October 2020 – Your Financial Pharmacist

YFP 176: How Stephanie Got $72,000 Forgiven Through TEPSLF

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How Stephanie Got $72,000 Forgiven Through TEPSLF

Stephanie Hale shares her journey applying for and receiving Public Service Loan Forgiveness (PSLF).

About Today’s Guest

Stephanie Hale, Pharm.D., BCPS is a pharmacist for WellSpan Health System in south central Pennsylvania. She completed her pre-pharmacy studies at Rutgers University and the University of Maryland, Baltimore County. Stephanie then completed her Doctor of Pharmacy degree at the University of Maryland School of Pharmacy.

While enrolled at the University of Maryland School of Pharmacy, Stephanie worked as an intern for Wal-Mart Pharmacy. Upon graduation in 2008, Stephanie practiced retail pharmacy at Wal-Mart. In 2009, looking for a change, she accepted a staff pharmacist position at WellSpan Health and courageously transitioned from the comfort of retail pharmacy to the diverse world of hospital pharmacy in a Trauma Level 1 hospital. Within 2 years, Stephanie was promoted to a Clinical I Pharmacist position giving her the opportunity to participate in patient specific dosing regimens including pharmacokinetics, total parenteral nutrition, and anticoagulation. During her time at WellSpan York Hospital, Stephanie earned her BCPS certification and was a member of various committees, all while having and raising two wonderful children.

In 2019, Stephanie transferred to WellSpan Gettysburg Hospital. With her vast experience and knowledge, Stephanie immediately became an integral member of both their inpatient staff and the outpatient infusion team.

Earlier this year, Stephanie’s federal loans were discharged through the Public Service Loan Forgiveness program. Stephanie and her husband are looking to use the money that is no longer going toward those monthly payments to explore real estate investing.

Summary

When Stephanie Hale graduated pharmacy school in 2008 she had about $100,000 of federal student loans and $20,000 of private student loans. After the six month grace period, Stephanie was left feeling overwhelmed with what to do, so she consolidated the loans so she’d only have to make one payment a month.

In 2016, one of Stephanie’s colleagues that had recently graduated began talking about PSLF at work and how he was pursuing it. This caught Stephanie’s attention as she didn’t know what it was. After looking into PSLF, she realized that she worked for the right type of employer and was approaching her ten year anniversary at her hospital. She transferred her loans to Fed Loan Servicing in September 2016 and learned that the repayment plan she was in didn’t qualify for PSLF forgiveness. She needed to be in an income-driven repayment plan, however this would have increased her monthly payments significantly. She put PSLF on the back burner and circled back to it in 2018, this time discovering that TEPSLF (Temporary Expanded Public Service Loan Forgiveness) could be an option for her.

After researching TEPSLF’s requirements and with a lot of patience, perseverance, organization and diligence on her part, Stephanie was granted forgiveness for over $70,000 of federal student loans in May 2020.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Stephanie, thank you so much for taking time to come on the show.

Stephanie Hale: Hey, thank you for having me. Hopefully I’m able to help anyone who’s thinking about going through this journey.

Tim Ulbrich: Really appreciate your willingness to do that, and I think it certainly is going to be the case and excited for everyone to hear your story. And we are often asked if PSLF is a viable option and if pharmacists should even consider it given all of the news and attention that it has received. And so when I saw your comment on the YFP Facebook group about receiving forgiveness through the TEPSLF program, I knew we had to bring you on the show because I think it’s going to do exactly that — it’s going to give some more information and perhaps some will realize maybe they’re eligible for something they didn’t know they were eligible for, weren’t thinking they would meet that eligibility criteria, and it’s going to be an example for someone who has actually walked down this path and received that forgiveness. So before we dig into your PSLF journey — or I guess your TEPSLF journey, however we want to say it — I’d love to hear more about your background in pharmacy, where you went to school, and what your career story has been thus far.

Stephanie Hale: Yes, so I did my undergrad at Rutger’s University in New Jersey. I did a year there before deciding I was going to transfer to be closer to home. So I did another year of undergrad at the University of Maryland-Baltimore County. And then the following year, I started at the University of Maryland School of Pharmacy in Baltimore. So I graduated in 2008 from pharmacy school and throughout pharmacy school, I was an intern at Walmart and I figured that’s what I was going to be doing. I enjoyed it a lot. And then about a year out, I decided that I wanted to try something different. So I had called one of my location sites a local hospital, and luckily they were hiring. And so I started there September of 2009.

Tim Ulbrich: Awesome. Very good. Thank you for sharing that. And I think it’s a good segue into our discussion about the debt journey and ultimately, the forgiveness journey. So let’s talk a little bit more about student loans. You get to the point of graduating. So tell us a little bit about how much you had at that point, how you felt about the debt while you were in school, as well as while you were making that transition and that point in time what your plan and strategy looked like to ultimately pay back the student loans.

Stephanie Hale: Yeah, so while in school, I just figured hopefully I’ll graduate, I’ll have a great job that makes good money. So I will pay it back. So when I graduated, I had roughly about $100,000 in federal loans and about $20,000 in private loans. And after graduation, you know, you had about six months’ grace period. I got to looking into everything with all the paperwork they sent you. It was a little overwhelming. And so I decided at that point to consolidate my federal loans. I was like, I’m going to miss a payment if I don’t consolidate. I forget how many different lenders there were. So I did consolidate, which proved to be helpful later on.

Tim Ulbrich: Very good. And at that point, was PSLF even on your radar? And if not, when did that come into play?

Stephanie Hale: So I think PSLF was new in 2008, so it was not on my radar. So I had consolidated to a 30-year loan, decided I’m just going to pay for 30 years, and this is the way it’s going to be. At the time, I wasn’t married but I was engaged to my husband. And we were planning for a wedding, so I figured 30 years is what we could afford at the time, we were paying for an apartment at the time, so I had just had thought OK, well it’ll be 30 years, and we’ll see what happens.

Tim Ulbrich: Awesome. So looking at a long 30-year timeline at that point, obviously as you mentioned, PSLF was new, so enacted in 2007. So that was the first group, wasn’t even eligible for receiving that tax-free forgiveness until 2017. So one of the things that we have talked about on the show before is that I think for individuals such as yourself that graduated in that time period where shortly after PSLF was enacted, legislatively, you know, while that happened, there wasn’t a whole lot of good guidance around what folks should do. And I think like there was certainly much better advice that’s out there today. So many folks out there may be unaware of the options as well as whether or not they were PSLF-eligible. So when did PSLF then come on your radar?

Stephanie Hale: So I had been working at the hospital, and I think around 2016 or so, a colleague of mine was talking about it. He was newly graduated, he started working there, and he’s like, I’m going to be doing PSLF. What’s that? So I looked into it, and I was like, well, I guess it doesn’t hurt to try. So in doing that, you have to transfer your loans to FedLoan, so I did that. That was about September 2016. And I did get the denial saying my loans did not qualify. So at that point, I kind of just put it on the back burner and didn’t even think about it for awhile.

Tim Ulbrich: And when they sent you that rejection in 2016, and then you mentioned putting it on the back burner, what was the rationale for the rejection at that point in time?

Stephanie Hale: I would have had to change income-based payments, and the payments would have been a lot more than I could afford at the time. I believe it was going to be — my payments were roughly $600. And I think that they were going to go up to like $1,100 or $1,300. And we had already at that point bought a house, I had one kid, thinking about having another. So I was like, I don’t think we can do this. So at that point, I had been paying my loans for almost 8 years. And I was like, well, I’d have to start all over again and be another 10 years and by that point, I’ll have been paying 18 years. And I didn’t know if it financially made sense.

Tim Ulbrich: Sure, OK. So I want to make sure I’m summarizing correctly because I think this is such an important part of your story. At this point in time, 2016, you hear about PSLF, you obviously have been in the workforce, you’ve been working for an employer that would count as a qualifying employer, and obviously you’ve been making federal student loan payments all along the way. But you weren’t in a qualifying repayment plan. And so obviously the pieces here that we need to consider would be one, you’d have to get into a qualifying repayment plan — and we’ll talk about the logistics there with TEPSLF — but at that time, that would have meant a significant bump in payment per month, an extra $600 or $800 per month, which obviously is significant. It matters. But you did make the change in terms of FedLoan servicing as your servicing company, which would have been the loan servicing company for those that were pursuing PSLF. So that door was still open.

Stephanie Hale: Yes.

Tim Ulbrich: And then fast forward a couple years, and why did you end up coming back to this in 2018?

Stephanie Hale: So like I said, I was just going about my business and I don’t know — like I said, I saw it on Facebook or I saw it just scrolling through the news about TEPSLF. I’m like, oh, what’s this? So I started reading it, and I was like, I think I might qualify for this. And that was I want to say August of 2018. And at that point, I’d had a second kid, working full-time. So very busy. So I actually didn’t look more into it until I think it was closer to December when I actually sat down and I was like, I need to look into this and see how I can go about this. So I knew that I was coming up on 10 years with my employer and I had the correct type of loans, I knew I just didn’t have the right type of repayment plan.

Tim Ulbrich: Perfect. And insert there Temporary Expanded Public Service Loan Forgiveness. And so I want to take a few moments to do some education on the terminology for those that may be hearing some of this for the first time. So Stephanie, hang tight —

Stephanie Hale: OK.

Tim Ulbrich: — for a few moments, and we’re going to come back here to the story and learn more about the execution and ultimately what happened at the end for you. So TEPSLF is Temporary Expanded Public Service Loan Forgiveness and really is intended for exactly what we’re talking about here today. Folks that may be working for a qualifying employer, who have been making what would be qualifying payments in terms of federal student loan payments, but are often in the wrong repayment plan. And that can be for a variety of reasons. And to be fair, this isn’t extremely easy to navigate. And so I think sometimes there’s issues around consolidation or people are often in an extended or graduated repayment plan, thinking they’re making qualifying payments, but they are not. Or folks such as yourself, Stephanie, where you may be looking back and saying, oh my gosh, I am working for an employer that is really the intended audience for something like PSLF but just didn’t think of it that way from the get-go, and therefore are now trying to look retroactively to see if this is an option. And so if folks want to learn more — and we’ll talk about the details of TEPSLF here in a few moments — we also talked about it on one of the recent Ask a YFP CFP episode, Episode 036 where Karen from Coral Springs asked the question around this — really this — being under the wrong repayment plan and what that meant for the TEPSLF application. Now, one other thing I want to talk about for a moment is just a brief history and the mechanics of PSLF. Now, we’ve talked about this on the show before. Episode 018, we talked about maximizing the benefits of PSLF. Episode 078, we talked about is pursuing PSLF a waste? And that was when there was a lot of headline attention and news that came out about only 1% of folks that were successful in achieving that PSLF forgiveness. And we felt like it was an important episode to really break down the data further. And of course, we talked about PSLF in “The Pharmacists Guide to Conquering Student Loans,” which is available at PharmDLoans.com. And so I think as we look at the history of this, it’s really, really relevant here as we look at Stephanie’s timeline in terms of what played out and the information that was available to her and ultimately, having to look backwards to correct some of this. So as we talk about PSLF, this is typically loan forgiveness, the loan forgiveness strategy that gets all the press — usually, for all the wrong reasons. And I think it’s important that we look at some of the history of why that is the case. The Public Service Loan Forgiveness program, PSLF program, was created under the George W. Bush administration via the College Cost Reduction and Access Act of 2007. Now, since the program’s inception, it’s faced significant political opposition from both administrations since Bush, since President Bush. President Obama proposed a cap of $57,500 for all new borrowers in his 2015 budget proposal to Congress. And then in 2016, the PSLF program was threatened this time by the Republican party with the congressional budget resolution that saw PSLF on the chopping block for the first time for all new borrowers. And since then, PSLF has remained an endangered species as both President Trump’s budget and the Republican-backed PROSPER Act proposed the elimination of the program for borrowers after July 1, 2019. Now, the good news is that those have all been proposals and talk, and despite its rocky past and uncertain future, we believe that PSLF is one of the best payoff strategies for pharmacists paying off their student loans if they meet the qualifying criteria because of what it means in terms of tax-free forgiveness and what you are then able to do with that money that otherwise could be going towards student loans that of course you could allocate to other parts of your financial plan. Now, it certainly has considerations. It has logistics. It has details. And you have to be crossing your t’s and dotting your i’s like we’re talking about right now. But assuming that those things are happening, it can really be a great option for many pharmacists that are facing significant student loan debt and certainly can be a viable path forward. Now, quickly on the rules for PSLF: You have to work for the right type of employer. We’re talking about that here with Stephanie’s story on this episode. You have to be working for a not-for-profit employer or government agency. You have to have the right kind of loan, and that’s really where TEPSLF comes in — and we’ll talk about that as well as the connection to the repayment plan. So that loan has to be a direct consolidated loan, and if you haven’t done that and you think you’re making qualifying payments, again, TEPSLF is an option to consider. Now, you also have to be in the right repayment plan, typically an income-driven repayment plan. You have to make the right amount of payments, 120 payments. And ultimately, you have to prove it when it’s all said and done to both apply for and receive tax-free forgiveness. So Stephanie, thanks for bearing with me as we went through that. Let’s come back to your story here. You’ve identified that you’re working for a qualifying employer, obviously you haven’t been making all the full qualifying payments because you weren’t in the right repayment plan. So you start to pursue the TEPSLF option to be able to then retroactively get those payments counted. So what did you need to do at this point in time to get to today where we now are at that point of where the money has been forgiven? What did you have to do to actually take advantage of the TEPSLF program and its requirements so that you could ultimately receive that tax-free forgiveness?

Stephanie Hale: Sure. So one of the rules of TEPSLF — and I’m going to read from their website — “to be eligible for TEPSLF opportunity, the amount you paid 12 months prior to applying for TEPSLF and the last payment you made before applying for TEPSLF must have been at least as much as you would have paid under an income-driven plan.” So I kept reading that and I was like, well, I’m not making income-based payments. My payments weren’t as much as I would have been paying, so after talking to the people at FedLoan, I decided that the best thing to do was to change to an income-driven payment plan. So I went ahead and did that. I applied in December of 2018 and the payments went from $580 up to $814. And so what I decided to do — at this point, like I said, we had a house, two kids — I decided to decrease what I was putting into my Roth 403b. I figured, you know, a year wouldn’t hurt so bad, especially if I qualified for TEPSLF and got these loans forgiven. So that’s exactly what I did. And so I applied in December and my first income-driven payment in February of 2019. And at that point too, I had asked about what was my history that they had because when applying for PSLF prior, they just said that I didn’t have the correct number of payments. But they never really told me — they don’t count how many payments you actually have for TEPSLF. They just look at your income-driven payments. So mine were at 0. And so they told me that they had some missing information I think in 2013 and they said, oh, we have those in some files that need to be converted. Just give us a call back in a couple weeks. We’ll let you know. I call back in a couple weeks, and they still didn’t have that information. They said, who told you that? Well, it will take us probably six months. I put it in my planner. So this is something that I recommend is definitely document all your phone calls and everything. I put it in my planner, I called back in six months, they’re like, no, we don’t have this converted. It’s taking a lot longer, and I don’t know who told you six months. It will be about a year. Like OK. So I just kept calling back, just to make sure that they were on top of things and making sure that they knew that I was looking into it. So I went ahead and applied for PSLF in April 2019 because I was told I had to go ahead and apply because they would have needed to know that I would have made income-driven payments for a year, not that I actually had to make the income-driven payments, which at the time didn’t make sense. I’m getting information from — different information every time I call. So like what does it hurt to go ahead and apply for this PSLF? So yeah, so that is one of the things. You have to apply for PSLF and get denied before you can — they look into TEPSLF. So I got denied for the April PSLF application in June. And then at that point, I had also submitted — you have to submit an email saying that you want to be considered for TEPSLF. And I got that denial for TEPSLF in September, that September 21. So then I went ahead and applied for PSLF again September 25 because at that point, I already had 10 years with my employer. So I figured, OK, well I’ll try for the 10 years even though it hasn’t been a year of income-driven payments. But we’ll see what happens. And ultimately, I got denied for PSLF in the end of October. And then for TEPSLF, it was just a few days after that this time. And that was — the reason for that was because I needed the payments the 12 months prior to applying for TEPSLF and the last payment had to be the income-driven payment. Then I waited and applied after my 12th payment in January, and that was January 10. I got denied January 30 for PSLF. And then I got denied for TEPSLF February 27. And actually, I found out that I was denied for TEPSLF probably about a week before I actually got the letter in an email. I had been making phone calls, probably I was calling at least once a week, sometimes twice a week, just to follow up. But yeah, so the week before I actually got the official denial, they had told me you don’t qualify because you need 13 payments. So when you apply for PSLF, there’s a box that you can check stating that you don’t want forbearance while they’re going through the paperwork. So I always made sure to check that box to make sure that I was still making payments, just in case anything happened like this. And I figured I would get the money back in the end anyways if I made too many payments. So at that point, I reapplied again, this was February 29, for PSLF. And I got the denial in March 12 for PSLF. And then I got a letter stating that I was being considered for TEPSLF May 13. And ultimately, I was forgiven May 27.

Tim Ulbrich: Wow. OK. I mean, a couple of things: This is great. And I appreciate the detail because I think it’s so important here. And as you were talking, you know, things that stood out to me were No. 1, patience.

Stephanie Hale: Yes.

Tim Ulbrich: But persistence. I mean, you went through multiple denials, making multiple phone calls, and obviously you saw the value that was going to come from having it forgiven. And I think showing to them as well, like you’re not going away, right? And so you know you’re going to make sure you get this taken care of. And if you qualify, you qualify. And you need to have that recognized. So definitely patience as many, many months and some years went by but also persistence in making sure you’re calling back and you’re following up. You know, the other takeaway I had there, Stephanie, was documentation. I mean, just so you can chronicle this verbally tells me you had great documentation along the way, which of course is important. And we’ve heard that before. We’ve discussed that before on this show. And if you run into issues, the documentation is important as well as I just think for your own sanity but also being able to prove that information in previous conversations in case you run into issues. And then I think I also heard that you’re really well-versed or at least learning along the way about the requirements and making sure you had good information and you were spending time to understand the rules and trying to interpret them so that if you were calling and you think you’ve got some erroneous advice or perhaps you’re getting different answers along the way, that when you called in, you knew that information, you could follow up with the information you learned, and you could continue to be persistent, obviously because there may be interpretations along the way, depending on who you were talking to.

