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Month: August 2019

YFP 115: Financial Considerations for Job Loss or Reduced Hours

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Financial Considerations for Job Loss or Reduced Hours

On this week’s episode, Tim Ulbrich and Tim Baker talk through financial considerations for those that find themselves in a financial hardship due to job loss, hours being cut or wages being reduced. With the recent news of some big box pharmacies planning to close stores and cut their workforce and many other employers cutting back hours for full-time pharmacy employees, this conversation of how to navigate a current hardship or be ready to weather a future storm is more important than ever.

Summary

Tim and Tim talk through several financial considerations for job loss or reduced hours. Some pharmacists are facing potential job loss, cut hours or a reduction in wages. Companies like Walgreens, Walmart, Kroger and Harris Teether are either closing their pharmacy doors or reducing hours significantly, leaving many pharmacists to question how secure their jobs are. If you’re in this position, what should you do or be thinking about? Tim and Tim discuss emergency funds, what to do with your student loans during a financial hardship, health insurance, what to focus on with retirement savings, the value and importance of a side hustle and networking.

Tim Baker shares that while many of this is out of a pharmacist’s control, you can start by looking at your foundation. How much credit card debt do you have? Is your emergency fund where it needs to be? By reducing credit card debt and having an emergency fund to cover 3-6 months of non discretionary expenses like rent, utilities, mortgage and loans, you’re setting yourself to be protected in case you face financial hardships like many are in the field today.

Next they discuss federal loans and when to use forbearance, deferment, or choosing an income based repayment plan. Tim Baker says that first deferment should be explored and then forbearance if needed as your interest will capitalize greatly with the latter.

In regards to health insurance when losing your job or having a change in your benefits, there are several options to consider including COBRA, short-term health insurance, exploring the federal marketplace, healthcare sharing, or HSAs.

When looking at retirement savings, Tim Baker says that typically, if you are in your 30s, there is plenty of time to right a ship that’s off course but that it’s also important to keep the fees associated with your investments low. They also talk about the importance of diversifying not only your investments but also your income by taking on a side hustle or entrepreneurial venture. This allows you to make money and also put the extra money into different savings goals depending on your passions. Tim and Tim also talk through how networking can help in times like these and the membership offer APhA has to those facing financial hardships.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. And I have with me back on the mic the one and only Tim Baker, fee-only Certified Financial Planner for Your Financial Pharmacist. Tim, it’s been awhile. How are you doing?

Tim Baker: I’m doing well, Tim. How are you doing?

Tim Ulbrich: Good. So before we jump in, it’s been awhile since you’ve been on the show. And big news for the Baker family with the addition of a baby. Give us the good news and tell us how everyone’s doing.

Tim Baker: Yeah, everyone’s doing well. And August 2, we welcomed Liam Baker to the fold. So we have Olivia who’s 4, turns 5 in October. And now we have Liam. And everyone’s doing well. I’ve got to give major props to my wife, Shea. She experienced 40 hours of labor, and we finally got to meet him on the 2nd. So it was a lot of stress I think leading up to it, but we’re happy and healthy baby, healthy mom, and now we’re kind of going through the storm of — I shouldn’t say storm, that’s probably a bad way to say it — but in-laws here and family here and trying to get into a routine and everything like that. So all good things, though, and thanks for asking.

Tim Ulbrich: Yeah. When people ask about like the birth of a child, I always feel like it’s easy to think of it as like the most chaotic, most joyous moments of your life, all wrapped into one.

Tim Baker: Yeah. And I’ll tell you what — and this came I think straight from you guys, you and Jess, like I don’t think I could have done it without our doulas. So shoutout to our doulas, our doulas were unbelievable and I think if I looked back on that experience, if they weren’t there to support Shea and myself, I think we would have been lost. And it’s just one of those things where you don’t know what you don’t know. It’s almost like a financial planner, you know, these individuals are just lovely people who are there to help coach you and advocate for you and in a world sometimes in labor and delivery where it’s almost like it’s very medicalized, if that makes sense, and sometimes, the things we manage to the lowest common denominator — obviously we want a healthy baby — but do we have to do this procedure? Do we have to do this? Or it gives us some time to think about it, and I think that really when we compare Shea’s birthing experience for Olivia versus Liam, they’re so different. I think the doulas are a big part of that. So not to get on a tangent about that, but that was a great process or great to have them on the team.

Tim Ulbrich: Yeah, and the value of a coach is real, right? Especially in this situation and this exciting time in life but also very stressful one. And a shoutout to YFP team member Caitlyn, who helps us with the podcast and lots of things with YFP who is also a doula, helping people up in the northeast Ohio area. So let’s transition and talk about this week financial considerations for those that are facing potentially a job loss, hours that are being cut, a reduction in wage, and this topic I think is really more important than ever in the profession if you think about the recent announcement by Walgreens and its plan to close 200 stores in the U.S. Obviously, we have others; this isn’t an isolated story. WalMart had made similar announcements. We have many others that have cut hours, notably would Kroeger and Harris Teeter. It seems like 32 is really becoming more of the norm when it comes to a community pharmacy practice, and we’re seeing certainly wages that are being reduced as well. And so I think this conversation about what should one be thinking about if they find themselves in this situation, whether that be a job loss, whether that be hours cut, or whether that be a reduction in wage. And oh, of course we’re not seeing a slowing down of the student indebtedness with the most recent data from the class of 2019 showing now an average just over $172,000. So Tim, before we jump into the strategies and what one should be thinking, what do you make of all this and what we’re seeing out there in the profession?

Tim Baker: It’s a great question, Tim. I mean, I am not — I think you and I have stated multiple times and just in our view on things is that I think we are very much the optimist. But I’ve seen it with clients that have come through my door where they’ll — it’s like OK, we’re talking about their financial plan and their net worth and income, and I’ll say, “OK, what’s your annual income?” And I work with two full-time community pharmacists, and they’re making in the $70s each. And you know, at the end of the day, I think this is all cyclical. Like I think right now, we’re in a position or the profession is in a place where it’s kind of right-sizing, and I think we’re going to see that from a job perspective, probably even an education perspective. So I think that this is something that we definitely have to I think talk about and talk through. And I think that’s where YFP I think can play a role is kind of talk through these issues and what we can do financially, but I think also what we can do as a profession — and this is me as an outsider speaking about pharmacy. But it concerns me, I think. You know, when you’re looking at a full-time job of $70,000-80,000, and you still are carrying $170,000, $270,000, $300,000+ in loans, which I see, that’s concerning, you know. And the political climate out there is such that our leaders, at least what you see on the Democratic side, and we’ve heard it from President Trump, I think there’s attention that is at least being paid to this crisis, or whatever you want to talk about. But at the end of the day, there’s a lot of things that we can’t control. And there are things that we can control, and I think what we want to do is kind of shine a light on the things that we ultimately can control and at least get something to think about and to chew on, and I think that’s really our purpose in this episode.

Tim Ulbrich: Yeah, absolutely. And we’re going to jump into those things that we can really focus on and one can control. And before doing that, I want to give a shoutout to Richard Waithe from RxRadio. And him and I talked on our podcast last week and also on his show about the debt cancellation that’s being proposed by the 2020 candidates. But what I want to mention here — and we’ll link to our show notes — I think he did an awesome job, to your point about starting and sparking a conversation, he wrote a great post on Medium that we’ll link to that talks about some of the WalMart news and other cuts and what we should be thinking about as a profession and those within that profession. And I think I’m with you. We need to have a constructive conversation, and I feel like there really isn’t a great venue for that to happen right now. But I think that’s where we’re going to see really a lot of creativity and innovation in what we can be doing going forward. So let’s jump in. What can people control? And I think No. 1 what comes to mind, Tim, for me is really developing a sound financial base. So here, I’m really thinking prevention that if somebody were to find themselves in this position, if they have their financial house “in order” or those that aren’t yet in this position but maybe find themselves in that position in the future that they can really weather a storm like this or maybe even put themselves in a position to be more opportunistic if they’re dissatisfied with their work or they want to find something else to do. And we talk on this show all the time about having a sound financial base, having your financial house in order. So when you’re working with clients, what does this really entail in terms of putting yourself in a good position?

Tim Baker: Yeah, so I think the thing — and we talked about this in Episode 026, Baby Stepping Into a Financial Plan, which I look back at I think with this episode is it’s so long ago that I think we talked about it, it’s worth bringing up again. I think the two things that I look at when I first kind of do a once-over to someone’s financial situation is what does the consumer debt look like? So I’m not even really concerned about the student loans as much because there’s a lot of things that we can do to kind of mitigate the cash flow or the repayment of those loans. The thing that I look at is what essentially do the credit cards look like? And unfortunately, I feel like more and more pharmacists that come through my door, we have a good amount — I’m talking $10,000 or more — of credit card debt that we have to really reconcile. So you know, I think figuring that out is probably first and foremost. I think secondarily is it goes back to the emergency fund. So typically when we don’t have an emergency fund, that’s when we’re reaching for the credit card when something comes up. So the emergency fund really allows us to have peace of mind so we have cash money set aside in case something were to happen, it allows our investments to keep kind of working. So we don’t want to be pulling money out of our 401k or any of our investments that are really tailored to more of a long-term approach.

Tim Ulbrich: Right.

Tim Baker: And it allows us to avoid the credit card debt, so we’ve talked about at length of why this is important, and this is typically 3-6 months of non-discretionary monthly expenses, which are just a fancy way to say if you lose your job or your hours get cut back, these are the expenses you’re going to have regardless: your rent, your mortgage, utilities, your loan payments, that type of stuff. So I think at the end of the day, those two things, from a foundational standpoint, is the consumer debt in check? And you know, is the emergency fund in place or at least phase one? Sometimes I’ll say, “Hey, client, you need $30,000 in an emergency fund,” and they’re like, they might have $10,000 worth of debt, so we kind of take it in bite-sized chunks so we can achieve that goal.

Tim Ulbrich: That’s one of the things you boo, right? Go home, Tim Baker.

Tim Baker: Yeah, yeah. And the thing about it, and I kind of talk about this at length with regard to the investments, it’s really boring to pay off a debt, right? It’s just boring. There’s nothing exciting about it. It’s really boring to save money in an account. I mean, I like doing it because I like to see my interest payments go up, I know interest rates have gone down, so we’re big Ally nerds, and I think their interest rate has gone down to 1.9%, but it’s still 20 times better than the next guy. But that’s really not — a lot of people would compare it to watching paint dry. But I think sound financial planning for the most part is super boring. So yeah, I might get booed off the stage when I say, “Hey, pay off this debt,” or “Save this money,” or “Be really, really boring with regard to your investments,” but at the end of the day, I think it’s kind of the best interests of the client.

Tim Ulbrich: Well, I think there’s a great opportunity for people to reflect, myself included, yourself included, that you know, while you may not have been impacted by some of the recent cuts or job layoffs, any one of us is vulnerable to this at any given point in time.

Tim Baker: Yeah.

Tim Ulbrich: And obviously, there’s things we can do to help protect ourselves, but if you can envision a situation where if you find yourself in a job loss or hours cut or wages reduced, and you imagine Scenario A where you’ve got $20,000 of credit card debt, no emergency fund, Scenario B where you’ve got no credit card debt and a fully funded emergency fund, the stress associated with those two scenarios is very, very, very different. And so I think that’s a great reminder, as you mentioned, Episode 026, we talked about it. The other thing I think worth mentioning here — and we talk about this a lot in terms of budgeting and really thinking about the future — is these are moments where, again, even if you haven’t been impacted, to just take a step back and say, “What can I do to create margin in the month-to-month?” so that if I were to find myself in a position like this, either you can weather it or it may not necessarily hurt as much or you can work through having several months where you may not find yourself having an income coming in. So again, you think about if somebody’s in a situation where they’re used to making $7,000 of net income per month, and they’re spending $7,000 or more of net income per month, versus somebody’s who’s maybe only spending $3,000 or $4,000 of that net income per month because of house payments and car payments and all of the other things that we’ve talked about before, obviously, again, those are two very different scenarios. So I think there’s wisdom in all of us hearing this message and taking a look at our financial plan to say hey, what can we do to build margin and take some of the pressure off if we would find ourselves in a situation like this.

Tim Baker: Absolutely. Yeah, I mean, one of the things that we kind of brushed over here recently is about interest rates. I mean, some of that margin could come from just restructuring debt. So you know, if you bought a home, and your interest payment is 4.75%, you might be able to — if we consider closing costs and things like that, it might make sense for you to do something like that. I mean, that’s something that doesn’t really test your kind of putting you outside of your comfort zone, so a lot of things when we examine inflows like making more money or outflows, cutting expenses and tightening the belt, it’s typically outside of our comfort zone, and we don’t like to do it. But it might be something as savvy as that, taking advantage of where interest rates are to kind of create that margin. But there’s lot of ways to do it.

Tim Ulbrich: Second area I want to talk about is potential need for deferment or forbearance of loans. So obviously, we have people that are listening that have been impacted by this, may currently find themselves in a position where hey, I don’t have work or I have such reduced hours or wages that I just cannot make the payments that I have. And so here inserts this option of potentially deferring or forbearing loans, which we know is not the ideal scenario but may be the reality for some people. So talk us through what is deferment, forbearance? What’s the difference? And what are some of the considerations here?
Tim Baker: Yeah, and when we typically talk like deferment, forbearance, grace period can be like also rolled up into this, it’s essentially periods of time where you don’t have to pay off your loans, where you’re basically out of school, sometimes you might be in additional training, so that’s where we talked about — and this is one of the things that I love we talk about, Tim, moving the needle. I rarely come across a resident that I work with that will automatically say, “Oh, I’m deferring my loans,” which makes me happy because I know when we first talking on the subject, I would ask a resident, “Did you defer your loans during residency?” or “Are you doing it?” Yeah, I feel like the majority of them would. So I feel like that message has come out. So like we say about the grace period, it’s not very gracious, you know, the deferment and forbearance, they’re not good. We’re really look at these as really stopgaps, like you said, Tim, when we can’t make the payment. So I typically follow the alphabet and go, deferment first — D before F — and then forbearance, typically because of how interest accrues. On some loans like Perkins and subsidized Stafford loans or direct loans, in the deferment period you may not be responsible for paying off the interest that accrues. And typically, it accrues during those deferment periods or forbearance periods and then the interest capitalizes, meaning it moves from the interest column to the principal column. And then when you’re paying back that amount of money is now bearing more interest on the bad side of things. So you know, the big thing to remember is that ultimately, one of these is typically going to be available to you, either deferment or forbearance. And I would say look at deferment first, go to forbearance second, because typically, the forbearance is for a financial hardship, that type of thing, but the deferment will be a little more gracious. So I would say if this is a you need to do this, which I would advise against, but sometimes you have to do what you have to do, go that route because it’s going to give you a little bit more runway to get your financial house in order, try to figure out ways to make the income, find a job, side hustle, whatever it is. The big con is ultimately not only are you not putting a dent into the loans, they’re growing, unfortunately. And for the amount of loans that we’re talking about with pharmacists, it can grow substantially. So you could wake up — and the terms vary. Sometimes it could be 12 months, I think some deferment periods can last up to three years. That’s a long time for you to be sitting on a loan that on average, 6-6.5% interest, that can really add up over time. So at the end of the day, what you want to do is on the federal side of things, with federal loans, this is a no-brainer. This is actually one of the benefits that the federal loan system provides is that if during a hardship or during a period of time where you can’t make the payments, they’re going to work with you. And the reason for that is that loans are not discharged during bankruptcy proceedings, so they’re not going away. Even if they do, the federal loan program is backed by the full faith and credit of the U.S. government, which has us as taxpayers to be able to support the. So this is kind of a no-brainer. And at the end of the day, the government collects more in interest the longer that you pay off or the longer that you defer. On the private side of things, it’s a different ball game altogether.

Tim Ulbrich: Yeah, and I think that’s worth noting because when we talk about on the private side of things, obviously you’re now at the mercy of the private lender — and mercy may not be the right word, that makes it sound terrible — but the reality is that we talk about this all the time: When it comes to refinancing your loans with a private lender, full transparency, you have to consider both the pros and cons in that. And while many of these lenders have really come into line with having all of the benefits — or many, if not all — of the benefits of the federal system, one of them that you have to consider is one important one here that we’re talking about is if you were to find yourself in this position, what’s going to be the option if you don’t have a deferment/forbearance option with a private loan? So how have you handled that with clients? Or what advice might you have for them? Because they’re probably not going to just throw this out there and market it and say, yes, we’re going to offer you forbearance or deferment. So you’re probably going to have to dig a little bit deeper here.

Tim Baker: Yeah, one of the risks moving from — although we believe that — so when I first started advising clients on student loans, basically, what we were told is never have the client move from the federal system to the private system. So never have them refinance. And obviously, the big reason was because of all the federal protections: They forgive upon death or disability, there’s forgiveness, there’s lots of different plans that you could pay off the debt, that’s also hardship. Now, because this is a $1.5 trillion issue that affects 45+ million Americans, a lot of these companies have said, hey — the CommonBonds, the SoFis, the LendKeys of the world — have said, “Hey, we’ll match those benefits. We’ll forgive upon death and disability, we’ll try to make you basically as similar to the federal system as we can.” Now, one of the things where I think they fall short a lot of times is a lot of these companies don’t necessarily advertise that they’ll work with you on a hardship. Kind of behind closed doors, I think that they will because at the end of the day, they want what you want. They don’t want you to — you can’t really default on the loan. Well, you can default on the loan. But it’s not going to go away. So eventually, what the companies will do is they’ll sell the loan for pennies on the dollar to a collector, and then they kind of hound you for it. They don’t want that because they want to get as much of the interest and principal paid back as possible. So what I would say to someone that has private loans that is struggling to make the payments is just level with them. I think pharmacists have a little bit more cash because you have a professional degree, you have the ability to make a good income, even if it’s not now but in the future once you kind of get sorted out. So to me, it’s just level with them and say, “Hey, I want what you want. I want to be able to pay this back, but I need some time to figure this out, or I need some grace.” And I think more often than not, they’ll figure it out. But at the same time, they are running a business. And they are not backed by the full faith and credit of the U.S. taxpayers, so sometimes they might call you on the loan, and then you’re kind of left paying with it. So it’s a little bit of give-and-take. Obviously, when you move from the federal system, you’re getting a better rate, but there’s a little bit less flexibility in repayment. And sometimes, a hardship is chalking that up to that.

Tim Ulbrich: Yeah, Tim, I think that’s a great point in terms of the private companies and at the end of the day, they’re running a business. I think this is also a good time to remind our listeners that are in the federal system that maybe haven’t refinanced their loans to the private sector that before they go through and pursue a deferment or forbearance option, is to see whether or not one of the income-driven repayment plans, if they’re not already in an income-driven repayment plan, would allow them to right-size their payment to match the income in terms of the time period that they may have a reduced wage or have lost their job. Of course, deferment/forbearance always being an option, but not overlooking the income-driven repayment plans that might provide some temporary relief without having to go into a deferment or forbearance situation.

Tim Baker: Yeah, and I think one of the — we often talk about — especially on the federal side — there’s lots of flexibility in repayment, and I often say it’s almost too much flexibility because there’s so many different options with the different repayment plans and deferment and forbearance. And what it typically does is it just confuses people in terms of like what they should actually do in practice when things are normal. But when they’re not normal or when things aren’t going as well from an income perspective, it’s actually a good thing on the federal side. And just to recap, like I said, the private companies, they do want you to pay back the loans, so they’ll try to work with you I think the best they can. But sometimes, they’re not going to be as flexible as the federal system. So again, lots of flexibility in the federal system. But I think there’s typically an avenue for everybody that might hurt the long-term gain or long-term approach to the student loans but can give you some relief in the short term.

Tim Ulbrich: Yeah, and I think to wrap up this section here as we continue to reemphasize the importance that when you’re refinancing student loans or looking into refinance, of course, interest rate is a big variable. You want to calculate the savings. But it has to be the savings plus looking at some of these other variables. And I think that’s more important than ever now as we see rates continue to drop. Those refinance offers are going to become attractive. Here we are in September, end of August 2019, that making sure you’re looking at OK, what are some of these other benefits that you may be losing from the federal system, although you’ve talked about those have really equalized across the board. But certainly it’s not an apples-to-apples comparison between the two.

Tim Baker: Sure.

Tim Ulbrich: So again, as we continue this journey talking about financial considerations for those that have potentially a job loss, hours cut, or reduced wages, we’ve talked about first developing a sound financial base, really the prevention aspect. Then we talked about loan deferment or forbearance. I think the next thing, Tim, we need to talk about is if somebody ends up in a situation where they lose their job or potentially they get hours cut to a part-time where they no longer have access to health insurance benefits, or I know we have several side hustlers out there that may make the decision to say, hey, I’m going to jump ship from my day job and ultimately, they carry the responsibility of health insurance coverage. But this factor, especially if you’ve always been used to having employer-provided health insurance, is a huge consideration. I mean, the cost of this is no joke, right, Tim, when you look at this relative to the rest of the plan?

Tim Baker: Yeah, absolutely. And this is one that’s going to be dependent on the region or the state that you live in in terms of the coverage. This one’s a hard nut to crack, and I’m of the belief hopefully that eventually, the employment will be separated from this benefit and that everyone can get coverage separate from who their employer is because I think it is one of those things that sometimes, it prevents people from moving away from a job that isn’t necessarily a good fit for them and they feel stuck. But it’s either looking at the exchange per state — and some states, you can really find something that can fit your needs, and other states, there’s almost nothing available. But the big one — and Tim, I think you have some experience with this here recently — is going to be COBRA and what that basically provides for people in kind of a transitionary period.

