2021 – Page 5 – Your Financial Pharmacist

YFP 198: What You Need to Know About the Most Recent Stimulus Bill

Posted on April 8, 2021November 2, 2022 by yfpadmin

What You Need to Know About the Most Recent Stimulus Bill

On this episode, sponsored by Insuring Income, Tim Baker and Tim Ulbrich break down the key points of the most recent $1.9 trillion stimulus package also known as the American Rescue Plan Act of 2021. Tim and Tim discuss the items that they think are the most relevant to your financial situation and plan, including the stimulus payments, the expansion of the child tax credit, the unemployment compensation and benefits, and what to make of the student loan forgiveness provisions being tax-free through the end of December of 2025.

Summary

On this episode, Tim Ulbrich and Tim Baker break down the key points of the American Rescue Plan Act of 2021 and the relevance of these key points to you and your financial plan. Tim and Tim review, in detail, the stimulus payments which many people have already received, how the total amount is calculated per tax filer or family, and the nuances and differences between this stimulus package and the two previous stimulus packages.

Tim Baker explains the new phase-out guidelines for stimulus funds in the current package, how the income ‘cliff’ could impact you, and a few ways to implement strategic financial planning to maximize your stimulus. He also breaks down the history of the child tax credit, how this package changes the way that the child tax credit benefit is applied and received, and provides a general guideline for calculating your expected child tax benefit.

Tim and Tim share about the changes and updates to the unemployment compensation and benefits as they relate to the current stimulus package. They also make some general predictions about the future of student loans and student loan forgiveness given the current impact of student loans debt on borrowers and the growing pressure from student loan holders for wide-sweeping change.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Baker, glad to have you on the show. How is everything going?

Tim Baker: Busy. Tax season is upon us, so yeah, it’s been really busy. But good. How about you, Tim?

Tim Ulbrich: Good, speaking of taxes, we’re going to come back to that topic today as we dig into the American Rescue Plan Act of 2021, also known as the most recent stimulus bill. And this of course, as our listeners already know, is the follow-up to the CARES Act from March 2020 and then the Consolidated Appropriations Act that was passed in late December of 2020. So the primary focus of these bills of course have been related to COVID-19 relief, but as we will discuss, there certainly are some broader implications here that we need to consider. And while this bill contains lots of things, many of which we’re not going to touch on today, we’re going to hit on those parts that we feel like are most relevant to the financial plan of the YFP community and to those that are listening. So Tim Baker, I’m going to put you on the hot seat here to try to break down hundreds of pages of bills as we talk about what does all of this actually mean? So give us the 10,000-foot view. What is the American Rescue Plan Act? And really, what are some of the key pieces that the bill focuses on?

Tim Baker: Yeah, when I see the numbers, Tim, I actually think they look like — it reminds me of like professional sports contracts, you know, when you first saw that first like that $100 million contract and now they’re signing ones that are $250 million. That’s kind of what it reminds me of. So the American Rescue Plan Act of 2021 was signed into law on March 11, 2021. It’s a $1.9 trillion — with a t — piece of legislation that, according to the Department of Treasury, will change the course of the pandemic and deliver immediate and direct relief to families and workers impacted by the COVID-19 crisis through no fault of their own. So this has been billed, pun intended, as one of the most progressive pieces of legislation in our history. And I think what Congress and what the president is seeing is that they’ve been — I think the numbers are like 9.5 million workers that have their lost jobs and 4 million have been out longer than a half a year or longer. So what this is really meant to do is kind of stimulate and help those that are in need. So to your point, there’s lots of things that this covers, one being like infrastructure, which we’re not even going to get into, but help with small businesses and vaccinations and testing and things like that. But I think what we try — want to do here is really kind of distill it down to what does this mean for many of the listeners that are tuning into this? And how does this affect me? And I think that’s what we’re excited to kind of dig in and jump in and talk through.

