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Month: September 2021

YFP 223: How First-Time Home Buyers Navigated the Current Housing Market

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How First-Time Home Buyers Navigated the Current Housing Market

On this episode, sponsored by APhA, Jacob and Michaela Soppe discuss their home buying journey in the current real estate market.

About Today’s Guests

Jacob and Michaela are graduates of Ohio Northern University who moved to eastern Ohio in 2018 so that Jacob could pursue his dream of starting a pharmacy with Southeast Healthcare. Since then, he has successfully grown his pharmacy and offers clinical services including diabetes and hepatitis C clinics. Michaela works at East Ohio Regional Hospital where she collaborates with doctors and patients in the inpatient, outpatient, and long-term care settings. In their spare time, they love to stay active and travel the world. They recently bought their first home and are excited to continue to serve God and their patients in their community.

Summary

In this episode, Tim Ulbrich turns the microphone over to Nate Hedrick, The Real Estate RPh and co-host of the YFP Real Estate Investing Podcast, as he interviews two pharmacists, Michaela and Jacob Soppe, about their home buying journey. Michaela and Jacob share their experience working with YFP’s Real Estate Concierge, their home search, how they determined their home buying budget, and the realities of buying a home in the current real estate market.

Jacob and Michaela weren’t necessarily looking for a home after pharmacy school and focused their energy and funds on paying down student loans and investing. When they were ready to start the home buying process, they didn’t know what to do or how to start, so they contacted Nate Hedrick and started working with the Real Estate Concierge Service. Nate paired the couple with a real estate agent in their area who worked with them diligently until they found a home that met their budget requirements and exceeded their expectations on must-have items like room for a family and plentiful parking.

The couple shares their experience receiving regular emails with listings and changes to the housing market, a day with nine house viewings, their experience with their home inspection, and how their experience at closing differs from what many folks will see in the current market.

Mentioned on the Show

Episode Transcript

Nate Hedrick: Hey, Michaela, Jacob, welcome to the show.

Jacob Soppe: Thanks for having us.

Michaela Soppe: Yeah, thank you for having us.

Nate Hedrick: Absolutely. Excited to chat today. We are talking all things real estate. I’m taking over the Tim and Tim show here on the Your Financial Pharmacist podcast so we can talk a little bit more about real estate today. So again, appreciate you guys joining us.

Michaela Soppe: Absolutely.

Nate Hedrick: So we are here to talk a little bit about navigating the current housing market, right? So you guys are first-time home buyers, just closed about two months ago on your first house, and what we thought we would do is kind of sit down and talk a little bit about that, talk about what it’s like to buy a house in the current market, what it’s like to be a first-time home buyer, how you guys navigated that, and just kind of get that information in front of people. So before we dive too deeply into the real estate side of things, maybe give us a little bit of background on your pharmacy journey so far and kind of what you guys are up to.

Jacob Soppe: I graduated in 2018, and I immediately got a job on rotations. I met with one of my preceptors and they wanted to open a pharmacy, and they wanted me to open it for them, and that’s something I’m interested in, and so I opened it. That was three years ago. And we’re continuing to grow, and I’m very happy with it. We’re a clinic pharmacy, but we also do long-term care, we also do diabetes clinics, and we’re just starting up Hepatitis C clinics.

Nate Hedrick: That’s great.

Michaela Soppe: So I graduated in 2019. We both graduated from Ohio Northern. And we actually got married while I was on rotations, so he’d basically said, “Hey, how do you feel about moving an hour and a half away from Columbus?” I’m like, “OK, that’s great. But I have rotations in Columbus.” So I started working with Rite Aid after I graduated as a pharmacist and kind of floated all over the place because we didn’t really know where we’d be living for sure. And then worked with them for a couple years and at the end of that, in January, I got a job working at a local hospital. So I do mostly inpatient, but I also have a mix of some outpatient stuff and long-term care in there with that as well. So I’m kind of running all over the place. But I love it.

Nate Hedrick: That’s great.

Michaela Soppe: And we finally made it out closer to where Jacob works. So.

Nate Hedrick: That’s nice, especially when, you know, you’ve already got long days at the hospital or at the pharmacy, you don’t want to add an extra long commute to that. So that’s great.

Michaela Soppe: Exactly.

Nate Hedrick: And when you guys graduated from pharmacy school, I know it was different years, but when you graduated, was buying a house kind of always in that mix? Was it always part of the “next step?” Or was this something that came along later?

Jacob Soppe: We knew we wanted to buy a house eventually, but there was student loans in the way that kept me up at night.

Nate Hedrick: Sure.

Jacob Soppe: And I was like, I can’t buy a house until I pay off these, we pay off these loans. And so after about two years, we paid off the loans and that’s when we started looking for a home.

Michaela Soppe: Yeah, it was definitely student loans first and then, you know, it all worked out around the same time where my job brought us instead of an hour and a half away for Jacob, it’s now five minutes away. And at that point, we were like, OK, like we’re ready to find a house because we’re going to be out here for a while.

Nate Hedrick: Wow, yeah. So I know I’ve talked to others who have that feeling of like, man, I cannot buy until these are gone. And so you guys took that and said, yeah, let’s make sure that’s the case. Let’s go all in on the loans and then once that’s done, then we’ll go ahead and buy a house. Do you feel like that was crippling at all? Was it just like, this is what we have to do to get it done?

Jacob Soppe: It was definitely the second one there. We just felt like we had to do it and felt like it was the right way to go for us.

Nate Hedrick: Yeah.

Michaela Soppe: Yeah, it was kind of like, let’s still act like we’re college kids for a couple years, you know, not buy a bunch of brand new stuff. Like most of our stuff came from our families or stuff I had from college. And so until the loans were gone, we didn’t really spend much money on anything else. Like we’d go traveling, but other than that, it was just loans completely. Like our entire paychecks went to it, basically.

Nate Hedrick: Yeah, avoiding that lifestyle creep can be a really great way to get ahead and make sure that those loans could be knocked out first. So that’s awesome. Were there any other factors that were holding you guys back? I mean, was the market something that scared you? Or talk to me a little about that too. Was it just the student loans and once those were gone, you were ready to move?

Jacob Soppe: The other thing that was holding us back was, like I said earlier, I was driving an hour and a half one way to work each day, so a total of three hours when we started and Michaela was still in school. We wanted to see where she was going to end up working and then when she ended up moving closer to my work, it worked out because it was like just after we paid off our loans. So we didn’t end up looking for a house at our old employer where I was still driving 45 minutes, and I really liked the idea of living like right next to work and the gym and church — and we’ll get into that later.

Michaela Soppe: I guess something I should say is that we moved four times in three years.

Jacob Soppe: Yeah.

Michaela Soppe: And progressively each time, every time my position changed, basically, going from rotation student to floater at Rite Aid to actually having a store at Rite Aid to getting the job at the hospital. Basically every single time, we moved closer and closer to where Jacob was working. And now, it definitely just where are we going to be settled was kind of like a factor that was holding us back slightly too because like my goal was always to get a job closer to where Jacob was working but just we didn’t know when that would happen. And it ended up being at a really convenient time for us.

Nate Hedrick: That’s great. And that actually, that’s a good segue because one of the things I want to talk about today is choosing the location and some of the steps that go into that kind of getting ready phase of buying a home. And that’s actually Step No. 1 of six steps that we’re going to talk about today. So we put together a video series — and actually, there’s a guide out there, we can link to that in the show notes. But if you head on over to YourFinancialPharmacist.com, we have the “Six Steps to Home Buying.” And what I’d like to do is actually walk through each one of those steps and kind of get your take and your experience as first-time home buyers and see what information we can share with our audience. There’s a lot of people that are probably in your shoes or who are about to be in those shoes here pretty soon where they’re graduating, they’ve got a lot of student loan debt, or they’re ready to buy a home, and now it’s time to figure out, OK, what does that actually look like? And more importantly, how do I do that in this kind of market? Because it is quite the seller’s market. It’s very competitive out there. And so trying to get a home today is more difficult than it’s been before. So we’ll start with the first step, which is making sure you’re ready. A lot of this step includes things like choosing a location, determining what is important to you guys, and also setting a budget and not letting the bank set the budget necessarily, not just going out and asking for the biggest loan we can get but setting our own budget. And so when you guys sat down and said, “OK, we need to figure out if we’re ready,” what did that look like? Was it a formal process for you or was this like, I don’t know, I’ve been on Zillow, let’s go take a look. You know, what was that like for you guys?

Michaele Soppe: There was definitely a lot of Zillow involved. So before we made our final move here closer to work, the apartment we were at, we were initially looking for houses there because it seemed like a good, you know, central location at the time when I was with Rite Aid still. So I think Jacob was on Zillow every single day, just you know, browsing houses for probably half a year or so at least and then continuing once we did move a little bit closer into another apartment, like OK, now we’re getting serious. What are we looking at? It wasn’t like a formal, let’s sit down and talk about this. It was just something we talked about almost every day probably for months just casually like, OK, you know, what do we want out of this? And everything kind of grew from there.

Nate Hedrick: And did you sit down and figure out, again, like not a formalized but at least like a budget for what you wanted to spend? And how did you go about doing that?

Jacob Soppe: One thing that we talked about even before we got married, we decided together that we both definitely wanted to live way below our means, less than 50% of our income, just because that’s what made us feel safe. Just in case one of us lost our jobs.

Nate Hedrick: Sure.

Jacob Soppe: It’s getting harder to find a job, especially with the growing concern of the pharmacist job market. Then also we want to have a family. We’re big givers as well. And so it just takes a lot of that stress off having a big cushion to make all those fit potentially with Michaela either decreasing work hours or going to 0 in the pharmacy in the future.

Nate Hedrick: Sure.

Jacob Soppe: But as far as budget goes, we decided that we wanted to really find a house for $200,000 or less. And I know like especially in Columbus, Ohio, where we’re from, that is very difficult to do in a nice place for a nice home.

Nate Hedrick: Sure.

Jacob Soppe: But the nice thing about where we moved is that the rural Ohio is much lower cost of living, and we were able to meet that goal of finding a home in that budget.

Michaela Soppe: Yes.

Jacob Soppe: Actually, way under budget.

Michaela Soppe: When we started looking at homes, there were a lot of homes we found that we liked that were more like $250,000-300,000. So like I’d say our upper limit kind of became $300,000 with the understanding of we’d much rather not spend $300,000 on the house. So we actually did find a couple that we liked, which we didn’t get a chance to put an offer in on. I mean, the market out here isn’t quite as crazy as it is in Columbus, but stuff still sells fairly quickly. So it ended up being a good thing because our realtor could kind of point us towards the house that we’re in now, which was like half of that but way big enough for both of us and even for a growing family. And yeah, so that — like we had that budget in mind the whole time. And it did shift a little bit as we were looking, but then it all ended up going back to what we were originally thinking.

Nate Hedrick: Yeah, I love that. And I think there’s two things that I think are really, really important. One is intentionality, right? You guys stepped back and said like, ‘This is important to us to live slightly below the typical means,’ right? Or ‘We can live at 50% of our income. And here’s why we’re doing that,’ right? The intention behind that is that if we want to cut back on hours, we lose a job, we’re not stressing about this home purchase. And I love that. I think that’s super important. The other thing that you said that I think is interesting because I advise my clients of this all the time is that it’s super easy to fall in love up to whatever amount, right? If I start looking at $500,000 homes, I’m going to love $500,000 homes. The trick is not to exceed that budget if it’s reasonable for your market. And so you guys took a step back and said, “Yeah, you know what? It’s possible to find a nice place under this $200,000 in our market.” And again, I know the West Coasters out there are probably like screaming at their radios right now. But the idea is that, you know, you guys took a look at your market and said, “This is feasible, and so I’m not going to push it beyond my means because I’ve set this budget, and this is realistic for where I’m looking. I think that’s a really great way to set yourselves up for success. So I admire that a lot. The other thing you mentioned is that you leveraged your realtor, and that actually leads us to Step No. 2 or point No. 2 here, which is assembling a team. And this is actually where you and I got connected back in May of this past year. And you know, you guys came to us, the Real Estate Concierge service, which is a service that we offer to pretty much anyone that if you want to get connected with a real estate agent, we will actually help you do that. And so again, if you head on over to YourFinancialPharmacist.com and head over to “Buy a Home,” you can check out the Real Estate Concierge service there, a free way to get connected with an awesome local agent. And again, that’s actually how Jacob and Michaela and I got connected. We got you connected with Sean, and I guess tell us a little bit about that process and what it was like to work with an agent.

Jacob Soppe: Yeah, I want to thank you guys, thank you again for finding Sean, our realtor.

Nate Hedrick: Sure.

Jacob Soppe: We had no clue on like what realtor, who should we go to, and we heard about your service through YFP, and so we reached out to you, you found us a great realtor. Sean has over 10 years of experience as a realtor, he’s also a broker. And he was amazing, mainly because one, he was super responsive, two, he found us homes, including the one we ended up buying, that we would like. And we didn’t think we would like this home, so we didn’t put it on our list of liked homes and must-see homes. But he’s like, “I think you guys will like it anyway. Let’s go.” And we looked at like, I don’t know how many homes.

Michaela Soppe: Well, the one day, I think it was a Saturday, we did nine homes on that Saturday. And he had it all set up like perfectly. And then honestly, the whole process only took a week or two for us. He was just on top of it. And you know, ultimately, we looked at 14 or 15, and this was one of the last ones. And we basically knew going into it like, this is something that we’re definitely open to buying because it was a great price, like great location, can’t really get any better. And I’m just really glad that Sean figured out what we liked so easily and you know, pointed us to this house because it wasn’t really on our radar initially.

Jacob Soppe: And one other thing I want to give him praise for too is every house we went to, he pointed out anything that he thought was a potential problem. And so like he was super honest, he wasn’t in a rush to sell us a home.

Michaela Soppe: Yes.

Jacob Soppe: And so I really trusted him and I think that you’ve really found a great realtor.

Nate Hedrick: Good, I’m so glad. That’s awesome. And that’s exactly what we want to hear, right? I mean, the agents you work with, it has to be somebody you can trust. And it’s so funny, that’s exactly what I try to do for my clients is point out the scary, right? My job is to walk around and look for things that you don’t recognize as bad while you just figure out if you’re going to like the house. That’s awesome that Sean was able to do that for you guys. Were there other members of the team along the way that were important as well? I know obviously the real estate agent is big, but were there other players that jumped in here as well that you found a lot of value in?

Jacob Soppe: Not really.

Michaela Soppe: Honestly, it all happened very fast.

Jacob Soppe: We weren’t even really seriously looking for a home.

Michaela Soppe: Yeah, this was just to get our feet wet.

Jacob Soppe: We were actually in the middle of a lease.

Nate Hedrick: Ok.

Jacob Soppe: We were just like looking at homes, we’re like, ‘Oh, well, it takes about a month or two to start closing on a home, so maybe we should just start looking at homes for a couple months and then –’

Michaela Soppe: See what’s out there.

Jacob Soppe: See what’s out there. And so we started looking at homes and we found one that we really liked, and we’re like, ‘We kind of want to put in an offer. But I still have like six months left on my lease.’ And so I was just like, you know what? Let me call up the landlord tomorrow and see if they’d be OK if we put an offer on a home and moved out early. And we talked to them and we ended up having an agreement, and we were able to leave early. And so we’re like, ‘Oh, great.’ Well, the home that we really liked, apparently some other people really liked it too. So it was already gone by the next day. But that really opened the door for us to seriously look.

Nate Hedrick: That’s great.

Michaela Soppe: Yeah, and I guess that’s something else I’d say is don’t be afraid to break your lease because we lived in three apartments before buying this house, and we broke our lease every time, which obviously —

Jacob Soppe: But it was with the —

Michaela Soppe: With their permission. Like obviously, it’s not ideal. But like, I mean, definitely talk it through with them and see what you can do if you’re ready to buy a house. That shouldn’t be something holding you back because usually, they will work with you and figure out a deal that way.

Nate Hedrick: It’s a great tip, and it’s something that I’ve done with tenants of mine. You know, if I can fill that vacancy quickly, it doesn’t bother me who’s in that house as long as they’re a great tenant. So that makes a lot of sense. That’s a good tip. That also leads me to you talked about putting in an offer and looking for a house, but what about the paying for it, right? So there’s dollars there, so talk to me a little bit about financing and did you guys have an idea of how you wanted to finance the home ahead of time? Or what did that look like?

Jacob Soppe: I mean, I’m really adverse to debt. I really don’t like debt. And Michaela really let me spearhead this. And so we went in — I don’t know, I was like, “You know what, I want to do” — how much down was it? I don’t remember anymore.

Nate Hedrick: 15% down?

Jacob Soppe: Not 15%, 20%.

Michaela Soppe: He would have rather paid cash, but reasonably, he wanted to do 20% down.

Jacob Soppe: Yeah, 20% down at 15-year fixed mortgage. But I kept, you know, I listen to YFP, I listen to a lot of other podcasts as well. And I looked at the offer that IBERIABANK has that you guys work with. And I felt like I really couldn’t pass up taking advantage of the low interest rates going on right now. And I was thinking to myself, ‘Well, if I’m going to pay it off early, I can still do that.’ We didn’t necessarily need to do a lower amount, but we ended up doing 5% down on a 30-year fixed. And we do a lot of investing as well, so we are putting every single dollar that we’re not spending on a mortgage into investments.

Nate Hedrick: I love that.

Michaela Soppe: So like when you have a 3% mortgage with IBERIABANK, we’re like, well, we can make more investing that money, you know, in the meantime than we would if we just kind of threw it at the house.

Nate Hedrick: Yeah.

Michaela Soppe: So that kind of changed his mind over a month or two.

Nate Hedrick: I definitely get that debt aversion, but it also makes a lot of sense if you break down the numbers, does it preserve your capital in a way that allows you to do other things, like you said, travel more, invest better, pay down student debt if you hadn’t already done that? Those are the things that that flexibility can allow. So I love that you guys took a look at that and even though you went in with one notion, you evaluated your options and made kind of the best financial move for you guys. That’s huge. And for those that want to learn more about that, definitely head over to YourFinancialPharmacist.com, and again, head over to the Financing section of the “Buy a Home” section, and you can find out more information about IBERIABANK and some of the pharmacist loan options that are out there. Great way to get a low down payment loan without having to get hit with PMI or things like that. So definitely a good option. So then Step No. 4 would be the search, so actually looking for the property itself. And we’ve alluded to this a little bit, but talk to us about that process. What were things that you guys were looking for? Or what were things that you learned after seeing a couple of houses or on that nine-house day, what were things that you learned along that process?

Michaela Soppe: We learned that house hunting is tiring on that nine-house day.

Nate Hedrick: I imagine.

Michaela Soppe: It was a lot of Zillow, a lot of probably other online websites too for houses. And honestly, Jacob looked at most of that because I got a little overwhelmed with all the options.

Nate Hedrick: Sure.

Michaela Soppe: But something we really wanted, which actually kind of excluded this house initially was we wanted a two-car garage was one of our main things because we’ve kind of done it all. We’ve done garage, no garage, all of that. So this house we ended up buying only has a one-car garage, but it has tons of parking, like a carport. You can have everyone over, and they don’t need to park in the street.

Nate Hedrick: Nice.