Tim Ulbrich: Yeah, and I think this question’s really interesting because I think it’s just a good activity for everyone to look at, even if you’re not foreseeing a situation where you leave a job is to look at what you’re paying out of pocket per month for your plan and what percentage that is of the overall cost. I mean, most likely, the employer is carrying about 90% of that, right? You know, varying degrees, obviously less or more, varying degrees depending on how catastrophic the coverage is or not or high deductibles, all those things. But at the end of the day, again, it’s easy to get lulled into this is one of the real benefits, just like we’ll talk about here in a moment with retirement where if you have a match provided and then all of a sudden that’s fully on your back, you’ve really got to factor that in, especially for those that are thinking about making a jump that’s of their own choice, especially to pursue some type of entrepreneurial option or side hustles. You’ve really got to factor this in when you’re thinking about your business, pricing your services, all of those things because often, people will say, “OK, I’m making $100,000. I need to replace $100,000.” And obviously, we know it’s probably more like $150,000-200,000 when you factor in all those other things. So yeah, Jess and I actually had a little bit of experience with this last year when we made the transition down here to Columbus from northeast Ohio, and we were looking at, OK, what are our options for health insurance coverage? And the reason why we were looking at this is we made a really specific decision for our family that we’re going to take two months off in the transition, which was awesome. And then we had the holy cow moment of oh, wait a minute, we have three kids, and we’re not going to have any health insurance, so what’s the game plan? So the most obvious option we ran into is Cobra, which is essentially extending your employer coverage that is offered to you for a period of time, but you’re going to really foot the bill for doing that. And this allows you to take out the plan you have now, you know who’s in network, you know who’s not in network, especially if you’re staying in the area, you’re comfortable with the offering of what’s there, so it’s essentially the continuation of your coverage that was being fully funded by your employer or a combination of employer and you, and now you’re able to continue that offering, have access to that offering, but really, the cost is going to be on you to do so. And the reason we didn’t go through this — and this is really a good bridge option for many people, especially if this is only a 3-6 month period is that the plan that we had offered at my previous employer was so rich and we necessarily weren’t really using a lot of those benefits that we looked at the cost and said, “Wow, like we don’t really want that,” and I think this really highlights us having the opportunity to talk about the importance of an emergency fund that if you have a fully funded emergency fund and you’ve been relatively healthy, you may not necessarily want to pay out of pocket for an expensive Cobra coverage. Or if you’re looking at options in the exchange, you may be able to take on something that has a little bit higher deductible or that has more catastrophic coverage because of the other savings and funds that you have. So Cobra is certainly an option. The other option that I honestly, Tim, wasn’t aware of, is short-term health insurance. And we ended up doing this when we took a couple months off between jobs because at the end of the day, it was cheaper than Cobra, and for us, it really just provided what we needed, which was catastrophic coverage. So the cost of this was really, really significant in terms of the savings, pretty simple to get signed up, simple to find, so for those that are relatively healthy, have a good savings in place, I think this is a good option. If you’re looking longer term, I think of course the exchange, all those you mentioned, state-to-state you’re going to see a significant variety. From my experience looking at some of those, those policies, many of them are very expensive, even just for catastrophic type of coverage. But obviously, healthcare.gov is a place to go to look there. Then the other one that I think is often overlooked are some of the healthcare sharing service organizations that are out there. You probably have heard of terms such as MediShare, Liberty HealthShare, these are essentially individuals that are coming together, a lot of them are faith-based organizations that come together with the idea that you as a community are, through contributions, sharing in the cost and essentially pooling together money and resources that can help fund one another. So that, of course, has upsides and downsides. And then if somebody moves into the route of being self-employed through opening up their own business, then of course, you have the opportunity to open and provide health insurance coverage through yourself and the tax advantages and benefits that come with that as well. So I think at the end of the day, for most people that are listening that may find themselves as one of those pharmacists that either is losing their position or is getting cut down to part-time hours, doesn’t have healthcare coverage, most likely, they’re going to be looking at either Cobra coverage for that transition period or potentially some short-term health insurance really would probably be the two predominant options.

Tim Baker: Yeah. The other thing that we talk about more is almost like a longer term stealth IRA is the HSA where that’s something that if push comes to shove, you can use for medical expenses in the near term. We talk about as a triple tax benefit account that can almost act as a secondary retirement account. But if push comes to shove and we need to dip into that, I mean, by all means. I think having that as part of the overall thing to tap into is something to look at as well.

Tim Ulbrich: That’s a great point. Next bucket, Tim, is this idea that people in this situation may find themselves with a loss of the option of saving for retirement through an employer-sponsored account. So if they no longer have their job, they can no longer access a 401k or 403b, maybe they’re losing the match, or even just the option to contribute to that beyond the match or even in the absence of a match. So if you’re working with a client who’s in this situation, how would you handle this in terms of evaluating, OK, are we just going to put on pause through this temporary time of hardship, and what are the things we’re going to be looking at? Or if we do want to continue to save, what are the other options that are out there?

Tim Baker: Yeah, I mean, typically, when we’re looking at a situation like this where it’s either job loss or maybe even significant cutback in hours, you know, this is kind of an emergency situation where we might not look at even getting the match. Most of the time, I would say, get the match as best you can. But I think this is where some people can get in trouble with kind of the longer term because it’s really hard to put numbers and calculate, OK, if this happens, what are the long-term repercussions? So one of the exercises that I think we do at YFP Planning, which I really think kind of turns the light on, is actually just taking a client through a nest egg calculation and showing them, OK, if we give a set of certain assumptions and kind of we can see what your current savings rate is, what you have saved, how long we have until retirement, we can kind of see are we on track or off track? And then we can take some of those variables and change them to say, OK, if before, we were putting 8% in and now we drop that to 4%, how does that change the overall bottom line? So I think if I was working with a client, that’s essentially what we would do. And most of the time — I wouldn’t say all the time — but most of the time, given the fact that the majority of the pharmacists that we work with are kind of in their 30s, there’s a lot of time between now and retirement to kind of right a ship that’s not necessarily on the right track, but my belief is that from an investment perspective when it comes to retirement investment is trust in the market. It will take care of you over long periods of time. So my thought is to be fairly aggressive with those accounts and make sure that expenses are low. So I think when you couple those two together — I had a couple recently that they felt, I think they were in their late 20s, didn’t have a whole lot saved for retirement, just getting started out, and we kind of went through the numbers, and I think they were like flabbergasted that they weren’t like 10 or 20 years behind. So I think when we actually do the numbers, it can be a powerful reassurance to see if the variables change, how that changes the overall thing. But you know, I think, again, this wouldn’t be something that I would necessarily fret at in the short term if we were in this scenario because I think at the end of the day, this could be figured out.

Tim Ulbrich: So Tim, I think it’s worth talking through here, you know, somebody who finds themself in a situation like a job loss, maybe even a time period before they find another opportunity, so they have this 401k or 403b account that’s sitting there. What do you typically advise — or maybe better yet, what are the factors or variables you’re helping a client think through in terms of determining, do I leave those monies there as is until I may have a new position that I can make that decision to compare what I might get in an IRA versus what my new employer offers? Do you move forward with a rollover into an IRA? How do you typically work that through with a client?

Tim Baker: Yeah, so to me, this decision really begins and ends with expense. So in a 403b, 401k environment, I always say that we have to operate within the sandbox that the employer and the custodian, whether it’s Fidelity, Vanguard, whoever it is, allows us to basically play in. So in those retirement plans, you typically have 20 or 30 different investments that you can put your money towards, and that’s it. In an IRA environment, the world’s your oyster. You can invest in just about anything that you’d like. So but I think the big difference is that in the 401k, 403b environment, it’s not as transparent as we would like. So most people, they sign in, they say, oh, I’m putting 5% in, here’s x amount of funds, I like these four or five or six funds, and then that’s it. But what they don’t know is there’s typically a lot of fees that are associated with that that are very opaque to them. So I actually did an analysis with a client here in Baltimore. He’s one of the clients that is not a pharmacist, but he has a 401k with a major company here, and basically, when we went through his analysis, I had not yet analyzed his 401k yet, but he has an IRA with us, and I say, “Look. Depending on when we do the analysis, depending on what comes back in terms of like how expensive your 401k is, is going to really determine if we should contribute future dollars to the 401k or to the IRA.” So when I did the analysis this morning, and his 401k was about five times more expensive than the IRA that we have. So basically, the move was to keep his 401k contribution static, so basically get the match. And then as he increases his contribution to his retirement account, it will go into the IRA until we max that out. So this is kind of — and sometimes, this can be shades of gray. This is like looking at expense ratios of .1% versus .05%, so it’s very, very minimal. But if we’re talking hundreds of thousands of dollars or even millions of dollars over the course of a career, that stuff definitely adds up. So the decision, longer answer, Tim, the decision to move those monies is going to be dependent on the actual plan themselves. You know, if you’re in a TSP, as an example, those are really efficient funds. But what most financial planners will say is they’ll say, “Hey, move the funds for me to manage,” because that’s typically how they get paid is the investments that they’re managing. So it’s typically sound advice, but not advice that is not necessarily in the client’s best interest. So I say it just depends on what the analysis shows, if that makes sense.

Tim Ulbrich: Yeah, absolutely. I appreciate the insight. I think fees, at the end of the day, we’ve talked before on this show, the impact those can have. And with a few exceptions, I think you mentioned the TSP being one, and maybe there’s a couple others out there. I mean, more often than not, what we’ve seen is that employer-sponsored accounts just typically don’t always have as low of fees as you can get out there in the open market through index funds and other things. But I think being aware of where the advice is coming from is really important as well. The next one we have here is the value and importance of a side hustle. And obviously, we’ve talked at length on this show, we’ve had lots of examples as recent as Brett Rollins coming on the show to talk about his two side hustles in writing for Pro Football Sports and then doing some work around expert witnesses and his area of expertise. But when it comes to side hustling, especially for those that are potentially in a time period of loss of job, reduced income, reduced wages, what do you see as the value of this side hustle in addition to, of course, just what they’re going to get from potentially the monetary income?

Tim Baker: Yeah, you know, when we talk through like a savings plan for a client, when we do goal-setting, we’ll talk about things like, what are the things that are important to you? And a lot of people will say, you know, it could be travel, it could be starting a side business, it could be whatever that — retiring at a certain age. So we typically like to marry up what they’re actually passionate about in life and what they want to do with kind of how we’re deploying our savings and our money. So one of the things I like to kind of point to is basically a savings plan. So the baseline or the bedrock of that is going to be the emergency fund, but it might be where we have a savings plan for our trip to Disney World. We have a savings plan for Benji, our dog, so when he gets sick or he needs grooming. So one of the things I really like about the savings plan is that it clearly shows where the money comes from. So for nine out of 10 of us, it’s going to be like a paycheck, right?

Tim Ulbrich: Right.

Tim Baker: So when we talked about at length with Shea and I, when we basically funded our trips to Disney World, Brazil, and Iceland through Airbnb and Rover, in our savings plan, that’s what we outlined was that everything else was paycheck except for those two things or that one thing was all going to be from those dollars. So what I like to clearly show to clients is that typically, all of our proverbial income eggs are in one basket. It’s going to be WalMart, like we talked about in the beginning of the show, or it’s going to be a hospital, or it’s going to be CVS, whatever it is. We’re at risk because if a decision is made in a boardroom in some city in the country, it can affect all of us. So my belief — and I understand that I’m biased because I’m an entrepreneur, Tim, you’re an entrepreneur — but it should be to not only diversify our investments but to diversify our income streams. One of the conversations that we’re having in our household is, Tim, is about YFP profit distribution. So as we distribute profits to the business owners, Shea, what should we be doing with this money? So like for me, it’s like, I really want to buy an RV and travel the United States. So that might go into an RV fund. Or it might be, we really need to catch up on retirement, so it might go strictly into retirement. But I like to clearly delineate lines of income for a purpose. And part of that is to show that most of us are very susceptible to kind of a one-income or two income streams if there’s two people in the household.

Tim Ulbrich: And one of the things I love that you do with your clients — and Jess and I have experienced this firsthand in working with you — is you mention as you’re working through that savings allocation worksheet, if you have a prioritized list of what you’re working on, when that extra income comes in the door, boom. Like there is no question about where that is going. It doesn’t go off into the ether of no-man’s land or expenses come here or there. So I think the clarity, and obviously, that then gives you that feeling of acceleration of your financial goals, which fuels on itself and I think helps things move forward. The other thing I really love — and we’ve experienced this personally, and I know we’ve heard this over and over again from the guests we’ve had on the show — is that while there’s not a direct monetary value necessarily from it, but that value of having a creative outlet, you know, where you can really contribute to something that you’re really passionate about and that you want to implement and to have the fun in terms of the creative side of the business and working through the problem and the challenges. And I think especially for people that find themselves stuck or dissatisfied in their day job, I think beyond the cash, there’s incredible value in being able to have that creative outlet while you may be pursuing other opportunities or even just working through that difficult time.

Tim Baker: Yeah, and I think one of the things that is worth mentioning — and I remember something that I think Tony Guerra said that I’ll paraphrase — is like, he almost set his schedule off the bat at like a 32-hour schedule so that he could have one day of just thinking or working on different progress.

Tim Ulbrich: The entrepreneurial 8.

Tim Baker: Yeah, exactly. So to me, a lot of people sometimes bemoan the fact like, oh, I can only get three days this week or four days this week. To me, I would flip that on its head. It’s like, well now you have a day or two that you have capacity to do something else that you can monetize your time in a different way. So and sometimes, it’s just getting there and getting outside of your head or maybe doing something that you would never do. Like I said, like when I launched my business, Tim, I drove Uber. And it was one of the best jobs because I love to drive, and I love to talk to people. But for me, when I was launching my business, I was just stuck in a room and I was kind of bouncing off the walls. But when I got out and looked at the world in a different space and talked to different people, it made all the difference. But to me, it was to earn income so I could pay my rent and feed myself. But it was also to think through a problem or work through a problem or do something that’s kind of outside your comfort zone. So I think sometimes with a lot of pharmacists that we work with, I say, “Hey, look, whether you’re growing top-line revenue, top-line income or cutting expenses, typically, both of those things are going to be outside of your comfort zone. But I think doing a little bit of both is good, especially to tighten the belt if you’re expecting hey, I thought I was going to make $120,000, but now I’m only making $80,000-90,000. So I think capacity in your workweek is something that we should value and really try to figure out ways to go from there.

Tim Ulbrich: I agree. And one of the last things I think about with a side hustle, which takes us into our last plan around networking and professional development, that I don’t think it’s talked about as much as the extra income and the creative outlet is this idea that as you pursue a side hustle, as you get yourself out there, as you meet more people, you’re naturally going to expand your network, right? And you’re going to take yourself out of your comfort zones, you’re going to have to really talk about the work that you’re doing and why you have a solution to a problem that needs to be solved. And those are skills that if you’re working in a 9-5, let’s say a traditional community pharmacy job is one example, you’re probably not forced to do those things. And your opportunities to expand that network may be a little bit limited unless you take that step above and beyond yourself. So I think this last point here of networking and professional development — and this timing is really good as next on the show, we’re going to have David Burkus, the author of “Friend of a Friend,” to talk about this concept of hidden networks and really redefining how we think about networking and why networking is so important, not when you need it in the moment of holy cow, I don’t have a job, I now need to tap into my network, but why you should be fostering and developing that network all along. So stay tuned to next week, we’re going to talk about that a lot more. I think this is also a good chance, Tim, for us to highlight what APhA is doing here as we continue to partner with them and value their partnership, is they just a couple weeks ago announced that they’re offering complimentary APhA membership to those that have found themselves in a position where they have been laid off or work hours have been significantly reduced, and they’re really positioning this as for people, whether they need CE, whether they’re looking to network, they’re trying to find new opportunities, pursue new skills, that this membership that they feel like will help them do that. And I really commend them for doing that. I think there’s been a lot of discussion nationally about hey, national organizations, where are you in this difficult time? And this is really somebody stepping out there and saying, we’re going to invest in this. And this is one way we’re going to show this is a priority. So for those that find themselves in that position of either a job loss or hours that have been significantly reduced, you can email the APhA membership team at [email protected]. Again, that’s [email protected]. Or you can call APhA as well, and it sounds like they’re going to be able to move that forward, which we’re excited about. So networking, professional development, when you think of your journey, Tim, and the work that you’re doing obviously now with YFP, but formerly Script Financial, I mean, how important — I hear you talk about a thousand cups of coffee all the time, right? I mean, this concept of networking.

Tim Baker: Yeah. No, it’s true. I mean, when I kind of had this Eureka! moment, I’m like, I’m going to start a fee-only financial planning firm for pharmacists for Gen X, Gen Y pharmacists, I’m like, I’ve got a lot to learn. So that 1,000 cups of coffee really put me on the path so when I sit in front of prospective clients, and I say, “Hey, prospective client, these are typically the things that I hear, and by the way, we have a solution to kind of hope ease some of that pain,” most of the time, they’re like, “Wow, Tim, you just described my life. Yeah, I’m struggling with debt. And yes, I’m unsure about my budget or my long-term projections and things like that. So to me, it’s so huge. And I think that any way you can expand your network, not just for — I think looking at it from like how you can help others is the best approach, not necessarily being in it for yourself, is the way to go. So I’m looking forward to that episode.

Tim Ulbrich: Well, great stuff, Tim. I want to remind our listeners if they’re not already aware and if they’re here listening at the very end of August, we’ve got a few days left in our exciting giveaway for the end of this month. So for those that are interested in pursuing something entrepreneurial, building off what we talked about today, or a side hustle, but if you’re not sure where to get started, we’ve got a giveaway for you this month that includes some awesome books and resources that will hopefully help spark some ideas and remove some of the barriers to getting started. So for three different winners, you will receive a copy of some great books: “Will It Fly?” by Pat Flynn, “Failing Forward” by John Maxwell, “The $100 Startup,” “The Freedom Journal,” and, of course, a Hustle Mode T-shirt. What would this be without a Hustle Mode T-shirt? So giveaway ends end of August, Aug. 31, 2019, and for those that are interested, you can sign up at YourFinancialPharmacist.com/giveaway. Again, YourFinancialPharmacist.com/giveaway. And if you’re hearing this after the end of August 2019, don’t worry. You can go to that same URL, and it’s likely we have another giveaway that’s ongoing right now. So Tim, as always, great stuff and looking forward to connecting soon on future episodes.

Tim Baker: Yeah, thanks, Tim.

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Disability Insurance for Pharmacists – The Ultimate Guide

Posted on by yfpadmin

Disability Insurance for Pharmacists – The Ultimate Guide

The following post contains affiliate links through which YFP or its team members may receive compensation.

I had received another email at work one morning indicating that “Julie” was not going to be in and that coverage would be needed. I knew this wasn’t planned otherwise her clinic would have been closed in advance. I didn’t know her that well so I had no idea the reason she was out but wondered what was going on and if something bad had happened.

A few weeks later it was revealed at a meeting that Julie would not be coming back to work and the reason why. You see, Julie had been struggling with rheumatoid arthritis for a long time and for many years was able to manage her disease and work full-time without any issues. Unfortunately, and unbeknownst to most of her co-workers, her disease had been progressing over the past couple of years causing tremendous pain and stiffness that became so bad that she had to drop to part-time and eventually stop working altogether.

Since she was relatively young and likely expected to work several more years, I had often wondered if she was going to be ok financially. How was she going to be able to support herself and her family without an income?

What is Disability Insurance?

One of the greatest financial assets you have as a pharmacist is your ability to generate an income. Think about how long it took you to get to that point of becoming licensed. Six years? Eight years? Maybe more with residency or fellowship? Think about the energy, the focus, the sacrifices you made. What if that income was suddenly taken away?

Remember, you are going to have projected lifetime earnings in the millions.

Disability insurance is really income insurance. It provides you with money in the event that you are unable to work because of an accident or illness.

In the example below, let’s say a 25-year-old pharmacist wants a policy for approximately 60% of his or her income (~126,000) . A monthly (or annual) premium is paid and if a disability occurs at age 35, that pharmacist would receive $6,250 per month until age 65 when the coverage ends. We will discuss some of these specifics a little later on.

long term disability insurance for pharmacists, pharmacist disability insurance

Do Pharmacists Really Need Disability Insurance?

I know what you may be thinking, “As a pharmacist, something pretty bad would have to happen to me to not be able to work.” That may be true. After all, most pharmacists just require their cognitive faculties to be intact, and therefore accommodations could be made in the event of broken bones or limited mobility secondary to an accident. Right? Remember, you are not invincible!

The Social Security Administration predicts that more than 25% of today’s 20-year-old Americans will become disabled before the age of 67. However, almost 70% of those working in the private sector do not have disability insurance. Beyond car accidents, think about potential insidious diseases like Parkinson’s disease, dementia, cancer, or MS. There a lot of health-related scenarios that could occur at a young age and either force you out of the workplace or reduce the time you are able to work.

Besides being able to afford typical bills such as food, mortgage, utilities, etc, think about your student loans. If you still have federal loans then you don’t have to worry because these are discharged in the event that you become permanently disabled. However, what about private loans? Or ones that you refinanced?

Depending on the company, you may still be on the hook for making payments. We have partnered with a number of refinance companies and some such as Commonbond, Earnest, and Sofi will discharge the loan balance similar to the Department of Education.

Therefore, unless you already have substantial wealth or have additional income streams and don’t require an income as a pharmacist to live, you need disability insurance.

Types of Disability Insurance for Pharmacists

Disability insurance is typically classified as short-term or long-term based on the length of the policy. Although not always the case, short-term disability policies are typically up to 5 years and tend to provide you with a monthly benefit very quickly from the time a claim is made. Many times these are offered by your employer or through a pharmacy association.

If you have many working years ahead, then you really should consider a long-term disability insurance policy. Most of these policies can be in force up until age 65-70, which can ensure you will have income until you are eligible to claim social security or other retirement benefits. The time to which benefits are paid once a claim is made is known as the elimination period which will typically be longer (30-180 days) for a long-term disability policy.

This often brings up the question of whether one needs both a short-term and long-term policy. If you have a good emergency fund and sick leave that can cover the elimination period for a long-term disability policy, then this may negate the need for any short-term policy. Now if your employer offers you short-term at no or very low cost then definitely don’t pass on the benefit.

For the rest of the post, we are going to focus on breaking down the components of long-term disability insurance for pharmacists.

disability insurance for pharmacists

How Premiums Are Determined

I will be honest with you. Disability insurance is not cheap, especially when compared to term life insurance. Before we get into some typical premiums you can expect to pay, let’s break down all of the things that can impact what you will actually pay. And just brace yourself, because there are a lot! The first time I received some quotes, my head was spinning because of all the features and factors they display.

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Coverage Amount

This is one of the biggest determinants of how much you will pay for your long-term policy. How much you need depends on your current income, your savings, and how much you need to maintain a desired lifestyle in the event you can no longer work. A general rule is to consider 60% of your gross income as this should be pretty close to your take-home pay after taxes. If you pay your premiums out of pocket, and not through your employer, your benefits will be tax-free. Typically most companies will have a max of somewhere of 60-70% of gross income.

If you are a government employee, you probably won’t be able to get a policy for 60% of your gross income. The reason is that there are benefits available to you in the event you are disabled. You will have to check your agency and see what you are entitled to. If you are a FERS (Federal Employee Retirement System) employee, which includes all VA pharmacists, check www.opm.com for more information. This is the reason you are asked on your initial application or quote whether you are a government employee.

Benefit Period

How long do you want to receive benefits in the event you become disabled? This will be a key question to answer and what you choose will have a large impact on what you pay. Assuming you have many working years left and have no substantial savings and will depend on earning an income, then you should probably consider choosing a benefit period up until around age 65. But depending on your situation, you may not need something in place until then and could consider a shorter period.

The way most quotes with long-term policies is that they will show you the cost of 5 years, 10 years, and then age 65, 67, or 70 or something similar to that as you can see in the example below.

long term disability insurance for pharmacists

Elimination Period

As mentioned above, the elimination period or waiting period is the time between when a claim is filed and when you actually start receiving benefits. This is typically 30-365 days. As you can see in the example above, the longer the elimination period, the cheaper your premiums will be. If you have an adequate emergency fund and have built up some paid time off, you may be able to opt for a longer period.

Payment Frequency

Like car and life insurance, you can often shave some money off your premium if you pay annually or biannually. It may not be significant savings, but every little bit helps. You can see the example below of how payment frequency can make an impact.

long term disability quote

Age / Health History

Similar to life insurance, your premium will be determined in part by your age and how healthy you are. Your weight, smoking status, past medical history, history of DUI, and any past suspensions of your professional license will also be considered.