Tim Ulbrich: Yeah, and to that point, we’re going to cover three main areas: Economic Impact Payments, also known as the stimulus payments, the Child Tax Credit, which I think is really substantial in some of the changes that are forthcoming there that I think will have an impact for many pharmacists listening and their families, and then also some that may have been impacted in terms of jobs and unemployment compensation. So those are the three areas that we’re going to focus on. Again, certainly not all-encompassing of what this piece of legislation includes but the three that we feel like are most relevant to you. So Tim, let’s start with the stimulus payments as these have already started going out, probably at the time of publishing for those that are eligible, it likely has already hit their bank account. But how much are people getting? What are the phaseouts here in terms of Adjusted Gross Income? And what’s different about this round of stimulus payments?

Tim Baker: Yeah, so stimulus payments or recovery rebates, whatever you want to call them, you know, this is really, to your point, Tim, round 3. So the first one with the CARES Act was, you know, a lot of people received or the tax filer received $1,200 and $500 for dependents. And dependents was more strictly defined. And then second round, I think it was something around $600 per person or per — is what they were looking at. This is the most generous. It’s the greatest stimulus, it’s $1,400 per person. Think of it as taxpayer or spouse. But then it’s also $1,400 for dependent. So a dependent is not strictly defined — this is not just anyone under 17. This could be a college-aged 21-year-old, somebody that you actually provide for the health and welfare. But it could also be for an elderly parent. So that was one of the big things that prior bills had really kind of left out in the cold that those parents that were caring for elderly parents and now all of that is included. So it is a greater benefit in terms of total dollars. It is a better definition in terms of what it qualifies as a dependent. But the big thing that changes are the phaseouts. So — and I wouldn’t even really call them phaseouts. They’re more like cliffs. So for the phaseouts for this round — and this is going to be based on either your 2019 or 2020 tax return. So for a lot of people — and we’re seeing this on the tax side — it might be beneficial to you to kind of hold filing your taxes or not. And this is one of the areas that’s going to be a big part of this. So for a single income or single tax filer, income below $75,000 in Adjusted Gross Income, you’re going to get that full $1,400 times a spouse and dependents, etc. So if you’re a single parent and you have a dependent, you’re going to get $2,800. Now the phaseout or more likely a cliff is very narrow. So once you get to that $85,000, so $75,000-85,000, then basically that rebate or that stimulus check is gone. For married filing jointly, the number is $150,000. And then it completely phases out at $160,000. So before these phaseouts were greater. Now they’re more like a cliff. So the idea here is — this is where planning can be very important here because when we’re actually seeing this — you know, I mentioned that tax season is upon us where as we’re talking through clients, we’re saying, “Hey, this return is ready to be filed. But we’re just holding onto it until the stimulus gets figured out and then we will go ahead and file the 2020, the tax return.” And it’s just basically a planning decision to get the most benefit for that client as we’re looking at those situations.

Tim Ulbrich: Tim, I suspect we have many, many folks listening that that cliff, as you put it, which is really one of the main things that’s different here in addition to the amount of these payments, are going to be impacted because of that cliff. So if I’m someone who’s listening and 2019 and 2020, let’s say I was just above, married filing jointly let’s say for the sake of example, two dependents, so you know, if I were under that $150,000 would have been $5,600 if I’m doing my math correctly. Let’s say someone is just above that $160,000. Out of luck? It is what it is? Like what’s the strategy, if any, here for folks that are just above that cliff and that threshold of those payments?