Michaela Soppe: So that’s kind of why we initially didn’t look at this house. And Sean was like, ‘Well, let’s go look at it.’ So we started out with Zillow. Once we got hooked up with Sean, he created basically an account for us on — was it MLS? On MLS, and basically every day, he would push emails to us of like, here’s any changes in the housing near you, like new houses, price drops, houses going under contract, coming back on the market, being sold. That was super helpful. You know, he’d send it to us after work each day so that he wasn’t interrupting our day and we could look at it, like them, communicate with him what we wanted to see, what we weren’t interested in, stuff like that. And then from there, he would call Jacob up and be like, “Hey, I have a list of these houses. Let’s go see them tomorrow if you’re free or whatever the next day you were free was.” And I mean, really, he just kind of led the way and was like, here’s houses you liked, here’s houses I think you would like, and kind of all over our price range too. We saw stuff under our budget, over our — not over our budget, but on the higher end of our budget — and kind of just pieced together from there what we really wanted and what was important to us.

Nate Hedrick: Yeah, and sometimes just getting out there and seeing it in person can make all the difference. You know, you might think there’s one thing that’s super important or not realize something that is important to you until you get out and see a house that has that particular feature and recognize that. So that’s great. And I also love the tip about the auto-emails. That’s something I recommend for a lot of my clients is get that auto-email so that you are getting daily alerts. It helps us really learn that market so that you can move quickly. If you’re just looking at everything on Friday afternoon and then scrambling to try to react to the properties that have come up in the week, it’s going to be tricky. But if you can get that daily, just take 20 or 30 minutes out of your day to really learn that market, see what properties are coming available, you’ll have a lot more chance at the good properties, and you’ll know what the right price point is because you’re starting to learn that market and see what’s becoming available. So great tips. And then once you actually found the property, again, I know we’ve talked a little bit about this, but talk to me about that negotiation process because Step No. 5 is all about putting that deal together. And so I know negotiations are hard in the current market, there’s not a lot of wiggle room, but what did that look like? What was the putting together the offer process look like?

Michaela Soppe: So Sean was really great with this too because the house that we really liked, ended up buying that we’re living in now, we actually were able to get for asking price.

Nate Hedrick: Nice.

Michaela Soppe: So out here in Eastern rural Ohio, it’s a little different than Columbus, obviously. We knew when we were here he was in contact with the seller’s realtor, and she told him like, “Hey, there’s another offer on the table today. Do they want it or not?” So basically, we were sitting in his house at 8 p.m. like kind of putting together our offer. We knew that this is a house that we would really like, that it could be the house that we’re buying, you know? And we’re like, ‘Well, let’s offer them asking price.’ They’d already dropped the price $5,000 I think. This particular house was on the market for —

Jacob Soppe: Over 30 days.

Michaela Soppe: It was. Some houses go within a week out here, some of them are on the market for months, depending on the houses. You know, there’s not that many people in rural Ohio. But you know, so completely different from the big cities. So basically, we did asking price but we also really wanted this house, so we added an escalation clause just in case, which went I think like $8,000 over maybe.

Nate Hedrick: And could you enlighten our audience about what an escalation clause actually means?

Michaela Soppe: Yeah, so basically if you have an escalation clause on your offer, it means that you’re willing to go up so much more money if the other person bid higher than your or offered higher than you on the house. So like if you’re offering $200,000, the other person offered $205,000, but if you have an escalation clause going up to $210,000, they could take your $210,000 — or I guess $206,000 at that point. You know, something slightly higher than what the other person offered if your clause goes above that.

Nate Hedrick: Yep, that’s spot on. And it’s a great way to protect you from pitting you against yourself, right? Because then you can put in $200,000 and you pay $200,000 if that’s the final price. But if there are other offers, you can still protect yourself by getting higher than — just slightly higher than those next offers. So thank you.
Michaela Soppe: So hopefully it keeps you out of a bidding war.

Nate Hedrick: Exactly.

Michaela Soppe: So yeah, I mean, putting the offer in, I think the deadline was given to us by the seller’s realtor was like 9 p.m. or something. And he faxed over all the papers by 8:55 p.m. and called like, “They’re on their way,” you know?

Nate Hedrick: Nice.

Michaela Soppe: Basically, we knew an hour after that they were —

Jacob Soppe: They verbally accepted our offer.

Michaela Soppe: Yeah, they verbally accepted an hour after that.

Nate Hedrick: Great. Yeah.

Michaela Soppe: It was a very fast process, I feel like, and probably a little less stressful than it is in the big cities for us. But at least putting the offer down was really simple.

Nate Hedrick: Still, yeah, it sounded like crunch time decisions, though, and faxing it then at 0 hours.

Michaela Soppe: It happened really fast.

Nate Hedrick: That’s great. And did you have inspection contingencies on the home as well? I know some people are out there waiving inspection contingencies. What did that look like?

Michaela Soppe: We did have an inspection. I guess something I should mention is we also offered to cover closing costs. I know that’s a big deal-maker or -breaker anymore. But we did have an inspection, and Jacob can talk more about that process.

Jacob Soppe: OK. So

Michaela Soppe: I set it up.

Jacob Soppe: Yeah, so I scheduled an inspection with one of the six recommended inspectors that our realtor gave us contact info for. And so I did some price shopping with them and got to know the guys who did it. And I picked one,s scheduled a time before our closing date, and they came in and they agreed to meet them at the house while they did the inspection and kind of showed me what they were looking at. And then they gave me a full report, photos, and descriptions of the inspection about two days later. So it’s like 80 pages. And we got to look through them, and they highlighted the things that they thought were a big concern and that what we should look at before closing. So what that led to is that we talked — we showed our realtor that report too, and most of the things we’re like, ‘Ah, don’t worry about it. We’ll just fix those problems.’ And our realtor was like, ‘No, no, no, no. The sellers are going to fix those for you. And so we’re going to use this contingency and try to barter for to see what we can get them to fix before we close.’ And we went back and forth probably like four times with the sellers.

Michaela Soppe: That sounds about right.

Jacob Soppe: And our realtor ended up saving us like $5,000 in repairs.

Michaela Soppe: And just like little — some of the stuff was bigger, but some was just little stuff that we’re literally like, it’s fine, you know. And some of the bigger stuff the sellers were like, ‘Well, we’ll split it 50/50 with you guys,’ and Jacob and I are like, ‘OK, that’s fine.’ Sean was like, ‘No. You’re not paying for it.’

Nate Hedrick: I love it.

Michaela Soppe: He’s like, ‘You guys offered asking price. They’re going to pay for it.’ And we’re like, ‘OK, sure, we’ll see what happens.’ And like Jacob said, I mean, they basically agreed to everything except tightening a railing outside. Like literally $5,000 worth of stuff, they got done for us before we closed. Can’t thank Sean enough for that.

Nate Hedrick: That’s great.

Michaela Soppe: Because we had no idea. We’re like, ‘Oh, this is fine. They’re never going to agree to that.’ But they did.

Nate Hedrick: And that’s exactly why you have a good real estate agent to lean on, right? Because again, without that experience, without that know-how, you would have lost out. So that’s a big, important point. The other thing I think is great there is that you guys went into it with this idea of I’m going to offer full asking, and so because of that, like there’s a renegotiation process that may occur. And so there’s two — I think a lot of people assume as soon as you put that offer in, that’s it, you’re done, that’s what you’re buying the house for. But the reality is you get to go back to them, and there’s renegotiations that can occur if you have the right contingencies in place. And again, lean on your agent for that. But that’s a really important factor to making sure you’re getting a good deal. So that’s awesome. Well, that leads to our last step, which is Step No. 6, all about closing. So you’ve gone through, found a house, put the offer in, renegotiated on the fixes and everything, and now you’re ready to actually sign the paperwork. So talk to us a little bit about the closing process. Anything that surprised you or things that you learned during that?

Michaela Soppe: I’d say it was pretty straightforward for us. I mean, basically with all of the negotiations that happened ahead of time, we knew exactly what we were getting, exactly what to expect. We did come walk through the house before we closed, I think the morning that we closed.

Jacob Soppe: The same morning that we closed.

Michaela Soppe: Yeah, just to make sure everything was done, everything was what they said they would do. From there, everything was good. You know, Sean was there at closing with us for the first part. And then once you actually get into the more financial stuff with the bank, your realtor leaves and says, “See you later.” So I guess that was kind of surprising. I’m like, ‘Oh, OK, so he’s not here.’ But it makes sense too just that he would come for a little bit of it.

Nate Hedrick: I remember my first — when I bought my first house, I thought that like my agent was going to be there waiting with the keys as soon as I signed and he was going to drop them in my hand, but then there’s a whole — like title had to actually transfer, and there was the — like you’re working with the bank first and finishing the deal. Was that your experience as well?

Michaela Soppe: So we got the keys at closing.

Nate Hedrick: Nice. That’s pretty rare these days. That’s awesome.

Michaela Soppe: Yeah, we didn’t have to wait until after for it in our case, at least. So I mean, that was kind of what I expected and I guess what I assumed was the norm. But I also wouldn’t be surprised if it does take awhile.

Nate Hedrick: No, that’s good. And again, that is — it’s more rare these days. And again, some states even require you to have different levels of closing with a lawyer present and things like that. So it’s nice when you can actually do it all in one fell swoop like that. That’s excellent.

Michaela Soppe: And we had kind of asked Sean like, do we need an attorney to be there with us? Are we good? He’s like, ‘Well, unless you have any questions about the stuff that’s already been fixed or gone over,’ like everything he basically had already gone over everything with us and there wasn’t any surprises.

Jacob Soppe: And there’s a lawyer at the title company.

Nate Hedrick: Yeah, and depending on your state, that may vary, right? Some states will actually require that you have a lawyer present or that they’re actually the one doing the closing with you. But again, in Ohio where we are, that’s not the case. So good to lean on your agent there for the local guidelines. Well, great. Well Jacob and Michaela, I really appreciate you guys sharing your story. I think, again, it’s a tricky time to be a first-time home buyer, but you guys are proof that it can be quite easily done. And again, YFP is here to help you guys if there’s something to make the process easier. We’re along for that same ride. Any final thoughts or other tips you can share with our listeners?

Jacob Soppe: Well, I can share one thing that we did not include in our search talk, but we were actually looking at a home that we could potentially rent out in the future.

Michaela Soppe: Oh, yes.

Jacob Soppe: Once we outgrow it. It might be awhile before we outgrow it because there’s plenty of space here, but we were looking for a home that we potentially could rent out or even hack out. And we found this home, and the offer we put in fits the 1% Rule that a lot of landlords like to follow when they’re looking for a good home but also I wanted to make sure we bought a home that we could increase the value on. And there’s a lot of opportunity to do that in this home. But we also found that this was — in the neighborhood of like 20 homes, this was like the second lowest valued home in the neighborhood. So we feel like we can really use that to help increase the value of this home if we end up selling it.

Michaela Soppe: Yeah, and part of the plan with this home too — and we’ll be here for awhile — but eventually, it’s something that we could easily rent out in the future because it’s a great size for a rental home, and it’s actually really close to the highway. Like you can see the highway, you can’t necessarily hear it all the time. But it’s in its own little neighborhood but in a really good location for people just passing through. So that was something that was always in the back of our mind that we knew we kind of wanted, our realtor knew we wanted it, you knew we were looking for it. So that was something that just kind of like fit together well with the home we ended up getting as well.

Nate Hedrick: Yeah, that’s awesome. I think that, you know, your shameless plug for our other show, the YFP Real Estate Investing podcast with David Bright and I as cohosts, if you haven’t checked that out, definitely do so. And maybe we’ll have Jacob and Michaela on that show once they turn this property over and start renting it out. I love it. Well again, guys, really appreciate you guys being with us today and sharing your story. Where can people reach out if they want to get in touch with you?

Jacob Soppe: They can reach me at my email, [email protected]. Soppe is spelled S-o-p-p-e.

Nate Hedrick: Perfect. Well, I’ll make sure to put that in the show notes. And again, thank you guys so much for being here.

Michaela Soppe: Yeah, thank you, Nate.

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YFP 222: Why Estate Planning is Such an Important Part of the Financial Plan

Posted on by yfpadmin


Why Estate Planning is Such an Important Part of the Financial Plan

On this episode, sponsored by Thoughtful Wills, estate planning attorneys, Notesong Thomson and Nathan Kavlie, discuss estate planning and its importance in the financial plan.

About Today’s Guests

Notesong and Nathan, Co-Founders, Approachable Attorneys, Thoughtful Wills

Notesong and Nathan met in junior high in Jamestown, North Dakota – a friendship forged in orchestra concerts and speech meets – much laughter in hallways and early-90s nerdiness.

They both started law school in 2001, bonding over the exciting concepts they were learning, the intense 1L reading requirements, and Legally Blonde (released that summer).

Years later, Nathan asked Notesong to help create a law firm that would emulate the automation of LegalZoom but pair it with actual attorneys to create custom, lawyer-drafted Wills at an affordable price point. Thankfully, Notesong said yes!

This friendship is our firm’s foundation – and with each passing year, both grow stronger.

Notesong Srisopark Thompson, Co-Founder | Attorney, Thoughtful Wills

Caring for so many ill and injured children led Nurse Notesong to law school – she wanted to advocate for children from multiple avenues beyond the hospital bedside. After practicing as a pediatric emergency/trauma nurse for over 18 years, Notesong took a break from paid work to be a full time mom to her three sweet and spunky kids – one of her most challenging and rewarding roles. Along the way, she and her husband caved, and their family also welcomed two fluffy sheepdogs who are constantly at her side as she helps translate estate planning into terms and concepts that are understandable – echoing her signature nursing style when she explained painful procedures (such as IV starts) to her tearful and terrified patients as they clung to their parents.

Having dealt with the yuck of creating her own estate plan, Notesong ensures the Thoughtful Will experience respects and addresses the anxieties of parents and non-parents alike, helping make the process as pleasant as possible. She infuses TLC into every aspect of our brand of approachable lawyering. Attention to detail is crucial in both nursing and law – Notesong doesn’t miss a beat.

Nathan Jay Kavlie, Co-Founder | Attorney, Thoughtful Wills

In high school, Nathan knew his science fair presentation was ready when he could explain the enzyme pathways to his grandmother. That ability to translate concepts was rewarded when he won awards at the international science fair, three years in a row.

Many years later after repeated nagging by his Uncle David, Nathan turned his attention to wills and discovered this whole new area of law that desperately needed translation for normal people. He took a year to learn and study wills & trusts law – rewriting the standard “legalese” will into something elegant and understandable. The Thoughtful Will is one of his proudest accomplishments to date (it’s a three-way tie with his marriage and rehabilitating two rescued terriers).

Summary

This week, Tim Ulbrich taps into a topic not yet explored on the YFP Podcast, estate planning. Estate planning attorneys and co-founders of Thoughtful wills, Nathan Kavlie and Notesong Thompson, discuss what an estate plan is, who needs one, the value of a living trust, and why estate planning is an important part of the financial plan.

Thoughtful Wills solves the issue of unpleasant experiences with attorneys, delaying the start of estate planning. Nathan and Notesong have worked to make death planning and lawyering approachable for everyone.

Nathan explains that estate planning is not just about your estate, but everything you own, even non-physical items, when you die. Estate planning is death planning, using our system of laws to make decisions, spreading goodness even after your death. Anyone who has children, people who have pets, married couples, anyone with some assets, and people who have family members that they care about should consider estate planning as a set of directives in the event of your death. Notesong explains that because circumstances in life change, revisiting the estate plan annually is a good idea.

Nathan and Notesong give a general overview of the estate planning documents, including the will, the revocable living trust, other relevant documents of estate planning, and how they work together to protect your estate after your death. Nathan details what probate is and how it affects a person’s assets when they die without a will, versus with an estate plan. Notesong provides an overview of the healthcare directive and the durable power of attorney, which authorize someone to make decisions on your behalf if you are incapacitated.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Notesong and Nathan, thank you so much for coming on the show.

Notesong Thompson: Thanks for having us, Tim.

Nathan Kavlie: Thank you.

Tim Ulbrich: So before we dive into all things estate planning, a topic that we surprisingly haven’t covered in detail on this show before, I’d love for you both to introduce yourselves and give us an overview of the work that you do with Thoughtful Wills. So Notesong, why don’t you kick us off? And then I’ll have Nathan follow.

Notesong Thompson: Sure. Well, it’s nice to meet everybody on the podcast. I am based in Madison, Wisconsin, and I am mom of three young kids — young, spunky kids. We have two sheepdogs who are very needy and wife of a really busy corporate attorney. But yeah, I’m a lawyer and I previously practiced as an emergency trauma nurse for 20 years, so I bring a lot of different perspectives to estate planning.

Tim Ulbrich: And we’re going to tap into some of your healthcare background a little bit later when we get into some of the healthcare directive pieces of the estate planning process. So very good. Nathan, go for it.

Nathan Kavlie: Yeah, so my name is Nathan Kavlie. I live in Minneapolis. Notesong and I, actually, we met in high school in Jamestown, North Dakota, back in the early ‘90s. But I am a lawyer. I was not a nurse, but I did work in a video store for several years, which, you know, oddly, I think was really I think formative, as much as probably anything else in how I sort of approach the world and my work, which is just sort of — we’re all customer service agents I think in the past. And if you aren’t, thinking that way I think you really are kind of missing the boat because I feel like especially in this new world where with masks and distancing, I think if you’re not spending time thinking about how to be friendly and approachable, you are not being friendly and approachable. I think you’re just missing a chance to sort of make people feel welcome and taken care of. But yeah, I live in Minneapolis with my husband, our two rescue dogs, yeah. Life is good.

Tim Ulbrich: Great comment, Nathan, about the importance of customer service and a priority. I actually — you made me think of the book by the founder of Zappos, “Delivering Happiness,” and great story about just that perspective and how important it is no matter what industry that one is in. So before we get into the weeds of estate planning — we’re going to try to make it as lively and fun to really highlight the importance of estate planning as a part of the broader financial plan — but before we get into that, tell us a little bit more about Thoughtful Wills. What is Thoughtful Wills? What’s the problem that you’re trying to solve? And what is the offering that you have, Nathan?

Nathan Kavlie: Yeah, so I think the problem we’re trying to solve is most lawyers are not very friendly or approachable. They kind of suck to work with. And people know that, right? There’s a reason why people — I’m sure you guys at YFP have heard of how often do you ever get clients that come in and they say, “Well, we’ve got all of our estate planning documents ready.”

Tim Ulbrich: Rarely.

Nathan Kavlie: Rarely, because they know that it’s like, you know, you have to take time off from work and go meet with this lawyer who’s probably going to make you feel like an idiot and charge a lot of money. And that’s the experience that I kept running into over and over again amongst my friends. And so you know, it was sort of an epiphany, like why does it have to be that way? And it doesn’t. We can just work online with people all over the country. We can — instead of sitting down and having this meeting, which is long and frankly then becomes expensive because we’re lawyers, right? We sell our time. We don’t do bookshelves, we don’t sell electric cars. We sell our time. And so you know, we can use technology efficiently to sort of save time, reduce expenses, and hopefully then if we’re being really sort of thoughtful about all of this process, we can sort of create kind of an experience for you that is sort of shockingly friendly and approachable. And that’s really what we’ve sort of done is sort of looked at every piece of our process to sort of ask ourselves, like is this understandable to normal people? Does it feel welcoming? Is somebody going to read this and feel supported? And if it doesn’t, then we work on it and frankly, we keep working on it over and over again just because when are you ever like perfect, right? So we’re sort of on a quest to really make lawyering approachable is I think really the crux of what we do.

