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Month: October 2018

YFP 071: Ask Tim & Tim

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Ask Tim & Tim

On Episode 71 of the Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of YFP, and Tim Baker, YFP Team Member and Founder of Script Financial, tackle 10 listener questions that were posed in the YFP Facebook Group, covering a wide array of topics like investing, refinancing student loans after pharmacy school, taxes, and more.

Have a question you would like answered on a future episode of the show? Make sure to join the YFP Facebook Group to pose your question to the YFP community or shoot us an email at [email protected].

Summary

Tim Ulbrich and Tim Baker field 10 questions from the YFP community. The first question asks about the pros and cons of a traditional 401k versus a Roth 401k. Tim Baker explains that “Roth” means after tax (Roth 401K, Roth 403B, Roth IRA) and a traditional 401k means pre-tax. He explains that there are different participant contribution amounts to 401Ks and that you are able to have a traditional IRA and Roth IRA that you can put aggregate money in each year in separate systems. Question 2 asks, what is something you wish you would’ve started in pharmacy school based on what you know now? Tim Ulbrich says first become educated, especially around student loans, work in school to help set yourself up for a career to to form connections and skills, and, lastly, look at the amount of money you are borrowing as real money that you’ll need to pay back. Question 3 asks how to start earning interest on monetary gifts a child has received. Tim Baker responds that first you need to know the goal of the money. From there, you can put it in a high yield savings account or CD or put it in an index fund. However, a 529 is probably the best vehicle for the money to be put in, as it offers tax advantages. Question 4 asks about unconventional pharmacy jobs. Tim Ulbrich says that 45% of jobs are in community pharmacy and 30-40% are in residence training, however there are still many different avenues of unconventional pharmacy jobs to explore. The best advice is to find a mentorship, either within your college or outside, to help you see other possibilities. Question 5 asks about online banking and suggested companies other than Ally. Tim Baker says that it’s important to gauge the ease of use, customer service, and fees charged. These online bank accounts are best used for separate emergency funds or storage accounts.

Question 6 asks if there is any benefit to staying with the same home and auto insurance or switching companies for a better rate. Tim Ulbrich suggests that you should assess the price with the service you receive. Nickel and diming policy coverage over a company you are happy with should be avoided as it’s important to put value over relationship. However, if there is a significant savings, then, of course, switching makes sense. Question 7 asks what should be taken for an initial appointment with a financial advisor and what questions should be asked. Tim Baker says it’s important to ask good questions, such as how would we interact and how often, are you fee only or fiduciary, how is the fee calculated and how are you compensated? If you are going to a financial advisor strictly for guidance with student loans, be aware of how much knowledge they have. Question 8 asks if anyone has repaid their student loans through the federal government with income based options, such as IBR or PAYE, and if the better option is refinancing student loans after pharmacy school. Rim Ulbrich says that you have to assess what the best repayment option is for you. Run the numbers, look at the feelings you have toward carrying student loan debt for 20-25 years, assess your financial goals, and lay our all of your options. From there, you are able to make a decision. Question 8 asks if it’s better to file taxes married filed separately when a spouse is eligible for PSLF. Tim Baker explains that there are situations that married filed separately is the right way to go, however, it depends on the repayment plan. He suggests to do a tax projection and student loan analysis to see if you’re approaching the situation in the best way possible. Lastly, question 10 asks if someone should stick with federal loans to keep a minimum payment down or refinance to lower their interest rate. Tim Ulbrich suggests that as the interest rate market rises, refinance offers may not be as attractive. If you refinance on $100,000, a 1-2% interest rate change in refinancing may largely affect how much you are repaying. Regardless of the math, refinancing is off of the table if you are pursuing PSLF.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 071 of the podcast. Excited to be alongside Tim Baker as we dive into an Ask Tim & Tim episode where we take a wide array of questions, 10 from the YFP community that were posed in the YFP Facebook group. So Tim Baker, how you doing?

Tim Baker: Doing well, how about you, Tim?

Tim Ulbrich: Good. So you’re back from Iceland. Welcome back. How was the trip?

Tim Baker: Oh, it was awesome. Yeah, it was great. You know, I feel like the last few weeks has been crazy, but it was good to get away. I think I literally didn’t touch my phone for about a week. So now I’m trying to get back into the swing of things, but Iceland is an interesting place to visit for sure.
Tim Ulbrich: It seems like I’ve noticed a lot of friends from college and coworkers are taking that trip, it seems like on the East Coast here. I know Cleveland has direct flights over to Iceland, I’m guessing something similar by you guys. Seems like a popular destination to begin to see that part of the world.

Tim Baker: Yeah, it’s funny because like prohibition ended like for beer, I think in like the late ‘90s — don’t quote me on that — which was interesting. But I think since then, the tourism has become the biggest staple in Iceland, moreso than fishing. But you have a combination of just like incredible scenery, like almost where you’re on a different planet. And of course, beer drinking and things like that. So yeah, it was great. It’s one of those vacations where you’re out in the country, but it’s somewhat affordable. It’s expensive when you get there in terms of like food and things. But oh man, it was great. Just good to get away and reset and, you know, I’m ready for the final quarter of the year.

Tim Ulbrich: Yeah, welcome back. We’re excited to jump into this episode. And we’re actually getting together end of this week in West Palm Beach, Florida, where Tim Church lives. We have a YFP retreat, so excited to be jumping into all things YFP. And actually, as a part of that time that we’re together — to our listeners, we’re going to be recording an episode that’s taking all questions related to investing. So if you’re listening to this episode and you have a question, all questions investing, shoot us an email at [email protected] or jump on the YFP Facebook group and pose your question and we’ll make sure to feature that on the upcoming episode where we do that Q&A session. Alright, so here’s the format. We’re going to go back and forth. We have 10 questions, great questions from the community. We’re going to read the question, we’re going to answer them between the two of us, and then we’ll jump in with some feedback that the community has provided as well. So Question 1, Tim Baker, comes from Nidhee (?), and he asks, “What are the pros and cons of a traditional 401k versus Roth? Currently, I’m trying to maximize my traditional 401k. Any suggestions would be helpful.” What do you think?

Tim Baker: Yeah, such a great question. And you’re starting to see more and more 401k’s offer a Roth component. So just kind of to break this down for listeners who are kind of a little murky about this, anytime you see “Roth” before 401k, 403b, IRA, you’re going to think after-tax. So the money that gets thrown into that account is after-tax. Now, if you see a traditional 401k, traditional IRA and traditional 403b, you’re going to think pre-tax. So the money goes into that bucket pre-tax. And typically, the opposite is true when the money comes out. So it goes in pre-tax, it usually grows tax-free, and then it comes out taxed. And then the opposite is true if it goes in after-tax, it grows tax-free, and it comes out tax-free in the after-tax world. So to get back to the question, I think the Roth component is actually a great component to the 401k because a lot of pharmacists because of their salary, they make too much to actually contribute directly to a Roth IRA. So when you sign up for your 401k or when you’re adjusting your 401k, you’re going to want to see if there is a Roth component and if that makes sense for your particular situation. In our last episode, we kind of talked about all the different levers to pull when it comes to, you know, should I pay the tax now? Should I defer the tax? What does that look like? And this is actually one that you can do. So a lot of people get confused by kind of the Roth 401k because it really, you can’t commingle those accounts. So it actually looks like you have two accounts when you’re funding this. So basically, you go in and you would see a balance for your traditional 401k. And if there’s a match, that’s where all your match dollars are going to go from your employer. But for your Roth, if you’re deciding to fund that, you know, those are basically funded with after-tax dollars. So you would go in and you would set up an allocation similar to your 401k, your traditional 401k. And essentially, the difference would be just if those dollars are taxed or not. So that’s essentially the basics there.

Tim Ulbrich: Tim, one of the questions I often get here — and I think it’s good just to clarify for our listeners because the term “Roth” gets confusing when they see it as a Roth 401k versus a Roth IRA. Does the Roth contribution towards a Roth 401k go towards or impact the total of the $5,500 that you can contribute in a Roth IRA? Or are those completely separate buckets?

Tim Baker: Yeah, to kind of draw the lines around the 401k and the IRA. So you as a participant in the 401k, you can put in $18,500 — these are 2018 numbers — per year in aggregate between a traditional 401k and a Roth 401k. In the same breath, you can also have a traditional IRA and a Roth IRA that you can put an aggregate $5,500 per year. So these are, they’re essentially separate systems. So if you put money into a Roth IRA, it doesn’t necessarily affect how much money you can put into a Roth 401k.

Tim Ulrich: Got it, thank you.

Tim Baker: So the next question for you, Tim, is a great question from the Facebook group. “My name is Steven. I recently joined the group, and I really enjoy all of your posts about business and financials. I am in my third year in pharmacy school and wanted to ask you this question. Knowing what you know now, what is something you wish you would have done or started in pharmacy school?” That’s a great question.

Tim Ulbrich: Yeah, great question, Steven. And first of all, kudos to you for being proactive as you’re in pharmacy school. I think so many in this community — and I think some even commented in the feed of the question that you posed saying, “Hey, I wish I would have been thinking about this sooner,” and I know that’s something, Tim, that I often think back of, wow, what would have happened if I would have actually dove into this topic, been a little bit more proactive instead of reactive where looked up, had a ton of debt and then tried to figure it out and felt the pain. And that was the beginning of trying to figure this out. And I think that gets to the point of my answer to Steven’s question. If I had to go back and do it all over again — and this is not a sexy answer — to me, it’s all about being educated, specifically probably around student loans for many of the students that are listening. You know, I think as I look back, I was trying to dabble in the Roth IRAs and learn some other things here or there. All the while, I had student loans that are accruing above $152,000 at 6.8% interest, I didn’t have really a solid emergency fund, and I was just doing things out of order because I didn’t have a good education and understanding of what it meant to have a solid financial base. And that even, to me, trickled into new practitioner life where I was getting ahead of myself in some areas around kids’ college saving and other things at the expense of having, again, a solid emergency fund, the right life insurance protection, making sure I had end-of-life planning documents, all the things that we’ve talked about before around having a solid financial plan. So Steven, the one thing I would do, which you’re obviously doing, is getting involved in this topic, being educated. And hopefully you can inspire your peers and your friends and your coworkers to do the same. The other thing that I would do — and I know a couple people had responded, and actually, we had a response from Steve, who is another fourth-year student. And one of the things he mentioned was definitely work in school. And I would advocate for that. And I know I had a lot of faculty members who would tell me, “Hey, don’t work in school. You’ve got to focus on your academics.” Of course you have to graduate, otherwise your degree and not having one is counterproductive. But many students who can balance these things — I’m not saying you need to work 30-40 hours a week. But obviously a little work experience is going to, you know, provide a little bit of a financial component. But probably more important, it’s going to set you up for career components, going to allow you to begin to form those connections in your network, and I think as I now see new practitioners coming into the workforce, I think it gives you those skills that you just aren’t going to get in school, right? Dealing with difficult customers and time management and coworkers and understanding all of the things beyond the books and what you’re learning in school. So Steve, if you haven’t yet too, make sure to take a look at the responses from your peers and some of the group because there was some great feedback around — you know, I really like what Vbar (?) had to say about “borrow only what you need for tuition and fees because these student loans are killers.” And we say this over and over again on the podcast that if you look at the average indebtedness of a pharmacy graduate, those numbers are often double what are the numbers for tuition and fees. And that’s because of the borrowing that’s happening for cost of living expenses. So do everything that you can, especially in the interest rate market we’re in for student loans, everything you can to minimize the costs you’re borrowing while in school.

Tim Baker: And I think just to piggyback on that, Tim, one of the things that I think I hear quite a bit is it’s almost like Monopoly money, you know, like the loans you’re taking out. So I think if you can, you know, in your mind, make it real. And I think the best way to do that is to, you know — I know that with the average debt load being $160,000, I know that a standard — that equates to a standard payment of like $1,800 and change. So if you have loans that are $320,000, then you’re looking at a $3,600 payment. So obviously listeners, if you’re P3, P4, you’re going to know more or less where you’re going to fall in that, so I think — like you said, if you can work — anything you can do to kind of make it more real. And I think once it becomes more real, then you’re more likely to actually be intentional, I think, with what you’re trying to do, whether it’s working or just being more frugal as a student. I think the sooner you do that, I think the better you will be as you enter into repayment.

Tim Ulbrich: Great advice. Great advice. Our third question comes from Rachel in the Facebook group, who says, “My husband and I just had our first child and want to start earning her interest on the monetary gifts we have received for her. Any advice and suggestions?” So Tim Baker, I’m guessing maybe there’s a question behind the question here around college savings for kids or just investing money long-term for a child. What are your thoughts? And what do you do with clients typically in this arena?

Tim Baker: Yeah, I think the question with the question would be like, well, what’s the goal? What are we thinking we want this money for? If we want something that’s a sure thing and we want to be able to access this when the child is growing up for whatever reason, then something like a high-yield savings account or a CD might be the best bet. If it’s more of a long-term goal and we don’t really have an education goal in mind, maybe it’s just sticking the money in an index fund. But more acutely, I think the 529 would probably be the best vehicle to put money into that these monetary gifts, even some of these 529s are getting pretty creative. Like I know the Maryland 529, you know, I can send out links to grandparents and aunts and uncles and say, “Hey, contribute to Olivia’s 529.” I think the big advantage there is you typically, most states will give some type of tax deduction. And even with the new tax code we talked about a little bit last episode, you know, the 529 can now be used for kind of secondary school, high school, middle school, that type of thing. So you can actually use it as a pass-through to get a state tax deduction. But then longer term, you can invest it similarly like you would your 401k, your IRA, where you’re putting money in there and as it accumulates over 15, 16, 17 years, it provides a return on the investment that you can apply towards your child’s education. So you know, there’s a lot of I guess different sides to the answer. And same thing with 401k’s and IRAs and things like that, not all of them are created equal. So you’re going to want to really pay attention to fees and the investments that are there for you. But obviously, your state is going to play a role in that. But those would be kind of the top things that I would rattle off in terms of advice and suggestions.

Tim Ulbrich: Yeah, just a couple things to add there, you know, especially knowing where we are in the year and coming up on the month of November, if Rachel, if her and her husband are thinking 529 — and I don’t know, I’m guessing this is every state in terms of the income tax deduction, I know here in Ohio I think the limit to that is $2,000. And so depending on the amount that they’re looking at doing, there may be a play there to divide some between the 2018 and some between the 2019 year rather than going above that $2,000. And I think you and Paul did an awesome job last week talking about that in the context of tax. The other thing I think about here, Rachel and to the broader community that’s listening — and Tim Baker, you helped I think Jess and I realize this, that not only the why of what the goal is, what you’re trying to do, what you’re trying to achieve, but I think for those of us that graduated with tons of student loan debt, we tend to probably be compensated a little bit too much on the other side when it comes to kids’ college because we want to avoid that, naturally, for our own kids, right? And so I’m not suggesting here that Rachel, you and your husband take your child’s money that was received for your child, but I am just bringing up the point that as you and your husband talk through this going into the future, making sure that college savings for children is done so in the appropriate context of your own financial plan. And I’ve seen a lot of new practitioners, myself included, who, again, to my point earlier, maybe don’t have those foundational items like the right insurance and emergency fund, etc. but are running off saving for kids’ college, and that’s 18+ years away. So again, just thinking about the priority and the order of things within a financial plan.

refinance student loans

Tim Baker: Yeah. I’ve actually had some clients like stop at a certain amount of kids because their goal was to pay 100%. And I mean, obviously, it’s a personal choice. But there’s different ways you can go about funding education, it’s important to kind of talk with your partner and maybe a planner to kind of work through that. So great question by Rachel. So Tim, next question for you is — this is from Elise. “With the ever-changing pharmacy job market, I’m starting to think more about unconventional pharmacist jobs, i.e. not in hospital or retail. I think in school, we’re kind of programmed to believe that those are our only two choices, so it’s hard to even know where to begin looking for what else is out there. I’m wondering if anyone has experienced doing something other than hospital or retail that they really enjoy and is financially stable, offers good perks and benefits. Thanks.”

Tim Ulbrich: This is a great question, Elise. Thanks for taking the time to pose it. And I got fired up when I saw this question, Tim, because in my former day job at Neomed, I did a lot of career counseling, advising with our students. And I cannot tell you how often I heard from our own students, even as a P1 or a P2, even before they’ve really been getting along that path of looking for jobs, there tends to be this mindset that Elise is describing of, I’ve got one of two options, right? I’ve got retail community pharmacy, and I’ve got hospital pharmacy, which more often than not means residents to train.