Tim Baker: A lot of the — and we weren’t sure about this until recently — but a lot of the, with the extensions of the tax filing date, a lot of the targets or the accounts that you can also put money into like an HSA, like an IRA, have also been extended. So it might be where you shift your strategy or you’re saying, hey, I was really focused on this debt, i.e. student loans, that we know that our $0 payments with the CARES Act going until later this year. Maybe you’re trying to get ahead of that, but maybe you do shift some money into some of these other types of accounts to lower your AGI, specifically the HSA was probably the one because there’s no income limits. So these are things that you could do before you file. It’s a little bit of a circular logic because you have to — sometimes you have to get all those numbers in before you can actually figure it out, which again, it’s helpful when you’re having someone help you file your returns. So there can be some planning that you could do before you actually file. But there’s also a look ahead. So the bill basically affords people that potentially have a lower ‘21 tax year, so this year, that when they go to file in 2022 get a true-up or a credit to their taxes say in the future. So basically, the way that this was explained to me is that if you have your 2019 or 2020 return, and you’re in that phaseout, within that range, you’ll get a payout. And that’s typically direct deposit with whatever bank account that you have on, which make sure you do that. So just a message out there: Make sure your banking information is correct. We’ve had some that was incorrect, and that can take a long time to unwind. But the second checkpoint is if your 2020 AGI is less than 2019 and you filed before — so say you already filed your taxes, there is what’s called the additional payout determination date, APDD, that you could potentially — the IRS could potentially look at it and true you up if 2020 is lower than 2019. And then looking ahead to 2021, if the AGI is less than that upper threshold, the IRS will send an additional balance adjustment. So there are going to be some kind of fallbacks to make sure that the people that are in need of relief that are in and around these AGIs are going to be made whole. But there could potentially be some planning to get that money sooner.

Tim Ulbrich: Great summary. And I think what you just mentioned there highlights to me the importance of the planning, not only in the financial plan side of course, which we have been adamant about promoting the value of it and what our planning team does but also on the tax side. I mean, for that reason right there, if you look at someone who may be in this situation, what’s ahead for 2021, what could be done from a planning tax perspective with these numbers in mind as they look ahead to the year. So for folks that are interested in that service and working with our tax professional, working with our financial planning team, you can head on over to YFPPlanning.com and schedule a discovery call.

Tim Baker: And I would just say as a note to this, like this could be really where you are, if you have any control over things like bonuses or unpaid leave and things like this, you know, the planning I think potentially associated with this if you have a young family and you could potentially take FMLA or things like that, these are real-life things that it might not be worth you making that additional money to actually spend that time at home with your family. And that’s the impact of this is if you do a little bit of planning, you can get a really greater benefit that’s really even outside of the numbers of just the dollars and cents, so being paid to stay home in some way.

Tim Ulbrich: So Tim, you mentioned a good PR campaign for the IRS, make sure you have direct deposit set up. Make sure all that’s good.

Tim Baker: Yeah.

Tim Ulbrich: But if someone’s listening, they think they should have received a payment and they haven’t yet gotten one, what’s the strategy here?

Tim Baker: Yeah, just like anything tax-related, I put the heaviest weight on the IRS.gov. So if you go to www.IRS.gov/coronavirus/get-my-payment — and we can put this in the notes of the, you know, you should be able to see kind of the status and what that looks like. So the IRS — and you could probably just Google “IRS stimulus check,” and you’ll get this link and that basically will direct you in what you need to do.

Tim Ulbrich: Tim, the other thing that comes to mind here is, you know, if I’m listening today, I’ve received perhaps a previous stimulus payment in Round 1 or 2 that maybe I’ve put in a savings account, it’s still sitting around or it might have been added too here in Round 3, I think it’s a good time to think about what are some considerations in the event of an unexpected windfall? So of course, assuming someone doesn’t have a short-term need for these dollars, gap of employment, some type of other need, how do you think through this in terms of OK, there’s dollars here now that perhaps weren’t planning on seeing those dollars, and the options of how somebody can best allocate those dollars to their financial plan?

