything but look for the money to be deposited in my checking account. Well, long story short, that’s not what happened. And to this day, I still have not recouped the money that was invested into the book, which was really only about $1,000 since I went the self-publishing route. But what’s interesting though is that every couple months, one or two people will buy the paperback book or Kindle version, and that actually brings in a royalty of a couple dollars. So I get a good laugh out of that because of how far off my expectations were. But at the same time, I did the work once, and it still has the opportunity to bring in more income. And so this is obviously a much more passive stream of income than physically being present and working in a traditional pharmacy role like I was doing when the extra staffing.

Well, this failure with my diabetes book or what I’m going to call it, a learning project, was really important, though, because it kind of helped set the stage for my next project, which was writing “Seven Figure Pharmacist” with Tim Ulbrich. Now, that has actually brought in some consistent revenue every month. My first book gave me the confidence in the process of not only writing and getting all the pieces in order, but really to get from that vision to reality and figure out how to actually get a good reach and sell the book.

And so besides the book, my other side hustle — as probably you could have guessed — has been working with YFP, Your Financial Pharmacist team, creating content, managing the website, among a bunch of other things. And this is something that I’m truly passionate about, and I’ve believed in Tim Ulbrich’s mission since he started the company in 2015. As I shared on previous episodes, I struggled with my finances for awhile, so the idea and the opportunity to help others and help prevent them from making the same mistakes that I did is just a great experience and something that really does motivate me and want to continue to work on this project and work on this side hustle.

So that’s really a quick snapshot of my experiences that I’ve had with side hustles. And I mentioned that when I started off, really it was really mainly money. I was looking for additional income; it was the bottom line. I mean, it was a very cut-and-dry reason. I wanted to get my student loans paid off faster, so what can I do to get more income? But eventually, it really — passion has been a huge driver for me for a lot of the things that I’m doing.

So if you’ve thought about a side hustle or are thinking about what else can you do to bring in additional income or what can you do that is something that you’re very passionate about, what are some things that you can do to get started? So I think the easiest thing to consider is that if you’re really just looking for an additional stream of income, you don’t care how you do it, then obviously looking at other pharmacy jobs out there where you can do some shifts, maybe even at your own institution or organization where you work, looking at different special projects that they have, something that’s a different time than your main hours, I think that’s obviously, that’s an easy one. And that’s what I did. But if you’re thinking about something other than that, then here’s some questions I think you can consider.

The first one is what knowledge or experience do you have that others would find useful or valuable? So obviously, you have very high competency with pharmacy-related topics and things when you graduate, but everybody has a very unique background and experience. And I had a lot of pharmacists in my class that had other careers, even prior to pharmacy. And I think that has helped shape a lot of what they’re doing now. And I think that’s something that you really have to consider is to bring into the picture because it doesn’t always have to be something pharmacy-related or it could be a combination of something pharmacy-related and something that’s not. Is there a hobby or passion that you have that you could actually monetize it? So I think that’s another one to think about. And the other one is, are there problems out there that people are willing to pay to have solved? And I think this is a big one and just a great way to think about entrepreneurship in general. When I started getting interested in this idea of side hustles, I was listening a lot to the Smart Passive Income podcast by Pat Flynn. And he always makes a point of this, that when you’re looking at different businesses and opportunities that you’re really looking to solve people’s problems. Can you solve them better than what the options are available now? Or do you have new and innovative ways on how you can solve people’s problems? So I think that’s a great way to think about that.

And as I mentioned, there’s a number of different motivators for wanting to do a side hustle. Maybe purely financial, maybe some other reasons, but I also think you have to have the right mindset. One of the most inspiring books I’ve read over the past couple years is a book called “The Go-Giver” by Bob Berg. And in this book, there’s really a story that goes on, and he talks about a lot of different laws that apply. And one of them that really stood out to me is called the Law of Compensation. And that basically states that your income is determined by how many people you serve and how well you serve them. So a lot of times, instead of asking the question, how do I make more money? I think a better question is, how can I provide more value to others? And by doing that and providing more value to others that the income eventually will come.

Now, if you’re looking to get some ideas for side hustles, I recommend you check out my friend Alex Barker. He has a post called, “53 Side Hustles Any Pharmacist Can Start Today.” And you can find that on his blog called TheHappyPharmD.com, and we’ll put that in the show notes. And in future episodes of the series, we’re going to talk about some more specific ideas and some things that you may not have even considered.

So moving forward with this series, I’m going to be interviewing other pharmacists who have a side hustle and really get into some of the details of what they’re doing, how they actually make money, how much money they’re making — when they’re comfortable with sharing that, of course — and how the heck they balance being a full-time pharmacist, having a personal life, and then also their side hustle. Because I think a lot of people manage this differently and depending on your personal situation and where you are, even the thought or the idea of doing something extra I think can be very daunting, especially if it’s something that you’re not truly passionate about. So I think it’ll be great to hear some of those experiences moving forward.

Now, if you have a side hustle and you want to be featured on the show, please reach out to us at [email protected]. Even if you’re in the beginning phases and just starting out, we would love to hear from you. So we’re really looking forward to hearing and learning about your stories in episodes to come. And so I’m just really excited about this series, so please if you have any comments or feedback, please reach out.

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YFP 062: The ‘Other’ Loan Forgiveness (Non-PSLF)

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On Episode 062 of the Your Financial Pharmacist Podcast, Tim Baker, owner of Script Financial and YFP Team Member, and Tim Church, YFP Team Member, talk about the ‘other’ forgiveness through the federal loan system. Many borrowers aren’t aware that this program exists, so Tim and Tim spend this episode shining a light on the details of the program and who should consider it.

Mentioned on the Show

public service loan forgiveness

Episode Transcript

Tim Baker: What’s up, everybody? Welcome to Episode 062. I am here with my co-host, Tim Church. We are going to talk all about the ‘other’ loan forgiveness program. Tim, I’m excited to be here with you. What’s going on?

Tim Church: Hey, Tim. Glad to be be back on and excited to hear that you and Tim Ulbrich are going to be heading down to south Florida coming up in a couple months.
Tim Baker: Yeah, this will be our — so I think Tim and I just booked our flights. We’ll be down for our T3 conference to talk Your Financial Pharmacist business in West Palm Beach, Florida. I think it will be our first meeting there, so we’ll finally be able to meet Andrea, and you’ll be able to not travel for one of our meetings for once, right?

Tim Church: Exactly. And I’m not going to have to go into the snow, and you guys are going to have to bring beach attire. Get ready to go.

Tim Baker: That’s true. I can work on my base tan. Yeah, so today, Tim, we’re going to talk about — you know, we talk, obviously, student loans a lot on the podcast, but we’re going to talk a little bit more about the non-PSLF forgiveness program, which a lot of people don’t know is a thing. So you know, I’m interested to kind of talk with you and kind of we’re going to take a more casual approach, I think, and just talk about the program and some of the details behind it. But what are the — I guess for you, what do you think are some of the reasons why, you know, people or pharmacists come out, and they don’t, they’re not aware of I guess some of the strategies that are out there. Why do you think that is?

Tim Church: Well, I mean I think we’ve talked about it many times that not every school is going to put personal finance in their curriculum and make it a priority. And some schools, they have it as an elective. But really, the bare minimum that students have is as they come out and as they graduate is they have the exit loan counseling, which as I think we heard from many people that that’s just not enough. It’s just such a small amount of information that they get, and so it’s really hard to sort of cram everything in there that you need to know about your loans. And with so many repayment plans and structuring and different dates and eligibility, I mean, it can be very overwhelming to kind of understand and know first of all, your options, but then all the nuances within all of those options.

Tim Baker: Yeah, it’s funny. I had a meeting with a resident, so I work with some students and some residents, and we were talking about her loans. And I was asking her what her strategy was, and we’ll break down the difference between strategy and repayment plans and things like that. And you know, she was kind of in this deferral period. I was looking at kind of some of the questions that I was asking, I was like, man, we need to switch this up. And I asked her about like had she considered forgiveness or PSLF, and she didn’t even really know what PSLF was. And you know, I think sometimes when I look at our Facebook group, and I see some of the conversations there, there’s a lot of people out there that are kind of in-the-know with their student loans, and I think they understand the different strategies and the plans available to them. But I think that there are also some that don’t know. And for this particular case, we’re talking $200,000 in loans. It’s a big deal. So I think having all of the different strategies and repayment plans kind of in front of you is important, and really breaking those down is important because, you know, you can make decisions, you know, in residency or as a new practitioner that are going to affect really the next 10-20 years of your life. So I think it’s important to kind of talk through those. So let’s talk about that, Tim. When we’re talking a student loan strategy versus a repayment plan, what are we talking about here?

Tim Church: Yeah, that’s a great point. And I think so many people get these two things confused because repayment plans, really, they’re going to dictate your minimum payments over a designated term, and that really could be in the federal system, could be a refinance, but basically, you have a set plan that says how much you’re going to have to pay a month and at least over a minimum period of time. But when you’re talking about a strategy, you’re really looking at your comprehensive game plan on the most effective way how you’re going to tackle your loans. And really, for most people, it’s going to be, well, what’s the strategy or game plan that’s going to save me the most money? And really, that strategy could be executed using a number of different repayment plans, especially if someone is going to keep their loans in the federal system and pay them off that way or whether they’re pursuing one of those forgiveness programs. So one of the things that we’ve kind of talked about is when you kind of look at very broadly, if you’re looking at your student loans, what are those main strategies that you can kind of look at and analyze? And really, for a lot of people, they’re going to be looking at really three different broad strategies. So the first one — and we always talk about this because a lot of people are unfortunately not eligible, but it’s great if you have it, is tuition reimbursement programs. So a lot of those are through the federal government, through the Veterans Affairs, Indian Health Service, Public Health Service, National Institute of Health, so there’s great programs that exist, just unfortunately, there’s not a lot of people and not always everyone is eligible because that’s essentially free money that your employer is giving you or matching you. And then so to the next big, broad kind of strategy is non-forgiveness, so everything that’s outside of the forgiveness realm. That could be refinancing your loans through a private lender or it could be keeping your loans in the federal system and just paying them off through one of the repayment plans. And then besides that, really you have forgiveness, and that can even break down, and that’s where we were kind of going with the Public Service Loan Forgiveness or what we would call non-PSLF forgiveness or the ‘other’ forgiveness.

Tim Baker: So when we say the non-PSLF forgiveness — so I guess to break that down a little bit, you know — so let’s first talk about, why don’t we first talk about PSLF, and we’ll just kind of walk through that. So you know, typically, when I talk with clients, and I’m looking at their student loans, typically kind of the rhythm of this is that they have to work for a certain type of employer, like you mentioned. And typically, that is a 501c3 nonprofit. So if you don’t know if your company’s a nonprofit, there are different resources out there that you can check it out and see if they are. You have to have the right type of loans, so that’s typically the federal loans that we’re talking about. You have to be in the right type of repayment plan, which is typically one of the income-driven plans, so the ones you’ve heard of, which are IBR and ICR, and then the newer ones on the block are pay-as-you-earn and revised pay-as-you-earn. You have to make the right amount of repayments, so in the PSLF, it’s 10 years. Those have to be consecutive, you’re basically looking at 120 payments. And then you prove it, and you typically do that with your employment certification form. And then when you do that, you apply for forgiveness, and you receive tax-free forgiveness. So that’s kind of the way it works, and like I said, we’re not going to spend too much time on PSLF, but — I don’t know, Tim, should we kind of talk about some of the updates now in terms of that program? And then we can kind of shift to the non-PSLF forgiveness?

Tim Church: Yeah, I mean really, not much has changed. There’s still the questions that are on the table about the uncertainty on the longevity of the program — you know, will it be capped at a certain level? Will it still exist in the future? I’ve kind of been searching off-and-on on the Internet to see how many cases of people that have been actually received forgiveness, and really, I still only see just a few out there.

Tim Baker: Which is amazing. It’s amazing when you think about it because of the problem — whoever is running PR for like the PSLF or fed loan servicing really kind of needs to look in the mirror because it has such a bad reputation, but I know it’s happening. We don’t know, but when we were making this student loan course, I called fed loan servicing just to kind of get an inside opinion of where PSLF is going, and you know — to kind of give a little bit more background on what PSLF is, it was put in place when George W. was in office and then basically, both administrations then, both Obama and the current administration under Trump either talked about capping it or eliminating it completely. So there is some risk to that. I think what is comforting in some regards is in March, which is probably the most recent news when it comes to the forgiveness program is that the Congress has allocated $350 million for those that were seeking forgiveness that didn’t quite line up everything for them to be in forgiveness. And actually, I just read an article from Forbes, who this lady was, I think she was like eight years into forgiveness, but she had FFEL loans, and FFEL loans, unfortunately, are not eligible for forgiveness. You have to actually consolidate those first, so — and I actually have a client that’s kind of going through the same thing. She was halfway through forgiveness, and not all of her loans were in the right type of loan, so she essentially has two different clocks, one that was in the correct type of loans, and one that wasn’t. So the point being is that Congress, the government, has allocated some funds for those, mistake cases that in all intents and purposes, they should be forgiven. So there’s that. Now, to shift gears here and kind of talk about the non-PSLF forgiveness. So if we kind of use the same type of rhythm in talking through non-PSLF is don’t — in terms of the right type of employer, it doesn’t matter who you work for. You could work for the circus and still receive non-PSLF forgiveness. So it doesn’t matter if your employer is a nonprofit or not.

Tim Church: Are there pharmacists in the circus, Tim? I wasn’t sure. Is that some of your clients that are in there?