Tim Baker: Right.

Tim Ulbrich: And really, if you look at the workforce data, the reason people think that is valid. If you look at the last workforce survey that was pushed, 45% of all pharmacists’ jobs are in the community pharmacy sector. Now, that can be obviously retail chains, CVS, Walgreens, etc. It could be independent pharmacies, but that’s almost half of the workforce. So that’s why I think you see — and depending on the school that graduates, you’ll see these numbers upwards of 50, 60, 70% depending on the region and the job that they have available. And then I know at Neomed, we saw 30-40% of our grads every year would go into residency training. So you put those two together, and that’s 80% or so of a graduating class. And so I think it’s easy for students and new practitioners to think these are my only two options. And for those listening that also have this question, please make sure to go check out the Facebook group and look at the answers because there’s some great examples out there that were highlighted of people that are doing different things. Somebody’s working for a hospice, pharmacy benefit manager on the side. People that are in pharmacy informatics. Nate Hedrick, who we’ve had featured on the show, the Real Estate RPH, during our September series on home buying, talks a little bit about his job working for a pharmacy benefit manager as a sales team clinical liaison. So very unique, niche position. And he actually I know did an in-patient hospital residency. So there’s many different paths and options, and I think the advice I would have to somebody asking this question is begin to find the mentorship and the people that are going to offer you this viewpoint, if you don’t feel like you can get it as a student at the college that you’re at. So are there new practitioners, are there people with an organizations, associations that you’re connected with that have these positions that are the “nontraditional” or unconventional positions that you can begin to form those relationships and networks and get them to help you along this process because the reality is we all know pharmacy’s a small world and we know that when it comes to these niche markets, it’s all about networking and building those relationships. So if you want to find something beyond the hospital, community pharmacy world, go find those practitioners who are out there. You know, you’ve talked before on this podcast, Tim, the 1,000 cups of coffee. You meet with people, have them introduce you to three more people, and keep going and going and going. And it may take 10 or 20 or 30 conversations, or it may take two, but doors will open over time. And you’ve just got to put the work and effort into doing that. The other thing I would just highlight, Elise, in response to your question, is if you haven’t done so already, check out the side hustle series that Tim Church has been doing on this podcast, episodes 069 and 063, also in episode 038, we had Alex Barker from the Happy PharmD on talking about his journey. He’s got some great context — or excuse me, he’s got some great information on the unconventional jobs that are out there. And then Tony Guerra, pharmacy leader and podcast host, we had him on in episode 053 as well, did a great job of talking about some of these other options. So Elise, thanks for your question. Alright Tim Baker, question 5 here comes from Lane inside the Facebook group. “What other banks do people use besides Ally? A Google search showed Northfield Bank offers higher APY.” And I think maybe we’ve brainwashed our audience unintentionally about Ally because you and I are Ally users, and we get giddy when we get the rate increase emails that come. I think they usually come on Friday afternoons.

Tim Baker: Yeah, and I think I missed the last one because when I was researching a bit for this question, I saw that Ally’s now at 1.9%, so I think I missed that last bump, which I’m pretty excited about.

Tim Ulbrich: So what — and maybe, so Lane is asking here what other banks do people use? But maybe there’s a better question here — not to hijack her question — is what should people be looking for when they’re choosing a bank specifically for more of that long-term savings, you know, emergency fund and whatnot.

Tim Baker: Yeah, so I think that having a bank set aside for kind of your long-time savings like emergency fund and storage account, which might be like a travel fund, a car maintenance, a home maintenance fund, I think what you’re really trying to find is something that there’s ease of use, there’s an app, there’s a website, that doesn’t charge fees, that you can move money in and out fairly easy. And for me, like when I started kind of recommending, I found that when I started working with clients, this was kind of a topic that came up over and over again. Where should I bank? And where should I put money? And again, it’s not something that most financial planners I think even think about because it’s very much investment-centric, and we’re not really thinking about budgeting and debt and things like that. But this was kind of a key question that came up over and over again, so when I did research on this topic awhile ago, those were some of the things that I was trying to figure out. OK, where is the best bank to park money and get a little bit of return and not be charged fees and all that kind of stuff. So I actually tested out Ally, Synchrony Bank, Capital One, and I think Barclays was the fourth one I looked at. And although Synchrony at the time was kind of providing a little bit more return, I just found that from a great experience across the board, Ally was far and away better in terms of opening accounts, moving money in and out of it, just the app, all that stuff. To me, I think Ally was head and shoulders, even I think above Capital One 360, which obviously is a huge bank. So again, I’m a big proponent of kind of keeping this type of banking kind of separate from your everyday kind of monthly expenses. So if you bank with BNC or Chase or something like that, I like kind of a separate entity that is going to park kind of your emergency fund and kind of those storage accounts for those particular goals. So that was just my experience in testing these out. And obviously, you know, it’s a little bit of an arms race because these companies are putting money into their apps and things like that. But at the same time, I think Ally — and even for me, I know, Tim, you and Jess are using Ally. And again, we don’t get any type of benefit from talking about Ally. I just think that they have a great solution.

Tim Ulbrich: You know, it’s funny how far we’ve come in this online banking. Do you remember when Ally came out and it was kind of like, really? Are we going to do banking online? I remember those days. And you know, great customer service and I think you can obviously find that with other banks as well, but I think looking at some of the components you mentioned is great advice.

Tim Baker: OK, so next question comes from Kara. “Home and auto insurance question. Is there any benefit to staying with the same company? We have had the same company forever, but I called MetLife to get quotes because I can get a corporate discount through my employer. For the same exact coverage, auto policies are almost half as much. Switch and save money?”

Tim Ulbrich: Yeah, this is a great question. And actually, I just went through this in the move of getting a re-quote on home and auto. And you know, obviously as Kara mentions, the number half as much, it’s hard to not say, switch. But I think you always have to consider this in the context of price versus the service that you receive. And obviously, there’s a point where you’re going to be able to save a significant amount of money. But don’t — I guess what I’m trying to say here is don’t nickel and dime policy coverage for a company that you’re happy working with that you have a quick connection if you need it and that is responsive, obviously, in the times that you need them to be responsive. And Nate Hedrick really highlighted this for me as I asked him for his input as I was shopping around on home and auto. And that was his advice back to me is, you know, look at the total cost of the policies. And if you’re talking about saving $20 or $30 and you have somebody that’s an email or a phone call away that you have a relationship with, you have to put value to that relationship. Now, obviously if you’re talking about a policy that’s half as much, unless it’s just atrocious customer service and you’re not going to be able to get that same coverage, then obviously there’s a point where switching makes sense to save some money. The other thing I always encourage people to do is make sure you look side-by-side, whether it’s a home or auto insurance policy, look side-by-side to see the coverage that you’re getting is the same because if your deductibles are changing or coverage isn’t as good, obviously that may explain the price difference. But if you loko side-by-side and say, “OK. All coverage is equal,” now you’ve got to really weigh this against what is the level of the relationships and the customer service and how much am I going to save on this? Kelsey also makes a good point. In responding to Kara, she says, “I think it depends on the company. Some will now give you money back after x amount of years you don’t have a claim. My sister is an insurance agent, and the company she had me switch to will give us back 25% of our payment if we have no claims for three years.” So obviously, that policy is built in a way that incentivizes that relationship over time. So different factors that you have to consider as you’re looking at these different companies. Alright, Tim Baker, question No. 7, Devin asks, “Hello everyone, I’m meeting with a financial advisor tomorrow, and I was wondering if there was anything I may forget to bring them that you all think would be helpful. I’m a recent graduate.” So recent graduate, going to meet with a financial advisor, what information should they be bringing? Or what questions should they be asking? What do you think?

Tim Baker: I think typically when I meet with a kind of a prospective client, I don’t have them bring anything except for questions. I know some people’s process is different. They might start kind of getting down to some of the details of kind of the work they would do and everything. But for me, I think it’s just a matter of like do I have a connection with this particular person? Do I see myself working with them for a long period of time? And in Devin’s case, it might not be a long period of time. It might be I’m just trying to get a few questions answered and then I’m going to move on. So that would be kind of the question that I would ask first is how would we interact? And how often? I think the big thing is — and again, I’m biased here — is are you fee-only? Are you a fiduciary? You know, how is your fee calculated and compensated? Can I clearly see what I’m paying you? And nine times out of 10, these will send financial advisors squirming. And I think if you see that, then it’s probably a good indication to kind of go in the other direction. You know, just a lot of financial advisors, they have minimums. So you have to have — it’s kind of like, hey, I can help you, but only if you have a quarter million dollars or something like that.

Tim Ulbrich: Right.

Tim Baker: Or I don’t have minimums, but typically when you don’t have minimums, typically that particular client is maybe ignored more so than someone who does a quarter million dollars. So I think there’s a variety of questions. I think some of my FAQs that I would give a person to ask their financial planner — and I think a big one is around like what are the conflicts of interest? Are you a fiduciary? Are you fee-only? And from my experience, the majority of financial advisors out there — and I can say this with confidence that the majority of financial advisors out there are not going to be keen on a lot of the issues that pharmacists deal with, and the big one being student loans. A lot of — one of the reasons that I decided to kind of move on from my last firm was because there wasn’t a whole lot of understanding or process around student loans, which obviously is a major pain point for pharmacists. So if Devin, if this is one of the big things that you’re going to talk with a financial planner about, ask good questions because I would suspect that a lot of people in our Facebook group, a lot of our listeners, know more about student loans than some of my counterparts, sad to say.

Tim Ulbrich: Mhm. Yeah and Devin, make sure to check out YourFinancialPharmacist.com/financial-planner if you haven’t yet done so. Again, YourFinancialPharmacist.com/financieal-planner. We built out an entire page really getting to the gist of your question. We have a free guide that answers a lot of what to look for in a financial planner. We have a list of questions that you can ask inside of that document. What are the qualifications you should be looking for, some of the things that Tim talked about there. And then also on that page, we have referenced episodes 015, 016 and 017, where Tim Baker and I talk through a lot of this as well. And on that page, for those that are interested, you can also schedule a free call with Tim Baker if you’re interested in learning more about working with a financial planner and the value that he can provide. Alright, Tim, I think we’ve got three more, right?

Tim Baker: Yeah, let’s do it. So this question is from Sabina. So the question is, “Has anyone repaid student loans through the federal government and utilized the income-based options such as PAYE or IBR, both of which list forgiveness after 20 years as an option. Any recommendations on that approach versus refinancing with private companies?”

Tim Ulbrich: Yeah, thank you, Sabina, for your question. And what really she’s asking here about is what we called in Episode 062 “the other forgiveness.” So we’ve talked a lot on the show about Public Student Loan Forgiveness, PSLF. In Episode 018, we talked about that. I think we’ve mentioned it probably in 15 other episodes, right?

Tim Baker: I think so, yeah.

Tim Ulbrich: And I’m glad we did because I posted in the group last night, there’s a lot of negative news coming out about PSLF, and I’m not going to get on the soapbox right now. News article that 99% of borrowers that applied for forgiveness didn’t get it. And while you and I think we both agree that the federal government and the loan servicers could do 1,000,000% better job than what they’ve done in terms of the PR or the press and all of this, if you really dig into the details of why people aren’t Public Student Loan Forgiveness, most of it if not all of it really isn’t a surprise. It’s either they haven’t consolidated to the right loans, they’re not in the right repayment options or they’re not working for a qualifying employer. So as I mentioned on that episode, dotting your i’s, crossing your t’s is critical. If you have questions, let us know. But what Sabina is asking is about the other forgiveness, non-PSLF forgiveness. So if you stay inside the federal student loan repayment system, and she mentioned two of the income-driven repayment plans, PAYE and IBR, after a certain period of time, 20 or 25 years, depending on the plan, there is an option for forgiveness. And the key here is you do not have to work for a qualifying employer, which is different than PSLF. However, the amount that’s forgiven is taxable, unlike PSLF, where it’s tax-free. So there’s some planning that has to be done with tax. All that we covered inside Episode 062. And so I’d reference our listeners to Episode 062, Sabina the same. And also, she’s asking about refinance. And I think the question here behind the question is what is the best repayment option for Sabina? And I know many of our listeners and followers have that question. Should I refinance? Should I stay in the standard 10-year repayment program? Should I choose one of the income-driven repayment plans? Should I go PSLF? Should I not? If I do refinance, is it five years? Seven years? Ten years? Fifteen years? And we talk a lot about choosing the best repayment option, and we’ve got a full course around that topic, specifically that I would point our listeners to as well. So Sabina, without being able to dig into the numbers, this really comes down to lots of different factors such as running the numbers on each of these options, what’s the math? What are your feelings towards having these loans around for 20+ years? What are other financial goals you’re trying to achieve? What’s your progress in those goals? And I think at the end of the day, what I’m trying to encourage you and our listeners to do is to lay out all of the options, refinance, no refinance, forgiveness, no forgiveness, PSLF, non-PSL Forgiveness — and then from there, look at all the numbers, consider some of the non-math factors, and you can move on and make that decision to ensure that you’ve got this big decision and you’ve made the best decision for your financial plan. Tim Baker, question No. 9 is from Blake, who asked, “My wife is a PA, and I’m a pharmacist. She’s eligible for PSLF, and I am not. She’s set up on an income-based repayment plan, but this will be the first year where we both have a full year of income when we go to file our taxes. We’re wondering if there is a best way to file taxes to keep her payments low to maximize the amount that’s forgiven. I didn’t know if we filed our taxes as married filing separate, would it be more beneficial than filing together?” What do you think?

Tim Baker: Yeah, it’s a great question. And it’s kind of similar to our last question. It’s kind of difficult to dig into without all of the nitty gritty details. But you know, I would say that I think that there are situations where with student loans and spousal income that married file it separately is the right way to go. And I actually have a few clients that are doing that. It also depends on what repayment plan you’re in. So if you’re in a REPAYE — and if you’re in PSLF, those are going to be the two that you are really going to want to look at is Revised Pay as You Earn and Pay as You Earn. One of them, REPAYE, it doesn’t matter how you file. It’s going to count both spousal income. Pay as You Earn, it does matter how you file, depending on if you do file married filing separately will only account for the one spousal income. So I think you have to actually sit down and maybe do a tax projection, so we talked about that last time. If you’re interested, YourFinancialPharmacist.com/tax, we’re doing tax projections right now. And maybe actually couple that with kind of a student loan consult, student loan analysis, just to see am I approaching this the most efficient way as possible. Now, it is a pain in the neck to file with your spouse to file separately for 10 years. That’s not fun. And for nine out of 10 scenarios, just strictly from a tax perspective, married filing separately offers few benefits. But if you look at it, and your benefit or your payment is hundreds of dollars a month or even equate to thousands of dollars per year, the tax benefit might not equate to that in terms of married filing jointly. So again, I think that your question, it does, Blake, it does have legs. And there are scenarios where it does make sense to actually not file jointly with your spouse, especially if you’re looking at PSLF. And it kind of just depends on some of the income and the underlying numbers with the loans themselves. Alright, Tim, last question here is question No. 10. This is from Joshua. So Joshua says, “I’m on course to pay off student loans in a relatively short period of time. I noticed that refinancing my federal loans to a private lender would decrease my interest rate, as expected. But because I’m set to pay off the loans in a small period of time, the amount saved in interest is relatively small for a pharmacist’s salary. Would it be wise to stick with the federal loans with the option of utilizing a graduated repayment option to keep my minimum payment low in case something unexpected happens that doesn’t get paid for by insurance, like having a baby, etc.?”

Tim Ulbrich: Yeah, this is a great question, Josh. And Tim Baker, I don’t know your thoughts on this, but I have a feeling we’re going to get more of this question as we see the interest rate market rise. You know, I think a year ago, we had our student loans that were hovering around, what, 6-7% fixed rate? And some of our listeners were getting refinance rates in the 3-4% and obviously some a little bit higher depending on your credit and all those types of factors, debt-to-income ratio, etc. But I think as we see the interest rate market rise, then obviously we’re going to see refinance offers become maybe still attractive but not as attractive. Would you agree with that?

Tim Baker: Yeah. Absolutely. I mean, the interest rates on here are a huge thing that’s hanging out there. I think it will always be competitive in the five-year or the seven-year, but if you’re doing like a 10-year and you’re at 6%, I think eventually that market will dry up.