Stephanie Hale: Correct.

Tim Ulbrich: So great. Yeah. I’m guessing you did get that right. I heard that you got some different input along the way when you called in. Is that correct?

Stephanie Hale: Yes. So I had learned that just because someone says one thing doesn’t mean it’s actually true. So I would call, someone would tell me one thing, and then I’d call again, someone would tell me something different. So I always made those notes. And I was like, well — I wasn’t sure what to believe. But if somebody said one thing and I hadn’t done that yet, I would be like, maybe I’ll do this instead. That’s why I applied early for PSLF those couple times. Like it didn’t hurt. And actually, I do feel like applying early those couple times kind of helped because it probably helped to move them along with counting my payments because they had already done that those couple times before. I feel like my process from February to May when I got forgiven went fairly quick compared to some of the other people that I’ve heard trying to pursue this. But like I said, I think it’s because I had applied before, and they had already had that information, me being persistent and following up.

Tim Ulbrich: And how much when it was all done, so you get to May 27, if I heard you correctly, it’s forgiven and it’s forgiven tax-free. What was the actual dollar amount that was forgiven?

Stephanie Hale: So my account balance, which I think included interested, was $69,900. And then I ended up getting about $3,800 back of overpayments. But then when I’m looking at the email of the amount of loans forgiven, it’s roughly $72,000. So I don’t believe that includes any of the interest.

Tim Ulbrich: Got it. OK. So a little over $70,000. And right now, your account balance is — so $0s are showing. Is that right?

Stephanie Hale: Correct.

Tim Ulbrich: That’s awesome.

Stephanie Hale: So one of the fun things I had learned was — so there’s an app that you can have on your phone. And when you try to log into the app if you’re pursuing PSLF or TEPSLF, once your loans have been forgiven, you’ll get this big “Caution” sign saying that you can’t log into your app, it’s no longer working. So I got that that morning. I was like, oh, this is a good sign. So then I went onto the actual website on my computer and was able to see the balance was $0.

Tim Ulbrich: That is awesome.

Stephanie Hale: So I was able to find out before they actually sent me the official notice.

Tim Ulbrich: Yeah, when you no longer can get in and the “Caution” flag, it’s a good day, right?

Stephanie Hale: Yes, it was.

Tim Ulbrich: I mean, you reached the finish line. And obviously you put a lot of hard work into this. And I think that’s what’s so refreshing, Stephanie, you know, to me, as I mentioned a couple times already, it’s just your persistence in this in terms of not only the process but making sure you felt like you were really understood the things and were getting your questions answered. But also, you know, to that, I think many folks are going to hear this story and say, “I had no idea I could look backwards and consider PSLF through this TEPSLF option.” So I think we’re going to have many people that are going to listen and are now going to pursue this, and they are probably going to hit the barriers that you hit along the way. And you know, they’re going to have to knock them down and be persistent, just like you showed us here and you demonstrated in your own story. But I sense this will give many people hope in their own journey and ultimately as we talk about the bigger picture here with your financial plan, what it means when you don’t have to be putting money towards student loans because you can allocate that elsewhere into your financial plan. So I want to just quickly outline for those that are hearing this and thinking, OK, maybe I qualify for TEPSLF. There’s really four steps that you need to be thinking about. No. 1, you have to check your PSLF eligibility. And we talked about that already throughout Stephanie’s story. Are you working for the right type of employer? The right loan? And as we talked about, that’s really where this TEPSLF comes in and really where the issues are in terms of making sure you’re in the right repayment plan, right number of payments, ultimately 120. And then you’ve got to be able to prove it and apply for that tax-free forgiveness. Now No. 2, as Stephanie mentioned, you have to show that you’re ineligible for PSLF. So you have to submit your application, and you essentially have to get denied and be determined ineligible. And then you really have to be looking at meeting the TEPSLF requirements. And that’s No. 3. And Stephanie talked about this with the need to switch to income-driven repayments, the number of payments that had to be made, and the dollar amounts associated with that. And for you, as you mentioned, that meant a temporary increase in payments, a little over $200 a month, which meant knocking down some of your retirement payments temporarily because you saw the bigger picture and what could be forgiven. And then finally, No. 4 is you have to request the TEPSLF certification, and you can do that through email. There’s actually not a form. So to do that, it’s [email protected]. Again, [email protected]. And we’ll link to that in the show notes as well as some information on studentaid.gov that actually includes some draft language and examples that you can use when doing that communication via email. So Stephanie, my final question for you, now on the back end of this and you went through this long journey to get here, you know, what does this mean for you and your family and your financial plan both monetarily in terms of having more cash flow available because it’s not going toward your student loans as well as just non-monetary, what this means in terms of having this off your back?

Stephanie Hale: Well, definitely a weight off my shoulders. I’m the breadwinner, so that was just something that was taking a toll on me and just even though I’d already been paying for 12 years or so, it was just — it was so nice to not have to think about that anymore. And financially, we’ve been tossing around the idea of getting into some real estate investing. But if we don’t do that, I mean, we do have two kids, so we want to start putting away more for their college and just being able to save more and have a more comfortable retirement or even be able to retire a little bit earlier.

Tim Ulbrich: Awesome. Yeah, that’s great. I mean, I think the options that are available certainly go up, whatever that would be as a part of your financial plan, and goals when you don’t have to make those payments anymore. Any words of advice you would have for folks that maybe find themselves in a similar position as you did where you already had several years in of meeting that employment qualification or even perhaps folks that are even more in the front end of this and really looking at this to say, is this really worth it, considering all the logistics and everything that you’d have to do? What thoughts and advice do you have for them?

Stephanie Hale: Well, I definitely want to say there’s a really good Facebook group called Public Service Loan Forgiveness program support. I joined that, and they — you can ask any questions there, you can look up, you know, if you have a question, you can look up whatever you’re looking for. And somebody probably has asked that. But they were very supportive. And it definitely gave me hope because people would post whenever they got forgiven, and it actually — the funny thing is it comes in batches. It’s like they forgive a group of people at a time. So there will be no activity for awhile, and then all of a sudden within a week there’s probably, you know, I don’t know, 15-20 people posting that they were forgiven. But if you search #PSLFvictory or #TEPSLFvictory, you can see people’s stories of being forgiven. So it definitely gave me a lot of hope. And a lot of people there too talk about the Freedom of Information Act. You can request your paperwork for that. And a few have issues with any payments that were missing. Luckily, I did not have to do that. And other people also asked for the help of an ombudsman, which is somebody that’s assigned to you to help you through the process if you’re having issues. Again, I didn’t have to do that either. But those are different options that you can have, that you can use, if there’s issues with your payment history. And I was looking yesterday and it looks like there’s roughly about $600 million left with TEPSLF. They expect it to last another 2-3 years. So if it’s something that you’re considering if you’ve worked for your employer for close to the 10 years, made the 120 payments, definitely look into it now and try to get that straightened out before then because it will run out.

Tim Ulbrich: Great advice, Stephanie, encouragement. We’ll link to that Facebook group as well as other resources we’ve talked about on today’s show in our show notes that we publish. And you can find those show notes by going to YourFinancialPharmacist.com/podcast and finding this episode, Episode 176. And then we’ll have all of that information right there. Stephanie, I really appreciate you taking the time to come on the show to chronicle your TEPSLF journey. Excited to have you on officially as the first pharmacist that we have interviewed that has had their loans forgiven. We know there are others out there, and we hope and plan to feature more stories in the future. And as always, to our YFP community, if you liked what you heard on this week’s episode, please leave us a rating and review on Apple podcasts or wherever you listen to the show each and every week. And I hope you’ll join us if you haven’t already in the Your Financial Pharmacist Facebook group, over 7,000 pharmacy professionals committed to helping one another on their path towards achieving financial freedom. So thank you again all for joining, and have a great rest of your week.

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YFP 175: How to Reduce Costs During the Residency Application Process

Posted on by yfpadmin

How to Reduce Costs During the Residency Application Process

Sarah Cummins, a PGY2 Emergency Medicine Pharmacy Resident, joins Tim Ulbrich to talk about specific strategies to make the residency application process more affordable.

About Today’s Guest

Dr. Sarah Cummins is a PGY2 Emergency Medicine Pharmacy Resident at the University of California Davis Medical Center in Sacramento California. Prior to this position, she completed her PGY1 residency at Thomas Jefferson University Hospital in Philadelphia, PA and earned her Doctor of Pharmacy degree from Purdue University in West Lafayette, IN. Dr. Cummins’s clinical/research interests include trauma resuscitation, acute pain management, optimizing healthcare access to underserved populations, minimizing healthcare disparities in BIPOC, and emergency department transitions of care. When she isn’t working, Dr. Cummins enjoys hiking, caring for her blind dog named Muffin, reading novels, and any sort of activity that takes place on a patio.

Summary

Sarah Cummins, a PGY2 Emergency Medicine Pharmacy Resident at UC Davis, is passionate about helping other pharmacists reduce the cost of the pharmacy residency application process. Although Midyear and interviews may look a bit different during the COVID-19 pandemic, the tips Sarah shares are still powerful ways to save money.

Sarah breaks her tips into six categories: how to save money before interviews, Midyear, travel, eating, where you should spend your money and some general advice.

Prior to sending in applications or going to interviews, Sarah says that you first have to figure out your goals and create and execute a budget to help you reach them. For example, she suggests beginning to save during your P3 year and to ask for gift cards from family and friends in lieu of material items so that you can purchase professional clothes or other necessities.

Midyear is virtual and free this year due to COVID-19, however it’s normally $340 for a student member and $480 for a non-member. Sarah explains that Midyear is usually in an expensive city, meaning you should really do your best to save money on other expenses like food costs.

Sarah explains that there is the potential to save the most money with travel expenses if you’re willing to put the time and work into doing so. She shares that you have to put all methods of travel into a side-by-side comparison so you can see which method or hybrid of methods is going to be the cheapest. It’s easy to spend a lot of money on food and coffee while you’re traveling. Instead, Sarah suggests packing granola bars, packaged foods and drinking the in-room hotel coffee to save some money and time.

While there are many aspects of this process that you can save money on, Sarah explains that you should spend money on things like professional clothes you feel confident in and to make sure you’re staying at a comfortable and safe location.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Sarah, thank you so much for taking time to come on the show.

Sarah Cummins: Thank you so much for inviting me. I’m happy to be here.

Tim Ulbrich: So our conversation began over the summer on LinkedIn, and I knew what you shared would fit so well in the fall as P4s are gearing up for the residency application process and really also for preceptors that are listening, faculty members that are listening, that they can also share some of this information with the students that they may be mentoring, coaching, helping along the way. And before we dig into your tips and tricks for making the residency application process affordable, I’d love for you to share a little bit about yourself. So tell us about your pharmacy career, what led you ultimately into pharmacy and how you’re able to determine the path that you want to take in terms of residency training.

Sarah Cummins: Sure. So I started out at Purdue University in Indiana, which is where I’m from.

Tim Ulbrich: Go Boilermakers.

Sarah Cummins: Yes, yes. So I grew up in Indiana, went to school there, then I did my PGY1 residency in Philadelphia, Pennsylvania at Thomas Jefferson University Hospital. Then I drove 3,000 miles across the country to go the UC-Davis in Sacramento for my PGY2 in emergency medicine. I think I originally got into pharmacy because the same reason that many of us do — because we’re nerds and we like science and we like helping people. And I really liked the aspect of this career where I felt like I could make a difference in patients’ lives face-to-face, talking to them and helping them manage their diseases versus some of the other healthcare professionals where you don’t get as much face time as you do with pharmacy. And I really liked that.

Tim Ulbrich: And when did you know emergency medicine was the path that you wanted to take?

Sarah Cummins: That one was a little bit of a quick decision. So I had originally thought I was an infectious diseases person all the way. I love ID. I did my bachelors in microbiology and biochem. I had done ID research. I love bacteria. I think they’re so cool. But then I did an APE (?) in the emergency room, and I was a little shocked at how much I really enjoyed it. So then I started second-guessing myself, wondering if maybe I was an EM person instead of an ID person. I did an EM rotation during my PGY1, and that kind of sold it for me that I was actually an EM person instead of an ID person. I think I made the right decision. I feel very at home, I feel like this is my niche. And I’m really excited to go to work every day, and I think that that’s all we can really hope for with careers is just being really happy with what we do.

Tim Ulbrich: Absolutely. And the irony — you know, we’ll talk obviously about mindset around spending and frugality — and the irony that you ended up in California where cost of living is high, but thankfully you had some behaviors and strategies in place that could help you manage some of that. And really, what I want to spend our time on today is that you had tweeted an amazing list of topics about how to make the residency application more affordable, where folks should consider spending money, where it’s worth it, cutting where it’s not, and some general advice to those that are starting this process. And you know, I should mention, disclaimer here, we are obviously fall 2020, given the situation with COVID-19, you know, this residency recruitment-application-interview cycle, it’s going to look different than any other one that we’ve had before. And so some of that we don’t yet know at this point, some of it we do in terms of things like ASHP Midyear of course being virtual. Will all interview be remote? Will some be on site? I think it’s probably leaning towards remote but certainly that’s a ways off as we think about the February and March timeframe. So for those that are listening, you know, P4s applying this year during the spring 2021, going into the match that starts July 2021, obviously we’re a unique situation, but we expect others in the future, we might be back in more that traditional environment. So before we get into these strategies that you mentioned, one of the things I was asking you before we hit record — and really, one of the things that impressed me when I first ran across what you shared on this topic is I could tell you had really an intentional mindset around your finances, but specifically, you had a mindset around being frugal. And I think here, it’s important that we’re talking about places where it’s important that we think about cutting but also places where we think it might be important to spend some and that that’s OK where it’s worth it. So where — my question is where does that frugal mindset come for you? Where did that start?

Sarah Cummins: That is such a great question, and I don’t actually have an answer for you. I don’t really know. There isn’t one pivotal moment in my life where I learned this. No one really taught it to me. I think it came from pressure of not having financial resources as a student and not having support with family, friends, and whatnot financially going through this process. I’ve always been the kind of person that I don’t do anything halfway. If I’m going to do it, I’m really going to do it. And I put a lot of work into figuring out exactly how I could afford this because my resources were very limited. I made a goal to go to Midyear, I made a goal to apply to the programs I wanted to all over the country, and I planned accordingly to make sure I could do that. And I think the skill that I learned from that that was very difficult for me to understand at first and I think very difficult for a lot of people who are financially limited is to plan ahead. So many times, you know, when we don’t have resources, we don’t have a lot of money, we just think about the here and now. How am I going to afford my bills this week, this month? Where can I cut costs on my groceries this week? But I’m not thinking about what I’m going to be paying for eight months in advance. And that’s something that’s kind of a difficult mindset for people to adopt when they’ve never really had to do it or where they’re always in this fight or flight mode on how they’re going to survive each week. So that was something I really had to push myself to do.

Tim Ulbrich: Yeah, and that’s great input. As we talk often on the show about the intentionality of the financial plan, thinking ahead, planning ahead, thinking long-term, which is hard, especially when you think about in the position of a student where you obviously have a limited income and certainly may be in a debt accrual with student loans. And so as you put together the time and the effort to share this list out, what were some of the motivations of doing that? Obviously it was near and dear to you and your own plan, but did you also see others that were struggling with it?

Sarah Cummins: Absolutely. So I saw a lot of students posting on Twitter, residents posting on Twitter, just kind of venting how frustrating it is that this process is so expensive, sharing how difficult it is to afford this, sharing their fears. And I really just wanted to provide a little bit of hope and a little bit of encouragement to those students who are in the same situation that I was in where you have to really work a real full-time — or I mean part-time job to fund your expenses. And I think that the post definitely achieved that. A lot of people messaged me, sharing their thanks for just reaching out and saying, “Hey, it’s possible. It’s hard, but it’s possible.”

Tim Ulbrich: And I’m so glad you did, Sarah, because as you know, as I know living through it, as our listeners know living through it, P4 year, that final year is often when things fall off the tracks financially, right? So you’ve got — you know, obviously you’re in a transitionary year, so depending on where you’re doing your rotations, you may be going out of the area, you have additional transportation expenses, additional housing expenses, you may need additional professional clothes, other things. Expenses add up. Obviously busy hours, you tend to maybe have to eat meals on the go, so you have lots of expenses that come with rotations. But then you also have many schools, the tuition and fees are higher in the fourth year when you’re doing experiential rotations and then on top of this, you have — whether it’s residency, a job, combination of both — you’ve got the additional expenses that are associated here. So I think sometimes I see — and I don’t know if you saw this with your classmates where — you know, I see this among students where they’re like, my gosh, I’m already $160,000 in debt, like what’s it matter at this point, right?

Sarah Cummins: Yeah, just add it to the tab.

Tim Ulbrich: Yeah, and I think again, what we’re talking about here is whether it’s $100, $1,000 or $10,000, the intentionality and the mindset and having really the processes, whether it’s a budget, this long-term thinking, to really be able to see the benefits of this and other parts of your financial plan in the future are really important. Do you — just as a general ballpark, what do you think on average students are spending when you think about the residency application process? I mean, you’ve got the applications, you’ve got Midyear, you’ve got travel, you’ve got professional clothes. Like what do you anticipate that number is?

Sarah Cummins: Thousands. I know it’s thousands. It’s definitely different for each person, so going to Midyear in and of itself is very expensive. So if for whatever reason you don’t go to Midyear, you can cut a large portion of that out. But even the application is expensive. So the NMS match fee is $160. The forecast fee is $110. That gets you four applications included. So if you want to apply to more than four programs, you’re going to be paying $43 apiece for every additional program. So just to submit your applications, if you want to apply to 10 programs, which is what I feel like a lot of students do on average is $528 just to try.

Tim Ulbrich: Yeah, and as we know, if that is borrowing money, it’s going to cost more at some point, right? It just accrues and things into the future. So we’re going to go through, as I mentioned, you put together this list and you broke up these tips into six main categories. No. 1, how to save money before interviews. No. 2, things to think about at Midyear. 3, on the traveling side. 4, eating while you’re traveling. 5, where you should spend your money, so essentially permission granted, where it’s worth it. And then 6, some general advice. So let’s start with this first category, prior to interviews. And you start off by sharing some advice for people before they even send applications in or have interviews lined up. So what’s some of your advice here? And why is this important?