Tim Baker: I think some of them either they feel like they’re working in the circus or they want to work in the circus.

Tim Church: Oh, OK.

Tim Baker: So sometimes, that’s the case. But let’s say we’ll keep it positive here, so it doesn’t matter who the employer is. They still need to be in the right kind of loan, so this is your federal direct loan. So again, no private loans can be forgiven here. They still have to be in the right type of repayment plan, so that’s one of the four income-driven plans. And they have to make the right amount of payments. Now, this is typically over 20 or 25 years instead of the 120, so this is the 240 payments over 20 years or 300 over 25 years, depending on what type of repayment plan. You don’t really have to prove it, you still have to re-certify your income every year, which is going to basically change your repayment, and then you apply and you receive forgiveness. Now, what’s left out of there that you heard me say with PSLF is that with PSLF forgiveness, it’s tax-free forgiveness. In the non-PSLF program, it’s taxable forgiveness, so what does that — Tim, what does that mean when I say taxable forgiveness?

Tim Church: So essentially, any amount of money that you have left at the end, any balance remaining on your loans at the time of forgiveness, the IRS basically treats that as income. So whatever you make 20 and 25 years down the road, your income from the previous year plus whatever amount is going to be forgiven will be tacked on as income. So essentially, you would be responsible for paying any of the taxes for that. And I think we’re going to break that down in a little bit more detail later on in the episode. But I want to kind of shift back to what you were talking about in terms of the years, in terms of the repayment period. So you’re kind of talking about you’ve got to have direct loans, you have to be in an income-driven payment plan, and actually, you can also be in a standard repayment plan actually counts, which doesn’t really make much sense. If you were in the standard repayment plan, you’re on track to pay it off in 10 years. But in case you started out in the standard plan, you could have made payments and then shifted over. But those would still count if you shift later, at a later point down into an income-driven plan. But when you looked at the different income-driven repayment plans, that’s where the timeline is a little bit different. So if you look at the revised pay-as-you-earn or re-PAYE, really it comes down to whether your loans are all undergrad or whether they’re going to be professional. So we’re talking for pharmacists, most of those are going to be for professional study, most likely. So if you have any loans that are for a graduate or professional degree, that timeline is going to be 25 years. So basically, you have to make those 300 payments over that timeframe in order for those to count. Now, and contrast that with the pay-as-you-earn or PAYE, that’s going to be a 20-year period. So the same thing will be true if you’re in the new IBR, or income-based repayment plan, it will also be 20 years — so if you’re a new borrower on or after July 1, 2014. And then for the old IBR, or the ICR, income-contingent plan, that’s going to be a 25-year repayment period.

Tim Baker: Who ultimately should consider this strategy when we’re viewing their student loans? Because like, you know, I hear a lot of, you know, I hear a lot of kind of chatter of, you know, looking at, you know, extended or extended graduated repayment plans that are out there, and which way to go in terms of, you know, if you’re not eligible for the PSLF program. So who ultimately should look at this program?

Tim Church: It’s a great question. And I mean, even just to kind of take a step back and think about it, like who wants to be in debt for 20-25 years? That’s a long period of time when you think about it. But I think there are some cases where it’s definitely something that you have to consider. There’s no perfect example of this, but I think the people that we’ve talked about quite a bit in the course and going through that is if you have a very huge debt-to-income ratio, so we’re talking at least 2-to-1. So for example, your income is $120,000, but you have student loans of $240,000 or more, then maybe this is something that’s on the table. And I think the reason that it becomes something that’s on the table is that if you start to look at the 10-year repayment for somebody with just massive student loan debt, I mean, that can be a huge chunk of your income every month, I mean, just to be able to make that payment. And then not only that, when you look at your other obligations, if you have other debt besides student loans or you live in a high-cost area, you know, that could be something that’s very difficult to do to even make that. And then you could say, well, what about refinancing to an extended period as well? And depending on how big the loan is, I mean, that can also be pretty difficult to pay. And again, if you’re extending that out for 20-some years, well, if you can get part of the forgiveness benefit, then you have to sort of look at that as being a potential option.

Tim Baker: Yeah, so whenever we talk about student loans, I always hearken back to the student loan course because I think one of the best things about the course is the decision table. So you basically, you look at your standard, the best repayment plan for non-forgiveness and non-PSLF forgiveness and PSLF forgiveness. And obviously, if one of them isn’t on the table, the PSLF, you cross that off. But it shows you very deliberately, you know, how long you’re going to — what the term of the loan is and what your total payment estimate would be after that. And the math, you know, the math typically doesn’t support any of the extended standard repayment plans. You’re either going to be looking at a standard plan or, depending on your strategy, looking at one of the two newer income-driven plans. And you know, the borrowers that have that larger debt-to-income ratios, anything that, like you said, Tim, is above 2-to-1, this would be something to consider. But the other thing that you have to really worry about is that tax bomb that comes at the end of that 20 or likely 25 years. So you know, if you have $100,000, which in some scenarios, that will definitely project out, that means that $100,000 that’s forgiven will be taxed. And if your taxed at a 25% income tax rate, then that’s a $25,000 tax bill, which is a little bit of a kick in the pants, you know, considering that you just were in debt for 20-25 years, and now you’re paying a large tax bill again. So I mean, there are different strategies to save for that, but you know, this is really a case where, again, if you’re in that. But I think one of the things that I think we’ve talked about amongst the Tims is at what point do we really — and maybe some pharmacists are at this because they understand the math behind it, but at what point do we view kind of that nonprofit status for the employer as almost part of your overall benefit packet. So like as an example, if I’m a new pharmacist and say I’m carrying $200,000 worth of debt, and I have a job for a nonprofit that pays me $100,000, and I have a job at a for-profit that pays me $120,000, I don’t think that we can look at that as well, this one place is going to pay me $20,000 more. I think that we really need to be a little bit more reflective and say, OK, if I look at this in totality and I look at the fact that, you know, you can’t argue with the math — I know I said this before — you can’t argue with math. And I know Tim Church, like we did this with your loans in retrospect. You can’t argue with the math of the PSLF. So if you are a believer, kind of like I am, that PSLF does have a little, that the program has legs, I think we really need to consider that as part of it. Like I did a student loan analysis for an individual, she’s actually a lawyer, so a non-pharmacist, and she walked out of the meeting saying, you know, I need to get back. She was in a nonprofit sector as a lawyer. She’s like, I need to get back to that because there’s no way that I want this hanging over my head for 20 or 25 years, and I don’t want to pay the I think it was $80,000 — or not $80,000, maybe like a $50,000 tax bill. I don’t know, Tim, what are your thoughts on that?

Tim Church: Yeah, I think you’re absolutely right that you have to consider that. And I think that a lot of times, people don’t. They’re looking at just standard salary, standard benefits and kind of what they’re looking to do. But as you’re going through that job search and how you’re going, I mean, that certainly is part of it. I mean, are you going to be working for a 501c3 or government entity? And is this something that could potentially change the course of how you pay your loans off? I mean, it’s a big deal because we’re talking over a long period of time, but also you have to look at that opportunity cost. So if you don’t pursue the PSLF or don’t go after it, then you’re losing that opportunity to potentially put a lot of your money towards retirement and other things. And I think that’s actually one of the things I wanted to go back to is that somebody that has a very high debt-to-income ratio and is coming out and just could feel extremely overwhelmed and they’re thinking, how do I even make these student loan payments? How am I even going to make those? Even if I refinance, maybe it’s going to be a huge chunk of my monthly income and even if I did that, how am I going to start retirement account? How am I ever going to get a house? How am I going to fund my children’s, my kids’ education? So I think like when you look at those, put that on the table that it can be very, very overwhelming. But if you’re sort of in one of these programs, in the program of non-PSLF, and you say, I can make income-based repayments, then I think that’s actually important to talk about as well. So how are those income-based repayments, how are those calculated? And I recently just put out a post on the website on how to define and how to calculate it because it has a very specific definition when you’re talking about these income-driven repayment plans. But most of the plans, so if we’re talking about re-PAYE, PAYE or the new income-based repayment, it’s going to be 10% of your discretionary income. Well how is discretionary income calculated? Well, that’s going to be based on your adjusted gross income, and that’s going to be — you’re going to subtract that from the poverty guideline. So those come out every year and change based on inflation and are relatively — they’re the same for all states except Alaska and Hawaii.

Tim Baker: All the Lower 48.

Tim Church: Exactly. And then your spouse’s income is only counted if you file jointly in most of the plans and in re-PAYE, it’s regardless of how you file your taxes. But when you look at that, when you break that down, you know, those payments can No. 1, they can be more manageable, but just like we’ve talked about with PSLF that funding retirement accounts and things like that, you can actually lower your payments that you’re making towards the loans by taking advantage of some of the tax benefits that are available.

Tim Baker: Yeah, so essentially, what you’re saying is that there are a few ways, a few levers to pull to lower your AGI, your adjusted gross income, and what you’re essentially doing is you’re deferring money into things like a 401k or a 403b or an HSA or a traditional IRA that allows you to kind of pay your future self but also lower the AGI, which will lower your payment and then hence, maximize your forgiveness.

Tim Church: Yeah.

Tim Baker: Go ahead, Tim.

Tim Church: No, and I was going to say too, now, some people may be listening to that and say, Well, if I’m lowering my payments towards my loans, won’t I be having a higher tax bill at the end of the forgiveness period, so whether that’s 20-25 years, and part of that is true. The balance may be a little bit higher, but I think the other thing to keep in mind is, you know, we talked — what did you mention? A $25,000 additional tax liability, could be something greater, but you also have to think that wherever that money is going to be in 20-25 years, is really going to be eroded. So it’s kind of hard to think about, I think, in today’s value because 20-25 years, you know, if you have to cover an extra $25,000 of income taxes, that may not be as — that’s really not going to be as substantial as what it would be today.

Tim Baker: So this might be a good part to bring up, we had a question on the podcast, Melissa from Salsbury, right down the street for me, asked, “You quoted on one podcast that after x number of payments, that one might qualify for non-PSLF. I’ve been paying on-time and extra for 16 years, didn’t know if I might qualify or soon qualify.” She talked about what she — looked like she had some proceeds that she could use, that could apply extra towards paying off the loan. So Melissa, thanks for asking the question on the Facebook group. I would say that if you qualify for non-PSLF, so you’ve been paying for 16 years, it’s really going to depend if you are in direct loans, so if you have Stafford or FFEL loans, those might not have qualified. So essentially what I would do is, you know, just look at your loans and see how long you’ve actually been paying. Those 16 years, are they all for direct loans? And you could be very well close to a forgiveness where you can actually apply and seek forgiveness, but it’s going to depend on really what kind of loans you’re in and what repayment plan. Typically, you’re probably in an income-driven plan. I think the second part of this is if you’re seeking a forgiveness — and this is kind of where we talk about you’re either forgiveness or you’re not. If you’re in a forgiveness strategy, whether it’s a PSLF play or a non-PSLF forgiveness play, you never want to throw extra money at the loan because essentially, you’re almost flying in the face of your strategy. So if you’re a Tim Church, and you’re being super aggressive on paying off the loans, he wants to plow as much money toward that loan as humanly possible because he’s not seeking any type of forgiveness or anything of that nature. If you’re on the other side of the fence where you’re trying to pay the least amount towards the loan, you want to basically maximize your forgiveness. So you wouldn’t apply any extra savings or money to the loan. So in your case, unless you find out that you are not on track to be forgiven for that non-PSLF time period, you would take that $25,000 and apply it elsewhere, whether it’s, you know, to plus up your emergency fund or apply that towards retirement savings or something like that. So I wanted to call that out, it’s really going to depend on your situation. So hopefully that answers your questions, but thanks for asking it. So what else, Tim Church? What else should we cover with regard to the non-PSLF forgiveness play.

Tim Church: Well, I honestly think if you’re really considering this option, I mean, one of the things I probably — if I were someone that was saying, this may be an option for me, a good play, I would really seek the help of an accountant. And the reason I say that is because No. 1, you have to think about the tax implications later on down the road. But you also have to think about what repayment strategy you should be in. And the reason that comes into play is we talked about that whether you have a spouse is going to depend on what kind of payments you’re going to make based upon that strategy and how you file your taxes. So really, it comes down to the repayment plan but also how you file your taxes and then preparing for that. So there’s a lot of different factors that go into the calculations, so I think having someone really go through and crunch the numbers and make sure that you’re on the right path that’s best for you, I think is really, really important. And then I think the other thing talking about is, OK, you’ve kind of said, OK, I’m comfortable with that tax bill coming up in 20-25 years. Well, how do you actually prepare for that? And you know, we’ve kind of talked about — you and I have before, that really, you know, there’s a couple different ways to go about it. One is you could just put money in a savings account and just have enough money for when it’s time to pay that extra taxes. But you know, why is that not a good idea, Tim?

Tim Baker: Typically, it’s not a good idea because you have such a long runway that, you know, if you — even right now, a lot of the better savings accounts out there are paying — they’re paying decent, you know, 1.5-2% interest, which is the highest it’s been in a long time. If you kind of believe in my philosophy, which is over long periods of time, the stock market will take care of you. And this is like 10+ years, so this would be 20-25 years. If you believe that over long periods of time, the stock market will take care of you, then you really should be investing your money there because you’re not going to touch it. Same thing with, you know, a lot of younger professionals with their retirement funds, you’re not going to touch it for a long, long time, so the market could go up and down and left and right, and so in a similar example, if you’re looking to build wealth for the potential tax bill that’s out there, I think some type of low-cost index fund is most appropriate to, you know, pay off the minimum amount of your student debt and then to put, you know, we’ve got to calculate it out, but to put a sum per month that you’re just buying into the market and letting it do its thing over time.