Tim Ulbrich: Yeah, I mean, obviously when you’re talking about potentially refinancing $150,000-160,000 and you look at 1-2% interest rate change, that can be huge, you know.

Tim Baker: Yes.

Tim Ulbrich: And we’ve done the math before on some fairly conservative numbers, and we estimate that somebody who has the average indebtedness can definitely save around $25,000-30,000 in refinance, depending on your individual situation. So and I like the way Josh asked this question because I can tell he already did the math. And that was the first suggestion I would have for our listeners is go to YourFinancialPharmacist.com/refinance, shoutout to Tim Church, who worked hard to build out a refi calculator, so you can look exactly to see as you get quotes from different lenders exactly what is the difference? How much are you going to save? Is it worth it? And based on those savings, you can then make the decision — or projected savings — you can make the decision to switch or not. Now, I must clarify, any time we talk about refinance, you know, regardless of what the math says, if anybody’s pursuing loan forgiveness, obviously refinance should be off the table because once you refinance, you’re taking yourself out of the federal system into the private system. You’re then making yourself ineligible for a refinance — or for forgiveness, excuse me. So for those who are not pursuing forgiveness who are then doing the math on a refinance, now the question becomes what am I giving up by getting out of the federal system? And how much am I saving? And is it worth whatever I am giving up? And you’ve talked about before several times on this show that 10 years ago or so, there was some vast difference between the benefits of the federal program and the private system. And those really have gone away because as you’ve made the point, when you have such a lucrative market, those private companies have to be competitive against whatever the federal system is offering. And so I think as we now look at some of these major lenders that we have, obviously pumped on our page as well, SoFi and LendKey and Common Bond, etc., you know, they really are becoming apples to apples with the federal system, with of course the exception of the forgiveness clauses. Now, there’s a couple lenders that are still out there that do not offer a discharge on death and disability, so of course you need to look at that as a factor. And if you’re going to get a much better rate from them, you have to weigh that against the risk that you’re taking on there. But for me, it’s starting with doing the math, seeing what the savings are, and then making the decision as to whether or not you’re going to switch. And again, YourFinancialPharmacist.com/refinance, we’ll give you the information to get started. The other thing I want to add here, which is the second part of Josh’s question, is would I just be better off with a smaller minimum payment in an extended or graduated plan in case something unexpected comes up? Now, I think this goes all the way back to budgeting and financial planning and really trying to get a feel for what are you locking yourself into month-to-month. And the thing I would say here to Josh is don’t forget that you can refinance more than once. So if you’re looking at your monthly budget, and you’re saying, “Oh, I’d be really squeezed by a five-year refinance, but I feel really comfortable about a 10-year, and then I’ll reassess in 12 months or 18 months or whatever,” you can always refinance into a 10-year, and then you could reevaluate that into the future. Or you choose a lender that allows you just to make those extra payments, right? Which are all of the ones that we have listed on our website. So don’t feel like you’re locked out of that because of a refinance. You could choose a longer term period and then you could obviously make extra payments or you could reassess and re-refinance at a later point in time. Alright, Tim Baker, good stuff. This was fun to take on these 10 questions. I think we’ll be doing more of this. So again, as a reminder to our listeners, if you have a question that you would like featured on the show, shoot us an email at [email protected] or jump onto the YFP Facebook group if you’re not already there, join the 1,700 other pharmacy professionals, great conversation, great community, and certainly you ask a question, you’re going to get a lot of good feedback in addition to Tim and I — Tim, Tim and I jumping in as well. As we wrap up another episode of the podcast, I want to again take a moment to thank our sponsor of today’s show, CommonBond. CommonBond is a on a mission to provide a more transparent simple and affordable way to manage higher education expenses. There approach is no big secret…lower rates, simpler options and a world class experience…all built to support you throughout your student loan journey. Since its founding, CommonBond has funded over $2 billion in student loans and is the only student loan company to offer a true one-for-one social promise. So for every loan CommonBond funds, they also fund the education of a child in the developing world through its partnership with Pencils of Promise.Right now, as a member of the YFP community you can get $500 cash when you refinance through the link YourFinancialPharmacist.com/commonbond. Again, that’s YourFinancialPharmacist.com/commonbond. And one last thing if you could do us a favor, if you like what you heard on this week’s episode, please make sure to subscribe in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to YourFinancialPharmacist.com, where you will find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Have a great rest of your week!

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YFP 070: Pre-Planning for Tax Season

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Pre-Planning for Tax Season

On Episode 70 of the Your Financial Pharmacist Podcast, Tim Baker, YFP Team Member and owner of Script Financial, talks with special guest Paul Eikenberg. Paul works alongside Tim at Script Financial and handles all of the tax planning and preparation for Script clients. On this episode, they discuss the new changes to the tax code and tips you can use for pre-planning for tax season.

Summary

In this episode, Tim and Paul discuss changes to the tax code that will affect your tax preparation for this year. There are several changes that have been made. The 1040 form is 23 lines and has new schedules. Standard deduction amounts are changing from $12,700 (couple) and $6,350 (individual) to $24,000 and $12,000, respectively. Personal and dependent exemptions are going away, meaning that those who have itemized before will probably take the standard deduction. Other changes include the amount that’s able to be deducted for medical expenses (now 7.5%), limits for local and state income taxes, child tax credit (now $2,000/child), student loan discharge due to death or disability is not taxable in the future, and the 529 is now available for primary and secondary education in addition to college. Paul also discusses how tax brackets have changed. There are the same number of brackets, however, the rates have been lowered. Paul suggests that most people will get a tax reduction between higher standard deductions and lower tax rates.

Tim and Paul then talk about the differences between tax planning and tax preparation. Tax planning involves long term strategy matching with your personal goals. Tax preparation is more mechanical where you plug in what happened financially from last year.

Paul offers tax review services through Script Financial. In a tax review, Paul uses your tax return from last year, current paycheck stubs, and payroll statements to project what your tax bill will be, assess if you are withholding enough from your check, and walk you through different options. Paul is still offering tax review services.

About Today’s Guest

Paul Eikenberg has been involved in starting and selling 4 businesses, has worked in the IT field as a franchisee and executive, as VP of Franchise Operation for a 500 unit Franchise System and is currently is serving as Vice Chairman of the Board of APG Federal Credit $ 1.4 billion asset Federal Credit Union. He has a wealth business operations and financial experience. In addition to being a licensed Maryland Tax Preparer, he is scheduled to completed the IRS’ Enrolled Agent exams by year end.

Mentioned on the Show

Episode Transcript

Tim Baker: What’s up, everybody? Welcome to Episode 070 of the Your Financial Pharmacist podcast. Paul, thanks for joining me on today’s episode. How’s it going?

Paul Eikenberg: It’s great, Tim. Thanks for having me.

Tim Baker: Yeah, of course. So Paul, why don’t we take a step back before we kind of get into all of the exciting things that are tax. And we don’t spend enough time on taxes, which is a very important part of the financial plan. But before we kind of do a deep dive into discussing the different changes to the tax code and what our listeners can do to prep for the upcoming tax season, why don’t you tell us a little bit about yourself and how you came to be the tax guy at Script Financial?

Paul Eikenberg: Sure, I’ve had several careers now. I’ve owned two businesses. And most recently, I was working with a network service provider. When that job got eliminated, I decided that I’d go back to tax preparing and got my Maryland certification, and I’m working on the enrolled agent program with the IRS, which I’ll be completing in December. And was looking to work real hard for part of the year and not so hard the rest of year has been my life. So that’s when you and I sat down together and started talking about our financial plans, and I wasn’t ready to retire, but I wasn’t ready to go back to work full-tilt. So you and I came to an understanding that Script Financial needed a tax practice and that it was a good fit for me at the right time.

Tim Baker: Yeah, and I think for me, you know, I think tax is so important because it really permeates every part of the financial plan. And I think a good understanding of one’s own tax situation and how you can practically plan for your tax situation I think is super important. So like I said, I’ve really enjoyed working with you and Anne over the years, and I feel like when I think back on the first time we met, I think we talked a lot about finances, but especially with Anne, we talked a lot about just life and just experiences and things that you guys have experienced and my experience, and it was more about the human element, I think, that we connected. And it’s been a good ride so far, and I’m lucky to have you as part of the team. So yeah, thanks again for coming on the podcast today. So let’s hop right in. So Paul, last year, the new administration passed the new tax code. The Tax Cuts and Jobs Act was signed by President Trump on December 15, 2017. What has that done to the tax system from where you sit as you’re looking at preparing taxes for 2018? What are some of the big changes?

Paul Eikenberg: Oh, everybody’s still working on figuring it out. The forms, the 1040’s changing. And the IRS has released drafts of the 1040s and all their forms, but they’re still in draft form. None of it’s been finalized. But one of the big changes you’ll see is that form 1040, which was 79 lines last year, is going to be 23 lines this year, postcard-sized, which sounds great until you find out there are six new schedules to support the 1040.

Tim Baker: Right.

Paul Eikenberg: And those lines really haven’t been removed, they’ve been moved to other schedules. So from a complexity of doing your taxes, it is I expect to be every bit as complex as last year. We will have a lot more people this year will be itemizing than previous because of the changes in the standard deduction.

Tim Baker: Yeah, it’s funny because I think the rhetoric behind the tax changes were that we want people to be able to basically file their taxes on the back of a napkin. And obviously, the 1040 itself is smaller, but it looks like they just moved the information to these new schedules, which I understand are actually numeric. So if people are familiar with the tax forms, you know, you have Schedule A, which was typically for your itemized deductions, Schedule C for business income. And now we actually have Schedule 1-6, so it actually makes it a little bit more confusing, in my opinion. Obviously, we haven’t seen kind of the final product of what the forms will actually look like, but interesting that I think it’s still going to be as complex as it was before. So let’s talk about some of the meat of some of the changes that we’re seeing. So you mentioned the new standard deduction. So walk us through some of the big — what is the standard deduction compared to the itemized deduction? And how has that changed for this upcoming year?

Paul Eikenberg: Well, in 2017, the standard deduction for an individual was $6,350. For couples, you were looking at $12,700. This year, it’s going to be $12,000 for single and $24,000 for couples.

Tim Baker: So essentially, it’s doubled.

Paul Eikenberg: It would seem that way except that your personal and dependent exemptions are going away, which was $4,050 per individual.

Tim Baker: So it looks like a little bit of the same stuff with kind of just rearranging the numbers, similar to the lines in the 1040.

Paul Eikenberg: It is. You’ll have, you know, you’ll have a higher standard deduction. So a lot of people who were itemizing last year will be taking the standard deduction this year. There’s estimates all over the board as to how many people will be affected. But you know, we saw a lot of them in our practice that were maybe $2,000-3,000 over the standard deduction last year that it made sense to itemize. This year, they’ll be taking the standard deduction.

Tim Baker: So just to back up, typically, what you want to do as a taxpayer is you want to look at what the standard deduction is and then what you’re itemized deduction is and then you want to take the greater one of those. So last year, if you were single, and you had itemized deductions of $6,500, you would have took that over the standard deduction of $6,350 because it was a greater number. So Paul, quickly, what are some examples of what would constitute an itemized deduction?

Paul Eikenberg: Mortgage interest is one of the big ones. Property taxes, state taxes, charitable contributions, employee business expenses, medical expenses can be if you have a significant amount of medical expenses. In the past, it had to be the amount over 10% of your adjusted gross income. This year, it’s dropped to 7.5%. But for the most part, unless you had a major health factor, you’re not — most people aren’t getting to itemize the medical insurance, I mean medical deduction.

Tim Baker: OK.

Paul Eikenberg: Last year, one of the big changes, state and local income taxes were deductible. They’re still deductible, but there’s a $10,000 limit on the amount of state taxes that can be itemized, and that is withholding taxes and property taxes. So higher income earners, that’s going to be a reduction in what you can itemize.

Tim Baker: So that’s big for high income earners and if you live in a part of the country where your mortgage and state and local taxes are higher, so say in the San Francisco area, that’s going to obviously affect those areas more than, you know, if you live in more of a rural area. How about, Paul, how about with kind of the, you know, if you have kids — how does the tax code change if you have kids?

Paul Eikenberg: Well, the biggest change there is the child tax credit goes from $1,000 per child to $2,000 per child. And the amount that’s refundable goes from $1,100 to $1,400. So that is the biggest change. The other change is that credit was phased out at $110,000 last year for a married couple. The phase-out has been raised to $400,000 this year.

Tim Baker: Which is huge, especially for our listeners, you know, probably as a couple are making more than $110,000. Now if you make up to $400,000, you get that $2,000 tax credit. And really good point of emphasis here is a credit is actually a dollar-for-dollar reduction from your tax bill, whereas a deduction just kind of decreases the income that you’re taxed on, so it’s not necessarily a dollar-for-dollar. And I think for the child tax credit, I believe if you’re single, I think it’s you can make up to $200,000 and still get that $2,000 credit per child. So just like you were talking about, it’s changed but the personal exemptions have gone away, but you’ve increased the child tax credit. So it’s a little bit of a — I don’t want to say bait and switch, but not a huge change. OK, so what about the — in terms of like education? We’re talking like the 529, the student loans and forgiveness. Are there big changes for that? Because that would obviously be something with listeners who have kids that are trying to avoid maybe the student loan hell that they’re in, so they’re saving for 529 or, you know, if you are a borrower and you’re trying to navigate your student loans, are there any big changes to the tax code in those two areas?

Paul Eikenberg: One of the big changes is the student loan discharge due to death or disability is not going to be taxable in the future.

Tim Baker: OK.

Paul Eikenberg: The interest deduction, the phase-out earnings have been raised a little bit but not significantly. I guess the biggest change is the 529 is going to be available for use for primary and secondary education.

Tim Baker: Yeah, so from what I understand, Paul, the 529, you can actually use for kind of your grade school, middle school, high school, which was a change because the 529 was really — before, it was just locked into just college. They did, for you homeschoolers out there, there was supposed to be a benefit that was stripped out at the last minute, so unfortunately, the 529 is no longer good for homeschooling. And so you know, from what I’m hearing more about people that work with clients that use 529s, it could actually — you could use it as a pass-through. So if you’re paying for private school, make sure you’re funding a 529 because you get a state deduction in most states. But then you can also use a 529 almost like you would use a retirement account where you’re accumulating, you know, so if you have a child and they’re going to go to school in 18 years, you’re investing that money and you’re accumulating it over time so you have a bucket of money for your child in the future to apply towards college. And then to circle back, the student loan interest deduction, it remained intact. I think it goes up a little bit, but not enough to really affect a regular pharmacist. Maybe for residents out there, the 2017 phaseouts were I think $65,000-80,000, so anything above $80,000, you didn’t get a deduction. So obviously for residents, for those maybe your PGY1, PGY2 year, you’d probably get a deduction for those years. But you know, beyond that, not necessarily. But the fact that the loans are discharged due to death and disability and not taxable because of death and disability is a big win for those people that unfortunately have to deal with that situation. So I guess, Paul, before we kind of talk about what we can do to prepare for the 2018 tax season, just about I guess the brackets. You know, I think everyone would like simplicity, but with the new tax code, do the tax brackets, how did they change? Did they change? What does that look like?

Paul Eikenberg: It’s pretty much the same number of brackets, but the rates are a little lower. The base rate is still 10%, but the next bracket down from 15% to 12%. The bracket above that went from 25% to 22%. 28% to 24% and then the next bracket, 33% to 32%. The others are pretty much the same or higher. So you know, we’re looking at overall, most of us are going to get a tax reduction between the higher standard deduction and the lower tax rate should have a positive effect on most of us out there.

Tim Baker: Yeah, and I think, you know, the number of brackets, again, like it would be nice to pare those down. I think essentially, though, moving forward with this tax plan, I think it is going to be better from a taxpayer perspective. Most people’s taxes are going to be lower. So that’s something to consider as you plan, you know, for the future. And that’s a good segway into kind of our next discussion is, you know, the difference between tax planning and tax preparation. So Paul, for you, how would you separate those two things?

Paul Eikenberg: The preparation is just more mechanical. We’re taking what happened last year, plugging it in, selecting maybe a couple options, whether itemizing or standard deduction works best for you, should you make an IRA contribution up to April 15 that you didn’t make before the end of the year. But you know, that’s working in the past with a lot of things you can’t change. Tax planning is really taking a long-term strategy, kind of matching your personal goals with your tax strategy. So you know, if your goal is to pay off student loans now, you may not want to defer as much retirement income as somebody without that. It’s just kind of putting all those pieces together and, you know, when we look at planning, like a mid-year plan for somebody, we’re going to look at where you are now, have you had enough taxes withheld that you won’t have a surprise come April? And are you taking advantage of the HSAs? Are you definitely getting the matches in your IRA, in your retirement programs?