Tim Ulbrich: So making lawyering approachable is really a big part of what you guys do. And folks can go to ThoughtfulWills.com/YFP and learn more. And we’ll reference that link again later in the show. I was telling my wife about this interview last night, and the way I was describing it, based on our experiences with a young family, going through the estate planning process, we really delayed ourselves in that process probably longer than we should because No. 1, it wasn’t exciting. It’s pretty boring, right? In my mind, it was going to be somewhat painful. And I felt like the industry wasn’t very transparent. As I look at what you guys have built, you really have addressed all three of those. And excited about what that means for not only pharmacists but also other professionals that want to do this part of the financial plan and do it well. Notesong, tell me about your background as an emergency — if I heard correctly, emergency care nurse. What about that experience led you to want to go back to law school and then specifically do the work that you’re doing now with Thoughtful Wills?

Notesong Thompson: Well, it’s funny you say that because Nathan and I reconnected after several years. And ironically, we were actually in law school at the same time. Started in 2001 and then we graduated in — did we graduate in 2004?

Nathan Kavlie: Uh huh.

Notesong Thompson: And I practiced law for a little bit in the juvenile defense world. I did some public defender work, guardian at litem, and pediatric nursing really drove me to the law because I saw so many things at the bedside that really, really troubled me. It just — it had me just wondering going home at night thinking, why is it like this? Why is this child with this abuser? Why is this informed consent issue an issue at all? So I will admit, nursing is my favorite love. And Nathan had to do a little bit of convincing to get me to practice law again, right, Nathan? And largely it was because of what Nathan talked about before is the traditional legal process is in many ways really miserable. And I practiced at a big law firm, and like I said, I did some more public defender work. But ugh. It was just yucky. And I went through the — I went through the estate planning process at my husband’s fancy law firm, and I just want to be clear that there is a place for attorneys and fancy law firms and for big estate planning too. And I’ve got to tell you, the only thing I remember going through that process myself was how much it was filled with yuck. And it was so anxiety-provoking, emotionally challenging, and we were doing this with a friend who took care of us. But it just was yucky, all of it. And so when Nathan finally convinced me to join in, it was after he heard me on a show called “Moms Every Day,” and he recognized that moms make a lot of decisions and keep the ball rolling forward with things that keep getting back-burnered. And as a mom of three young kids, you know, I — and having worked in healthcare in the nursing, I was faced with life-and-death issues every day. And even with that, at the bedside during a code, working with pharmacists who are handing me syringes of epinephrine and just on the ready — I love pharmacists, by the way. Can I just say? They’re the calm in the storm. And no matter what chaos is going on, the pharmacists were there, they just showed up in their cape and quietly handed us the meds we needed. It was like a miracle. But you know, that’s the thing. It’s the best part that I’ve found about being an estate planning lawyer now with the nursing background is that I still get to give TLC to our clients. And I think they are a little bit shocked when I say, “We’re going to take really good care of you and your family.” So yeah, that’s where I’m tying in nursing into estate planning. And it’s been really wonderful.

Tim Ulbrich: That’s great. And as I mentioned, estate planning isn’t a topic we’ve covered a lot in detail on this show before but certainly an important piece of life and one’s financial plan. And we’re not going to be able to get into all the nooks and crannies and aspects of estate planning, but I do think we’ll be able to lay a good foundation and hopefully get folks somewhat excited about learning more about this topic and some next steps that they can take in their own journey. So Nathan, as I was doing research on Thoughtful Wills and your background, one of your claims to fame that’s listed on the website is having a lifelong obsession with making the complex understandable. And so I want to tap into that a little bit here as we just start the conversation of what exactly is estate plan? What do we mean by an estate plan? Who might need one? Why is it important? And what are some of the various documents at a high level that make up the estate plan?

Nathan Kavlie: Yeah. Let’s emulate — I think let’s start with just the word, right? So we’re talking about estate plan, and estate — so this is the weird part. Estate planning is not just about your estate. Estate really just means like all of your stuff when you die. So when you die, all of your cars, your dirty laundry, your CDs, your art, it’s all — everything you own. And not just physical possessions but if you sort of owned patents or if you wrote some music, all of those pieces of property are your estate. And so we’re planning for that. But the problem is it’s like sanitation engineers, right? You know, like garbage truck people? And it’s like, they’re like, “Now we’re going to be sanitation engineers.” Really, what we do is death planning. But nobody likes to say that. And so they’re like, “Well, let’s call it estate planning.” But the thing is that it’s bigger and more important than just your stuff. Right? Because that’s the thing, it’s like, how many people as they’re lying in the hospital bed dying are thinking about like, ‘Wow, I wonder who’s going to get my couch?’ Right? ‘I wonder who’s going to take care of my silverware collection?’ No one cares about that. You care about your family. And your family is not part of your estate because you don’t own your children, right, as much as people might want to. So we’re planning for death. The problem — and this is why people don’t think about it and I think probably at some level why you haven’t done this as a podcast is because it’s morbid. We’re talking about when you die or we’re talking about when you’re in a coma and can’t communicate. Like these are not fun topics. But they’re important topics because you care about the people in your life. And this is the law’s mechanism for how to do that. Our system of laws, it’s kind of amazing. And I feel like — and that’s the thing I try to sort of impress upon people. It’s like, these documents are frankly like superhero documents because they allow you after you’re dead — I mean, you’re gone. But you are still making effect — you’re having effects in the world. You are actually still spreading goodness and care in the world because of these documents that you’ve created. And that’s kind of amazing I think. And you know, our legal system wouldn’t necessarily have to operate that way. There’s no reason why we would sort of say like, Jim died, and he left this fancy house. And we’re going to let Jim decide who gets the house, right? We could say, “Everybody gets a piece of the house,” right? We’ll sell it and put it into the tax coffers. Or Jim’s oldest son would get it. Right? But no, we give people a lot of control to affect these changes if they choose to. And that’s the thing, that’s what estate planning is. It’s you are making affirmative choices to sort of change the world in the ways that you can by using these documents. So the bad news is we’re talking about death, but the good news is we’re talking about this amazing set of documents that can really change the world for the better for the people that you love and your pets because I don’t have kids so I’m always thinking about my pets. So that’s what we’re talking about. We’re talking about death. And I think just put it out there. You know, we don’t introduce ourselves as death lawyers, but that is what we do. And it’s really important. And that’s the thing, it’s like why should people do this? Well, you know, I guess the thing is like you have people in your life that you love. Do you have young children that you care about? Do you? Right? If you have young children that you care about, probably you care about who would raise them if you and your partner were in an automobile accident or something and you both died unexpectedly, right? And I get why people don’t want to think about it. I mean, I think about one of — my oldest dog is almost 18, and the thought of her passing kind of makes me want to curl up in a ball. So I get why parents, it’s like, it’s a huge hurdle to actually say like, let’s affirmatively think through all of those gory scenarios. But the fact is, it’s like, if you want to really take care of your kids, you have to do this. Right? That’s just point blank. If you care about your kids, you should do this. So who should do this? Who should do an estate plan? People with kids, people with pets they care about, people who care about their family. You know, the thing is is that our system of laws also does have a set of default plans. Every state has a system of default plans. So if you don’t do your will, it’s not like all of your property just goes to the state. There’s sort of a mechanism in place for who should get things. And you know, for a lot of people, that system works great. If you both die in a car crash, it’s not like your children are just wandering the streets, begging for money. There is a system in place to sort of decide who should care for your children, right? So I mean, there are these default plans in place. So just to be clear, the “if you don’t do this,” it’s not catastrophic. But yet if you don’t decide who should take care of your kids, most often all of your relatives fight about it in the courts. You know? I don’t know. But there are default plans. The default plans are not the end of the world, but they are not your choices. And there’s chaos and trouble involved with it because there are lawyers and there are custody hearings and it’s all kinds of yuck. And the way that you opt out of the default plan is by creating these estate planning documents.

Tim Ulbrich: And I appreciate, Nathan, what you said about — and I’ve never heard this perspective before, and I like it a lot, which is that we have a system, which has given folks a lot of opportunity to make decisions that might otherwise be made for them. And so I think if we take that perspective and apply it to the estate plan, it’s not as morbid — still a morbid topic — but you know, now we’re in that conversation of, OK, I’ve got some decisions to make. I’ve got some autonomy. I’ve got some choice. And you know, you’re touching on that concept of probate, essentially that process where if folks don’t make these decisions, yeah, there is a net that’s in place but it might not be the desired state that one has, whether it be related to those that are loved ones and their family or even resources that they have. One follow-up question I have here, Nathan, because I think we probably have many folks listening that maybe this is very obvious that they need these documents or have to update them, maybe there’s young children or just children altogether involved, maybe there’s substantial or growing assets, and I think that tends to be fairly obvious. But often, I’ll get the question from folks that maybe someone who’s more of a recent graduate, perhaps doesn’t have a partner or significant other, there’s no kids involved. So is there a point when it’s a clear like, someone should have an estate plan in process? Or is there a period in time where some folks it might be not now, but we need to look at this in the future?

Nathan Kavlie: Yeah, I mean, if you’re single and don’t have any kids and you get along with your family, you’re probably good to go. I can’t be certain, right? I mean, to be absolutely certain, I’d need to do an analysis of your actual circumstances, but if you’re single and get along with your family, you’re probably fine. If you’re single and you don’t get along with your family, you should definitely create an estate plan. One of my best friends from law school is totally estranged from his mom and his sister, and it’s like, well, you need to do an estate plan then because otherwise they’ll get all of the stuff. And that’s not what he wants to have happen. So when you have children, you know, when you’re pregnant or when you’re thinking about kids — and actually, the thing is when you’re thinking about kids is when you should do this ideally. But anytime in that process is great. We get a lot of clients that sort of say like, our due date is x months away, should we do this now? Or should we wait until the baby is born? And the answer always is, do it now. Because when the baby gets here, you will not have any time. You won’t even have time to sleep. So do it now. Do it when you’re thinking about having kids. We can write the documents to basically sort of already account — a lot of what we do as estate planning is we sort of create documents that anticipate many different futures. Because we don’t know what the future will hold. But we know there are some things that might happen. You might have children. You might not have children. And so we can sort of draft the documents as an either-or situation. So when you’ve got kids, when you get married is a good time as well. Yeah. And if you have some assets, that’s always good. I mean, it’s one of those things, I think people think of it sort of like senior photos, right, where it’s like, it’s going to be expensive and you just do it once. And I think it’s a real disservice. I think it’s driven, of course, by awful lawyers that are really expensive and really unpleasant. But I think it’s sort of weird that we think that like you should only do this once because you will know exactly what your life is going to be like. And circumstances change.

Tim Ulbrich: Yeah, and that’s true, right, with the rest of the financial plan. You know, we always say when you’re looking at investing or retirement or insurance or whatever it may be, it’s an evolution. It’s a journey, right? And that was, Notesong, a question I have for you before we come back and talk with Nathan about the living trust and then some of the other documents. This concept of OK, it’s a lot of work to get it done but is it something I should be looking at annually or every five years or as life events change? And I’m looking at the site where you’ve got a two-step process, which is evaluating the plan and then wanting to avoid probate and you know, a couple different options where one is you’re creating your plan in that Phases 1 and 2 where you’re then updating that or having some ongoing support, so talk to us a little bit more about what you typically do or recommend with folks in terms of OK, yes, we do this upfront work, but then how often we should be evaluating this.

Notesong Thompson: Sure, absolutely. That’s actually a very common question that we get all the time. We’ve reorganized the way to think about this because the whole process is yucky and it’s overwhelming. So Nathan and I really strive to break it down into nuts and bolts. And so on the ThoughtfulWills.com/YFP page, we’ve created two boxes that talk about Phase 1 and Phase 2. Phase 1 is essentially creating your plan. This is where all of the drafting happens and we can customize it as much as our clients want. And then we also ensure that the document is signed correctly and questions can be asked without, you know, worry of the clock ticking because we also want to try to avoid that because that’s always a fear is how much am I going to get charged for this email exchange? Like we try to avoid that. And then Phase 2 is really equally important because if you get a revocable living trust, it’s important that you actually fund that trust. And there are certain mechanisms that have to — that are in place that need to happen in order to put stuff into that trust. And so that is all under the umbrella of Phase 2. And so as far as like reviewing your estate plan, for example, my husband and I drafted our estate plan — gosh, 14 years ago. And we haven’t had a lot of major life changes. A lot of our — we’re still close to the people we’ve named as legal guardians and backups, my sisters and my sister’s mom, and so luckily, if nobody’s developed a gambling habit where we need to change up who’s going to be the trustee or durable power of attorney. That being said, it’s always — we think it’s always a good idea to review your plan every year, just to make sure your wishes are still reflected. And then also, the revocable living trust, it takes a little bit more work, a little bit more follow-up with that every year. But making sure that you fund your trust, make sure that you are updating your non-probate assets too — and I’ll let Nathan go into that later — but you want to make sure that all of your beneficiaries are up-to-date. So it really drives me crazy when all these online will-making services have really now come onto the scene in light of the pandemic, and everybody facing life-and-death issues, they talk about like all these unlimited amendments and things like that. But what they are not talking about is all of the legal requirements that are required in order to make sure that they’re valid, they’re actually valid. So every time you change your plan or you do a formal amendment, if it’s required, you also have to make sure that it’s re-executed, meaning signed and notarized where necessary. And that’s all based on your state. Each state has really super specific nuances and that’s where we rely on our local counsel attorneys in each state to help us ensure that we’re following their state’s laws exactly to a T.

Tim Ulbrich: And Nathan, Notesong mentioned the revocable living trust, the importance that document can play and I heard you guys talk about this on another podcast as really a magical and powerful document that when utilized and funded correctly can sidestep the high cost and hassle of probate and how important that is for professionals, especially professionals who have a higher income potential. So talk to us more about what is the living trust and the importance and the value that that plays.

Nathan Kavlie: Yeah. So I want to sort of back up before I get to that if that’s OK.

Tim Ulbrich: Sure.

Nathan Kavlie: So I think we should first talk about the will, which is really sort of the foundational document to estate planning. I think most people know what a will is. It’s in TV, right? They all gather when somebody dies and reads the will and then people are all pissed off. But the will is the key, right? The will is sort of the foundational document where everybody sort of — where you create essentially your last testimony about what you want to have happen. And so that sort of superhero document that I talk about — I mean, the set of superhero documents. The will is the first one that people do. In like the 1960s, lawyers starting using what are called revocable living trusts. It was sort of a newer concept back then, but now it’s very subtle but it sort of was a little bit kind of cutting-edge back then, but now it is not cutting-edge because, you know, frankly, who wants to have — when you’re talking about your babies and protecting their assets, people don’t want to be experimental in the law. Right? You want settled law.

Tim Ulbrich: Not the place to be cutting-edge.

Nathan Kavlie: Yeah, exactly. So it was cutting-edge in the 1960s. It is not cutting-edge in the 2020s. Basically, so when you create a will or if you don’t have a will, basically, everything goes through probate. And I think it’s first important to say, what is probate? Because I think everybody sort of hears — if you listen to enough or really any sort of financial wellness sort of podcasts, everybody knows that probate is awful, but I don’t know that people necessarily know what probate is. And probate is our legal system’s sort of mechanism to wind up the affairs of people after they die. So it’s important to understand it’s a judicial process. And that’s why it’s expensive and a hassle because you have lawyers involved and you have a judge involved and then they have to send notice to the interested parties and there are hearings and it takes a long time. We probably all know somebody who is like, “Yeah, my grandfather’s estate took 15 years to probate.” That’s what it is. It’s — but it’s an important process because, you know, since we give the dead a lot of control over their assets, we need to make sure that we know what they really wanted. And if they didn’t make a will, then we need to make sure that the process, the sort of default plans, are followed correctly. And so that’s what probate does. So it’s an important thing, but it’s an expensive hassle. And especially — just somebody has to deal with it, right? You don’t just get to turn it over to the lawyers. Like somebody has to manage the process. And so there are ways that you can avoid probate. One of them is called non-probate assets. And I think people are becoming more and more familiar with these. These are things like life insurance and retirement accounts. Life insurance and retirement accounts, when you open them, you choose a beneficiary. So you say, you know, “When I die, this asset will go to my spouse or to my kids,” or something. And because the asset has a built-in beneficiary mechanism, it doesn’t go through the probate process because our system of laws honors life insurance’s own mechanism.

Tim Ulbrich: Makes sense.

Nathan Kavlie: Assets that are inside of a trust are non-probate. It’s like a $10 legal sentence, but it doesn’t really make sense without context. But the idea here is like your goal — because your house is not a non-probate asset. Your house is a probatable asset. So are your cars. Your cars are a probatable asset. So are your rights to music you wrote and your clothes and all of those things — some bank accounts — all of those things go through probate automatically. But if you move them into a trust, they can avoid probate. And so then the grand idea is well, let’s create a trust that will house these assets and then they can skip probate. Caveat: If you live in Connecticut, you don’t get to skip probate entirely. But this still is a very — it minimizes the hassle and the cost. So just a little caveat there. So the goal here, you create your own trust. Trusts are about as old as wills. They sort of hearken back to like the crusades in England. When the lord was taking up the holy cause and going out to the Middle East, you know, what happens to their assets? And so that’s where trusts came about. They were like, well, you can hold my assets, but you hold them for my benefit. You don’t own these lands. You’re just going to hold them for me because I’m going to be gone for like 12 years or something. So trusts — and trusts are used in many different contexts, not just in estate planning because like some charities are structured as trusts. But estate planning uses a lot of trusts. We can set up trusts for your children to protect their inheritance. We also use these living trusts. So it’s lots of different trusts, but this is the revocable living trust that we’re talking about here. And what it ends up doing is it becomes sort of a companion piece to a will so that together your will and your trust take care of all of your stuff together. But the will ends up becoming a much less important piece of this process. The will ends up acting like a backstop so that if you forget to move any of your assets into the trust, the will says, “Throw all these assets into your trust.” So if you forget to — or you know, if you sign all of your documents and you have like a Beetlejuice car accident on your way home and everybody dies, right, it’s like you won’t have had time to move your assets into the trust. So the will acts as a backstop. The will still is important because the will is still going to contain who should take care of your children, who should be the legal guardians, who should be the guardians of your pets. So the will is still an important document, but when we talk about like where your money should go, setting up trusts for your kids, or if you have somebody who has special needs, all of that goes into the revocable living trust. And we’ve described it as sort of a magic law box. Right? It’s like you create this account that you put your assets into, but it really only works if you put your assets in. Otherwise it’s just sort of really expensive paper. And so that’s when we talk about like Phase 1 versus Phase 2, Phase 1 is when we talk through how many kids do you have? Who should take care of your kids? Where should your stuff go? When we’re talking about Phase 1 and creating your plan, I don’t actually care about any of your assets, which is weird because a lot of people come and they’re like, “Well, I want to tell you all about my assets.” And it’s like, I don’t — it’s sort of jarring for them, their, essentially their death lawyer to be like, “We don’t actually care about your assets right now.” Right? And the reason I don’t care about them at this stage is because I don’t know what you’re going to own when you die.

Tim Ulbrich: Yep.

Nathan Kavlie: No one does, right? So right now, we’re creating a plan that really is just sort of broad strokes. And so we talk more in percentages, right? Like half goes to my spouse and half is divided amongst my kids.

Tim Ulbrich: Right.

Nathan Kavlie: And whatever you own, you know, that’s the key because we just don’t know, right? So yeah, during Phase 1, I don’t care about your assets at all. At all. That’s where Phase 2 comes in because once we create your plan and we talk about who should take care of your kids and who should get your stuff, then it’s time to actually talk through your assets. Do you have some retirement accounts? Do you have an LLC? You know, maybe you have an investment property as well as your primary residence. Maybe you have a cabin in a different state. Maybe you have some expensive cars. All of those assets, then we start talking about the actual assets because we need to move them inside of your magic law box.