Sarah Cummins: So I think that this is actually probably the most important part and where you could potentially have the most cost savings because I think the first thing you need to do is figure out what your goals are. You need to figure out if you are going to be applying to programs near home, if you’re going to be looking all over the country, and then you need to make a plan on how to budget for that, how much money you can expect to have to pay and then execute that plan. So I think for a student that is — I’m going to just pick the most expensive example. So let’s say you just, you really want to do it, you’re going to apply all over the country, you’re going to go to Midyear, you’re going to go all out. Start saving early, like P3 year early. One thing I did, if you have anybody in your life that likes to buy you birthday gifts or holiday gifts, ask for gift cards. So I asked for gift cards to Macy’s department store because I know that they have a pretty good selection of suits and business clothes. And they also have pretty good sales sometimes. So I asked for gift cards early on during P3 year so that way I could start to collect a wardrobe, some nice shoes and some other things to wear to Midyear because if you wait until the last minute to do that, that’s just going to be another expense added on top of it if you don’t plan on anything to wear to these interviews and PPSs. Another thing is just registering for Midyear is expensive. So as a student this year, it is actually free because of COVID, which is incredible. Snaps to ASHP for that. But last year and every other year, it’s not free. So the registration fee is different depending on whether you’re an ASHP member or not. If you’re a student member, it’s $340. But if you’re a non-member, it’s $480. And this is a really easy place to save money because if you just register for a membership, it’s $54. So you can save like almost $80 if you just do the membership and then apply as a student member instead of not being a member and applying as a non-member. So do your research on that, make sure that you aren’t paying more money for registration than you need to. The other thing with planning to go to Midyear is once you have everything that you need to wear and you have your plan, what kind of programs you want to start looking at and you are starting to think about flights and hotels and stuff, then that becomes a lot more work. And I think that is the most time-intensive part of this.

Tim Ulbrich: Great advice, Sarah. And one of the things I wanted to add here as you think about number of applications, in my experience working with students going through this process, you know, I’ve worked with some students that applied to one or two sites and to 22 sites and everything in between. You know, you mentioned 10 is a pretty good number that you see out there. I would agree with that. I mean, I think most students are probably applying to somewhere between 8-12 sites. But where I really am encouraging the listeners to think about is you have to do some really serious self-reflection to really identify what factors might determine how many sites you need to apply at. So you’re looking at obviously things like the reputation of those programs, how many applications might they be getting, how selective are they, geographic types of things, the cost that’s going to be associated with the travel, how strong of a candidate are you, how well-networked are you with that, have you worked there, have you had a rotation there? And all of those things should have a significant impact on how many sites you’re applying to. And I think there can be a challenge, especially for the all-stars out there that are listening, you know, those that have really strong connections, have done all of their things along the way well to make themselves a strong candidate, there can be a feeling in the moment of oh my gosh, match is so competitive, they look at the national match statistics, and then they apply to a bunch of places. For some, that’s necessary, and for others, it’s not. So I think really doing some reflection to determine what that right number is or working with some advisors at the college or others that can help you do that is really important.

Sarah Cummins: Definitely.

Tim Ulbrich: Let’s talk about Midyear for a moment. You mentioned the registration fee, which of course, obviously this year in 2020, we have, again, somewhat of a unique situation. But we know that’s just one piece of the puzzle when it comes to costs associated with Midyear. So talk to us about other strategies here that people can be thinking about for how to save money as it comes to Midyear. And here, obviously we’re talking about more in the traditional sense of in-person Midyear.

Sarah Cummins: Yes. So Midyear, historically, takes place in one of four cities: New Orleans, Orlando, Las Vegas, or Anaheim. So those are the only cities that have enough conference space to hold the vast amount of pharmacists and students that are drawn to these conventions. So this has been done before. People have gone to all of these cities before, found the cheapest place to live, there’s probably a lot of people who have advice out there. So any students that are wondering where the cheapest spots are, where you can get a good deal at, feel free to just tweet it out and ask, “Hey, who went to Midyear in Anaheim? Who went to Midyear in Orlando? What did you do?” And those people might have a little bit of advice to contribute. But something that all of these destinations have in common is they are expensive to go to. So one thing that’s really hard to budget for is all the food and unexpected costs that you’re going to accrue there. So you think about, OK, I’m going to pay for my hotel, I’m going to pay for my flight, I get there, then what? Sometimes that airport is a substantial distance away from where your hotel is. And those Ubers, Lyfts, can be $50-60 one-way, especially in some of the bigger cities. And this counts for interviews too. So one thing that I do is I do my research on the public transportation system. So a lot of — some of these cities don’t have a lot of great options for public transportation. But most of them have buses. And buses are cheap. They do take a long time, however, so if you can plan to have an earlier flight where you have a little bit more time to get to your hotel, look into getting a bus ticket for $2.50 compared to spending whatever the surprise cost of the Uber or Lyft is going to be because that is not a discreet cost. It’s going to be a random number, depending on how busy they are.

Tim Ulbrich: Yeah.

Sarah Cummins: Another thing that I spent more money on than I thought I was going to spend, even though I planned for it, was food.

Tim Ulbrich: Yes, yes.

Sarah Cummins: So you wake up in the morning and you’re in your hotel room, you’re starving, you just traveled all day, so what are you going to do? You’re going to go down to the Starbucks, get a coffee, maybe a granola bar or a muffin or something. And then it’s $12 because that’s what it is in Las Vegas. I paid for a banana that was $9.

Tim Ulbrich: And you have no choice.

Sarah Cummins: Yeah.

Tim Ulbrich: Yes.

Sarah Cummins: And that’s it because you’re starving, you’re exhausted, and that’s what you need. So something that you can do to mitigate these costs is to plan for being hungry. I called ahead to hotels to see if they offer in-room coffee because some of them have that cheap coffee that you can make just in your room.

Tim Ulbrich: That’s right.

Sarah Cummins: That’s great because it’s $0. It’s a little bit of an appetite-suppressant, so it can tide me over until I can eat breakfast somewhere. Also, if you’re going to be going to Midyear for a couple days, you’re probably going to check a bag, which costs about $30. But it’ll save you money in the long run versus just trying to shove everything on a carry-on bag because you can fill that bag with snacks and food. I put a couple boxes of granola bars, I had some Easy Mac cups because I called and asked if my hotel room had a microwave. And those — just having that little bit of food available was really a life saver because it saved me a lot of money, and it saved me a lot of time from having to go to a restaurant or wait in the ungodly lines at the cafes.

Tim Ulbrich: Yes.

Sarah Cummins: And you don’t think about that cost when you’re planning your trips. You just think about the major expenses. But that really adds up. I think I would say I probably saved maybe $200 just by planning for the coffee and the food alone.

Tim Ulbrich: As you’re talking, Sarah, I’m just — I’m smiling as you’re talking because I’m thinking of all of the Midyear meetings that I’ve been at as a student, as a new practitioner, on the other side interviewing, where some things — it’s like, it takes so long to learn some of those lessons. But where you’re standing in those long lines and you’re not only waiting but then you’re spending $20 for coffee and a muffin, you’re frustrated, and then you’re still hungry and you’re off sync with how you normally are and all of these things. So I think preparation here and planning is so important.

Sarah Cummins: Yeah. And the — I don’t know if I’m using this word right, the opportunity cost of when you’re very, very hungry is different when you’re not very hungry. So you’re more likely to spend more money on food if you’re starving versus if you’re not starving because you have more time to plan for it. Another tip that I have if you’re going to go to Midyear is this thing called the industry showcase. So at first glance, you might not think that that’s for you as a student because it’s basically a bunch of pharma companies and tech companies that set up booths to showcase their products. But this is an absolute gold mine for hungry students. Last year, I got free espressos, like individually wrapped sugar cookies, snacks, they gave out water bottles. So basically you just go up, you get snacks and food and stuff and just take a pamphlet, pretend to be interested, and then just go on your merry way. It’s incredible. So most students don’t venture in there because they don’t see a need to. They’re not a hospital looking for new technology. But are you thirsty? Do you want a free water bottle? Go for it, it’s great. You won’t regret it.

Tim Ulbrich: That’s great. I mean, the specific advice you have here is fantastic. You know, for the preceptors that are listening, they’re probably smiling as well. But I hope the students are taking notes. And these things add up. It’s a combination of planning ahead, it’s a combination of getting creative, cutting expenses while you’re there, and hopefully together, some of these will have a real impact. We’re really just getting warmed up, right?

Sarah Cummins: Yeah.

Tim Ulbrich: So we talked about the cost of applications, we talked about the cost of Midyear, which even in this year is of course going to be significantly different. But we haven’t yet talked about traveling. So when it comes to traveling for interviews, you know, I know for many folks this can look very different if they’re maybe just applying in one region where they live and their college is versus those that are looking across the country. So what pieces of advice here do you have in terms of traveling for interviews?

Sarah Cummins: I have a lot. And I think this is the piece of this whole thread and podcast that is potentially the most cost-saving. So it takes a lot of time to do this. But it’s really worth it in the end. You need to do your thorough research on the cheapest way to get to and from an interview or Midyear. So you need to look at prices of driving, flying and public transportation. So driving, estimate your gas costs. And don’t just like guess. You can go online and Google “gas price calculator” and figure out for the exact make and model of your car how much money you can expect to pay for what the current gas prices are because those fluctuate each year. Sometimes it’s very expensive, sometimes it’s not. Additionally, if you’re going to be traveling for several hours to wherever your interview site is, a lot of people use toll roads. They’re much faster, it saves time, but it costs money. There’s this website called TollSmart.com. And you can use it to calculate toll fees anywhere in the country. You just type in your start address and then your destination address, and it’ll show you the route that you would take using toll roads to see how much money that costs because who knows how much toll roads cost off the top of their head? I’ve never met anybody. I have no idea.

Tim Ulbrich: No.

Sarah Cummins: It’s just a guess, it’s a surprise. Sometimes you need cash, sometimes you can use card. No one ever knows. It’s just a big mystery.

Tim Ulbrich: That’s right.

Sarah Cummins: So if you plan ahead for that, for the gas, another thing you need to plan for if you’re going to drive is parking because a lot of times, hotel parking is not free. $40 a night, $60 a night, depending on where you go. In some of the bigger cities — and even in some of the smaller cities, you can use this app or website, it’s called Spot Hero. So you can just go to spothero.com, and basically what it does is it shows all the available parking spots in garages, in lots, and you can compare prices of how much money you’re going to pay to leave your car in that lot or that parking garage from the time that you arrive to the time that you leave.

Tim Ulbrich: That’s awesome.

Sarah Cummins: And it can be substantially cheaper than parking at your hotel. Another thing to do if you’re planning on driving is try to pick an interview day on a Monday or a Friday so that way Sunday you have plenty of time to drive and you’re not going to be rushed, especially if you’re going to be driving like 10-12 hours or something crazy like that. And then Fridays, you’ll have plenty of time to drive that evening or even the next day if you need to. So that’s always nice. For flying, the best case scenario is always to find a flight that arrives the day before the interview and then have a return flight right after the interview has finished, the next day in the evening. But that’s usually not the cheapest flight. So again, you’ve got to do your research. It might actually be cheaper to stay an extra day and pay another $80 for your hotel or Airbnb and then take the early morning flight the next day. I did this, and it saved me over $200 for one interview. And then the last mode of transportation is public transportation. Some places, they have trains that go in between big cities if you’re someone that’s coming from a big city. I was not. But Megabus is a life saver. Megabus, I love Megabus. Shoutout to Megabus, you’re awesome. You can buy a bus ticket on one of this double-decker bus, and they are cheap. They are — you can ride on a bus for nine hours for as low as $3.50 after taxes and fees. And I did this for one interview. I rode the bus for nine hours one day, and then went to my interview and then flew home the next day with a one-way ticket.

Tim Ulbrich: Oh, cool.

Sarah Cummins: And that saved me over $150 compared to doing a round-trip and flying on Sundays. Because flying on Sundays is so expensive.

Tim Ulbrich: Yes.

Sarah Cummins: There are also seats, there are eight seats on each of these buses that are — have a table in front of them. So you can have like a little cup holder and a table, you can get your laptop out and do some schoolwork or whatever you want to work on, prepare for the interview, while you’re actually on the bus, which is what I did. So it was a great, great use of my time. So then you can do a hybrid of these options. So you can look into the price of a one-way car rental to drive on Sunday, show up for your interview Monday, fly home with a one-way ticket. It’s a lot of work putting all these side by side for every single interview, but trust me, it’s so worth it.

Tim Ulbrich: And one of the things, Sarah, I remember you wrote about, which really resonated and I want to make sure the students hear is not being afraid to ask the site — whether that’s the RPD or somebody that they have delegated that responsibility of coordinating interviews, I think generally speaking, the sites want to be amenable and want to work with folks if it’s going to help save them money, time, coordination. So whether that’s stacking interviews if you’re going to be in a certain area so you don’t have to travel twice or I remember you had written about just a schedule and by asking a question, they were able to move something around by a half hour so you could take a flight out that day that was cheaper. So you know, I think being open — and obviously there’s a respectful, professional way to do that — but not necessarily feeling afraid to have some of those conversations that could have cost savings depending on the mode of travel and where that interview is taking place.

Sarah Cummins: Definitely. So I feel a lot of students don’t want to be the person that looks like they can’t figure it all out themselves and aren’t completely independent and savvy and they don’t need any help from the RPDs. But you know, they want you to be there. They want you to be able to be comfortable and to have plenty of time. I remember I emailed an RPD and I asked, “I know my interview ends at 4. There’s a 5 o’clock flight at the airport. Do you think I would have enough time to make it from the hospital to the airport and make that flight? Because it’s $200 cheaper than all the other flights. And I would like to save that money if possible.” Every person can understand this, so she was great and she said, “Traffic is minimal. Security is minimal. And I can bump your interview date up half an hour just to give you a little bit of extra time.” And it was awesome. So they’re experts. They live in that city. They know their way around. They know like don’t take this rail from the airport to the hospital because it’s generally not very safe, or don’t stay in this area or fly into this airport instead of the main airport because it’s a lot cheaper or faster. They have all these tips. They live there, they travel there. And I don’t know if I’ve met one RPD that would not gladly share that.

Tim Ulbrich: I agree. And as someone who has served on both sides of this in terms of the applicant as well as an RPD, I think often if schedules are sent, people are busy, they’re trying to coordinate a lot of things, and sometimes just somebody asking that, and they’re willing to work with it. So don’t be afraid to ask that question. Next category, we talked a little bit about this with Midyear and packing food, but eating while traveling. And I think this is obviously a piece that is often missed when thinking about saving money in the residency process. But just like if you were at home, eating out can be really expensive. So give us some general tips or thoughts that you have on how folks can save on eating and food expenses while they’re traveling.

Sarah Cummins: Definitely. So one thing I noticed that I didn’t really prepare for I guess when I was interviewing is that sometimes I would be interviewing on one side of the country one day and then a few days later, be on the other side of the country the next day. And those time changes are different. So I got hungry at very odd hours. Like I would wake up in California at 4 a.m. ready for breakfast and there’s no places that are breakfast because I’m used to that being 7 a.m. on the East Coast. So I always packed some granola bars, some packaged foods. I’m not going to recommend you check a bag for interviews just because that’s a wasted expense. So you can’t like make food like a sandwich or something and bring that on the plane. It has to be prepackaged. So I’m a big fan of those little packs of Goldfish crackers, again, mac and cheese noodle cups, those kind of things are always not a bad idea to have on board. But just making sure that you’re not in a situation where you’re unprepared and you’re going to be tempted to buy food in the airport or buy hotel food or have to run out before your interview because you’re hungry and you really wish you had coffee and you didn’t think about that. And then it’s stressful, it’s expensive, and then you get home and you’re like, wow, how did I spend so much money? I didn’t even notice that that happened. Just being prepared for that is I think the best way to prevent it.

Tim Ulbrich: I agree. And as someone who likes to eat every hour or so when I travel, I swear, airports and hotels are like the death of me when it comes to food, options, costs. I generally eat more at home and am somewhat of a picky eater. So it’s not only expensive but it’s like ah, you can’t even always get what you want.

Sarah Cummins: I know. And don’t even think about that minifridge either.

Tim Ulbrich: No, no, absolutely not. Don’t even open it. Yeah. So we talked about where we can cut back. And I want to end by talking about where you should spend money. So there’s obviously there’s going to be some costs that applicants have to incur and some areas where maybe they shouldn’t try to cut corners. So talk to us about those areas where you have felt like, you know what? This is an area where you don’t necessarily want to invest a bunch of time and resources to try to cut back but rather give permission to spend.

Sarah Cummins: Definitely. So I think the one area that I felt personally I was going to spend the money was on my interview suit. So I feel most confident when I’m wearing clothes that fit me very well, that I think look nice, and when I’m going to an interview, I don’t want to be uncomfortable, I don’t want to be worried that my outfit looks weird or just something doesn’t — just doesn’t look very put together. So I saved up and I got a very nice suit. So I guess my definition of very nice might be a little bit different than everybody else’s definition of very nice. But I got a matching suit and had it tailored to fit me. And what I did basically is just rewore that one suit instead of getting a bunch of less nice outfits, less expensive outfits. One thing that’s a life saver if you’re going to be rewearing suits, instead of getting it dry cleaned between each interview, that can be really expensive: hotel steamers. So if you call ahead to the hotel and ask them to put a steamer in your room, pretty much every hotel I’ve ever called have steamers available. You just have to ask for it.

Tim Ulbrich: Ah, I didn’t know that. OK.

Sarah Cummins: Yeah, yeah. So also starch spray is your friend. So if you just like want to iron it out and put a little starch spray on it, fold it very gentle inside your carryon and take it out first thing and then steam it, it’ll look brand new. And you won’t have to get it dry cleaned over and over again because it’s free to use a steamer versus getting it dry cleaned. So I think that spending money on my outfit helped me feel more confident and I think probably in the long run helped me be more relaxed during the interviews. Additionally, I think another place to feel OK to spend a little bit more money is if there aren’t many hotel options or perhaps the hospital that you’re interviewing at isn’t in the best part of town is to make sure that you feel comfortable and safe where you’re staying. One of my interviews, I remember specifically the hotels were like over $200 a night, some $300 a night really close to the hotel. And I opted to get a cheap Airbnb instead, and that was a huge mistake. It was not a safe part of town. I felt very uncomfortable. And the Airbnb did not have any of the amenities that I needed. I usually don’t pack hair dryers because most places have them. But I did not realize or did not look for the hair dryer until after I had showered in the morning before my interview. But there was a space heater, so I just was pressing my wet hair up against the space heater to try to dry it. Oh, it looked horrible. But spend the money on somewhere that you’re going to feel safe, somewhere that you’re going to feel comfortable because you don’t want to be stressing right before the interview. You don’t want to be worried about it or not get a good night’s sleep because that’s definitely going to show in your interview performance the next day.