Occupation

Most insurance companies have 5-6 occupation classes that are stratified based on the risk of injury with day-to-day activities. Pharmacists and other white-collar professionals are generally in the highest class which has a lower cost of coverage compared to other classes.

Riders

Have you ever tried to purchase a car and notice they always try to upsell you with all the bells and whistles? Long-term disability insurance policies are filled with them! That’s what makes them so complicated. It’s not like term life insurance where you just put in your info and then choose an amount and time frame for the policy to be active. Instead, these policies are jam-packed with extra benefits and features. Some, depending on the policy, are baked in and include all of these benefits while others don’t have them included. This is something to pay close attention to when you are evaluating policies and getting quotes. In addition, because the definitions are not universal, some companies may define riders slightly differently than others.

Let’s break down some of the common ones you will probably see:

Own Occupation

What if you suffered from a disability that affected your critical thinking skills and prevented you from working as a pharmacist, but you could still work in another profession likely at a lower pay? Unless you have a true own occupation rider, you may not get the full benefit or possibly no benefit at all.

This is one of the major distinctions between many workplace offerings and what you can get on your own. Some policies offer own occupation coverage but only for a couple of years. After that point, if you can perform other work, your benefits may cease. This is probably the most important feature you want in a policy and want it to be in force for the whole term of the policy.

Non-cancelable

This rider prevents your insurance company from canceling the policy (unless you aren’t paying your premiums). With a non-cancelable plan, you have the right to renew the policy every year without any increases in the premium or reduction in benefits.

Guaranteed Renewable

Having this in place means that the insurer is obligated to continue providing coverage unchanged as long as the premiums are paid. However, unlike the non-cancelable rider, premiums could go up over time.

Future Purchase Option

You can buy more coverage in the future if your income goes up with this rider. Remember, disability insurance is paid out as a percentage of your income, so you would want this to be increased as your income goes up, unless your expenses stay the same and inflation is non-existent. This rider is also known as benefit increase and may be particularly important when your income is lower initially such as during residency.

Cost of Living

Often referred to as COLA (cost of living adjustment), this rider helps protect your benefits to be protected against inflation over time. The key thing to remember here is that the adjustment for any cost of living does not begin until the disability occurs.

Partial Disability or Residual Benefit

If you become disabled, you may not be able to work full-time or your usual hours, but maybe you can still work part-time. Many policies have this rider in place so that if you experience any reduction in pay because of a disability, you can get a percentage of your benefits.

Waiver of Premium

In the event you become disabled and you start to receive benefits, who would want to continue paying for the policy during that time? That is exactly what this rider does. It eliminates the need to continue paying premiums during the period you are receiving benefits.

Student Loan Rider

This allows you to purchase additional coverage to pay student loan balances while on the claim. Remember, this won’t be necessary if you have federal loans as they will be discharged in the event of permanent disability. Where this could be a consideration is if you are with a student loan lender that does not offer this protection.

Is your head spinning yet after all this jargon? Believe it or not, there are even more options and features that exist that I didn’t even get into! Again, because some companies bake some of these riders into policies and others require you to pay an additional amount in premiums, you have to look at everything when trying to compare multiple quotes.

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How Much Will it Cost?

Remember how I said disability insurance wasn’t cheap? As you can tell by the estimated monthly premiums in the chart below, I wasn’t lying. If you are a female who graduates as a pharmacist at a traditional age of 25 and is relatively healthy, you can expect to pay about $2,112 per year assuming you want a benefit of 60% of your gross income with the additional features mentioned.

You can see that premiums for women are much higher than they are for men. Sorry ladies! This is because companies set their rates based on their claims experience and they have found that they are more likely to pay for claims for their women policyholders.

disability insurance for pharmacists, long term disability insurance quote

So what can you do to cut down these costs? As mentioned there are a lot of features you can add or leave off and obviously, the fewer add ons the less you will potentially have to pay. Another thing to consider is maybe you don’t need a benefit of 60% of your income. Your lifestyle may not require that much and perhaps you could live just fine off 40%.

Remember, you can also extend the elimination period and make annual payments to also help cope with the costs. Also, if your employer offers some benefits, you might consider this as well when determining your needs.

The other thing to consider is that if you are not in the best shape and are overweight or have uncontrolled hypertension, becoming healthier prior to submitting your application could also be to your benefit.

I know this can seem like very expensive insurance to have in place and you may not feel like you can afford it. But can you really afford to not have it? Are you willing to take the gamble? Remember, if anything happens to you, how are you going to pay your bills and potentially support those who depend on your income?

What if My Employer Offers Long-Term Disability Insurance?

As I mentioned a few times, it is possible you have some form of this benefit through your job. Besides the coverage amount, benefit duration, and whether they offer true own occupation coverage, one of the biggest things to consider is the portability of the policy. If you were to leave to take another job, would the policy go with you? Remember, if you are in excellent health and leave your job after 5 years, your new employer may not offer it and you could be paying a lot more in premiums simply because of your age.

That’s the major advantage of an individual long-term disability insurance policy. It doesn’t matter where you work or if you change jobs because it follows you and you don’t have to get another evaluation of your health status.

disability insurance for pharmacists

How Do You Purchase?

There are many reputable companies out there that offer quality coverage with the features I talked about. However, it can take a lot of time and energy to get multiple quotes and your phone could be ringing off the hook with offers and reps trying to get your info. That’s why Your Financial Pharmacist has partnered with Policygenius, an online independent broker that helps you get a long-term disability insurance quote from multiple companies for the coverage that’s right for you.

They have a very user-friendly interface and their team helps you through the entire process. You can even get an estimate without entering any of your personal information.

Check out the video below where I walk you through their interface and how quickly you can get an estimate.

 

Conclusion

Unless you already have substantial wealth or are very close to retirement, long-term disability insurance should be an important part of your financial plan. Although it can be pretty expensive, remember all of the time and effort it took to get to where you are today. In addition, if you are married, have a significant other, or have children, you have to consider how they are affected by your ability to earn an income. No one is invincible and there are so many things that can happen that you can’t predict. Using an online broker such as Policygenius allows you to get multiple quotes from reputable companies and can save you time through the entire process.

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YFP 114: Presidential Candidates’ Plans for Student Loan Forgiveness

Posted on by yfpadmin


Presidential Candidates’ Plans for Student Loan Forgiveness

On this episode, Tim Ulbrich and Richard Waithe, the creator of RxRadio, talk through the student loan forgiveness plans proposed by Senators Bernie Sanders and Elizabeth Warren, two of the 2020 presidential candidates. Tim and Richard discuss the details of who would and would not receive forgiveness under these plans and how they would be funded if enacted. They also discuss current loan forgiveness plans that are already in place and options that are available for those that need to delay loan payments due to a financial hardship such as a job loss or reduction in hours.

This episode originally aired in July 2019 on the RxRadio Podcast. You can learn more about RxRadio by visiting rxradio.fm.

About Today’s Guest

Richard Waithe, PharmD, is passionate about patient engagement and advancements in technology that improve adherence and health literacy to ultimately improve outcomes. With years of experience on the front lines in community Pharmacy, Richard is committed to helping individuals better manage their health and medications.

He is currently the President of VUCA Health, a company that has the largest library of medication education videos that serves to enhance patient engagement and provide an on-demand extension of pharmacists and other healthcare providers. He is also the host of the Rx Radio podcast where he interviews Pharmacists practicing in a vast variety of fields and discusses the future of our profession. Richard is the author of the book First Time Pharmacist: Everything you didn’t learn in school or on-the-job training.

Summary

This week’s episode is a simulcast release of a RxRadio episode. Tim Ulbrich joined Richard Waithe on the RxRadio Podcast to discuss Bernie Sanders and Elizabeth Warren’s proposals to cancel student loan debt.

Tim first dives into Bernie Sanders’ proposal, which is part of a more comprehensive college for all program and includes free tuition for public and private schools, the most ambitious plan yet. Bernie’s proposal is available to 45 million student loan borrowers, can be used for both federal and private loans, and has no eligibility differentiation as Warren’s does. Bernie is also proposing that interest rates should be capped at 2%. This debt cancellation will be funded by a Financial Transaction Tax which adds a .5% tax on stock trades.

Elizabeth Warren also has proposed a plan to cancel student loan debt, however, hers carries a few restrictions. This plan would cancel debt for about 95% of student loan borrowers. It would cancel $50,000 of student loan debt for households making $100,000 or less. The proposal offers phase out provisions: for households making $100,000-$200,000, borrowers can receive $1 forgiveness for every $3 of income. For example, if the household income is $130,000, $40,000 would be cancelled; if the household income is $160,000, $30,000 would be cancelled; and if the household income is $250,000, you would be excluded from receiving any student loan debt cancellation.

If these candidates aren’t elected or these proposals or similar ones don’t go through, there are forgiveness options that are available now. The first option is to pursue PSLF (Public Service Loan Forgiveness) which 25% of pharmacy graduates qualify for. To obtain PSLF forgiveness, you must work for a qualifying employer, have a qualifying plan, work full-time, and make 120 payments over 10 years. If you fulfill all of the requirements, your remaining loan amount will be forgiven tax free.

Non-PSLF is also an option for forgiveness. With this program, the borrower can work anywhere and makes payments over 20-25 years. However, the forgiven amount will be taxable and can be a hefty bill that you have to plan for. This program is best suited for those with a high debt to income ratio. Lastly, there are several state and federal forgiveness plans that you could qualify for.

So, if these proposals go through, what do you do with the extra money? Tim suggests that you first need to articulate your financial goals and prioritize them. First, you should focus on building up your emergency fund and paying off credit card debt. Then, you can focus on putting money toward retirement savings, home savings, college, vacations, etc.

Mentioned on the Show

Episode Transcript

Richard Waithe: Tim, how’s it going?

Tim Ulbrich: Good, doing well. Thanks, Richard, for having me on the show. I love what you’re doing over at RxRadio.

Richard Waithe: I appreciate the kind words. I am excited to have you on because one, I’ve heard obviously great things about you from Your Financial Pharmacist that we had on here. So we heard a little bit about your background, but we’ll hear a little bit again that part from you as to like how things got started, but just to give a little preface to what the episode today is going to be like, the news with the presidential candidates and their debt cancellations, I immediately thought about what your organization, Your Financial Pharmacist, and how things like this could potentially impact people’s financial plans. So you guys immediately came to mind, so I want to chop it up with you to dive into it, get some ideas, get some exact facts as to what it is that’s going on. But before we do that, if you could just start off by telling the listeners a little bit about yourself.

Tim Ulbrich: Absolutely, Richard. Yeah, great topic, excited to jump in the conversation. So I graduated with my PharmD from Ohio Northern University in 2008, did my community residency also alongside academia at The Ohio State University in 2009, and then for about 10 years, I was up in Northeast Ohio Medical University in the Akron-Cleveland area in various roles, patient care, service development, ambulatory care, community care, did some administrative work in admissions and student affairs and really developed a passion for professional development and helping students identify their career path and to really help empower them along that path. And that really intersected nicely for me with the financial piece, which really came to be in 2015 with the beginnings of Your Financial Pharmacist. But I started, and of course I know you had an opportunity to interview Tim, and we also have another Tim, hopefully no more Tims in the mix after three.

Richard Waithe: That should be in the rules.

Tim Ulbrich: Yeah, right? But I went through a journey of paying off a couple hundred thousand dollars of debt. Obviously, I’m being casual about that just for the sake of brevity so we can get into the discussion, and really felt like I lived a little bit on an island while going through that journey and didn’t really hear many pharmacists talking about this topic, talking about issues like we’re going to talk about right here tonight. And so I reached out to 100 of my closest colleagues and friends, said, “Hey, I’m thinking about starting a blog around personal finance and pharmacy. What do you think?” And the responses I got to that were really overwhelming and I think incredible for me to hear, OK, others are interested in this. It’s not just for financial nerds, and many people in pharmacy are feeling some of the pressures and pains around personal finance, especially those making the transition from student to new practitioner. So that began Your Financial Pharmacist, which started as a blog. We then launched the podcast the summer of 2017, we just crossed our 100th episode. And we’ve got comprehensive financial planning, lots of resources and tools, all designed to help the pharmacy professional on their path towards achieving financial freedom, which obviously student loans is a big, big part of that. So I think this conversation is timely. And now currently, just this past fall, I transitioned back to Ohio State University, and I direct the Masters and Health Systems Pharmacy Administration. So again, a lot of intersection between professional development. I really see personal finance being a big piece of professional development, and I’m excited that we as a profession are starting to embrace that personal finance is a topic that I think many, most, agree that we need to be addressing as a part of one’s professional development.

Richard Waithe: Yeah. So I think this is a prime example of, you know, find a passion, start creating content around it, and then all of a sudden it could potentially become either a business or a side hustle. So you’re a great example of that. Also before we jump into everything, you mentioned that you’re part of the Masters program at Ohio State now. Can you maybe shed some light on the topic of maybe what a pharmacist can benefit from going through a program like that? Because I get that question a lot, I see it a lot, like should I do this Masters? Should I do x, y, z that’s extra? An extra degree? Which a lot of times, I think it’s not an easy answer. Sometimes, I’ll discourage it depending on what their motives are. Sometimes, I’ll say it’s a great idea. Can you shed some light as to why that might be a good or bad idea for that particular program?

Tim Ulbrich: Yeah, absolutely. And I think you nailed one of the key questions that your listeners need to ask themselves or if they’re advising others is what’s the motive? What’s the reason? Because with any Masters program, whether it be a program like I direct at Ohio State, which is simply a Masters around Health Systems Pharmacy Administration, so really gearing people to be in an administrative roles in health system pharmacy. So this could be Director of Pharmacy, Chief Pharmacy Officer, Operations Manager, all types of roles that one could be depending on the type of program that they’re going to engage in. But whether it’s a health systems pharmacy administration Masters, whether it’s a PhD, an MBA, an MHA, an MPh, so many students I would advise, I often felt like they were enamored with the degree but really couldn’t connect it to why they wanted the degree and how that helped them along their career path. So I always encourage people, take a step back regardless of the program and really have some good, deep conversations and self-reflection about what’s the path — and it may not be crystal clear, but what are the things that I really identify with? What are the things that energize me, that I want to do more of regardless of how much time I spend? And what are the things that exhaust me, and how can I better align my career and my job towards those things that really give you energy? And if a Masters degree or if a residency or if a PhD, whatever be the case, helps you get there and you can specifically put an ROI on that path, then I think that that is worthwhile to consider. But I think for many people, that may not necessarily be the case. And so for specifically our program — and your question’s actually a timely one because right now and historically, our program at Ohio State has been around since 1959 and almost entirely for that time has been paired with a two years of residency and a Masters degree that are happening simultaneously. And we just now are getting ready to convert that program to an online offering, which is going to open that up for working professionals, and so the way I always describe is if somebody’s out there in the workforce, typically is working full-time, maybe they didn’t complete residency training, maybe they only did a PGY1, have interest in administrative roles, or maybe their leadership has identified them as an emerging leader, often they may want them to enroll in a program like this to help fast-track their skill set around things like operations and inventory management and supply chain and patient safety, leadership, entrepreneurship, all these types of skills that certainly with enough years of experience, you can get. But typically, in the inpatient health system setting, the leaderhsip will often identify people and say, OK, we really want them to go into this program so they can evolve to the next role that will be along their career path.

Richard Waithe: Got you. Great, great. Well that’s a lot of insight for the listeners. I really appreciate that.

Tim Ulbrich: Yeah.

Richard Waithe: OK, let’s jump into it here. So I’m also going to start off by saying that we’re going to discuss some ideas that are presented by political candidates, either maybe if you’re listening to this, maybe affiliated with your particular views or not, but we are talking about this solely to present the facts and present what the ideas are that are being presented around cancelling student debt. Neither one of us, both individually or our organizations, are taking a side with what we think is a good idea or not with some of the policies that are presented by these candidates. So I want to give that disclaimer here that no matter how you hear us describing a potential idea, it’s solely to give information about it and/or play devil’s advocate to get both sides or to get a better understanding as to how this could work. So now that we’ve gotten that disclaimer out of the way, let’s jump in by talking about Bernie Sanders’ plan that was recently announced. If you can just give us some background on that.

Tim Ulbrich: Yeah, absolutely. And before we jump into Bernie’s plan, Richard, if I could even build on what you said there because I think you articulated it really well, I also just encourage your listeners that these proposals, you know, we’re really far away from these potentially being implemented, and so I think it’s good to think and reflect on them for your own personal financial situation. But we still have current status, and we’ll talk about some current forgiveness plans and other things that are actually in place right now. So I think as you hear these, I don’t want to encourage our listeners to run and begin to make decisions on their own personal financial situation until some of these either go into place as they’re currently proposed, maybe they don’t happen at all, or they get modified to some degree. So Bernie’s plan — and I think that’s a good one to start because it’s probably the easiest to understand. So here we’re referring to Bernie Sanders’ plan, just announced last week, and it’s really a part of a more comprehensive, college-for-all program. So a common theme you’ve been hearing amongst some of the candidates is free tuition for public universities and community college, and so this plan around loan forgiveness for Bernie Sanders is a part of that more comprehensive, college-for-all program. And this is really the most ambitious plan yet that we’ve seen that’s trying to address what many of your listeners I’m sure have heard of is the $1.4 trillion student loan debt probelm in our nation. And we could debate all night long about how we’ve gotten there, but I think the better part is what does this plan address? And really, what it says it’s available to all of the nation’s almost 45 million student loan borrowers for both federal student loans and private student loans, and there’s no eligibility criteria included to be forgiven. And that’s going to be an important distinction when we talk in a little bit about Elizabeth Warren’s plan. So here, it doesn’t matter if you make $250,000 or you make $45,000, it doesn’t matter if you have $200,000 in debt or you have $20,000 debt, everyone is included. There are no specific eligibility criteria when it comes to Bernie Sanders’ plan.

Richard Waithe: Now, did they — I’m not sure if you might have seen this, but the way that you described it was as this is one plan, we’re in this one plan, we’re going to get free college, whatever, and we’re also going to get this great student loan forgiveness plan, whatever. Is there a chance that that’s potential exclusive, or was it clear in kind of what you see in that this is going to be one package and like one bill, let’s say?

Tim Ulbrich: Yeah, that’s a great question. And I think your question really gets to the point that when we’re seeing plans like this, and think about any previous presidential election, really reflect back on some major policy issues that came forward and how many of them got implemented as they were presented as a policy issue during a primary. How did that change when you actually got into the general election and you narrowed down the pool? And then once somebody is in office, what did that actually look like when it got implemented? So I don’t know, I think that will ultimately go forward in terms of how does this conversation shape? And I think that will be in part based on the reaction of the votership here in the country. As they get some receptiveness on this issue, will it be packaged as it’s currently presented in terms of a broader bill or however it gets included in terms of free tuition? And another part of this too, Richard, which I think is worth noting, is that often, people will say, well, this is great, but it doesn’t really address, what about in the future when somebody goes for a private school and they wrack up debt? We still have very interest rates, well above what you can buy a home for. So if you look at what our current pharmacy students are borrowing for their federal loans, you know, many students now are looking at interest rates at 6-8%. And what you can buy a home for on a 30-year mortgage is now down I think in the high 3’s. It’s a very stark difference, and a lot of people ask, why is it so expensive in terms of interest rates on loans? And so what Bernie is also proposing is that the student loan interest rates would be capped at just under 2%. So again, will this happen? How is it going to get funded? How will it be proposed? I think it’s all something to watch, but certainly this plan is the most ambitious, it’s the most comprehensive, there’s no exclusion criteria.

Richard Waithe: Yeah, I just hate when politics or politicians are presenting a bill or they’re voting on a bill, but that one bill has like 10 different things in it. And some of them don’t even relate to each other. And then it’s like, it didn’t go through because line item 7 was not great, you know? So I don’t know, hopefully it can be something that the American people can look at individually and make a decision on instead of forcing it to be one whole package. But alright, let’s just say things are going well, he decides he wants to implement this. Bernie Sanders decides to implement this for him, things are going well, and it seems like his plan is about to come to fruition. How would he actually pay for it?

Tim Ulbrich: Yeah, this is the million-dollar question, right? Whether it’s Bernie Sanders’ plan, Elizabeth Warren’s plan, or even a modified version of either one of these is that you can’t just erase debt. Obviously when you look at student loans and interest, ultimately, that’s a revenue stream for the federal government, so what Bernie Sanders is essentially proposing here is what’s referred to as a Financial Transaction Tax, or an FTT. And it’s really just a fancy way to say that there would be a small tax — I guess small depending on how you define it and how you view taxes — that would be about a .5% tax on stock trades. So if you were to buy $100 worth of stock, essentially you would get a $.50 charge. Now, it’s interesting because as I read that, you know, Richard, I started to think about well, why go after investments? Why go after stock? And what will be included, what will not be included in terms of this tax? And I also started to think that if you think about the individuals that are often buying high amounts of stock, especially outside of retirement accounts, I have to believe they’re going to find other ways to divert having to pay taxes such as this, such as oh, maybe I’ll put more of my money into real estate or I’ll do other types of investments. So again, it’s good to think about this question. How will it be paid for? And looking at the status quo of how people purchase stocks, guesstimation through this plan is that the Financial Transaction Tax, which would be a .5% tax on stock trades, would essentially cover the cost for the loan forgiveness provisions.

Richard Waithe: That’s interesting. I haven’t really heard of a lot of plans that targeted that specifically. I know they’ve talked about increasing corporate taxes and taxes on when you actually make a profit off of the stock trade, but this is really a little different. But any other additional information around Bernie’s plan before we move onto Warren’s plan?

Tim Ulbrich: Yeah, I think a comment I would just make here I think is a good one. And we can come back to this after we talk about Elizabeth Warren’s plan, but I think there’s some just really interesting issues that when we talk about loan forgiveness, it really presents a much broader conversation around why is college the cost that it is? Why are the interest rates the way that it is? How much of the borrowing is related to tuition, and why is tuition creeping up at a rate that is outpacing inflation by a significant amount? And how much of the borrowing is due to cost of living? And how do we teach more about personal finance? So this very much feels — when you and I talked about this leading up to — and you emailed me about the opportunity to do this, it almost feels like you’re peeling back the layers of an onion. And so what I hope we can do here is just start to begin a conversation among your listeners, among our community, that this — when you talk about student loans and you talk about loan forgiveness, you talk about student loan debt and broader just debt in general, it’s never one issue, in my opinion, that’s really just going to solve the problem, right? You have to holistically look at many of these variable, which starts to then get into some very interesting discussions around socioeconomic status and how do we teach things and all types of variables that I’m hopeful your listeners while they here these plans start to think of some of those broaders aspects as well.

Richard Waithe: Yeah, that makes a lot of sense. Alright, so let’s move onto Warren’s plan. What is her plan? Give us some details, some basics around that. And then we can see how it compares to what Bernie’s plan was.