Tim Baker: Yeah, so I’m a big, big proponent of assigning kind of a purpose for like inflows. So you know, like with our business, Tim, like we get profit distributions from the business, like I have a set purpose for that. And it changes from time to time, but I know before the money comes in like what’s that for. So you know, for a lot of us — and again, if we rewind to 12 months ago when everything started to go down and we were starting to see job loss and things like that, you’re like, whoa, OK, this is why we have that emergency fund. And for a lot of people, that can be tough to swallow, especially because where interest rates are right now, you’re not being rewarded as a saver. You know, you’re more rewarded as a borrower for anything just because rates are so, so low. So you know, to me, it’s really getting comfortable with OK, if there was a catastrophic loss like me or my spouse can’t work and we don’t necessarily have the means to generate income quickly, just making sure that that is on point, the emergency fund is really important. But it can be a little bit of a double-edged sword because sometimes we get people that come and work with us and they have $120,000 in the bank and you’re thinking like, oh, that’s a good problem to have. And it is. But it’s a problem nonetheless. So to me, it’s really about once you feel comfortable with those cash reserves is then getting that money into the market. Now right now, one of the things that was not included in this, there was no RMD component to the bill. So you’re thinking like, OK, what’s an RMD. An RMD is Required Minimum Distribution. So once you get to a certain age — and I think they’ve recently changed this, but it was 70.5 — but once you get to a certain age, the IRS is like, “Hey, Tim Ulbrich, remember all that money you squirreled away in your 401k and you haven’t paid any taxes on it? Well now, we’re demanding, we’re requiring you to distribute some of that to yourself that you pay taxes on.” So they didn’t put anything in the bill with this because to be honest, those types of people are not really in need. It’s like, OK, you have all this money squirreled away and you don’t need it to live? Like there’s no reason for a stimulus or some support there. So to me, it’s really about getting the money into the market in a way — so that can be an HSA, it could be an IRA, that could be a brokerage account. And because of the way that rates are, you know, it’s getting invested, or it could be actually looking at something that is more life planning-related. So I’ve had clients recently that are pulling money from potential retirement accounts to do something for their family, which is like a vacation home, a cabin in the woods, that they’re asking me is this crazy? And I’m like, no, not really, because again, this is a use asset that you’re going to be able to rent out, you’re going to be able to enjoy with your family. You’re kind of trading one asset for another, and we’re doing it in a way that kind of minimizes the penalty and the impact. But things like that is like getting creative. And one of the things that you could do, Tim, is you could just stick this money into a checking account and it really does nothing for you. It doesn’t enhance anything about your life or your future plan. And that could be problematic as well.

Tim Ulbrich: And I think this is a timely topic, Tim. I’m thinking of folks that not only have received a windfall through like a stimulus but also may — I’m assuming many listening are still in this time period where they’re in administrative forbearance on their student loans. So dollars that were otherwise being put towards debt that maybe they’re not making those payments, obviously individual to everyone’s situation. Here, there’s also additional dollars. And I think this really highlights to me the benefit of you have a plan in place, you’ve been intentional, you think about the goals. And when that windfall happens, when something happens like you don’t have to make student loan payments, you’re able to quickly identify and direct where those dollars are going to go because you’ve already established the goals and the plan to support those goals.

Tim Baker: Yeah, and I think it goes back to the planning of — in a lot of ways, planning can start with us putting out fires, so to speak. But then it can really evolve to challenging the client to think outside of what is normal, what is expected. And case in point is like everyone thinks — a lot of people think, oh, I have to work until I’m 60 or 65. I’m like, well, do you? And again, this is potentially something that we want to challenge clients on and say like, “OK, we have resources that are here that we can direct in a way that, again, you feel that you’re living a wealthy life both today but then in the future.” I think going from that scarcity mindset to more of an abundance mindset and challenge the client to push their planning in a new direction I think is important too.

Tim Ulbrich: So let’s shift gears to the child tax credit. I think this one has made a significant splash as a part of this bill. Somewhat I guess difficult just to understand exactly what is changing, what’s going to be different, who qualifies, who doesn’t. But I suspect listening are going to be interested in watching this unfold to understand how this impacts them and their personal situation. So child tax credit, tell us a little bit more, Tim, about what’s included in the American Rescue Plan as it relates to the expansion of the existing child tax credit that we have.