Tim Baker: Sure.

refinance student loans

Paul Eikenberg: You know. If you have a business, rental property, are you doing everything you can? Are you planning out your expenses for those to mitigate your taxes as much as possible?

Tim Baker: Right. Yeah, and the way I look at prep versus planning, tax prep versus tax planning is the prep I think is the very reactive in nature. You’re like, ope, this is what happened for 2018. Let’s plug in the numbers and see what pops out. And sometimes, it’s a surprise, you get a refund. And sometimes, it’s where you’re writing Uncle Sam a check. And that can’t be fun.

Paul Eikenberg: I know from preparing a lot of taxes that the most painful thing is to be doing your taxes, waiting and being surprised with a big tax bill instead of a small refund you were expecting.

Tim Baker: Yeah, so maybe the approach we take is maybe self-preservation too because it’s tough to sit across the table and say, ‘Hey, you owe a lot of taxes.’ So obviously, what we’re trying to do from a tax planning perspective is get out in front of it, be proactive, and actually, you know, don’t let really the tax situation control you. You’re controlling your — whether it’s, like you said, deferring the taxes or avoiding the taxes, whatever that looks like.

Paul Eikenberg: If you’re proactive, you have a lot more options.

Tim Baker: Yes. Yeah. And for some people, you know, we talk about having funds set aside, whether it’s for home maintenance, emergency fund, a vacation fund, a lot of people don’t have a tax bill fund that they can just write a check and say, ‘Here you go, Uncle Sam. I didn’t pay you enough over the year, so here’s a sum of money.’ So that definitely could be painful. So Paul, let’s break down. You kind of talked through it a little bit, but when you sit down and you do a tax review with a client, what does that look like? How does that play out?

Paul Eikenberg: Let’s say we’re doing one for you now. You know, what I’d want to see is the most recent paycheck stubs. You know, we’d want to look at your last year tax return, and we’d really take your payroll statement and look at where you’re earning are, what type of retirement program you’re in, what other type of health insurance — are you pre-tax, HSAs — and project all the contributions through the end of the year for earnings and withholding, withholding taxes, and pre-tax contributions. From there, kind of review the tax return from last year, look for other sorts of income, deductions, project those, and then we’d sit down for a half hour conference and kind of go over the assumptions that I make projecting your situation through the end of the year, be sure that if you had capital gains last year, rental income, any of those other type of items, that we’re working on the proper assumptions.

Tim Baker: Right.

Paul Eikenberg: You know, are there estimated taxes or anything we’re missing that you’ve already paid Uncle Sam. And from there, we kind of project what we expect your tax bill to be, what your withholding’s going to be, if nothing changes, are you going to have a refund or owe money? And then we kind of walk through your options. To me, the HSAs are a great tool. Everybody should be getting their matching retirement, whether that’s pre-tax or a Roth 401k. If your employer’s matching it, that’s something you want to be sure you’re taking advantage of. And we’d kind of walk through your options of is there anything you should be doing to mitigate the taxes? Have you had too much withheld? Should you lower it? Have you had not enough withheld? Do you need to increase it? You know, are you going to be subject to penalties if nothing changes? Maybe you need to make an estimated tax payment. So there are a lot of things we look at.

Tim Baker: Yeah, and it’s great stuff. What I really like about kind of your review is that, you know, you take the pay stub — and it’s funny because when I used to work for a company, I would get paid with a paper check, I’d rip the check off, I’d deposit it, and I’d throw the pay stub on a pile. And I’d never really look at it. But actually, there’s a lot of good information, a lot of good nuggets on the pay stub about what you’re actually paying into. And it could be your retirement fund or long-term disability or whatever that is. And what I really like about your system is, you know, you use that information to kind of set up where we’ve been throughout the year and then extrapolate that forward to where we expect you to be. And what I like is is that you generally say, ‘Hey, if nothing changes, you’re going to owe $2,000. Or you’re going to get back $2,000.’ You’re going to be basically equal. You won’t owe or get anything back.’ And then if there is an imbalance, then we kind of discuss some of the levers that we can pull. So you know, you mentioned the HSA, increasing a contribution into your 401k, whatever those things are. And I think another one that probably we could talk about is just, you know, changes to your payroll withholding, the W4 form. A lot of people, when you begin a new job, you fill out the W4, and you don’t really look at it. But that W4 form basically dictates to your employer how much tax should be withheld from your paycheck. And then if you owe more taxes than what is withheld, then that’s when you actually have to write a check to Uncle Sam. So it’s kind of important to really understand that form itself and what that does. And sometimes just changing that is one of the levers that we pull. So instead of paying at the end of the year, you just pay a little bit more throughout the course of the year. So these are I think levers that I think are important to look at and go through and be able to, again, be more proactive in your tax situation than just say, ‘Well, this is what happened last year. Cross my fingers, hopefully I don’t get any surprises,’ and go from there. So Paul, are you still doing the reviews for this year? I know we’re into October. What does that look like?

Paul Eikenberg: Yeah, we’ll probably continue doing them until the Thanksgiving holiday is the plan right now.

Tim Baker: OK. So I think, you know, for listeners out there, if you’re interested, some people, you know, really enjoy to do a great job of analyzing your own tax situation. But if you’re not one of them, and you can think of a million other things to do to spend your time, you know, we can definitely help. Paul can definitely help. I think he does a great job with my clients. So you know, if you’re interested, sign up for the Script Financial tax review, and it basically includes a lot of the things we talked about, you know, analyzing your current pay stubs, you know, doing an income projection, you know, for the rest of the year, reviewing last year’s returns to see if there’s any discrepancy. So you know, if there’s big changes like you got married, you bought a house, you had a baby, those are going to affect, you know, obviously your tax situation. And at the end of the review, really to project out kind of your year-end tax status. And with that, basically Paul delivers that in a 30-minute video conference where, again, you review all the assumptions and projections and kind of go over the steps that you need to take to kind of, you know, pull the levers and say, ‘If we want to get money, this is what we would do. If we want to not owe the government money, this is what you should do.’ And I think it’s of great value. So normally, a tax review like this, it would be priced at $99. Between now and Nov. 20, so this episode will be released on Oct. 18, so about a month, we’re running basically a promo for 20% off. So that just brings it down to $79. So if you go to YourFinancialPharmacist.com/tax and use the coupon code YFP, you’ll get that 20% off the $100 price. So it’s YourFinancialPharmacist.com/tax to get that — to sign up for the review and use the coupon code YFP for the discount. So Paul, you know, good stuff today. We kind of talked about changes to the 2018 upcoming tax year, changes to the 1040, it looks like we’ve added some numeric schedules, the standard deduction has increased, and we talked about some of the changes with, you know, with the new tax code with deductions and credits, and then really what you can do for your own tax situation to kind of get in front of the ball and make sure that you have really no surprises for, you know, this upcoming tax season. So Paul, anything else to add before we kind of sign off here for the day?

Paul Eikenberg: Yeah, one more thing to think about that we think we’re going to see a trend with this year with the standard deduction going up. In the past, people have tried to pay their property taxes on December 31, made charitable donations so that they got those in in time to be deductible in the current year. I think the trend’s going to be that a lot of the people will be doubling up on those. They’ll be looking at their tax situation and instead of making donations in 2018, they may make twice as many in 2019. And think about your property taxes as to whether it makes sense — like in Maryland, you’d pay your property taxes from July to July and you have an option of breaking it up. So it may make sense to pay more in one year and then take the standard — alternate your itemized deduction one year to the standard deduction the next year. So that is one of the things we anticipate being a good strategy for quite a few people out there.

Tim Baker: Yeah, and I think just a tip in kind of the direction of doing some proper planning and being as efficient with your tax situation as you can. Like I said, if the listeners are interested in working with Paul and doing a tax review, it’s YourFinancialPharmacist.com/tax and use the coupon code YFP for the 20% discount. So Paul, good stuff today. Thanks for coming on the podcast, really appreciate it. And to the listeners, thanks again for listening. And we’ll catch you next time.

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YFP 069: Carissa Explains it All: How One Pharmacist is Accelerating Her Financial Goals Through Rodan & Fields

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Carissa Explains It All: How One Pharmacist is Accelerating Her Financial Goals Through Rodan & Fields

On Episode 069 of the Your Financial Pharmacist Podcast, Tim Church, YFP Team Member, hosts another edition of the Side Hustle Series featuring an interview with Dr. Crissy Mahl, a pharmacist and entrepreneur from Yuma, Arizona. Crissy talks about her pharmacy career path and how she became interested in entrepreneurship. She started working for Rodan and Fields and has created a significant side income.

In the Side Hustle Series, Tim talks about ways you can create additional streams of income to reach your financial goals faster and highlights pharmacists who are doing this to help you get inspired.

About Today’s Guest

Crissy graduated with her Doctor of Pharmacy from the University of Findlay in 2012. After living in Ohio all her life, she moved to Yuma, Arizona and completed a PGY1 residency. She has a passion for acute care and hospital pharmacy and is now is one of her hospital’s biggest influencers and leaders. She also has a passion for empowering and inspiring others which is what lead her to become an entrepreneur.

Summary of Episode

On this episode, Dr. Crissy Mahl speaks about her pharmacy career and urge to travel which ultimately moved her from Ohio, where she lived all of her life, to Yuma, Arizona. She carries a passion for acute care and hospital pharmacy and currently works in a position where she is able to help create pharmacy jobs. To supplement her pharmacy income, Chrissy took on an entrepreneurial side hustle and started a business selling Rodan & Fields. In doing this, she’s learned how to fit her side hustle in with her full-time pharmacy career, allowing her to make larger payments on her debt and save for the future.

Crissy says that there are certain personality traits and characteristics that aid to the success this type of work. Her leadership skills as a preceptor to PGY1 students and Family Med residents matched with her personality and work ethic allow her to help navigate and balance her busy schedule. Crissy manages her time wisely, prioritizes well, and is incredibly focused on her business. She stopped watching television and even uses the “spare” time she has while walking or on an elevator to send emails and text messages that help fuel her business. By hustling around the clock, she has a goal set to retire by age 39.

Mentioned on the Show

Episode Transcript

Tim Church: Crissy, thank you so much for taking the time to come on the show and for being part of this side hustle edition.

Carissa Mahl: Thank you for having me, Tim. I’ve never done anything like this before, so I’m pretty excited about it.

Tim Church: Awesome. Well, we’re glad to have you on. And I was really excited when you reached out to me on LinkedIn to inquire about Your Financial Pharmacist and just to talk about some of the ways that you’ve been working towards financial freedom.

Crissy Mahl: Absolutely. Honestly, I felt like your page was everything that I wish that I knew when I was in pharmacy school. Honestly, there’s so much when it comes to finances and student loans and all this other stuff, and it’s super overwhelming. And it’s even more overwhelming when you come out of school and you’re not really sure what way to turn. And so this side hustle topic is very dear to my heart, and I think it’s something important for people to consider and kind of learn about too.

Tim Church: Yeah, I couldn’t agree more. I thought it was really cool when we were talking that we actually share a similar background in that we grew up in Ohio, lived there our whole life, and then we said, hey, let’s go ahead and take off to a state pretty far away and really kind of go from there. So I want to — can you share a little bit about how that happened and why you made such a big move?

Crissy Mahl: Absolutely. So I lived in Ohio all my life, moved to Yuma, Arizona about a little over five years now. So I went to pharmacy school in Ohio, the whole nine yards. I didn’t move until a few months ago after I had graduated pharmacy school. Ohio is where my whole family resides. It’s literally the only thing I know, honestly, because we didn’t have a lot of money when I was growing up. So traveling really wasn’t something that I had ever done before, you know, venturing outside of my little heart of Ohio State was a little bit nerve-wracking, but it was something that I felt I really needed just, you know, for my own push to get outside my comfort zone. And that’s exactly what happened. I was definitely outside my comfort zone, but honestly, I love it here in Ohio — or in Arizona! And I mean, the weather is awesome. I am constantly cold, all the time, so Ohio was really not my jam when you get like nine months of winter. So yeah, this heat is — this is my jam.

Tim Church: I hear you, I hear you. That’s how I got — I moved down to Florida, and for me, it was kind of a temporary situation. But after I was here, it was kind of like, you know, this is it. This is where I want to be, at least for awhile.

Crissy Mahl: Yeah.

Tim Church: So what was the main driver for you to get out there? Was it for a particular job? Or did you know people out in Arizona?

Crissy Mahl: You know, to be honest with you, I had always felt this inner — I don’t know what you would call it — this calling, if you will, to just explore the world. And like I said, I’d never really been able to travel when I was younger or even in school, to be honest with you. In pharmacy school, I had an internship, I worked all the time, so I really didn’t travel even while in pharmacy school. But I always had this inner feeling of just wanting to explore the world and get out there and try something new. And when I had first graduated pharmacy school, I actually had applied for pharmacy positions in both Ohio and Arizona. And I just kind of picked Arizona because I’d been to Orlando once before in my life, and my hair doesn’t quite agree with humidity, so I knew that humidity couldn’t be a thing in my life. And so I was like, oh sure, yeah, Arizona. Like their licensure requirements are similar to Ohio and I could totally pull off getting a license there if I needed to. Kind of a long story short, I actually got a job at a hospital where I had done a lot of my last year of pharmacy school rotations at. And I felt very comfortable with it. I was doing something that, you know, I thought that I wanted to do, which was work as a pharmacist at a acute care hospital. But honestly, I was a little bit scared because I felt like I was too comfortable with what I was doing, and I had only worked there for a couple of months. And it kind of gave me this feeling of like is this really it? Like you know, is this the challenge? Is this what I’m going to do my whole life? And you know, I don’t know. I’m kind of weird in the fact that I like constant change. And I don’t do well with monotony. So I actually had went to Midyear in Vegas that year and met up — just to say hey — to the director of pharmacy and the assistant director of pharmacy at a hospital in Arizona that I had done a phone interview for. And I don’t know if you and anybody listening to this right now have encountered this situation, but I feel like whenever you’re applying for a pharmacy position, they want to fill it pretty much immediately. So that was kind of a problem I came across while I was putting in applications, just before actually graduating is that they wanted to fill the position quickly. And so a lot of the positions I had applied for were already taken by the time I graduated. And I said hey to them, and they were like, “You know what? We have a position, and we want to bring you out to Arizona just to see the place and have the experience.” And I was like, “Oh no, I’m fine. I have a job, it’s cool.” And they were like, “Well, we’ll bring you out and you can see what it’s like.” And I was like, “You know, actually, I’m thinking about going back and doing a residency. I feel a little bit too comfortable with what I’m doing, and I really want to get more clinical.” Long story short, they flew me out to Yuma, Arizona, in the month of February where it’s like hell froze over in Ohio and gorgeous in Yuma, Arizona. It’s like 70 degrees during the day and then in the morning, it’s like 50. Like it’s perfect. And so they probably set it up purposely that way. But essentially, I did my residency there for a year in Yuma, Arizona. Yes, I moved to Yuma, Arizona, after going to Midyear and meeting them. And ended up staying on as a pharmacist after residency.

Tim Church: Crissy, was that a tough transition between working as a pharmacist and then actually going back to do a residency?

Crissy Mahl: You know, honestly, it was so much easier. I feel like the first year that you have after graduating and you are a licensed pharmacist is when you learn so much, regardless of if you’re doing a residency or you’re going straight into a new position as a staff or clinical pharmacist. I just learned so much because you — I mean, I guess you do those things ishish to a degree in your last year of school, you know, during your rotations. But when you have to sign your name to all these things and you are now an independent, licensed pharmacist, there’s like this heavy weight on you to constantly overthink everything and all this stuff. But to be honest, I felt like doing a full year as a pharmacist before going into residency — while I understand how unconventional that is — it actually almost prepared me even more for the residency, giving me more of an advantage because honestly, I felt like I was actually training some of the pharmacists that I ended up being a resident under. Not to like an extreme degree, but I was able to actually like cover vacations for people. It was kind of weird. But I’m glad that I did it, and I’m glad that I went back.