Tim Ulbrich: Yeah, think about Elizabeth Warren’s plan potentially as a scaled-back version of Elizabeth Warren’s (sic) plan. So instead of saying that there’s no eligibility criteria, it’s open to everyone regardless of income limits, regardless of debt loads, essentially, Elizabeth Warren’s plan puts some more restrictions around forgiveness provisions so that it would cancel student loan debt for approximately 95% of borrowers, so not 100% of borrowers. And it’s estimated — from their estimations — that it would cancel student loan debt in its entirety for a large portion of those because of how they have the caps on both the indebtedness as well as the income. So let me explain the restrictions here for a minute. Again, Bernie’s plan says no eligibility criteria. Elizabeth Warren’s plan says that we will cancel $50,000 in student loan debt for every person with a household income of under $100,000. So let me say that again. It would cancel $50,000 in student loan debt for every person that has a household income under $100,000. So hopefully, your listeners are thinking, OK, well, $50,000 in debt, we know the average indebtedness of a pharmacy graduate today is about $160,000. And when you say household income under $100,000, we know the average income of a pharmacist, while it’s changing, is above or close to that threshold of $100,000. So would this even be applicable for pharmacists? And the answer is yes, maybe. So the question then is what about this group that makes more than $100,000? And essentially what they have is some phase-out provisions. So it would provide for those making between $100,000-250,000 of household income — so that’s an important variable to keep in mind — that you would have some forgiveness, but it wouldn’t be to the full amount of the $50,000. So the $50,000 in cancellation, which is the maximum amount under Warrens’ plan, phases out by $1 for every $3 in income above $100,000. So for example, Richard, if you made $130,000, instead of getting $50,000 of forgiveness, because of that phase-out, you would get $40,000 in cancellation. And if somebody had a household income of $160,000, instead of $50,000 of maximum forgiveness, they would only get $30,000. So if you make under $100,000, you get the full $50,000 maximum amount forgiven. But if you make between $100,000-250,000, you get a lesser amount of that depending on how much you make. And then if you have a household income above $250,000, which could be the case if you have let’s say two pharmacists, a pharmacist-physician, a pharmacist-another high income in the household, you would be excluded altogether with no debt cancellation. So again, while we think in pharmacy, high debt loads, high income, if you really look at the general population of those that have student loan debt, I think the last average I saw was somewhere around the mid-$30,000s, and obviously we know the median household income in the country is about $55,000-57,000, so the vast majority — while it may not be the case for pharmacists — the vast majority would have $50,000 or close to that that would be forgiven as the maximum in this situation.

Richard Waithe: And you know, it’s important to note that while a pharmacist might not see 100% cancellation as another individual, it’s still helpful. I mean, even $30,000 off of my loan would be helpful, especially if it gets accompanied by some cut of an interest rate. I think that’s a huge deal, which I’m not sure if she proposed that in the plan or not, but —

Tim Ulbrich: I didn’t see that with hers. She may have as well. But I think it’s also important to note that both of these also mention private student loans being eligible for cancellation. And I think that’s something really interesting to watch because you think of all the pharmacists who, rightfully so, for better interest rates, they weren’t pursuing loan forgiveness, they refinanced, they had significant savings, how might this impact them if these plans go into place? So while that sounds really good, I just think that tracking that and trying to identify that, and now you’re getting into the private sector when you’re dealing with those companies, will something like that really become a reality? Or will it stay in the federal system? But right now, both of these plans as is do mention private student loan debt cancellation as well.

Richard Waithe: And along some of these lines, what about bankruptcy? Has any of them talked about — because I think a student loan is one of the only type of debt in the nation that you cannot declare bankruptcy on. Have you seen anything around that? Or potential ways that that come to fruition as this problem just starts to grow?

Tim Ulbrich: Yeah, I haven’t yet. I think that’s a really good point. I mean, there’s stories now that are floating around of paychecks that are being garnished wages and other things in terms of how they’re going after these student loan types of debts that are outstanding, and I think when you look at this number — and I think in pharmacy, to your point, Richard, especially as we see there are people that maybe can’t find employment or do so at a much lesser value, if they have $300,000-400,000 of debt, which certainly are stories that we have heard, those types of situations I think certainly could come to be. One of the things we can come back to, though, is there’s strategies that those individuals should be thinking about, such as income-driven repayment plans that would allow you to eventually pursue, even over a long period of time, forgiveness, and it would adjust up as your income would go up. So I think it’s a good question. I have seen a couple crazy stories of people fleeing the country, which is really sad.

Richard Waithe: Oh, wow. That’s crazy.

Tim Ulbrich: But I want people to hear there’s options. And we can come back and talk more about this, whether it’s deferment, forbearance, seeking out an income-driven repayment plan, working with your lender to really — just like you would on an outstanding credit card payment — trying to do whatever you can to establish a payment plan. Really, you want to do anything that you can do to make sure that you don’t go into default or any situation that would have a negative impact on your credit.

Richard Waithe: Makes a lot of sense. Alright, so let’s just say none of these go through, and we’re stuck with kind of what we have now. And what is it now that’s available for programs for pharmacists or, I would say any student, I guess, that is part of a loan forgiveness program.

Tim Ulbrich: Yeah, the most common current situation we’re in — which obviously there’s lots of debate about this and whether it would stay, and I think that will be a big part of the conversation when Bernie’s and Elizabeth’s and other plans come forward — we talk a lot about on our podcast and our website, we’ve got lots of resources around Public Service Loan Forgiveness, also known as PSLF. So in my estimation, about 20-25% of all pharmacy graduates qualify for Public Service Loan Forgiveness. Now, that doesn’t mean that it’s the right decision for them. There’s lot of options that are out there, it’s very much an individual situation, but it does impact a big percentage of pharmacy graduates. And essentially what Public Service Loan Forgiveness says is that if you work for a qualifying employer, which is most commonly going to be a not-for-profit employer, so for those that are in hospital, inpatient, health system, underserved types of settings, government work, if you’re working for a government entity or a not-for-profit institution, if you make payments under a qualifying repayment plan, which is typically an income-driven repayment plan that people are going to be looking at, if you’re working full-time, and if you make 120 payments — they don’t have to be consecutive, but 10 years worth of payments — when it’s all said and done, you essentially would have any remaining balance that’s forgiven, it would be forgiven tax-free. So for pharmacists that are especially facing a high debt-to-income ratio, so let’s say somebody listening has $200,000 in debt and they’re making $100,000 a year, if they’re working for a nonprofit, depending on their personal situation, it’s usually at least worth evaluating among other options. And of course, you have to consider the variable of how do I feel about the debt? And am I OK with some of the unknowns around Public Service Loan Forgiveness? And we talk a lot about this issue exactly on Episode 078 of the Your Financial Pharmacist podcast if any of your listeners want to hear some more discussion we have on that. So Public Service Loan Forgiveness is a great option that you should at least be evaluating if you work in the public, not-for-profit, government sector. And then, Richard, a lot of people don’t actually know that there’s also a non-Public Service Loan Forgiveness option that’s out there through the federal government as well. So whereas with Public Service Loan Forgiveness, or PSLF, you have to work for a qualifying employer, with non-PSLF, it doesn’t matter who you work for. So it doesn’t have to be a not-for-profit; you can work for Walgreens, CVS, Rite-Aid, whomever, a for-profit hospital, but the kicker is instead of 10 years, you’re looking at 20-25 years. And instead of tax-free forgiveness, you’re ultimately going to have an income tax bill on the amount that’s forgiven. So some more planning and logistics you have to think about, but there’s a very small percentage of people in our estimation and research, those that are in the for-profit sector of work that have a very high debt-to-income ratio, they may consider non-PSLF, especially if they can’t afford their monthly payments for whatever reason. And so those are the current options. The other one, there are some state forgiveness plans. I just read an article recently in the Wall Street Journal about more state forgiveness plans that are popping up, so I would encourage your listeners to check out state information. And then obviously, there’s some of the military plans. And I’ve seen some unique programs around, for example, those that work in underserved settings that address some of the opioid issues, there’s some forgiveness plan types of things out there. And I want to reference your listeners to — credit here to Tim Church, who wrote a very comprehensive, great blog post that helps people evaluate all the different repayment options that are out there. Not to say this is the right one or this is the right one but to look at all the options, look at your personal situation, and then try to navigate it and work through which of those may be best. And that’s over at YourFinancialPharmacist.com/ultimate.

Richard Waithe: And I’ll definitely link that up in the show notes as well to make it easier if anyone wants to just look in the show notes to get links to everything that Tim has just mentioned. Quick question about the non- or the for-profit forgiveness plan. What qualifications are in play there, if any?

Tim Ulbrich: Yeah, not really. I mean, you have to still use one of the income-based repayment plans, which is what you’d want to do anyways because the goal would be to minimize payments, maximize forgiveness. The biggest things, as I mentioned, is that when it’s all said and done, you’re going to have an income tax bill that you’re going to have to plan for. So it requires some work, in my opinion, working with an accountant to do some projections, running some numbers, but the way that would work is let’s say you’re federal income tax is right at 20% 20 years from now. If you’ve got $100,000 left over, essentially that year when you go to file your taxes, it’s going to treat that amount that’s forgiven, in that case $100,000, as taxable income. So you’d have — depending on the rest of your financial situation — an additional tax bill to pay because if you make $100,000 that year, and you have $100,000 that’s forgiven, the IRS that year is going to look at it as if you made $200,000. But all along, you probably were only paying that year and having withholdings based on your $100,000 income. So there’s some more planning. And it really takes, in my opinion, somebody to have a very high debt-to-income ratio that’s really in a hardship. Maybe they have a lower income situation that they’re struggling to make payments. And I think you also have to especially here look at the math side-by-side with can you really kind of ride this out for 20-25 years? I mean, I know I felt after two, three, four years like I’ve got to get these things off my back. But certainly there are some people I think that very much can have the mindset of, hey, I’m going to let this ride, I’m going to treat it like a mortgage, and it’s part of the plan. And they’re methodical in how they approach that.

Richard Waithe: So like a lifestyle tax almost.

Tim Ulbrich: Yeah, that’s right.

Richard Waithe: That’s what I like to call it, make it justify that a little bit.

Tim Ulbrich: Yeah.

Richard Waithe: So let’s get into a little bit of hypotheticals here. I mean, and this is actually real for some people that actually pay off their loans eventually. But let’s just say that some of these plans were to come into place, and some pharmacists were in a position where maybe from one day to the next, obviously this could take years to come into play, but let’s just say from one day to the next, they all of a sudden don’t have that extra $500-1,500 loan payment per month. What would you advise that they do instead of just living off a fancier lifestyle? Or maybe they should live a fancier lifestyle. But what would you advise that they would do with that extra specific amount of money?

Tim Ulbrich: Yeah, now this is a fun question, right? You know, what to do with extra cash each and every month. And this was real for my wife Jess and I. When we went through our journey, we were paying off aggressively as we were getting toward the end, about $2,500 a month toward our student loan on top of the payment. So all of a sudden, you get to $0 payment, and then it’s a conversation of hey, what are we going to now do with this money we’ve been allocating toward our student loans each and every month? That is a fun, motivating conversation to have. So we talk all the time on the podcast and on our blog and when we’re speaking about this is a great example of why it is so important to articulate and write down your financial goals and prioritize those goals because whether it’s at some point, you have your loans forgiven, whether you get a raise, whether you’re able to cut your expenses, whether you get an unexpected inheritance, who knows whatever be the case, when you run into a situation like this where you’ve got extra cash, you know exactly where you’re going to put that money. So you’re essentially putting around some guardrails that yes, we should always enjoy the achievement and balance the achievement of financial goals with enjoying life along the way, right? If we’re always squirreling money away for 30 or 40 years, it’s kind of like, what’s the point? But by having that prioritized list of goals, you’re essentially putting some guardrails around avoiding lifestyle creep and letting that happen. So if somebody were to find themselves in this situation, and they didn’t yet have an emergency fund, or if they had credit card debt, those are the two things that I always focus on first. And here, I’m of course making generalizations without knowing each and every person’s individual financial plan. So Tim Baker, our certified financial planner, refers those two steps as “baby-stepping” into your financial plan: having a fully funded emergency fund and having high interest rate credit card debt paid off. So those would be the two places. And then from there, you would begin to think about what other goals are going on and what’s the personal situation, what does that all involve? So where are you at with retirement savings and investing based on the goals that you have set and how much you’ll need at retirement? When do you want to retire? How much do you need? All those types of variables. Is a home in the mix? Do you already have one? If not, how much do you want to buy? How much do you want to put down? Kids’ college, vacations, enjoyment, all these things get put into a list, and you begin to prioritize them so when you run into this situation, you can work down the list and you know exactly where you’re going to fund them along the way.

Richard Waithe: Yeah, that makes a lot of sense. We talk about fairytales, but who knows? This could happen, one, if you have a great plan financially with where your loans are going to be paid off soon, or we get lucky and one of these people or even just whoever decides to say, oh, we’re going to cancel all student debt and all of a sudden, you don’t have any more debt. One thing that does come to mind, though — and so we’re going to start getting into a little of talks that aren’t as positive as I like to keep things on the podcast, but one also downside about some of the plans that are being announced is people are upset because one, if this sort of plan does go through, we’re essentially making someone else pay for our decisions in life. And then two, what about the people that’s kind of busted their butts to try to pay off those loans and pay down all that debt that they were responsible for? And then all of a sudden, these people coming along after them don’t have to put in all that work that they did. So there’s definitely a lot of different perspectives and a lot of different things that people can either like or dislike about these particular plans. I don’t know if you have any thoughts you want to throw in there at all.

Tim Ulbrich: Yeah, I do. And actually, we had some discussion on the YFP Facebook page — it might have been in the group or the page, I’m not sure which off the top of my head — about this exactly. So I think we posted Bernie Sanders’ plan, it just got some discussion started, and there was really a range of comments to your point. I mean, there were some sentiments of, this is not fair to those that have worked so hard to pay off their loans or those that maybe their family saved for years to help them or they didn’t have to take on that debt or pursued scholarships. So I think there’s some of that or that aspect of personal responsibility or you know, all the lessons that you learn while you’re going through paying off student debt and does this really address kind of the core issues and problems around cost of higher education and personal finance literacy and education? And then I think there’s some of the opposite standpoint, probably more so from those that are currently struggling with debt repayment that would say to the previous question, this would really help me out in terms of I’m really struggling month-to-month or I’d love to be able to do A, B or C, and this would really help me be able to do that by taking some of the burden off my back. So I think this is a good discussion to just continue. And again, to my comment earlier, is that these discussions around loan forgiveness, in my opinion, need to happen at a much, much broader, more comprehensive discussion around all of the issues that we’ve been talking about because just looking at one of them, you know, one of our members in the page had mentioned that any student loan forgiveness program or free college plan really needs to be paired and coupled with a plan to decrease the cost of college because if those two things aren’t happening in tandem in terms of forgiveness as well as addressing the cost, we may not be getting to the true issue. I would even add on to that in terms of some of the other things, I think about my four young kids at home. At a very young age, they’re learning hopefully good but some bad habits from me as well around personal finance. So a lot of this starts in the home, it starts in the education system, and again, to my comments earlier, when you start talking about those types of issues, you know, when you deal with education and you deal with other variables, it can become very complex in terms of how we address them.

Richard Waithe: Yeah. So with the crazy news that happened recently — and while this is probably one of the larger pieces of these types of news we’ve heard in awhile, I mean this has been a trend that’s been going on for at least the last five or 10 years, with pharmacies closing, jobs, the market saturation is increasing, people being laid off, this was a little bit unique. WalMart allegedly — I don’t think this has been officially confirmed by WalMart, this is all I think where the Bloomberg reported that a person familiar with the editor said that it was 40% of senior pharmacists, which so let’s assume that’s true. That means that they’re trying to streamline wages, things like that, but let’s just say that there’s an individual that’s in a terrible situation like this where they get to a point where because they just potentially lost their job and their main stream of income, they can’t pay for a loan. What are their options there if they’re in that extreme position and they can’t for a loan? What happens? What are consequences? Give us some details on that.

Tim Ulbrich: Yeah, and I think this is a really, really important conversation because the news I had read related to WalMart is that it impacted senior pharmacists and I think there were some projections as well around new hires and part-time workers. And I think those may have very different implications around where somebody’s at in their debt repayment, other goals they’re achieving or not achieving, do they have credit card debt, do they not? So obviously, we know it can impact those people in a very different way. But the other reason I think it’s a really important conversation is we’ve had news here in central Ohio of pharmacists that has been, of course, known nationally around going from 40 hours to 32 hours, 32 becoming the new norm. So whether it’s WalMart or another company, whether somebody’s working full-time or gets cut to part-time or gets hours cut, whatever be the situation, I think we’re going to see more and more pharmacists that are in this question and situation of, hey, what can I do if I can’t make my student loan payment? And this really gets to the option around deferment or forbearance. And I think when we hear those words, we think, oh my gosh, stay away as far as you can, but the important point I want to make here with deferment or forbearance — and I’ll differentiate those here in a moment — is that both of those, while they may sound terrible in terms of an option to pursue, if you pursue them and you pursue them wisely with a plan in place, they will not have a negative impact on your credit. And so what we’re trying to avoid is default. Default is really worst-case scenario when it comes to student loans. So the options I’m thinking about is if I’m somebody who’s making aggressive student loan payments, and I find out that I’m getting cut part-time or maybe temporarily I’m in search for another job, I’m going to first see if I can switch to an income-driven repayment plan where I don’t have to go into deferment or forbearance, but I can adjust my payments because of course, that adjusts with income. So if I go from 40 to 32 or if I go from 40 to 20 or whatever be the case, hopefully that won’t be permanent, you can make a transition and get back on pace with the rest of your financial goals, including your student loans, but the whole point of income-driven repayment plans — and here we’re talking about things like PAYE, RePAYE, IBR, ICR — is that they adjust up and down as your income adjusts up and down. Now, that may sound really good, and obviously, as your payment goes down, as your income goes down, it most likely will mean that your interest is probably accruing faster than your monthly payment, so that has its own challenges. But you’re not altogether stopping payments, and I think that’s important not only actually making the financial momentum but also behaviorally, you still feel like you’re making momentum. Whereas with deferment or forbearance, you’re actually going to stop making payments. And these are options that are available to you specifically in the federal system. Now, when it comes to the private lenders, it depends on the lender, so you have to work with them individually. Many of them do not, but some of them will offer forbearance or deferment provisions. But essentially when it comes to your federal loans, whether it’s deferment or forbearance, the idea is that you are stopping making payments for a period of time. Now, the one advantage — if I had to say one of these is better than the other, the one advantage of deferment over forbearance is that if any of the listeners have certain types of loans, most notably these would be subsidized loans or Perkins loans, they would actually not have to pay the interest, or the interest would not accrue while you’re in the deferment period. So if somebody’s listening and they have subsidized loans, they have Perkins loans and they’re thinking about deferment or forbearance, for that reason, there probably would be an advantage around deferment. However, most pharmacy student loans, which is most of a graduate’s indebtedness today, they’re not going to have subsidized loans. Most of them are going to be unsubsidized. So in that stance, it’s really not going to matter in terms of the interest that’s saved. So if you can, Option 1 for me, Richard, would be pursue or try to pursue an income-driven repayment plan so you can continue to make payments for the reasons that I mentioned. If not, then I think it’s pursuing deferment or forbearance with the goal of trying to avoid defaulting on those loans.

Richard Waithe: So it sounds like the deferment in that one case is kind of like literally just hitting a pause button.

Tim Ulbrich: Yeah, if somebody only has subsidized loans or Perkins loans, they could essentially hit pause if they get approved. And there’s obviously some application and there’s time periods around these. But they would hit pause and for those subsidized or Perkins loans, they would essentially — that interest wouldn’t keep ticking. Whereas if you go into forbearance, and when it comes to your unsubsidized loans and your other loans, interest continues to accrue on all of those loans. So let’s say you go into a 10-month forbearance period, if you’ve $150,000 in debt and you’re at an average interest rate of 6%, you know, yes, you’re going to get through that hardship period by not having to make payments, but your student loan balance at the end of that 10-month period is going to be greater than what you started with because that interest is going to continue to accrue and continue to compound. So you want to use it wisely. I really look at it as an emergency situation to do anything you can to avoid defaulting. But better yet would be can you get in an income-driven repayment plan so you don’t have to utilize deferment or forbearance. But know that they’re there, and that’s really the intent, one of the intents is financial hardship if you need them for situations such as this.

Richard Waithe: So what are the differences between the forbearance and deferment?

Tim Ulbrich: Yeah, so besides the which loans may have the interest not accruing — so that’s really the biggest thing. So subsidized federal student loans and Perkins loans, the interest would not accrue during deferment. Whereas in forbearance, it doesn’t matter. Interest is accruing on all loans. So that’s really one of the biggest differences. The other difference is the length. So with deferment, the length, while it varies by deferment type, some last as long as three years while others will be available as long as you qualify. Whereas forbearance, it lasts for no more than 12 months at a time. You essentially would have to reapply through that process. So there’s some interest advantages to deferment if you have those certain types of loans. And then there’s the difference around the time period, but in both situations, it would have no negative impact on credit. So again, remember, these provisions are there for a reason. Income-driven repayment option I’d pursue first. Then, I’d pursue one of these second. And you can work with your loan servicer to evaluate these options further.

Richard Waithe: Now, does any one of these loan forgiveness programs affect — sorry. In terms of a hardship, where you need to postpone payments, does it potentially affect your ability to be a part of a program that’s involved in loan forgiveness?

Tim Ulbrich: It does now. So with Bernie and Elizabeth Warren’s plans, obviously the way they have those structured, it would take a lot of this out of play. But right now, with Public Service Loan Forgiveness, and even with non-Public Service Loan Forgiveness, there’s a — with PSLF, there’s one example. You have to make 120 qualifying payments. So if you’re in a forbearance or deferment period, those obviously don’t count as qualifying payments during that time because you’re not making a payment, right? However, keep in mind that with PSLF, those don’t have to be consecutive payments. So while it may extend your time, so if you’re off for a year of making payments, now maybe the 10 years becomes 11 years. It doesn’t disqualify you altogether from PSLF, but that one year or whatever the time period would be where you’re not making payments, those don’t count towards your 120 qualifying payments. So yes, it would have an impact.

Richard Waithe: Wow. So that’s really interesting.

Tim Ulbrich: Yeah.

Richard Waithe: That’s a lot of information.

Tim Ulbrich: It is. And these are great discussions. And you know, I’m happy, if your listeners have further questions, they can shoot us an email over at [email protected], and we’ve got lots of resources, I mentioned one, Episode 078 of the podcast. We’ve got, I think it’s Episode 018, we also talk about PSLF. We’ve got some other podcast resources. And then we’ve got the Facebook group and community really out there with the hope and goal that people are asking these types of questions and getting encouragement and getting those questions answered from others in the community.

Richard Waithe: Yeah, and I would highly encourage people to go in there, and whether you’re involved in some of these Facebook groups, whether you’re going to be actively talking about your stories, or whether you’re just seeing what other people are doing, and definitely checking out all the information on their website. It’s super helpful, and I think that we are undereducated on all of this stuff because I learned a bunch today even, and I’ve been out paying loans for five years now. So there’s always new stuff to learn, new things to learn around how we can better manage our finances and our student loans, so really appreciate all that. But before I kind of close out here, I do want to ask a completely random question.

Tim Ulbrich: Yeah.

Richard Waithe: If you had to take anyone out to dinner, and the person had to be famous, and they had to still be alive, who would that be and why?