Tim Ulbrich: I mean this honestly, Nathan, I think that is the best explanation I’ve heard of the will and the revocable living trust in about a five or so minute period. So thank you. You’ve lived up to —

Nathan Kavlie: Well thank you.

Tim Ulbrich: — the obsession of making the complex understandable. It was really, really good, and I hope folks will hit rewind and listen to that as well because I think it can feel overwhelming, and that was very digestible. So thank you for that.

Nathan Kavlie: Thank you. Well, I appreciate it.

Tim Ulbrich: Notesong, pressure’s on now. So we talked about the will and the living trust. But that’s not it. We can’t stop there. There are other estate planning documents that we need to be thinking about. So talk us through some of those other documents and what they mean and why they’re important.

Notesong Thompson: Yes. Well, I mean, it’s the world we’re living in right now. Tim, you and I were talking about this before, but everybody is facing life and death right now with the pandemic in our face and its ever-evolving whatever it is. And so the phrase “accidents and illness happen without warning; there are no guarantees in life,” it just has so much more meaning today. And the healthcare directive and durable power of attorney are equally two magical estate planning documents that operate while you’re still alive. And the magic about them is that they both authorize somebody to act on your behalf if you’re not able to, if you’re incapacitated, if you’re in a coma. And we used to previously refer to these initially as coma documents because we tried to talk to people about them as incapacity documents and nobody got it. And they’d be like, ‘Oh, I’m fine. I’m young. I run every day. I do this. I’m so healthy. I’ll come back to you after when I’m older.’ And you know, we never want to pressure people, but at the same time, in that kind of blunt, very candid way, we just say, “OK. Quick question, do you drive a car?” You know? And it is, these are miserable topics. But we have to also consider that these things happen without warning. So both documents authorize someone to act on your behalf if you’re not able to. They authorize someone to act as a power of attorney. And so with the durable power of attorney document, they act as your durable power of attorney as it relates to finances and property. In your healthcare directive, you’re also a power of attorney, but it’s all related to your healthcare. They can make decisions for you. And the healthcare directive actually has two parts to it. The first part is power of attorney for healthcare. The second part is what a lot of people know as the living will. And that’s where you can get really specific as it relates to whether or not you want a feeding tube or assisted breathing, CPR, if you want altered CPR. I really have taken on the healthcare directive as my baby because I was my dad’s backup backup backup healthcare agent when he took his last breath. And as awful as it was, the saving grace there was that — you know, and he was a physician and he knew the importance of identifying exactly what he didn’t want — as awful as it was to be at the bedside, I was able to also give the poor resident who had to show up at 3:30 in the morning with a crying daughter at the bedside, I was able to tell her, “No compressions, just morphine, oxygen.” You know? And honestly, I think one of the greatest gifts that you can give your loved ones is that healthcare directive because otherwise, as Nathan mentioned before, estate planning is just rife with chaos and emotion. And in that moment, you don’t want somebody fighting over what your loved one wanted at the end of their life. So you can get really, really specific about that and also like organ donation as well. And so I think it’s a really powerful document that way. The durable power of attorney, you know, equally too. It seems like a no-brainer to have this in place, but the thing is you mentioned Zappos and wow, I mean, I know that — is it Tony Hsieh?

Tim Ulbrich: Tony Hsieh, yep.

Notesong Thompson: I’m not sure if I’m pronouncing — Tony Hsieh. I mean, the last I read, sadly, tragically, is that he died without an estate plan and that his dad and brother are in court, fighting to be able to take control of his finances, which are in the billions. And so not only is that a hassle, but they have to go through so many court proceedings, it’s expensive, and they’re trying to grieve the loss of their son and brother. So having this simple durable power of attorney in place lets your person of choosing and their backup, and you’re going to choose to have them as co-agents in case you want to have like a checks and balances. That could be a whole show in and of itself is choosing a durable power of attorney. That is equally important because you want to make sure that you’re choosing somebody who’s going to manage your finances while you’re not able to — or equally like if you’re out of the country and you want to move on a property that’s come available and you’ve been looking at it for 20 years, that person can also step in and act on your behalf in that capacity too. And that’s the durable part of it.

Tim Ulbrich: That’s great. And we’ve scratched the surface on these documents but really important points. We’ve talked about the will, we’ve talked about the revocable living trust briefly, the healthcare directive, durable power of attorney, and as I mentioned at the beginning, the goal is not that folks hear this and say, “OK, I’ve got the textbook on estate planning,” but rather hopefully is stimulating some interest and a conversation among folks about where am I at in this process? What do I need? What do I not have? And what steps do I need to take? And I hope folks will check out ThoughtfulWills.com/YFP, where they can learn more about the work that you guys are doing as well as the services that you offer. I also suspect that we might have some folks listening that are saying, “You know what, I’ve done this or I’m going to do this, but perhaps Mom or Dad or Mom and Dad, it isn’t something they have done. And how do I initiate that conversation?” And it reminds me back to Episode 108 where I talked with Cameron Huddleston about how to effectively talk with Mom and Dad about their finances and this obviously being one of those very important conversations. So Nathan and Notesong, thank you so much for your time, for your expertise, for the collaboration. And looking forward to having you back on in the future so we can dig deeper on this topic.

Nathan Kavlie: Thanks. This was fun.

Notesong Thompson: Thank you, Tim.

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YFP 221: One Pharmacy Entrepreneur’s Journey to FIRE

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One Pharmacy Entrepreneur’s Journey to FIRE

On this episode, sponsored by Thoughtful Wills, Michelle Lamb discusses her journey towards achieving FIRE (Financial Independence, Retire Early).

About Today’s Guest

Michelle Lamb currently works in two very different areas of pharmacy and feels she has found the perfect balance of creativity, flexibility, and job satisfaction. She works in a 1099 contractor position as a Senior Care/Pharmacy Consultant providing pharmacy inspection services for long-term care facilities. She supplements this income with a part-time W2 position (25 hours per week) providing weekly inspection services for hospital drug rooms with a small group of surgical centers. Each job entails some driving but allows her to set her schedule. She has the tax advantages of a small business owner with her nursing home consulting but also receives a full benefits package with her part-time W2 position.

In addition, Michelle is the Founder of LTC Pharmacist Connection, a networking group of over 4000 current (and future) pharmacists in long-term care dispensing and consulting. She plans to release a review book this fall for pharmacists wanting to specialize in geriatrics or studying for their board certification in Geriatric Pharmacy. In addition, Michelle also provides resume reviews for pharmacists planning to enter the field of long-term care pharmacy and writes and helps with an occasional CE program or speaking engagement. She has also partnered with the local university and their student engineers to redesign a product currently used in the drug disposal process.

Michelle’s passions include listening to podcasts, particularly about personal finance. She is a member of the FIRE movement and plans to have the option to retire at 55 with a FIRE number of 1 million supplemented by a small pension from the teachers retirement system. She obtained a savings rate of almost 40% last year and is on track for 25% this year. Her ultimate goal is to reach FI the year her younger son graduates from high school. He has special needs (Down syndrome), and Michelle would like to celebrate his graduation by obtaining a “work is optional” status.

Summary

Michelle Lamb discusses her journey towards achieving FIRE (Financial Independence Retire Early). She shares her motivation to pursue FIRE, how she is on the FIRE path despite graduating with student loan debt, and her timeline to achieve FIRE. Michelle also explains how her business, LTC Pharmacist Connection, intersects with her FIRE journey.

Many pharmacists with student loan debt hear about FIRE and the FIRE movement and think the goal is unreachable. Michelle is one pharmacist who has managed to tackle her student loan debt while committing to FIRE. After watching a video from Mr. Money Mustache about FIRE, Michelle was skeptical but inspired. Following the advice of her tax professional, she discovered that her financial independence was within reach – about ten years from now! Michelle has done this by intentionally contributing funds to her retirement accounts and investments annually while making strategic decisions regarding her student loans, making additional payments rather than simply paying the minimum.

After achieving FIRE, which includes paying off her home, Michelle plans on having time to take care of her family, as her timeline links up with the high school graduation of her son. Michelle’s plans include travel, a rental in Colorado with a lake view, and spending time enjoying live music.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Michelle, welcome to the Your Financial Pharmacist podcast.

Michelle Lamb: Hi, Tim. Thanks for having me.

Tim Ulbrich: Well, many of those that are listening know that this past spring, we launched our latest book, “FIRE Rx: The Pharmacist’s Guide to Financial Independence,” written by Dr. Jeff Keimer. And therefore, excited to feature you and other upcoming guests to share real-life pharmacist FIRE stories. And for folks that are listening that want to pick up a copy of that book, “FIRE Rx,” they can do so by visiting YourFinancialPharmacist.com/FIRE. Coupon code INVESTRX will be good for 10% off. Michelle, before we jump into your FIRE journey, share a little bit about your pharmacy background, where you went to school, when you graduated, and the work that you’ve been doing as a pharmacist since.

Michelle Lamb: Sure, Tim. I would be happy to. So before I went to pharmacy school, I graduated with a degree in mechanical engineering from the Colorado School of Minds in Golden, Colorado. My part-time job while I was in engineering school was at a small family pharmacy and really enjoyed that. And kind of at one point decided that I wanted to go to pharmacy school and maybe go back and buy that pharmacy someday. Things didn’t quite work out that way. When I went to pharmacy school, my eyes got quite opened to a lot of different areas, many niches and the clinical roles and so forth that are available. So started pharmacy school in Tulsa, Oklahoma, at the University of Oklahoma in 2004, graduated in 2008, and then completed a residency in community pharmacy, followed by about five years in academia with a focus on ambulatory care. After that, I did a small stint part-time as a hospital pharmacy manager in pediatric inpatient behavioral health. Did that for about a year, really enjoyed the hours and the flexibility. It was Monday-Friday from 10-2. Doesn’t get much better than that. My kids were young. But after a year, I decided that I wanted to work full-time and really try to make a dent in those student loans. At that point, that’s when my career really took a pretty big change. I found a job for long-term care consulting on a ListServ and looked into it, and it was really quite different than anything I had ever done. Primarily in the sense it was pure contract, a 1099 job. I was a little bit nervous about not having benefits and having to navigate health insurance and retirement all on my own, but when I looked at the compensation and the flexibility, I thought, you know, I’m going to give this a shot. So that’s sort of how I entered the world of long-term care consulting and did that for about five years. And then COVID hit. I imagine like you, my world really turned upside down, especially as an employee entering nursing homes. I went from going to about 20 facilities and driving 5,000 miles a month to overnight not driving at all.

Tim Ulbrich: Wow.

Michelle Lamb: My work went completely remote in a matter of just a few hours. So of course that was last spring, and after a few months of working remote and being able to knock those chart reviews out from the comfort of my own home, I thought to myself, you know, I really think I can get a second job. And a little bit scary, but looking at student loans and some of my long-term goals, which included FIRE as I’m really excited to talk about, I picked up a second part-time job providing hospital inspections of their drug rooms. In Oklahoma, this is a niche area of pharmacy where hospitals able to open up a small drug room without a pharmacist but it does need to be inspected once a week by a pharmacist. And we help monitor their policies and procedures, training, and so forth. So now I’m balancing really that 1099 contract work with a W2 job with benefits and feel that really, that’s the sweet spot. It’s going pretty well.

Tim Ulbrich: And we’re going to come back to that and talk about why that combination of 1099 and W2 has allowed you to progress and advance your financial goals. It’s interesting, Michelle, I don’t think I knew this about you before, but we share a lot in common. While I don’t have a background of being a mechanical engineer, I too graduated in 2008, I did a community residency, I spent time in academia, spent some time in the pharmacy administration world, and we share an interest, of course, and a passion for personal finance. So pretty cool to see those connections. So thank you for sharing your background there. One of the things I want to get right out in the gates on when we talk about FIRE is FIRE, Financial Independence Retire Early, we’ve talked about it on the show before. We had Scott Rickins, author of “Playing with FIRE” on Episode 188, we’ve had a couple blog posts that we’ll link to in the show notes as well. But I think Michelle, when folks hear Financial Independence Retire Early, I think sometimes there’s an assumption of you’re trying to escape or get away from your work because perhaps folks may not enjoy what they’re doing. But as you’re sharing your career story, I can’t help but hear the energy and the enthusiasm that you have for the work that you do. So what is the motivation for you? What’s the why behind your FIRE pursuit?

Michelle Lamb: Gosh, that is a big question. And there’s probably several answers. I’d like to just — you know, you’ve commented on the FIRE movement, Financial Independence Retire Early. I would like to say I am a pharmacist that loves not just my job but I love both of my jobs. So I have no real intention for the retire early part. You know, I may cut back here and there, but I feel blessed to have found a part of pharmacy that I honestly think that I could do for many, many years. I’m completely happy with the work that I do, and it’s really, really satisfying. So for me, I’d like to really focus more on the FI part, which is the financial independence. There are so many reasons that I think that it’s important to just really be able to take some time away from work where in my mind, financial independence that you’ve saved enough money where you could live off some of the proceeds from your investments and not have to work for a few months or even years if you want. I got started late on this journey, so my FI path is probably about 10 years from now. On a personal note, that really corresponds with when my son graduates from high school. He does have special needs, and that puts an extra financial and really emotional burden on a family and finances. So my plan is to really have our house in order so that when he finishes high school that I’m not having to worry about what’s the next step in his journey because my financial journey may be just really, you know, watching out for him and taking care of our family.

Tim Ulbrich: Yeah, and I think that’s a really important comment, Michelle, and I appreciate you sharing that, is I think the motivation for the FI or for that whole FIRE can be very different, is very different, you know, for everyone. And I think for folks that are listening and hear your story and get energized and excited — and we’re going to dig into that here in a few moments — is really taking some time to reflect on what’s the purpose? Right? What’s the vision for you? You know, sometimes I think we hear that concept of becoming financially free or becoming financially independent, retire early, and it’s exciting. But taking the time to dig a couple more levels deep and peel back the onion of what’s the purpose? What’s the vision? Why are we going to do this? Because I think that folks will really uncover and perhaps folks that are doing this together with someone else on their financial journey, those motivations might be different. I think being able to articulate that is really valuable as one is going throughout the plan. Michelle, you mentioned student loans in your introduction. And so I want to ask and start there in that I think sometimes, pharmacists, especially if they’re carrying around significant student loan debts, we’ve chronicled that to detail on this show, median debt load of a pharmacy graduate in 2021 is $170,000. That number has gone up significantly over the last decade since you and I graduated in 2008. But I think sometimes we hear student loans and we hear FIRE and we think, eh, do these two things really grow and go together? And so tell us about your situation and graduating with student loan debt, what that position looked like, and then how you’ve been able to navigate that student loan repayment while also having FIRE and that journey towards FIRE be possible.

Michelle Lamb: Yeah, that’s a great question, Tim. It really does seem to be a reality of becoming a pharmacist that so many times, student loans are part of that journey. And not just, you know, a few thousand. Often six figures of student loans, which I also had myself as well. I was fortunate that I went to an in-state school, but even despite that, I had well over $100,000 in student loans when I graduated. What was really interesting to me is for a few years, I didn’t really know how much I had, you know? They were in a few different places, and I was just sort of making the minimum payment. As a resident, I didn’t pay anything. I was told I could keep them in deferment, so I did. Just sort of made sense at the time. Then in academia, when I went over and finally had my first full-time job at the university, I would make the payments, but I wasn’t very strategic about the amount that I would pay or how much I would pay, what type of payment plan. You know, it was the first time I’d worked full-time before and I had the money to make the payment they told me to, so I did. You know? I think things really changed for me when I took that 1099 contract job. I realized that I was essentially financially — I had to kind of figure it out myself. I didn’t have an HR department to help me, you know, understand deductions or again, health insurance, you know, things like long-term disability and so forth. So I really sat down and thought, if I’m going to essentially work for myself as a contractor and own my own LLC, I really want to be sharp about how I’ll be able to do this. And so that’s when I really, really started to try to make a dent in those loans, making some extra payments as well. My job took me away from my family some, and so it was an extra layer of responsibility where I wanted to be very clear and intentional with my money. And so I started tracking all of my expenses and started really with Dave Ramsey, which I think is a good place for some people to start, listened to all his podcasts, but then just wanted to learn more, you know, kind of take it a step beyond that. So even despite still having some student loans, I started working very hard to avoid any new debt and pay the loans I have aggressively, avoid consumer debt, and become savvy about what is the interest rate on my loans v. what’s the interest rate on my mortgage v. how is the market returning? You know, do I want to play in crypto a little bit? I don’t know. ANd so I just think really that you can certainly do both. So I still have student loans, but I sort of use just extra or side hustle money to kind of throw that at that and I’m now on track to have them paid off by the end of next year.

Tim Ulbrich: That’s awesome. That’s great. And I think it’s a good reminder that often when you’re doing financial planning, you’re doing more than one thing at a time. And so you know, that could be home purchasing and student loans, here we’re talking about aggressive savings and student loans, but you know, certainly an opportunity for others that I suspect — many listeners are listening with a student loan position that is significant and might feel like a barrier to them achieving their long-term savings goals. In terms of your initial interest in FIRE, Michelle, was there a particular “Aha!” moment when you realized that you wanted to jump on the FIRE train? Was there a resource or a talk? Or where did that initial spark come from?

Michelle Lamb: Initial spark came from Mr. Money Mustache. And he has a very interesting and pretty entertaining TED Talk-style video of what exactly does it mean to be able to FIRE. And he often uses I believe it’s the number of tracking your expenses and saving 25x that amount. And the first time I saw that, I just thought to myself, there is no way. It’s absolutely impossible. In fact, the first couple years as a contractor, I didn’t put anything into retirement. You know? I just — no one had taught me how to set up a SEP IRA or how to save money on your own. And after a couple years, I think maybe my second year into it, my tax guy said, “You know, if you would put a little money into retirement, it could really reduce your tax burden.” And I think at that time, he had suggested $18,000. And the way that the timing with the tax worked, I actually was able to save that by the end of that fiscal year. When I realized that it could be done, started to do it, and then after a year or two just watched that compound and really get excited about index funds and just kind of learning about compound interest and watching it grow. So kind of then looking at that in combination with the money I was able to save working for someone else in a W2 position, combining all of that, starting to track it and graph it and project that out about 10-12 years, that’s when it started to get really fun. And now I just kind of throw as much money at it as I can.

Tim Ulbrich: Let’s dig into that a little bit further. I think often the FIRE movement, while there’s many flavors of the FIRE movement, folks may associate very aggressive savings with the idea, again, even though here we talked more about financial independence, less about the retire early, but to get to that point of financial independence, however you’re calculating it, that it may take very, very aggressive saving. So tell us about for you, you know, what is approximately the savings rate that you’re targeting to do? And how are you achieving this among other competing priorities, one of which we already talked about, you know, being student loan debt?

Michelle Lamb: Right. So with the unusual situation of working for myself last year and then most of 2020 being able to work remote and getting paid the same amount in my contract position but having no expenses, picking up that second job made all the difference in the world. In fact, I think I saved so much last year that my accountant said, “You know, you’ve got to be careful. Kind of worried you’re putting these to really maximize your deductions.” So I was able in 2020 to have almost a 50% savings rate.

Tim Ulbrich: Wow.