Tim Ulbrich: And Sarah, these are fantastic tips. They’re specific, they’re actionable, they’re ones I’m thinking, man, I wish I would have known some of this. But I’m glad we can share this with students that are out there, again, preceptors that are helping coach or mentor students, hopefully they’ll be able to find this information valuable. And I want to close by coming full circle to where we started tonight. And I mentioned I think the mindset piece is something that I hear as you’re talking, I know I read it when I first came across your content. I know you said, yeah, I’m not really sure exactly where I can pinpoint that. But I can tell you through our conversation, it is clear to me that you have an intentionality around your spending, around your money. We talk all the time on the podcast about the importance of that intentionality, of finding your why, of really aligning your spending and spending money where it’s important and not spending money where it’s not important. And I can tell that you have that. And I am so excited to see where not only your professional journey goes but where your financial journey and the impact that you’re going to have on the trainees that will work with you, whether that’s students on experiential training, residents, peers, and the others that you will be able to influence. So I appreciate you taking the time to come on the show to share this information and the tips, the advice that we’ll be able to share with the group applying this year as well as in the future. And my last question for you is where can our listeners go to connect with you further and perhaps follow your journey along the way?

Sarah Cummins: Thank you for all of those kind words. I really, really appreciate it. As far as where students can contact me, I do have a Twitter that I’m fairly active on. I’ve had quite a few students DM me with question about Midyear or my experience or just how to afford this crazy process in general, and I’m more than happy to answer any questions from anybody. You can find my Twitter at @SC_PharmD. And that’s probably the easiest way to reach me.

Tim Ulbrich: Awesome. We will link to that in the show notes as well as some of the other sites that you mentioned throughout the episode. Again, appreciate your time coming on the show. I know this information is going to be valuable. And for our listeners, if you like what you heard on this week’s episode of the podcast, please leave us a rating and review on Apple podcasts or wherever you listen to this show each and every week. And if you haven’t yet done so, I hope you will join us in the Your Financial Pharmacist Facebook group, over 6,000 pharmacy professionals across the country committed to helping each other on their path towards achieving financial freedom. Have a great rest of your week.

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YFP 174: How to Evaluate Employer Benefits During Open Enrollment

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How to Evaluate Employer Benefits During Open Enrollment

Tim Baker and Tim Ulbrich discuss how to best evaluate your employer benefits as you get ready to make selections during open enrollment.

Summary

On this podcast episode Tim and Tim discuss open enrollment for pharmacists and how to evaluate employer benefits during this period. They discuss health, life and disability insurance, retirement plans and HSA and FSA accounts. As a YFP financial planning client, a CERTIFIED FINANCIAL PLANNER™ works with you to understand your benefits and choose the options that work best for you and your financial plan.

Tim Baker explains that pricing for medical plans can vary greatly depending on factors like age, location, tobacco use, whether the plan is for an individual or family and the plan category (i.e. bronze, silver, gold, platinum). When it comes to deciding which plan is going to work best for your needs, Tim suggests choosing a plan that will match your use best and to not pay for a more expensive premium if the coverage isn’t being used. Similarly, if you don’t have an adequate emergency fund, it may not be wise to pick a high deductible health plan (HDHP). Tim shares that you have to think about your life plan, age, whether you have pre-existing conditions and how often you’ll need to go to the doctor when deciding on a health plan.

When it comes to life and disability insurance, Tim suggests having coverage if you have a spouse or a family that’s reliant on your income. However, life or disability insurance offered by your employer may not be sufficient. If that is the case, you’ll have to look into purchasing additional coverage. Tim also discusses employee sponsored retirement options like a 401(k), 403(b), or TSP as well as stock options, FSA and HSA accounts.

As we are in or nearing the open enrollment period for many pharmacists, Tim recommends taking a look at what’s being provided or offered by your employer, asking your HR department for help and being intentional with your decisions as these benefits are an often overlooked part of a financial plan.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Baker, excited to have you back on the show.

Tim Baker: Yeah, thanks for having me. It’s been a long time since I’ve been on I think a full episode.

Tim Ulbrich: So today, we’re talking all about evaluating employer benefits, navigating open enrollment. Obviously the goal is to provide that information heading into that season. So Tim Baker, you talk with our financial planning clients at YFP Planning about evaluating and understanding the employer benefits. So why is this an important part of the financial plan and something that needs to be covered among other topics?

Tim Baker: Yeah, so I think there’s really two different ways to look at it. You can look at it as like a new hire to a company and evaluating the compensation package in total, so you know, basically salary and all the other benefits that come with the offer, versus kind of your in the company and you’re just evaluating the package that comes up for open enrollment every year. I think we’ll probably focus more on the latter. But I think this is really important. And I sometimes see this with clients or kind of after the fact with clients where they’re like, “Hey, I was making $120,000 per year. And I got this offer to make $130,000 or $135,000.” But then when you actually dig into like what they are moving to in terms of like a new 401k or match or a bonus or the health insurances that are provided, the plans that are provided, you have to dig a little deeper because they potentially take a step back in a lot of ways that are not just tied to the paycheck. I think it’s important, again, to look at this in totality. But I think it’s also — especially when we talk about health insurance, this is most definitely a plan. And you want a plan in place for the purposes of health insurance. When we get into talking things about life insurance and disability, I kind of view that as more as a perk. So not necessarily a plan — and we’ll kind of talk about the difference there. So yeah, super important because what we talk about at YFP, our mission is to empower pharmacists to achieve financial freedom. When I kind of speak day-to-day with clients with their particular financial plan, we go a little bit more granular. Our job is to help grow and protect income, which is the lifeblood of the financial plan, grow and protect net worth, which is essentially what sticks while keeping your goals in mind. So a big part of this of what we’re talking about is the protection. And you know, if you have a health incident or a disability and things like that, we want to make sure that we’re properly protected so some type of catastrophic event doesn’t get in our way. And that’s kind of what this is really all about.

Tim Ulbrich: Yeah, and as you mentioned, Tim, we will focus more on the side of those that are post-accepting that position, they’re either recently employed with that company, trying to make that selection as a part of onboarding or probably for most of our listeners, going through the open enrollment season as they look out to the New Year. But Episode 166, when you and I talked about why negotiation is an important part of the financial plan, we did talk about some of these components as potential differentiators or at least things to consider as you’re evaluating an offer and how these are the things that you will start to see some significant variance, perhaps from one offer to the next and so why it’s important to look just beyond that salary. So Tim, whether someone is reviewing their benefits for the first time, again, after accepting a new position or probably for most of us, going through another round yet again of open enrollment, there’s lots of benefits that are connected to the financial plan that one needs to consider. And we’re going to talk about health, life, vision, dental to a lesser degree, and disability, and of course, retirement accounts and HSAs. So we’ve talked about each of these on the podcast at one point or another. But this is another example where we try to bring various parts of the financial plan, take a step back and look at some of these components in its entirety and how they can impact one another. So let’s start with health insurance. And again, I don’t want to spend as much time on dental and vision as I think in my experience, there’s not necessarily a whole lot of option here. And typically, the price tag is smaller, of course, than you’ll see on the medical side. So Tim, why does medical coverage pricing vary so much? And I’m sure that’s something we’ll talk about, the variance that’s there. And talk to us about some of the key pieces that our listeners should be thinking about as they’re evaluating the medical coverage.

Tim Baker: Yeah, so I think the big driver in why health insurances are different and differently priced across companies is the law states that there are really five things that account for when setting premiums. One is age, so there’s a stat that says premiums can be up to three times higher for older people versus younger. It could be location, so that could be a big thing. I know when we were introducing health insurance, we have employees that work all over the country. And every state has different rules and local rules, and cost of living can also account for this. One of the things, which is kind of interesting to me — and I understand why but things like tobacco use, so insurance can charge tobacco users up to 50% more, some other of those sin activities maybe not necessarily accounted for, individual versus family enrollment, so you can charge more obviously if it covers for a spouse or a dependent. And then probably the big thing is like the plan category.

Tim Ulbrich: Yeah.

Tim Baker: And I think you want to have I think choice. But you have different categories, and these are typically based on kind of your out-of-pockets versus what the insurance company is paying. And these range anywhere from the bronze, which are typically the high deductible health plans that are typically kept coupled with HSAs, silver, gold, platinum. So these are the different levels that you typically see. Not all companies are going to offer every level. They might offer one or two or even three, but typically, again, the bronze plans usually have lower monthly premiums and higher out-of-pocket costs where platinum are typically higher premiums with lower out-of-pocket. So the insurance for the platinum covers a lot more. But you’re paying more out of your paycheck. So those are typically why we see varying — and I think just with going on with healthcare is everything, it seems like it’s becoming more expensive. And there’s a lot of stats that this is one of the highest — you know, we talk about student loans and things like that. But healthcare is definitely up there with regard to, you know, the inflation of it year after year.

Tim Ulbrich: Yeah, point well taken, Tim, on that. I know many business owners feel that. In my experience on the academic side, a couple occasions I’ve been involved in helping our HR team evaluate medical benefits for our employers. And you just see some of the data about annual increase in healthcare costs. And I think employers are constantly trying to think of how do we offer a valuable benefit for our employees but also with an increase in costs, you know, how much can they shoulder versus they pass that on to the employees? And so I want to think through a scenario, Tim. If I’m somebody listening or perhaps a client of yours at YFP Planning, maybe I’m faced with lots of student loan debt, I’ve got competing priorities beyond the debt, I’m thinking about maybe getting in a home, I’ve got obviously other priorities that are tugging at my monthly income and at the end of day, there’s only so much to go around. So I think people get into open enrollment, especially on the healthcare side, and they see these bronze, silver, gold, platinum, and you start to ask the question of like, wow, there’s some significant differences potentially in premiums of what’s coming out of pocket per month as well as what could come out of pocket per month if there is coverage that’s utilized in the form of either deductibles, copay or coinsurance. And so I think there’s this constant question of like, what do I want to be paying out per month? And could I use those monies elsewhere versus how much do I want to play defense in the case that something would happen and not have to necessarily have a huge deductible that would come out of pocket? So how do we coach clients through that decision and that choice? And maybe better framed is kind of what questions are you asking or things that you’re getting them to think about?

Tim Baker: Yeah, so it’s definitely one of those things what you want to look at it comprehensively. We always talk about like the financial plan cannot be looked at in silos. So you can’t just look at the tax situation versus the investments versus insurance. You really have to look at the broad scope of things. And you know, that’s why I think having what we use as a client portal where we’re looking at everything at one time is so valuable. And most people, their finances are scattered between banking and investments and insurance, all that kind of stuff. So having that all tied in and having someone look at it objectively I think is important, to start. One of the things that I equate to is if I’m working with a healthy 30- to 35-year-old, for the most part, I’m asking questions about how often are you going to the doctor? Are there any pre-existing conditions? And again, we obviously build up a rapport to the point that we feel comfortable asking those questions. But the idea is we don’t want to have — we don’t want to pay for a Cadillac health insurance plan if we’re never going to drive it, you know? So the joke that I kind of make is for a lot of our clients that because they’re scared of the unknown, they might go and do a gold or a platinum plan, but it’s almost like my parents, who are older and kind of newer to a smartphone, it’s almost like giving them unlimited data. They’re just not going to use it, you know? And no offense, Mom and Dad, if you’re listening to this. But that’s the thing is like you want to match use. And it’s kind of like a cell phone plan. Some people, they’ll buy the Cadillac plan and not use it all, the data and the minutes, etc. So like the — I don’t know if minutes are even still a thing. But anyway, the point is is that we want to match the need with what we’re actually going to use. So those are some of the thing that we go through. And oftentimes, you can step down and maybe free up some more cash flow so there’s less coming out of your paycheck. But then, you know, we just want to make sure that we have things like an emergency fund that we can cover the deductible and obviously the maximum out-of-pocket costs for that year. The other thing that I think plays a part in this that we talk about is just — and it goes back to their life plan — is if I’m working with, again, a 30-year-old family and they’re thinking about having kids, is kind of timing that up. So it’s almost like an annual, like we talk about almost like an annual open enrollment optimization meeting where yes, if we’re looking at adding baby No. 2, maybe we don’t want a high deductible health plan with the HSA. Maybe we just put the HSA on ice, move up a plan or two so we have a little bit more coverage and we feel a little bit more comfortable, again, with those hospital bills and all the doctor appointments, etc. So those are the things that I think come into play. And we have clients that are like, yeah, I just, I go to the doctor a lot because I have this issue or this issue or it could pop up, and it’s almost like what we talk about the emergency fund, if you have a couple and one of them really wants $25,000 in the emergency fund although the calculation says we only $15,000 or $20,000, it’s not even worth the argument. Just pay the little bit of extra and have that comfort level. So those are all the things that I think at the very least, what we want to do here is — and I’m going to say it — we want to be intentional. We want to be asked those good questions and really do that on a year-to-year basis. So those are the things that we’re looking at when we’re kind of discussing the health stuff with clients.

Tim Ulbrich: Great stuff. And then let’s shift gears to talk about life and disability. And I want to first mention, we’re not going to obviously get in the weeds on all things life and disability insurance. Both can be a topic of their own, and they were a topic of their own, Episode 044, How to Determine Your Life Insurance Needs, Episode 045, How to Determine Your Disability Insurance Needs. We also have a lot more information on the website, YourFinancialPharmacist.com. But Tim, one of the most common questions I know that I get, I’m sure that you get, is do I need to purchase additional life and disability insurance beyond what my employer covers? So we’re getting into this what do I need and is what my employer provides enough? Or do I need additional coverage? So again, through the lens of how you’re coaching a client through this, how do you coach them through it? Are there questions that you ask to help uncover this answer?

Tim Baker: Yeah, so it’s going to be my stock answer of it depends. So if we look at life insurance from that perspective, actually life and disability I’ll say kind of the blanket statement that I kind of led the episode with is this is where we kind of venture from it being a plan to a perk. Just like we’ve seen with pensions and some other things, like it could be that in five, 10, 15 years, that these types of benefits are no longer offered by the employer. It’s just one of those things that it’s a suck on the cash flow of the employer and they go away. And this is me speculating, but when we look at life in particular, typically what I say to clients is sometimes it angers or annoys me when I see a client that is 28 that has no kids, no spouse, really just student loans and they’re paying premiums on a permanent whole life insurance outside of what the employer provides. So the caveat, you know, what I typically say to clients is when you have a — for life insurance, when you have a house, a spouse, and mouths to feed, that’s typically where you need some life insurance. So there’s other people that are dependent on you and your income. Now when it comes to the group policies, most of these are actually provided to you for free. It’s just one of the benefits. And it’s typically kind of the more on the not-so-great is like a flat $50,000 benefit that your beneficiary would receive. Or it’s typically a multiple of income. So it’s typically 1 or I just met with a client that had a 2.5x base, 2.5 times their base income was their benefit, which is pretty good. So if I make $100,000, I either get 1x or 2.5x, it just depends. And then you also have the ability to buy up voluntarily. So to me, you know, the problems with group policies is that there’s limits on actually how much you can get. Most of the individuals that we work with, they check off those boxes that they’re going to need $1 million+ in insurance at least. So there’s limits on the group policies. There’s portability. So if you just a group policy and you work with that company until you’re 42, and now you go and work with another company at 42 that doesn’t offer health insurance, I would rather you have bought that policy at 32 or 35. Now you have to go out and buy another policy yourself individually, it’s going to be that much more expensive. And the thing in life insurance is that typically, to buy it on your own, it’s not going to break the bank for most people. So the group policy for life insurance, it’s nice, it’s a perk, but not necessarily — most people are going to need to buy something outside of that. For disability, the same is true if not even more so. So typically, this is based on a percent of your income, so a 50-60% benefit. The biggest issue I have with group disability policies is that the definition of disability, which is sometimes really hard to find out what that is. So if you go back to that episode we talk about own occupation versus any occupation. So the big difference — so own occupation is the inability to work or engage in your own occupation versus any occupation, which is the inability to engage in any occupation. So the big thing I say to clients is if you have an any occupation — Tim, if you have an any occupation disability policy, and you get bumped on the head and you cognitively no longer can do your job, and you submit a claim, they’re going to say, “Well, Tim, we’re sorry about your situation, but we’re denying your claim because you can still bag groceries,” or something like that. So a lot of these group policies will be own occupation for a set period of time, maybe two years or three years. And then they switch to a any occupation. And to me, it’s kind of like a wolf in sheep’s clothing because you’re thinking like, oh, I have this long-term disability policy that’s going to cover me for a long time. And to me, I would almost rather them give you some type of stipend to go out and buy your own. So those are typically the conversations that we have with clients, for most of the clients that we work with, if not all, there is no spouse, mouths, house to feed kind of check box. Typically, if you are a pharmacist, you want to protect the income that you have worked so hard to basically earn. So for most people that we work with, that is definitely something that is often the biggest risk that is not necessarily felt by that particular client. Those are the things that we have to kind of like educate and talk through. So — and so much with the life — to kind of wrap up this answer, so much with life and disability is that you always think it’s going to happen to somebody else until it happens to you. And then that’s where we go down the path of like, this is a catastrophic event. How do we pick up the pieces from here? And those are just not conversations that we want to have.

Tim Ulbrich: Yeah, great stuff. And again, Episode 044, How to Determine Life Insurance Needs, Episode 045, How to Determine Disability Insurance Needs, we talk about some of those definitions in more detail, tax considerations, transferability issues, how to calculate your need. Tim, ironic you use the example of bagging groceries. So my very first job outside of working for the Ulbrich family business was bagging groceries at Top’s Supermarket, shoutout in Buffalo, New York. I loved it. One of my favorite jobs. And to this day, when I go grocery shopping, I have a hard time watching them bag groceries because I know, I know I can do it more efficiently. So one of my favorite work experiences. Alright, so let’s talk retirement. And again, a topic we have talked about at length on the podcast, long-term savings. We did an investing series, episodes 072-076, all about investment vehicles, retirement vehicles, tax consideration, fees. And most recently on Episode 163, we talked about investing beyond the 401k/403b. So Tim, my thought here is spending a few moments as people are going into just evaluating their benefits as a whole, we obviously know depending on where they work, they might be looking at a 401k, a 403b, a TSP, a Roth version of that. But taking a step back to say, before they just jump in, what are some general considerations that they should be thinking as it relates to those options available, options available outside of the employer? And again, how this fits in with the rest of the financial plan.