Tim Ulbrich: Ooo. If I had to take anybody out to dinner, and they had to be famous, and they had to be alive. Wow. That’s a great question.

Richard Waithe: They should have a Wikipedia page. If I can’t find them on Wikipedia, I’m coming back at you. And you cannot use Donald Trump or Obama or any of the Obamas because they have been taken — or Jeff Bezos because that’s becoming a popular option. You can’t use any of those four.

Tim Ulbrich: Yeah, you know, first thing that came to mind was some dead people, but your question, before I answer it, is really timely because one of the things I think often about is the concept of legacy and really whether it’s somebody that’s served in a high leadership role, started their own company, served as a president, I’m really trying to figure out why people do what they do and what drives them in terms of leaving a legacy in what they do. So the first person that came to mind comes from one of the books that’s had probably the greatest influence on me in terms of my own personal financial journey and how I think about personal finance would be Robert Kiyosaki, who wrote “Rich Dad, Poor Dad.” You know, if you ask people about what’s the No. 1 and No. 2 financial book that’s impacted your life, you often hear that book. And I think it’s such a different way of thinking about money that once you read it, I think it really transforms the way you think about it. I know it has for me in terms of business, real estate, just how my wife and I manage our finances, and I’d love to be able to sit down and kind of pick his brain about some of the concepts around that book. So that was the first person that came to mind.

Richard Waithe: And that book — I’ve read that book as well, and it’s an easy read too.

Tim Ulbrich: Yeah.

Richard Waithe: Like it’s not as intimidating as some other books out there that are really famous and end up being like 1,000 pages long with real hard vocabulary. That was actually an easy read.

Tim Ulbrich: That’s great. It is. It is an easy read, and it’s one that I think you read more than once, you go back to, and you take something different from it when you read it a second or third time.

Richard Waithe: Yeah, great. Well Tim, thank you so much for all your insights. I really appreciate you being on the show.

Tim Ulbrich: Thanks, Richard, appreciate it.

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6 Situations When You Shouldn’t Pay Extra on Student Loans

Posted on by yfpadmin

The following post contains affiliate links through which Your Financial Pharmacist may receive compensation.

I love hearing stories about people crushing their student loan debt in record times and all of the crazy and incredible things they do to speed up the process.

For many pharmacists, it can make sense to get rid of student loans as fast as possible. This lowers the total amount of interest you pay and also frees up your budget to focus on your other goals. Beyond that, there can be an overwhelming sense of peace and freedom.

However, there are some situations where it doesn’t make sense to make extra payments or accelerate the process.

1. You don’t have an emergency fund

If you have typical pharmacist debt load, it will likely take you a number of years to pay them off even if you are being aggressive. During this time, life can happen.

Medical issues, car repairs, kids, and other life events can occur forcing you to come up with a lot of cash pretty quickly. Make sure you have a solid emergency fund in place before you get ultra-aggressive with your student loans.

2. You’re facing a crisis or major life event

Whether it’s a job loss, new baby on the way, or major illness, a number of things can occur with the potential to derail your financial game plan. If you’re faced with or expect something to happen that will require a lot of cash (exceeding your emergency fund), or anticipate a reduction in your income, temporarily putting extra student loan payments on hold and just saving it can be a good idea.

3. You’re seeking loan forgiveness

If you’re committed to the Public Service Loan Forgiveness (PSLF) program, making extra payments won’t make sense. The program requires you to make 120 qualified payments over 10 years and you can’t make the process go any faster. Therefore your ultimate goal is to pay the least amount as possible.

I know this can cause a little anxiety as your balance will actually grow over time due to interest as you make minimum payments. Plus, the news seems to be highlighting the thousands of people who are NOT receiving forgiveness for one reason or another. However, as long as you are following every step in the process, any balance will be forgiven tax free!

To do this you should choose an income-based repayment plan that results in the lowest payment (usually PAYE or REPAYE) and reduce your adjusted gross income.

The best way to minimize your total amount paid is to max out your traditional 401(k), 403(b), TSP contributions and HSA contributions if you have access to a high deductible health plan. You can read more about optimizing PSLF by checking out the ultimate guide to pay back your pharmacy school loans.

Remember, you can also receive loan forgiveness through the federal loan program after 20-25 years of income-driven repayments. This can be a good option for pharmacists who don’t qualify for PSLF and have a very high debt-to-income ratio.

The major difference is that you will have to be saving for the “tax bomb”as the amount forgiven will be considered taxable income. Even in the situation, it will not make sense to make extra payments on the loans.

4. You’re receiving tuition reimbursement/repayment

While not abundantly available, tuition repayment programs essentially provide “free” money typically from your employer or institution in exchange for working a certain period of time. Pretty awesome right?

Others will require you to pay an amount toward your loans and they will match or reimburse you up to a certain amount. The ones that tend to provide the most generous reimbursement are those offered by the federal government through the military, Veteran Health Administration, and the Department of Health.

These programs dictate the terms of the reimbursement and to get the maximum benefit, you will likely either need to make a set amount of payments in exchange for reimbursement such as the Veteran’s Health Affairs Education Debt Reduction Program (EDRP) or be employed for a specific term. Depending on the program, if you make extra payments you may not receive the full benefit of the program and could pay out more than you have to.

5. You have credit cards or other debt with high interest

From a purely mathematical standpoint, getting rid of debts with higher interest rates first makes sense. If you have credit card debt with 12% interest and student loans at 6%, you are going save money by paying off the credit card first. This is known as the debt avalanche method when you pay minimum payments on everything except the one with the highest interest rate.

6. You feel you can get a better return on your money somewhere else

Instead of paying extra on student loans, many people put that money toward retirement, small businesses, real estate or other investment with the rationale of making a better return. This is certainly a valid argument especially if you have a very low-interest rate on your loans like 2-3%. For example, if you have refinanced your loans with First Republic Bank, you can get a fixed interest as low as 1.95%.

With investments such as the stock or real estate market, there’s no guaranteed rate of return. You could actually lose money in that period. But you could also be incredibly successful like Dr. Carrie Calton who now has several income-producing rental properties which she started purchasing while she still had student loan debt.

Whether you choose to do this really comes down to how much risk you are willing to take on and your feelings about prolonging the time you are in debt.

Conclusion

Although paying extra on student loans and accelerating the time to being debt-free can seem like a great idea, there are some instances when that may not make the most sense. If you’re on track for loan forgiveness or receiving tuition reimbursement, make sure you are maximizing these programs to so you are paying the least amount possible.

If you’re not in any of these situations, then, by all means, knock out your loans ASAP. Besides cutting expenses and maximizing your income to throw more money each month at your loans, refinancing can also be a great option.

YFP has partnered with multiple student loan refinance companies in order to get you a nice cash bonus of up to $850 and sometimes more if there is a special promotion running. Yes, we get a referral fee when you refinance through our link, but we have shifted the majority of the payout to you.

Current Student Loan Refinance Offers

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YFP 113: Is Your Home an Asset or Liability?

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Is Your Home an Asset or Liability?

On this week’s episode, Tim Ulbrich welcomes Nate Hedrick, The Real Estate RPh back to the show to talk about the value of homeownership. Tim and Nate discuss whether or not the American dream of owning a house is for everyone, the true costs of home ownership, when to consider renting vs. buying and tips for knowing when might be the right time to purchase a house.

About Today’s Guest

Nate Hedrick is a 2013 graduate of Ohio Northern University. By day, he is a clinical pharmacist and program advisor for Medical Mutual. By night and weekend, he works with pharmacists to buy, sell, flip, or rent homes as a licensed real estate agent with Berkshire Hathaway in Cleveland, Ohio. He has helped dozens of pharmacists achieve their goal of owning a house and is the founder of www.RealEstateRPH.com, a real estate blog that covers everything from first-time home buying to real estate investing.

Summary

Is your home an asset or liability? Nate and Tim dive into this question on this week’s episode.

Nate explains that there is a lot of emotion in home ownership and that pharmacists often feel pressured to buy a home even if we’re not financially ready to do, especially after residency or school. He recalls comparing the cost of a mortgage and interest vs the amount of money he was paying in rent when he decided to purchase his first home. Unfortunately, there are many costs and factors that are associated with home ownership. Like anything in the personal finance world, you have to make a decision that’s best for you while weighing both the math and your feelings toward the decision.

So what is the true cost of home ownership? Nate explains that the biggest cost you’ll have is your mortgage, which includes the principle and interest payment. In addition to the mortgage, you’ll incur other monthly costs like property tax, HOA fees, and maintenance which can produce some large capital expenditures (think roof, boiler, etc).

Of course, there are also upfront costs when buying or selling a home, like agent fees which the seller usually pays and mortgage fees such as inspections, the cost of reviewing the title, closing costs. Perhaps you’ll also spend money on adding on a deck, putting up a fence or lawn maintenance.

Robert Kiyosaki, author of Rich Dad, Poor Dad, explains that an asset is anything that puts money into your pocket while a liability is anything that takes money out of it. Nate says that a home very rarely puts money into your pocket. While homes could appreciate over time, that doesn’t necessarily mean that you’ll make money on the house. With Kiyosaki’s definition in mind, Nate says that a home is generally not an asset.

Tim and Nate also discuss how to decide if renting or buying a home is better. Nate shares that you have to look at your personal finances to see if you’re able to take on a financial hit (like a large maintenance cost). If not, you should wait to purchase a home. If so, you then have to determine how long you might be at that property to see when you’ll break even. There are factors in determining when you’ll break even, like looking at the rental price and home values in the area and how they’ve changed over a few years.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I have a familiar voice back on the show this week, Nate Hedrick, also known as the Real Estate RPh. And here, we’re talking about this question of is your primary residence an asset? And we’re going to talk about buying a home, owning your own home versus renting, pros and cons, considerations, running the numbers. You’ve heard from Nate before on this show. We’ve had him on in Episode 040, where we talked about 10 Things Every Pharmacist Should Know About Home Buying, as well as Episode 064 and 065, Six Steps to Home Buying, Parts 1 and 2. So Nate, welcome back to the Your Financial Pharmacist podcast.

Nate Hedrick: Thanks, Tim, always nice to be here.

Tim Ulbrich: So two things I want to talk about first, before we jump into the recording. First is before we hit record today, you shared the good news that you and your wife Kristen are getting ready to close on your first rental investment property. So congratulations. Tell us a little bit more about what you’re working on there.

Nate Hedrick: Thanks, yeah, we’re really excited. I’ve helped a number of pharmacists get their own rental and investment properties, and it was time for me to pull the trigger. So I’d been looking for awhile, we finally found a house that the numbers worked on, and we got under contract just a couple of days ago now. And now we’re going through the process of inspections and all that good stuff. So hopefully that all goes well, and we’ll have that secured here by the end of the month.

Tim Ulbrich: That’s exciting. And Jess and I are going through a similar process, and you and I were talking before we hit record, we’re going to come back on in the future and kind of break down those experiences, we’ll talk about the numbers, we’ll talk about the good decisions we made, probably the stupid decisions we made that we don’t even know about yet, right?

Nate Hedrick: Exactly.

Tim Ulbrich: All with the goal of really hopefully encouraging and teaching, as we’ve done with other topics on the show before. The other thing I want to mention here is that we’ve been talking about this on social media, we’ve been talking about it on other platforms as well, but we’re excited to continue the collaboration with you to roll out the concierge service that you offer for pharmacists as a part of the YFP community, for those that are both buying or selling a home. Tell us a little bit more about what is that concierge service? What’s involved? And where people can go to learn more about that?

Nate Hedrick: Yeah, absolutely. So the concierge service is this thing that I’ve been doing for a little while from my own website, Real Estate RPh. And now we’re rolling it out to the entire YFP community. And the basic idea is that we’re looking out for pharmacists in terms of finding a local agent that knows what they’re doing. We want to be kind of on your team because if you really get into the process of buying or selling a home, as, again, I’m going through it right now myself, there’s a lot of steps, a lot of processes, and a lot of things to know. And having more people on your team can only be helpful. So what we really do is we get together with you and whoever’s going to be buying that home or selling that home, go through your budget, go through some background about why you’re making the move or whatnot. And we come up with a plan, and then we find you a local agent. And all of these agents have been personally vetted by myself, they’re a part of a growing network I’m creating, and we find that local agent or connect with that local agent that we know really well and get you to basically purchase that home using that agent. So the service is completely free, but the agent that we are working with basically pays us a referral fee. So there’s no cost to you, but we’re able to connect with more agents and bring them clients and make everybody happy in the process.

Tim Ulbrich: Yeah, one of the things I’m really excited about, Nate, with this is that obviously besides your peer-to-peer connection, pharmacist-to-pharmacist, which I think just puts you in the position to be able to understand some of the issues and the challenges but also really being able to — you know, you’ve lived this life of you’ve had student loans, you and your wife have worked through budgeting and all these other financial goals and where does home buying fit into this? So I think there’s some of that peer mentoring and advising that can happen as well that, you know, clients may be thinking about things like, hey, what would be good in terms of percentage down and how might this fit in? And you can point them to various resources and content and obviously your own personal experience as well. So we’re really excited. This is live. If you go to YourFinancialPharmacist.com, you’ll notice at the top of the home page, there’s a button that says, Buy or Sell a Home. And from there, you’ll be able to learn more about the concierge services and get access to schedule an appointment with Nate and to move that forward and hopefully coming in the future — in the not-too-distant future — we’ll also have an option here for those that are looking to jump into real estate investing. So again, that’s YourFinancialPharmacist.com, top right of the page, Buy or Sell a Home button, and that will take you to the page to learn a little bit more. So Nate, setting the stage for this conversation today, so again, we’re talking about is your primary residence an asset? How might somebody decide this decision of what’s the ROI on a home buy? Or should I continue to rent or should I purchase a home? And really the backdrop here is that I feel like there’s a lot of emotion that comes with home ownership. And I think especially here in the great U.S. of A that there’s a common belief that owning a home, I know I had it, should be a top priority and is beneficial to everyone to build equity and that often, it should supercede anything else in your financial plan. And you know, I think what we really want to talk about is some questions like, do we take this common belief too much at face value? What does the math really say? What are the pros and cons of home ownership? And how does home buying fit in with student loans and other financial priorities? Because at the end of the day, home buying is really just one — albeit a significant one — one part of a financial plan. So am I alone, Nate, in kind of hearing that common belief? Or is that something that you hear as well?

Nate Hedrick: No, I think that’s absolutely. I mean, it’s even true in my own life. I mean, as soon as we became full-time pharmacists and got out of residency, it was like, OK, how do we get a house? Because that’s the next thing, right?

Tim Ulbrich: Yeah.

Nate Hedrick: It didn’t matter if it financially was the next thing, that was just, that’s what you did next because that’s what you do, you own a house. So I’m totally with you.

Tim Ulbrich: Yeah, and I know Jess and I really felt the itch as well post-residency and I think when you feel that itch and then somebody says, “Hey, why are you dumping money down the drain renting?” and then you start looking at homes, it’s all over from there, right? I mean, you just kind of go down.

Nate Hedrick: And even worse was that I, again, at the time, totally naive to this, but I just compared mortgage and interest payments versus my rent payment, and I was like, oh, it’s cheaper to buy a house. Like it’s actually less expensive. And didn’t factor in any other things than that mortgage and interest payment.

Tim Ulbrich: So I did the same thing, so let’s start with that component, what you just mentioned, the true cost of home ownership. And I think often, as you alluded to, people are thinking about, OK, I’ve got a mortgage, I’ve got interest, and often that’s what will come up on a calculator. Or if you’re looking at a home on Zillow or Redfin or whatever, you’ll see those fees. But of course, there’s many other fees that need to be considered when somebody’s really evaluating what is the true cost of home ownership. So what is involved? What’s everything that’s involved when we look at the true cost of home ownership?

Nate Hedrick: Yeah, absolutely. So obviously the biggest things are that principal and interest payment, right? You are paying the mortgage. Unless you’re paying cash for a house, you need to be paying for that mortgage every single month in terms of the principal balance, then interest. The way most loans are structured, you’re going to pay a lot more in interest than you are on the principal. So just looking at a loan and saying, “Oh, it’s a $200,000 loan,” just that principal amount is not going to give you an idea of what your actual payment’s going to look like. So factoring in both of those and looking at your interest rate and how that’s going to affect your interest payment is certainly important. The next thing and the thing that I think is funny because I totally ignored when I bought my first house is taxes, property taxes. It can be a huge component. I mean, we pay thousands of dollars a year in taxes, and that’s money that doesn’t just come out of nowhere. You have to plan for it. And again, I don’t know why I didn’t look at that. Like everyone knows there are property taxes. But I didn’t think of that as a big important number. But it really is.

Tim Ulbrich: And how different that can be, right? From one area to another within a city even.

Nate Hedrick: Oh, absolutely. I mean, where we’re investing, the property we’ve got, the taxes are several percentage points higher, in fact, than where we live right now. And that was a major factor to say, is this really a good area to invest in? Because of that property rate. And so the number’s still work, but you have to have all that in mind. So then the other things to keep in mind, if you live in a community, there might be homeowner’s association fees. Those are often kind of hidden. But they can be quite high. I actually helped a client quite recently buy a condo here in Cleveland, and the homeowner’s association fees were probably, I don’t know, $200 more a month than her mortgage and interest payment were.

Tim Ulbrich: Oh, for the love…

Nate Hedrick: I mean, it was huge. It was crazy. And if you ignored that, it doubled her payment every single month. It doubled it. And without taking that into account, you would assume that this was a great deal. But you had to look at those numbers before you could do the final math.

Tim Ulbrich: So when you mention principal, interest, taxes, insurance, so that term is referred often to as PITI. And I think for the most part, when people are looking at a home, they’re thinking of those things. You mentioned obviously we talked about the variance that can happen on property taxes, I think for the most part, people are thinking of that, although I didn’t necessarily think as much about it. Even here in Columbus, for example, 10 minutes away, one part of the city to another part, you can easily have an increase of property taxes of 60-80% based on school districts and other factors. You mentioned homeowner’s association or some type of an association fee. And I think our goal here is not to suggest that you should find a location in the middle of nowhere that has terrible schools with low property taxes and no HOA fees, I think what we’re getting to is just understanding what’s involved in the total cost so you can really evaluate it with the rest of your financial plan. So besides those things, besides PITI, besides HOA, besides property taxes, what else could be involved when somebody’s really looking at this aspect of true cost of home ownership.

Nate Hedrick: Yeah, the last thing really that in terms of every single month kind of a thing that you need to keep in mind are the maintenance fees. So when you live in a rental place, often you’ve got a landlord or some sort of maintenance division that’s taking care of the property. Maybe they’re cutting the grass, maybe they’re fixing things when they break. But the maintenance of a home, it vastly, vastly outweighs the maintenance of a rental property. And so you all of a sudden have big capital expenditures that might come up. You might need to replace a roof or a boiler or whatever. And all of a sudden, that’s on you. So you have to kind of plan for those things. It’s much harder to predict, but I’ll tell you one of the things that we do whenever I’m walking around a home with a potential client or with a client, I say, “Look, if these things are all about to break, that means your capital expenditures in the next couple of years are going to be much, much higher. You need to factor that into the payment.” If everything’s brand spanking new, then you can look at it a little bit differently. But keeping that kind of thing in mind. And even though you may not be paying for it every single month, you’re going to be paying for it eventually. And so factoring that into your monthly payment can be really important.

Tim Ulbrich: Do you suggest, Nate, on that point — you know, I’m thinking about like on a rental property, it’s often recommended that you set aside x percent each and every month to be able to fund those big capital expenditures, roof, eventually you’re going to need a new hot water tank, things like that. Do you typically recommend clients think of that as well to say, hey, obviously the numbers may be different, but it may not be a bad idea to every single month, you put aside some dollars, essentially a sinking fund, to be able to cover those things?

Nate Hedrick: Yeah, I usually recommend it. And that probably comes from looking at investment properties so often. I’m always calculating a cap x rate and what that’s going to look like, but I definitely recommend that, especially first-time home buyers, somebody that may not have had those kind of experiences before. If all of a sudden you need a $4,000 boiler, you don’t want to just have that surprise pop up.

Tim Ulbrich: Absolutely. And I think your point on upkeep and maintenance is a good one. I was just reflecting as you were saying that — and anybody who owns a home could appreciate this — is just go into your garage and look at all of the things you didn’t have before you moved into your house, right? So it’s not even just the week-to-week type of things and OK, you’re going to plant flowers, you’re going to do these things, but even all the different tools and devices and lawn mowers and all the things that you need that you probably necessarily didn’t need in a rental situation and factoring those in over time as well. So you alluded to, Nate, that there’s these monthly types of things that you have to consider beyond just the principal, interest, taxes, insurance, which then lends me to believe there’s some other expenses that may not be monthly but that are significant that we have to consider. Tell us about those.

Nate Hedrick: Yeah, you’ve got a number of up-front fees and costs whenever you’re buying or selling a house. You know, everything from simple agent fees, so if you are a seller, for example, often the seller is the one that’s paying the real estate agent fees. So the buyer doesn’t often see that, but sometimes maybe the seller can’t afford to pay all of it and want to split that with the buyer, that’s something they negotiated. So there’s even just the fees of doing the actual deal itself can pop in, and then again, if you’re getting a mortgage, not paying cash for a house, you’re going to have a number of fees associated with that, so everything from the inspections that you do after you get under contract — and believe me, you should be doing inspections, please — to title, the cost of actually reviewing the title on that property, making sure that it’s valid and re-writing that title in your name. You’ve got things like closing costs, which can be anywhere from 2-4% of the overall loan cost. And again, I’ve been in a mire this past week of loan documents and negotiations with closing costs and such. But all those things can really start to add up. So ignoring all those one-time fees can be really scary too because if you need $30,000 and you’ve calculated that as your down payment and all the stuff that you need for a house, all of a sudden you’ve got an extra $6,000-7,000 potentially in one-time, upfront fees that might be coming out. So you really need to keep that in mind.

Tim Ulbrich: I’m glad you said that because I think it’s easy to look at let’s say a $200,000 home and say, OK, we’re going to put 10% down, so we need $20,000 but not think of the additional cash. And that’s really important for those that have a goal that are listening of they need so much down to get into a home, putting those assumptions into that calculation so they can plan accordingly. The other one I would add here, Nate, just from personal experience, and I think this is certainly very variable from one person to another and isn’t as easy to measure as some of these other things, would just be the reality of depending on where you’re at in the neighborhood is that I think it’s natural that your expenses and costs may go up accordingly to those that are around you. So we’re getting into the concept here of potentially keeping up with the Joneses and you know, as people incur law maintenance costs, they install fences, or they put nice decks or patios on their property, like do those same pressures have an influence on how you’re spending money in your own home? And again, there may be costs there that are incurred over time. So if we think about, Nate, you know, I’m thinking back here to “Rich Dad, Poor Dad,” Robert Kiyosaki’s book, that an asset is anything that puts money in your pocket. And a liability is anything that takes money out of your pocket. As we just talked about all of these costs, even after a mortgage is paid off, how do you look at this? Is a home really an asset?