Tim Church: I mean, I think that’s just, that’s a cool story because you don’t hear too many pharmacists who are actually working, practicing as a pharmacist and decide, you know what? I am going to go back and do that residency. And so I just really commend you for doing that because I think that when you’re set in a position, as you said, you kind of get comfortable to some degree. And for some people, that’s not the way that they like to feel and they like the challenge of learning new things.

Crissy Mahl: Yeah.

Tim Church: And I totally get that you were much more prepared because you had that experience under your belt. But one of the things that often comes up — and I’ve heard some of this from my colleagues is that you go from making a full pharmacist’s salary, and now you’re taking a huge pay cut for a year. Was that tough having to do that?

Crissy Mahl: Honestly, it wasn’t too terribly tough. And that doesn’t — probably doesn’t make a whole lot of sense, but I will start off by saying that I make much more working in Yuma, Arizona, than I did in Sandusky, Ohio, per hour. So the move alone pay difference, you know, there was that. Also, I had a lot of perks going to the residency here in Yuma, Arizona. They actually have — the hospital owns an apartment complex. And so I was able to stay in their apartment complex for the full year of my residency. And I think I paid like $300 a month in rent, which was like squadoosh. It’s like nothing. And then our residency here in Yuma, Arizona, actually compensated residents a lot more than almost any other residency I looked at. I can’t remember off the top of my head right now what it was, but honestly, I think it was not quite — it wasn’t even half of what I was making as a pharmacist in Ohio. Like it was more than half. And you know, I just — it’s one of those things where if you’ve ever just made a serious commitment in your life, whether it’s I’m going to pharmacy school and you get that acceptance letter and you just like, you’re all in and you are going to make this work and you’re going to do this. And you’re going to see it out until the end, it was something like that. I knew that residency was something that I needed to do if I wanted to be able to work in the position that I wanted. And I knew I had to just go all in, regardless. And you know, I was already kind of used to being a student and having no money, so you know, the one year that I actually was a pharmacist and making a pharmacist salary, it was kind of like a vacation, if you will. And then it was like, OK, go back to student mode.

Tim Church: Did you have to make any sacrifices for that year during the residency? You know, compared to the previous year when you were making the full salary?

Crissy Mahl: You know, I did share wifi with your neighbor. So the wifi was a little bit horrible. I didn’t update my phone every year like I was used to. Like if it fell on that year, I didn’t do it. Actually, the year that I moved to Arizona and was a resident, I just, I did a lot of quick trips to like Sedona and Page and just stayed at cheap hotels. So I mean, I totally made it work. Like I said, it’s like student living. You just know that you can’t go all out with vacations and stuff. And honestly, I feel like our compensation wasn’t too terribly bad. So I felt like I didn’t have to make too many compromises when it came to, you know, the normalcies of life as far as finances.

Tim Church: Sure. So talk about a little bit about your current position and what you’re doing at your full-time job.

Crissy Mahl: Sure. OK. So right now, I am a clinical pharmacist at a 400-bed hospital here in Yuma, Arizona. I literally do a little bit of everything, and most of that is due to the fact that I did my residency here. So as a PGY1 resident, I every month did a different rotation, including oncology, ICU, internal med, infectious disease, like you name it. And so literally, I mean the goal at the end of any residency, in my opinion, should be that once graduated, you should be able to fit in any of those roles confidently. And that’s what I was able to do. So they kind of fill me into almost any position in the hospital, in and outside of the hospital, that is needed. And I’ve actually created a lot of the positions that we have here at the hospital now, including our Tower 2, which is our cardiac unit. We now have a pharmacist position there, so I helped create that. I also helped create an additional staffing position for the evening shift. And let’s see — now it’s been almost two months — about two months ago I helped, me and my coworker created an IV room pharmacist position. And I was actually a IV technician back in my day, so I kind of already know 7.7 and compounding chemo and things like that. So today, I work in the ICU. And yesterday, I was the quality and safety pharmacist.

Tim Church: You’re doing it all.

Crissy Mahl: I know. When I was mentioning that I get a little bit of pharmacy ADD and you know, I don’t like monotony, this is pretty much like, this is pretty much best case scenario as far as getting to dabble into a little bit of everything. And you know, we’re talking now about starting a ER pharmacist position. And actually, our ER here in Yuma is the busiest ER in all of Arizona. So the fact that we don’t have a pharmacist down there yet is pretty surprising to me. So within the next couple of months, I’ll be rolling that out. And I’m super excited about that.

Tim Church: Wow, well you are just doing everything there. And you’re doing a lot. And it’s pretty cool because it sounds like you’re taking on a leadership role as well and helping to get these positions created and just advocating for pharmacy in the hospital.

Crissy Mahl: Yeah, yeah. I mean, I guess I could consider myself — I don’t know if you’re like a Game of Thrones guru or anything — but I’m kind of like Tyrion. I don’t necessarily rule any kingdoms, if you will. But I’m kind of like the hand of the kings and give advice and help make things happen, which is kind of more my passion rather than being a boss, if you will.

Tim Church: And would you say that your going and doing the residency, do you feel that that was critical to be able to do a lot of what you’re doing today?

Crissy Mahl: You know, I do because one of the things that I really tried to make sure that I did during my residency was have experiences that I knew I wouldn’t be able to get as a staffing pharmacist. So for example, when I was doing my ICU rotation as a resident, I made sure that I asked to sit in on a open-heart surgery and then also be in the room when the patient comes up to the ICU and how the nurse handles all of the drips and you know, patient assessment scales and everything. I also followed respiratory therapy and how they adjust ventilation settings. And I even got to sit in on a patient who had a Passy Muir valve put on, which was pretty interesting and gross at the same time. I am so glad that people think that respiratory therapy is the bomb because I cannot handle that stuff. So I really feel like I got to not just get an angle of what a pharmacist does in a hospital setting, clinically, but also what the team approach and what they bring to patient care so that I can understand the process in a holistic manner rather than just constantly looking at it from my angle.

Tim Church: Sure, sure. I think that’s awesome, and thank you for sharing that story and just kind of how you got into that role with the residency. So before we kind of move into your side hustles, I want to ask you one more question. And that is, you know, in our profession, there seems to be a lot of negativity — and I know it depends on the job setting — but a lot of negativity around job satisfaction, just the profession. So I want to know, what do you like about being a pharmacist and about your job in general?

Crissy Mahl: Sure. So honestly, pharmacy wasn’t something that was on my radar when I was 5 years. When I was 5, I wanted to be a tornado chaser. When I was 8, I wanted to be an astronaut. And when I was 10, I wanted to be a veterinarian. You know, I don’t know if it’s because I just never really like knew anything pharmacy existed, but it got into my radar when I was in high school and had to sit down and be realistic about what a career required as far as schooling goes and how much to expect to get paid at that job. And for me, going to school for six years — and now they have the fast-track programs and everything where you can get done even sooner — but more or less, six years, and it paid $100,000+ per year, depending on where you work and what you do, obviously. But you know, I feel like there were other professions at the university that I went to. They obviously paid a little bit less than I did to go to that school because we had that College of Pharmacy tuition tacked on, but you know, at least I feel like I’m not in a position where it’s 100% impossible for me to pay off my student loans if I had only had my pharmacy job, but also pharmacy is growing in a lot of different ways, and one of the biggest things is outpatient services, so you know, oncology is huge right now. Anticoagulation, hypertension, diabetes, all of these clinics, they want to have pharmacy involvement. It’s big right now. And I have a hard time believing that we’re ever going to necessarily run out of different things to do. I know that there has been a concern regarding how many pharmacists are graduating every year and how many positions are available between those graduates and people transitioning in and out of jobs, but honestly, if you keep yourself competitive in a way of always learning and just kind of — I don’t know — having a personality where you are open and willing to work and go above and beyond, then I don’t know that you’d ever have a problem finding a job. You may have to, you know, go outside your comfort zone as far as location — that’s definitely something that I’ve seen, especially coming out of Ohio where we have — oh my gosh, I don’t even know how many.

Tim Church: Seven schools. There’s seven schools now, the last I checked, that’s how many. I don’t think there’s eight yet.

Crissy Mahl: Right. Yeah. And so you know, I remember it being rather competitive trying to find a hospital position in Ohio when I graduated. So I can only imagine how much harder it is now, especially if they’re doing any kind of cuts in the way of hospitals and retail and all that.

Tim Church: I think you’re definitely right, though, that it is competitive and that there are certain markets that are saturated, and there is concern with the number of pharmacy schools. But I think that’s even more incentive just to always keep yourself ahead of the curve in learning new skills and really making yourself incredibly valuable to the organization, the institution that you work for but also learning different ways on how you can provide value in patient care. So I think you really hit that. And I think it will be important too to see as there’s a lot of legislation going through to get provider status, to get more opportunities for pharmacists to bill, so that will be interesting to see kind of how that plays off. Well, let’s switch gears a little bit. So you’re working as a pharmacist, you’re creating all these positions, you’re loving it after you got through your PGY1 residency. How do you transition or how did you say, ‘You know what, I’m making pretty good money. I’m working as a pharmacist. But I’m looking for something else.’ What was your main motivation for pursuing a side hustle?

Crissy Mahl: That’s a really good question. So to be honest with you, my very first side hustle was something that was brought up to me by a coworker. You know, he had mentioned that he worked at a physical rehab hospital where he hooked up a couple of hours every weekend or holiday. It was super chill, he did patient interaction. And it was pretty low-key. And honestly, I wasn’t looking for anything super intense. I was just in my brain thinking, you know what? I could use a couple extra bucks, you know, like thousands of dollars every month going towards student loans and just not really seeing that number go down very much was a little bit depressing. So I was like, OK, yeah, like maybe I could do that. So I actually, that’s why I got into it. My very first side hustle was working as a PRN pharmacist at a local physical rehab hospital. And you know, honestly, at first, it was super chill. I knew half of the pharmacists who were working there, so it was easy and familiar. It was different than what I was already doing because it was a outpatient facility with a different workflow, so my job was essentially to literally face-to-face talk with patients about their home medications and what they were going to get discharged on and make sure that they have the education that they need and whatever paperwork is helpful to them in understanding, you know, what the plan of care is once they go home. So it felt very purposeful and, like I said, it was not very stressful. So it was just kind of nice to make that extra money.

refinance student loans

Tim Church: Sure. How many hours were you working there? What was typical when you were doing that side hustle?

Crissy Mahl: Typically, in the beginning, it was around probably six hours, which wasn’t bad because I got to sleep in, you know. Sleeping in is until like 7 o’clock. And then I would go in sometime around 9 o’clock and leave sometime around 3:30 and then, you know, maybe catch a movie or something with some friends afterward. But the problem came when we doubled in size and they were doing cuts left and right. Like they got rid of our HR department, they actually let go the technician that we had for — he worked there for more than 10 years. It was heartbreaking. And then — so literally I was doing technician, which means I was packaging medications, I was doing outdates, I was doing narcotic inventory, all these like things that are just not fun for me. And not only was I in charge of doing that, but I was also now taking care of twice as many patients. And the facility was now accepting patients at pretty much all hours of the day. So I would literally — I remember one time, I got a phone call from a physician — or no, it was from the nurse, bless her heart. She caught me at a bad time. But it was like 11:30 at night, and they needed Levaquin. And I’m just like, are you serious? You’re going to make me get up and go in and get you a Levaquin? When they probably already had a dose before they left the hospital that morning. And in that moment, I was just like, oh my gosh, I don’t want to do this anymore. Like, I was literally — I probably had one or — no, that’s a lie. I probably had two or three days off each month between those two jobs. And at the end, I was probably working 10- or 12-hour shifts every time I went in there. So it went from chill, six hours, you know, doing my thing to over the course of a year or two, now double the work, 10 to 12-hour shifts, getting yelled at for putting in so many hours and just stress, like ugh. I was crabby. Nobody liked me.

Tim Church: So it started out like it was a pretty good position starting out, but then it sounds like with all the extra work and the stress that it wasn’t worth the extra money that you were making in order to kind of accelerate the goals that you were looking at.

Crissy Mahl: Exactly. Yeah.

Tim Church: So how long did you work at that facility?

Crissy Mahl: I am not good at quitting. So I stayed at that facility longer than I wanted to, to be honest. I was there for probably close to three years. And it was probably halfway through there where I actually wanted to quit. And I didn’t have necessarily a backup plan because I was already used to that double income and couldn’t really afford, based on my plan for paying things off loan-wise, I couldn’t afford to just dip out. And so that’s kind of when I got into my second side hustle.

Tim Church: Yeah, so talk a little bit about that.

Crissy Mahl: So my second side hustle was something completely unexpected. Honestly, so I got into it because I wanted an eye cream. I was 29 years old, almost turning 30, and I wanted an eye cream. And I was talking with — this is going to sound so ridiculous — I was talking with a friend of a friend who was also a pharmacist. She’s from Arizona and lives in Wisconsin, and she was talking to me about, you know, what this particular side hustle did for her. And for her, she really, really wanted to be present for her kids at home. And she worked at a retail pharmacy location, and I know that the hours can be long and exhausting and just draining overall in retail in particular, and in my opinion. Maybe it’s just because retail isn’t my jam and it stressed me out more than maybe other people. But she was actually able to go down to only working two days a week with this side hustle. And so that impressed me, and I was like, I know how much a pharmacist makes, and you’re telling me that this side hustle is bringing in enough money that you can go down to working two days a week? That’s intriguing. So I joined the business with her. And within a couple of months, I think it was like less than three months, I was able to make back my initial investment in the business. After that, it was gains. And by, again, I suck at the quitting thing. So I could have quit at the rehab hospital a lot sooner than I did because I was actually to make more with this side hustle, with this business, after only five months than I made at the rehab hospital. So I was making more with this business than I was at the rehab hospital, and I was able to do it from home.

Tim Church: So talk a little bit about the actual business that you’re working for and what you’re actually doing.

Crissy Mahl: Awesome. I would love to. OK, so I am essentially paid to have conversations with people about the No. 1 skincare brand in North America. So I talk with people about their skincare concerns, and I also talk with people about the business opportunity. And I make a commission off of the skincare that people purchase through me, and I also make a commission off of the team that I build under me. So with this particular company, there are certain standards. You can’t just make money by sitting back and not doing anything. You actually have to be physically present in the business, working and like I said, building and coaching your team. Skincare isn’t necessarily something I was passionate about at all. Like literally, you’re talking to the chick who used a Neutrogena face makeup cloth before going to bed every night, and that’s it. Like that’s all my skincare routine included. And so once I got into this, it was kind of opening a whole new door of, you know, what skincare actually is and people started noticing my skin just after a couple of weeks. And that’s really when I saw the value in working with this particular company.

Tim Church: And what is the company that you’re working for, Chrissy?
Crissy Mahl: It’s called Rodan & Fields. Have you ever heard of it?

Tim Church: I have heard of that. And is it slang within the biz or is just on the street as R&F, also known as?

Crissy Mahl: No, R&F is like a thing. It’s their logo, it’s their — yeah.

Tim Church: OK.

Crissy Mahl: So that’s legit.

Tim Church: OK. I just didn’t know if you guys typically use that or you use the full name because I’ve kind of heard it both ways.

Crissy Mahl: Sure. So usually if somebody, if I’m bringing it up for the first time, I usually say Rodan & Fields because most people if I just say R&F are kind of like what? But sometimes, people will say, ‘Oh yeah, that sounds familiar. Tell me more.’

Tim Church: Right.

Crissy Mahl: And so that kind of opens up the door to me chatting with them.

Tim Church: So when you were talking about the different ways that you’re serving people and getting additional income, where is most of the income coming from? Is it from the products that you sell? Or is it from getting other people to work for the company?

Crissy Mahl: Sure. So to be honest with you, most of my personal paycheck comes from the products, the skincare products that I sell. However, with this business, that is not the same story for everybody. I know people who really were only interested in building a team. And so they made all their money through commissions on their team’s sales instead of, you know, necessarily selling product themselves to clients. So you can really work it either way. And I’m currently trying to find a balance between the two because I was very comfortable with the talking with people about the products in the beginning rather than the business. And so that’s kind of where I started. And the commission that we get for the products is always retail profit. And then after that, based on your position in the company, you can make, you know, 30%+ commission from product. As far as team-building, it again depends on your promotion within the company, but essentially, you can make 5% of your team’s sales up to six generations below you. So that’s where your residual income comes in. And that’s how people can make six, seven figures doing this business and literally retire them and their spouses in — I think most people like somewhere between like four and nine years. So it’s not a get-rich-quick scheme, it definitely takes work, like anything other business building would. You definitely have to get uncomfortable and push yourself to do things that you normally wouldn’t do because entrepreneurship isn’t something that I ever saw myself doing necessarily. So this is definitely outside my comfort zone, but it’s really been just so rewarding because it’s so different than pharmacy. So much more different than pharmacy.