Tim Church: And so that should really be a separate account versus the retirement. You know, we were talking about —

Tim Baker: Exactly.

Tim Church: You can lower your AGI, and you definitely want to be saving for retirement over a 20-25 year period. But that’s probably not the best way to save for the tax implications because you could have penalties and other implications, and so really, you kind of have a separate type of investment account that you’re really designating for the tax bill. And one of the other things that I have actually heard come up in some political discussions is that that tax bill, there’s a potential that they could even eliminate that at some point. Now, obviously, that would be a good thing if you were saving and preparing for it all those times and then all of a sudden, the government said, ‘Hey, you know what, you actually don’t have to pay the extra taxes.’ I mean, that could be a great thing. But along the way, you’re doing the savings anyway.

Tim Baker: Yeah, and actually, you know, if listeners are interested in opening up that type of taxable or brokerage account, we actually put a link, you can open one up at Script Financial and fund it within like 15 minutes. So we can do that. But essentially, those types of accounts are, they’re not retirement — most retirement accounts if you take them out before 59.5, you have a penalty. This is essentially, you know, it’s like a savings account, but you can actually invest it. And that’s the idea. To kind of talk about that, yeah, there is some conversation about allowing all forgiveness to be tax-free, not just the Public Service Loan Forgiveness. And I think that could be an option. That definitely could be an option. I think to kind of circle back on the longevity of the program, I think it’s — it is a very political thing. I think it’s easier to eliminate the non-PSLF program, which is what we’re talking about today. I think it’s easier politically to do that, so I think if you start seeing things, forgiveness programs kind of be chopped, I think the non-PSLF would go first before the PSLF. So yeah, so I think — could they do that, where it’s, you know, it is tax free forgiveness? Yeah, they could. But then they could also say, ‘We’re going to keep PSLF, but we’re going to completely eliminate the non-PSLF,’ because you know, from a political standpoint, you know, it’s hard to say, ‘Hey, I’m a teacher or I’m a doctor, I’ve been paying into this program for eight years, and now you’re going to pull the carpet out,’ versus whatever profession. So that’s just kind of my thought is there’s a lot of ways this could go. Again, if you are uncomfortable with having the debt hang over for 20-25 years, or you’re really uneasy about the longevity of either the PSLF or the non-PSLF, you know, this wouldn’t be something that you would necessarily want to pursue. But I think again, the situation, you know, math-wise, especially if you have a higher debt-to-income, it’s going to be one thing you should at least consider to look at.

Tim Church: Alright so Tim, good work. I think we covered a lot on the non-PSLF forgiveness program. So just to kind of recap what we talked about here, so typically, this particular program is really for individuals or borrowers that they don’t have access to the PSLF program, typically this would be for someone that has a higher debt-to-income ratio, but the things that are similar across the board here is that in the non-PSLF, it doesn’t really matter who you work for. You want to make sure that you are in direct loans, those federal direct loans, that you’re making your 20-25 years worth of payment, most likely with PharmD’s, it’s going to be 25 years worth of payments in the re-PAYE, and that you are kind of certifying your income every year. And then at the end of it, you apply for forgiveness, and you receive taxable forgiveness. You have to worry about that tax bomb. So ultimately, lots of risks that play into this particular forgiveness program, but I think given those particular set of borrowers, it does make sense to at least consider. So Tim, good to have you on this episode as co-host and looking forward to next time.

Tim Baker: Thanks, Tim.

 

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Defining and Calculating Discretionary Income for Student Loans

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What is discretionary income?

You know that money left over after you pay your rent, food, and other bills?

Discretionary income is commonly defined this way and is often viewed as the money you have to go on vacations, buy luxury items, and others things that are non-essential such as Kate Spade purses (Although my wife would disagree).

However, discretionary income for student loans is defined a little differently and has a more specific, technical definition. This is really important because it ultimately determines your federal student loan payments for the income driven repayment plans.

From the federal government’s perspective, your discretionary income comes down to two things: your adjusted gross income and the U.S. poverty guidelines for your family size. Specifically, it is your adjusted gross income minus the poverty guidelines.

Calculating Discretionary Income for Student Loans

 

Adjusted Gross Income

Adjusted gross income (AGI) is your income reported on your individual tax return after specific deductions or adjustments have been made. These are sometimes referred to as above-the-line deductions. These include student loan interest, IRA contributions, tuition, moving expenses, alimony payments, and HSA contributions.

adjusted gross income and discretionary income for student loans

U.S. Poverty Guidelines

The U.S. poverty guidelines are set by the Department of Health and Human Services and help determine eligibility for certain federal programs. These are updated annually for inflation using the consumer price index. These guidelines are the same for all states with the exception of Alaska and Hawaii which have higher limits. If you live in either of those states you can find the guidelines here.

The specific income driven repayment plan will determine what percentage of the poverty guidelines is used in the calculation. For most plans including Pay-as-you earn (PAYE), Revised pay-as-you-earn (REPAYE), and Income-based repayment (IBR), it is 150%. For Income contingent repayment (ICR), it’s 100%.

What is discretionary income

Let’s do an example to determine a pharmacist’s discretionary income who is in the REPAYE repayment plan. We will assume an AGI of $120,000 and a family size of 2.

You can see that discretionary income for student loans will vary year to year based on changes in your income, the poverty guidelines, and family size. In order to determine how this impacts your monthly payments, we have to do a few more calculations.

Incorporating spousal income into this calculation will depend on the income driven plan and how you file your taxes. For REPAYE, spousal income will count toward AGI regardless of how you file. If you file separate income tax returns, then only your income will be counted under PAYE, IBR, and ICR.

Calculating Payments for Income Driven Plans

Your monthly student loan payments are calculated using a percentage of your discretionary income from the previous year. Therefore, if you are a first-year resident and had little to no income in your last year of pharmacy school, your payment under an income driven plan could actually be $0.

For most income driven repayment plans, your monthly payments will be 10% of your discretionary income. For the old IBR plan with loans borrowed before July 1, 2014, it’s 15%. ICR is sort of the oddball in the group. Not only is discretionary income calculated differently, the payment is also different from the other plans. It’s the lesser of 20% of discretionary income or what you would pay in fixed payments over 12 years. Once you multiply the percentage by discretionary income, dividing that number by 12 will result in your monthly payment.

income driven repayment

If you want a shortcut and don’t want to do all the math you can use the studentaid.gov Repayment Estimator. While it will give you accurate payments based on your current income and family size, one of the limitations is that you cannot change these for different years. It has built-in assumptions that your income will grow by 5% each year and your family size will not change. So if you want to change these, you can just do another calculation or determine it manually.

In the case study below, Emily is single and works as a pharmacist at CVS. She is still trying to figure out her student loan payoff strategy but wants to start making payments so she chooses the income driven plan PAYE. Based on last year’s income and the current poverty guidelines for Ohio, her monthly student loan payments would be a little over $800.

No Longer Necessary to Recertify for Income Driven Repayment

Instead of having to recertify to stay on an income-driven repayment plan like before, borrowers can have their plans automatically renewed every year based on their tax return due to the implementation of the FUTURES Act. To stay in an income driven repayment plan, you will need to opt-in one time to allow the IRS to share your tax returns with the U.S. Department of Education. This eliminates the need to recertify your income annually.

If your income or family size changes throughout the year, you can make a request to have your payments recalculated. This can be a great remedy if you experience a financial hardship that results in a change in your income but you don’t want to apply for forbearance.

Income Driven Repayment

REPAYE Subsidy

Up to this point, I have discussed the factors that determine discretionary income and monthly loan payments under an income driven repayment plan but haven’t mentioned anything about student loan balances. That’s because in general, it does not factor into any of the plans. However, there are some circumstances in which it can have an impact. Since most pharmacists will have loans that are unsubsidized, I will focus on the REPAYE subsidy.

Depending on your loan balance, it’s possible that your monthly payment under REPAYE may not cover all of the interest that accrues in a month. That could be pretty depressing right? Fortunately, there’s a provision in the federal loan program that can help with that.

If you are in this position, the government will pay half of the remaining interest that is due on all unsubsidized loans. Let’s say you have $185,000 in unsubsidized loans at 7%. When you start paying your loans, the interest accrued in the first month would be approximately $1,079. Assuming you’re single with an AGI of $120,000 and live within the contiguous states, your monthly payment would be $840.50. Since this payment would not cover the total amount of interest accrued, the government would pay half of the difference which is ~$119.

The REPAYE plan can be a great option if you are a pharmacy resident and trying to survive on a limited income. When applying for income driven payments, you would likely be reporting an income of $0 or a very small amount depending on how much you worked during your last year of school, which could result in payments of $0. Under any other income driven repayment plans besides REPAYE, the interest on your loans would accrue at the full amount each month.

This is why choosing to defer or put loans in forbearance in residency could be a huge mistake because interest will also accrue at the full amount while in that status.

Public Service Loan Forgiveness and discretionary income

You may be wondering what income driven repayment plan is best for you. Unfortunately, there is no one plan that fits all and it can really depend on your student loan payoff strategy. It also depends on the type of loans you have and your overall financial situation.

If you’re pursuing the Public Service Loan Forgiveness (PSLF) program, it’s very important to understand your discretionary income and the different income driven plans. If you are all in with PSLF, one of your main goals should be to pay the least amount of money over 10 years. Remember, assuming you meet all of the requirements and make all of your 120 monthly payments on time, any balance remaining on your loans will be forgiven tax-free.

To accomplish this goal you want to first choose the right repayment plan which for most people will be REPAYE or PAYE since payments will be 10% of discretionary income. Second, knowing that AGI will determine how discretionary income is calculated, you want to look for ways to lower this.

Did you know that you can actually build wealth while simultaneously lowering your payments on your student loans? While this may sound like a scam, there’s actually a legal way to make this happen. You just have to take advantage of how the tax system is set up.

I discussed earlier that your adjusted gross income is determined after certain deductions are made. Some of these are retirement contributions or vehicles that allow you to invest. The first major one is contributions made to a Health Savings Account (HSA). If you have a qualified high deductible health plan, you can contribute up to $3,450 per year if you are single and $6,900 if you are married or have a family. While the name can be a misnomer, these contributions can be invested aggressively in things like index funds and exchange-traded funds (ETFs).

Another way to lower AGI is to contribute to a traditional Individual Retirement Arrangement or IRA. Currently, the max is $6,000 per year with an additional $1,000 if you are 50 or older. Unfortunately, many pharmacists will not be eligible to deduct this from their taxes since there are income limits. This completely phases out at a modified adjusted gross income of $75,000 for single and $206,000 for married filing jointly.

If you are self-employed, you may be eligible to contribute to a Simplified Employee Pension or SEP IRA. Depending on your income, you could significantly reduce your AGI given the limits are the lesser of 25% of your income or $57,000.

What you won’t find under the AGI section of the IRS 1040 form is contributions made to a 401(k), 403(b), or Thrift Savings Plan (TSP). That’s because this is actually reduced from the total income that you report on line 7 of the 1040 form. When you receive your W-2 from your employer, your total income will be your gross wages minus any traditional contributions you make. Keep in mind any Roth 401(k) contributions will not be deducted since you get the tax break when you make distributions at retirement age. For 2020, you can contribute up to $19,500 and an extra $6,500 if you are 50 or older.

You can see that there are some great tax-efficient ways to invest that also lower your AGI, ultimately lowering your student loan payments. So if the Public Service Loan Forgiveness program is right for you, make sure you take a look at these options.

Conclusion

Discretionary income for student loans directly determines your payments for income driven repayment plans. These can be a great option if you are struggling financially and don’t want to put your loans in forbearance but also the recommended option for the public service loan forgiveness program and non-PSLF forgiveness.

While in PSLF, you have the opportunity to lower your payments while building wealth by taking advantage of retirement accounts and other vehicles.

What is the best student loan payoff strategy for you and what repayment plan should you be in?

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YFP 061: Rapid Fire Insurance Q&A w/ Tim, Tim & Tim

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On Episode 061 of the Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of YFP, is joined by YFP team members Tim Church & Tim Baker to field insurance questions posed by the YFP community via the YFP Facebook Group in a rapid fire format. Whether it’s life, disability or liability insurance, having the right amount, not too much and not too little of insurance protection is essential to your financial plan.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim and Tim, welcome. Here we go, rapid fire insurance questions. You guys ready to do this?

Tim Baker: Let’s go.

Tim Church: Let’s do it.

Tim Ulbrich: Awesome. First things first, and I’m not going to sing “Happy Birthday” on the podcast, that would be embarrassing.

Tim Church: Why not, Tim?

Tim Ulbrich: I have a terrible voice, but if you absolutely demand it, we will do it. But it is Tim Church’s birthday! And he’s here recording a podcast, so happy birthday to Tim Church. Sincerely, we mean that. We appreciate all that he brings to YFP and the community. We appreciate his dedication, and so Tim, happy birthday.

Tim Church: Oh, thank you. Appreciate it.

Tim Ulbrich: I mean, what else would you want to be doing besides answering insurance questions, right?

Tim Church: Well, it’s kind of like deja vu because it’s been like, I remember a year ago, and I think it was on my birthday, you guys conned me into jumping in on the podcast.

Tim Baker: Is this like a birthday tradition? How does Andrea let you get away with that?