Nate Hedrick: Yeah, I think it’s so funny because I think growing up, we had this societal norm that a house, you did it because it’s cheaper and it’s better for you than renting, and it makes you money somehow. And like we never really think about how that works. Well, the house appreciates and then you sell it, and you make out. Everybody wins. But in reality, if you look at all those fees we just talked about, even though historically, houses have gone up in value considerably over the years, you don’t always make money on a house. In fact, very rarely do you put any money into your pocket. And so by that definition and by what Robert Kiyosaki often says, your house is not an asset in that regard.

Tim Ulbrich: Yeah, and I think of course, we have to mention here the market specifics, right? So I’m thinking about previously to coming down to Columbus, I was living in the booming metropolis of Rootstown, Ohio. And so just seeing the appreciation in that market, while there was some post-2008, certainly it’s nowhere compared to what happened here in Columbus or other markets. So even just thinking about appreciation, taxes, expenses, of course this is going to be varied from one market to the next. So Nate, one of the most common questions if not the most common question I get besides ‘Should I pay off my student loans or how should I pay off my student loans?’ is ‘Should I rent or should I buy? And how might I consider that and weight that decision in the context of all these other competing priorities?’ So when somebody comes to you and they’re looking at a home or maybe even how you thought about it for your own personal situation, just talk us through how you think through that scenario for the right time to buy.

Nate Hedrick: Yeah, yeah, absolutely. I think the first thing you need to look at is your own kind of personal finances and where you stand. Again, the biggest thing — if we haven’t said it enough already — is that there are a lot of extra costs that come with owning a home. It’s not simply just a rent payment every single month anymore. You’ve got things that are going to show up from taxes to maintenance to stuff that breaks, and you need to be able to weather that. So if your finances are to the point where you are spending so much on student loans or so much on other debt that a big financial hit would really ruin you, it may not be the right time to buy. That’s kind of the first thing is making sure that you’re stable enough and comfortable enough that if something does crop up, you’re able to handle that. Once you’ve kind of made that decision and made that move and said, OK, I’m comfortable here, the next question I think is how often or how long do I plan to stay in this particular area. And this is where it really varies by location. Different locations benefit from longer stays or shorter stays. I was recently reading about the advantages of buying a home in like New York City, and it’s so expensive there compared to renting — I mean, renting is expensive — but it’s so expensive to buy a home in New York City, you’d have to live there something like 20 years to make it worthwhile compared to renting.

Tim Ulbrich: Wow, wow.

Nate Hedrick: It’s absolutely insane. But in other areas, it can be a year and a half and the values are increasing so quickly and the purchase prices are so low that it doesn’t matter, you can turn that around in a year and a half and be fine. So if you’re financially sound, you then need to ask yourself, how long am I going to stay here? And then what does that mean for this market? Does it make sense based on that information to buy or sell?

Tim Ulbrich: Yeah, and I think you highlighted well that it certainly can be region-specific with your example from New York and market-specific, but I think it’s also economy-specific and what’s going on. I mean, if somebody bought a home today versus they bought it right after things crashed in 2008, very different outcome in terms of how long you need to be in a home before you may be able to break even on those costs. I would reference here too, one of the tools I love and I often give out to others is New York Times — and we’ll link to it in the show notes — New York Times has a really good buy v. rent calculator because I think to our conversation earlier, it typically is not an apples-to-apples conversation because just like you did, just like I did, just like many others do, you’re typically looking at, OK, here’s what I’m paying for rent, here’s what I’m going to pay for my monthly mortgage payment, which would include the principal and the interest. And obviously, it’s much more than that as we highlighted just a few minutes ago on this episode. And what I like about that calculator is that it helps you consider all those other variables and bring it to as close to an apples-to-apples comparison as possible. So we’ll link to it in the show notes. For those that are listening that can’t get to the show notes, if you just Google “New York Times buy v. rent calculator,” you’ll see that come up. So Nate, I want to continue that conversation for a moment on how long you might need to be in a home before you really start to really that value because I think we often see this with new graduates that are doing residency or maybe they’re in a transition period with the first job, and they’re really not sure, maybe three years, maybe five years, maybe 15 years, who knows? But while we have established it can vary, what are the factors that one is really trying to consider here in terms of will this be break-even or not? What’s going to help determine that?

Nate Hedrick: Yeah, so I think what you need to look at is if you’re looking at a particular area — and most people, honestly, start with that, right? You’re not just saying, “I want to live somewhere.” You have a plan, you’re going somewhere for a job or what have you. So once you know where you’re looking, you can look at the rent prices there. And then look at the home values and look how they’ve changed over the last couple of years. You know, nobody can predict the future in terms of what home values are going to do, but it should give you some insight as to wow, this — maybe it’s like a Columbus market where you live, Tim, and it’s just been going gangbusters for the last couple of years, or maybe it’s been on a decline. And so you can get an idea of well, where do I expect this home to go? If I only live there two years, where is it going to be when I end up selling? The other thing is if you are — even as a resident, I advocate for this quite a bit — even if you’re thinking you’re only going to be there for a short amount of time, what if when you leave, you end up renting that property out as a rental property? So maybe if you really have that itch to buy a home, maybe the trick is to go buy something that you know once you’re done, you could leave it, and it could still become a cash-flowing rental property. I’ve actually advocated, again, a lot for residents to look at doing this. You’re living most of the time in a big city, a lot of people want to rent there, you’re near to a hospital, which means near to a lot of jobs, you’re kind of setting yourself up for a perfect rental property location. And so if you want to go there with the idea that hey, I might be here one year or I might be here for 10, buying a home’s not a bad idea if you set yourself up for success to begin with and get a place that kind of meets whatever need you’re going to have down the road and has that flexibility built in.

Tim Ulbrich: And are you suggesting a potential single-family home? Or like a duplex, triplex, something you could house hack? What are you thinking there?

Nate Hedrick: Yeah, yeah, so I actually had an article about house hacking as a resident and how you can do that. But I think either would be fine. I think if it were me and I could do it all again, I wish I would have gotten a duplex when I was a resident.

Tim Ulbrich: Yes. Yes.

Nate Hedrick: So if I could change one thing about residency, that would be it. I would have bought a multi-family home, I would have had people paying my rent while I went off and did my residency. But again, I think you can still go right with a single-family home as long as you build it with the idea that, OK, when I leave this, it needs to be rent-happy, it needs to be capable of producing cash flow and worth its while.

Tim Ulbrich: Yeah, and while I would say if we’re honest with ourselves, there’s many things we probably would have changed about residency, but on the personal side, I agree with you. This is one that I would have done is I think a duplex, a triplex. For those that haven’t heard that term before, can you just define that quickly?

Nate Hedrick: Yeah, so multi-family homes, the short version is — so you get single-family homes, right? Which is a one-family dwelling, most people are aware of them. There’s one door and one unit. Multi-family homes are anywhere from two to four units within the same structure. So it’s kind of like a tiny apartment building. And the advantage of these multi-family homes over an apartment over a single-family home is that the bank when you’re getting a loan on a multi-family property, they don’t look at it as a commercial loan. It’s still considered a residential loan, so there’s a number of advantages in terms of lending and in terms of tax implications and so on to having a multi-family property, that two to four units.

Tim Ulbrich: I love it. And we’ll link to your article in the show notes as well if listeners want to learn more about that concept. There’s also lots of resources out there that talk about house hacking. The other variable I would add here, Nate, when you think about kind of this question of what’s a break-even in terms of how much time I have to be here, obviously would have to include how much equity you have in the home and how much down payment you had or didn’t put down in the home, right?

Nate Hedrick: Yeah, exactly.

Tim Ulbrich: So this could either be equity you build into your down payment, it could be equity that happens because of appreciation, but you know, if you put 20% down, and you move in three years and the market has only appreciated a little bit, you’re probably not going to have forced much equity through payments just because of how those payments are structured, as you mentioned earlier on the show. However, if you have to pick up and move, even unexpected, and you’re then going to incur realtor fees with selling, closing costs, all those things, you at least have some equity that can help cover the expenses of that. And while it may not necessarily be break-even at that point, you’re at least able to weather that storm and kind of work through that. So I think how much down payment you have, how much it has appreciated, what actually are the closing costs that are involved, all those types of things will determine this number of how long you have to be in a home before you get to a break-even place. And of course, with a greater down payment, you’re kind of working yourself down that amortization table where you’re making payments that more is going toward principal and less is going toward interest, which is always a good thing. So Nate, let’s just shift gears real quick to wrap up and talk about we’ve kind of established that is a primary residence an asset? It depends when you consider the costs, probably maybe not so much for many people. But I don’t think we’re saying there’s no value in home ownership, right? I mean, from your perspective, just thinking about for you and Kristen, like beyond the number, what is the value for you guys in terms of owning your own home and having your own place?

Nate Hedrick: Yeah, I think it’s easy to get into the financial weeds and just say, yeah, well, home’s not an asset, so maybe it’s not worth it anymore. But no, the reality is that there are so many emotional aspects to owning a home that are very difficult to replace and are hard to put a value on. Just having a safe, secure place that I can go back to with my family and I can put time and money into this place, I get the benefits out of that. There’s a lot to be said for that. And again, it’s something that I don’t think you can put a true value on. So it’s not something you can calculate, not something that you can Google and pull up in a table or an Excel spreadsheet, which all my data nerds are cursing, but it is an important factor to keep in mind.

Tim Ulbrich: Yeah, I think you have to weave into this the value of your own place and making it your own and being part of a community and all that comes with those aspects and factor that in. You know, we talk about with student loans that you’ve got to run the numbers, and you have to add the emotions on top of it, right? How do you feel about the debt? And this is the same thing. I think when we’re talking about home buying, you’ve got to run the numbers, but you have to also consider some of these other variables as well. So as we wrap up here — and again, you’re going to be hearing from Nate a lot more in the future — we already talked about the concierge service. If you’re looking to buy or sell a home, make sure you check that out, YourFinancialPharmacist.com, top of the page, ‘Buy or Sell a Home’ will get you more information on that. Also would recommend you check out — if you haven’t already — we have a first-time home buying Quick Start Guide, which Nate helped develop that for somebody’s who’s looking at home buying for the first time is really a great place to get started, to get more information as you’re continuing to evaluate what the next step will be for you in that process. You can download that guide for free at YourFinancialPharmacist.com/homeguide. That’s all one word. Again, YourFinancialPharmacist.com/homeguide. So Nate, as always, thank you for taking time to come on this week’s episode of the Your Financial Pharmacist podcast.

Nate Hedrick: Yeah, thanks for having me.

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YFP 112: Why One PhD Pharmacist is Taking on Two Side Hustles

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Why One PhD Pharmacist is Taking on Two Side Hustles

Dr. Brent Rollins, a pharmacy graduate of Ohio Northern who obtained his PhD in Pharmacy Administration at the University of Georgia and currently serves as a faculty member at Philadelphia College of Osteopathic Medicine, joins Tim Ulbrich on the show. They discuss Brent’s personal finance journey, why he cares so much about the importance of educating students on this topic, his unique side hustle in serving as both an expert witness and covering professional football, and how he is teaching his 3 kids about personal finance.

About Today’s Guest

Dr. Brent Rollins is an Associate Professor of Pharmacy Practice at the PCOM Georgia School of Pharmacy. He received his BS in Pharmacy from Ohio Northern University and then a PhD in Pharmacy Care Administration with an emphasis in Pharmaceutical Marketing from the University of Georgia. He has published numerous peer-reviewed articles and given presentations on health care consumer behavior, particularly focusing on direct-to-consumer prescription advertising, and the scholarship of teaching. He is the primary co-author of the textbook titled Pharmaceutical Marketing and co-author of another textbook, Financial Analysis in Pharmacy Practice. He is a member of Georgia Medicaid’s Drug Utilization Review Board. In addition to his day job, Brent also serves as a consulting pharmaceutical marketing and pharmacy practice expert witness for various law firms and works as an Analyst and College Football Writer for Pro Football Focus (www.pff.com) and now UGASports.com. In his spare time, Brent enjoys spending time with his wife, Deanna, and three children – Carson (12), Camron (11), and Breleigh (8) – and coaching youth football, basketball, and baseball.

Summary

Dr. Brent Rollins joins Tim Ulbrich on this week’s podcast for a discussion covering personal finance education in pharmacy school, side hustles, and his personal story.

Brent shares that personal finance education in the pharmacy curriculum is so important because there’s a large debt load that many pharmacists carry and more students don’t know how to manage their money. He explains that the pharmacy profession is evolving. When he moved to Atlanta and was going to attend graduate school, he was able to call to obtain a job. Now, it’s more difficult to do that and pharmacists need to focus on the business side of their degree. Brent’s ideal personal finance curriculum in pharmacy administration entails a consistent approach that starts as soon as the student steps on campus. He envisions hiring directors of careers to help show students different job paths and also offer seminars and educational sessions for students to learn more about personal finance.

Brent obtained his BS in Pharmacy in 2004 from Ohio Northern University and continued his education at the University of Georgia where he received his PhD in Pharmacy Administration. He decided to take this route because of advice from a local pharmacist he knew from his hometown, Dr. Sullivan. Dr. Sullivan said that you have to look at pharmacy like a game of chess; if you’re just a pharmacist, you are only a single piece on the board. You have to find what your king piece is that allows you to move anywhere on the board. From this, Brent knew he wanted to diversify his education while also fulfilling different passions, like business and money.

Brent and his wife aren’t shy about communicating with their three children about money. He talks to them about only making purchases if you have the money to pay for it and avoid credit card debt. They speak about how to save for large purchases, but also focus on how experiencing and living life is more important than material items.

Brent has two unique side hustles and shares that side hustles are invaluable as your day job can sometimes become monotonous. He says that side hustles allow you to do something you’re passionate about while being able to step away from his daily grind. Brent works for Pro Football Focus where he collects data on football players, plays and games and will also be content writing for them this season. He is also an expert witness and primarily has two types of cases: marketing (big pharma, patents) and standard of care.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? It’s my pleasure to have on today’s show Dr. Brent Rollins, an associate professor in the Department of Pharmacy Practice at Philadelphia College of Osteopathic Medicine in Georgia. Dr. Rollins completed his BS in Pharmacy at Ohio Northern University — Go Polar Bears — and his PhD in Pharmacy Administration at the University of Georgia. Brent, welcome to the Your Financial Pharmacist podcast.

Brent Rollins: Thanks so much for having me, Tim. Pleasure to be on. Love what you guys are doing with this.

Tim Ulbrich: Thank you, I appreciate that. And in addition to sharing our alma mater, Ohio Northern, we share a passion for personal finance education and the importance of side hustles and teaching kids about money, all of which we’re going to talk about on today’s show. So before we jump into your career and your financial story, I want to start by talking about the importance of personal finance education and the PharmD curriculum. And I think we would both share the importance of starting way before pharmacy school, but we’re going to focus on the area that we have the most opportunity to impact. And as I was reflecting on our conversation several weeks back, getting prepared for today’s interview, I was struck by your passion for needing to do more when it comes to teaching personal finance to our students. So tell me a little about where does this desire come from for you in terms of why we need to be doing more for our students on personal finance education?

Brent Rollins: I think in general, it’s mainly just my own — I like looking at money. I’m a numbers guy. And as we’ll maybe find out later when we talk about the football stuff that I do, numbers are somewhat of a passion for me, and money is the primo number we all care about, in a way. And the biggest thing that I saw was just within pharmacy school myself, watching UGA as a graduate student is when you get students talking about personal finance, money, business in general, you see eyes come open a little moreso. You see a renewed interest, you see something like, oo, this is 100% relevant to me and everything that I’m going to do moving forward. Thus, I care greatly about this.

Tim Ulbrich: And why is that, do you think? I experience the same thing, and that’s what gets me so excited is the feedback from students like, wow, we need more of this. I wish I would have had that earlier. What are the gaps that you think are there right now with students. Why are they feeling this pressure and concern around this topic? I mean, obviously, the debt load, but what else?

Brent Rollins: I would say debt load is very much there. And then also I think you’re seeing more and more students who one, they haven’t really had to manage money in their life. Thus, now it’s becoming a thing, specifically for maybe a younger student who’s two years and then straight to pharmacy school and things of that nature. But also, a lot of the students who’ve been out in the workforce for two, three, four years, especially where we are at PCOM, is you have those that are maybe in their mid- to later 20s in pharmacy school, sometimes even in their 30s and this is maybe even a second career for them. And really getting that knowledge and getting a handle of it as they move forward is I think of big importance for their own personal well being.

Tim Ulbrich: So with your Pharm Ad background, we’ll talk about that here in a little bit, I’m assuming you’ll fold some of this into your existing coursework. I know some colleges embed personal finance education in Pharm Ad courses; others do nothing at all; others have standalone courses, so tell us about what you’re doing at PCOM and maybe the desires you have even going forward because I’m assuming we have students listening, we have faculty listening, they may be able to go back to their colleges and say, oh, I really liked this idea or here’s some opportunities that Brent’s thinking about that we could utilize in our college as well.

Brent Rollins: The first thing I do is in terms of actually structuring the curriculum, it’s a piece of the Pharm Ad course, much like you see in a lot of other places. But one, we don’t ignore it. And the second part of that is there’s other pieces within the course, such as the topic of entrepreneurship in general, that personal finance continually comes up and a lot of the examples that I use, even when you teach basics of accounting and financial statements, profit-loss, those examples then become a personal finance type example. So as much as I possibly can, we try to interject — because I think it’s relevant. And it helps students truly just grasp it because whether or not maybe they understand certain concepts of pharmacology and all the things that we teach from a therapeutic standpoint, every single one of them grasps personal finance in that hey, I don’t have enough money to pay x or go on x trip.

Tim Ulbrich: So Brent, one of the things I hear — and I would say that this is changing rapidly, of which I’m grateful for — is that I think there’s still somewhat of an old-school thought of there of in some places, hey, personal finance education is really not pharmacy education, it’s not the sciences, it’s not what they need to be knowing and doing to be ready as a clinician. I obviously disagree with that wholeheartedly. I mean, to me, it’s a part of professional development, and I think we have an obligation to our students. I mean, what would your response be to sentiments like that?

Brent Rollins: I’m 100% on your side. And the biggest reason I would say that is just the evolution of the profession in general to where it’s not necessarily — I mean like, for example, when I graduated, I moved to Georgia to go to graduate school, I made a few phone calls, and shortly thereafter found a place to work part-time and then eventually full-time during graduate school. It wasn’t that difficult. And now that world doesn’t exist. It’s, to me, the business of pharmacy and the world of pharmacy is much like getting a business degree where things like right time, right place, right internship, knowing the right person.

Tim Ulbrich: That network, yep.

Brent Rollins: Or hey, I’ve got to go somewhere else to work my way up to where I want to be. All these ancillary things that matter for basically the rest of professional life outside of pharmacy and some other healthcare professions, those things now matter. And that, to me, is why educating students on one, personal finance, but two, just the realm of business and how the business world works becomes much, much more important.

Tim Ulbrich: We have over the past couple years been going to a lot of colleges, and we’ll come on campus for an hour or two. And one of the follow-up questions I often get because of the energy we see among the students is the faculty will say, “Hey, Tim, what do you think this looks like ideally? This is great to have a one-hour session, maybe a two-hour session, but obviously it’s not necessarily impacting all students, and it’s not necessarily longitudinal and intentional in its design,” so if you were to think about sort of the ideal personal finance curriculum in a pharmacy education, putting time aside and resources and other things, what would that look like to you in terms of how it’s delivered, when, and at what level along the way?

Brent Rollins: To me, it would look like a consistent approach from Day 1 that students step foot on campus. And I don’t know that I see it — it might exist. This might exist, and I haven’t looked specifically. But I see colleges of pharmacy and schools of pharmacy hiring directors of career or careers. And their job is specifically to help students, show students the different career paths, provide students internship help, I mean, a lot of that stuff is a lot under Student Services at some point now, currently. But I think it becomes more of an individual focus that we are directing your career, not just educating you on how a drug works and the side effects that it causes. And thus, over the period of the consistent three years that most students are on campus, there’s seminars from different people, there’s educational sessions from financial planning, how to buy a house, all that. We actually, at PCOM, we actually do a pretty good job of that. But it’s a campus-wide Student Services type function. But it’s not a mandatory, everybody comes, it’s a part of what you do. It’s more of a hey, here’s this evening seminar from this financial planning guy. Or here’s this evening seminar from a mortgage rep. That sort of thing. I think it becomes more and more a consistent approach, and it becomes — from an ACPE standpoint — co-curricular type thing that really helps from accreditation as well.

Tim Ulbrich: Yeah, and I share that with you. I think in my experience teaching this in an elective environment and working with other colleges, I think it tends to be a hey, we have a resource here for you if you want to engage, great. But what I typically see in those environments, especially when we talk about finance and money and a topic that for many is taboo, typically those attending it are already at a higher level or have a higher interest or have a higher concern. And to your point about kind of the requirement, most of the dreams that we have at YFP is to really move the needle and trying to move this as a requirement. And co-curriculars are nice, but co-curricular often still involves a menu and a selection, and it may not be for every student. And I think there’s some level of personal finance education that should be foundational for every student. Again, I truly believe we have an obligation, and I’m hoping we can help facilitate, just like you and I are talking here, that a lot of colleges are trying to do their own thing in this, and how can we share resources and syllabi and other things? And I hope if there’s faculty listening, we could begin to make those connections to try to leverage the expertise we have of various individuals across the country — and knowing faculty are busy and not having to reinvent the wheel at each of these institutions.

Brent Rollins: 100% spot on. And I know for darn sure, I send them to your website and tell them, hey, prerequisite for coming to class today, listening to this podcast.

Tim Ulbrich: I appreciate that. Well, we always say it’s everything that we wish we would have known while we were in school, so I’m grateful for that. So before move on to sum up your personal story, both career and financial, I have to just ask you, in your role as a faculty member, but we’re in a time period right now obviously leading up to a political election coming up in the future. We’re not going to talk politics, but we have to talk forgiveness a little bit because there’s some pretty bold plans coming out. You know, Bernie Sanders has a plan that was released recently, Elizabeth Warren, and I don’t even think we have to get in on the specifics of these plans because they’re going to change over time but rather I just want to get your feedback on the concept of forgiveness. You know, is it a good thing for pharmacy graduates? Is it a bad thing? You know, who should qualify, who shouldn’t? And does it really solve the problems? I mean, what are some things that we should be thinking about when it comes to forgiveness and pharmacy graduates?

Brent Rollins: That’s an absolutely outstanding question and one that for me, personally, I don’t know the right answer. I don’t know that there is a right answer because much like — I’m just a massive proponent of two things: One, competition, and two, sort of earning and everything that you get out of this time that you have on Earth and the work ethic that you put into these things. Now, from a resource standpoint, would it be better off and students, hey, I can go do what I want and not have to worry about these things? Of course. Me personally, I didn’t have the $150,000 student loan burden that other students and a lot of the students, the majority, have, and I realize what that means. But it’s also about sort of learning and learning how to evolve and being challenged. And financial challenges are just as much a challenge as a physical challenge or as a hey, I’m 5’9” in a 6’5” world, you know, in terms of basketball or something like that. Those challenges are things that people have to learn to overcome because every day, whether we like it or not, you have to go compete. And I guess my sentiment is hey, let’s learn, let’s evolve, as opposed to just making it something that totally, in essence, you don’t have to think about. Who knows? It’s a fantastic question. There’s so many economic ramifications of it that we could go into forever and people way smarter than I that have opinions on, but it is an interesting topic, for sure.