Tim Baker: So this can be fairly significant with regard to your financial plan. Like we work with clients that, you know, the 401k is stellar. And I actually had one of these meetings last night. The 401k for the wife was stellar, and good match, costs associated with the 401k were very minimal, good choice in terms of the investments that were there, versus the husband that his 401k was something like 30x more expensive. And the match was similar, but it was more — it kind of became more discretionary, meaning they would kind of evaluate it from year to year. Again, not a great investment selection, so these are the things — and I would say that this is really, really hard to kind of discern for yourself. So we have tools that we use that are very helpful, very expensive but very helpful to kind of help us crack the nut on the 401k. So it allows us to really kind of connect to these types of plans and evaluate them for the client and actually say — and the discussion that I had last night with a client was like, I said, “Look, you’re putting in 8% into your 401k, and they’re matching 4%. But the money that goes inside of that 401k is just being eroded at a rate that’s like 30x more if we put it into an IRA.” And that’s associated with the costs there. So what a client — and it’s easier to talk about this with round numbers, but if the client had $100,000 in their 401k, every year that 401k was basically charging that client like $1,200 versus his wife, which was like $20. So if you extrapolate that over 20-30 years, those are real dollars. And the problem with this is unless you can dig into the IRS forms that the plans file every year, it’s really hard to figure out what you’re actually paying. And that’s, to me, it’s a really big problem. So just like the health insurance kind of question, you’re kind of operating in the sandbox that they provide you with the 401k. So you’re going to be provided sometimes multiple options, it could be a 401k, a 403b, a 401a, you know, there’s different flavors. But you typically have, again, a set amount of investments inside of that, 20-30 funds that you are selecting from. And I would say it’s more important I think to have lower cost options within that versus a variety of — you know, one of the most efficient retirement plans out there is the TSP. And they have like six funds plus some target date funds. So it’s not a whole lot of choice. But the costs there are super low. So those are the things, as you are evaluating your employer’s plan, you have to kind of say, you know — and the discussions that we have is kind of what I was saying with the client that I recently met with is does it make sense to again get the match, get the free money, but then look outside to other accounts, whether it’s an IRA, even a taxable account, if there’s a side business maybe there’s a SEP IRA option or something like that, again, this is a little bit harder just because the information that you’re looking for is often buried in an IRS form. But it’s really, really important because if you look at the scenario that I brought up, that’s potentially hundreds of thousands of dollars, and that’s not an exaggeration if you extrapolate that over a career. So that’s really important. And for a lot of us, the 401k is going to be the biggest asset that we manage. And it’s important to get that right. So just a lot of moving pieces.

Tim Ulbrich: And I think, Tim, this is easy — I’m just speaking from personal experience — easy to kind of put this on autopilot of eh, it is what it is, it’s what I have. And I think really spending the time to dig in and understand not only the basic things like what are they matching? But also the investment options or choices, and you start to get into asset allocation, understanding fees. And some of that’s transparent, some of it’s not, so seeking help where you need to have help. We’re really investing the time because every year that goes by where there’s something like fees that are being taken out of what could turn into longer-term compounded returns, obviously there’s an exponential factor in that. So it’s worth spending the time. And that’s my challenge to the audience going into this year to really dig in deep here if you haven’t yet. Tim, I’m thinking of a small but important group of our audience, specifically probably some of our friends in the pharmaceutical industry space that may have some stock options available to them. I know we get this question often when we’re speaking with fellows — and a shoutout to MCPhS, a fellowship program. We’re actually going to be talking with them next week. And so that’s what had me thinking about this. You know, of course we know these options can vary from employer — one employer to another in terms of not only what they offer but of course the individual company and the outlook on that company, so there’s no black and white answer here. But what are some general considerations around stock options that folks should be thinking about?

Tim Baker: Typically, the big distinction that we want to make here is it’s not necessarily stock options that we’re dealing with. Typically, stock options is where you can buy a stock at a much discounted price sometime in the future then potentially sell it for what it actually selling for on the market. And there’s a variety of ways to kind of look at that and do that. Typically, what we see in higher levels of management, community pharmacy in kind of the big chains or in industry is RSUs, Restricted Stock Units. And this is not to be confused with employee stock purchase programs, which is kind of a savings account that you defer money into and then at the end of the quarter, you buy stock at a discounted price. It’s kind of almost like another way to save. So what an RSU is, what we’re talking about here, is think of it as compensation that is in the form of stock. So if I’m trying to hire you, Tim, to my pharmaceutical company, I might say, “Hey, Tim, I’ll pay you $130,000 and then we’ll award you $10,000 of stock over the next five years,” that’ll have some type of vesting period. So let’s pretend that we — after Year 1, we give you 100 shares. And then you know, that vest — and then what that means is that you have to work for a set amount of time for that to actually become yours. It’s in your account, but if you leave, it’s not necessarily there. The next year, maybe now have 200 shares and maybe that first 100 has vested. So if you leave, you can cash out that first 100. So it’s a creative way to provide compensation outside of what’s in your paycheck. So a lot of the considerations that we have to look here is again, what is the vesting period? They’re kind of golden handcuffs. What are the tax consequences? So when to basically sell them and if you have to pay capital gains tax and what that looks like. So those are all kind of things that we want to coordinate with not just the portfolio and the allocation that you have but also the tax ramifications that are there as well. So the RSUs are a beautiful thing, and we’ve been working with clients that get awarded, and it’s great to have that money there. But it’s also how does this plug into the greater financial plan and how can we do it in the most efficient way possible from an allocation but then also from a tax perspective.

Tim Ulbrich: And as we wrap up this section on retirement options and savings, employer-sponsored retirement, for those that are listening that perhaps your employer doesn’t offer one — I’m thinking about some of our independent pharmacy folks or you look at your option and say, “Wow, these are crazy. Is there a better way forward?” We’d love to talk with you about that. I mean, I think that’s an area that we’re interested in seeing an opportunity to help. So you can shoot us an email, [email protected], and we can set up a time to discuss that further. So Tim, last piece here before we talk a little bit about the open enrollment logistics and some considerations for the actual process itself. I want to spend a couple moments on FSAs, HSAs. I think these are often confused. I know we’ve talked about this on the show before, but it couldn’t hurt as a reminder as some folks may have an HSA available, some may not. Some may have an FSA and don’t want them to confuse that with what an HSA is. So talk to us about an FSA/HSA difference and considerations as they’re evaluating these options.

Tim Baker: Yeah, so I think the big difference between the FSA and the HSA is FSA I think — or FSA is a pass-through account, meaning it doesn’t accumulate over many, many years. So you essentially set up an FSA, which could be for healthcare, it could be for dependent care, through your employer. And it’s an arrangement that lets you pay for many out-of-pocket medical expenses or childcare expenses with tax-free dollars. So it’s allowed — from the medical side, it’s allowed for things like copayments and deductibles, prescription drugs, medical devices, etc. On the dependent care, it’s things like daycare costs, camps, etc. So with the FSA, if the money is left at the end of the year, the employer can typically do one of two things, not both. They typically can either give you another couple months, like typically 2.5 months to spend the leftover money. So let’s pretend I have $1,000 in my FSA at the end of 2020, I’m given until mid-February to spend that money. Or what they can do is they can let you carry over up to $500 into the next plan year. So if I have $1,000, I have to spend $500, and then I can carry over the other $500 into 2021. Anything above and beyond that is lost, which is why I just don’t like these types of plans. I mean, they’re good to shelter you from tax, but you’re kind of like — you’re kind of trying to guess some of the things that are maybe not as predictable as we might think. So it’s one of those things that we would fund with things that we know we’re going to have to pay. So if we know we’re having daycare that costs us x amount of dollars, we know we want to fund it at least for that. Or if we know that we’re going to have these particular costs for health, we want to fund it with at least that. So that is the FSA. The HSA, on the other hand, is an accumulation account — or it can be. It can also be a pass-through account. So the HSA is the only account that has a triple tax benefit, which means it goes in pre-tax, it grows tax-free and then if it’s used for qualifying medical expenses, it comes out tax-free. So it completely misses the tax man at every step. So the big difference, though, is that I could put $2,000 into it this year, as an example, and not spend it. And then next year, I could put another $2,500 and not spend it and actually invest it. You know, invest it almost like an IRA — similar to an IRA — and basically use it as an accumulation account. So a lot of people use it as a stealth IRA. And this is what we do is that we try to cash flow our medical expenses and just leave the HSA alone. And the idea is that it’s just another bucket of money that we’re funding that can be used for retirement sometime in the future or it could be used for hey, in 2022, we had a health thing that pops up that we really need to pull that money from. So there’s a lot of flexibility and power in the HSA. With the HSA, you have to have a high deductible health plan. So if you have one of those gold health plans, you’re not going to be able to fund an HSA. The deductible won’t be in line. So those are the big differences between the FSA and the HSA.

Tim Ulbrich: And we talked, Episode 165, Tim Church and I talked about the power of the Health Savings Account. Make sure to check that out. We talked in more detail about what you had summarized there, talked about some of the contribution limits, the definitions of high deductible health plan and got in a little bit as well of the differences between that and an FSA. And I couldn’t agree more, Tim. I think for people that have access to an HSA, if they can leverage the benefits that you suggested, great. Many people may not have access to one and so really looking at the FSA as is that an option for saving for planned expenses you know that are going to be coming up in the following calendar year? So we’ve talked about a lot, Tim. We talked about health insurance, life and disability, retirement, as well as the FSA/HSAs, and I want to wrap up by summarizing the open enrollment process. What exactly is it? And then what are some considerations for our listeners as they head into this season of open enrollment?

Tim Baker: Yeah, so open enrollment is typically a time, it’s a time period that every employer has. It’s usually held annually. A lot of them have them this time of year. Sometimes they’re in the summertime, sometimes in spring. But for the most part, we see them in kind of the September-October-November time period. So it’s a time for the employee to basically select their benefits or their health plan or whatever for the next year. So you know, the open enrollment period sometimes can be glossed over and they’ll just say, “Hey, well, I’m just going to kind of keep the status quo.” The problem with that is that oftentimes these plans are changing, you know, every year they’re changing with costs and everything kind of moving. But I think the way that we approach it with clients is one, to be a — kind of to be a sounding board for them. And we often, what we’ll do is we’ll log onto the benefits portal with a client, and we’ll just kind of go — we’ll review the packet that maybe they’ve sent out to us and we’ll read through it and we’ll kind of just provide comments and ask questions. And then sometimes we’ll actually log on and actually go through their open enrollment and say, “Hey, let’s opt into this. Let’s opt out of that, we don’t need to be paying for that, etc.” So the thing that I would say for listeners is to really take a look at what your employer is providing. And if you have questions, this is another thing that we do — because sometimes it’s not apparently clear what the benefit is or what it covers, etc. is put your HR people to work. I often ask the question — and I actually have this conversation. I’ll say like, “Is your HR person any good?” And they’re like, “No, not really.” So we can formulate good questions and then basically if we can take them all the way to finish line in terms of what they need, great. But if sometimes we have to go back to the HR person and say — and have the client or the employee say, “OK, like can you explain this a little bit more about –” we just had one that’s about the definition of disability and what that looks like. And this particular client, their company was going through a merge, so there was a little bit of kind of just unsure about what it’s going to look like going forward. But to me, this all goes back to the I word, which is be intentional, review your stuff, kind of take stock of where you’re at in your life, what you think you need, what you don’t need. I would say one of the things that I often see is that this is one of the things that is overlooked in the financial plan. And it’s kind of a microcosm of insurance. It’s like, ah, I don’t need insurance, or ah, it won’t happen to me and ah, I don’t want to take the time to read through it. And I get it. I mean, some of these packets that we get are 100 pages long. It’s 100-page PDF. And we can basically go through it fairly quickly and kind of pull out, extrapolate the information that is most important, provide good, sound recommendations. But it is one of those things that is important and you know, you want to — to me, it’s about optimization and making sure you’re using best use of everything that is kind of available to you, whether it’s, again, salary, insurance, etc. So those are the things that I think should be top of mind for someone as they kind of go through this period of open enrollment.

Tim Ulbrich: Yeah, that’s a great recommendation. It reminds me a little bit of the advice that we give to recent graduates of hey, don’t wait until the grace period’s up to make your decision and do your homework. So now is the time to really be understanding some of these nuances, the options that are available, looking at it in the context of the rest of your financial plan, reaching out, getting some help, so that once you get to that open enrollment period and you have that meeting or that webinar and you get that packet of information, you’re ready to hit the ground running with evaluating that further and making those decisions.

Tim Baker: The HR person should be able to like contact the insurance or even like the 401k, like I’ve come back with clients and I’ll say to the 401 provider, “Why are these fees the way they are when there are options that are much, much cheaper?” So you know, you — I mean, the HR person might not be able to answer the question directly. You know, sometimes it’s like, well, I don’t know that. But then to me it’s push the issue. And it’s like, well OK, can we talk to the people that do know these questions, whether it’s an insurance question or a 401k question, etc. So to me, it’s like don’t be shy about this. This is important. It’s a crucial part of your financial plan and your livelihood. So to me, those are questions that we want answers to. So I would just say, kind of squeaky wheel gets the oil type of thing and make sure that you’re putting the professionals that get paid to provide these services, put them to work and make sure that you’re satisfied with the outcome.

Tim Ulbrich: Yeah, especially for those listening that feel like they have some cruddy options available because those are the individuals that are often making the decisions, they’re getting in front of the reps that are providing them with the options, so you know, there might be an opportunity to do some direct or indirect education on oh my gosh, I had no idea about the fees or what other options may be out there. Because at the end of the day, you know, to defend some of these HR folks, many of them are busy with a lot of things and sometimes it’s easy to renew a package rather than really taking the time to evaluate what else may be out there and be of benefit to the employees. So Tim, great stuff, as always. And to the YFP community, we appreciate you taking time to join us on this week’s episode of the Your Financial Pharmacist podcast. If you liked what you heard on this week’s episode, please do us a favor and leave us a rating and review on Apple podcasts or wherever you listen to the show each and every week. And if you are not yet a part of the Your Financial Pharmacist Facebook group, I hope you will join us. Over 6,000 pharmacy professionals strong, helping one another and committed to helping one another on their path towards achieving financial freedom. Have a great rest of your week.

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YFP 173: Using Systems to Automate Real Estate Investing

Posted on by yfpadmin

Using Systems to Automate Real Estate Investing

Ryan Chaw, pharmacist and real estate investor, joins Tim Ulbrich to talk about how he built a six-figure rental portfolio, red flags to look out for as an investor, and the method he uses to find good tenants.

About Today’s Guest

Ryan graduated with his Doctor of Pharmacy in 2015 at age 23

He was inspired by his grandpa who bought 3 properties in the Bay and achieved financial independence for himself and was able to help cover college tuition for his grandchildren.

Ryan bought his first property in 2016. It was a single family home at his local college. He rented out the house per bedroom and renovated to add extra bedrooms to increase rental profit.

He repeated the same process for each property, buying 1 property each year. He then created a system for getting consistent high quality tenants, managing the tenants, and decreasing expenses through preventative maintenance. He now makes $10,755 per month in rental income.

Three of the properties are on 15 year mortgages and one is on a 10 year mortgage. Ryan took a HELOC out on the first house to help buy the 4th house. He paid off his first property in 2020.

Ryan is now teaching others his system: how to find a college town to invest near, analyzing a deal, generating tenant leads through strong marketing, and how to self-manage college tenants so everything is hands off and automated.

In his free time Ryan travels to many foreign countries to just absorb the culture and life outside of California. So far he has been to China, Japan, Taiwan, the Bahamas, Canada, Paris, London, Germany, and Mexico.

Summary

Ryan Chaw joins Tim Ulbrich to talk about his why and motivation behind real estate investing, how he built his portfolio so quickly, how he balances a full-time pharmacist career with real estate investing, red flags to watch out for when purchasing a rental property and Ryan’s unique method for finding high quality tenants.

Since graduating pharmacy school in 2015, Ryan has purchased four single family homes with 18 tenants and brings in $10,755 a month. Although he hasn’t been able to purchase a property this year, Ryan paid off his first property in full which brings in about $2,500 in rental income monthly. He also now has a large HELOC that he can access to fund a future deal if needed.

Ryan shares that despite being a full-time pharmacist and real estate investor, he does in fact have a work/life balance. Ryan set up systems and standard protocols in place so that he can run things on autopilot. He has systems created for maintenance issues and advertising which allows him to only have to spend an hour a week on his properties. Because of these systems he doesn’t feel the need to hire a property management company which would cut into his cash flow.

Ryan shares several red flags to watch out for when purchasing real estate like: water stains, mold, dry rot, strange odors, uneven flooring and if the property is being sold as is. He also explains his process for finding high quality tenants which he refers to as his PRIME method which stands for:

P – placement of advertisements

R – review of social media

I – identifying type of tenant

M – measuring responsiveness

E – ensuring proof of income

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Ryan, thank you so much for coming back on the show. How are things going?

Ryan Chaw: Things are good. I’m excited to be on the show again.

Tim Ulbrich: Happy to have you back. Appreciate you reaching out to give me an update on kind of where you’re at, and we’re going to talk all about your portfolio, what you’re working on on the real estate side, how in the world do you manage that given your competing responsibilities also as a pharmacist. And you know, I’ve been wondering, Ryan, so last time we talked, you had mentioned your love for international travel. So here we are, obviously in the midst of a global pandemic, travel hasn’t been what it was. So how are you spending your time and really finding that release from work without travel as an option?

Ryan Chaw: That’s a great question. Yeah, I’ve been going on a lot of hikes nowadays, kind of just get clarity and work on my mindset and see where I want to go with my real estate business and everything. So yeah, I’ve been doing that. Also just spending time with friends, either outdoor dining or sometimes just online, we play this game that’s kind of like Mafia, it’s called Among Us. But yeah, it just kind of is chilling.