Tim Church: Was that hard, making that transition into something completely different and kind of shifting your mindset?

Crissy Mahl: You know, it wasn’t that much. It sounds really weird, but I think that because of my natural want to help other people make something extraordinary, whether that’s a pharmacy position or building their own business, that kind of ties in together. And then also, I kind of like to have things that I can call my own, whether that’s a project or whatever, whatever it is. So this thing that is my own is my business. And so I have — give or take — full control over where my business goes. If I put a lot of work into it, I’m going to see a lot of gain from it. If I don’t put a lot of work into it, you know, it can slide backwards. So I have some control over it as far as that goes and that kind of give me a feeling of — I don’t know — safety, if you will.

Tim Church: And I wanted to ask you, Chrissy, because a lot of these business models, sometimes there’s negative connotations with them. And there’s a lot of stories out there of people who are very unsuccessful actually when they’re in these kind of businesses. But what would you say has led you for you to be successful in doing this? Because clearly, you’ve mentioned that it is bringing some additional income and is helping you achieve your financial goals quicker so that you were able to really quit the rehab facility position that you had.

Crissy Mahl: Sure. Yes. So my story in this business is unique to me. I don’t think I’ve ever come across two people with the same story in this business. Some people go super fast, some people are a little slower. You know, some people literally don’t do anything. And honestly, it kind of depends on your mindset — and when I say kind of, it’s like it depends completely on your mindset. So are you willing to do the uncomfortable? Are you willing to put in the work? Are you willing to be coachable? You know, things like that. And honestly, pharmacists have a bit of an edge in this kind of business because we’re already viewed as a trusted resource to people. And so for me, I mean, people would — before I even joined this business, people would come to me all the time, specifically to me, and say, ‘I have this patient. I need your help. What should I do?’ Or, ‘I’m going to Spain, and I need to know what restaurant to go to. Which one do I go to?’ You know, they look to me because they trust my opinion is going to be honest and is going to be helpful and accurate. And so, honestly, the relationship that you have with people in general and the, I guess the personal brand that you have on yourself does impact how well you’ll do in the business, especially in the beginning. So again, pharmacists having that trustworthy, you know, reputation kind of really puts you at a good spot because again, people are going to come to you with their problems. And they expect that whatever you tell them is going to be true and honest.

Tim Church: So besides just being a pharmacist, kind of being a trusted figure, are there any other skills or experiences that you’ve had in pharmacy school or just throughout your professional experience that have helped you be successful?

Crissy Mahl: You know, some of it I probably knew and had experienced throughout pharmacy, and I just didn’t realize it and it hit me more head-on in this kind of business. So for example, different personality types, different learning styles. Even though I am a preceptor to the PGY1 pharmacy residents that we have now as well as I help out with the family medicine residents that we have at the hospital here too, you know, everybody learns a different way. But when you are coaching somebody on how to utilize this system and how to run a business and what works for me, it doesn’t mean that they’re going to do what you tell them to do. And that part can be a little bit frustrating, and you just have to know that it’s going to happen. Like, there’s going to be somebody who wants to do it their way, and you have to just let it happen. There is that — I have encountered that negative connotation about, oh, you’re in direct sales, like what are you doing? And to be honest with you, their opinion doesn’t pay my bills. And if it did, then I would care. But it doesn’t, so I don’t. And you have to have that mentality to get through it because if you care too much about what other people think of you, and if you don’t have a place that you can go to reset your mind and bring you back to you, then you won’t get through it. You have to be able to say, again, ‘I’m all in on this. This is going to work for me. I will make this work. These are my goals. This is my timeline. You know, this is exactly what I want to do.’ And you have to kind of make yourself a plan. Like with pharmacy school, you know you’re going to be in school for six years. You plan it out. Year one, year two, year three, done. So with this, I’m like, OK, personally, my goal is to retire myself at the age of 39, which is a huge goal. It’s scary. It sounds audacious because it is. But you know, you have to believe in yourself enough to know that if you have the grit and the persistence, the coachability, you can literally do whatever you want with this business.

Tim Church: Have you ever considered leaving pharmacy and doing this full-time? Or does pharmacy still have something that’s very central to you?

Crissy Mahl: You know, I have thought about that, which is flipping crazy to think about, honestly, because it’s like, are you serious? Like you just went to school for six years and did a residency, and you’re telling me that you would be willing to drop it and do this business. Like are you nuts? But to be honest, like, once you find that thing that makes you, that fills all the holes from a perspective of career, you know, you kind of just have to go with it. And again, if you have a plan, and it’s a legitimate plan, and you’re moving along with it, it’s hard to turn down. Like if and when I hit that goal of, you know, matching my income as a pharmacist through this company, when I’m 39 years old, how could I not consider it, you know? Like when you have an e-commerce type business — I love to travel now. I don’t think I mentioned that. But instead of working in a pharmacy on holidays and weekend — like I still work holidays and weekends at the hospital because hospitals never close. But I travel so much now, so much. And it’s something, as I mentioned before in the beginning of our conversation, that I really, really, really, really, really wanted to do. I wanted to explore the world and just, you know, take in the cultures and take in scenery and experiences and with this business, I’m able to do that. And so I feel like I have such a better work-life balance, which is honestly pretty much anybody I know would love to have.

Tim Church: Well, that’s what I was going to ask you, Chrissy. I mean, it sounds like, you know, in order to be successful, obviously you have to actually do work. You can’t just sit back and expect to get this residual income that you’ve been. But how do you practically manage your side hustle with your full-time job and your personal life?

Crissy Mahl: Yes. So to be honest, it was really hard at first because I didn’t quit that rehab hospital position right away, you know. So I was literally working two jobs with 2-3 days off every month, in addition to this business. And honestly, it’s just having the focus and utilizing your time wisely. So literally, every nook and cranny that I had in my day, I was doing my business. So if — this is going to sound dangerous, and I don’t recommend that anyone does it — but if you’re walking down a really long hallway in a hospital, I would literally be sending text messages to people and catching up on my messages because, you know, my business is pretty much virtual for the most part, so that’s how I kind of kept up with that. Also, I stopped watching TV, except for Game of Thrones, you can’t take away that. But I stopped watching TV. And my other half, he loves watching TV. So I would literally still be in the same room as him, but I would have my computer in front of me, and I would be doing work. So you know, instead of being I guess nonproductive with my relaxing time, I was actually working my business. I stopped saying no to things that didn’t really benefit me in achieving my goals. So honestly, there’s always a baby shower, there’s always a birthday party, there’s always something going on. And unless there was a legitimate networking opportunity for me or it was, you know, a best friend or an immediate, really close family member, I said no. If I had work to do, then I did work. You know, like any other job, if you don’t get your work done, then it doesn’t get done, and there’s nobody else there to do it, so you have to make the time. I also stopped doing a lot of extra overtime at my full-time position, which now I guess isn’t so much of a problem because when I was first there, we were extremely understaffed, and I was doing a lot of overtime. But I don’t really do overtime anymore. I come home, and I work my business. I mean, also, not only like texting when I’m walking down the hall of the hospital, but you know, texting on the toilet is totally a thing. Just make things work. I was going to make this work. If I am sitting and eating, then I am sitting, eating and texting or emailing or having a conversation with somebody quickly over the phone. You can make it work. And that’s one of the reasons why I really loved this particular company’s business model setup, that it works for busy people. People who are in this particular company, I mean, they excel. And by excel, I mean they’re amazing. They’re like the top of their company amazing at their primary breadwinning position at their careers. It’s pretty astounding because I just got back from New Orleans at our convention, and just seeing all these amazing people and what they’re accomplished, it’s pretty cool that they were able to accomplish something so extraordinary with a business, you know, when they had so much else going on.

Tim Church: Wow, so you basically, you’re not wasting any time going all in in order to really drive this income and get to that goal. But I think that’s cool that you’ve cut out TV and you’re really prioritizing all the things that are really important to you. And I think that’s something that I’ve even struggled with in my side hustles is trying to figure out, you know, what is the process or system that works?

Crissy Mahl: Yeah.

Tim Church: And one of the things that I thought was kind of interesting when I read in this book called, “The One Thing,” by Gary Keller and Jay Papasan is talking about that whole work-life balance and how it’s really not the best way to view something that you actually should do. And I thought that just kind of blew my mind, like when they talked about that because it was basically saying that if you want to be completely balanced and equal in what you’re doing, then that really is how you’re going to be mediocre, that it actually leads to mediocrity. But rather what the reality is is that to be successful in something, sometimes you have to go all in. You have to be willing to do things that are uncomfortable to sacrifice some of the time that might be spending with family members or friends but then kind of shifting back at other times or different periods or seasons and kind of rebalance that in that sense. So it kind of sounds like that’s what it’s taken for you in order to do that. I mean, would that be something that’s fair to say?

Crissy Mahl: Yeah. I would say that’s totally fair to say. And actually, after you mentioned that, I remember reading this quote, and honestly, I can’t remember where I saw it or whose quote it was, but it said something to the effect of, if you are not obsessed with the process of what you’re doing, then you will be average. And it’s kind of true. Like I know people who are literally obsessed — and I call them nerds — with pharmacy. Like literally, I know a guy who on his honeymoon in Hawaii, read like I think it was a BCPS book or something. I’m like, are you flipping serious? Like you’re sitting on a beach in Hawaii, and you’re reading.

Tim Church: Was he still married after that?

Crissy Mahl: Yes. Oh my gosh.

Tim Church: Oh, OK.

Crissy Mahl: Right? She knew what she was getting into. But you know what I mean, and he is like somebody that I can ask any pharmacy question to, and he knows the answer right off the top of his head. I mean, he could probably literally tell me word-for-word, oh, well that study called blah blah blah said on page 3 that this that and the other thing. I’m like, oh my God, what? But if you’re obsessed with what you’re doing, like, you don’t even think about it. You just do it. And it shows, like you can tell when somebody is really into what they’re doing.

Tim Church: I totally agree. Well, Crissy, thank you so much again for coming on the show, talking about your story and your side hustles and some of your goals and aspirations. I think people are going to be better off hearing that, and hopefully that inspires some people to kind of pursue some of the things that they’ve always wanted to do or just really look at that. So again, we thank you. And if somebody wants to reach out to you or learn more about what you’re doing, how can they do that?

Crissy Mahl: Yes, so the best way to get ahold of me honestly is email. Email works perfectly, and you can reach me at [email protected]. So it’s Crissy Mahl at gmail.com. And I’d be more than happy to send you some information about what it is that this company is about, what I’m doing. Honestly, I’m not in the business to convince anybody of anything because I wouldn’t want anybody to do this business if it wasn’t right for them. And I want you to pick the side hustle that fits into your life and your family life best and what you’re trying to pursue.

Tim Church: Thank you, Crissy.

Crissy Mahl: Absolutely. Thank you so much for having me, Tim. This was so fun.

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YFP 068: Pros/Cons of Dave Ramsey’s Baby Steps

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Pros/Cons of Dave Ramsey’s Baby Steps

On Episode 068 of the Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of Your Financial Pharmacist, and Tim Baker, YFP Team Member and owner of Script Financial, discuss the pros and cons of Dave Ramsey’s Baby Steps and how they apply to the pharmacy professional.

Summary of Episode

Tim Ulbrich and Tim Baker discuss Dave Ramsey’s baby steps in this week’s episode by sharing their own experiences and answering questions from the YFP community. Dave Ramsey’s 7 steps include:

Step 1 = Save $1,000 for a starter emergency fund

Step 2 = Pay of all debt using the debt snowball

Step 3 = Save up 3-6 months of expenses in savings

Step 4 = Invest 15% of household income into Roth IRAs and pre-tax retirement accounts

Step 5 = Save for kids college

Step 6 = Pay off home early

Step 7 = Build wealth and give

Overall, Tim and Tim feel that Dave Ramsey’s baby steps lay out are a great framework for an individual or family to follow and then iterate to their own needs. However, these steps aren’t a financial plan and shouldn’t be used solely as one. There are so many scenarios and possible financial goals and plans that differ from person to person. For some, it might make more sense to follow the steps in a different order or to adjust the amount of savings or contribution toward retirement. Often times steps 5, 6 and 7 are happening simultaneously instead of consecutively following one another once the previous one is completed. It’s important to weigh the emotional part of your financial journey, your attitudes, and feelings toward debt and your goals, and what time frame you are working with when thinking about paying off your debt. These steps don’t include other important aspects of creating a financial plan, such as obtaining disability insurance, potentially using the avalanche method when paying off debt, or really take into consideration the amount of student loan debt a pharmacist graduates with.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Welcome to Episode 068 of the Your Financial Pharmacist podcast. Tim Baker, excited to be back together on the mic. I think it’s been awhile, right?

Tim Baker: It has been awhile. I feel like we cultivated this baby in the podcast and I’ve, like, been absent for the last few weeks. So I’m excited to be back on.

Tim Ulbrich: Yeah, we had a great month in the month of September doing home buying, all things home buying. Nate Hedrick, the Real Estate RPH joined us. Excited about the partnership with Nate. Excited also to jump into the topic we have today, discussing the 7 baby steps that many are familiar with, recommended by Dave Ramsey. We’re going to talk about the pros and the cons and how we think they do and don’t fit to a pharmacy professional. And we’re going to weave in throughout the show feedback from you, the YFP community, that we’ve gotten via email, the YFP Facebook group and via LinkedIn as well. So Tim, it’s my understanding you’re out at the XYPN meeting right now, correct?

Tim Baker: Yeah, I’m in St. Louis for XYPN Live. I think this is the fourth annual meeting. So XY Planning Network is a group of fee-only CFPs that are trying to bring financial planning to kind of the Gen X, Gen Y generation. So yeah, it’s been good to, you know, rub elbows with some of my colleagues and just get good ideas and bring them back to Script Financial and see how I can better serve clients. So it’s been a good week so far.

Tim Ulbrich: And you’re rocking your YFP T-shirt today? Is that right?

Tim Baker: Yeah, I’m flying the flag, Tim. So you know, we’re going to be talking to a lot of different vendors and things like that. Actually, it’s funny. I was telling you before we started recording that people, you know, my colleagues have kind of noticed what we’ve been doing on the YFP side of things and have taken interest in that. So it’s kind of cool to see that, and yeah, so definitely rocking the YFP T-shirt today.


Tim Ulbrich: Exciting time. So let’s jump into this topic. You know, when I think of the Dave Ramsey 7 Baby Steps — and we’re going to link to them in the show notes, and I’ll talk about them briefly — but for those that are not familiar, we’ll go through them quickly and link to more information. This is such an emotionally charged topic, and so when we posted this week, I said, ‘Hey, YFP Facebook group, YFP community, we’re going to do a podcast recording on the Ramsey 7 Baby Steps. What do you think the good, the bad, how does it work? What are the pros and cons? How does it apply to a pharmacist or not? And for our community personally, those that have walked through this step, what are some success stories or challenges they’ve had?’ So I think based on the response that we got in that post, we’ve got lots to talk about. So you ready to do this?

Tim Baker: Let’s do it.

Tim Ulbrich: Alright, so onto the show. Here’s what we’re going to do. I’m going to walk through briefly the 7 baby steps, so for those that haven’t heard of them before, are not familiar, I’m going to talk about them very quickly. Then, I’m going to get Tim Baker’s thoughts on his opinions at a high level. What does he think about the baby steps? Where do you they work? Where are maybe some areas that need more flexibility? And when it comes to advising his clients, where has he seen these work in both the success route but also in maybe areas that he may disagree with. Now, we’re going to weave in some comments and feedback from the YFP community throughout. So Dave Ramsey’s 7 Baby Steps. If you haven’t heard them before, here they are in order:

Step 1 is save $1,000 for what he calls a starter or a baby emergency fund. Now, we’ll come back and talk about this. We talked in Episode 026 baby stepping into your financial plan, two things to focus on first, which an emergency fund was one of those. We’ll link to that in the show notes. And we also have a blog post on why having an emergency fund matters, so if you want to learn more about this topic, we’ll link to that as well. So Step No. 1, baby emergency fund, $1,000. This is all about getting a quick win and making sure you’re starting to build some protection into your financial plan.
Step No. 2, probably the step, Tim, that causes the most debate — pay off all, all debt using the debt snowball.