Tim Ulbrich: Yeah, I think your point’s a good one. I mean, it’s obviously very complicated, and actually, Richard Waithe and I, Richard being the host of the RxRadio podcast, we just recently had a great conversation on this topic specifically in more detail. So I would reference our listeners to check out the work that he’s doing over there, which is fantastic. So a shoutout to him. What I struggle with — because even these two plans aside, we talk a lot on the podcast about Public Service Loan Forgiveness, and I always am encouraging people, it always has to be a conversation of the math plus. And the plus is all the other variables that often get overlooked, so when we talk about paying off debt, you have to account things like the rest of your financial plan and your spouse and how it impacts your family and how you feel about the debt. And when I think about my journey going through paying off a couple hundred thousand dollars of debt, I’m not suggesting this is for everyone, but I don’t think my financial plan on the back end would be where it is today if it weren’t for all the lessons I learned throughout that. Now, does it mean it has to be like that for everybody? I don’t think so necessarily. But I think that has to be a part of the conversation when you have a discussion like this in terms of some of the forgiveness options.

Brent Rollins: Yes, that’s 100% on point.

Tim Ulbrich: So jumping to your personal career story, you graduated in 2004 from Ohio Northern, BS in Pharm, went on to pursue a PhD in Pharmacy Admin. So why did you go that route? Share with us, our listeners, about the route in Pharm Ad?

Brent Rollins: Well, first off, we’ve shared a great professor who very much made an impact on me at Ohio Northern and who’s currently at Ohio State, and that’s Donny Sullivan.

Tim Ulbrich: Amen to that. Yeah.

Brent Rollins: And Dr. Sullivan sort of took me under his wing in a way and just showed me a different world. And for me, I was always looking for something else when I went to school. And luckily enough, I was the last class that had the choice of the BS versus the PharmD. And I knew I was going to graduate school, so that’s one year of tuition I didn’t have to pay. But a pharmacist in my hometown who owned a pharmacy, went to my church, just a great human, told me that — before I went to school, he said, “Look, Brent, you have to look at pharmacy like a game of checkers.” OK, that was a little interesting.

Tim Ulbrich: Yeah.

Brent Rollins: And I was like, “OK, so what do you mean?” And he said, “If you’re just a pharmacist, and that’s all you do, you are a single piece on that checkerboard. You can only go certain places. You have to find whatever it is for you that becomes your kingpiece —

Tim Ulbrich: Great wisdom.

Brent Rollins: — that allows you to move anywhere on the board.” And I took that with me. And I tell students all the time that same exact sort of philosophy, and that’s what led me to hey, and business and money was always something — and numbers — was always something interesting in the first place, so doing research under Dr. Sullivan, presenting at some meetings, those sort of things, it just led to that and led to exploring a graduate option.

Tim Ulbrich: I’m going to steal that, by the way.

Brent Rollins: Steal it all day, every day. It’s a great one. I like it.

Tim Ulbrich: Yeah, and it’s so timely in kind of the state we’re in as a profession now. I think it’s great wisdom and something I want to share with my kids but also students. But I think more timely than ever with some of the things that we’re facing now. So you get your PhD in Pharm Ad from the University of Georgia, so tell me about how that connects with your current role and what you’re doing at PCOM.

Brent Rollins: So one of the things — when we moved to Georgia, and it was basically — I’m originally from West Virginia, went to Ohio Northern, and then so I looked at West Virginia University and then everywhere south because I had had enough of the frozen tundra, unfortunately, at Ohio Northern. But we just, in terms of fit and faculty fit as well as just the life fit part of it, that’s why we came to Athens. And I just, I love it here. I love living here as much as anything else. And thus, so once I graduated from graduate school, looked at various academic jobs, interviewed, and then PCOM was opening just at that exact same time. And it just worked out to where I was able to come here and was offered a job here and have been here since the school was opened. So for us, it’s just — it would take someone like adding a 0 to my salary or something like that for us to move just because we love where we live so much.

Tim Ulbrich: And I think that’s a good connection and obviously, you and your wife have three children, you shared with me 12, 11, and 8 years old. And I think the academic life fits well with activities with kids, and I know your kids are active as well. And so I want to transition and use that as an opportunity to talk a little bit about how you and your wife have effectively worked together and maybe some of the things that you guys have implemented to do that well and where there’s been challenges and then also talk briefly about what you’re doing in terms of teaching your kids about money. So when it comes to this topic, we all know the data and the literature, it’s difficult for spouses to work together, to be on the same page. My wife and I have shared some of this on the podcast. So have you and your wife always been on the same page? And I’m guessing the answer may be no, but talk us through about how you practically work together when it comes to your financial plan and more specifically, how you resolve differences.

Brent Rollins: I think for the most part, we have. I mean, there’s always certain little things here and there like we’ve built two houses and we just finished building a house recently, and there’s always like, “Hey, I would like this,” kind of argument. And I’m like, “Well, hon, that’s great. But that also costs this.”

Tim Ulbrich: Right.

Brent Rollins: So you know, those sorts of things. But in general, we have always stayed on that same page, and we have a lot of the same interests in that we, for example, we have — I wouldn’t say extended ourselves, but we’ve spent just a little bit more on homes than we maybe would if we enjoyed traveling around the world or something like that because we enjoy our time at home, we enjoy spending time with our kids at home. So that was definitely something that’s helped over time. And my wife is very much, she’s not someone who’s just going to go and spend crazy amounts of money on anything. For me personally, the only thing I care about in terms of spending money is I want to be able to go out to eat when I want to go out to eat. And if I want to go to a ball game, I can go to a ball game. Outside of that, I have no sort of massive wants and desires in that standpoint. So for the most part, we have very much been on the same page. And even like for example, when I was in graduate school, I worked full-time as a pharmacist and then also was a full-time graduate student. And her ability to stay home, take care of the kids, that allowed me to do what I needed to do. And it relieved a massive burden of, hey, who’s going to pick up the kids now? All those sort of things. So given that she’s been able to do that, it’s made everything sort of fit. And now, it’s just about growing and getting better and making sure that we don’t — I think I remember the podcast you guys had a while back on lifestyle creep, making sure that that does not happen to us and that we have those same focuses and then also, now it just becomes those things as well as teaching kids.

Tim Ulbrich: So on the topic of teaching kids, you know, while teaching in pharmacy school is nice, I firmly believe — and I think you share this with me — that I think about my kids who are now 7, 6, 4 and newborn, like outside of my newborn, like they’re already starting to establish those behaviors and being aware of conversations, so I think it starts very, very early, and it starts in the home. So what does this look like for your family? And how have you and your wife approached this topic of teaching kids about money?

Brent Rollins: The biggest thing that we’ve focused on telling them and showing them is outside of, say, purchasing a car or a home that are the large, large purchases, if you can’t pay for it, don’t buy it. Like if you can’t stroke a check for it or take some cash out and pay for it, don’t buy it. Stay away from it. And that goes with credit cards and sort of teaching them what credit cards are about that hey, we — and for us, I hate credit card debt in any way, shape or form, so it’s something if it’s on there, I’m mainly using it for the points. I know I’m just going to write a check for it. And we did a lot of that when we built the house. We got a lot of points, that was nice. But you know, it’s one of those things, that’s really the primary thing. And I’ve seen that in my oldest son, who hoards money, any money that he gets, whether that be for birthday, Christmas, whatever, grandparents taking care of him, I think the only thing that they will legitimately want to spend money is if they haven’t got a pack of baseball cards or football cards in awhile, they’ll go, hey, can we go to Target? I’ve got an extra $10. I want two packs, that sort of thing. That’s about it. So we’ve shown me that look, experiencing life and living life is maybe more so way important on the scale than buying things.

Tim Ulbrich: Absolutely. Yeah, and it’s all about a balance, right? I mean, I think that’s one of the things I often think about my own kids. I tend to be on the aggressive saving, squirrel it away type of side of things, and I want my children to understand the importance and value of that, but I also want them to understand that it’s OK to spend money but to plan and for it to be intentional and balanced with other things. But to your final point there, which I think is the most important thing, is that typically, the things that have the most joy and are most rewarding don’t have a dollar sign attached to them. And they are that time that you have with family and friends and creating a lot of those memories. One of the things I wanted to ask you here on this kids topic is I just had on the podcast, it’ll be published soon, the author of a book that just got released, “Mom and Dad, We Need to Talk: How to have essential conversations with your parents about their finances.” Cameron Huddleston wrote that book. And one of the takeaways I had there was often, this issue of being able to talk to your parents about money stems from this being a taboo topic in the home with growing up. So how do you and your wife handle that? Is this something that is just an open topic? Or how do you engage with conversation in terms of money and their spending patterns and other things?

Brent Rollins: It’s very much been an open topic in our house. And we’ve not shied away — now, do we tell them, hey, this is what we have and this is what we’re going — we don’t get into maybe specifics, but certain things we very much, hey, this is what this costs. This is what you would have to do in order to get this level of money to pay for that thing. Is it really worth it? What’s the value? Does it provide such a great benefit that it’s worth that cost? So it’s more of an open conversation than anything else.

Tim Ulbrich: Yeah, and I like that. And I think that’s the point she was trying to make in the book is that yes, there’s times where you can be really intentional and have a specific conversation, but more than anything, it’s just not making it a taboo topic. So if you and your wife are talking about a home purchase or something you’re working on, like letting them hear and be a part of that conversation. The last part I wanted to transition here to is let’s talk about your side hustles because we have done a lot on the show — and credit here to Tim Church who’s done an awesome job of starting this side hustle series and featuring pharmacists’ side hustles — but you really have two unique side hustles, which we’ll talk about here in a minute. But even before we talk about what those are, I want to ask you the question of why do you think a side hustle is valuable? And why do you think that’s something pharmacists should consider?

Brent Rollins: It’s invaluable to me because so often — and we hear this from students who are applying, I see this on the message boards about admissions with pharmacy and where we as pharmacists — a wise man once told me what you have is what you spend, so you might want to do something that you enjoy. And you get into that sort of — not necessarily the melees (?), but a this is what I make, this is is what I do. It becomes monotonous in a way. It becomes, you know, just I have to do this as opposed to I want to do this. And the side hustle allows you to sort of have that passion for something, whatever that something may be. For example, a friend of mine that works — it was a full-time pharmacist across the street from me when I was in graduate school. His side hustle was as a DJ. And he would go DJ like across the country and do that. That was his thing. So he enjoyed pharmacy, but he enjoyed that and had a passion for that as much as anything. And it allows you the balance to step away from, in essence, the grind or that day-to-day so it doesn’t become as monotonous as possible. But we talk to students about that often. I know I do individually. And I’ve had a lot of students who, especially given the fact that our program is — we have sometimes an older student population, we’ve had some who already have side hustles when they come in. I remember interviewing a student who is still successful with it, had an ebay business and was buying and selling things through ebay and doing that. I’ve had other students who do homemade soaps and natural soaps and things like that. So it’s — because it’s fun. It’s a passion, it’s something that you love. And as we’ll talk about mine, I’m a sports superfreak, so that’s why I do what I do.

Tim Ulbrich: Yeah, and I think to the point that you just made there, I think what I’ve seen is in balance, in the right balance, a side hustle often makes you better at your day job because it’s giving you that little bit of a mental break, it’s allowing you to pursue some of the passions or hobbies or other things that you had. And of course, the extra income is nice to be able to put that towards other goals, but I think it’s also the value of being able to pursue something you really are passionate about. So let’s talk about your two side hustles. They’re really unique. One is you serve as an expert witness, and the other is you cover pro sports. You mentioned you’re a sports fanatic, so let’s start there since you just mentioned it. Tell us about what that is and the work that you do related to Pro Football Focus.

Brent Rollins: OK, so the first one there, Pro Football Focus, that is a company, like if anybody who watches professional football and watches Sunday Night Football on NBC, you’ll hear Chris Collinsworth talk about the PSF ranks of players or it will show it on the screen when they introduce the players. So that is a company that I work for, Pro Football Focus. It’s a company that was started initially by a man named Neil Hornsby, who was actually from England, and basically, it looks at every player of every play of every game. And we collect absolute mountains of data and now have — when I first started, so this will be my fifth season working with them — but when I first started, I think we had like 13 or 14 NFL teams as clients and a few college teams. Now we have all 32 NFL teams as clients, and we have over 60 college programs that basically, in essence, use our data and use — it helps coaches, it helps anything and everything you can think of in the realm of preparing for and playing a football game from a data and analytics side. So for me, I get, in essence, paid to watch football and write about it.

Tim Ulbrich: Something you love, I mean, that’s awesome. Hey, without sharing specifics, obviously, is it a contract where you’re utilized hourly or for a season or for content you produce? How do those relationships typically work?

Brent Rollins: The contract part of it I think will actually start this year in terms of the writing part and getting reimbursed or paid for providing content. But the rest of the data collection-wise, it really depends on what you’re doing. Certain things, it’s you just do it, and thus, you get paid for it say on a per-play basis because obviously, some games have more plays than others. But the other part of it, some of it’s accuracy-based. Some it’s hey, how accurate are you? Because if you’re not doing a very good job and not accurate enough, it’s kind of worthless to pay you for it, in a way. So there’s some baseline level, and then you get paid more for being insanely accurate with what you do.

Tim Ulbrich: And what I love about that example, before we talk about the expert witness, is it’s completely unrelated to pharmacy. It’s something you’re passionate about. But you can translate, obviously, into some side income and the rest of your goals. So let’s talk about the expert witness. That’s something we haven’t talked about on the show, and I know we’ve wanted to before, as I think this could be an opportunity for other pharmacists to pursue. Tell us about what that looks like and how you got involved in that.

Brent Rollins: So initially, so my PhD’s in Pharmacy Administration, but my focus is marketing. And it was the area of passion that I wanted — you know, you can do economics, you can do health outcomes, things like that. Marketing was the one that was I loved the most and pursued that passion. And when I was in graduate school, my major professor was involved with a very, very large case that involved the Department of Justice, various state attorney general’s offices, all sorts of other things, and I was asked to help in certain aspects of that work. And through that, it’s just, it grows. And you have that working relationship with that person, you do more and more and more. It gets to the point where hey, my major professor, he’s swamped, and then hey, just talk to Brent initially. And then finally, once you do one, and you have a series of attorneys that say, ‘Hey, we need your opinions on this matter,’ once you do one, once you’re deposed, once you go through that process, now you get more phone calls here and there. So it just has evolved over time, and I’ve done more and more of it. I do primarily two areas of casework: One is in marketing, so those are big pharma cases. I’ve even done like a class action suit that was a marketing thing and some other variety of things that are marketing-based, patent litigation, things like that. And then also standard of care cases, which I don’t like doing as much as the other because I was trained in marketing and I get to use that. But the standard of care cases are interesting because it’s one of those things where we as a profession almost in a way have to police ourselves and just say, ‘Hey, look, there’s a certain standard that we need to have.’ Now, it doesn’t necessarily mean that I am in any way, shape, or form attacking pharmacists. I don’t. I don’t want to. I want everybody — I don’t want to have any of those cases. I don’t want people to mess up. But sometimes, they do. And someone needs to take a look at that and see if there are processes involved. And if any chance I get, it’s like, hey, let me defend the pharmacist here. They did their job, and this is not on them. So it just depends on the case. But I do get calls for those various cases as well.

Tim Ulbrich: That’s great. And I appreciate you sharing those two examples. And as I mentioned, I know the side hustle is something that we’re continuing to just try to feature different options. I mean, there’s unlimited options out there, so obviously the goal is to get people thinking. And I appreciate you taking time to come on the show to talk about personal finance education for students and for sharing a little bit about your career journey as well as the side hustle. So before we jump off, one of the questions I like to ask our guests on the show is, is there a book or a podcast or a resource that either has inspired you or that is currently inspiring you that you would recommend and share with our audience?

Brent Rollins: Well for me, obviously, like I said, sports superfreak, so most of the things that I do listen to or read are sports-related.

Tim Ulbrich: Yeah.

Brent Rollins: But from a personal finance standpoint, I think you’ve touched on it and talked about it before, but the book that really changed how I do what I do and what we do as a family for personal finance was David Bach’s, “The Automatic Millionaire.” And that was the first one that really — because I even started as soon as I graduated from school setting up those things where it came out instantaneously on certain days of the month, money comes out.

Tim Ulbrich: Automation.

Brent Rollins: And everything gets automated, it’s still to that way to this day. And you just don’t worry about it. It’s not something — well me, sadly, I check most all of these accounts daily, unfortunately. It’s an OCD-ness. But it was one that, you know — and I do that with students. We go through the latte factor, I’m going to pick on you that has the Starbucks cup in class today. We do various things in class that show like for example, just messing around with students, hey, this guy, you’re the bachelor guy, right? You’re the one that has the bachelor pad, you’re in Barkhead (?), sort of the ritzier area of Atlanta, and you’re hanging out and this is all — versus this person over here who’s in the ‘burbs, maybe with kids, and let’s look at your financial portfolio. So that was really the book that changed a lot of things for me.

Tim Ulbrich: That’s a great recommendation, “The Automatic Millionaire” by David Bach for those of you that haven’t read it. We also have talked a lot on the podcast about automation. Episode 057, we talk about it in great detail about the power of automating your financial plan, so I’d recommend that to the listeners as well. So Brent, thank you so much for taking time to come on the show. I appreciate your passion for this topic, I appreciate you sharing your journey. And as always, to the YFP community if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please leave us a review and rating in Apple podcasts, iTunes, or wherever you get your podcasts each and every week. Have a great rest of your week.

Brent Rollins: Thanks, appreciate it.

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YFP 111: How One New Practitioner is on FIRE

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One New Practitioner and His FIRE Journey

Jared Wonders joins Tim Ulbrich on this week’s episode. Jared is a 2012 graduate of the University of Findlay and currently works for the VA remotely doing home health care. Jared and Tim talk about how he and his wife, Jess, aggressively paid off their debt within a few years, how they got started in real estate investing, and how and why they are on a FIRE journey (financial independence, retire early).

About Today’s Guest

Jared Wonders graduated from the University of Findlay school of pharmacy in 2012 and completed a PGY-1 general residency at the Dayton VA Medical Center in 2013. Jess, his wife of two years, and Jared currently reside in Charlotte, North Carolina to pursue job opportunities and get away from the long Ohio winters. Jared has had the amazing opportunity to serve our nation’s veterans for the past 5 years as a Home-Based Primary Care Pharmacist at the Dorn VA Medical Center. Jess, who is also a pharmacist, and Jared are currently pursuing FI through a high savings rate mixed with real estate investing.

Summary

On this podcast episode, Jared Wonders joins Tim Ulbrich to give an insight of his financial journey since graduating in 2012 from the University of Findlay, how he paid off their debt within a few years, how they got started in real estate investing and how and why he and his wife Jess are on the path toward FIRE (financial independence, retire early).

Although Jared and Jess didn’t carry the debt load most pharmacists accumulate, $75,000 is still a large amount of money and requires a lot of intentionality to pay off. Jared and Jess were motivated to tackle their debt to have more opportunities in their life, have the ability to explore investments and not have to be tied to a job.

They caught the FIRE (financial independence, retire early) bug when they realized that they didn’t want to be stuck without options. Jared explains that they are trying to diversify their investments as much as possible by taking advantage of different retirement funds like the TSP offered through the VA, his wife’s 401(k) as well as looking into an HSA account.They also have two real estate investment properties and are pursuing brokerage funds like Vanguard. The real estate income is supplemental and allows them to have more control in regard to expenses with the properties. Traditional retirement vehicles are unable to be accessed until age 65 1/2 , so real estate investments provide cash flow sooner and also have tax strategies and savings. Additionally, Jared and Jess currently save 50% of their income or more. Jared says that it helps that they have two good incomes, but they also try to live frugally.

Jared discusses the purchases of their real estate properties next. He shares that the first purchase was full of pure excitement. He had done research for 8 to 10 months prior and was excited to finally take the next step in purchasing a property. The biggest issue he’s faced so far is having a good property manager, so he and his wife manage their properties. They put 20% down on a $170,000 home that’s now worth $190,000 to $200,000. They purchased the second property for $140,000 and it’s now worth $190,000 to $200,000 (paid $10,000 for renovation). Jared says that they are getting close to the 1% rule, meaning that rent should be 1% of the purchase price.

Although Jared enjoys his job, he shares that they are pursuing FIRE aggressively to create opportunities in the future. In the next 5-10 years, Jared envisions that they will focus on building more equity in their properties but will keep an eye out for good deals.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. Joining me is Jared Wonders, a 2012 graduate of the University of Findlay, who completed his residency training at the VA in Dayton and currently works for the VA in South Carolina remotely doing home healthcare. Jared and his wife Jess have a fascinating journey as two new practitioners that are on the path toward financial independence. Jared, thank you so much for joining me on this week’s episode of the Your Financial Pharmacist podcast.

Jared Wonders: Hey, Tim, I want to thank you so much for giving me this opportunity. Always good to meet a fellow Buckeye.

Tim Ulbrich: Absolutely. Go Buckeyes. So before we talk about what you’re doing with real estate investing, we’ve got some exciting late-breaking news on that related to your own journey. And before we talk about Financial Independent Retire Early, I really want to give our listeners some insight into your financial journey since graduating in 2012 from the University of Findlay, because I think all of what you did and laid the foundation has set you up on the path to be that you’re on right now, which is certainly one that I think is bright. So give us an overview of the student loan and the debt position that you and your wife Jess were facing at the point of graduation.

Jared Wonders: Yeah, absolutely. So when I graduated pharmacy school, I went and decided to go through the route of residency, so I did a residency in Dayton, Ohio, which is fortunately where my wife was actually living at the time, current wife. So we ended up moving down to North Carolina kind of just on a whim, and I was able to find a job in South Carolina working as a pharmacist. When I graduated pharmacy school, I had about $75,000 in debt, so definitely not the typical debt load that you might see with some pharmacists graduating.

Tim Ulbrich: So this is all your debt, then, not Jess’ debt.

Jared Wonders: This is all my debt. She came to the table with no debt at all. So I definitely married up in that situation for sure.

Tim Ulbrich: Well done, yes.

Jared Wonders: Yeah, so she actually was very fortunate. She went to the University of Toledo, a public school, and actually worked as a TA. So she did not come in with any debt whatsoever, which was great.

Tim Ulbrich: That’s awesome. And I think that speaks to, you know, I always talk with the students when I talk about student loans, say, “Hey, anything you can do to minimize the amount of debt at graduation makes all the difference in the world.” And here I think that’s certainly a case where being aggressive and whether it’s support from parents, scholarships, TA, anything students can do to minimize that debt load will pay off in the long term. So even though you didn’t have $160,000 like is the national average right now, $75,000 is no small chunk of change. And it still requires being intentional to get it paid off in such a short period of time. So tell me about the motivation. Why were you and Jess so adamant about aggressively paying off this debt?