Tim Ulbrich: Awesome. And I’m glad you mentioned mindset because I have found also, you know, I think 2020 is going to be a year for many of us that we look back in five or 10 years, and there’s a lot of reflection going on. I know for me in 2020, I think just the midst of everything that’s going on, perhaps more time, less activities, whatever be the reason, but a great time to develop, to set mindset, to reflect on where things have been, to reset if you need to reset, and to look ahead into the future. And so today, we continue our focus for the YFP community, as we mentioned, in 2020, we want to bring you more real estate investing content. And so again, Ryan, we had you on the show, Episode 140. We talked all about how you’re bringing in almost $11,000 a month through college town real estate investing, such an awesome conversation, great story. I personally think it was really inspirational to a lot of people that are itching to get into real estate investing while still working full-time as a pharmacist but maybe aren’t quite sure as to where to start. And so I hope folks will go back and take a listen to that episode, Episode 140, if they haven’t yet done so. And we’ll link to that in the show notes. And so Ryan, I want to chat with you about a few different aspects of your real estate investing journey, including your strategy behind building the portfolio that you’ve built, especially in an expensive market, some red flags that ended up costing you quite a bit of money on your first deal — and we’ll break that down — as well as your unique prime method that you use to find great tenants at your properties, which as we know obviously can be the difference in terms of not only headaches but also in terms of cash flow. So let’s hit the stage and talk about your portfolio and recap some of your journey for perhaps those that didn’t join us on Episode 140. Take us back. Remind us when you got into real estate, why you got into real estate, and what your current portfolio is made up of.

Ryan Chaw: Yeah, sure. Let’s start with why I got into real estate because it really was an inspirational journey for me. I got started from my grandpa, actually. He bought a couple properties back in the ‘50s before Silicon Valley was even a thing. And as we know, all those properties went up in price like crazy, and he became a multimillionaire and was able to retire early. Not only that, he was able to cover part of my college tuition and that of my brother’s. So it really showed me that real estate is one of the best ways to create generational wealth, not just for yourself but for your children and future generations as well. Unfortunately, I wasn’t able to ask him how he did it before he passed away, but you know, I wanted to get started as soon as possible. So I got my pharmacy degree in 2015, I graduated as a RPH or PharmD, and I just wanted to get started as soon as possible. So I worked a lot of long hours. I actually had two jobs. I worked as a retail pharmacist and as a hospital pharmacist and really grinded it out because I had this dream and vision for myself, right? So I wanted to get started in real estate as soon as possible because I knew that the prices will go up over time, rent will go up, all of that. And so real estate’s really a time game, and you’ve got to get started as soon as possible. So I bought my first house in 2016. It was a $262,000, three-bed, two-bath house. And I bought it in my local college town because I figured if I rent out per bedroom, I could get a lot more rental income than if I rented out the whole house to like a family or something like that. And so I bought one house every year by reinvesting the cashflow, investing my W2 income, and I actually took out something called a HELOC, which we can talk about later, it’s called a Home Equity Line of Credit. Because my first house went up in price by about $60,000, I was able to access the equity, take it out, and put it onto my fourth property. So now I have four single-family homes with 18 tenants that makes $10,755 per month at max capacity.

Tim Ulbrich: I love it. Thanks for the recap. I mean, I love the energy in your voice, kind of the why. We talked about that on Episode 140, what’s the why, what’s the purpose beyond making money, but what’s the vision as it relates to your financial plan? I love the focus on a desire for generational wealth. And you know, while you weren’t able to ask your grandpa what the playbook was, you know, here we are, recording this, right? So this is going to be available not only to others in the community but as I’m sure you’re already thinking, how you can pass this down in information to your kids and their kids and how important that is to be able to teach others the principles that we learn along the way. And so Ryan, in 2020, here we are. I know you had mentioned a goal of acquiring one property each year, but this year has been different — let’s be kind and say it was different, right? It’s been a challenging year, we’ve got a global pandemic, you live in an expensive market, so I’m guessing your plans and visions for 2020 may not have panned out exactly as you had thought they would before especially the pandemic hit. So tell us a little bit more about what has happened in 2020 as it relates to your portfolio?

Ryan Chaw: Yeah, definitely. So coronavirus hit and unfortunately, the college that I invest near did shut down and went to online classes only. There are a few classes that are still on campus, and so I was kind of like worried. Like am I still going to get tenants, right? So I contacted my existing tenants and asked them all, you know, ‘Do you guys want to extend your lease? Do you still want to stay or not? Because you guys have the option to cancel your lease because I can’t — obviously this was unprecedented, we didn’t expect this. So I’m giving you the option to cancel.’ So you know, just kind of working with the current tenants and saying, ‘Hey, I can go around your budget as well if there’s budgeting concerns.’ I basically made that connection with them, and that’s how I was able to actually keep a lot of the current tenants. And not only that, when I advertised, I advertised in Facebook groups, and I offer them to give me a call so I can talk to them to see if this is a good fit for them, right? So I would basically on the call go through any of the concerns about the house. A lot of the concerns are like security, is this a good neighborhood, what are the other tenants like, and all of that. But because I took that extra step to get on a call with them, I was able to basically fill up almost all of my bedrooms during this year. So I have 17 bedrooms, and I filled 15 of them so far.

Tim Ulbrich: That’s awesome. And I think that speaks to your focus on relationships, not only finding good tenants but also maintaining those relationships. And before we hit record, you also mentioned this year, you were able to pay off one of your properties in full, correct? Tell us more about that.

Ryan Chaw: Yeah, I was actually able to pay off the first property. It’s kind of like for peace of mind, honestly. There’s definitely this debate between should I just leverage my money to the max and basically just buy as much property as I can with the money I have? Or should I pay off some of them so I don’t have to worry about not being able to pay the mortgage? If there’s a huge recession or something like, I’m not underwater. So for me, I kind of wanted a little bit of peace of mind, so I paid off my first property. And it doesn’t mean I can’t touch that money. I can still access it through my HELOC, right, my Home Equity Line of Credit. But it does give me that peace of mind and that extra cash flow. The first property was making around $2,500 per month in rental income, so I have that $2,500 per month in just passive income basically, minus some expenses, obviously. But yeah. I mean, that kind of was one of my goals is to pay them off, right? So I was definitely happy for that.

Tim Ulbrich: Congratulations. And you know, $2,500 a month of rental income, no mortgage payment, that’s a great position. And I think I appreciate your comment about, you know, even though you paid that off doesn’t mean you don’t have access to the equity if you wanted to tap into that. But obviously you’re weathering a little bit of an unprecedented situation here I’m sure and will be on the offensive going into the future. So tell us more about the financing of those four properties. Did you approach the financing the same in all of those? And tell us about how you were able — you mentioned the HELOC, but in terms of the mortgage structures, and I think that will help give folks an understanding of what options may be available to them.

Ryan Chaw: Yeah, definitely, especially with pharmacists having such a high salary, a lot of them making a good six-figure income or a little bit less than that, we have options to purchase these houses, we have that opportunity that a lot of people may or may not have, right? Especially as an employee, you actually get pretty good financing options. What I did is a conventional mortgage through Fannie Mae/Freddie Mac, those are just two government-sponsored enterprises out there that basically set the rules for how the loan can be done or what loans are given out, right? And so I just did the conventional financing and was able to reinvest my cash flow every time to purchase a property sooner and sooner each year.

Tim Ulbrich: OK. And if I recall from our conversation before, majority of those you had on a 15-year mortgage, maybe one that was shorter than that. Obviously you’ve paid one off since then. But is that correct?

Ryan Chaw: Yeah. They’re all on 15-year mortgages. I kind of that, again, with the peace of mind idea, I want to pay them off as soon as I can. If I were to pay them all off, it would take me until I had around 31, and then I would have that six-figure, that $10,755 per month just coming in in passive income. And so then at that point, I could retire, basically live life on my own terms, be able to do what I want where I want with whomever I want to do it with and have that choice whether I want to go on to work or not.

Tim Ulbrich: Yeah, financial independence by definition, right, right there. So tell me more, tell our listeners more — you know, I’m guessing some folks are thinking, my gosh, rates are at the lowest we’ve seen in who knows how long, it probably doesn’t get any better than they’re at right now. And so as you were kind of reconciling paying these off early — and you’ve alluded to this a little bit with peace of mind versus it’s a low interest rate debt, I can free up some monthly cash flow, whether that be for purchasing properties, maybe contributing into other retirement funds or other investments or ventures. How have you reconciled this balance between peace of mind/aggressive repayment versus you know what, it’s pretty cheap debt and I might be able to do something else with that money?

Ryan Chaw: Yeah, definitely. I mean, I’ve definitely been looking at the current market. And it’s kind of like as Bruce Lee says, you have to be like water. You want to definitely have a plan but be flexible with your plan, right? Water takes the form of the container it’s in, which means like you have to be able to pivot. Like if there’s a — maybe let’s say the housing market crashes, right? All of these houses are on sale. Well then you do want to start leveraging your money. You do want to buy as many properties as possible. So that’s why I have that HELOC. You want to be in that position where you can go either way. So right now, the market’s very hot. Houses are actually being bought in cash for over asking price. So I’ve been definitely having trouble finding a house to purchase this year. But I’m definitely always looking, and if I can find a good deal and an opportunity add where I can add extra bedrooms like turn a three-bed to a five-bed house, then I will jump on it right away. So yeah, I guess that’s my best advice, just what Bruce Lee said, be like water.

Tim Ulbrich: I love that. I mean, be flexible, be nimble, and put yourself in a position, right, so when the time is right — it doesn’t mean you’re always on the offensive, but you’ve got yourself in a position, whether that’s cash, whether that’s a HELOC that you have ability to access some equity, but you’re in a position, ready to go, when that time does make sense and obviously when that deal presents itself. So Ryan, you’ve built a six-figure rental portfolio in a matter of four years. I want our listeners to remember you’re a 2015 PharmD grad, bought your first property in 2016, which is really impressive in and of itself, but you’re also working full-time as a pharmacist. And so the obvious question here is, how are you doing that? What’s the work-life balance like? Or is there even one?

Ryan Chaw: Yeah, that’s a great question. So there’s definitely a work-life balance. So the thing is, if you have systems in place to go to protocols, standard protocols in place for when something goes wrong, then you can automate everything and be able to do this while you’re working as a full-time pharmacist because I did it, right? I have four properties. I have 18 tenants. And I’m able to do this on the side simply because I have these systems in place for when something goes wrong. So for a quick example, let’s just say a toilet broke down, right, or there’s a toilet leak. So I teach my tenants, I empower my tenants and give them responsibilities, if this happens then you should call this number, bill it to this contractor. So I kind of have like a list of numbers of contractors that they can go to for that. Or if they were to like text message me, I would just forward that text message to the proper contractor because I have this contractor team that takes care of issues for me. And I know what the strengths and weaknesses of each contractor, so I know where to put whom.

Tim Ulbrich: And so when it comes to that contractor team, you know, I’m wondering as somebody who’s at the very beginning of this journey, how do you build that contractor team that you trust, right? So I’ve talked to several folks who are like, I’ve got this contractor, I trust him, I know that it’s good work, it’s a fair price. But you know, as somebody who’s new into this space, you’re like, I don’t know. I might Google search, I might ask some people on Bigger Pockets or whatever, so how did you build that team? Was it through experience? Was it through referrals? Tell us more about that.

Ryan Chaw: No, real estate’s all about connections. And going back to what we were talking about earlier where I connected with the tenant on the phone, right, and really give that human touch, it’s really all about connections. So what I did is I actually talked to my neighbors, and my neighbor’s friend was actually a contractor in the area, and he did a lot of projects. So I just had him kind of, just tested him out, had him do some smaller projects, and then eventually some larger projects. He did a great job, and you know, he charged a fair price and all of that. Right? But if you’re kind of just starting out, I would say just talk to your real estate agent. Your real estate agent will likely know some contractors in the area. Talk to your neighbors, talk to people around the area, build those connections. Also when you talk to contractors, make sure you talk to — if it’s a major project especially — talk to at least three. Get like — they’re called bids. Get three bids, and choose the one that seems to know what they’re doing, is able to explain what they’re going to do, and is a good price point. So the point of getting the three bids is so you can compare. Also, you can ask for something called an itemized bid, and this is just like another tip. An itemized bid is where they separate out the cost of materials and the cost of labor. And so the cost of labor shouldn’t be too much, like it shouldn’t be over $100 per hour most times. And then the cost of the materials, you can just look that up on Google or you can even pay for the materials yourself, ship them over to the contractor and have them give you a bid for labor.

Tim Ulbrich: Great advice and input. And one of the other things I was wondering that I suspect our listeners are as well, you mentioned that when an issue comes up with a tenant, you’ve kind of educated them or given them information on where to go, ideally take yourself out of it, but if they reach out to you, you can then just work with that one contractor, forward their information. So does that remove the need for working with a property management company? Or is that in addition to working with a property management company?

Ryan Chaw: To me, it actually removes the need for a property management company. I feel like I do like even a better job than most property management companies out there because I have these systems in place. If you do want to hire a property management company, they can take anywhere from like 8-12% of your rental income, right? And that, to me, wasn’t necessary because I have systems in place for advertising my properties, vetting and finding high quality tenants, I have systems for if issues come up, if tenants complain about other tenants, right? And because I have all that in place right now, that’s all automated, I really don’t have to do much work other than just keeping track of the finances.

Tim Ulbrich: That’s great. That’s awesome. I think the investment you’ve made there, I can tell it’s something you have a strength in, you know? And for some folks, they may build that system, others may factor in the property management into their deal analysis but making sure you’re accounting for that piece of it is really important. So you’ve got these four units, obviously you sat tight here in 2020. What are your future plans? Do you plan to continue with single-family homes where you’re renting out the rooms, this model that you’ve been doing? Or are you looking to branch out into other property types?

Ryan Chaw: Yeah, that kind of goes back to the being flexible part, right?

Tim Ulbrich: Yeah, yeah.

Ryan Chaw: I would say first, I will diversify, definitely invest in different college towns, not just my own. Maybe go to 7-10 houses, somewhere around there would be kind of like my end portfolio. You really don’t need that much to achieve financial freedom, honestly. And like I said, I’m able to do it by the time I’m 31 or so. And I started this when I was 24. So that’s like 7-8 years or so. Any pharmacist could really achieve financial freedom, especially if they use these strategies of renting out per bedroom because you’re basically doubling your cash flow on the property.

Tim Ulbrich: That’s great. So let’s talk about your first deal. And you know, one of the things I mentioned — and I feel like we probably don’t even do enough of — is that real estate investing isn’t always rainbows and butterflies, right? Sometimes you walk into a bad deal, issues come up with tenants, you’re faced with a major maintenance, unforeseen rehab costs, I mean, really, the list can go on. So talk to us about the red flags that cost you big on your first real estate deal and how you learned from that and what you’ve then applied to future investment properties that you’ve evaluated.

Ryan Chaw: Oh yeah, definitely. So my first deal was a 100-year-old house, so you can imagine it already had a lot of problems on it. So I got this call at 11 p.m. on a weekend from one of my tenants. He said, “Dude, man, there’s sewage shooting out the kitchen sink, and it’s all over the kitchen floor right now.” So I was like calling up a cleaning crew, plumbers, at like midnight on this weekend. And of course I had to pay premium pricing because it was on the weekend at midnight. And so the plumber stuck down a camera down the pipe, and he found that the sewage pipe whole line was rusted over and there were roots sticking into it, and it was broken, basically. So it had to be replaced. It cost $9,000 just to replace that line with like PVC and everything and to clean up the mess and everything too. So I was like, oh man, I’m $9,000 under, right? Not only that, there was a lot of these openings around the outside of the house where rats got in and feral cats actually brought fleas in. So I had a flea and a rat infestation at the same house in the same year.

Tim Ulbrich: Lovely.

Ryan Chaw: I know, right? It’s like, come on, man. There’s so much stuff. And then last thing that I didn’t notice was the house actually had no A/C. So I had to — and this was in Stockton, so it gets up to 100 degrees there. So the tenants were complaining like crazy. I ended up having to install a mini-split system that cost me $15,000. Yeah. So like you know, don’t make the same mistakes I’ve made. Obviously I could have easily figured out if there was an updated HVAC system on this house. I was also really terrible at advertising, so I had put up a sign on the lawn, a “For Rent” sign. That didn’t work very well because I ended up getting a lot of calls, but the calls were from people who weren’t very qualified to live at the property. Yeah, it was just from random people. And most of them couldn’t even afford it. And most of them weren’t even students. Lesson learned, get a sewage line inspection during the escrow phase because you can tell if a pipe is broken, and you can use that as a negotiation point at the point of sale, so the seller either cuts you a check at closing or they pay for some of the closing costs to make up for the broken pipe or for a rusted-over pipe with roots sticking into it. Other red flags, look for any signs of water stains or mold because water honestly is one of the worst forces of nature that can totally destroy a house and its structure, especially if untreated. So usually when I go through a house, I kind of have this red flag checklist I look through. Is there water stains? Any signs of mold? Is there any dry rot? You guys can look up dry rot on Google. It’s basically a fungal infection of the wood that can destroy the structural integrity of a house. Are there any strange odors in the house? That can mean poor ventilation. Is the house — do they have uneven flooring? That could be a foundation issue. When the property is listed, is it sold as is? That means the seller is not going to be willing to pay for any fixes that come up during the inspection. So there’s a lot of things I look for on the house definitely.

Tim Ulbrich: Yeah, and what I hear there, Ryan, I guess there’s a couple ways to kind of implement solutions going forward. One is you live the mistake and then you make sure it never happens again or you hear from other folks such as people listening to you and they’re like, OK, got it, checklist system now that I need to have in place. But I think what I hear you really trying to describe — of course there’s going to be maintenance, things that are going to go wrong from time to time, tenant turnover and so forth — but what are those “catastrophic” things that are really going to eat into either your cash flow, returns, your emergency funds, or cause significant issues that you can try to identify and advance. And what process do you have in place to make sure you’re going to do everything that you can to identify what those things would be before you obviously close on the property. Or I guess if the deal is good enough, you account for it in the financials to make sure that you can take on that repair. So that’s helpful. And I really want to spend a few moments here as we wrap up learning about your process for finding high quality tenants because I think, you know, second maybe to fleas or rehab costs or things going wrong, second to that, a common objection is I just don’t want to deal with tenants and multiple tenants and turnover of tenants and what that means. And so I think finding high quality tenants is really an important process. So you have a PRIME process to do that, PRIME. So give us an overview of that method and how and why you created it. And then we can talk further about that.