Tim Baker: Right.

Tim Ulbrich: So this is referring to credit card debt, student loan debt, car debt. The only exception here to the word all is mortgage, the primary residence, which we’ll talk back and we’ll come back to this in Step No. 6. So Step No. 2 is pay off all debt except for the mortgage using the debt snowball. And we’ll talk about what that means and we’ll dig into that further.

Step No. 3 then is save up 3-6 months of expenses in an emergency fund. So we mentioned Step No.1 is save $1,000 for a starter emergency fund. Step No. 3 is to build up a full emergency fund, which is 3-6 months of expenses. Now, one that he doesn’t publish on his website but he talks often about is Baby Step 3b. And this, I think, Tim, is codeword for “Woops, I didn’t really think about a home. Where should I put it?” So it’s Baby Step 3b, which is save 10-20% down for a home. And I’ve actually heard him reference 10% in some areas, his Financial Peace University class, but also 20% on his podcast. So that’s Step No. 3 and 3b.

Then Step No. 4 as we’re working through these one by one is invest 15% of household into Roth IRAs in pre-tax retirement accounts. So invest 15% of household income into Roth IRAs and pre-tax retirement accounts.

Step No. 5 is save for kids’ college.

Step No. 6 is pay off the home early.

And Step No. 7, probably the most nebulous one, is build wealth and give.

OK, so those are the 7 Baby Steps, and I think it’s worth noting that his recommendation that I’ve heard throughout the podcast and listening to it over the past several years is that steps No. 4, 5, and 6 are actually happening together. So of course you’re not going to invest in 15% possible income into Roth IRAs and pre-tax retirement accounts and be done and check it off. That’s going to be ongoing. Saving for kids’ college is going to happen over a period of time. And paying off the home early will happen over time as well. So steps 4, 5, and 6 are happening over time. So there you have it, the 7 Baby Steps. And I can speak a little bit from personal experience. My wife and I used the 7 Baby Steps in our journey paying off $200,000 of student loan debt. And we worked through them, we made some modifications along the way, which I think is going to lend itself nicely as we get some questions and feedback from the YFP community. So Tim Baker, your thoughts and opinions at a high level on the 7 Baby Steps. Where do they work? And in your experience working with clients, what are some of the successes you’ve seen in clients using these seven baby steps? And where do you think they maybe have a little bit more downside or maybe points of contention?

Tim Baker: Yeah, I think that as a framework, I like it. Now, I think that’s part of the problem with financial planning — because this is essentially like a framework of a financial plan. And I think a lot of people will throw some shade towards Ramsey because, you know, they say, well, it’s not a one-size-fits-all. And I think financial advisors will sometimes give him some backlash because of, you know, he’s too focused on the debt. And if you remember me talking through like, you know, a lot of advisors are paid based on investments. So they’re not incentivized for you to work through your credit card debt or things like that. And then I think there’s just some disagreements about like his particular investment choices. But as a framework, and I think in some of our engagement with the Facebook group and LinkedIn and things like that, there are people that are identifying, saying, ‘Hey, we’re in Step 2. We moved to Step 3, and then we had to move back,’ things like that. So it is more or less a working financial plan that people can identify with and at least benchmark off of. So I’m in favor of that, and I think it’s good to kind of get the blood up a little bit and talk about these things. But I think there are some people that maybe are a little bit more financially savvy that, you know, have their ducks in a row. And they say, ‘Well, this isn’t necessarily how I would do it.’ But for a lot of people that aren’t in that position — and I come across a lot of them, and they eventually become clients, which is a good thing. Where should I put an emergency fund? How much? Why 15%? And what’s a Roth IRA? That type of thing. And I’m not really being facetious, I think some of these things are, they’re true. So for people that go through Dave Ramsey stuff, you know, there’s an assumption, I think, afterwards that they’re going to know more or less which direction they need to go. And from a financial advisor’s standpoint, they don’t necessarily make good clients because they feel like they’re set. But I do think that there are some strengths but also limitations to me overall to the 7 steps. So for example, you know, if I look at the first one, save $1,000 for your emergency fund. You know, I do have clients that are in this position where they have, you know, hundreds of thousands of dollars of student loans, but they have $30,000 or $40,000 worth of credit card debt. So you know, we’re just trying to dig our way out of, you know, paying through the credit card debts but then, you know, having a buffer of like $1,000, that’s a huge step in that direction. So even — you know, some people might look at this like eh, this isn’t for pharmacists. I would say not so fast. There are some situations where that’s going to be true. So like the way I talk about, and I think we talked about this in Episode 026 of the podcast is, you know, let’s baby step our way into that kind of the foundational part of the financial plan, being the emergency fund. So I look at it as kind of look at it in phases. So maybe Phase 1 is $1,000. And as we work our way through some of the — and I think about more the consumer, not predatory debt, but in that where you’re 16-17% — to focus on that first and really not tend too much to the emergency fund. But as you work your way through that, Phase 2 might be to get that to $5,000 because the fact of the matter is, if you’re a single pharmacist and you have a good amount of credit card debt and student loan debt, that alone with your rent could put your emergency in the $20,000-25,000 because you’re multiplying that monthly number by 6, essentially. So for a lot of people to get to that number, they’re going to default on their credit cards before that happens.

Tim Ulbrich: And I think that’s probably the most common thing we hear from pharmacists is they look at this and say, ‘OK, Step 1 is I need a $1,000 baby emergency fund. Step 2, I have to pay off all my debt.’ And so they may be looking at who knows? $200,000 in student loan debt, $20,000 in credit card debt, a $20,000 car note. Then I need to get a full 3-6 months of an emergency fund and then I start thinking about investing. I think that’s the piece where people are like, wait a minute. I’m not going to be investing for 10 or 15 years? And we’re going to come back to that because I think that, you know, the framework, as you mentioned, obviously — and Dave would admit this — is that mathematically, this is not the most advantageous framework to operate from. It’s really a behavioral framework to help people really get the motivation and the mindset and to have some structure around the steps they’re working through. And if we have a thousand people listening to this podcast when we release it, at the end of the day, we have a thousand different financial situations. And I think that speaks to — to your point — that speaks to that this plan by itself probably should not, in my opinion, stand alone but could be paired with the work of a financial planner, could be customized. And I think that if you look at the plan in and of itself, it’s not meant to be a standalone. It doesn’t deal with issues like insurance, end of life planning, investing strategies. You know, we got some feedback from the Facebook group, which I thought was cool. Matt said that he agrees with a lot of the baby steps in terms of them being introductory and getting yourself on track. They’re a good blueprint to getting out of debt. The only problem is what to do after the steps are complete, so they’re not wealth-building steps. And so if you look at Step 7, this idea of building wealth and giving, obviously that’s not necessarily a blueprint for what you should be doing in terms of investing and saving and strategies and end-of-life planning and all those other things that come along with it. However, I will say for those that are listening — and my wife and I just experienced this firsthand — if you feel like you are extremely overwhelmed, don’t know where to start. If you and your spouse maybe where applicable are having difficulty getting on the same page, I think that these steps or it could be another stepwise approach, but having a stepwise approach that you’re working together and achieving and feeling like you’re getting momentum forward, even if that’s not necessarily the most mathematically advantage approach, you can’t speak enough to the value of getting momentum and getting those wheels going forward. Because Tim, how many people do we talk to that say, ‘I’ve been spinning my wheels for seven years, and I feel like I haven’t made much progress,’ right?

Tim Baker: Right. And we’re proponents of — I think there’s some weight to the emotional side of the — we talk about this in the student loan course over and over again. It can’t be just about the numbers. And of course, we’re talking about, you know, for a lot of people, does it make sense to look at PSLF versus not? And in this scenario, in these seven steps, PSLF I don’t think would even be entertained because if you’re trying to pay off in Step 2, the non-mortgage debts as quickly as possible, it’s not even a thing. So if you’re someone that has a lot of student loan debt, and you have the emotion behind it that, hey, you’re anxious or you’re concerned, you can’t sleep at night, these are all things that people have said to me. Then we weight that somewhat heavily because it doesn’t make sense to take a more maybe of a reactive approach, say from a Public Student Loan Forgiveness, and you want to just be more reactive to that. But I think to your point, Tim, that people get riled up about this because potentially in some situations, especially for pharmacists, you might be waiting 10+ years to start putting any money towards retirement and not, you know, capitalize on match and things like that. And I think that’s where I fundamentally disagree with this model.

Tim Ulbrich: So before we go into some of the more detailed questions, let me read off some of those that commented from the Facebook group that talk about the support of this model and I think some of the positive aspects of the success that it can lead to and the behavioral aspects of the model. And then we’ll dive a little bit deeper into maybe where tweaks could be made to this model, depending on individual situations and scenarios.

So Scott says, “The plan is great. It teaches you to focus on just a few things and do them with intensity. You also need to keep in mind that he only teaches very low-risk strategies. If you lost everything like he did, I’m sure you’d have a similar mindset.” So what Scott’s referring to there, if you haven’t heard his story before, Dave essentially — I think it was in his mid-20s — got pretty deep in real estate investing, kind of lost everything. But I do think to his point, as I think through Jess and I going through this approach, intensity is a good word, right?

Tim Baker: Yeah.

Tim Ulbrich: Because when you’re going all in on one step and you’re singularly focused — and yes, to the comments we received, yes that may be at the expense of other things — but that singular focus has to be factored in somewhere into the equation with the mathematical components as well.

Tim Baker: And I think he uses — what does he use, like gazelle-like? You want to be gazelle-like. I think that’s his term. And I see that, you know. I have clients that come in, I want to buy a house, I want to travel the world, I want to start saving for my kids’ education. There’s I want to pay for my wedding, there’s a million different things. And part of my job is to cut through some and say, OK, what’s most important? Because you can do a little of a lot of things, or you can do a lot of one or two things. Typically, the latter is a better prescription for that.

Tim Ulbrich: Dalton says, “You can’t really argue with its effectiveness. The number of people who have gotten out of debt and built wealth through his plan are incredible. He even acknowledges that the plan doesn’t necessarily make mathematical sense all the time because the benefits of compound interest and retirement savings but always follows that up with the fact that being in debt doesn’t make mathematical sense either because if personal finance was all about math, people wouldn’t spend more than they make. I think that it makes sense for pharmacists mostly if they live like a college student still after graduation. You could actually pay off your loans decently fast, as long as lifestyle creep doesn’t happen.” And then he goes on to talk a little bit more about Baby Step No. 2. So let’s jump in there because I think we had a couple questions from the group about Baby Step 2, which makes sense, right? Because pharmacists are facing average debt loads of $160,000. So Dave Ramsey, in speaking to whatever, 5 or 10 million listeners every week, obviously their average debt load is not $160,000. So that is a unique piece to our audience. And Cole asks the question, “I’d love to hear your thoughts about stopping retirement investing and losing the match while in Baby Step 2.” So talk to me about your thoughts as you’re working with clients, typical pharmacist, $160,000 of debt, maybe you’re thinking about this in the frame of these baby steps. We’ve talked before about the match being a no-brainer, let’s take it. But how do you balance this retirement and student loans or at least looking at the match component while in Baby Step 2.

Tim Baker: Yeah, so just a comment on Dave and like the student loans. Like, I think when I first started hearing some of his stuff about the student loans, like he would almost fall off his chair when like a doctor — I think for awhile, I think a fair criticism of him was that he was a little out of touch. And I’ve seen some things where he’s like almost browbeat people, and that’s not productive. But I think in more recent times, he’s come around and he understands a little bit more about the student loan picture. So that’s the first thing. I think the third thing for me personally is — and I say this when we speak to pharmacy schools and, you know, different organizations is — you know, they say the two certainties in life: death and taxes. And I would add that you should, for the most part, match your 401k or your 403b. I think that is for the majority of people the thing to do because it’s one of those things that the whole thing, it’s free money. Unless you’re in dire, dire straits from a predatory or some type of debt, I wouldn’t do it. If it’s student loan debt, absolutely. You need to be doing the match.

Tim Ulbrich: So death, taxes, and the match are three certain things in life?

Tim Baker: I think so. That’s Tim Baker’s amendment to that. So I think by and large, if you’re not doing that — because most of the time, especially because it comes out tax-free, you’re not missing it. So if you’re an employer — and most employers, it’s 3%, 5%. It’s not like you’re asking to give up 10%. Some are structured like that to get the full match, but to get the full match is typically a small percentage of your income. So that would be my thoughts there. And you know, I kind of with the invest the 15% of household income, I kind of say as a general rule of thumb, which these are, to start getting it in your brainpiece for newly minted pharmacists and new practitioners is a race to 10%. Because what often happens is that you do get the match, you get 5%, and you have the 401k inertia. I talk to you years later, and you haven’t increased it at all. So in their mind, I try to plant the seed. It’s a race to 10%, so if you couple that with the match, you know, you are in that 15% range. And that’s typically, when we do the nest egg calculations, which we did on the APhA webinar here recently, the Investment 101 and 102, the nest egg is going to show that that is, more likely than not, true to be in that range.

Tim Ulbrich: Yeah, and I think this is a great example as you think through Baby Step 2 and this question that Nicole throws out there is that this is not a black and white framework, as we’ve already talked about, especially with everyone’s customized situation. So if you’ve heard Dave talk on the podcast or taken any of his courses like Financial Peace, I think he uses an average time range of debt repayment too of about 18 months or less. So again, a pharmacist with $160,000 as a graduate does not match the national average of somebody coming out from undergrad with $25,000-30,000. Now of course they have a higher income potential, but he’s then under the assumption — when you think about steps 3, 4, 5, 6 and so on — that that debt in Step 2 is going to be gone quickly. Now, if you’re somebody listening that’s got $30,000 or $40,000 of debt, maybe that’s the case. But if you’re somebody that has $200,000 of debt, you know, unless you’re hustling like Adam Patterson-style, Tim Church-style, that’s probably not going to be happening. So now, you have to have this discussion and balance and work with somebody like you as a financial planner to say, OK, what is this timeline of debt repayment? Not that we’re going to carry this on forever, but what is the debt repayment strategy? And then how do we now fit retirement savings into there. Because you and I would both agree that if somebody’s paying off their loans for 10 years, probably not contributing to retirement is not a good idea. Not probably — it’s not a good idea.

Tim Baker: Right.

Tim Ulbrich: But if somebody’s hustling for 2-3 years, that conversation is very different, especially if there’s some behavioral momentum that’s going to be happening. Now, I would agree with you 100% that that match is a given in all of those situations, it doesn’t matter whatever the debt repayment period is in my opinion. I think that that should be there.

Tim Baker: Yeah, and I think the other thing to take note of, call out here that I commend for him is, you know, he’s talking — again, I’ve listened to him talk to doctors that have a truckload of debt. And he’s like, “Oh, you’ve got to hustle.” Even though the make hundreds of thousands of dollars, he’s encouraging them. He’s like, you’ve got to take up, you’ve got to get extra shifts. So he’s not resting on your laurels just because you make a six-figure income. So you know, the people that we’ve highlighted, the Pattersons, the Churches, they’re trying to hustle. They’re thinking of additional ways to increase income, which I think is something that kind of falls by the wayside because we’re always talking about how can we cut our expenses? But it’s a two-sided equation. So I would say that that is something to focus on as well.

Tim Ulbrich: Yeah, and just to wrap up this Baby Step 2 and how do you balance the loans with the investing and what’s your time period, I would say that, you know, for many listening, the answer’s going to be different. We’ve talked a lot on the podcast before and live events that we’ve done about how do you make this decision between investing and paying down loans. I don’t think we need to get in the weeds here, but this really comes down to the factors like interest rates, what is your feelings toward the debt? How is your investing style? All of these things, and for everyone listening, that answer’s going to be a little bit different, which will obviously help determine where you’re going to go with that. Tim, Tyrell asks that he says that he’d like to hear pros and cons of paying off house versus student loans if working toward PSLF or towards PSLF or other forgiveness components. So he’s talking about working for a qualifying company, pursuing Public Student Loan Forgiveness, and obviously then that changes your strategy about paying off your loans, correct?