Michelle Lamb: I completely recognize this will never happen again. It was just sort of a fluke of the times, again, working from home, no travel. You know, when COVID hit, I had refunds come in for trips and concerts and, you know, just subscriptions, gym subscriptions. Money kind of flowed back in and I was making more and had no expenses. So for 2020, I was able to achieve that really high savings rate. Not only that, I’m not scared of investing. I’m really in it for the long haul. So I think when you kind of saw that stock market going down, I look at my investments and I thought, March or April, I was putting extra in. So that really helped for my returns. It’s kind of fun now to look at that yearly return with index funds and kind of see a hit — I think almost a 40% return.

Tim Ulbrich: Yeah.

Michelle Lamb: Which that will never happen again. When COVID kind of settled down and the nursing homes opened back up, I had to cut back down on the consulting. And that’s when I picked up also the W2 work. I sort of think of it as a pendulum, you know, that kind of swings some to the left, some to the right, depending on what are the obligations at each role. It’s nice. They balance each other. Now, I would say that my consulting is probably, you know, 10 business days, 8-10 business days a month.

Tim Ulbrich: OK.

Michelle Lamb: And my W2 position is about 25 hours a week.

Tim Ulbrich: OK.

Michelle Lamb: So through that W2 role, I maximize my percentage savings rate. I kind of watch it and try to hit I think it’s $18,000 a year now in my 401k. And then I’ll also put in — anything extra from the consulting, I’ll put into my SEP IRA.

Tim Ulbrich: OK.

Michelle Lamb: So probably looking more 20-25% this year. But again, that just varies with contract obligations and how many hours I’m picking up.

Tim Ulbrich: And I appreciate the comment, you know, Michelle, about the flexibility. Pandemic aside, especially for folks that have young children or even for anyone regardless that things change from any given year, and I think that’s where some of the stress can come from sometimes. If you put a very stringent goal out there, whether it’s 40%, 50% savings rate, you know, things are going to happen. And maybe sometimes it’s higher than that, maybe sometimes it’s lower than that, but that really is the target that you’re trying to shoot for and will require some flexibility to make sure you’re in it for the long run. Michelle, whether that number is 20% or 25% or 30% or 50%, it’s significant, right? And I think that by having the diligence and by having the discipline to put away such a significant savings, that means you are intentionally choosing to not spend that money on other things that could be priorities and goals today. And so there’s a little bit of this delayed gratification to be able to achieve this financial independence. And one of the things we talk about often with our clients at YFP Planning is, you know, we’ve got to be developing a plan that yes, takes care of our future self, but also ensures we’re living a rich life today. And so how have you reconciled that where when you’re saving at a 40% or 50% savings rate, that means that there’s other things that you aren’t doing today. Talk to us a little bit about that.

Michelle Lamb: Yeah, so you know, some of the things that I’m not doing today that I wish I could, I’m probably like a lot of your listeners and a lot of the world that works from home, you know, I office out of my living room. And I’m barely with COVID retreating a little bit. I’m able to have friends over and share time with other people in my home and we’re walking around my desk and my bookcase and my printer. And so you know, kind of putting a big move like that on pause, that’s kind of part of our journey right now. But that’s not to say that you can’t have a high savings rate and just really work hard to save and have a great time too. So one thing I did last year — probably before it got real popular — is I bought a little motor home. It’s a 1978 GMC Midas. In fact, it’s so old, it has a CB radio.

Tim Ulbrich: Oh, wow. Yeah.

Michelle Lamb: Which is super cool, I know. It’s really fun. So you know, I love to take that out to the lake on weekends. And so it could be instead of taking a trip across the country, we maybe go camping at the state park in our little motor home and get outside and enjoy nature. Also, you know, travel mostly in the summer. I love to go see concerts. I went to Colorado last year and fall hits, and now I’m going to be home for awhile.

Tim Ulbrich: That’s neat. And you mentioned a couple mechanisms for saving. I heard you say 401k, I heard you say SEP IRA. And again, that’s because of your split income with the W2 and the 1099 and obviously having your own business with that 1099 income opens up some other savings opportunities. But one of the well-known challenges with Financial Independence Retire Early, especially if folks are planning to start withdrawing that money before the age of 59.5 where we think of traditional accounts being accessible without a 10% penalty, is we’ve got to think a little bit differently about where we’re putting this money. So certainly this is not meant to be investment advice, so I don’t want folks to hear what your investing strategy or plan or where you’re putting in and hear that and say, “OK, that’s what I’m going to do,” right? That may or may not be appropriate, depending on their plan. But tell us a little bit about your strategy for where you’re saving, how you’re saving, I think I heard you talk a little bit more about a passive investing approach, probably an approach you’re keeping the fees low. Tell us a little bit more about the saving strategy.

Michelle Lamb: Yeah, so this is something that it’s taken me a couple years to really even wrap my mind around some of the vocabulary involved. And Tim, you mentioned that you have financial planner services. I would really recommend to anyone that’s looking at saving and investing, considering the FIRE movement, definitely get the help of a professional because there’s just — there’s so much to learn. As a 1099 contractor, again, I didn’t put anything away for the first couple years. And I really, really regret that. But once I got on board with that, I did establish an account with Vanguard. I’m a big fan of their index funds and BTSAX, which is basically just buying a little slice of the market. And I put that money in there and don’t plan to touch it for quite some time. I also am able to put money into my 401k with my part-time employer, and they’ve started matching that, which is fantastic. That’s through a Fidelity retirement target date fund, so it’s kind of fun to watch the performance of those two kind of bounce against each other. I have a small teacher’s retirement from the University of Oklahoma, which is wonderful. That I believe I could actually access a little bit earlier than 59.5. Of course, if you wait longer, you can get out a little bit more. But for me, that would be an option at age 55.

Tim Ulbrich: OK.

Michelle Lamb: If I choose to need a bucket of money to take out of before then. I also put just a little bit kind of what I’d call the playing-in-the-sandbox money, just a few percentage points of my investment, into ethereum. I don’t know. You know, if Mark Cuban says it’s a good thing, maybe it is. I don’t know. So but anything I put money into, even that play-in-the-sandbox money, I have no intentions to touch it until probably, again, when my kids finish high school, so 8 or 10 years. So I’m really in it for the long haul. You know, I think having a good emergency fund, the 3-6 months of expenses, helps kind of buffer that as well.

Tim Ulbrich: Yeah, that makes sense. And again, a variety of different options it sounds like. And you have some unique tax considerations as well I suspect as a 1099 employee as well as having W2 income. So I think this is an example, without going down the tax rabbithole, of where good tax planning can supplement good financial planning as well and making sure you’re considering that not only on the accrual phase but also on the withdrawal phase, whenever that would be at a later point in time. Michelle, some of the common objections to the FIRE movement, you know, we talked about one of them already, which I think you addressed nicely, which is hey, you can love your career — and I’m glad to hear that you do, and I think many of our listeners do — you can love your career and still pursue financial independence. I personally think that’s a goal we should all strive towards with the retire early being optional. Other objections are things like hey, if I don’t have my employer, what about things like health care? What about being able to purchase disability? You know, other types of considerations like that. What are we going to do with our time and money? So talk to us about how those objections really have any impact, if any impact, as you think about your FIRE journey over the next 10 or 20 years.

Michelle Lamb: One point I’d like to make is people have this wrong assumption that they should or just have to work until age 60, 65, 70, or higher. And you know, I think the first thing to do is just take a step back and challenge that assumption. You know, what do you honestly — what do you want to be doing in your 50s? And for me, I don’t want to be clocking in somewhere and standing on my feet for a 10-hour shift or I don’t want to be driving across the state in bad weather, dodging tornadoes here in Oklahoma to do my inspections. So I think that’s the first step is kind of to really challenge these expectations. And if you look at the numbers and play with some of the retirement calculators, which I’m sure you’ve got some ideas on, just putting a few percentage points more into your retirement early can make such a difference down the road. So you know, I think that’s a good place to start. There’s so much to be done outside of work for me. It’s travel and camping, being outside, being with my kids, that I want to be able to enjoy that when I’m still young. Now, could there be some problems? Sure. You know, the health insurance one is really tricky. But I think the FIRE movement is getting so strong. There’s lots of great resources to try to even battle that one. One tip I’ve heard — and honestly, I don’t know if this would work or not, but I’ve heard of some people taking a few college classes and trying to get student health insurance. Now, is it going to be the best plan on earth? Or how many hours do you have to take? I don’t know. I’m not in that boat now. But I know there’s some really creative ways to try to tackle that. You know? I think both you and I having taught at a university, even teaching a class at a community college, you know, something where it may be a significant drop in salary, but it could be something that the value of the benefits that come with it could be huge.

Tim Ulbrich: And I love what you said, Michelle, about just challenging the assumption of “traditional retirement age,” right? It’s one of the questions I like to ask pharmacists just to get them thinking. And I can tell sometimes it’s the first time someone’s asked the question is hey, have you thought about what retirement looks like for you, what it means for you? Like what does living a rich life mean to you? You know, if we fast forward 30 years and you look backwards, what needs to happen that you would say, ‘This has been a success’?” And I think sometimes we ask a question of when are you going to retire? And it’s 65, and then we get out our fancy calculators and model out savings rates and all of that. And that has a role or value. But these questions are really important about what matters most to you and what is the value of achieving financial independence? And I remember for me, Michelle, reading several years ago “Four-Hour Workweek” by Tim Ferriss, and I think he talks about the concept of like what if we re-thought of retirement as more of like mini retirements kind of throughout our career and not necessarily in this phase where we work for 30 years then we just all of a sudden stop working. And that resonates with me because I love the work that I do, but I also like to have breaks and I like to have points in time where you can pursue interests, other hobbies, other opportunities. And so I think that integration of work and life will resonate for many folks as well. What is the plan to celebrate, Michelle? So when you reach this FIRE number, you get to that magic FI number, like have you thought about the celebration plan? What’s going to happen?

Michelle Lamb: Oh gosh, well, part of our FI journey involves having a paid-off house.

Tim Ulbrich: OK.

Michelle Lamb: And so we’re getting pretty close on our home now. And so I think part of that may involve travel as well. I’m a big fan of Colorado, so I have my eye on some senior apartments that are right downtown in Golden, Colorado, for age 55 and up, which is about 10 years for me from now. So you know, maybe renting a cool unit where I could walk along the creek and go see concerts at Red Rocks is pretty appealing to me. Oklahoma has a lot of lakes too though, so I think — you know, travel is different now where you can even do like Tim Ferriss says and take a few months off and work perhaps remotely in different places. But definitely there will be a lake view involved somewhere.

Tim Ulbrich: And I think the pandemic accelerated that, right? I think we’re going to see more creativity and employers being comfortable with some of those more nontraditional models that might be more in line with what folks are desiring today. Michelle, one of the things you mentioned earlier, I think if I heard you correctly, your anticipated FI date is somewhere at about the point where your children will be graduating from high school. And as I hear that, I can’t help but think that this really has been a family journey. And so tell me about as you’ve gone through this journey, obviously there’s decisions that the family is making, one of which I mentioned earlier, if you’re aggressively saving, that means there’s other things that you may not be doing or doing differently. And so how has this impacted the family, both in terms of whether that’s sacrifices or opportunities for the family to have and be on this experience together?

Michelle Lamb: Gosh, Tim, that’s such a great point. My husband is extremely supportive of our journey as well. You know, I’m one of these that I made him sit down and watch Mr. Money Mustache on YouTube, and I made him watch the documentary that came out on the FIRE movement. And he kind of might snooze a little bit, but he’s definitely on board. He owns his own small business as well. And so we definitely work as a team to make that work. Some sacrifices that we’ve made: I think living in a smaller home. We’ve chosen to kind of have our family in a home where maybe not more than one person can go in the kitchen at one time, but that’s not going to necessarily be the case forever. If we move, we’ll have a paid-off home first, probably rent it out for whatever would cover a new mortgage, also with a down payment, and then maybe kind of move on from there.

Tim Ulbrich: That’s great. And I want to wrap up by asking you about part of how I got to know you and your journey is I followed some of the work that you’ve done with the long-term care pharmacist connection. So in addition to your W2 and your 1099 work, you also have started a community of long-term care pharmacists. Tell us a little bit more about that group, why you started that group, and really the goals you’re hoping to accomplish.

Michelle Lamb: Thanks, Tim. So for me, I entered long-term care about five years ago, and my role specifically is nursing home consultation where I go in, I’ll do chart reviews, check the med rooms, check the med carts, and help with med destruction. I absolutely love long-term care. I never thought when I was in pharmacy school that I would enjoy working with the geriatric patient population as much as I do, but I just really love it. I am a member of the Pharmacist Mom’s Group, so shout out to another really cool Facebook group, and my heart would just break when I would see good, hardworking pharmacists and moms just really struggle with some of the expectations that are involved these days in community pharmacy. And it’s probably, gosh, even more so these days with COVID boosters and just ever-increasing expectations. So I would comment every now and then, you know, “Hey, don’t forget about long-term care. I’m genuinely happy. I set my own schedule. I make as much money now as I ever have or did in any other setting.” So just really trying to spread the optimism of this niche that I never learned about in pharmacy school. And I started answering the same question over and over again of, what is long-term care? How do I get in it? And you know, just how do I meet people? So I created a Facebook group called LTC Pharmacist Connection, really just for that purpose where I’d say like, “Gosh, come over to the Facebook group. There’s lots of people with questions about how to make a career change, and let’s bounce ideas off of each other.” That was about three years ago, and I’ve tried to keep the Facebook group just really focused in on pharmacists and interns that want to go in that niche. I think because there’s just a lot of pressure in other types of pharmacy right now, there’s a really growing interest in that. At this point, we’ve got about 4,000 members.

Tim Ulbrich: That’s awesome.

Michelle Lamb: Yeah. And I just am so pleased to see the positivity in long-term care and just the growing opportunities that are really coming up. So it’s a — come check out the group, lots of good networking, some job postings, and I think it’s really helpful.

Tim Ulbrich: And that group is LTC Pharmacist Connection. We’ll link to that in the show notes. Michelle, for you and your journey, resources that have been really helpful in the FIRE journey as well as engaging with the rest of the community. So you mentioned one, Mr. Money Mustache and some of the resources that they’ve had. And I think probably many of our listeners are familiar with some of that work, which is really great readings that he’s been putting out for several years now. What other resources have been really helpful to you on your FIRE journey?

Michelle Lamb: So Tim, kudos to you and your podcast. I will say especially driving 5,000 or 6,000 a month in my car, podcasts have been a great resource to me. I started with Dave Ramsey, and as I learned about the FIRE movement, I found a few others that I really enjoy: Stacking Benjamins is fantastic, also Afford Anything has been a great source of information. Also reading, I would highly recommend a book called “The Simple Path to Wealth.” It really just spells out what do I do when I’ve got debt but I’ve got goals and I don’t know where to start and how do I invest? It really does break it down and is just a great place to start. Excel spreadsheets, you know, track your expenses, track your net worth, track your savings. And also, I really like some of the retirement calculators. You know, I kind of play with my budget and I think, OK, if I put $750 in this month, what would that look like 20 years from now? What if I bumped it to $1,000? What if I took a year off? So just playing with projections has been a big help.

Tim Ulbrich: Great recommendations. We’ll link to those in the show notes. You mentioned the Afford Anything podcast, Stacking Benjamins podcast, the book “Simple Path to Wealth.” I mentioned another resource earlier, “Playing with FIRE” by Scott Rickens, great book, great documentary as well. We had him on Episode 188. And then a shout out to Jeff Keimer, who wrote “The FIRE Rx: How to Retire Early as a Pharmacist Achieving Financial Independence.” And as a reminder, you can pick up a copy of that book at YourFinancialPharmacist.com/FIRE, and you can use the coupon code INVESTRX for 10% off. Michelle, beyond the LTC Pharmacist Connection Facebook group, if someone wants to connect with you, learn more about your story, ask you a question, where is the best place they can do that?

Michelle Lamb: I would have them come over and see me on LinkedIn. Michelle M. Lamb or just look for LTC Pharmacist, and you’ll find me.

Tim Ulbrich: Great. Thank you so much for your time coming on the show, for sharing your journey, and looking forward to following the rest of your FI journey here over the next several years. Thank you, Michelle.

Michelle Lamb: Thanks, Tim.

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YFP 220: Student Loan Forbearance Extension – Now What?

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Student Loan Forbearance Extension – Now What?

Kelly Reddy-Heffner talks about how those with student loans should be calculating their next moves considering the most recent extension of the administrative forbearance through January 2022.

About Today’s Guest

Kelly Reddy-Heffner is a Lead Planner at YFP Planning. She enjoys time with her husband and two sons, riding her bike, running, keeping after her pup ‘Fred Rogers.’ Kelly loves to cheer on her favorite team, plan travel, and ironically loves great food but does not enjoy cooking at all. She volunteers in her community as part of the Chambersburg Rotary. Kelly believes that there are no quick fixes to financial confidence, no guarantees on investment returns, but there is value in seeking trusted advice to get where you want to go. Kelly’s mission is to help clients go confidently toward their happy place.

Summary

Tim Ulbrich welcomes YFP Planning Lead Planner Kelly Reddy-Heffner back to the show to discuss how those with student loans should be calculating their next moves considering the most recent extension of the administrative forbearance through January 2022. Kelly talks through how to maximize the time left to evaluate your loan repayment options and choose the best next steps for your situation.

Kelly walks through the recent history of administrative forbearance for student loans taking us through to the current and likely final extension set to end at the end of January 2022. During this time of administrative forbearance, recent pharmacy graduates may not have had to make any payments. Others may have allocated the funds elsewhere, new expenses may have arisen, or employment status could have changed. In response, Kelly shares some general advice on making the most of the remaining forbearance period.

The Student Loan Analysis is one way to help pharmacists feel confident with their financial decisions regarding their student loans and to map out realistic goals for repayment regardless of the type of plan. Kelly outlines how the Student Loan Analysis at YFP works, who should consider it, the information to have on hand for your appointment, and where to gather all of your loan details, whether your loans are in the federal or private sector.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Kelly, welcome back to the show.

Kelly Reddy-Heffner: Thank you, Tim. I am happy to be here.

Tim Ulbrich: It’s been awhile. We had you on last Episode 187, where we talked about how to maximize your student loan strategy while federal student loans payments are paused. And that was back in January 2021, and I think at the time we thought, hey, this whole student loan forbearance thing might be coming to an end soon. And here we are again, talking about this topic and what this pending end to the administrative forbearance means. And so Kelly, kick us off by just bringing the audience up to speed on the background of the administrative forbearance on student loans and the extensions that have recently been extended one last time is what we’ve been told.

Kelly Reddy-Heffner: Absolutely. Right. So nothing has changed and yet it feels like everything has changed at the same time. The perfect feeling. Right, we originally had that administrative forbearance at the start of COVID in March of 2020 by the Trump administration. It was extended once during that presidential administration. And then now, we’ve seen with the Biden administration that it was extended two more times. So we had that extension until September, and now we have what I believe is the final time where we have until January 31. So I do think we’re coming to the end of the forbearance extensions, in my opinion. So we’re going to enjoy a few more months of 0% interest, no loan payments due, and of course those loans not having any default issues. So a couple more months, but we’re coming to the end of it.

Tim Ulbrich: Yeah, and Kelly, you and I were talking before we hit record, I think one of the challenges — and certainly there’s been some benefits during this time period. We know firsthand from many in the community that they’ve been able to through this administrative forbearance accelerate the achievement of other financial goals, and that certainly has been a positive but also coming up on the two-year mark, essentially, right? So March 2020, you know, we entered lockdown, the pandemic, we started the forbearance with the CARES Act. So this time period of two years, I think that presents an interesting challenge where perhaps folks have gotten used to having no student loan payment and perhaps other expenses that have come to be. And then I think about the classes of 2020 and 2021 specifically where student loan payments haven’t even been a thing, you know, for them because of their graduation during this time period. So I suspect, Kelly, that a lot of pharmacists, a lot of folks listening out there, perhaps clients that you’ve been working with, have been wondering, should I or should I not make payments on my student loans during the administrative forbearance? And certainly this is not meant to be and it’s not individual advice, but what are your thoughts on this? And how have you helped coach folks through making this decision?