Ryan Chaw: Yeah, for sure. And this is one of my systems I use to basically automate the whole process. And once you automate everything, honestly I spend less than an hour per week on my properties in general. So creating this system is really key to creating a profitable, successful real estate investment. And so that’s why I’m kind of going through each system and checklist that I have in this interview. So let’s start with the PRIME method. P stands for Placement of advertisements, R stand for Review of social media, I stands for Identifying the type of tenant they are, M stands for Measuring responsiveness, E stands for Ensuring proof of income. So let’s start with the P first. P is Placement of advertisements. You need to place you ads where your target tenants hang out. I made the mistake of just putting a sign on the lawn, right? But putting ads up where your target tenants don’t hang out, it’s like fishing in an empty pool. You’re not going to catch anything, right? Or catch anything that you want, at least.

Tim Ulbrich: Sure, yep.

Ryan Chaw: So what I do is I actually go onto these Facebook groups, Class of 2022, Off-Campus Housing, Rooms for Rent, basically these Facebook groups where the students, college students, will hang out and look for housing. I also contact — last year, I contacted the student government and asked them, can they put some of my ads or fliers up in the school buildings where the college tenants hang out? And so that really actually got me quite a few tenant leads through that. So that’s very important, just placing advertisements, thinking about where your target market hangs out, it’s very important. R stands for Reviewing social media. So that means I go through their Facebook profile, social media, to screen for are they like a party type of tenant? Are they smoking, doing drugs or alcohol in their pictures? Right? Or are they going to a bunch of raves and all that? Are they like more of a studious type tenant who is very focused on their studies, they’re maybe in a professional school like a pharmacy, dentist, medical student, right? A third- or fourth-year student usually are more mature than first- and second-years. They’ve usually got their party life out and all that as well. Just because if I can get one or two studious students in that house, they kind of stop the other students from throwing a wild party because they’re like, “Dude man, I’ve got a midterm tomorrow. I’m not going to stand for us having a drinking party right now.” Right? So that’s important. I stands for Identifying the type of tenant they are. So there’s different types of people out there. There’s ones who will look for the cheapest deal, right? They’ll go for the Motel 6 rather than the Ritz Carlton. But there’s others out there who will go for the Ritz Carlton, right, because they want the best quality deal that’s out there.

Tim Ulbrich: Sure.

Ryan Chaw: So the one who wants the best quality, obviously I would put them in the master bedroom versus the one who wants the cheapest deal, I’ll put them in a smaller bedroom but also the cheapest price bedroom. Sometimes, I have so many tenants that I don’t even have to — the tenants always asking for a discount or a cheaper deal, I could just find another tenant who doesn’t care so much about the price of the rent. But honestly, my houses are half the price of on-campus housing. On-campus housing is around $1,200 a month. And I charge only around $600 a month. So really, it’s a really great market out there. We are providing affordable housing for a lot of students.

Tim Ulbrich: Yes.

Ryan Chaw: M stands for Measuring responsiveness. So that’s the more responsive a tenant is, usually the more responsible they are, the more mature and professional they are, because would you rather have like let’s say you contact a tenant for rent, late rent. Would you rather have them take three weeks to get back to you and say, “Oh, I didn’t see this message,” or something or someone who gets back to you right away. So you measure the responsiveness of the tenant based off of how fast they get back to you on the paperwork you send them or anything you ask of them, right? And then E stands for Ensuring proof of income. So that means you ensure that the parents make enough money to afford the rent. Usually, it’s the parents paying, which is great because what parent is not going to pay for their child’s — you know? And risk their child being evicted from where they’re staying in college, right? Parents are also great because they help clean up after their children too, believe it or not. They’ll vacuum the whole house. I’ll go like, wow, OK, I didn’t have to do anything.

Tim Ulbrich: And easier to communicate with, right? You’ve got a second option if need be.

Ryan Chaw: Yeah. Exactly, exactly. Yeah. And I have like an authority figure I could go to if there are issues with that current tenant too. But I haven’t had to do — I only had to do that once in my whole five years of renting out to students. So yeah, I usually ask for the last two monthly bank statements and FICO score or credit score. The kids also will give me student loan documents or financial aid documents to prove that you can afford the rent, that type of stuff. It’s important to ensure proof of income, especially during COVID if you guys are investing during this time. There are people who have lost their jobs, right? So you do want to make sure that they have a good amount in the bank and that they’re not going to ever have trouble affording the rent because that’s not good for both of you, right?

Tim Ulbrich: Absolutely. So again, that’s the PRIME method for finding high quality tenants. P is for Placement of advertisements, R: Review social media, I: Identify type of tenant, M: Measure responsiveness, and E: Ensure proof of income. So Ryan, one of the things I was thinking about as you were talking, just by the nature of who you’re often recruiting as a tenant, obviously a college town, health profession types of students, I would assume that would almost refer themselves, that you — the advertisement may be important up front and perhaps if you have a vacancy, but I could see where P4s, P3s, P2s, even if they’re in a medical school, M4s, M3s, where they are often talking among themselves. And it’s like, if there’s a good deal and it’s a nice property and they feel like you’re a good landlord, then they’re going to refer that to their peers. So is that something that you find to be true?

Ryan Chaw: Oh yeah, definitely. Nowadays, I get about 50% of my tenants just through referrals, basically guys that say like, “Hey, I have this friend who also wants to stay at the property because I enjoy staying here. And I was wondering if I could bring some of my friends in.” And I’m like, “Yeah, totally fine. Just have them shoot me a message.” And so I’m able to actually get a lot through referrals. So it’s kind of like one of those businesses — at the beginning, you do have to put in a lot of work to establish your reputation. But then, if you treat your tenants right, you treat them with respect, then it really snowballs to a point where it’s pretty much all automated. The tenants start looking for you instead of you having to do that push and advertise and look for them.

Tim Ulbrich: That’s great. And thank you for sharing that input in both the method for finding tenants, some of the red flags that you look for when you’re acquiring a property, looking at properties, as well as your current status of your portfolio. So great to have you back on the show. And I want to wrap up by — I always like to ask guests, you know, what resources would you recommend to those that are looking to get started or even continue their journey in real estate investing?

Ryan Chaw: Oh yeah. So I would say Bigger Pockets does provide a lot of resources. I actually went on their podcast yesterday. So keep an eye out for that episode.

Tim Ulbrich: Hey, no way!

Ryan Chaw: I talked about student housing. Yeah, I did. On the Rookie podcast.

Tim Ulbrich: Yeah.

Ryan Chaw: On the Rookie podcast that they just started out. Yeah. And then there’s some books you guys can definitely pick up. “Rich Dad Poor Dad” is definitely a go-to. There’s “Millionaire Real Estate Investor” by Gary Keller. Gary Keller is one of the big names. He actually owns Keller Williams realty company. There’s also — let’s see — there’s some mindset books I can recommend. There’s the “High Performance Habits” by Brendon Burchard. That one’s a great one. Oh man, there’s a lot out there.

Tim Ulbrich: But those are good. Those are good recommendations. And we will — I subscribe to the Real Estate Rookie podcast, so when we see that go live, we’ll link to that in our show notes as well. So.

Ryan Chaw: Oh, that’s awesome.

Tim Ulbrich: Yeah. No, that’s awesome to see a pharmacist investor featured on the Bigger Pockets site. And what’s the best way for our listeners to contact you and follow the journey that you’re on?

Ryan Chaw: Yeah, definitely. So I have this free PDF for anyone just trying to get started in real estate investing, especially the student housing market and some about the strategy that I use. You can actually get that at my homepage at www.NewbieRealEstateInvesting.com. That’s www.NewbieRealEstateInvesting.com.

Tim Ulbrich: Very cool. So just logged on there, we’ll link to that in the show notes, “The unique and highly profitable strategy I use to go from newbie real estate investor building a portfolio that generates just under $11,000 every month.” So we’ll link to that in the show notes. Ryan, thank you so much for coming back on the show, for sharing your journey, and I’m sure this won’t be the last time. So I appreciate your time.

Ryan Chaw: Oh yeah, for sure. Thanks again, Tim. I appreciate being on the show, and I hope your audience got a lot of good tips there. And you know, real estate’s all about connections, guys.

Tim Ulbrich: Absolutely. And to the YFP community, as always, if you liked what you heard on this week’s episode, please go and leave us a rating and review on Apple podcasts, wherever you listen to the show each and every week. And if you haven’t yet done so, make sure to join us in the Your Financial Pharmacist Facebook group, over 6,000 pharmacy professionals that are committed to helping one another on their path towards achieving financial freedom. Have a great rest of your day.

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YFP 172: Should You Be Concerned About the Projected Decline of Pharmacy Jobs?

Posted on by yfpadmin

Should You Be Concerned About the Projected Decline of Pharmacy Jobs?

Tim Ulbrich gives his thoughts on the outlook of the pharmacy job market, what to make of the U.S. Bureau of Labor Statistics’ projection for a 3% decline in pharmacy jobs over the next 10 years, and how this impacts your financial situation and plan. Tim also shares 10 steps you can take now to hedge your financial plan against job loss or reduced hours.

Summary

Tim Ulbrich addresses the Bureau of Labor Statistics’ projection for a 3% decline in pharmacy jobs between the years 2019-2029, which would equate to about 10,500 fewer pharmacy jobs. This projection is generating a lot of conversation in the pharmacy community as this has the ability to make a large impact on the profesion.

Tim dives into the data from the BLS as well as from the AACP Graduating Student Survey, the National Pharmacist Workforce Survey, ASHP Residency Match Statistics and the Pharmacy Demand Indicator and shares his opinions on what to make of the data and discusses the pharmacist job outlook for the future.

Finally, Tim shares 10 steps that pharmacists can take to hedge against job loss or reduced hours:

Do everything you can to reduce credit card and consumer debt.
Don’t become house poor.
Understand debt repayment plans and options for your student loans.
Make early aggressive retirement savings if possible.
Diversify your income.
Network (and don’t wait to do so until you’re in dire need of a job).
Get rid of car payments to build a margin in your financial plan.
Develop a plan to reshape your mindset.
Surround yourself with people that challenge you in a positive way.
Have a good coach to help you develop a strategy and hold you accountable.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Welcome to this week’s episode of the Your Financial Pharmacist podcast. My name is Tim Ulbrich, and this week, I wrap my arms around what to make of the BLS-reported 3% decline — that’s the Bureau of Labor Statistics reporting a 3% decline in pharmacist jobs projected over the next 10 years — and the implications this may or may not have on your financial plan. And we’re going to tackle this in three parts today. I’m going to present the data that’s available and some of the statistics around this as we look at this issue, then in part two, we’ll talk about what to make of this data, my interpretation, and then finally what this means for your financial plan. I’ll talk about 10 steps that I think you can take right now with your financial plan to hedge against job loss or reduced hours.

Now, let’s start with a few very important disclaimers before we get into the weeds on I think what a topic that can often evoke significant emotion for good reasons. And first and foremost, these are my opinions and projections. Yes, I’m going to dig into the data that I think will support my argument. But as you know, as I know, this topic is complex and has many contributing factors when we’re talking about the outlook of the job market. I would also reference you to Lucinda Maine, AACP Chief Executive Officer, in May of 2019 wrote an article, an opinion piece, in the American Journal of Pharmaceutical Education, called “It Really Isn’t That Simple.” And I would encourage you to take a look at that, whether you agree or disagree with parts of that, I think that it’s a good piece that helps to shape our mind around the complexity of this issue. Now, other disclaimer here that I think is important is as we look at the profession as a whole, we of course are generalizing. And this may or may not reflect reality for you, the listener, and your personal situation. Every single one of us is in a unique situation. And I think that’s one of the challenges that comes with this topic when you hear statements such as the “gloom and doom of the future of the pharmacy job market.” Well, it depends, right? It depends on your area of work, it depends on the supply and demand of your area of work, it depends on where you live, it depends on your training that you have, so many factors. And of course here in part, although I’ll try to break down, in part we’re going to be generalizing as well. Now, it’s easy to go down the pain train, right? The gloom and doom, whatever you want to call it. And my challenge for you is to join me today in objectively looking at the data and applying it to your own personal situation to make your own conclusions — not what I say, not what some other podcast or blogger says, but to make your own conclusions and hopefully to even investigate this topic further. The other thing I’ll say here before we jump in is that there are some principles for personal finance that are tried and true that should be adhered to whether the Bureau of Labor Statistics is reporting a downward trend or not, even if they’re reporting an upward trend in the pharmacy job market over the next 10 years, which is not the case. But if they were, there are some sound financial principles that are true across the board. And we’ll talk about some of those in terms of building a solid financial foundation.

Now, we’ve talked about this topic before, right? Episode 058, I had Deeb Eid on talking about how good is the ROI of a pharmacy degree. Episode 122, we had past president of AACP Todd Sorenson on talking about what will the future of the pharmacy practice be. But we need to keep talking about this issue, and that’s why we’re doing it again here today, because as with many things, we’re going to see data shift over time, we’re going to see new issues that come up. And this isn’t something that we should be talking about just one time.

OK, let’s jump into the data. I want to talk about data from the Bureau of Labor Statistics. I want to talk about data from the Pharmacy Demand Indicator, which is published by PharmacyManpower.com. I want to talk about some of the data published by the American Association of Colleges of Pharmacy and their graduating student survey around student loan debt. And I also want to talk about some of the data as it relates to the residency match statistics. And I think it will become clear why I’m choosing these four areas as we progress further on this episode today.

OK, so the purpose of this episode is looking at first and foremost the Bureau of Labor Statistics data. And that’s available at BLS.gov, if you google BLS and pharmacist, you’ll find this data specifically. But what they’re projecting is a 3% decline in jobs over the next 10-year period for our profession as a whole. And so what this looks like specifically is a projection between 2019 and 2029 of 10,500 fewer jobs in 10 years, 2029, than were there in 2019. Now, this is really interesting, right, because you start to think about the number of new graduates that are coming out each and every year, you start to think about some of the pressures, which are well known, on our profession in terms of some of the automation, the technology, maybe perhaps in some areas the oversupply that already exists. And so when you start to see a continued trend towards graduates coming into the space, new licenses that are granted but a projected decline in jobs, of course that’s going to raise some concern. And rightfully so. And we’ll talk about that more here on this episode. Now, to be fair, the Bureau of Labor Statistics, which also reports median pay for pharmacists, this is still pretty strong, upper $120,000s. Now we know that that of course varies by role, by experience, by training that you have, by geographically where you live, supply and demand. But overall, we continue to see the median pay of pharmacists to be pretty strong. But we can’t ignore the fact that there’s a projected decline in jobs in our profession over the next 10-year period.

Now, I also want to say here, for those of you that are familiar with some of what led to the expansion of the number of pharmacy schools and the expansion of the class sizes for existing schools, that goes all the way back to when there was a projected significant need for pharmacists because of several factors: One, the continued rise in the number of medications that are used by Americans, the aging population of our country, which obviously could further exacerbate the number of prescriptions dispensed and therefore the number of individuals that are needing care from a pharmacist, as well as a projected evolution of the role of the pharmacist, which we have seen play out in some regards but not to its full effect it was projected. So it’s important that we’re talking projections here, right? And a lot can change. What we saw there was a projected significant need in the early 2000s that didn’t pan out like we thought it would. And so therefore, we saw this change in supply and demand. But perhaps we may see that go the other way, right? What if we had some significant evolutions in the profession over the next 10 years that the BLS is not projecting? We could certainly end up in a situation where we have some demand or it could go the other way as well. So again, projections, projections, projections. And we don’t know exactly what will pan out over the next 10 years.

Now, the second data point I want to talk about is from the PharmacyManpower.com, and we’ll link to that in the show notes. And this is called the PDI, the Pharmacy Demand Indicator. And unfortunately, it hasn’t been updated since the fourth quarter of 2018, but if you look at the last 10 years, we certainly see a national trend towards demand being in balance with supply whereas in 2008, this was really closer to having significant and in some cases moderate demand with difficulty filling positions. So the difference from 2008 to 2018 is pretty significant, so they look at this on a 5-point scale. And we’re currently, as at the last measured date in Q4 2018, we’re exactly at a 3 — actually, I think it was just below that, like 2.99, which essentially means that we’re, nationally speaking, we have supply and demand that has equalized. And of course, we probably have seen that shift. We don’t have the data from the PDI, but we probably have seen that shift based on other indicators where there now is more supply than there is demand. So that was a 3 on a scale of 5, but in 2008, this was actually a 4 on a scale of 5, signifying moderate demand with difficulty filling positions. So we say a 1-point shift on a 5-point scale happen in a 10-year period. And again, if you dig deeper by region, by specific area, by role, you’ll start to see some differences. But generally speaking, we can’t ignore that. There was certainly a shift that happened in supply and demand. So again, looking at the data here.

Now, the third data point I want to look at is the graduating student survey that’s published by the American Association of Colleges of Pharmacy, AACP, each and every year. So this is a survey that goes out to graduating students. And one of the questions that they ask on that survey relates to student loan debt. And for the Class of 2020, we see that number now inching up in terms of median student loan debt for graduates, all school, so public and private — obviously we see a significantly higher number for private than we do public — but we now are approaching $175,000 as the median debt load for those that graduate having borrowed money to obtain their PharmD. And that’s an important distinction because not every graduate comes out with student loan debt, right? So this is not a number that transcends all graduates. The data shows 86% of respondents — and this has been pretty consistent — 86% of respondents report graduating with debt related to borrowing for their PharmD. And of those that do have debt, the median debt load is now approaching $175,000. Now if we look at this as another data point from the National Pharmacists Workforce Survey — again, we’re going to link to this all in our show notes so you can dig deeper and make your own conclusions — this is conducted about every five years. And the 2019 data shows us that pharmacists who reported graduating during the last decade reported a median student loan debt at the time of graduation of just over $142,000, which was higher than the median debt at graduation of $82,000 reported by pharmacists graduating between 2001-2010. So let me say that those numbers, again, for pharmacists that graduated between 2001-2010, their mean debt was about $82,000. As those who graduated between 2011-2019, their debt was around $142,000, just shy of actually $143,000. So whether you’re looking at the AACP data, whether you’re looking at the National Pharmacists Workforce Survey data, it doesn’t matter. You see the same trend of a significant increase in debt load of graduates that far outpaces inflation and far outpaces any increase in tuition that you see across the board as it relates to higher education. I think that’s often an argument that you will hear is well, of course debt load’s have gone up. That’s been true of all higher education that’s gone up faster than the pace of inflation. But if you look at pharmacists’ debt load specifically, not only is it higher than inflation has gone up — significantly higher — but it’s also higher than the general trends that we’ve seen and the increase of indebtedness of college graduates across the country.