Tim Church: I guess because we had to both work in the morning, so you know, I’m off the hook and kind of can make it work.

Tim Ulbrich: That’s probably her quiet time that she appreciates and lets you off to record. So let’s do this. We’re going to do rapid fire Q&A all about insurance — life, disability, professional liability, and if you remember back in Episode 056, we did something similar related to student loans. And I would also reference listeners back to episodes 044 and 045, where we talked about life and disability in much more detail than we’re going to get to tonight even though we’re going to talk about those two topics specifically. So make sure to check out those two episodes. So the format, if you haven’t joined us before in Episode 056, I’m going to do the easy work. I’m going to punt the questions. Tim Baker and Tim Church are going to do the hard work. They’re going to answer the questions. And we’re going to get some feedback from the YFP community. And these questions come directly from the YFP Facebook group. So if you’re not yet a part of the YFP Facebook group, check it out. We’d love to have you a part of that community, and we’d love to have you featured on a future episode of the show. So Tim Baker, Question No. 1 comes from Zach in the YFP Facebook group. He says, “Which life insurance option should I choose? Term life or whole life? I think the right answer is term, but I’m not positive. Also, should I purchase it individually or through work? Through work is a lot cheaper.” So Tim Baker, life in terms of term or whole life and where to get it purchased, what are your thoughts?

Tim Baker: Yeah, so I think we’ve documented pretty thoroughly, I think that we’re big proponents of term versus whole life. You know, when I work with clients, I typically say that I feel — this is my opinion, I think this is the Tim, Tim and Tim opinion is that I think that whole life is generally better for the person that is selling it to you than the person is purchasing it. And we kind of take a mantra that we, you know, you buy term and then invest the difference. So to kind of give you a sense of what the difference is is I was on Policy Genius, which is the partner that we use to help our YFP audience with their solutions, insurance solutions, and this is what I use with clients. And before we started recording, I quoted a $500,000, 30-year term policy for a healthy 30-year-old, and it’s kind of the rule of 30. It’s about $30-35. That same $500,000 policy for whole life insurance is about five times more, it’s north of $160 per month. So I think the problem with whole life is that it can be complicated, it can be confusing, it’s not necessarily transparent, although there is a cash — so the big difference is one is pure insurance, term, it covers you for a term, a length of time. The other is whole life, it covers you for your whole life. And there is both an insurance component and like a savings or an investment component. And I think that whole life is typically, you know, I think it has lots of fees and you know, it’s not as transparent as I think I would want it to be. And I’ll probably get a lot of people that disagree with me and think whole life is a good solution, but I typically that for most of our listeners and for most people out there, term is a much, much better fit. From the perspective of should you buy individually or through work, I think one of the problems that I see often is that there is this insurance inertia, same thing when you have a 401k inertia. And what I mean by that is, you know, if your employer says, “Hey, we’ll match 3%.” Then you put your 3% in to get your match, which is great, but then five years later, you’re still at 3%. The same thing can be said about insurance is that most employers will say, “Hey, we’ll insure you 1x or 3x your salary,” or whatever it is, and you can buy up a little bit. That’s typically not going to be enough, especially for pharmacists in terms of what you actually need. So although a group policy is there and is a nice little benefit, for the most part, by and large, especially when you have kids or you have a house, things like that, you’re going to need a lot more insurance outside of what the employer gives you as a baseline. Now, I am a big proponent of buying individual policies because it’s portable. You can take it with you. And if you lock in a policy at 30 years old versus when you’re 45 and leave your job or 50, the policies are going to be a lot different in terms of the premium that you’re paying. So a lot of factors there. And typically, I know Zach, you said the group is cheaper. That’s typically not been my experience. Typically, if you’re a younger professional, you are typically paying a premium for your premium to kind of account for the older population that is in your group, whereas if you’re a younger professional, you’re going to pay a little bit less of a premium because you’re younger, you’re healthier. So I know that’s kind of a lot of moving pieces to that question, but to kind of sum it up — term, buy an individual policy because it’s portable. And yeah, just go from there. And obviously, be more — you probably need more than what the employer gives you, anyway.

Tim Ulbrich: Yeah, and Tim Baker, I wonder too if the purchase he’s referring to at work being cheaper is probably likely because it’s a much smaller amount of coverage, like you alluded to. So I know here at the university, I think we get one or maybe up to two times annual income but a max of $100,000. So you know, I’m wondering if there’s an apples to oranges comparison there where, as you mentioned, $500,000 policy or in my case, as I have documented in other episodes, $1 million policy, about $38 a month, versus $100,000-200,000 policy, obviously, the price difference per month may look very different. But the amount of coverage could also be very different. So it seems, as we talked about on Episode 044 in terms of how to determine your life insurance need, it seems to me this topic of term versus whole life is probably one of the most contested, emotional debate or whatever you want to call it, second only to the should I be paying down my debt versus investing? So lots of opinions on this topic. And one last thing I would add here is that I think for many listening to this show, we know that many of our listeners are recent graduates, new graduates, within 10 years or so of graduation. Often, we have so many competing priorities that being able to have that coverage that you need but being able to free up as much cash as possible to achieve other goals, we think is critically important, which obviously favors the term life side of the argument. OK. Good stuff. Tim Church, question from Anna in the Facebook group, “How long of a life insurance policy should I get? Is it most beneficial to get a 30-year policy?” And so she referenced that she’s currently in her 30s with young kids. What do you think?

Tim Church: Well, I think it kind of goes back to first off, are you in the term or the whole life camp? So go back to the question that you asked Tim Baker. But if you kind of agree and say, “OK. I’m in for term,” well, with term life insurance, you have to actually choose a term over which you’re covered. So you may have an amount in mind in terms of how much you want to have covered in the event of your death but over what period of time? And it’s really subjective to your specific situation, and I’m sure we’ll probably say that about 18 times on this episode as we kind of do on all insurance-related episodes. But really, the main question is is how long is it going to take you until you’re self-insured? I.e., how long is it going to be until no one is actually relying on your income or that you’ve accumulated so much wealth that no one is dependent on you making an income? And also, it could be how long do you want to work for? And how long do you expect to work for? So if you look at some of those big-cost items, so if you have kids, thinking about kids’ college, dependent on your income about future expenses, any debt that would be inherited by a spouse or family member such as a mortgage, so over what period of time are you going to need that coverage in place? So I think those are some of the questions that are really important to ask when you’re trying to figure out that term. Now, practically speaking, most insurance companies — and if you look on PolicyGenius — really, they’re going to go anywhere from 5-30 years. Thirty years is sort of like the maximum amount of time that they’re going to let you go with any policy. Now, some people get a little bit fancy. So they pick a policy for 20-30 years and then a couple years later, they layer on top of another policy to kind of get them an extra couple years or a little bit later into their retirement age. So there’s a lot of different ways you can go about it, but I think kind of a general rule of thumb is how long is it going to take you to become self-insured. And for a lot of people, that’s going to be into the retirement age.

Tim Ulbrich: Yeah, and I think this question really gets to the fact that you can’t buy life insurance in a vacuum, right? So Anna’s asking the question around length of policy, she mentioned she’s in her 30s, she’s got young kids. You alluded to things about when would you be self-insured, which obviously goes to components like how are your retirement savings going? How is your debt repayment going? What other debt do you have? Do you have a mortgage? Do you not? What are your goals? All types of things, so I think that further highlights the importance of comprehensively looking at your financial plan, not just looking at insurance as one component but as really a broader conversation related to all parts of your financial plan. So Tim Baker, continuing on here, Brian, a very active member of our Facebook community, asks, “How much life insurance is suggested for a stay-at-home spouse? General rule of thumb is 10-12 times annual income, but that doesn’t really apply here.” And then Dalton follows up to say, “It’s a great question. I’ve heard about $250,000-400,000 but curious to see the team’s opinions.” What do you think, Tim Baker?

Tim Baker: Yeah, I know Brian. So shoutout to Brian and Leah in Ohio and their son Nathaniel. So yeah, I think this is a tough one because you know, there are a variety of ways to calculate life insurance. I kind of subscribe to the Keep It Simple, Stupid method, which is, you know, roughly if you go by the old adage of 10-12 times income. I think more or less, you’ll be OK. But I think with some of those kind of if you have, you know, one spouse that doesn’t work or, you know, if there are, you know, kids or you have different goals with respect to college or if there’s a special need or something like that, I think breaking it down a little bit further. So the two main avenues that you can go down are let’s call it the Financial Needs calculation, which this method basically evaluates income replacement, lump sum needs, accounting for inflation and things like that, examines recurring expenses and, you know, some variables to consider would be things like final expenses, what the outstanding debts would be that maybe not be forgiven upon death and disability. If and what you want to provide for income to survivors. So if there’s, like I said, education or special needs that we need to account for with the, like again, with the marital status is and the roles of the spouses, size of the family, that type of thing. So that’s more or less one calculation you can go through. The other one is called a Human Life Value, and this is more or less a time value money calculation that uses income throughout what would have been the remaining work life expectancy. So you essentially take out the person that you’re insuring, you basically project what their income would have been, and you kind of discount what their consumption would have been in the household. And then voila, you have your calculation. So in this case, I probably would go through both and then probably with more of an emphasis on the financial need, the first method that I calculated that said, OK, in this case, in Brian and Leah’s case, if Leah decides to go back to work more full-time than she is now when Nathaniel is grown up, like what does that look like? You know, what are your thoughts on having a part of the life insurance benefit go to completely pay off the home mortgage or go to completely fund Nathaniel’s college? So there’s a little bit of wiggle room and gray area, and ultimately, what we’re trying to kind of come up with is a number that, hey, if someone were to pass on, we can then take that money and invest it and have a level of life that makes sense. Now, just to kind of flip that switch with the stay-at-home spouse, from Brian’s perspective, obviously he’s going to be on the road, traveling, working, and things are going to change. There will be an adjustment period if that were to happen, God forbid. But, you know, as lots of families with young kids know that that both work, daycare and child care services are hugely expensive. So I think that, again, we would look at the cost of daycare from basically the age of the kids to kind of college age and then provide some type of benefit to cover that in the event that the stay-at-home spouse was, you know, to die prematurely. So there’s not — unfortunately, there’s not, you know, just like Tim said, it’s not kind of a one-size-fit-all. I think basically, sitting down and asking tough questions — because again, like a lot of my, if I say, “Hey, what do you want to allocate for final expenses?” people look at me like I have three heads. It’s just not something that we think about. So like I’ll provide some guidelines and some left and right limits in terms of that, and then we kind of just build that into the calculation and then go forth, get a quote and get a plan in place. So stay-at-home spouse is a little bit tricky. Again, not a great rule of thumb out there, but I think ultimately, there’s a — sitting down and kind of backwards planning into a number makes the most sense.

Tim Ulbrich: Yeah, good stuff. And a shoutout as well to Brian and Leah. Leah actually is a graduate of NEOMed. Go Walking Whales. Tim Church, also a graduate of the great university that is NEOMed, so excited to have them a part of the community. And this one hits home for me. I know Jess and I really hadn’t thought about life insurance in terms of her being a stay-at-home mom. And that came up as a topic, and all of a sudden, we were asking ourselves, what expenses would arise in the event that she were to be unexpectedly pass away? So I think this is a good topic for everyone to be thinking about. And we ended up landing on $400,000. But obviously, as you mentioned, there’s certainly not one size that fits all here. I would also reference our listeners, we have two great guides and pages on life insurance and disability insurance. So if you’re ever talking about life insurance, if you go to YourFinancialPharmacist.com/lifeinsurance, a great guide that will help you walk through and answer some of the questions that we are talking about here tonight. Tim Church, this is a loaded one regarding disability insurance, and this gave me actually flashbacks to us writing the book, when we were digging in and trying to decipher the code that is disability insurance. So Dalton asks, “I feel like I know very little about disability insurance, even less about professional liability. So it would be great to know how much is needed and what’s a reasonable amount to pay for it.” So we’re going to talk about professional liability here in a minute, but talk to us a little bit about basics of disability insurance and what our listeners should be thinking about.