Jared Wonders: Yeah, absolutely. My motivation was definitely just to have more opportunities and to kind of just give my life some sort of purpose. And I think that the one thing that really kind of catapulted me into really being aggressive with paying off my loans was actually, honestly, getting married to Jess because that just kind of gave the motivation I really needed and really thought that — you know, because I needed to provide for not only myself, but I needed to provide it for my wife. And I knew by being able to do that, paying off these loans would not be necessarily hog-tied to a job if I didn’t want to do it and would maybe be able to pursue more opportunities as far as like investments or real estate, whatnot. Yeah. So that’s pretty much where the motivation came from, honestly.

Tim Ulbrich: Yeah, options, options, options, right? Once you have that off your back, I mean, the rest of the story, you’ve got a lot of opportunities ahead. And we’ll talk about some of those here in a minute with real estate investing and other things. So one of the questions I want to ask you — because I think often, I’ve seen where whether it’s two pharmacists or not, couples may or may not be on the same page in terms of how aggressive they want to pay off the debt. Sometimes, there may be competing priorities like home or investing or cars or other things. Was this something that you and Jess had to work through to get on the same page? Or were you both of this mindset of hey, we need to aggressively get this off our plate?

Jared Wonders: Yeah, I think that for the most part, we are on equal pages I think for the most part of kind of going forward in that process. It did take us — of course there were some definite times where we were kind of like, well, maybe we don’t need to be necessarily as aggressive as we need to. But for me, I guess it was — actually before our marriage, I really wanted to try to get all my loans paid off before we got married. So it was one of those things where I wanted to make sure that happened, and I actually worked an extra pharmacy job in retail as well just to make sure, ensure that happens.

Tim Ulbrich: So did you guys go all in to get the $75,000 paid off? Meaning that you delayed other goals such as savings and other things? What was your approach to pay off the debt in the context of balancing other goals?

Jared Wonders: Yeah, no, that’s a great question. So we actually went the unconventional route, possibly from the Dave Ramsey crowd, and we actually did buy a house before we had all my debt paid off. We bought a house together before we got married, but it ended up working out. Obviously it worked out very well.

Tim Ulbrich: And we actually did an episode — I can’t remember it off the top of my head, we’ll reference it in the show notes — we did an episode on what we think are some of the pros and cons and some of the considerations around the Ramsey plan that people should think about. It’s certainly not a one-size-fit-all. I think for certain people, the steps are spot-on, exactly what they need. For others, depending on personal situation, how much debt you have, what else is going on, so I think certainly for the two of you, that made sense in the route that you went.

Jared Wonders: Right, and honestly, the interest rates were only going up at that point, so we kind of just wanted to lock in what we got.

Tim Ulbrich: Yeah. Now they’re finally coming back down, right?

Jared Wonders: Exactly.

Tim Ulbrich: It’s crazy, my wife Jess and I bought a home in October 2018 here in Columbus.

Jared Wonders: Oh yeah, congratulations.

Tim Ulbrich: I think it was a 4.62% interest rate, and now we’re back down to the 3.7-3.8%, something like that.

Jared Wonders: It’s crazy.

Tim Ulbrich: Yeah. So let’s talk about FIRE, Financial Independence Retire Early. And in Episode 104, we covered the basic tenets of FIRE. Again, Financial Independence Retire Early. So I don’t want to spend too much time rehashing exactly what is FIRE but rather talking more about specific plan that you and Jess are taking around FIRE and why you’re taking that route. So talk to me about why you caught the FIRE bug. What was in terms of why this concept of Financial Independence Retire Early really stood out to you as an option that you want to pursue? And really, what is the goal? What are you trying to achieve when it comes to FIRE for your personal situation?
Jared Wonders: Yeah, that’s a great question. Honestly, I think the most important thing is when pursuing FIRE, having a why. So you really need to have that why in order to really, I guess just really make it happen and really kind of just studying those goals and attaining those goals. So mine, honestly the thing that kind of pursued me and kind of got me into it was honestly like just really trying to not be stuck at a job or position I didn’t necessarily want and having those options to pursue if I really wanted to and you know, not having those golden handcuffs, if you will, and just being able to really not necessarily be hog-tied to a job for 30 or 40 years.

Tim Ulbrich: Sure. Yeah. I mean, again, options, like we talked about. And in Episode 104 when we interviewed Jason Long, he had retired at the age of 38, self-made millionaire, and he gave a lot of really good specifics about the amount and the calculations and how he determined that and how he was saving and a distribution plan. So what is the goal? Have you guys defined a number? And how aggressive are you saving to try to do that and the investment strategy in getting to that point?

Jared Wonders: Yeah, I mean, Jason has an absolutely terrific story. I would definitely reference that or definitely check out that podcast episode as well. But honestly, what we’re doing right now is we’re really trying to diversify as much as we can. So we’re taking advantage of the retirement accounts, we’re taking advantage of the TSP through the VA, which is an absolutely terrific retirement program. My wife is taking advantage of her 401k. We actually just recently looked into doing an HSA as well, so you know, the high deductible plan. The HSA we found out just is an absolutely terrific vehicle for those who haven’t looked at it. I know that you guys have done some research on that as well in previous podcasts. One of the things we stumbled upon is real estate, of course. And I mean, honestly, what we’re doing right now is we’re saving probably around 50%, maybe a little bit higher, of our income, and we’re trying to pursue those active investments like some of the brokerage funds, like doing some Vanguard, but also trying to attain our goals in real estate as well.

Tim Ulbrich: So let me talk about that for a minute because I think some pharmacists hear that and say, “Jared, 50% of your income? Like how is that even possible when you just think of life’s expenses and housing?” So what are you guys sacrificing? What are you giving up? What have you minimized costs in other areas so that you’re able to both save in traditional tax-advantaged retirement vehicles, you mentioned those: TSP, 401k, HSAs, but also be able to then build up cash reserves to get involved in some real estate investing? How are you doing that? And what are you giving up to be able to do that?

Jared Wonders: That’s a great question. We obviously have the advantage of having two great incomes right now. But I mean, for how we’re doing that is I would say we don’t do fancy stuff, honestly. We’re trying to live frugally. I mean, we’re still going out and enjoying ourselves from time-to-time, of course, but we have a goal and we have a mindset of when we want to retire, when we want these future assets to be utilized for our kids. So we just have that goal and are really focused in on that goal, on what we want to do. So honestly, that’s just kind of what’s kind of pushed us forward and getting us to that point. So it’s really just a lot of mindset. Honestly, you know, there is a little bit of luck that’s involved, but I believe that I’ve heard this reference on I think Scott Trench referenced it, but luck is the intersection of preparation and opportunity.

Tim Ulbrich: Amen.

Jared Wonders: So just being able to find that aspect and being able to prepared and kind of make yourself prepared for what’s coming I think is incredibly important.

Tim Ulbrich: So you mentioned an interested in diversifying in real estate, so let’s talk about that for a few minutes. Why real estate investing? And what do you see as the advantages of doing that and why you want that to be such a big part of your financial plan going forward?

Jared Wonders: Yeah, I think the biggest thing for us is that supplemental income that you can get through real estate. If you are a little bit more aggressive and have a paid-down real estate portfolio, then you have an income coming in, and it’s not through dividends, it’s not through other things. And I think that one of the greatest things that I love about real estate is the control that you have. So we currently have two properties that — and it’s obviously not like a huge portfolio — but we are able to control basically every single aspect when it comes to expenses, when it comes to income. I mean, there’s obviously things you can’t control like some capital expenditures and things, but you know, I can see a property and I can be like, “Oh wow, there’s carpet there. There’s a value-add. We can put in vinyl plank and the property look more appealing to renters,” those types of things. So it’s just a lot of different opportunities and things that you can do with a particular property that really just make it look better and make it more appealing for someone to actually live in.

Tim Ulbrich: Yeah, one of the things I enjoy — just building off of what you said there — that gets me excited about real estate investing, we’ve talked about it before on the show why I think it’s a good fit for our community to consider, and obviously, I don’t want to minimize, there is risk involved, of course, with anything. But when you think about traditional retirement vehicles, you think about accessing those at the age of 59.5, and this obviously is an opportunity to generate some cash flow sooner. It’s an opportunity to be able to have some different tax strategies and savings. But also, one of the things that I really enjoy in thinking about this — you and I talked about it before the show — is if you have that tolerance of risk, it’s I think a really fun challenge to think through. It’s a very different mindset in how we typically think as pharmacists. And there’s no ceiling on the opportunity in terms of what you’re able to do. Obviously, there’s limitations in terms of how much cash you have to invest and other types of things. But talk our audience through the IDEAL principle because I think that really helps frame the relevance and importance of why pharmacists out there may want to consider real estate investing.

Jared Wonders: Yeah, absolutely. And as pharmacists, we have the opportunity I think to actually invest in real estate and use our capital because of our good salaries as well, so because of our good income. And yeah, we had mentioned the IDEAL principle, the acronym IDEAL, which I like to use in real estate because it’s kind of a good way to kind of understand the different ways you can actually make income or offset some of your expenses that you have in real estate. And I, of course, can’t take credit for this. I’m going to give a shoutout to Bigger Pockets and Andrew Syrios, and I can’t remember the other brother, but the Syrios brothers in one of the earlier episodes, they mentioned this principle. The I stands for Income, so income being cash flow that actually comes from the property after all your expenses are paid off and everything is kind of paid off with the property. D stands for Depreciation. So the government sees the house or a home as a depreciating asset, kind of like a car or like a vehicle. So they mark it off on 27.5 years, so you basically buy a property for $100,000. They use that asset, and they divide it by 27.5 years, and you can use that depreciation to offset some of your income that you make going forward. There are some caps like as far as like income and stuff goes, so you definitely don’t want to buy a property just for tax purposes. But definitely something to look into and check out. The E stands for Equity, so as a tenant is paying off or giving you rent money, they’re actually already paying down the mortgage. Your mortgage principle is being taken down. The A stands for Appreciation. So properties typically appreciate in value, but you mentioned risk, like you said before. So 2008-2009 can happen, of course. But properties typically over a long period of time do appreciate. And then the L standing for Leverage. Now, my wife and I take a little bit less of a stance on leverage. We have leveraged two of the rental properties that we’ve bought, but we’ve bought them in a position of financial strength, which I think is incredibly important when you’re delving into real estate because we put 20% down and we have stable jobs and incomes and we’re able to kind of offset — and when we went into this going forward, we wanted to make sure that we had the reserves in place to be able to cope for anything that comes up because problems will come up. I will give you an example of one that just came up. So we had a storm come through in North Carolina, and a couple branches fall down, and you know, that’s just something that we have to deal with. I mean, stuff comes up.

Tim Ulbrich: Got to have cash reserves. Yeah, and I’m glad you mentioned that because I think, Jared, I think it’s easy to listen to something like “Bigger Pockets,” and you get all fired up and it’s like, man, I want to go buy a property tomorrow. And I think building a strong foundation — so obviously, you guys were in a position, no debt, you have reserves, I’m guessing you’re in a good equity position in your home, you’re putting 20% down, so obviously if things happen, which they will, you’re in a position to be able to handle them, market dips 5%, 10%, 15% next year, who knows what will happen, you’re able to weather some of those things and continue to move on with that plan without it being derailed. So I did just find the “Bigger Pockets” episode you were mentioning. It’s Episode 121. We’ll link to it in the show notes. “Creating the IDEAL Real Estate Investing Business with Andrew and Phillip Syrios,” and we’ll link it to our show notes for those that want to learn more about the things that you mentioned with IDEAL. So talk us through that first purchase because, you know, when I’m listening to the “Bigger Pockets” podcast, I often hear them say, “It’s about doing the first deal and getting it done.” Obviously, you don’t want to lose your money, but it’s about learning, it’s about actually doing the deal because I think so many people learn, learn, learn, read, read, read, but don’t actually do the deal. And obviously, the second one becomes a little bit easier, the third, the fourth, and so on.

Jared Wonders: Yep.

Tim Ulbrich: So when you were getting ready to do that first deal, what did that look like? And how fearful were you in that process? And what made you decide to actually finally pull the trigger?

Jared Wonders: So like I would say that the first deal was pure excitement. Like I was so pumped about this first deal because I had probably done research for 8-10 months, I did a lot of research on “Bigger Pockets,” I listened to Paula Pant. It was one of those things where I think another important thing is having an accountability partner to kind of pull you back a little bit. So my wife is my accountability partner and kind of pulling me back a little bit. The first property, I mean, it was definitely one of those things where we thought it was a good buy. And it was a good buy, and we bought it in a great area. However, we did make a lot of mistakes. That is something that I think that when you make a mistake, you can’t let it define you. You kind of have to work through it. And I think it makes you stronger on the other end of it. But you know, like you said, you have some issues that come up, of course. I don’t know if you want me to — I can give some examples because it definitely happened quite a bit. But the first one that we bought was not like a value-add, so it was one that was probably — it was pretty much rent-ready when we bought it.

Tim Ulbrich: OK.
Jared Wonders: So we were pretty much ready to have a tenant and basically move into the property. The biggest issue that came up with us was we vetted property managers, however, we probably didn’t vet them as well as we should have. So we had not a great experience with property managers, which is actually —

Tim Ulbrich: It’s funny how often you hear that.

Jared Wonders: What’s that?

Tim Ulbrich: It’s funny how often you hear that. I mean, they talk about that on the show all the time.

Jared Wonders: Oh, yeah. You really need to manage your manager. Like I can’t emphasize that enough. And honestly, for me, it’s definitely busy managing it — like we self-manage right now. It is busy, but it’s more rewarding, I think. And you get more of that control aspect back because you lose that control aspect of real estate when you do have a property manager do it. But like I said, if you have a really good property manager that you trust and is really good, then definitely — well, either send them my way —

Tim Ulbrich: Yeah, right?

Jared Wonders: But no, it’s definitely very important to have great processes around you.

Tim Ulbrich: Getting a little bit more detail if you’re willing to share, how did you guys finance that first property? What was your strategy for finding the deal? How much was the property that you’re purchasing? Because I think our listeners may be thinking, hey, I’m really interested in this, but what are we talking about here? Like what would I maybe need in terms of cash and things to get started with that first deal?

Jared Wonders: Yeah, absolutely. So we put 20% down. And Charlotte is a crazy market right now, so we purchased outside of Charlotte a little bit in an area called Lake Wiley, which is a little bit south of Charlotte. It’s in South Carolina. And that was one of those things where we purchased, like I said, 20% down, so we put in about $40,000 into the deal. The property itself was about $170,000. It’s probably worth about $190,000-200,000 now, so definitely not like a property like with a big value-add, like I said.

Tim Ulbrich: Is it a single family?

Jared Wonders: It is a single family rental, yes.

Tim Ulbrich: OK. And conventional loan, 20% down?

Jared Wonders: Conventional loan. And I should probably talk about how we found the deal too. So we honestly just had a realtor that we liked, we trusted, and he would just give us leads automatically through email. And this popped up on a Saturday. I was like, oh, this is kind a cool-looking property, nice area. I checked out the area, and he responded right back. So I think having a really good realtor on your side, especially for that first deal, is really important because having a very responsive realtor is great because you can go in and see the property that same day and really check into it before it’s popped up, especially if you’re in a hot market like Charlotte is.

Tim Ulbrich: So your goal with this first property is buy-and-hold, is that correct?

Jared Wonders: Yeah, correct. That’s honestly our focus for most — actually all — the two properties that we have right now is buy-and-hold, yeah.

Tim Ulbrich: And the second one, you mentioned before we jumped on, had a little more rehab and other things involved?

Jared Wonders: Yeah. The second rehab that we had, we might have it — we talk about the acronym BRRRR, which is Buy, Rehab, Refinance, Rinse and Repeat, which we could possibly do for this property but definitely more of a value-add. We purchased this one at $140,000, and it’s probably worth about $190,0000-200,0000 now with about — I think we spent $10,000 to renovations.

Tim Ulbrich: OK.

Jared Wonders: So there is a pretty good amount of equity buildup in there. And we kind of are trying to get close to the 1% rule, which where you buy a property for — so I’ll use my example, the $140,000. So you buy a property for $140,000, and we’re actually going to be renting it out for $1,400, which is right at that 1% rule purchase price. And that kind of usually takes care of most of your expenses, your property management if you do want to pay for property management, repairs and maintenance that come up, and vacancy, of course.

Tim Ulbrich: So to our listeners that are hearing some of this for the first time and thinking, this is awesome and I’m cracking along but I’ve got these questions, stay tuned. We’re going to be bringing a lot more content on the podcast, on the blog, around real estate investing and trying to do some more education. Obviously, Bigger Pockets is a great resource, fantastic resource as well, and we’ll continue to bring more into the future going forward. Going back to the FIRE — and obviously, real estate investing is playing a big part in that, I want to talk about the concept of Financial Independence Retire Early. And the reason why I’m thinking about this is I’m going through re-reading — actually that audio book, so I guess re-listening — “Four-Hour Workweek” by Tim Ferriss, which is a fantastic read. And it really has me thinking more and more that the concept of early retirement is somewhat overhyped and somewhat overrated, although I think the Financial Independence piece is incredibly important. And obviously, I’m making broad generalizations. This is a unique situation for everyone. But when I hear you talk and we had our previous conversation that you really enjoy your job, you’ve got great benefits, you’re working with the VA, pharmacists have great scope of practice. I think you’re probably practicing at the top of your license, you’re teaching students and residents, so really doing a lot of neat things. And so some people may be thinking, why in the world are you so aggressively chasing Financial Independence Retire Early. So talk to us about that. Is it more about the FI, Financial Independence for you? Is it about the options? You never know what may change in the future. Give us some more input on that.

Jared Wonders: It’s more about opportunities. I think having the — I believe that Jim Collins referred to it as F-You money, so have the financial resources and those funds to I guess make it happen and just kind of pursue opportunities that you wanted to pursue that may not have been possible if you didn’t have that income at your disposal I guess. So I think that’s kind of the biggest thing why we’re pursuing this. And I’m the kind of guy that I want to be there for my kid when he has a game. I want to be there for my kid. I don’t want to be stuck at work all the time and like have to have that be something that I’m tied down to. So it’s just all about opportunities and all about something that I can pursue in the future. If something comes up, and I like it, then I’m probably going to try to do it.

Tim Ulbrich: I love that. And I even love how you shared practically what you guys are doing. It sounds like you’re kind of carving out 50% of your income, some of that going to maxing out 401k’s and TSPs, some of it you’re saving up cash for real estate so you’re ready to put money down, you’re ready to do a rehab. And then obviously, you’re going to build equity in those homes and they’re further going to generate cash flow and other types of things. So a mixture of tax-advantaged retirement savings and real estate. But I think that gives our listeners one example of a road map of something you may follow if this is an area of interest. So I’m hopeful you and Jess have had some of these conversations, you know, I’m guessing you have because your story’s awesome and what you guys are doing is pretty aggressive. But what does success look like for you guys in 5-10 years in terms of where you’re at with savings, where you’re at with real estate, maybe you have other goals and things that you’re thinking about? Where are you hoping to head in the next 5 or 10 years?

Jared Wonders: Yeah, honestly, that’s awesome. I really appreciate you asking that. So I think that the biggest thing for us is we’re probably slowing down after the second one because it’s a little more rehab, a little bit more work. It was great because I tell you, I know a lot of stuff about homes that I definitely did not know before going into the second one. So that has been really interesting. So I think we’re probably going to slow down the real estate just a little bit, maybe build a little bit more equity in these homes because I think that for us, having that income at our disposal with a fully paid-off rental property is really important to us. So that’s something that we’re going to be pursuing. But we’re definitely going to keep our eyes open for deals if they come up. And if we spot a real estate deal that we like or even could partner on or something like that, that’s something that we’re definitely going to consider taking on for sure because we really like it, we like the process, and it’s something that we both really like, really enjoy.

Tim Ulbrich: That’s good. And I think that makes all the difference when the two of you are on the same page and getting excited. And you mentioned accountability partner, which is awesome because I think that getting on the same page is so critical to be able to achieve the dreams and the visions and the why that you guys have identified for your family. Do you have — outside of Bigger Pockets and the things that you’ve mentioned, do you have a book, a podcast, a resource, something you’d recommend to our community that either has inspired you in your journey in the past or is currently inspiring you in your journey towards this quest of Financial Independence?
Jared Wonders: Oh my gosh, there’s so many. But I’ll list my top three that I really enjoy. My first one is the guys at ChooseFI are absolutely incredible. Jonathan and Brad Barrett are just outstanding to listen to.

Tim Ulbrich: One of which is a pharmacist. That’s cool.

Jared Wonders: And Jonathan was a former pharmacist. Like that was one of the things that really got me hooked on the FI, honestly. The second one is Paula Pant. Paula Pant’s interviewing skills are just terrific. I would encourage anyone that is pursuing FI to listen to the Suze Orman episode because that is just an absolute hoot to listen to.

Tim Ulbrich: That’s a good one.

Jared Wonders: It will get you fired up if you’re wanting to pursue FI. But she is a great interviewer, and she’s outstanding on her FI journey and does a lot of real estate and everything. My third one is Chad Carson. He just recently had a book come out, and I think it was called “How to Retire Early on Real Estate.” That kind of was a little bit more in tune of me and Jess’ goals as far as like not — we don’t want to be real estate moguls and have thousands of properties. We want to just have a couple properties, kind of give us that cash flow, and kind of be able to just kind of live on that in the future and have those options. So that was an incredible read.

Tim Ulbrich: Awesome. And that book, “Retire Early with Real Estate: How smart investing can help you.” So we’ll link to that in the — or “How smart investing can help you escape the 9-5 grind and do more of what matters.” So we’ll link to that in the show notes. So for our listeners that have heard your story, are fired up and say, hey, I’d really like to get in contact with Jared, how can our listeners reach out to you if this is something they’re interested in learning more about?

Jared Wonders: Yeah, reaching out to me on Bigger Pockets is great. And I’m actually not really on social media too much, so Bigger Pockets is probably the biggest social media advocate or arena that I’m in. You can honestly just shoot me an email too. [email protected].

Tim Ulbrich: Awesome. Yeah, and for those not familiar with the Bigger Pockets community, easy to sign up. And from there, you can connect with others. I would highly recommend that as well. And to our listeners that are interested in learning more about FIRE, again, make sure to check out Episode 104 of the podcast where I interviewed Jason Long about his journey, including how he retired from community pharmacy at the age of 38 as a self-made millionaire. And I’d also recommend the blog post written by Jeff Kymer on our site, “The FIRE Prescription: How to retire early as a pharmacist,” which is available along with all of our blog posts at YourFinancialPharmacist.com/blog. So Jared, thank you so much for reaching out, No. 1, No. 2, coming on the show. You have got me fired up, and I enjoyed both of our conversations. And I have a feeling this is just the beginning to hopefully some exciting collaborations and future with the community as well. So thanks for coming on the show.
Jared Wonders: Absolutely. And I want to say congratulations again for getting to 100 podcast episodes, that’s incredible.

Tim Ulbrich: Thank you, appreciate that. And as always, to the YFP community, if you like what you heard on this week’s episode of the Your Financial Pharmacist podcast, make sure to leave us a review and rating on iTunes, Apple podcasts, Stitcher, Spotify, or wherever you get your podcasts each and every week. As always, we appreciate you joining us for the Your Financial Pharmacist podcast. Have a great rest of your week.

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