And so just to give you some data, when we look back to 2010, according to the AACP graduating student survey, the median debt load of a graduate was $100,000. And as I mentioned, in 2020, 10 years later, we’re looking at about $175,000 as the median debt load. So a $75,000 increase in a 10-year period. So again, the data, right? We’re talking about the data here. So the BLS is reporting projected 3% decline in jobs over the next 10 years, the PDI, the PharmacyManpower.com looks like we’re certainly moving towards a direction nationally speaking of being more on the side of supply more than demand, and then here we’re looking at the AACP and the National Pharmacists Workforce Survey that are suggesting a significant increase in debt load over the last 10 years.

Now, also important, as I mentioned, the fourth data point I want to consider here is the ASHP residency match statistics because you know, one of the things we want to consider is how many of our graduates are going into pharmacy residencies, is there a continued increase in that, and how might that be playing into the broader pharmacy job market? And what we see with the match statistics is that it remains difficult, with a pretty steady match rate reported of around 65% — so this is referring to those that apply for residency, about 65% of them are successful in obtaining a position through the match. So you know, overall, remains pretty difficult. Interestingly, if you look at the last five years, you see that the number of resident applicants climbed from about 5,000 to 7,300 over the last five-year period while also seeing a growth in the number of positions that are offered, growing from 3,700 to 4,800. But of course, if we have 7,300 applicants and 4,800 positions, we still see a significant number of people that are applying for residency that aren’t getting a position. Now, why is this important to the job discussion? If you think about the timeline of when the match is happening, these individuals are often finding out into late March and April about whether or not they’ve been successful in obtaining a position. So if we see 35%, let’s just generalize this here, 35% of applicants, most of whom are P4 students getting ready to graduate, that apply for and are unsuccessful in obtaining a residency position, they obviously are at a point of time where there’s not a whole lot of time between when that decision has been made, when they find out about that, and when they’re going to graduate from school. And so that may have implications in terms of delayed time of being able to find a position and/or finding a position in which meets their interests and career goals going forward. So that’s the data.

Now, the second part I want to talk about is what do we make of this data? So the question here is what will the job outlook be over the next 10 years, right? And as I’ve already alluded to, I think that really depends on a few important factors, including but certainly not limited to the number of pharmacists that retire, right? This is an important variable that really played a big role, I think, in why we saw what we saw in terms of the shift of supply and demand over the last 10 years. 2008 hits, a major recession, any major recession, you can expect that’s going to delay people’s timeline to retirement. So one of the questions we still have here — and time will tell, it will depend on the pandemic — but does the pandemic and the impact that has on financial plans of those that are near retirement, does that impact the number of pharmacists that would have retired pre-pandemic to now where we are obviously through a pandemic? So what will happen over the next 10 years? How many pharmacists will retire? We don’t know. But will that be an indicator, will that have a significant impact on what the BLS is projecting? No. 2, perhaps most importantly, is the evolution or not of the pharmacy role beyond the traditional dispensing role? Now this has happened in some regard. We’ve had great examples of this happening here in Ohio, but will that continue and to what level will this continue, not only in terms of being able to have advanced roles and responsibilities through advocacy efforts, through legislation, through practice acts, but being able to translate those expanded roles into positions that can be justified and that there’s a business case for those positions being there. So what will that evolution or not look like of the pharmacy role? And then, you know, I think we also need to look at here what will be the trend in the average number of graduates? So standard supply and demand would suggest that there may be some contraction that’s happening naturally already of the number of graduates that are coming out, the number of students that are admitted. Will class sizes be reduced? Some colleges have already done that. What will that trend be or not be over the next 10 years? Will it continue where we have perhaps a lesser number of graduates that are coming out over the next 10 years? And we’ve seen over the previous 10 years, of course, with a lot of expansion in class sizes and colleges that have happened over the last 10 years.

And as I already mentioned too, I think another important variable we have to look at when trying to answer this question, what will the job outlook be over the next 10 years? is how will residency program growth continue? And can that program growth, will it or will it not keep up with the applicant interest?

So here’s the reality is that while globally, the data doesn’t lie, right? We certainly have seen brighter days relating to job projections, supply and demand, related to student loan debt figures, all of the data I presented, not all pharmacy students and career paths and opportunities are the same. Right? So when you start to break down the data, you noticed a few different things, that different career paths have different outlooks, naturally, right? Those that perhaps complete advanced training, whether that be a PhD or residency, a Master’s degree, that certainly may lead to a different outlook. Somebody who is in a health system versus a community setting, somebody who’s in ambulatory care, somebody who’s in specialty, somebody who pursues an industry fellowship, all career paths have different outlooks. And we need to slice this data a little bit thinner and have better data to help inform some of the career choices and outlooks going forward.

Where this data also looks different when you break it down is naturally different areas of the country based on the number of pharmacy schools, based on the patient population and the needs, based on of course cost of living and other things, we see significant differences from one pharmacist to another in different areas of the country, which again, make this difficult to generalize. And of course, individual factors: experience, networking, hustle, advanced training, all of those things that sometimes are difficult to measure, which can have a significant impact. And if you talk to 10 pharmacists, I believe you’ll get 10 different opinions and outlooks. There’ll be some similarities there, but 10 different opinions and outlooks on what the future holds because of those nuances that are different: the career path, where they live, their training and some of those individual factors that I mentioned.

So you know, would I make a recommendation that someone enter the pharmacy profession? And I think it really depends on several factors of which I’m going to come back to a little bit later in the episode. And I think one of the things that, you know, we can do and continue to work on in academia is that really focusing on helping students get broad career advice, giving them the skills and advice necessary to help equip them to demonstrate how a PharmD education, how that skill set, can be transferable, right? It can translate into other roles beyond what we think about of the traditional dispensing role. How can we create new positions? How can we be flexible in other areas of the health care system that could benefit from the role and the value that we know pharmacists can bring and that has been documented in the literature over and over and over again.

Other interpretation I have of the data is that I think we are going to see a continued compression on pay where oversupply is prevalent, where automation and technology is threatening positions in certain areas of our profession, where the role is perhaps not evolving beyond traditional dispensing. And so I think we’re already starting to see this in some regard. If you look at the 2019 National Pharmacist Workforce Survey, what you’ll see there is while it’s still a small number, “a considerably higher proportion” — direct quote from that survey — “a considerably higher proportion of full-time pharmacists in community retail pharmacies, approximately 12%, reported a base pay decrease in the past year compared to full-time pharmacists in hospital settings.” So only 12%, but it’s important that we’re talking about a pay decrease, given that naturally costs of things will go up over time. So I think that’s a trend we need to keep an eye out for in the future. I think we’re also likely to see interpretation of data, continued stress among pharmacists as they’re being asked to do more with less, especially in traditional dispensing types of settings, that could lead to burnout, will likely lead to burnout, could lead to decreased satisfaction with work, and certainly through that, could put pressures on one’s financial plan, depending on how long they want to do and what options they have beyond that work.

So you know, for prospective PharmD students that are listening, I think this is really true of anybody who’s evaluating a career decision, I think you should ask yourself, what’s the return on investment of the degree? Looking at all the data that we just looked at, what’s the return on investment to the degree? Also, what’s the opportunity cost of the time spent getting that degree? And then how does this align with your interests? What’s the motivation behind pursuing this degree, whatever that degree would be? And if there were some bumps along the way, how would you feel about pursuing that path? So certainly, the ROI of the degree has changed — again, generalizing here. The opportunity cost, we know what that is given the time length of the degree. But if somebody is passionate about healthcare and what the pharmacy profession has to offer, you look at that alongside of that ROI, alongside of that opportunity cost to try to make that best decision for your goals and for your career path going forward.

And so I want to shift here to the third part to talk about what this means for your financial plan. Now, I want to start this by saying for those that are facing a financial hardship or job loss in the moment, I hope you will check out Episode 115, where we talked about strategies to handle student loans, to handle healthcare expenses and other things that come along when you’re dealing with a financial hardship or job loss. And before we jump into some steps that I think you can take to essentially help hedge you against some of the negative aspects that can come from job loss or reduced hours, I think we first have to ask some questions and reflect on some questions that will help inform how you shape your financial plan around this. No. 1, how much do you enjoy your work? Are you somebody that graduated a few years ago and you look up and say, ‘I love what I’m doing. I could do it for another 30 or 35 years,’? Or are you wondering, how in the world am I going to do this for another 30 or 35 years? Again, that might shape how you address certain parts of your financial plan. Second question, what demand is there for you, for your experience, for your skill set? Essentially, how marketable are you if for whatever reason you want to do something different or something were to happen to your position? How easily or not could you pivot to another area of practice? And of course, factors like is it one income in the household? Is there two incomes? How much flexibility do you have with your financial plan in terms of needing your income? And those questions, answering those questions, reflecting on those questions, are important as I head into this final section as we talk about 10 steps to take right now with your financial plan to hedge against job loss or reduced hours.

OK, so No. 1 — and we talked about these in Episode 026 of the Your Financial Pharmacist podcast, these are the baby steps, the baby steps in your financial plan — No. 1 is making sure you’re doing everything you can to reduce your credit card debt, your consumer debt, to minimize, get rid of it. And number two, to build the emergency fund, the rainy day fund, 3-6 months of expenses, so that if or when a job loss or financial hardship hits, you can weather that storm without taking on additional debt and hopefully you can cash flow some of those expenses without disrupting the rest of your financial plan. So if you are listening today, struggling with consumer debt, credit card debt, or you don’t yet have a solid emergency fund in place, that should be the No. 1 thing. We talk about that in more detail on Episode 026 if you want to go back and listen.

No. 2 is not becoming house poor. Now, we talked about this on various episodes related to home buying. I think it’s one of the — probably one of the biggest challenges that pharmacists is that their home and their home expenses can take up a significant percentage of their take-home pay. So for those that have not yet purchased a home, trying to purchase a home in a way that you can have as much discretionary income as possible, obviously you want to enjoy that piece as well. But for those that are in a home, what are some options that you have to potentially decrease that percent of your take-home pay that is going to your home each and every month through mortgage, through property taxes, through insurance, and through expenses that come with owning a home, right? Because what we’re trying to think about here is if we can let’s say take the percent of our take-home pay that goes to our home from 40% down to 20%, obviously we just have more margin to achieve other goals but also be ready to handle and to hedge ourself against some of the negative aspects that come from a job loss or reduced hours. So that could come from refinancing or restructuring a mortgage, of course that could be something more extreme like downsizing, but I think there’s several options there that you can consider.

No. 3 is making sure you understand your debt repayment plan and options. And here, I’m specifically talking about the student loan debt for those that are still facing student loan debt. Now, why is this important as we talk about hedging against job loss or reduced hours? It’s because there are so many options that are out there and available, both in the federal system and the private system. So this could be different, right? Those of you that are pursuing loan forgiveness, those of you that are not, that certainly can depend how much is coming out of pocket each and every month. Is there an opportunity to pivot repayment plans if necessary to an income-driven repayment plan that might have a lower monthly payment, which of course could free up some cash flow. Is there an option to refinance in the private market and extend that repayment period or re-refinance if you needed to and extend that repayment period so you could free up some of that monthly cash flow? So if you’re hearing this and you’re wondering, have I evaluated all the options? Have I considered what’s that one best option for my repayment plan? Do I have a good understanding so that if I had to make a pivot, I’m ready to do that? Please check out our latest resource, written by Tim Church, “The Pharmacist’s Guide to Conquering Student Loans,” available at PharmDLoans.com.

No. 4 is making early, aggressive retirement savings if you can. So if you find yourself in the event of reduced hours, reduced pay, or job loss, obviously that time period is going to hinder your ability to save for retirement. So if you’re able to make early, aggressive retirement savings, you’re going to be able to reap that continued benefit of compound interest that will come from those early savings that were made. So we talked at length during our investment series on episodes 072-076 on investing, all things investing, including retirement savings, vehicles to do that, priority of investing, understanding investing accounts. So I would encourage you to check that out.

No. 5 is thinking of how you can diversify your income. Now, this could be a through a side hustle. We’ve talked about these through the side hustle series on the Your Financial Pharmacist podcast. We’ve featured stories of those that are doing medical writing, most recently we had Austin Ulrich on the show, talked about this, Brittany Hoffman-Eubanks, we talked about on a previous episode. It could be a second part-time job that’s in a different area of practice, so I’ve talked with many pharmacists that are working maybe 32-40 hours in a community setting and then have a PRN position in a hospital setting, which obviously gives them some diversification — not only additional income, but diversification into another area. It could also be through real estate, right? We’ve talked with several pharmacists on this show before that have done real estate and real estate investing in many different ways that has allowed them to produce some cash flow to achieve their financial goals but also has helped to diversify their income. So diversification of income I think is an important consideration.

No. 6 — and we’re going to get into some of the softer sides here of the financial plan — No. 6 is networking. We talked about this at length on Episode 116 with David Burkus, author of “Friend of a Friend.” We talked about transforming your life and career through networking. And this is one of those things that is drilled into us while we’re in pharmacy school: networking, networking, networking. But I think it often is hard to wrap your arms around the benefits that come through networking, whether that be collaboration in your job, whether that be staying sharp with your skills, whether that be having somebody that you can lean on when you’re in a difficult time that’s going through perhaps a similar situation at work. But networking and the value of building your network and the value that comes from that building is important to establish that before you have that dire need for that network, whether that’s because of reduced hours, job loss, or reduced pay and you want to look at something else. So shoutout here to the collaboration that we have with the American Pharmacists Association, that we provide personal finance education for APhA members. You can learn more at Pharmacists.com/YFP. We offer 30% off YFP products and services to APhA members. And for those of you that are not yet an APhA member, make sure to check out that membership options, Pharmacists.com, use the coupon code YFP2020 for 25% off membership.

OK, No. 7 is getting rid of those car payments. And this kind of goes along with the home buying is we’re trying to build margin in our financial plan. So if we can get rid of those car payments or minimize those car payments, then obviously we’re going to have more income. So way back when — we’ll link to it in the show notes — I wrote a blog post, “My Top 10 Financial Mistakes.” And number seven was buying a car I had no business buying. Now you know, obviously we all make financial mistakes, I continue to make financial mistakes, and this was one of those that was not catastrophic but really was something that wasn’t needed and ultimately delayed our debt repayment plan. So 2014, Jess and I were still trying to get rid of our student loans, I bought a really nice used Lincoln MKX while I had a perfectly functioning and paid off Nissan Sentra with less than 50,000 miles on it. I ended up reselling the Lincoln MKX, no big deal, actually used those proceeds ultimately to pay off student loans. But it was tax that I had to pay that I didn’t need to have to pay, it was getting rid of a used off car, a depreciating asset that I could have had. And if you look at right now, the average monthly payment on a new vehicle is now north of $500 a month. And so if you’re somebody who’s struggling with debt or getting better control of your monthly expenses, this is really an area I’d recommend you take a look at to see if there’s an option to cut back or to pivot your car situation so that you can free up some of your monthly cash flow.

No. 8 here is developing a plan to reshape your mindset. Really, knowledge is power when it comes to your financial plan. This could be through reading, this could be listening to podcasts such as this one. You know, at the end of the day, the more you learn, the more you empower yourself, the more you put yourself in a position of really having a solid understanding of your financial plan and learning as much as you can about this, you’re going to find yourself in the driver’s seat. You’re going to find yourself making decisions that are going to put you in control of your financial plan rather than external situations that are dictating your plan for you.

No. 9 is surrounding yourself with individuals that will challenge you in a positive way and that share your same goals and vision. You’ve heard this before that we tend to take on the behaviors, the beliefs, the actions of those that we’re around most. And so here, when we’re talking about our finances, if you have a goal, let’s say to achieve financial independence, if you have a goal to cut your expenses and reduce your lifestyle so that you can ultimately get to the things that are most important to you, surrounding yourself with folks that have a similar philosophy, that are spending their money, spending their time in a similar way, can have a profound impact on your own personal situation. And so really evaluating who you’re around, that could be certainly family, friends, making sure you have good accountability, jumping into groups like the YFP Facebook group where you’ve got folks that can encourage you, folks that can answer questions that you have, folks that can share in a win that you have with you, I think you’ll find that to be really a significant impact on your financial plan.

And No. 10 is having a good plan and having a coach. Now, this obviously is self-serving. But I believe in this wholeheartedly. So obviously we offer one-on-one comprehensive financial planning at Your Financial Pharmacist. I would encourage you to check it out: YFPPlanning.com. You can schedule a free discovery call to learn more about our services, see if it’s a good fit for you. Whether it’s us or whether it’s somebody else — I hope it’s us — having an accountability partner, having a coach, having somebody that can work with you one-on-one to help look at all of these various aspects of your financial plan and help you develop a strategy to how you can prioritize those and to help keep you accountable in that plan is incredibly, incredibly important. It’s been significant for Jess and I in our own financial plan. We’ve seen it in many of our YFP clients. And I encourage you again, you can check that out, YFPPlanning.com. But No. 10 here is having a good plan, having a coach, having a good accountability partner that will join you along the way.

So that’s a lot, right? We talked about some of the statistics of what we’re facing as it relates to the pharmacy job market. It doesn’t look great, right? Compared to what it was maybe 10 or 15 or 20 years ago. But we also talked about how to interpret that data, and the reality is we can’t just look at that data and say it’s gloom and doom. We need to look at the individual aspect of one’s profession, of your situation, and really try to understand, what is the true risk as it relates to your position, your area, and your financial plan. And then ultimately, what are some things, what are 10 things that we talked through that you can do right now to start hedging yourself against a potential reduction in hours, reduction in pay, or obviously worst case scenario there would be job loss. Now, the reality is those 10 things, even for those of you listening that say you know what, I’ve got a secure job, I’ve got options, I’ve got diversified income, those 10 things are 10 things that will benefit your financial plan regardless of what you perceived of the outlook of your position going forward.

As always, thank you so much for joining me on this week’s episode of the podcast. If you haven’t yet done so, please leave us a rating and review on Apple podcasts or wherever you listen to the show each and every week. And again, if you haven’t yet joined us in the YFP Facebook group, I hope you will. Over 6,000 pharmacy professionals that are committed to helping one another on their path towards achieving financial freedom. Have a great rest of your week.

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