Tim Church: Definitely. Well, disability insurance is really income insurance. It’s protection to guarantee yourself an income if you can’t work because of an accident or an illness. And I think a lot of people, they have this feeling, especially people that are young starting out in their careers that they’re just invincible and that nothing bad is going to happen to them. And unfortunately, that kind of thinking can lead to a bad situation, as I’ve known — specifically known cases of people who have had debilitating chronic illnesses that have limited their ability to work full-time or part-time. I’ve known people that have gotten into car accidents, who’ve had head trauma and couldn’t work for an extended period of time. So if you think all about that it takes to become a pharmacist, all the time, all the energy, that this is really probably one of the most important insurances that a pharmacist should have because it’s really a way to guarantee that you’re going to have an income for whatever period of time that you become disabled. And you know, that kind of goes into how long should you have a coverage? Should you have a short-term disability coverage? Should you have long-term? And I think that obviously, again, it’s going to be situation-dependent. But if you expect that you’re going to work until you become 60, 65, then you really should have a policy that’s in force over that time period. And so when it comes to the actual amount, you have to ask the question, well, what could you comfortably live on or what kind of lifestyle do you want? And that’s an interesting way to look at it, but that’s really what it comes down to. So if you’re someone that says, I really want to maintain my same standard of living that I’m doing right now, then you probably need to go up to the max of what insurance companies are going to allow you to have, which is about 60-70% of your gross income. And if you think about that 60-70% of your gross, that’s really pretty close to what you’re getting paid net anyway when you think about taxes and other deductions that come into play. So if you’re trying to replace basically most of the income that you’re going for, then that’s a percentage that you would kind of look at. Now, you may be someone to say that, well, if I couldn’t work, maybe I don’t need to have my same standard of living and I would be OK with a lesser amount. And certainly, that’s an example of one of the routes that you could go. Now, one of the things that you mentioned about the book, Tim Ulbrich, is just thinking about how complex these policies are. I mean, when you think about a term life insurance policy, it’s pretty straightforward. You choose a term, you choose an amount, and there you go, right? But when it comes to disability insurance, you have these basics in place, but then you have all of these other bells and whistles. So in the policies, they call them “riders.” And so it can make it very, very confusing, very complex, and it’s almost like you’re buying a car. Like they have all these upsells and things that they’re trying to get you on. Now, some of them are kind of standard in policies. But when you look at what the cost breaks down and how do they come up with a cost for you, really going to be based on some personal details: your age, your health history, the benefit period, so how long you want that coverage. Like I said, for most people, probably going to be up to retirement age. And then also something called the elimination period. And this is basically the time it takes for when you would make a claim that you are disabled until you would actually start getting payments in the mail, you’d start getting a check and getting payments. So the longer that elimination period, the cheaper your policy’s going to be. So if you say, “I have enough emergency fund or enough savings to wait until six months between making a claim,” well then, you would have an elimination period of that length. And basically, you’d be able to cover yourself until that period. And then some of the other things that kind of break down and go into that are some of those riders that we talked about, so something called own occupation, meaning that if you can’t work as a pharmacist, you’re going to get that income every single month, not if you can do any occupation or any meaningful work. So those are something that I think is really important. And then when you go into looking at the cost, again, because there’s so many variables into play, it’s hard to say, you know, what is a good amount? What’s a reasonable amount? But I will give you an example. If you look at someone who’s 25, so around the average age of someone who’s graduating as a traditional student, and they’ve got coverage until age 65, 60% of their income they’re trying to replace within a 180-day elimination period, that’s going to cost around $120-160 a month. And a lot of people may be looking at the number and say, “Wow, that’s a lot higher than life insurance and possibly even health insurance and other things.” And it is. It’s true. If you want kind of a very comprehensive type of policy, it’s going to be a little bit pricier than other things. But again, at the end of the day, you think about all the time and all the effort that you put into become a pharmacist, what are you going to do if you can’t work for a period of time? If you get in an accident, if you become disabled because of an illness, what are you going to do? So again, I think it’s so important. And one of the ways to kind of look for, shop multiple companies, again, is checking out PolicyGenius, and you can do that on our partner page. And that’s at YourFinancialPharmacist.com/insurance. Wow, that was a mouthful, Tim.

Tim Ulbrich: No, that was the Cliff Note version of disability insurance that I wish I would have heard 10 years ago. That was great. And I think, as you mentioned, very complicated topic. And I’m going to issue a call to action to our listeners because I know there are lots of people out there that need adequate life and disability insurance protection that don’t have it in place. So if you’ve heard this night — and obviously, this is just scratching the surface — head on over to the website, learn more, check out the free guides, evaluate what type of coverage you need, and then, as Tim mentioned, you can check out the PolicyGenius site to get going there and get learning more about this topic as well. So also, I’d reference Chapter 7 of the book, “Seven Figure Pharmacist.” We talk about this in great detail, and you can get that over at TheSevenFigurePharmacist.com. OK, two questions we have about professional liability insurance. So Tim Baker, the first question comes from Tyrell. He says, “Should I carry my own professional liability policy on top of whatever my workplace provides?” What do you think?

Tim Baker: Yes. So a professional liability policy is definitely something that you’re going to want. And I think given the cost of said policy, it’s really a smart move. I think they’re almost negligible in terms of what you pay for the year. Typically, if you’re a pharmacist, you want to protect yourself. Typically, the policies that are issued through employers will mainly protect the employer. So this would be to protect yourself if you’re individually named in a lawsuit or if your employer doesn’t have the proper coverage in place to protect you or if you have a second job, if you’re side hustling, or if you kind of give advice outside of your employer, these would be things that would be covered under your own policy. So they say, some of the studies show that 75% of claims against pharmacists is wrong drug, wrong dose. So some of the things that would be covered would be things like that kind of overarching professional liability, things like license protection, defense attorney, those kind of things that are super important, you know, just like Tim Church was talking about with, you know, the disability policy. This is your really protection against your ability to make a living. Pharmacists spend lots of time and money and blood, sweat and tears to get the PharmD, get on to the world, and these are, you know, these are these protection mechanisms that are in place to make sure that you are defending your income and your overall balance sheet. So you know, I know that Pharmacists Mutual, the clients that I work with will look at that or HPSO, I know has an agreement with our partner, APhA, so these are all places that I would look and make sure that, you know, you have that policy that’s portable to you that you’re paying for and provides you coverage that you need.

Tim Church: And like you said, Tim, the cost is really negligible. We’re talking for most policies, they’re going to be like $150-300 a year. So it’s really, really cheap for the coverage that you get. And it’s pretty easy to get these policies. It’s kind of an all or nothing. A lot of the other insurances we already talked about, you have to pick a lot of different variables and things that you want, but these with liability insurance, it’s pretty much all or nothing. And most coverages give you about $1 million worth of liability per claim, then somewhere around an aggregate of $3 million for as an annual limit. So I think for most part, it’s pretty much a no brainer to have.


Tim Ulbrich: Yeah, one thing I would add too to the discussion is that the role and scope of practice, depending on the state that you live in, is evolving quickly. So I think as the role of the pharmacists continues to expand — you know, here in Ohio, we obviously have an expansion of collaborative practice agreements, which means now essentially, we’re able to prescribe without using the word ‘prescribe’ in our state laws. But obviously, that’s going to add additional opportunities where that liability protection is going to be needed even more. So I think for the cost and what that provides, I think it’s critically important. And I know here in Ohio, I’m sure other states are experiencing, you know, the rules associated with the laws that the board is governing are evolving very rapidly, by the week, sometimes by the day. And so being able to stay up with those and make sure you’re practicing according to the law, I think is becoming more difficult, which validates the need for that insurance even more. Tim Church, Kristin asks — this is a good question — from the VA here, “If you work for the VA, do you need to carry professional liability insurance?” What do you think?

Tim Church: It’s interesting. I asked the same question when I first started, and I think a lot of people have this question. Well, when I looked into this a little bit more, that VA employees are federal employees, they have this extra protection through the Federal Tort Claims Act, and so when you’re functioning within your federal scope of practice, it does provide a level of immunity from personal liability damages, so if you have any malpractice or negligence, if you’re working under your scope or within your scope. So I think that you definitely get an extra layer of protection. I think where it can get fuzzy is if you’re functioning within that scope, and if there’s any way that possibly you could be told or determined that you’re not within that scope. And the other thing I would say too is there’s always going to be opportunities to work somewhere in addition to the VA or if you’re going to give verbal advice like Tim Baker mentioned. So I think that in general, if you want that extra layer of protection, it just kind of makes sense. Is it absolutely necessary? Probably not if you’re solely going to be practicing pharmacy within the VA and that’s it. But again, kind of go looking back to the cost and the benefits that you can get, I think it’s just a great buy in terms of what you get in exchange.

Tim Ulbrich: Yeah, just don’t get Crazy Uncle Joe any drug advice, right? Outside of work. And it’ll all be OK. So I think take-home point here, professional liability, get it done. For what it costs, it’s good protection, good coverage, thinking of that also alongside disability in your life. So Tim Baker, last question we have here from the YFP Facebook group comes from Shaveida — and I apologize in advance if I butchered your name. Let me know, we’ll get it right next time. She asks, “My employer advertises long-term care policies.” And she says she doesn’t know much about it. So talk to us briefly about long-term care. We haven’t talked much, I think if any, about it on the podcast or even on the blog. What is long-term care coverage? And who should be thinking about it?

Tim Baker: Yeah, and I would say full disclaimer, I’m not a long-term care insurance expert. I know, typically this is coverage for individuals, you know, basically as they become seniors where you pay an annual premium in return for financial assistance if you ever need help with kind of those day-to-day activities like bathing and dressing and eating meals, maybe toileting, those types of things. And most of my experience with long-term care insurance is from my last firm where a lot of our clients were more kind of approaching retirement and in retirement. You typically don’t buy these types of policies until you’re in your late 50s, early 60s. And they’ve had kind of a checkered past. So back in the ‘90s, there were probably more than 100 insurers that issued these policies. And I think today, it’s less than 20 that actually do because of a variety of underpricing policies and premium spikes and just insurers going out of business. You know, typically, what I saw in that space in my last firm is a lot of people electing to let the policies lapse because they just became too difficult to manage and really self-insure. Now, there’s a lot of risk there because, you know, I read a stat that someone retiring in 2015 will spend I think $245,000 on medical expenses kind of outside of Medicare. So it’s going to be a large part of, you know, the future of retirement planning. How do you self-insure versus long-term care insurance? So you know, like I said, most of my clients are kind of in the 25-45 range, so it’s not something that necessarily I look at day-in, day-out. I know that overall, it can kind of be expensive and difficult to price and project. But I think, again, as my client base ages, it’s just something that we have to look into and see how to really approach that part of the retirement plan.

Tim Ulbrich: Good stuff, Tim and Tim. This has been fun. We’ve got more of these coming. We’re going to do rapid-fire Q&A’s on investing, home buying, other topics. We’d love to hear from you. So again, if you’re not yet a part of the YFP Facebook group, come on over, join us, ask your questions, and we’d love to feature it on a future episode of the YFP podcast. So on behalf of the team, that’s all for today. And we look forward to joining you again next week. Have a good one.

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YFP 060: One New Practitioner’s Lessons Learned Accruing $224,000 of Debt in 7 Years

Posted on by yfpadmin

 

On Episode 60 of Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of Your Financial Pharmacist, interviews Brianne Porter, a new practitioner and faculty member at The Ohio State University College of Pharmacy, all about her journey of going into more than $220,000 of student loan debt, the plan she has put together to pay off this debt and the lessons she has learned along the way.

About Today’s Guest

Brianne Porter, PharmD, MS is Assistant Professor of Pharmacy Practice at The Ohio State University College of Pharmacy. She is primarily responsible for co-coordinating and teaching in Integrated Pharmacotherapy 1 and 2. Her research interests include community practice advancement and the scholarship of teaching and learning. In addition to her position with the college, she moonlights with a local independent pharmacy to bring those skills and experiences to the classroom. Brianne is actively engaged in APhA, serving as the Chair of the NPN Education Standing Committee, AACP, and OPA. She is passionate about community pharmacy practice and about getting students excited about and prepared for upcoming changes in community pharmacy practice.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: So Brianne, welcome to the show. Thank you so much for joining me.

Brianne Porter: Thanks for having me, Tim.

Tim Ulbrich: So excited for this recording, and I’m pumped up about your journey, and as I mentioned to you before we jumped onto the recording, we’ve done several debt-free episodes, but I think what I’m really excited about is your willingness to share your story as you’re really in the thick, in the weeds of this journey of paying off student loan debt. And you and I had a chance to meet all the way back — I think it was actually at AACP we met for the first time. Is that correct?

Brianne Porter: Yeah. It’s been a couple years.

Tim Ulbrich: Yeah. So at the time, you were just starting your fellowship — and we’ll talk a little bit more about your career journey and so forth — but your fellowship at Ohio State along with your Master’s degree. And at the time, I didn’t know anything about your financial journey. So I’ve learned more along the way, I know you’ve attended a couple presentations we’ve done, we’ve talked a little bit about student loan repayment strategies and options, and what I know from your story is that you obviously had a moment of conviction, an “Aha!” moment where you said, ‘There’s got to be a better way to do this.’ And I don’t know where that “Aha!” moment came from, but I’m excited to learn that on the recording and this episode today. So before we jump in to the details of your story, I first want to say thank you for your willingness to come on the show, for your willingness to be vulnerable with our listeners, and I’m confident that your story is going to inspire action from others in the community. So in advance, thank you for that.

Brianne Porter: Sure.

Tim Ulbrich: OK, so let’s jump all the way back — if I have my facts correct — all the way back, you graduated from pharmacy school at The Ohio State University in 2014. And it’s my understanding at that point, you had no student loan debt prior to starting pharmacy school. So you graduated in 2014, but prior to starting pharmacy school, you had no student loan debt. Is that correct?

Brianne Porter: Yeah, that’s correct.

Tim Ulbrich: So how did you manage to get through undergrad debt-free? Tell us a little bit about that story.

Brianne Porter: Yeah, so I was really fortunate. I actually went to undergrad at Ohio University in Athens. And I was really fortunate to get a scholarship that not only paid full tuition for four years, but it also covered my living expenses, I got a stipend in the summer to do some experiences, go travel and do some different things, and so really, when I was an undergraduate, during my undergraduate studies, all I really had to worry about was spending money. I had a job, and I made money, and I had spending money. But really, I didn’t have to think about what college cost or anything like that. I was really living a pretty good life at that point. I was very fortunate.

Tim Ulbrich: So you’re crushing it through undergrad, you’ve got scholarships, you have no student loan debt, so I guess one of the upsides of this story is it could be worse, right, if you had undergraduate student loan debt that was accumulating. So fast forward then, you graduate with your PharmD in 2014, tell us a little bit about your total debt load at the point of graduation. And then take us through your decision, your journey, in the postgraduate training and fellowship and ultimately why you decided to defer your loans through that period.