Tim Baker: Yeah, because, you know, typically, the way to optimize that strategy is to take, you know, Step 4, which is invest 15% of Roth IRA and pre-tax retirement accounts and really cross off the Roth because the Roth is after-tax and put as much money as humanly possible into pre-tax retirement because what that effectively does is lower your adjusted gross income, which affects how much you — which is the number that calculates your payment for student loans. So the lower that your AGI is, the lower that your payment is, and the more that you potentially will be forgiven. So there’s a lot of moving pieces to that. So I would say if you’re weighing paying off a house versus student loans, to me, the picture is are we getting the $18,500 into the 401k or the 403b maybe since it’s a nonprofit. Are we maxing that out? You’re probably not afforded a pre-tax IRA deduction because pharmacists typically make too much. But are you maxing out the $3,450 or the $6,900 if you’re a family in the HSA to get that if you have a high deductible plan. Once those things are checked off, then I would say, OK, you know, what are the goals? And maybe paying off the house is that. But if that house is, you know, if the rate’s 3.25, I don’t know. I don’t know if that’s the best way to go. Some people, again, I know Leah Donnells made a comment on this, and she’s a client of mine, and her mantra is, their mantra is they want to get through the debt as quickly as possible. So they, regardless of what the mortgage or interest rate is, they want that out from underneath them. And I can’t blame them because if you think about, hey, we’re striving for financial independence, what is a greater measurement of that when you don’t have to pay the bank your rent or mortgage anymore? So Tyrell, that’s a good question. But again, there’s a lot of moving pieces and I would say focus on the pre-tax accounts and max those out before, you know, throwing more money towards the house.
Tim Ulbrich: So Tim, you know Dave’s a big advocate in Step 2 about the debt snowball. And Ryan in LinkedIn says, you know, as he’s talking about the pros and cons of this model, he says, “Why should I use the debt snowball method? It works great for those people who really benefit from the psychological impact and reward of paying off small debts. But for those who don’t benefit from it will potentially spend more money in the long run.” So give us the quick overview of the debt snowball, how that contrasts to the avalanche method. And as you’re working with clients, how do you guide or advise them in terms of which of those methods may work best for them?

Tim Baker: So the debt snowball method is basically where you write out all of your or you have all of your debts laid out: what kind of debt it is, what the interest rate, what the minimum monthly payment is, and what the balance is. And the idea is to pick the debt that has the lowest balance and pay the minimums on all the other debts. And then for the one that has the lowest balance, you want to pay as much toward that as humanly possible. So when that one falls off, when that debt is paid and dead and gone, then you roll that payment into the next lowest balance. And then when that one falls off, you roll that payment into the next lowest balance. So this is really trying to clear liabilities from the balance sheet. And the idea is that that gives you, if you focus on the lowest one, it gives you a psychological advantage, it gives you momentum, that type of thing. The avalanche method, in contrast, is where you do the same thing except the priority payment is based on the interest rate, not on the lowest balance. So you want to focus on the highest interest rate — this is typically credit card debt and that type of thing — and you pay the minimums on everything else. And then when the highest interest rate falls off, then you direct your attention to the next highest interest rate. So from a math perspective, this makes the most sense because you want to clear those debts off that you’re paying the most interest on. So that’s really the difference between those two. Now, working with clients, theoretically, I coin flip. It’s one of those things where from a math perspective, yes, it does make sense to do the avalanche. But it’s the same thing with everything else. If you’re doing this on your own, don’t get into the paralysis by analysis. Just pick one method and go. For a client that I have, you know, $30,000 of credit card debt with that’s spread out across 20 different cards, to me, it’s just about clearing the balance sheet so she can, you know, work through those effectively. So now, it’s more of an organizational thing. So in that situation, we’re employing the snowball method because it’s almost unwieldy to handle. So it just really depends on where your mind is, if you’re running the math and you’re maybe less emotional towards it, avalanche. If you’re thinking that, hey, it’d be really nice to log into your credit card account or if I plug my client portal that you can sign up for on my website, Script Financial, you can see all of your, you can link all of your accounts and see a dynamic net worth statement. If you see a list of liabilities there that’s $10,000, $12,000 deep, and you really want to log in in six months and see $6,000, then I would say probably the snowball method would be the better route to go.

Tim Ulbrich: Yeah, and I think the time period is critically important here as well, right? So if you’re talking about a wide array of interest rates over a long period of time, say 10 years, obviously the math on that is going to become more advantageous toward the avalanche method. If you’re talking about I’m going to pay off whatever debt we’re referring to in a short period of time, and the interest rate’s aren’t that different, or some combination of that in a couple years, then obviously the math doesn’t matter as much. Does it still matter? Yes, of course. But you have to, again, make this determination about your own behavioral patterns and choices and how important that momentum is or is not. And as I think back to the journey that Jess and I took, that momentum for us was critical, even at the expense of paying a little bit more interest because as we were going through whatever step, let’s use Step 2 as an example, if we were going through a snowball method, if I knew we needed $2,000 more to pay off this loan to get to the next one, we were that more motivated to stay on budget or to look for additional opportunities to earn income, whatever it be, that I’m not sure for us collectively as a couple, we would have been as motivated if we would have been working that through the avalanche method. So did we spend a little bit more interest? Yes. But did we get it paid off faster? For us, I think we probably did. But again, back to the point of customization for somebody else listening, somebody else commenting, that may be a very different situation if for them, it’s very black-and-white, and they can work the system going through the interest rates. I want to encourage for a minute. Amber posted on the Facebook group that, “My spouse and I follow these baby steps, and they are great for getting out of debt. Our problem keeps showing itself on Step No. 3, which is the full 3-6 months of emergency fund. We complete it and are ready to move on, and we have somewhat. But then, wham, something happens and we are right back on No. 3. We’ve been stuck like that for several years now, but living without debt is really freeing and wonderful.” So I think again, it speaks to the power of getting out of debt. But I think is something Jess and I felt as well is that when you talk about something like paying off debt, it can be very exciting to see that balance come down. When you talk about investing, it can be very exciting. Building an emergency fund is not necessarily super exciting. And so obviously, they’ve had some things come up that have derailed them from doing that. But I think for those that are in the grind of building an emergency fund, to your point earlier about how much that could be, $15,000, $20,000, $25,000, $30,000, $35,000, that’s not super exciting. But it’s certainly a critically important step and a foundational part of a financial plan. Tim, wanted to get your thoughts on this. This I think speaks to I think maybe where you have some customization to this seven-step plan. Katie says, “After graduation, we DR’ed our way to becoming debt free.” I love that he has his own DR.

Tim Baker: Yeah, when do we get YFP’ed?

Tim Ulbrich: Seriously, YFP our financial plan, right?

Tim Baker: Can we hashtag YFP’ed? Get that trending on Twitter maybe?

Tim Ulbrich: I like that. Be a trademark, yeah. “The main tweaks we made in the beginning were splitting steps 2 and 3 equally, so equal amounts going toward the emergency fund and debt reduction until we had enough saved, and then we maxed out our own tax-preferred accounts before kids college. It’s not a perfect system, great for debt elimination, not ideal for investing, but it’s simple and gives a roadmap for those starting out. It worked well for us.” So what do you think about that idea of balancing the savings for emergency fund with paying off student loans or other debt?
Tim Baker: Yeah, I mean I think that’s exactly what the point is is like, this is a template for then people can iterate off of. And this is what I was talking about with like having, you know, Phase 1, Phase 2, Phase 3 in terms of, you know, Phase 1, it might be get the $1,000 or $2,000. Have a emergency fund that probably covers 80% of emergencies in your situation. And then from there in Phase 2, now maybe go through and start paying off debt and apply maybe little. I think this is a perfect example of how, you know, they looked at the situation and said, well, this doesn’t work entirely for us, so we’re just going to iterate. And again, bias, you know, I think they did it well themselves working off the two of them, but this is where I think a financial planner can come in and provide a little bit of guidance and objective opinion and say, this is what I would do and these are the recommendations. So I think that’s the power of this is people look at it as a benchmark and then they can iterate off of it and apply it to their own lives.

Tim Ulbrich: Absolutely. And so just to build on this a little bit more, Mark asked and has a comment in the Facebook group, and I can speak to this one. I dealt with this last year. He says, “I’m on Baby Step 2 and I’m really concerned about this idea of not having a credit score. Has anyone used manual underwriting to buy a house? And probably because I don’t fully understand a credit score, but I’m a little concerned about not getting a job because of it.” So I think what he’s referring to is that Dave’s a big advocate for no credit cards, cut them up, get rid of them, pay off all your debt, etc. And obviously, there’s some concern about having no credit when it comes to purchasing a home. If you currently are paying a mortgage, Mark, what I learned throughout this process is that that mortgage payment will still provide you with a credit score. Now, if you don’t have a mortgage and you have no credit cards, then obviously after a period of time of having no credit cards and not making mortgage payments, your credit score will effectively be reduced to 0, which could present problems when it comes to purchasing a home. You certainly could do manual underwriting. There is lenders that are out there that do that, just give yourself some more lead time. It will probably take more time. And we didn’t experience this or get to this point, but I’ve heard — Tim, I don’t know if you’ve heard — that sometimes in a manual underwriting process, you may end up paying a little bit higher of an interest rate.

Tim Baker: Yep.

Tim Ulbrich: So something to balance and think of throughout that process. Tim, want to get your thoughts on this. Lisa says, “I definitely don’t think Step No. 4 should be No. 4.” So No. 4, again, is 15-20% into retirement savings and tax advantage accounts. She said, “It should be closer to No. 1. I have always been taught that saving for retirement as early as possible is a necessity and you should think of that 10-15% money as unusable for anything else. So whatever your net income is, write 10-15% off, and that is your new net income. It’s very easy to push that kind of saving off.” So here she says, “For me, it was more like year one post-graduation, it was Baby Step 2 was immediate, very high interest debt like credit cards.” Then she went to Step No. 4, setting up 401k. Then went to Step 1 and 3 of saving an emergency fund. And then as she went into year two post-grad, she further went into Step 4, saving enough to put max in a Roth IRA, into retirement. And then year three post-graduate, she went back into Step 2 to pay off student loans. So I think the risk that I would have with this — I certainly fundamentally agree with what you talked about before of getting that race to 10%, right? Getting that behavior set up for retirement. But doing that at the expense of any emergency fund, I think you’re putting yourself in a risky situation. Would you agree?

Tim Baker: Yeah, I would. I mean, I probably would put it as, you know, maybe 1a. So I think — you know, I was talking to a prospective client the other day, and I was asking him, you know, if something were to happen from an emergency standpoint, what would you do? And the answer is kind of like, eh, credit card or bank of mom and dad. And I think those are two habits that we probably need to wean off of and break. So I’m always — you know, it’s not the sexiest thing, although I get jacked up every time, you know, an interest rate happens. We’re both Ally proponents. Whenever you get the interest payment in your emergency fund, I think that’s cool. But I’m a big proponent of having some cash set aside for those emergencies and then get serious about at least getting the match. That’s kind of how I view it.

Tim Ulbrich: So as we wrap up this episode, Tim, I think that as we look at this framework, I think you and I would both agree that it’s meant to be exactly that. It’s meant to be a framework, it doesn’t apply to everyone’s personal situation, there’s caveats. And again, I think that speaks to the power of individualized, customized financial planning. And I would highly encourage our listeners, if you’re not a part of the YFP Facebook group, head on over, join the group, there’s great conversation going on on this topic as well as many other topics related to your personal financial plan. And that group is really all about encouraging, motivating and inspiring each other in this community of pharmacists, all committed to being on this path towards achieving financial freedom. So Tim, any last thoughts here on the Ramsey plan as we begin to wrap up the episode here?

refinance student loans

Tim Baker: Yeah, I would just say, we didn’t focus too much on 5, 6 and 7. You know, I would just say that, you know, the whole saving for kids’ college, that’s not a given for a lot of people, even pharmacists that have gone through kind of student loan hell. That doesn’t necessarily mean that they’re in a position or even there’s a want to do that. So that might be something that we can, you know, address a little bit more in the future about different strategies to do that. And I would say paying off the home early, we addressed that a little bit. It also depends, and finally, I think No. 7 is kind of like, you get to the end of this and you’re kind of released out into the wild and to build wealth and everything is good. But you know, for build wealth — for what purpose? You know, I often say that typically the way that I price my services is based on income and net worth, which is great because I’m incentivized to kind of help you grow income and help you grow net worth over time. But if we fast forward 20, 30 years, and you’re sitting on $10 million but you’re miserable because you haven’t done the things that you’ve wanted to do, then that’s not a wealthy life. So I would say build wealth, but to what end. So last year, you know, you did an episode on giving, which is part of kind of 7b in the build wealth and give. But not everyone has that same worldview, so you know, some people are, they want to give 10% right off the bat of their income, you know, even if they have debt. Some people are even if they don’t have debt, they don’t really feel inclined to give. So it’s just different. But I would say that a big one that’s probably missing from here, especially from a pharmacist’s perspective is disability insurance. If you don’t have any coverage at all from an employer, the ability to work and earn really needs to be protected. So that would be one of the things that I would probably edit from a pharmacist’s perspective. But I think it’s a great list, it’s a great template to look at and to build off of and to iterate for your own purposes. So I think this is a great episode because we had a lot of engagement on the Facebook group, and I hope it keeps going because I think people learn when we shine a light on it.

Tim Ulbrich: Yeah, and to your point, I think we’re going to come back and do a lot more on all of these topics, but especially in 5 and 6, you know. We haven’t done a ton on college savings. And that’s an interesting one because I think especially as we think about pharmacists coming out with such high debt loads, I think there’s a tendency, myself included, to maybe put that one at a different priority than it should be because you’re compensating from your own experiences, and you don’t want to put your own children through that. So you know, 529s, ESAs, what’s the strategy? What’s the timing of that? How do you balance that with retirement, your current debt, all those other things? And then as you mentioned, even in Step 6 and the home, how you prioritize that, what’s your interest rates? What’s your other goals related to real estate? What’s your motivation? Do you care about the debt? Do you not? How do the new tax laws impact all of that? We’re going to come and talk more about that into the future. So I think there’s lots of people that are out there listening today, Tim, to this episode, that are thinking of the Ramsey plan, thinking about the framework but are finding themselves spinning their wheels with their own financial plan, lots of competing priorities coming at them, not sure in what order and how this applies to their own personal situation. And as we talked about, this plan is not intended, the Ramsey steps are not intended to be a standalone financial plan. And so I know personally, you have lots of clients who know these steps, maybe some are following them to a T, others are not. But they still value the one-on-one approach in terms of working with you and working with a financial planner. So for those that are listening that want to take that next step, get engaged with you as a financial planner to learn more, what’s the best next step they can do to do that?

Tim Baker: Yeah, Tim, it’s super easy. You can either go to the Your Financial Pharmacist website and click on the “Hire a Planner” tab at the top and then you can schedule a free call on that page. Or just go to ScriptFinancial.com and on the homepage, you’ll see a “Schedule a Free Call” button there. So those are really the two ways to find me and schedule a free call.

Tim Ulbrich: So again, that’s YourFinancialPharmacist.com. You can click on “Hire a Planner,” and then from there, you can schedule a free call with Tim Baker to discuss next steps. So Tim, great to be back on —

Tim Baker: Yes.

Tim Ulbrich: the podcast with you. Have a great time at the XYPN conference. And we’re certainly looking forward to having you back as we continue with some great content coming forward.

Tim Baker: I’m going to be YFPing this conference. Trending on Twitter.

Tim Ulbrich: Awesome. Love it. Love it. So as we wrap up today’s episode of the Your Financial Pharmacist podcast, I want to take a moment to again thank our sponsor, Splash Financial.

Sponsor: If you’re looking to refinance your student loans, head on over to SplashFinancial.com/YourFinancialPharmacist, where in just a few minutes, you can check your rate. Splash’s new rates are as low as 3.25% fixed APR, which can literally save you tens of thousands of dollars over the life of your loans. Plus, YFP readers receive a $500 welcome bonus for refinancing with Splash. Again, that’s SplashFinancial.com/YourFinancialPharmacist.

Tim Ulbrich: Thank you so much for joining Tim Baker and I on this week’s episode of the Your Financial Pharmacist podcast. Next week, Tim Church and I will be tag-teaming some updates related to student loans, including the latest on the Public Service Loan Forgiveness program. Also, for those graduates that are getting ready to come out of the grace period and enter active repayment, we will talk about repayment options and strategies. If you like what you heard on this week’s episode, please make sure to subscribe in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to YourFinancialPharmaicst.com, where you will find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Again, thank you for joining us, and have a great rest of your week.

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