Kelly Reddy-Heffner: Well, I think you’re right that, you know, two years is a lot of time. So we changed our financial goals and priorities changed considerably, our employment may have changed in that timeframe as well. In general, I think I speak for our podcast listeners that they are proactive. They want to be taking action. They’re listening because they want strategies to put into place. So this has been a very interesting time period. We’re feeling like we’re not doing anything with the student loans. But there are a lot of things that we could be doing in the background, which I think can have a very positive impact on net worth and put our listeners in a great position for when repayment starts again that they’ve accomplished a couple other things. So we’ve been recommending if you are, you know, having any other debts, take care of those. Anything accumulating interest should be a top priority while this federal loan is not accumulating any interest. Building up an emergency fund — so again, we may not see net worth increase because the student loan debt is paid off. But we can see positive changes because those emergency funds are improving and giving people more options and more confidence in their finances. If you are in a PSLF program or a non-PSLF forgiveness program, then we’re not making payments at all on the federal side because there’s no benefit to doing that. But if you are only paying the loans, that is your strategy, you’ve either done the math yourself or spoken to a professional and you know that that is your plan, then that really could be on the agenda. Like if it’s comfortable to make those payments on the federal loans, then that could be an activity as well. But we do need to get back into the mindset of the payments are coming back. So we are asking clients and listeners to know at least a rough idea of what the payment amount is and to bring that back into your budget.

Tim Ulbrich: Great point, Kelly, there. I think it’s time to dust off, re-dust off the budget and really look at — run the calculators, use the tools that are available at studentloans.gov, you know, what is that estimated payment going to be as we get into February 2022? And how does that work or what changes need to be made to the budget to make that work, right? And now is the time to get the practice reps so that we’re not caught off guard in the New Year and we can make some adjustments or changes and have some time to warm up to that. And I think that’s a really important point and perhaps one that folks have been thinking about but dragging their feet on for good reason because of all the talk of the extension and I think I believe, you believe, that this is likely the end of that. And so let’s get ready for those payments to begin at the beginning of February 2022.

Kelly Reddy-Heffner: Agree. I mean, there was a statistic out there that 90% of the over 45 million borrowers were not making payments as of March of this past year. So that is the bulk of borrowers not making those payments. So it is time to figure out what that payment might look like. Like you said, recent graduates, 2020/2021, may have had an income tax return with part of a year in residency or the full year in a residency. So that payment amount could be very low. Once they’ve started full-time employment, income has increased, if they’re on an income-driven repayment plan, that’s what drives what that payment amount is, the income. So that will have potentially changed significantly.

Tim Ulbrich: Yeah, one of the things, Kelly, I often share with new graduates or even students that are beginning to think about student loan repayment is because of the complexity of the options that are out there, both federal and private — and we’re going to come back to that here in a little bit — this is not a decision that you want to wander into. Right? We want to be intentional with understanding those options, we want to be intentional with thinking about how this fits in with the rest of the financial plan. And here we are, we’ve got months to do that, right? So let’s take advantage of this time period, the end of 2021, and let’s really get ready so that we can hit that beginning of repayment when the pause ends and we can be confident with making that decision. And as we’ve talked about on the show before, you know, choosing between Option A v. Option B v. Option C, given the amount of student loan debt that many pharmacists have, that can be very significant in terms of the amount that’s going to come out of pocket because of the nuances with the different repayment plans. So intentionality really matters here. And let’s use this time that we’ve got left before this administrative forbearance ends to make sure that we’re ready in making that decision. Kelly, Step No. 1 — so I’m somebody listening and maybe I’m not loving the energy of this episode and the reality that hey, I’ve got to get back in the game. But I’m listening, I’m ready, and whether I’m a 2020/2021 grad or perhaps I was paying prior to the pandemic and it feels like forever ago and I’ve got to get back in the game, what is the first step that listeners can take to get ready for payments to start back up?

Kelly Reddy-Heffner: Absolutely. Well, again, just knowing what we’re dealing with, like what are the loans? Taking that inventory, you know, understanding which ones are federal, which ones are private, they have very different attributes in terms of what types of options are available for repayment. So we want to know what are we working with? What do we have on the table? And again, I think figuring out some of the other lifestyle goals as well, we cannot ever undervalue like how people feel about the loans, what they really want to accomplish with other goals as well. So you can look at studentloans.gov, which will actually redirect to studentaid.gov, to get some calculators, some information. That also is the source of your NSLDS file for taking that inventory and then pulling your credit report, you can get your free annual credit report and seeing like, OK, what’s federal? What’s private? I think knowing how much you can afford is key too. So sometimes that payment amount is what the payment amount is but knowing what your budget is, what you can afford, will help determine like do you need to be in an income-driven repayment and putting a plan in place? Is refinancing a better option because you have resources available? So again, there are resources out there to assist with this. But it’s a lot of data, a lot of information, a lot of subtle nuances. Even we have to be like, hold on. What is the date of the loan? That sometimes will impact what repayment options are available, just literally the date the loan was taken out.

Tim Ulbrich: Absolutely. And so Step No. 1, you know, if you don’t have that up-to-date information is understanding all of the information about your federal and private loans. What’s the balance? You know, who is servicing those loans on the private side? You know, we should be able to quickly get information on the interest rate and the repayment terms on the federal side right now. That probably is showing as a 0% if those are qualifying under the administrative forbearance. But I love — Kelly, I talked with a couple actually just the other night who when I asked them about their student loans, you know, it was very precise. They had all the information. “I’ve got three federal loans, I’ve got one private loan.” And it was to the penny of the outstanding balance, what they had. And I loved the intentionality of hey, I don’t like the number. I don’t like that it’s $194,000. But I understand that in order to put a plan together and to be able to evaluate the options and to be able to know what we can afford inside the budget, I’ve got to understand what we’re working with first and make sure that we have all the details. Step No. 1 is that inventory. And we’re going to link in the show notes to the links that Kelly mentioned on the federal side and the private side. So the federal side, she mentioned studentloans.gov will redirect to studentaid.gov. And then on the private side, running the credit report at annualcreditreport.com. Kelly, after the inventory, you alluded to the second step, which I think is really important is what can the budget afford? And when I teach this topic of student loan repayment, that’s often something I try to walk folks through is, hey, let’s make sure we know what the budget looks like. And as we’ve said many, many times on this show, student loans, as big as they are for many pharmacists, student loans are one piece of the puzzle. So we’ve got to understand what else is going on, what other expenses are out there, what other goals are out there, so that we can determine what that budget can afford. And if we decide to do a more aggressive repayment path, what does that mean for achieving other goals? If we decide to do something like a forgiveness path or more extended path, what does that mean for achieving other goals and really looking across the financial plan? And so we’ve got a budget template for folks that want to get started or update that budget. If you go to YourFinancialPharmacist.com/budget, you can get a copy of that. And so Step. No. 1 is inventory, Step No. 2 is really looking at what the budget can afford, Step No. 3, Kelly, is probably the most confusing, the most difficult, but the most important part, which is understanding the options. And unfortunately, the hand we have been dealt as borrowers of student loans I would argue is more complex than it probably needs to be. Separate topic for a separate day. But talk to us about understanding repayment options, something you work often with our clients about, and just the magnitude of this decision.

Kelly Reddy-Heffner: Well, right. I mean, once you’re on studentaid.gov and you’re plugging in some data, I mean, you’re going to get a lot of information back about these repayment options, especially on the federal side. I mean, and they, again, range significantly. So even that date you took out the loan can have a significant impact on what options are available. So we have income-driven repayment options, which we have two that we usually recommend or work with in PAYE and RePAYE. Of course we have standard repayment as well, which is usually that 10-year term, which is a fixed payment amount, does not vary with income. We don’t lean towards extended or graduate options, just because they really perpetuate the length of time that it takes to repay the loan and often, you know, with pretty high interest paid in the process. So income-driven is usually the area where we’re operating in and also that standard repayment if we’re not refinancing. And again, just understanding like the date you took out the loan, you’re right that 0% is kind of the default on all of the data, which is hard. Like we were taking out loans when we were 18, 20. It’s not usually the ideal time for being detail-oriented about this type of information. So we can take a look at the dates the loans were taken out in the federal system and see what the interest rate was that year. But it’s a lot — it’s a lot of nuance for sure.

Tim Ulbrich: And then we’ve got, you know, on the federal side, you mentioned the variety of options. To make it a little bit more complicated, we’ve then got the private option. And we’re going to come back to talking about some common questions that we get around refinancing. I do — without going too far down the rabbit hole because we have talked about it extensively on the podcast, most recently on Episode 214, I interviewed a pharmacist who had $127,000 that was forgiven through the Public Service Loan Forgiveness. And so we’ve talked in detail about PSLF, non-PSLF, but I think it’s worth talking about again just briefly in the context as we look at the end of this administrative forbearance. So Kelly, quick dive, I don’t want folks to hear this and think, oh, I’ve got it with PSLF and non-PSLF, certainly more complicated than what we’re going to discuss briefly — but quick dive into PSLF, non-PSLF, what they are, and the main differences between the two of them.

Kelly Reddy-Heffner: Absolutely. And I mean, I think there are still questions. Like it has improved our level of information, but the PSLF rules are very specific. You do need to work for the right type of employer in a nonprofit setting, and you can check an EIN number now in some of the PSLF tools on studentloans.gov, which is helpful. You do need to be in the right kind of loan. So we still see that as a little bit of a problem at times. Like it does need to be in a direct type of loan. So if we see FELL loans, we see HPL loans, we see Perkins, those don’t automatically line up to qualify. And that’s where some of the confusion still exists. You do have to be in the right repayment plan. So in income-driven repayment, there are some nuances with standard repayment that require a little bit of conversation if you’re in standard. You have to make the right amount of payments. It’s 120. And you do need the documentation. So as FedLoan servicer changes to a new servicer, this is an area that we are focusing on and just reminding borrowers to make sure that they have their data documented. Go onto FedLoan, take a screengrab of where your cumulative payments are. Of course the best part is it’s a tax-free situation. In contrast, the non-PSLF forgiveness is a longer time period. So instead of being 10 years, it’s 20-25 years. 20 or 25 depends on some nuances with grad loans and the type of repayment plan that you’re in. And again, it doesn’t matter if you work for a nonprofit. You can have any employer to qualify for non-PSLF forgiveness. It really is based more on the amount of loans compared to income for that program. And then there is a tax consequence at the end. I think that tax consequence is one of the things that maybe will continue to be evaluated by the current presidential administration, like are we keeping that? Are we not keeping that? It would have an impact on people in that program. So yeah, there’s some pretty significant differences between those two programs.

Tim Ulbrich: Kelly, when I talk with folks about non-PSLF and the way I describe these is, you know, PSLF I think is a little bit better known by folks just because it’s gotten so much press and attention, although maybe not the best press. But it feels like folks are more aware and educated. I describe non-PSLF as the lesser-known forgiveness option in the federal system. And I think when I see folks’ reaction, there’s kind of this range of emotion from, ‘Oh my gosh, 20-25 years, like I’ve got a tax bill known as the tax bomb at the end of this, like who in the world would do this?’ Right? And then you start to talk a little bit about, OK, well, depending on the debt load, depending on some of the strategies around this, depending on if we think about saving for that tax bomb, maybe it’s not as overwhelming as it can seem. But certainly that’s a long period of time and, right, there’s some complexities here with the tax piece. So in your conversations with clients at YFP Planning, like does this have a role? How often does this come up? And are folks, you know, worried about some of those things that I just raised in terms of that tax piece as well as the timeline?

Kelly Reddy-Heffner: Yes. I mean, that is a long time to be, you know, in a repayment strategy. So right, we do do an analysis to see like what do the numbers look like? Often, these decisions are very emotional. 20-25 years is a long time. So we try to refocus on the factual components like what does the actual repayment look like? Like how does the payment amount per month compare if you refinance or accelerate a repayment? What is the overall forgiven amount? Sometimes, that number is quite compelling. Like if you are seeing, you know, six-figure digits of what’s forgiven, then we really do have to see like is that a viable option, despite the fact that it can be a little overwhelming to think of a 20-year time span. So yeah, we do carefully look at really all that factual data and then try to talk through the emotions behind it and what it means in terms of other things that you might be able to achieve in that timeframe. Sometimes it does make it much easier to buy your first home, to pay off something else, to be able to meet your monthly budget. Sometimes accelerating repayment is not affordable.

Tim Ulbrich: Yeah, absolutely. And I think this is a good reminder of — and many folks that I’ve talked with I can sense that sometimes, the overwhelming feeling, beyond just the number of the amount of debt they have, is that nagging feeling of like, I know there’s so many options out there, and I’m not sure I understand the differences between them and a desire to feel confident in that understanding and then making a decision that you know has evaluated other parts of the financial plan is ultimately best for their individual situation. And I want folks to not underestimate how important that feeling can be, especially with momentum and the rest of the financial plan, to confidently choose the repayment option that you know has been evaluated and is really best for your personal situation and to hopefully feel empowered and educated throughout that process as well. So Kelly, on the private side, refinancing is a topic that we talk about often on this show. It’s one of the most common questions that I get in terms of should I or should I not refinance? What should I look for in a lender? You know, what are some of the considerations in the refinance process? And I want to hit some of that because I think there’s probably many folks that are listening that maybe refinanced before the pandemic and have been excluded from this administrative forbearance or folks that have delayed refinancing and are wondering like, when might I pull that trigger? You know, thinking about what might or might not happen in interest rates. And so I suspect the conversation around refinancing is going to heat up as we saw the activity around refinancing really at historic levels before the pandemic hit back in January and February of 2020. So first of all, Kelly, what is refinancing? Give us the definition.

Kelly Reddy-Heffner: Absolutely. And it is — the two terms consolidation and refinance are very different. They’re used interchangeably, which is not quite right. So you know, as opposed to consolidation, which is taking federal loans for convenience or to be in a position to be in income-driven repayment or to qualify for forgiveness, consolidation is taking like a bunch of federal loans and putting them into like one or two subsidized or unsubsidized. So still federal, interest rate really is not impacted. It definitely doesn’t lower the rate. It may open up other opportunities for different federal programs. Refinance is either taking your federal loans and moving them into the private sector, which is a one-way transaction. Like once you’ve moved into private, that’s it. Or you have existing private loans and you refinance them into other private loans. So very different, very different what is happening there.

Tim Ulbrich: Yeah, and I think folks are likely somewhat in this holding pattern, right? I think in terms of, as I alluded to just a couple minutes ago, like hey, I think refinancing is the play or perhaps they’ve evaluated that, but what do I do? We’ve got several months left of administrative forbearance, rates may or may not go up, there’s offers that are out there that might help minimize some of that concern. But like what might I be giving up as well? And I think that’s one of the other questions and considerations folks need to be thinking about is what is different? So it’s not identical from the federal side to the private side with refinancing. Important note here is that every private lender can be a little bit different. So you know, we’re generalizing as we’ve put them together. But what are some of those main differences or things that folks need to be looking for as they consider what might be different from what they have in the federal system versus what they’re pursuing in the private market?

Kelly Reddy-Heffner: In order to really evaluate a refinance, usually the primary objective to refinance is interest rate. So if you can get a better interest rate, that can be a compelling reason to refinance. But you’re absolutely right that there are tradeoffs to doing that. So you know, high level, I think there is a little of FOMO, like ‘Oh my gosh, interest rates are low. Are they going to go up in the next week?’ And then this becomes not a viable strategy. We have been monitoring interest rates throughout the summer, and they’ve been pretty steady. Like we’ve even seen them go down a little bit and kind of back up a bit, but pretty steady. We have seen some interesting programs or offers from private lenders where they kind of offer this 0% bridge. That was happening for a bit. In general, you know, the couple big things are with the federal loans, we have seen the protections in action. Like we know there is a very tangible like ah, that is what a federal protection means because of the CARES Act. In general, you know, will the loans be discharged? That’s a big question if something happens to someone. In the federal loan program, they are discharged for death and for disability as well. On the private side, it really depends on the lender. So that is something if we’re working with a client who’s considering a refinance, we are looking at the fine print to see what the discharge status would be. In terms of, you know, can I pay extra towards a refinanced loan or even a federal loan, the answer is usually yes in both cases where you can accelerate some repayment if that’s the appropriate strategy to take. But in general, we don’t have income-driven repayment on that refinance side. So if your income goes down, which you know, is something we hope doesn’t happen to our listeners but occasionally it does either by choice or not by choice, you know, is a job opportunity amazing and you’re willing to take a slight pay decrease? In the federal program, you can provide documentation that your income has gone down and have that income-driven repayment re-evaluated and lowered. That’s not a feature of a private loan system. So the payment is what it is.

Tim Ulbrich: And I think you articulated well there why it’s so important that folks are running the numbers, right? You mentioned the primary goal is to effectively lower the interest rate. And for many folks, that savings can be significant. If you’re talking about $150,000-$200,000+ of debt and you’re seeing a spread of 1-3%, whatever it might be, on interest rates depending on their personal situation, like that math adds up. So what I encourage folks is run the math but don’t stop there, right? Be thinking about these other things. You mentioned some tangible examples we have seen are the benefits of the federal program, the CARES Act being one. Just last week or it might have been the week before, the announcement from the Department of Education about over $5 billion being allocated to those that have a total or permanent disability in terms of loan forgiveness. So again, another tangible benefit and them improving the ease of that forgiveness process for those that have a total and permanent disability. So there are differences, and the savings may be there and often that may make sense, but just make sure you’re also considering some of these other factors as well. So we have I think outlined fairly well that navigating student loan repayment certainly on your own given the factors that we’ve discussed can feel overwhelming. I’ve been there, and I think aside from exit counseling that folks get, there really isn’t a whole lot of assistance in figuring out which repayment option is going to be best for your personal situation. And therefore, folks might get defaulted into the standard 10-year repayment plan or wonder, am I in the best repayment plan for my personal situation? And that is why we developed an offer a custom one-on-one student loan analysis. In this service, the goal is that we’re working one-on-one with you to lay out all your options so that you can confidently choose a repayment plan that hopefully will save you the most money and that ultimately aligns with other financial goals. And so in doing this, you’ll work with one of our YFP Planning Certified Financial Planners to inventory your loans, both federal and private, evaluate eligible repayment options, including the ones we’ve discussed here today, student loan forgiveness, income-driven repayment, private refinancing, and then ultimately try to determine what that best repayment strategy is for your situation. So Kelly, you are the lead for us on conducting these one-on-one student loan analyses. I know it’s something you also do frequently with clients of YFP Planning that are participating in our comprehensive planning services. So talk to us a little bit more about this service, the student loan analysis, and what folks can expect.