Brianne Porter: Sure. So I feel like this is the reason I reached out to you, Tim, is because as I’m looking back on this time and thinking about decisions I was making, I’m thinking, oh my gosh, how many people probably are making those same decisions. Like, please, let me help stop you from doing this. But yeah, basically, whenever I started pharmacy school, I’m going to go back even a little further because I think this part’s kind of important for the students listening. But when I started pharmacy school, because I had that experience in undergrad, I don’t think that I was very intentional. And I know we’ve talked about intentionality before, but I was not intentional at all about thinking about how much money I needed. I’d had four years paid for, and I think because I didn’t have any responsibility for my undergraduate education that I wasn’t really thinking about what it actually cost to go to college. And I had the same mindset that everyone has, which is that I’m going to graduate, I’m going to be making $100,000+ a year, I’ll be able to pay those off in no time, it’s no big deal. So every semester, whenever I did my applications for the student loans, I would just get like an offer. Like, ‘You’ve been offered this much. Accept all, or enter a different amount.’ And I think that if one slight change would have just been instead of offering me the max amount, they would have just had a blank and said, ‘How much do you need?’ I probably would have been more intentional, right? But you know, being a student and being fairly irresponsible at the time, I basically just rationalized in my own mind, well, I know what tuition is, and I know that I need to cover living expenses, and this is the first time I’ve lived alone. I live in a city, I’ve always lived in small towns, so instead of really thinking through or trying to estimate those costs, I just thought, you know what, I’m going to need it. Pharmacy school’s going to be stressful enough as it is, I’m just going to take the max amount. I’ll be able to pay it back, no problem. So I went through that, and even through school, I mean, I worked all through school. And I, again, used that money for maybe joining organizations or spending money or whatever else I needed. I mean, I had a car break down at one point. So like, it was kind of like an emergency fund, so to speak, as a student. And I think that even throughout those four years, it never really dawned on me like what this payment would look like whenever it came in, even that $160,000, which is what I graduated with. But even thinking about that total number, it never dawned on me like, how much money is that actually going to be out of my paycheck? And how hard would I work for that paycheck, you know? I felt very comfortable with that, oddly enough. But I had $160,000 of debt, and I was very comfortable with that.

Tim Ulbrich: Mmhmm.

Brianne Porter: But then I decided very last minute, I made a rash decision to apply for residency. And I was very lucky I matched, but at that point, I hadn’t really thought through the financial aspect of that. So when I was finishing pharmacy school, I had already accepted a job with Target, and I was going to be making about $120,000 at the time a year. And so even with that $160,000, I was like, well, I’m going to make $120,000. I’ll pay it off in a few years, no problem. Which is a funny joke now. But then whenever I matched for residency, I thought, oh my gosh, I’m going to be making like a third of what I was going to be making, what I was planning to make, so now I’m going to have more expenses with travel to conferences and different things. What am I going to do? And just a side note — I think it’s kind of funny how as a resident, we think we’re so poor. I think because we compare to what the pharmacists make, but if you think about it, people raise their families on significantly less than what we make as a resident. So I wish that I would have that moment of realization back then to know that, yes, you can very easily live on this much money. And yes, you can very easily make payments on your loans with this much money. But again, I think I was really good at talking myself into deferring or talking myself into I need more money because I just didn’t have that appreciation for my undergrad. So fast forward three years, I completed a PGY1 and then a two-year fellowship and a Master’s. And luckily, the Master’s was included in the fellowship, so I really did only have one degree to pay for, which is kind of sad that I landed at $224,000 with just one degree out of three that I have. But regardless, I finished my postgraduate training in 2017 and then suddenly, I got the final statement of $224,000. And that was a little more sobering, I think. That was a lot of money.

Tim Ulbrich: And I think that speaks to, you know, a few things that really stand out to me that I hope current students pick up on. I think your initial description of the process in which you borrow money — it’s very easy, almost like it begs you to take all that you need, right? And for cost of living and other things. And I think really taking a step back and saying, to your point, if this were a blank slate, and I really did my budget and did the math, what would I actually need and how can I minimize as much as possible what I’m borrowing because at the end of the day, an unsubsidized loan — as obviously you have experienced firsthand — an unsubsidized loan, that interest is accruing all the while that you’re in school. And so the other big takeaway for me is if there’s current residents, new practitioners listening — and I know certainly you’re not alone in this, Brianne — is deferment is real in terms of the impact it can have. And for you, obviously that went from $160,000 to $224,000 because of three years of deferment. And one of the things I always encourage resident or new graduates to think about is that even if you’re unsure about exactly how things are going to shake out, if you opt in to an income-driven repayment plan, because of how they’re calculating your monthly payment looking back at the previous year tax return, you’re going to have a very, very low — likely have a very, very low monthly payment. And so better than deferring, you can go into active repayment, and then obviously, you can start to pay it from there and get ahead of the interest over time. So thank you for sharing that. So you started with $160,000 from your pharmacy degree, you end up with $224,000. And I think my follow-up question to that is, as a new practitioner with life coming at you in many different angles and priorities, things that you want to do and accomplish, how does $224,000 of student loan debt, how does that practically hinder you as a new graduate? What impact has that had on you?

Brianne Porter: Yeah. It has been — I’m not going to lie to you. It’s been pretty awful, actually. And not to say that I don’t have a lot of good things in life, I definitely have much to be grateful for. But I had no idea how much this was going to really impact not just how I felt but other people in my life, how it was going to impact the decisions that I got to make, the things I got to do with my free time. So you know, for example, because of some other poor decisions, I also had some credit card debt, and so my credit score isn’t fantastic. And then I got married, and we wanted to buy a house. And we were able to buy the house. My husband, luckily, he had his undergraduate paid for as well and went straight into a job and was saving for several years. So he was very financially stable, actually, which was very lucky for me. So we were able to get a house, but it’s like, now we have the house, we have things that happen with the house, you have to repair an AC unit or a furnace or whatever the case may be. Or you have to get new windows, and these things come up. And because of my student loan debt and my monthly payment, we’re so strapped that it’s like, we can barely pay the bills that we have. We have a little to go into our emergency fund for those sort of things with the house or other things that might come up. But we do not go on vacations, we do not spend a lot of money on anything expensive. I mean, I can’t tell you the last time I went shopping for fun. I mean, I guess probably if you’re financially responsible, you’re really not just going shopping without a budget anyway, but I just have felt very strapped, quite the opposite of what I thought in pharmacy school and residency, to be honest. And it’s a real bummer.

Tim Ulbrich: And I think what you’re describing is what Jess and I felt, what I hear from so many other graduates is this feeling of, you know, I had one thing in mind of what this income would provide in terms of, you know, the feelings of that income. And then all of a sudden, it’s like, wow, I really feel like I’m living paycheck-to-paycheck despite this income. How is this happening? And obviously, as we’ve talked about many times before on this podcast, big student loan payments, other big purchases, a home, other priorities, quickly will evaporate the income that you have in any given month. So what I really want to find out from you is I know in our conversations before — which by the way, I’m very much looking forward to becoming a coworker of yours soon at The Ohio State University — so I’m pumped up to be working with you, but I know as we’ve talked before in different venues and settings is that I can tell you have an energy and a passion and a motivation to get after this whole topic of personal finance. And obviously, through you journey, I think it’s fair to say that you kind of wandered into this and really maybe didn’t always have that passion, energy or motivation. So what was the “Aha!” moment for you where you said, “There has got to be a different way of doing it.” Was it seeing that balance of $224,000? Or was it a combination of factors and things that came together?

Brianne Porter: Yeah, that’s a great question. So there’s a lot of things to address in your question here. I think the big “Aha!” moment, honestly, was not the balance. It still hadn’t hit me because really, if you’ve never had much money in life, that balance still doesn’t really mean anything to you. $224,000 I’m like, OK, well that’s six digits. What does that really mean? OK, I’ll tell you what it means. It means when you make a little over $100,000 a year, and you get your paycheck and taxes and everything else come out, your health insurance, all the things that you don’t account for when you think about that $100,000 income. My student loan payment was one-third of my take-home pay, which is significant, I think.

Tim Ulbrich: Yes. For sure.

Brianne Porter: And what my lender did, which was kind of sneaky, is they kind of started throwing the loans back one at a time. So my first payment was like a couple hundred dollars and then a little more and then a little more. But then my final payment came in, like the final amount that it was going to add up to, the first time was $2,300. Now, that’s a lot of money. You know? So it really hurt to pay that out on the beginning of the month and be like, wow, I just lost $2,300 this month.

Tim Ulbrich: That’s when it gets real, right? When you see that number, and you’re like, OK, here’s my paycheck after taxes, here’s what’s going toward student loans, here’s the house payment. And like you said earlier, what’s left after that? I mean, I think that’s the moment where it goes from almost feeling like Monopoly money to, ‘Holy crap, this is real. And I’ve got to do something about this.’ So one of the things I know is that you’ve been a really active member of the Facebook group, the YFP Facebook group — which for those that are not on there listening, please jump over and join the conversation. There’s so much support and encouragement and helping one another, it’s been really fantastic to be a part of. But it makes me want to ask the question, like for you, what role has community played in terms of people being around you and helping you on this journey? Whether it’s your spouse, peers, coworkers, family or friends. Talk a little bit about community aspect and accountability for you on this journey.

Brianne Porter: Yeah, I think that’s a good question. To be honest with you, when this all first started to unravel or kind of maybe unfold is a better word — when it started to unfold in front of me and I really realized the impact of the decisions that I had made, I was really embarrassed because it’s like, here I am, a pharmacist, I’ve got a Master’s degree, I mean, on paper, I look like I should be very intelligent, right? So how did I make these decisions? And how did I justify them in my head? So I think that I was really embarrassed that I wasn’t more intentional up front and that I really didn’t take that responsibility to just learn more about finances. I mean, totally honest here, I still don’t know a lot about financial things, which is why I purchased your book because I wanted to learn more about that. And so that’s really what kind of, you know, drew me in, but I was really embarrassed by that. Like I didn’t talk about it to anyone, and I didn’t talk about my debt, I didn’t talk about the choices that I had made. And I certainly didn’t want to ask other people because I didn’t want to then feel obligated to share, so I felt like I was really — especially when I started getting that payment every month, that bill and making that payment, I was really feeling very isolated and kind of trapped and just feeling almost like I couldn’t breathe. You know, I really felt like I was struggling to figure out how to manage with it and how to make decisions and what to do with it. And I think that the community that really helps me the most really is the Facebook group, the Your Financial Pharmacist Facebook group, which is why I’m so active on it. And I think that the thing that is so nice is to just get on there and see that I wasn’t the only person who made these decisions, and I’m not the only person who doesn’t know what certain things are when it comes to financial things, I guess, you know, financial terms. I don’t have any background in business. I never had to take any classes like that in any of my training, and I never opted to, so I really don’t know anything about it. And that group just made me feel like I wasn’t alone. And then I think it gave me the confidence to start talking about things a little bit more openly, so that was really powerful for me, actually, that group.

Tim Ulbrich: And so I want to follow up with that and talk a little bit about how you got to the decision of what your game plan is with your student loans. You know, we’ve talked a lot about on this podcast when we’ve done speaking events, there’s so much to be said for getting it right when it comes to having the optimal loan repayment strategy. And knowing you work for technically a PSLF-qualified employer, I know you and I have talked a little bit about refinance, you have all your federal options. So just walk us through briefly, what was your process or strategy to come up with your game plan when it came with why, for you, this was the option that you were going to go forward with in terms of paying back your student loans.

Brianne Porter: I appreciate you asking that question because it was actually, as I’m sure you know from some of our conversations, a journey that I really struggled with a lot, even once I started to get educated and really understand what the different options meant because that’s the first thing, right? When you’re a student and you’re doing the exit loan counseling, for any students listening, that is not good enough on its own. You have to learn more about what’s going on because I went through that counseling, and I still really didn’t understand what all of my loans were and what the payback plan for those were and what compounded interest is. Like I really didn’t understand any of that stuff. But once I became educated, again, through the Your Financial Pharmacist community and the book “The Seven Figure Pharmacist” and really understanding what those options were, sitting them down side-by-side, I still really struggled. And I’ll tell you why. So I owe $224,000, and as you mentioned, I work for an institution that would qualify for Public Service Loan Forgiveness. So yeah, sure, it probably makes a lot of sense to the average person to just say, well, you’re going to pay a lot less if you do Public Service Loan Forgiveness, so why wouldn’t you do an income-based repayment plan and go for that? But I am very risk-averse, actually, so to me this idea that that could go away at any time and I would have all of these small payments that I made that are really compounding interest as I went was very unnerving. Like it was keeping me up at night thinking about, can I really do this? Could I make this leap? So for the first year out of training, my first year as faculty at Ohio State, I actually opted into the 10-year standard repayment. And I did not refinance, which was another mistake that I’ve made. I’ve made every mistake you can possibly make. Yeah, I did not refinance. And for that first year, I was making those $2,300 a month payment. And the reason that I did that was the uncertainty of PSLF but then also, I’m the kind of person that I just like to attack something and get rid of it as soon as I can. And so I really just wanted to be done with this. I wanted to try to get this done in 10 years or less and know that I paid it all, I don’t owe anyone anything, and I’ve moved on. But kind of what we were talking about earlier, how that really impacted me, we were — my husband and I just felt very, we felt very trapped. We felt like we couldn’t do anything that was fun, we created a budget, and we were living by the budget. And that was really great, we paid off credit card debt, we paid off all kinds of other debt outside of this, actually. But we still felt like, wow, this is really strapping and is really suffocating in a lot of ways. And it just feels like we’re not really going anywhere, right? Because especially at the beginning, you’re kind of not really going anywhere. So at that point I realized I needed to either refinance or just go bite the bullet and go with PSLF and hopefully everything works out and the program continues or I’m grandfathered in or whatever the case may be if things were to change. And when we looked at refinancing, we found that even with the lowest possible rate that we could get, down around 4%, with my husband co-signing and everything, it was still only a matter of $300 or $400 difference a month. And so for us, that didn’t feel like enough to justify to continue on that repayment plan. So ultimately, I decided to opt into the income-based repayment plan. I get my first bill tomorrow, and I’m really excited to see that it’s over $1,500 difference. So you know, we want to look into investing and building our emergency fund more and things like that as well, but we are excited to have a little extra in there to be able to do something fun, you know, when we get the time or when the opportunity arises, very first world problems I’m talking about here.