Kelly Reddy-Heffner: Well, especially now, as there are so many unknowns, we do struggle with like what is the next best step? And I think we do — I hope — help clients get some clarity. Like sometimes there are options and knowns beyond what we think are available. So I’d say one of the biggest objectives of doing the analysis is putting confidence in a next step. So this is the information we have available. So I think it is an ideal option for any borrower who wants to have a strategy in place so that they can make other good decisions about the rest of their financial plan. So it is an ideal opportunity to build some confidence and to say like, ‘OK, here are my various options.’ You know, we look at within the confines of the federal program what the options are in terms of income-driven repayment, which payment plan might be best, do a comparable with refinancing, look at non-PSLF forgiveness, and really put out the facts of these are the options that are available and help talk through what is best for that individual client and that household. It is not ideal for folks who have already refinanced everything into the private sector because already, the options are significantly more limited. You’re in the private sector, you could potentially refinance again for a lower rate — and I think that is a question we get a fair amount, like can I refinance again? It is different from a home mortgage refi. The process is a little bit different. It does have a credit component, though. You know, you are getting a hard credit check if you refinance. So that can have an impact, but you know, there’s not closing costs. It is a little different. So yeah, you know, if you can get a better rate, it’s certainly worth looking into. But for those clients, I feel like we best help people who still have some federal and are deciding like what is that next best step.

Tim Ulbrich: Yeah, I agree, Kelly. I think for — you mentioned, you know, the service is not necessarily for everyone. So folks that have already refinanced and because there is less options at that point — you mentioned it is a one-way street earlier. But for many folks I suspect who are, ‘Hey, I’ve still got federal loans. I’m wondering about forgiveness, PSLF or non-PSLF,’ or those that do think PSLF is the path forward, do I have all my ducks in a row? What might be some of the strategies or things that I’m thinking about for optimizing that strategy? Or if I’m not pursuing Public Service Loan Forgiveness, does non-PSLF forgiveness make sense if I work for a non-qualifying employer? Or might I evaluate that refinancing? And how do I do some of that analysis and consider some of the things one might be giving up by making that move from the federal to the private. And so for folks listening, if you’re ready to get help in mapping out your plan, I think now is a great time as we, again, head into this home stretch on the last several months before that administrative forbearance ends, you can go over to YourFinancialPharmacist.com/SLA, where you can get more information about the service, get a little bit more information about Kelly, what’s included in the service, what the service costs, and then you can book that right there as well and get on Kelly’s calendar. Again, that’s YourFinancialPharmacist.com/SLA. Kelly, really appreciate your time and your expertise and the contribution that you made to the community on the show today.

Kelly Reddy-Heffner: Thank you. I’m excited for listeners to really feel like they can make that forward progress and have some confidence in a decision. So I know sometimes, especially during the last two years, we have that feeling of being in a little bit of a holding pattern. But use the time wisely. Prepared is a strategy. So never underestimate the opportunity of having those ducks in a row.

Tim Ulbrich: Great advice. And certainly last but not least, if you’ve been listening to the show for a while and you like what you’ve heard, please do us a favor. If you could leave a rating and review on Apple Podcasts or wherever you listen to the show, that would help other pharmacy professionals find this show. And if you have a question that you would like us to answer or feature on an upcoming episode, you can reach out to us at [email protected]. Have a great rest of your day.

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YFP 219: How to Negotiate Your Salary and Benefits as a Pharmacist

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How to Negotiate Your Salary and Benefits as a Pharmacist

Alex Barker talks about why pharmacists should negotiate their salary and benefits, benefits of negotiation, and two practical negotiation tips.

About Today’s Guest

Alex Barker helps pharmacists create fulfilling careers and lives. For a time, he was a burned-out clinical pharmacy specialist. Now, he is the Founder and Head Coach at TheHappyPharmD.com where, alongside his team, he creates classes to help over 750 pharmacists find and create new career paths. The Happy PharmD’s goal is to help 500 pharmacists transition into new jobs by January 1st, 2022.

He recently published the book Indispensable: The Prescription for a Fulfilling Pharmacy Career. When he’s not working with pharmacists, he spends time with his wife, Megan, and two lovely girls, Izzie and Addie.

Summary

Alex Barker, the Founder of The Happy PharmD, is back on the show discussing salary and benefits negotiation. He talks about why pharmacists should negotiate their salary and benefits, the benefits of negotiation, and two specific tips that you can use when having those difficult conversations with your supervisor. Alex also shares some insight from his e-book, “A Pharmacist’s Guide to Salary and Benefit Negotiation.”

Through the discussion, Alex breaks down the four benefits of negotiating. Your salary determines your future. Your salary can control, to some extent, when you retire. Your benefits depend on negotiation. Lastly, your salary now affects salary negotiations at future jobs.

Alex walks through some of the eight steps for negotiating salary and benefits listed in the guide. Pharmacists should do their research and document it. Research salary and benefits internally, externally, regionally, and for specific skills. Alex also suggests that pharmacists discuss compensation after the offer is made, and once you receive the offer, you do not have to act right away. Alex shares a typical response for negotiating a higher salary. In his example, the candidate expresses thanks to the hiring manager for the offer then takes some time to reflect. With some time to evaluate, you will be better able to discuss salary and benefits that you feel you are worth, based on your experience and the value that you add to the company.

In closing, Tim Ulbrich shares two real-life examples from the YFP Facebook Group, and Alex provides his advice and guidance for each.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Alex, welcome back to the show.

Alex Barker: Tim, it’s always a joy being with you, buddy. Thanks for having me again.

Tim Ulbrich: Absolutely. Glad to have you back as this time, we’re going to dig into salary, negotiation, as well as other things to negotiate beyond salary. But this is a good segue from our last conversation on Episode 205, not that long ago, where we talked about the pharmacy job market and considering the current state of the market, which we’ve talked about before, Alex, the Bureau of Labor Statistics projecting a decrease of about 10,000 pharmacist positions between 2019-2029. Some folks may hear that data point, may have listened to our previous conversation and be thinking, negotiation? What negotiation? Is that even possible? So let’s start there, Alex. Why should someone listening, you know, resist the urge to throw their hands up and say, ‘Not worth trying,’ right, considering the supply and demand changes that we’ve been seeing over the last several years. Is this even a relevant topic?

Alex Barker: I think it is. We put a post the other — a few months ago now on LinkedIn asking, ‘Do you feel comfortable negotiating your role, salary, or benefits?’ And obviously it was just geared at pharmacists. Vast majority of people said, ‘Absolutely not. No way.’ And I don’t think I blame them. You know, I’m actually working on as of this recording, we’re working on our Quarter 2 job market report. And things have kind of taken a downward turn, and I think it’s because of the COVID pandemic kind of wrapping up the hiring sequence as I think we all were predicting. And I think the tone of the market, particularly with newer grads and students is, ‘I’ll just take anything. Please just give me anything.’ And you know, you’ve been at a couple of universities, you’ve taught at different places. I don’t believe salary negotiation is taught.

Tim Ulbrich: That’s correct.

Alex Barker: Yeah. And there’s also this mindset of a residency is a major career pathway. And that role is non-negotiable in most cases. Most people I think enter the market now with this expectation of the market’s tough, so I’m just going to take whatever I can get. And whatever it is, I’m going to be happy because I’ll be able to pay off my loans, I’ll not be indebted, I don’t have to claim bankruptcy, you know, whatever the worst possible case scenario people go through in their minds. Why is negotiating important? It’s because you have value. And the pharmacy market is — yes, it’s in flux. But you have a doctorate or the equivalent of a doctorate for those BS pharms listening. And you are going to provide a lot of value to a company when you are offered a job. And you should be able to negotiate for the things that you want. And recognize as well that this is a long-term game. This is not, ‘I need to demand for the things that I want.’ Having this discussion in the beginning when you’re offered a position is laying the seeds for the things that you want for your career in the future.

Tim Ulbrich: That’s right. That’s right. Alex, I think that’s spot-on, right? You’re laying the seeds for what lies ahead, you’re initiating some of this conversation, the expectations. And we’re going to talk about other reasons and benefits to negotiation. Alex, I remember — I’m going to date myself a little bit here but 2008, graduated from pharmacy school, took a residency position, which as you mentioned, was non-negotiable, for a whopping $31,000. And thankfully, salaries have come up a little bit since then in residency, although not a whole lot. And then took that first position for an even $100,000. And it’s interesting, you know, here, we’re talking about 2021. You mentioned the Q2 report coming out here soon, which is showing that continued trend. Well, this was a different market in 2009. And I did have leverage to negotiate. But I didn’t know that. I wasn’t comfortable with that. I didn’t have the school, I didn’t have the skills, I didn’t have the tools, I didn’t have the mentorship, right? And I was excited. It was the first offer. The answer is yes. But as we’ll talk about here in a moment, remember, this is the starting point. And this is so important. It’s not just about the dollars. It could be benefits, it could be some of the confidence, the self-worth, the positioning, the value that you’re bringing to the organization. So some of these I think are very tangible monetary benefits and some of them may not be tangible monetary but very important, in some cases more important. Alex, you mentioned the LinkedIn post, right, and the answer was, ‘No, like I’m not comfortable.’ And I think this topic is one that folks either say, ‘You know what, I’m not comfortable.’ Maybe it makes folks a little bit uneasy. Maybe they squirm when they think about that conversation with their supervisor. It could be awkward, it could be overwhelming. Why is that the case? Is this unique to pharmacy? Or is this just something overall? Like we’re not comfortable, fear of rejection, lack of self-confidence, like what’s the why behind that?

Alex Barker: All of the above, I think. In pharmacy in particular, if you were to do an analysis of our personality as a profession, we would be the people that like avoiding conflict. We would like to be the people who everyone’s on the same team, we’re all working together towards the same goal. And so conflict is not something we’re typically taught in our education, conflict resolution, conflict management. But by and large, I think in most western societies, honestly, our value is placed on a dollar amount. And getting told that you make a certain amount is a reflection of self-worth and to change that, to think about negotiating for that self-worth when you may not feel like you are worth that, is a problem. So if you don’t feel confident in your ability to do that, then you’re probably not going to take actions towards that end. In fact, there’s quite a bit of growing research on this concept called professional identity in pharmacy in that pharmacists have a weak professional identity, which essentially means that we don’t tie ourselves strongly to the identity of a pharmacist. This has all sorts of consequences for our profession. One of the main ones — don’t want to deviate too much on this — but is the fact that our role is changing. You know, pharmacy, we’re trying to change our perception of who we are and what we do. And unfortunately, this just creates confusion for us as pharmacists. What do we do? What is our value? Are we just dispensing automatons? Or are we prescribers? We don’t know. And because we don’t know, that creates a lack of confidence in what we do. And that lack of confidence translates into, again, what we kind of talked about earlier, we’ll just take whatever we can get. I can relate to your story, by the way. I did the same exact thing. I remember the phone call. I was working a clinic, they gave me the call, and they said, “We’d like to offer you the position.” “Oh! Well, OK. Great.”

Tim Ulbrich: Yes.

Alex Barker: Yeah, tell me more. “Well, it’s $115,000 a year.” And dead silence on my end. “Oh, yeah. Of course.” You know? I’ll take three times my salary. OK, what’s next?

Tim Ulbrich: Yeah.

Alex Barker: It’s so foolish, but if you’re not informed, if you’re not trained to kind of handle that situation, why wouldn’t you take that?

Tim Ulbrich: Yeah, and I think, you know, one of the thoughts that comes to mind, Alex, as you were just talking about — of course we’re overgeneralizing — but when we talk about some of the personality of a pharmacist or folks that may not be comfortable negotiating, I would have put myself in that bucket, especially early in my career. I think we need to be careful that we’re not pursuing an outcome of avoiding conflict or avoiding an uncomfortable conversation because while that may feel OK in the moment that you don’t have to be in that uncomfortable conversation, if it leads to resentment down the road or you feel like you’re undervalued, that can have significant ramifications, right? We’re not just talking anymore about dollars and am I making a fair market value? But do I feel valued as a part of this organization and do I feel like I’m advocating for myself? I think that’s a part of negotiation that often gets overlooked for a variety of reasons of which we probably all individually struggle with for different reasons of which is a different discussion but I think is important that we really, honestly evaluate and reflect of why might we be avoiding this conversation? What’s behind that, right? Let’s peel back the layers of the onion a little bit to inquire further. Alex, so your guide, “A Pharmacist’s Guide to Salary and Benefit Negotiation,” and folks that are interested in receiving that guide, 29-page e-guide that you put together, great resource — we’re going to hit some of the high points here on this episode, certainly not go into the full details of that — folks can get a copy of that for free by sending an email to [email protected]. Again, that’s [email protected]. Let him know you listened to this episode, get a copy of that. One of the things you start out with, Alex, is four benefits of negotiating. I think some of these are obvious but some maybe not as obvious. And we’ve alluded to a couple of these. But talk to us about what are these benefits of negotiating, laying the groundwork for why we think this is important before we get into the strategy.

Alex Barker: Yeah. You’re going to love them because you’re Mr. Money Man. So your salary, it determines future raises. Right?

Tim Ulbrich: Yep.

Alex Barker: If you start off at $100,000 versus $110,000, every raise you get thereafter will be more if you are at $110,000. This is obvious. But over time —

Tim Ulbrich: Compound effects.

Alex Barker: Exactly.

Tim Ulbrich: Compound effect of that.

Alex Barker: Yeah. It’s huge. You know, I remember starting that job at $115,000. And I think the year before I quit, it rose to $127,000. Now I worked at a very bureaucratic, very rule-driven, union-driven organization. So this may not be as negotiable in terms of salary as other organizations. But whatever you start with often determines the future. So if you’re thinking about a career transition, if it’s your first job, you need to understand you have to negotiate — you should negotiate because it’s going to determine what you get paid in the future. Depending on whatever strategy you take, the next reason is that your salary often determines when you retire. You know, I know you’ve talked about different retirement strategies on your podcast a lot. I’m in your community on Facebook and I see a few people wanting to follow the FIRE movement. So this may not be relevant, depending on how I guess driven you are to retire early versus later. But obviously a higher salary, if you decide early on in your career to save the majority of that, can help you retire earlier if you choose to. And one of the things that I think most people look at — because when you think about I guess like the salary aspect of pharmacy, there’s a lot of hullabaloo about it. I polled 500 people on LinkedIn, and over 76% I think said that they think salaries are decreasing. Now the data is actually contrary to that. The data actually suggests there’s a very small increase, if not over time flattening, of our salary. But the rumors obviously are more popular than data. A lot of people focus on it, but benefits matter too. If you don’t negotiate for those benefits, you could be missing out on some really just life-changing and lifestyle things. One of the best things I ever did during my pharmacist career working as a clinician was getting the change to the four-day work week.

Tim Ulbrich: I remember you doing that.

Alex Barker: Yeah, back when you and I both were working day jobs.

Tim Ulbrich: Yeah, I couldn’t believe you pulled that off, actually, because you know, within the organization — that’s challenging if there’s not precedent for it.

Alex Barker: Absolutely. Yeah, so just full disclosure, I used to work at the Veteran Affairs. I don’t represent them obviously now. Never did, really, before online. But I loved the three-day work week. And it just felt like even though the days were longer, yes, and I did miss out on quality time in the evening with my kids, that three-day weekend was just so perfect. It’s so wonderful. Negotiating for your benefits can just make a huge lifestyle difference. And I know for me personally, when I had that, it made me significantly happier about what I was doing at my day job. And then lastly, the main reason why you want to do this is that this job that you take, whatever it is, it will probably not be your last and final job. All trends right now point to people changing jobs more frequently than ever before.

Tim Ulbrich: That’s right.

Alex Barker: And whatever salary you end up taking at this next job likely will influence the next job salary that you take because you want to use that, whatever your previous salary was, as evidence for your value, the contributions you make at your company, and you can use that as fodder for your next salary negotiation.

Tim Ulbrich: And Alex, so good. So you talked about four different things there: your salary determines your future, your salary determines when you retire, your benefits can depend on it, and then it affects salary negotiations at future jobs. And you know, I’m not going to get out the nerdy investment calculator, but I’ve talked about on the show before just one really tangible example beyond what this means for the income that’s coming into your bank account after taxes and all that. You know, take a simple employer match on a retirement account, right? If you’re making $110,000 because you’ve gone through a negotiation or $120,000 instead of $100,000 or $105,000, whatever that difference would be, it may not seem large. But that additional match on that benefit, you know, is going to have a compound — significant compound effect over time. And that doesn’t even account for your point, which is a really good one, you know, if you’re going to be changing jobs, which likely you’re going to be doing many times throughout your career, often your current position is the jumping point for that next position. And you’ve got typically pretty good leverage there if that organization really wants you in that role. And I’ve got a really tangible example of this when I made the transition from Northeast Ohio Medical University to my faculty role to The Ohio State University College of Pharmacy and overseeing the Master’s program in health systems pharmacy administration. At that time, I really was enjoying my role at NEOMed. I loved what I was doing. Interesting opportunity came up at Ohio State, love that institution, the people that work there. The opportunity was there, but there wasn’t really that pressing need to make that move. And you know, that’s probably one of the better strategies of negotiation is if there’s a recruitment that’s happening and you don’t necessarily have that need, obviously you’ve got some leverage. But using current position and salary obviously becomes — for me, it was and it becomes for many people — that jumping point to that new role. So it’s not just the first offer that you take that has the implications. For those that are listening, maybe they started a position five, six, seven years ago and have seen marginal increases in their salary that probably haven’t kept up with inflation, if they’re thinking ahead to that next jump, like it’s not just at the job offer. You can also negotiate while you’re along the way. And you should be having those conversations, right?

Alex Barker: Absolutely. You know, just on a quick point there, one of the reasons why I feel like a lot of people can’t negotiate or feel like they can’t is something you said previously. When they offer you the job, they want you. It means that they don’t want other people. They’ve made decisions collectively as an organization to give you the job, not someone else. This may not be true for every organization. You know, there may be some devious nature to some offers, which I know there are those kind of practices. But in general, major organizations in particular, when they give you that offer, when they say, “We want to offer you the position doing this and it’s for this much,” that means this is an offer to you, and this is where a lot of your practice negotiation strategy will come into play where you’re able to wrestle with that, hopefully it’s an offer that you love so there’s not a lot of conflict. But if you’re negotiating and what you’re asking for is reasonable, they’re going to work with you because they’ve already made the decision to commit to you. I have not heard horror stories nor actually does any research indicate that negotiation for the offer more often than not ends in the person’s offer being terminated. What happens actually more often is that offers are made to pharmacists and for whatever reason, budgetary restraints most commonly happen where the job is let through. It is not because of negotiations.

Tim Ulbrich: Yeah, I agree. And I’ve been on the other side of these conversations, Alex, in several instances. And even if, even if there’s not a huge gap in preference between candidate 1 and 2, what often happens is when that offer goes out, that organization starts to envision that person in that role and what they bring to the table, right? So they’re starting to affirm the strengths that person is bringing, the opportunities that they’re bringing, and they’re starting to see that person in that role. And there’s a risk to the organization — so if I’m offering you a position, Alex, I’m waiting for you to hear back and let’s say you try to negotiate. And if I’m the employer and I’m like, “No, no, no, we’re going to make an offer to the second person. Just we can’t budget-wise do it,” like unless that number is way out in left field, like there’s a risk I now lose both of my candidates as the employer end. So flip the script. I think this is sometimes where we’ve got a lot of self-confidence challenge and issues and obviously this is a very individualized, you know, assessment and hopefully where some good mentorship can provide value, what do you bring to the table, why are you unique for that position, how are you different from other candidates, but really great advice there. Alex, in the guide, I think it’s in Chapter 3, you start off by talking about mindset and the connection between mindset and negotiating. And you write that your strategy doesn’t just start at the negotiation table. It starts with your mindset right now. What do you mean by that?

Alex Barker: Well I think the quote that I put at the beginning of the chapter fits it perfectly. If you fail to plan, you are planning to fail. You know, a lot of people think the biggest struggle in the process of getting a new job is the application, the interview. And most people put the majority of their effort when looking for a new career in those things. And the idea of success, the idea of getting an offer and negotiations often doesn’t even come into play when making this consideration. And so in most cases from what we’ve learned from talking with thousands of pharmacists is they don’t even plan for this. There’s a lot of pessimism about our job market, there’s a lot of pretty negative analysis and posts about it, and so why would you plan for success? In their mind, I think. And if that’s the case, you know, whether you think you’re right or wrong, you’re probably right. I was thinking as you were talking about this guide, when I first made it, I did a ton of research. Not only did I help people increase their offers by thousands of dollars, but I spoke with negotiation experts. I interviewed them. I talked with hiring managers, executives, I talked to them about this issue, and I talked with them about what the best practices were, and I gathered up all this research and information. And I thought, this is really valuable, this guide. And I remember thinking, OK, well, I’m looking to see what other businesspeople are doing out there about negotiation courses, books. And I thought, I could sell this. I could legitimately sell it. And it did make a few sales but nothing near where what I had hoped. And I just learned that after talking with people and presenting this, people were like, why would I pay for this? I’m not going to be able to negotiate anything. So I was like, what? Like, there’s such a low level of mindset around this issue that people aren’t even believing that this is possible.

Tim Ulbrich: Yep.

Alex Barker: So now we just, hey, we just give it away for free because we have multiple reports of people using this guide, following the steps, and getting thousands of dollars more from the initial offer, which of course compounds over time. But this is why I feel like mindset is so important, it’s why I’m hoping that people kind of see the stories that we’ve posted online to social media and say, “OK, other people are doing it. Maybe it’s possible for me.”

Tim Ulbrich: Absolutely. And I think you do a nice job, Alex, in the resource, which is really valuable and I hope people will take a look at it, where you give some tangible strategies, eight steps to negotiate your salary and benefits. And we’re not going to talk through all eight of those. I want to hit just a few of them that I think folks can walk away with some very specific ideas and perhaps skills that they can take to those conversations that they’re going to have with their supervisors. So let’s walk through a few of these. First, Alex, is document your salary and benefit research. Tell us more about this one.

Alex Barker: Absolutely. So if you don’t know what’s going on in the salary world in pharmacy, you’ve got to get up. We’ve got a guide on our website, it’s very thorough. I recommend you check it out. But you should be doing your research in really three main areas. Internal research, meaning looking at what your company is paying people, what published information they have. External research, seeing what other companies are paying. Specific skill research, so if you have something specific to your career, residency, certification. Those are easy examples. You should understand what value that trans — how that translates into into the market. The reason why you want to document these things is because when negotiating, you want hard evidence, proof of the value of what you’re going to do for that company. Because you can’t just say in the negotiation, “We want to give you” — let’s say the hiring manager says, “We want to hire you as a clinical pharmacy specialist managing this HIV clinic. And we want to pay you $115,000.” You could just say, “Absolutely. Yes. I’ll take anything. Just give me the job.” Or what you could do is do your research. So look in the city and state and look to see what is the average pharmacist pay for that kind of job? There are of course information on our website, TheHappyPharmD.com, but there’s plenty of other resources as well like GlassDoor, Indeed, Mercer Job Salary Report.

Tim Ulbrich: Some state associations do some of this too. Not all.

Alex Barker: Absolutely.

Tim Ulbrich: Yep.

Alex Barker: Yeah. And with that, you’ll be able to tell easily like what is an average. What’s the median? What could you expect even before you are offered the position because it’s becoming less and less common now for job postings to say — particularly for professionals — what is the salary reach. You want to have that evidence so that when the offer comes, you’re able to gauge whether or not this is something that you would want. Also, if salary isn’t the thing for you, like let’s say $115,000 a year is an acceptable salary for what your life expectations are and let’s say that you know that on average, this position gets paid $120,000, well that’s $5,000 difference. You could negotiate for that. But you could also negotiate for other benefits. “Well, because I’m not getting what the average is, and the average is this, here’s what I would like to ask for in return.” This research is so critical because it can lay a solid foundation on what is true because the company cannot dispute these external resources.

Tim Ulbrich: That’s right.

Alex Barker: I mean, they can certainly say no. But they can’t dispute what evidence is collected.

Tim Ulbrich: Yeah, it’s not Alex’s made-up numbers, right? This is data. Yeah. I think too, Alex, the other thing I think about here is if I’m in a position let’s say I’m getting an offer for say $110,000 and I really think because of my research and because of x, y, and z, I really think that should be let’s say $118,000, right? And the answer is no. Now there’s some strategies for how you navigate that conversation and there’s very specific techniques that you talk about in the guide. “Never Split the Difference” is another great book that talks about some of those techniques where you’re really trying to get to that yes and it’s not just that initial no and how do you approach that. But let’s just say for the sake of this example the answer is no but you’re really interested in that position, you think it’s a good fit. I think one of the thoughts I have here is if I’m that candidate, my next follow-up is remember, we’re laying the foundation. You talked about that earlier. What can I do? Like what can I do over the next 6-12 months to get to $118,000, right? What are some of the goals that I can work towards? What are some of the opportunities? Because if I’m a hiring manager and I really like a candidate and they say, “What can I do to get to whatever that number is?” like that starts to really become the road map of the objectives for that individual and perhaps some even opportunities, depends on the organization of course, the company you work for, of what are some things that they might be able to do that either is or is not in their job description to be able to earn up to that income.

Alex Barker: Absolutely. Hopefully by that point, when the offer is given to you, you’ve asked the right questions in the interview to have a really good understanding of what the position is and where the company or the department, pharmacy department is going in particular. This is a great place for you to provide even more value during the negotiation process. One example that comes to mind was a client we worked with who was wanting to get into academia — no prior experience, no residency — and wanted to run a clinic, something that this person hadn’t done before. The offer came, and what was offered was a lot lower. And they based this on the idea that ‘Hey, you don’t have a residency, you’ve never done a position before.’ It was quite a pay cut for this person. So what this client did was brilliant. They knew that what this college was struggling with was getting new sites. This was a relatively newer school, and they were struggling with that aspect. And obviously, if you don’t have the number of rotations, you can’t get always accredited. It’s a huge problem. You can’t market your school as well, which is becoming increasingly important for colleges. So what this person was able to do was twofold. Because the offer came in, they were actually able to renegotiate their position to where they were doing more of the kind of work that this person enjoyed, which was doing more experiential education management and getting more involved in that department, talking with more people, getting more sites on board, with certain guarantees that they were able to negotiate for. And in turn, this meant less clinic time, which this person still loved. But she was a kind of pharmacist who enjoyed a large variety of tasks. So being able to negotiate in the moment, knowing the company’s priorities, being able to get more of what you want — and ultimately, she was able to negotiate a salary change as well — is a brilliant strategy. Don’t think that no means no.

Tim Ulbrich: Yep.

Alex Barker: In this case. In this case alone.

Tim Ulbrich: Alex, that too is a good example of like understand your environment. You know, I believe negotiation can apply to everyone, but understand your environment and where you may have more flexibility and leverage. So that example, an experiential education individual, there is not seven of those at a college, right? There’s typically a director of experiential education. So if I’m the department chair, I’m the dean, and I working with that person, I have some more flexibility of which is true just in that environment overall. But through things like administrative stipends, through how we split time, through other things that I’m not as concerned with like I’ve got 10 people that are in the same role and I have to have them all within this range, right? Because obviously that’s something that an employer might be thinking about. So I think understanding your environment — and I would even point to that position, that’s a really hard position to both recruit and retain. It’s one of the hardest positions to retain in a college of pharmacy is an experiential director because of the challenges and the stress that can come with it. So an experiential director is listening out there, like you’ve got leverage, right? Understand the leverage that you have. So good stuff. Alex, I want to fast forward to the offer. And again, there’s lots more in the guide. You go through eight specific strategies, but one you talk about is the offer moment, right? So this is what we’ve been waiting for, the offer is on the table, we can react to something. Talk to us about some negotiation tips after receiving an offer that folks can consider employing in their own situation.

Alex Barker: Practice, practice, practice. Practice with your spouse if you’ve got one, practice with your parents, practice with a friend. Role play the event. This is by far the best advice I can give you. It isn’t hard because most people have had a job. Most people have gone through this experience. While probably the majority of your friends and even parents are not managers and have actually done this, you can put yourself in that situation and script your response. You do not need to accept right away would be my first encouragement. You don’t need to say absolutely yes, no, or even negotiate in this moment. For me, I’m a very emotional person and so having — making decision in an emotional state often leads to not the greatest results. Hence, both probably your and my first job offer. Right? “Oh yeah, I’ll take it 3x my salary! Of course! That’s a great thing!” That was a great moment, but making that decision in that moment may not reflect really where you want to take your career. So be willing to say, “Thank you for the offer. I’m so happy to be able to have the opportunity to work with you. But I want to think about this, I want to talk with my spouse, I want to review my research and make an informed decision.” Having another call is not unexpected for people because everything they share with you about the offer — and by the way, get more than just the salary. Make sure that you understand the benefits package, make sure you understand the demands, make sure that you understand what their goals are for you in this role.

Tim Ulbrich: What you’re saying yes to, understand that.

Alex Barker: Absolutely. I think everyone has had an experience where they took on a job and didn’t realize everything that they were going to be asked to do. In fact, every time I talk about the offer with people, I often kind of get that response of, what happens when the unexpected happens? Like they tell me that I’m managing this now and I’m doing this and I’m doing this when that wasn’t a part of the offer. Well, that’s a whole other discussion. And my final recommendation to you is even when the offer is better than what you expected, still hold back your yes and ask yourself, what do I really want? Take that time before and during the offer to really consider is this everything that I want? Or is there something more can I get? Heck, even if it’s just $500 for an education fund. Something as simple as that can just make that much better and it also can create a better relationship with the team that you’re working with.

Tim Ulbrich: Yeah, and I think sometimes, Alex, you know, it’s monetary. Sometimes it’s things that are maybe not in the form of salary but could be professional development-related. It could be carved out time to work on certain initiatives or projects, for some folks it could be an administrative role that are pretty easy to create from the employer side. So you know, those are often, again, you’re setting up future opportunities and leverage and then there’s other areas you can get into like maybe they can’t — because of how that position is classified, maybe there’s limitations on salary for that position, but if you have something else like an administrative position, you’ve opened up like stipends and other things that can be different ways that they classify income. So there’s certainly some strategy here to be thinking about. But great wisdom in that recommendation of take some time to think about it, right? And express the gratitude of the offer. Express, you know, some of the interests that you have in the position. But I think that pause is incredibly important, not only to give yourself space to think about it but again, flip the script, right Alex? So if I’m hiring and I’ve got Alex applying and I’m like, ‘I’m really excited about what Alex can do for this organization,’ I’ve got the offer out there, I’m starting to envision Alex in that role. When Alex says, “Hey, Tim, really excited about the position, the company, the direction what you guys are going. I’m grateful for the offer. I really need 48 hours to think this through and really evaluate how this fits in with my goals and talk this over with my wife, think about it for our family, like now I want you more, right? Now I want you more because you’ve created that space and you’re opening up the door for me to expect a follow-up conversation. And I would encourage folks, like in that follow-up conversation, if there are things that you are genuinely excited about as well as maybe some reservations, concerns, or questions, articulating some of that, giving the space for them to talk, is going to even further open up that door for some of the negotiation. And you talk in the guide, Alex, about some strategies that folks can read up to learn more about the use of silence and mirroring and active listening and again, this is something that you can read and I think apply in practice certainly so that you’re ready for that situation. And Tim Baker and I also talked about this on Episode 166, about why negotiation is an important part of the financial plan. And we talked through some of those strategies as well. So again, folks, check out the guide. We just hit a couple of the high points. You can get a copy of that guide by sending an email to [email protected]. Again, “A Pharmacist’s Guide to Salary and Benefit Negotiation.” Alex, I want to wrap up our time with a couple of comments that we had from the Facebook group, in the YFP Facebook group. And I said, “Hey, I’m going to be recording with Alex, upcoming episode on salary negotiation, give me your thoughts.” And two really that stood out to me, one that I want to get your reaction on based on everything we just talked through, what are you hearing as why that might have been a successful negotiation and then the second one is someone who’s got some questions around some difficulties that they’re having with the negotiation process. So you up for that?

Alex Barker: Hopefully my responses are adequate. Let’s go for it.

Tim Ulbrich: Alright, here’s the first one. And this comes from someone that put in the YFP Facebook group says, “I”m a recent graduate who is hesitant to negotiate, but I’ve been with the same company for 5+ years and knew I owed it to myself to at least counter once I got the job offer to move to full-time staff pharmacist. I was able to get $250 more per hour on top of the initial offer and build a great relationship with my boss to help reach my future goals as a pharmacist. Biggest things I learned throughout this process: No. 1, it’s not offensive to ask for more. Know your worth. No. 2, the company already likes you, so don’t freak out about taking back that offer. You’re now trying to reach an agreement that works for both parties. And No. 3, my biggest selling point was that I would be saving the company time on training for the day-to-day things since I was a pharmacy tech and intern, so not having to reorient, re-onboard somebody in that role.” What are your thoughts to that, Alex?

Alex Barker: Super smart kid. I shouldn’t say kid. But just that simple having that belief that they’re worth that value and demonstrating that through evidence earned this person $5,000 more a year. You know, I don’t know how much prep this person did, and I’m sure it was stressful, as most people think negotiations are. But that little bit of effort earned him $5,000 more dollars that he would not have made had he not made the effort. I love the angle of him deepening that relationship with his manager.

Tim Ulbrich: Yes.

Alex Barker: That’s the thing. As you were talking before this example, I was actually just thinking that this kind of feels like dating all over again or like the phase before dating where you’re like, ‘Ooh, does she like me?’ You know, and your hands touch for the first time. You’re like, oh my gosh, electric jolts go up yourself and you’re like, oh my gosh, this is so, so awesome. But you don’t know if they like you. There’s definitely a misconception of yeah, they like you. They want you. And if you’re able to demonstrate with evidence, with proof, and with a strong agreement commitment to what you’re going to do for them, then they’re more than willing to likely give you what your value is.

Tim Ulbrich: Yeah.

Alex Barker: And it would be great to teach that in pharmacy school. It would be great to say, “Here’s the value of what you bring. Here’s what — for example, one pharmacist, here’s what they’re able to produce economically for a business, hospital, community pharmacy, whatever,” so that you have an understanding of it isn’t like the company is just throwing money at you and not getting anything back, right?

Tim Ulbrich: Otherwise that wouldn’t make sense. The position wouldn’t be there.

Alex Barker: Right. And salaries wouldn’t be at where they’re at if a company wasn’t making money.

Tim Ulbrich: Yep.

Alex Barker: So $5,000 in the grand scheme of things to the company is not a lot of money to keep someone happy and retained because the cost of retention is higher than probably what you think.

Tim Ulbrich: I was just going to say that, Alex. For anyone who’s listening and has worked with an organization for a period of time and know that you’re an awesome employee and ambassador of the organization, go do some research on the cost of retention and I think that will give you a lot of confidence and feeling comfortable of why and employer wants to keep a valued and key employee. It is significant, not only in the cost of time of retraining but what that means for the culture of the organization, the time that’s spent, all of those things. And it can be underestimated, as you mentioned. Alright, next one I have here is a little bit of a hey, help me out here, what should I do? So this comes, again, from the YFP Facebook group. It says, “I don’t negotiate for salary and benefits because my employer doesn’t really discuss compensation at all.”

Alex Barker: Yikes.

Tim Ulbrich: “There have been two times that I have asked for a raise because I had taken on more responsibilities, so someone else who had left, grew metsync, implement of vaccinations, other clinical services, started diabetes prevention program, etc., etc. Both times, the boss essentially said, ‘I’ll look into it.’” And goes on to share another example where boss was paying a company to do something that she had been working on and so asked, “Hey, what can I do to earn that money instead of us using that money to hire somebody externally?” That ended up of her getting some raise, not the full amount, and so the question here is how can one more effectively negotiate with someone who really doesn’t seem interested in wanting to have that conversation?

Alex Barker: Yuck. It sounds like this kind of manager is the person who sweeps problems under the rug and doesn’t want to handle conflict themselves. So that is definitely an uphill battle. I do — I sympathize with you. But here, I would say at the core of all of this, is actually a word that Tim, you used earlier: agreement. Employee is an at-will agreement between yourself and the company. You are not forced to work that job. You have the right, the choice, to make that decision. And agreements change over time. They have to because the market changes, demands change, and clearly, you — I’m assuming everything you’re saying here is true and obviously we only have one side of this story — but I’m assuming that you’ve been providing consistent value over time and you’ve had two attempts without success. So my old ID mentor used to tell me, “Two points don’t make a trend, but three do.” I think a third conversation is warranted. And I think you need to say with great certainty what your value is, what you’ve produced for the company, and what your expectations are moving forward, letting them know what you’re willing to decide if a decision isn’t made. You know, the whole ‘Let me think about it,’ or ‘Let me work on it,’ response kind of — it reminds me of my children asking me to play with them throughout the day as I work from home, you know? Like, “Dad, we want to play! Let’s play! Let’s play!” “Yeah, yeah, yeah. We’ll do it later. We’ll do it later.”

Tim Ulbrich: “We will. We will.” Yeah.

Alex Barker: And it pacifies them knowing that I’ll eventually get to it. And I do. At the end of the day, I do. I fulfill on my promise. I play with them. This person hasn’t fulfilled. And they’ve done that now twice. That’s evidence for you. Now, you need to be willing to come to a decision about what it is that you’re going to be doing should they not give you a raise. And this is hard because, you know, one of those decisions obviously is ‘I’m not going to work for you,’ or ‘I’m going to work less,’ or ‘I’m going to look for a new position.’ And you’re well within your rights to negotiate for that. There is nothing forcing you to continue working for this company. And you can point out very clearly that they have not fulfilled the request that you made previously for negotiating your salary. Hold yourself to that high standard and elevate them along with you. You know, this shouldn’t be a us v. them, right, kind of battle. It should be about hey, you’re on my side. And this is what’s happened. Here’s the value of what I think I’m worth. And how can we move forward? Before you start suggesting or demanding what your actions are, try to understand what the limitations are. Maybe they did look into it and they ran into a roadblock and they’re too afraid to tell you of what that roadblock is.

Tim Ulbrich: Yep. Yeah, and I think the lack of communication here probably — you know, we don’t know the full story — but probably can lead to resentment, just like it does in any relationship.

Alex Barker: Oh, sure.

Tim Ulbrich: Right? So I think, you know, even if the outcome isn’t desired, I think the conversation can be really valuable. This also feels — and Alex, I might be wrong — but as I look at this question again, this feels like maybe an independent environment when somebody talks about what they’ve done to grow programs, some MedSync, diabetes prevention, stepping in for another pharmacist. So back to my comment earlier about leverage, if I’m an independent owner and I have a key employee of which probably not only developed these programs but probably of which these programs depend upon to run and maybe the owner doesn’t even necessarily know how to continue them and they’ve had a good impact on the pharmacy for both patient care and bottom line, like understand the leverage, you know, that you have in this situation, not to abuse that but to understand what you have as you’re coming into the conversation to really show and communicate the value. Alex, great stuff, as always. Appreciate having you on the show again. I look forward to these episodes that we do every so often. And this one certainly didn’t disappoint for me. So thank you so much for taking the time. And again, to the listeners, make sure you get a free copy of “A Pharmacist’s Guide to Salary and Benefit Negotiation.” And you can get that by sending an email to [email protected]. Alex, thanks again.

Alex Barker: Thanks for having me.

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