Tim Ulbrich: Yeah, but I think your story is such an important one that matches up with so much of what we preach here on this podcast and even in the YFP student loan course is that there is no one right solution that we can blanket cover everyone and say, ‘This is the best option,’ right? You said something like, you know, these could keep me up at night. And for somebody else, that may be a very different scenario. Or maybe the math looks better on a refinance. And maybe somebody isn’t as interested in investing or maybe they’re not as conservative. So all the factors come together, and I’m so glad to hear you’ve thoughtfully walked through those and obviously worked with your significant other to do those, to say, OK, collectively for us, this is the plan going forward. And that may be very different for somebody else, and certainly that’s OK. And I want to go there then, since you mentioned even before and also through that last segment there, you know, your significant other obviously has become a very important part. You guys are in this together, you’re doing it together. He came in with no debt, right? You mentioned that earlier.

Brianne Porter: Right.

Tim Ulbrich: So I think I would love to hear from you, just what you’ve learned through that experience where maybe for others that are listening, one person’s coming in with a ton of debt or all the debt, somebody else has no debt. And just some of the feelings that you’ve had around that and how collectively, you’ve come together to work it out and say, OK, yep, we came in at different starting points, but we are a team, and we’re trying to do this together. So talk us through that.

Brianne Porter: So we — obviously, he came in, like you said, with no debt. And I came in with a lot of debt, so that was our first point of kind of not really being on the same page. But then we were also raised very differently financially. And so we approached finances in general very differently. So I think I talked a little bit earlier about how I was embarrassed about my debt and how I got there. And so to be honest with you, I was not up-front with him at first. It took me years of dating to really come clean about what I owed in student loan debt. And because we weren’t married, because we weren’t paying on it, I wasn’t paying on it at the time, he really, he didn’t know. And poor guy, I waited until we were engaged to drop that bomb on him. So he was in a situation, you know, he’s like, wow, what am I going to do now?

Tim Ulbrich: He’s not out now, right?

Brianne Porter: Yeah, but he’s a good sport. So he has — you know, and I said we’re very different in how we approach finances. I’m much more the — nowadays, at least — I’m much more the let’s count every penny, let’s keep track of every penny, let’s budget every penny. You know, I want to know where all my money is going now. And I’m very intentional. I learned my lesson, but I’m very intentional now. Maybe I was too intentional. But he is a lot more laid back and he is of the mindset that it all works out. So he’s on the opposite end of the spectrum. But because of that, he was very relaxed when I shared with him my student loan debt. And he said, you know, we learn lessons. That’s what life is about. But what are we going to do moving forward? And I think that was the biggest thing is just coming clean about it and then really sitting down and coming up with a plan versus his motto, he’s very laissez faire about things, and he’s very comfortable being like, we’ll fix it out. But at that point, we both agreed, we need a plan. This is very significant. We need to plan moving forward.

Tim Ulbrich: Well and just kudos to him to embrace that and say, “Hey, this is what it is. And it’s now our problem collectively, and we’ve got to figure this out together to have a plan.” And I think that’s great advice for those that are listening that may be struggling through or maybe even people that are in that dating phase. And you know, I think my advice would be the earlier, the better. You know you can get some of these topics on the table. And I know for Jess and I, personal finance wasn’t something we talked about before we got married. And all of a sudden, you’re thrown into it, and you’re dealing with it. Now you’re coming up with the questions of should we merge our accounts and how do we budget together? What goals are we trying to achieve? You know, all of these factors come together and so obviously, the earlier the conversations, the better. So two questions I have left for you are a little bit lighter questions, but I think part of your journey here is to share with others to hopefully help them along their journey as well. So pharmacist peers that are listening or students that are still in school, what are a couple pieces of advice you would have for them in terms of, you know, how they can prevent maybe some of the mistakes that you made along the way.

Brianne Porter: For pharmacists, I guess I would say those of you who are in my shoes right now, you’re now practicing, you’re making a little bit more than a resident or a student would make, it’s just don’t be afraid to jump in. I know I’ve been at a lot of your presentations and on your webinars, Tim, and you talk about this a lot. Like the first thing is be real and look at your numbers and just get down with that. And so I think that’s, you know — I heard you say that, but I think that when you’re always thinking about what do I have and you haven’t really wrestled with the numbers yet, you haven’t been plain with yourself about what’s actually there, that looming concern about what might be there or what that looks like is sometimes twice as bad as what’s actually there. So I would say just take a look, be really honest (gap), think about what motivates you. I know you’ve also talked about motivation quite a bit. And I think that’s really what it comes down to. Like you said, there’s no right answer for anyone. But if you avoid and you don’t confront this problem, like no matter who you are or what motivates you, that for sure is not going to be a successful thing. I can tell you from experience, it’s not successful. I guess for the residents, I would say dont’ defer. Like you mentioned earlier, Tim, even that income-based — you’re a resident, your income-based payment is going to be next to nothing. There’s literally no reason not to make those payments. So I definitely would not defer during residency. And then for the students, my best piece of advice is if you’re being offered the maximum amount or fill-in-the-blank, just put your hand over the maximum amount and pretend like it’s not being offered to you and actually calculate what you need, even if you’re just making approximations and you want to just slightly overask to meet, that’s fine. But if you just automatically select, you know, taking out the max amount, you’re always going to use that. No matter what, you’re going to put that money to use, and you’re going to owe it at the end. And you, trust me when I say you cannot appreciate how much money that is right now when you’re a student. You just cannot.

Tim Ulbrich: Great wisdom there. I wish I would have heard all three of those things through my phases as a new practitioner, as a resident and as a student. So you alluded to earlier that, you know, I think for you maybe this topic is one that you haven’t necessarily had as much education previously on and maybe one that doesn’t come as naturally. But obviously, you’re committed to learning more about the topic in terms of your own professional development. So what works for you in terms of learning more about this topic? Is it books? Is it podcasts? Is it webinars? What is the strategy that you have to develop yourself in this area?

Brianne Porter: Well, obviously, Your Financial Pharmacist teaches me a lot.

Tim Ulbrich: That’s a good one, yes.

Brianne Porter: But in all seriousness, I do tend to really utilize the resources of the Your Financial Pharmacist community as my primary source. If you think about how you approach Pub Med searching — I’m going to go nerdy here for a second — but I always, you know, when you find a good article, and then you look at the other references that that article has referred to or referenced. I kind of approach this the same way. I have found this resource to be extremely valuable for me. The book has been very eye-opening as far as really putting things into perspective and being at the level for someone who doesn’t have a lot of background knowledge on the topic, that I can actually understand what’s going on. And then a lot of things that I hear on here or read in a book, kind of resourcing out from there. I think podcasts are really helpful for me because I can listen while I drive and then that’s where I do a lot of thinking versus the book where it’s easy to kind of passively read and not take it all in. But I definitely find this community to be extremely valuable and a great resource. And like I said, you can then find other resources from Your Financial Pharmacist. But it’s been my main source.

Tim Ulbrich: Yeah, thank you for the shout-out. And I think my encouragement to the audience would be, if it is YFP, great. I’m glad to hear that. If it’s not, find whatever resource is going to keep you motivated on this topic and keep you learning. It’s a lifelong journey of learning and making mistakes, and learning and growing and making mistakes, and learning and growing, and you repeat that cycle over and over again. So if it’s YFP, if it’s something else, making a commitment to develop yourself in this area of personal finance. So Brianne, I want to again just thank you for your vulnerability, your willingness to share your story with our listeners. And I know this topic can feel so overwhelming and weighty at times. And I think it’s easy to avoid the pain, as you mentioned, wish it all weren’t there, turn the other way. And what I love about your story is you are choosing differently. You’re choosing to embrace the pain, you’re choosing to dig in, make a commitment to turn the ship around and invest in yourself in the future. So what an incredible, and I’m hopeful we can have you back on the show to share your debt-free journey and to talk about what life is going to look like once you have all of those loans paid off. So thank you again for coming on the show.

Brianne Porter: Yeah, absolutely. Thanks for having me, Tim.

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YFP 059: Life After Debt Free…Now What?

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On Episode 59 of Your Financial Pharmacist Podcast, Tim Baker, founder of Script Financial and YFP Team Member, interviews Adam and Brittany Patterson. On Episode 31, Adam detailed how they paid off $211,000 of student loan debt in 26 months. Adam and Brittany are 2015 graduates from Auburn University Harrison School of Pharmacy. Brittany is a pharmacist at Children’s Healthcare of Atlanta. Adam is a pharmacist at Northeast Georgia Medical Center and Assistant Pharmacy Manager at Publix Pharmacy.

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Episode Transcript

Tim Baker: Adam and Brittany, welcome to the Your Financial Pharmacist podcast. How are you guys doing today?

Brittany Patterson: Good.

Adam Patterson: Great, thanks for having us.

Brittany Patterson: Yeah, thanks for having us.

Tim Baker: So I would say, Adam, and you did a good job on Episode 031 when you were last on detailing your amazing debt-free that you did and excellent job of calling out Brittany and giving her credit to this journey of paying back debt, but I’m so happy, Brittany, to bring you on and kind of hear your side of the story. That episode, in particular, has been a huge success. It’s actually our third most downloaded episode with almost 1,600 downloads. And I think it just resonates with a lot of pharmacists out there. So kind of if you would, tell us a little bit about yourself and walk us through kind of — Brittany, I guess I’m talking to you of this debt-free story and kind of recap, you know, how it came to be, how you got through it. And let’s go from there.

Brittany Patterson: Yeah, so it’s great to be here. I know Adam talked a lot about our story. I guess he made it sound it like it was all nice and easy, but we really did have a big struggle, you know, those 2.4 years that we went through this. You know, we got that first letter, I guess six months when we got out, and it said, ‘Hey, great job finishing school, but you know, we need our money back.’ And that’s just something that we didn’t really talk about in school. And so we were texting all of our classmates, trying to figure out what they were going to do, and they didn’t know. And so we kind of bit the bullet and that’s why we just decided to refinance. Both of us came out working retail jobs, and so we refinanced, about a year into your retail, you got your job at the hospital. And that was hard because Adam was working night shift, and I was working day shift, so you know, he would be driving out of the neighborhood when I would be driving in the neighborhood. I think we would go three full days of not seeing each other. So it may sound real great, oh, only 2.4 years, but that was really — I mean, it felt very long when we were in the middle of it. It’s not as easy as it sounds. It was very hard work. But it was definitely hard work that paid off in the end. And we had that support of each other, we were on the same page with money. You know, that’s what we — when we just spoke recently to students, we told them that money is one of the biggest issues that couple fight about. And I feel like for us, that’s something that we never really have arguments about. We’re on the same page with money, and we’ve been kind of there since Day 1, knowing how we were going to refinance and everything. And so even though it’s been hard work, we’ve always been on the same page, and it’s definitely helped our marriage too throughout all of it.

Tim Baker: Yeah, it’s funny, when I was preparing for this episode, I went back and it’s one of the few times, actually, to go back as a listener. And I listened to Episode 031 again, and one of the things that Adam said was, smart decisions, hard work and sacrifices, those are really the three things that allowed us to propel you guys forward to pay off the debt. And another thing that Brittany, you mentioned was the refinance. I think you guys refinanced your rate of 6-7% over 10 years down to I think it was 4.25% over five years, kind of locking you into more of an aggressive payment process but also saving you about $65,000 in interest over the course of paying that off. So I guess for you guys, what has been since you paid off the loans, what’s been going on? Like what’s been the big driver of like where do you go from there? Like what’s been the big difference in life since the loans have been paid off?

Brittany Patterson: You know what’s funny is we were just talking about that this morning. I think we work more now than we did when we paying off loans.

Tim Baker: Really?

Adam Patterson: I can agree 100% with that.

Brittany Patterson: Yes. People are like, oh, your loans are paid off, you’re going to enjoy it so much. And I’m thinking, I think we work more now than we did then, but we’re so accustomed to it that it doesn’t seem like a big difference to us.

Adam Patterson: I think it’s about goal-driven too is setting your sights on what’s into the future and just trying to get there. But also, you have to enjoy every bit of it and take some time and have free time for yourself. But yeah, hustle’s been real. We’ve been hustling since we finished paying off loans, still keeping both jobs, Brittany’s been working a little bit extra too, and I work my full 70 and then turn around and pick up a whole other 44, 45 hours in my off week and then back around again, 70 hours again the next week. So it’s been nonstop.

Tim Baker: It’s funny though, because like I think what, you know, it’s kind of like the get-rich-quick schemes that are out there, one of the things I often say to clients and even when we’re speaking is, you know, the key here, especially if you want to retire early or if you want to get through the debt is a lot of it is just elbow grease and is just kind of putting your head down and working hard. There’s not a lot of fancy schemes or tricks. It’s about, you know, really maximizing income and being smart with, you know, budget. I know, Adam, you talked about how, you know, Mint.com was a big part of this. And Brittany, I know you are a Mint.com addict, it kind of is safe to say that.

Brittany Patterson: Yes.


Tim Baker: So and then just having that kind of 100% transparency between the two of you and really looking at it as your loans, but you know, so not much has changed. Obviously, I knew that you guys — and to kind of full disclosure here, you know, Adam mentioned he would be reaching out to me and Script Financial about working together. And you guys did in February, you kind of came on and became clients. And that’s why I have a little bit of an inside track to what’s been going on. But I was reviewing your finances, just in the time that you guys have come on, your net worth has grown exponentially. And it’s really just exciting to see because you guys obviously took a negative of the $211,000 and in two years and change, took that off the balance sheet. And now, you’re perpetuating that same type of mentality and really deploying your resources to your goals. So one of the things that you guys talked about when we did kind of the ‘find your way’ was experiences. And you guys took a vacation here recently. Where did you guys go? How was that?

Adam Patterson: We took a trip to Ireland. We went for a little under two weeks. It was breathtaking. It was amazing.

Brittany Patterson: So much fun.

Adam Patterson: Being able to cash flow pretty much everything and knowing you’re not having to worry about spending this, spending that, because you’ve worked hard, we’ve worked hard, we’ve saved for it. It’s a great payoff, treating yourself to something like that after you finish accomplishing one of those goals.

Brittany Patterson: Yeah, we didn’t have to limit ourselves on the trip, which is nice. We weren’t afraid about not being able to afford a dinner or buying a souvenir because we knew that we worked hard before we went on this trip, and we were able to, you know, buy the things that we wanted to buy. We didn’t go overboard on things, but we just knew that we didn’t have to limit ourselves while we were there, which was really nice.

Tim Baker: Well, and I know kind of when we talk about your goals, obviously experiences is a big part of that. And you know, like when I look at some of the things that we’ve done, you know, as kind of just simple, you know, we’ll get to kind of your next big goal here in a bit, but obviously vacations, so having a travel fund, you know, a savings account that you can cash flow, having a, you know, obviously a fully funded emergency fund, having your home purchase fund, which is kind of the next big thing on the horizon, I think those are just naming the accounts the goals that are out there, you know, psychology says that that alone is a big win. And you know, for me as kind of working with you guys, I know that, you know, if the next trip is Australia or New Zealand or Germany or attending a sporting event to the Panthers or Steelers or Cooperstown, whatever those things are that we kind of outline, my job is to kind of help you make sure that this is the next on the docket and we’re cash flowing those appropriately. So walk me through, you know, since the debt was paid, why did you guys — what was the genesis around, hey, we need to work with a financial planner? What was the big driving force to kind of email me and contact me and say, ‘Hey, Tim, we want to see if working together is a good fit.’?

Adam Patterson: I would say the first thing that got us talking about it is — and I tell other people this too — is we went to school to be pharmacists. We understand certain things when it comes to financial stuff, but we’re not a professional in that. So seeking out professional help, it was our No. 1 goal, whether we should have started before we paid off loans or not, that’s up in the air, but we tell people all the time, it’s never too early to find a financial planner or somebody to help you with that because that’s what their profession is. For us, it was being a pharmacist, serving patients and things like that. So seeking out a financial planner, it was our next step, our next goal simply because we wanted somebody to give us more directive, be able to help balance more things in our life.

Brittany Patterson: Yeah, and to hold us accountable. We know we do have a good income that comes in, but making sure we are putting that income towards our goals and making sure our budget is correct. Just we knew that you could help us more financially than we could help ourselves in that area.

Tim Baker: Well, and I think the other thing that I think resonates or resonated with me in the last story — I know, Brittany, like you just said, kind of confirms that is — I think one of the things that a lot of pharmacists do is they kind of drink that six-figure Kool Aid that says, hey, I come out, and I’m making x amount of dollars, I don’t really have to worry about the debt, it’ll take care of itself. And I think for you guys, and I know, you know, kind of the backdrop is Adam, you went through the Dave Ramsey — I’m not sure if both of you guys went through the Dave Ramsey stuff — but it was kind of this no-nonsense approach to paying off the debt. So talk to me, what’s the big thing right now that is kind of top of mind with where you want to take your financial plan and where we’re going? So I know the big one is the home purchase, right? So we’ve talked about this at length and what that looks like. So walk me through kind of where you guys currently are in that part of your financial plan and what you’ve learned thus far.

Adam Patterson: Right now, like you said, our next step is financially purchasing a home, working with you, setting up, figuring out what we can actually afford. I think that’s one of the biggest things and knowing that you’re not spending too much but you’re going to be comfortable. That’s something that we are working with you, getting approved, working with a bank to get approved. We have a real estate agent now, so we’re in the process of shopping for a home, whether it’s one month, two months, six months from now, we just know that we’re ready for it. And that’s what we’re doing right now is we’re continuing to work towards that goal.

Tim Baker: And I think, I think the idea was to be almost singularly focused on that, similar to what you were with the debt until you guys are moved into the house. And I know, Brittany, that’s kind of like, you want that to happen yesterday because you’re ready to make the purchase. But I think being smart about it and surrounding yourself with a team of people that have your best interests in mind. And I think sometimes that is lost in the home purchase process just because most people, most professionals are incentivized about how much you actually purchase in terms of the size of the house, but I think you guys are going about it, and I think when we went through, ‘Hey, what can we actually afford?’ it was with this discount that you guys are not going to be hustling like that for the rest of your life, you can actually afford something probably greater than you probably would be if you were kind of working consistently. But I think it’s been great working with you because I think you are very open to advice and kind of the education that surrounds a lot of these decisions. So from my end, it’s been awesome. And I think, you know, we see it a lot because I think your story resonates. So walk me through kind of what you’ve been doing speaking-wise since, you know, we’ve last had you on the podcast.

Brittany Patterson: I think — was it June, Adam?

Adam Patterson: Yeah, it was around June.

Brittany Patterson: Yeah, in June, we went to the Alabama Pharmacy Association convention, and we were invited to come speak to the students there. So there were Stanford students, and there were also Auburn students. And we went in, and we had a whole PowerPoint presentation, and it was funny because I don’t think we spoke until about 7, 8 o’clock at night.

Adam Patterson: Yeah, it was 7 or 8.

Brittany Patterson: And it was after they’d all been to the pool, they were all outside, all having fun, and I’m thinking, there’s no way they’re going to want to sit in here and listen to us talk about finances at all. And we walked in there, gave our presentation, and they ate it up. I was shocked.

Adam Patterson: It’s just — it’s crazy when we’re presenting and seeing these students’ mouths drop just because we’re providing them with this information that whether they knew about it or not, it’s just resonating with them and telling a story not in trying to convey that they have to pay off this much money in such a short period of time, but the fact that we’re giving them these resources that, you know, they’re just not provided in school. And I think Your Financial Pharmacist, I think we’ve all harped on this, is making the education relevant and putting it out there for everybody. That’s just something, it’s a passion that we’ve kind of taken up on now is wanting to speak at more events and do more things to try and share our story.

Brittany Patterson: Right, because I think it’s something that we wish we would have had too, coming out of school.

Tim Baker: Yeah, I think Adam, I think one of the things that you said was, you know, when you were looking around, kind of looked to your left and looked to your right at hey, what’s the best way to tackle the loans, there wasn’t really anything there outside of maybe like a colleague and a few opinions. So you know, I think shining a light on this and having more people kind of like just openly speak about some of the trepidations with their loans. We hear a lot of people say, ‘Hey, you know, if we would have known now what we know today, we would have made a lot better decisions,’ and I think that’s why, aside from the facts of, you know, the facts and figures around your particular case, you know, there’s no — like I said, there’s really no silver bullet. It’s just like, OK, we worked a lot, we sacrificed, and you wake up, and you’re through the loans. And now, it’s what’s next? So I think your story, you know, is amazing. But then, you know, the fact that you can stand in front of people and say, ‘A few short years ago, I was in a similar spot, this is kind of what we did,’ is really amazing. So do you guys see yourself speaking more? Did you enjoy that part of it?

Brittany Patterson: Yeah. We both really enjoy it. And we actually have another one in November coming up, and we’re speaking at the National Community Pharmacists Association in Auburn. And so we’re going to go back to Auburn and be able to speak to those students. They came up to us after, I think it was the president of NCPA from Auburn, she came up, she’s like, ‘Oh, we loved y’all so much. We really want to have y’all back. I feel like these students could really learn from y’all since this is something that we don’t hear much about in school.’

Tim Baker: Well, and I think, you know, and that’s what I’m kind of hearing more, especially from NCPA, you know, or at least people associated with, pharmacists associated with NCPA is, you know, the decision or start, you know, an independent pharmacy is so huge. You have to have your own financial house in order or at least have a plan to have it in order, so I think there’s a lot of — you know, especially with that group, you know, a lot of relevancy to say, ‘Hey, if this is something that I really want to pursue, you know, I need to make sure that, you know, this big kind of elephant in the room at least is accounted for and there’s a plan in place,’ and I think that’s a great group to be talking to. So I guess for you guys, if I’m a recent pharmacist grad, what are kind of the big takeaways — I’m a new PharmD, I’m out, I’m earning income, I have kind of the average $150,000, $160,000 in debt. What would be the kind of big takeaways for, that you would impart on me in terms of how to tackle it?

Brittany Patterson: I know no one likes to hear this, but the biggest thing that we did was we lived below our means, which I know everybody hates to hear that because you feel like you’re constricted, but we weren’t because we were so used to living like that in school. And I think that’s one of the biggest reasons we were able to pay off our loans. We weren’t buying expensive cars, we weren’t buying expensive boats. Nobody told the students. We had friends who went and bought cars and boats, and there’s nothing wrong with that, but we just didn’t want more debt on top of the debt we already had. So I think that was one of the biggest things was really watching what we were spending and not overspending.

Adam Patterson: Yeah, I would say that would probably be one of my biggest things is living below our means. Something other to add to that is, you know, work hard for what you’re given. I mean, there’s too many people that just expect or receive things, and it’s all about hard work. Like we’ve talked about before, you know, putting in the hours, trying to maximize that income. As a new grad, I mean, what else do you have to do?

Brittany Patterson: Right.

Adam Patterson: I hate to say it, but to go on top of that, while you’re working hard, you have to treat yourself every now and then. I think debt’s something that we all can get caught up, and just working nonstop but not ever reaping some of that benefit, some of that benefit is to take a vacation every once in awhile.

Brittany Patterson: Yeah, and we don’t really eat out much, and that’s something that, you know, we really appreciate when we do get to eat out. We enjoy those moments more because of the fact that we aren’t doing it all the time.

Adam Patterson: Right.
Brittany Patterson: So we don’t take those moments for granted when we are able to enjoy evenings out together, which is nice.
Tim Baker: Yeah, it’s a treat rather than the norm, right?

Brittany Patterson: Right.

Tim Baker: Exactly. Well, and maybe, you know, you grow an affinity for Mint.com and logging in every day, right, Brittany? And making sure that the spending is in line, and you’re good there, that would probably be another piece of that.

Brittany Patterson: Right, that is true.

Adam Patterson: What is it they say? Eat, sleep. And Brittany’s is eat, sleep, mint.

Brittany Patterson: Mint, unfortunately.

Adam Patterson: So I will add, you know, something we got a lot of questions about. As a new grad, don’t be afraid to reach out for help. Using your resources and everything, that’s huge coming out of school is finding the information and going off, adding to that is talking about a financial planner and stuff. You know, that question’s came up to us a lot. Should I invest in a financial planner early on? There’s nothing that hurts from investing in a financial planner early on because they’re going to be able to, you know, guide you to those resources also. So that is a big thing I would harp on coming out of school.

Tim Baker: Yeah, and I think to play on that, you know, in terms of extra resources, obviously, I think what we’re trying to achieve here at Your Financial Pharmacist is just with the Facebook group and the different guides, to have information and kind of a community surrounding the information to put you in a position to tackle the debt or investments or if it’s insurance questions, so you know, I know you guys talked about — to kind of bring it back to the loans is one of the big things you did is refinance. So if you are looking to refinance, you know, YourFinancialPharmacist.com/refinance, we have calculators, we have different refinance companies that will give you bonuses and we have podcast episodes that are about student loans. So there’s a lot of good information there if you’re a YFP listener that you can digest and kind of learn more about the process. And I think it’s key to continuously push the envelope in terms of what you want to do with your financial life. Well, Brittany and Adam, thank you so much for coming back on the Your Financial Pharmacist podcast and sharing your incredible story. It doesn’t sound like you guys have let off the gas at all. I know you took your trip to Ireland and took some of that time to decompress, but it sounds like with the home purchase and some of the other things you’ve got going on that, you know, you’re kind of going back to the hustle and making sure you’re making moves with your financial plan. So it’s been a pleasure working with you guys, and I can say that your story truly resonates with a lot of our listeners and just a lot of pharmacists out there that it’s truly inspiring. So keep up the good work, and we’d love to have you back for the next major milestone. So you’ve done the debt-free theme hour, maybe we’ll have you on for the millionaire theme hour when you hit that millionaire status for net worth. So again, thanks again for coming on.

Adam Patterson: Thank you so much for having us.

Brittany Patterson: Yes, we really appreciate it.

 

 

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