Tim Baker: Yeah, and this actually was a tax credit that was expanded in the Tax Cut and Jobs Act under the Trump administration. So back in the day, it was you had a child and it was $1,000 credit. Now before, we used to get exemptions on the tax return and those have gone away. But one of the things that the Tax Cut and Jobs Act did is that it changed the credit, it doubled it from $1,000 to $2,000. And then it really expanded the phaseouts. So at a baseline today, if you have a child, you get a tax credit of $2,000 and that doesn’t phase out until $200,000 for a single taxpayer and doesn’t phase out until $400,000 for a married couple filing jointly. So it’s already a lot more generous. And then with this extra temporary provision as part of the American Rescue Plan, it actually increases more. So the credit amount has been increased so it goes from $2,000 to $3,600 for children under the age of 6. And that’s by the end of the tax year. So I think Olivia turns — I think — Olivia turns 7 this year, so I’m going to be over that. But then it does go to $3,000 for other children under the age of 18 by the end of the year. The example here would be if you have three kids, 2 years old, 4 years old and 8 years old, previously that would have been a flat $6,000 credit. So $2,000 times each kid, so $2,000, $2,000, $2,000 would be the $6,000 credit. Now the credit would actually be $10,200. So you get the full credit for your 2-year-old, $3,600, a full credit for your 4-year-old, which would be $3,600, and then $3,000 for your 8-year-old because you’re above the 6-year-old threshold. So that would be a total of $10,200. So for those of you that have lots of kids — Tim Ulbrich — this could potentially be a big benefit. So the other big part of this is that the scope has been expanded so children 17 years old and younger as opposed to 16 years old. So it gives you an extra year. Now, the other things it does is it follows the same phaseouts as the recovery rebate, as the stimulus check. So again, from a rebate perspective and from a child tax perspective, for married filing jointly, that $150,000-160,000 is critical. And finally, the one big thing that it does and that I want to go through the advanced payments really quick, but it’s now fully refundable. So non-refundable tax credits, Tim, basically what that would mean is let’s pretend at the end of day, you have a $10,000 tax bill. But then you have $10,000 of fully refundable, so that would basically, it would zero out your tax bill. If you had $12,000 of a refundable tax credit, you would actually get $2,000 back. But if you had $12,000 of a non-refundable tax credit, it would just zero it out. So for the IRS, the tax credits are the most generous in terms of credit versus deduction. But a fully refundable credit is even better because that actually sends money your way versus this is zeroing out your balance. So that’s really important.

Tim Ulbrich: Tim, I want to rewind and make sure I understood correctly — and correct me if I’m wrong. So they are looking at when we talk about the phaseouts, they’re looking at 2020 income in terms of AGI?

Tim Baker: It’s going to be whatever’s on file.

Tim Ulbrich: Whatever’s on file, OK.

Tim Baker: Yeah, so again, this is one of the things where you’re — if your 2020 income was higher than 2019, you know, especially if it’s within that threshold, if you’re filing your taxes and that disqualifies you, you want to make sure that you put a pin in that and not file. And that’s just a little bit of planning. Now, if it has gone down because of the pandemic and say you made $180,000 as a family and this year, you’re going to be making $145,000-150,000, then absolutely get that tax return filed and get the benefit of both the stimulus checks but also the child tax credit.

Tim Ulbrich: Gotcha. And if I understand correctly before we go onto the advanced payments and how these are going to be distributed or at least what we think they will be as of now, the phaseouts — so you mentioned that $200,000/$400,000 on the existing tax credit of $2,000. And then you mentioned the phaseouts of income here that also mirror what we saw in the stimulus payments. That is for the bonus amount, correct? So from what is going $2,000 to $3,000 or $2,000 to $3,6000?

Tim Baker: Yeah, that’s right. So you have the baseline amount that’s the what’s part of the Tax Cut and Jobs Act. And then yeah, this would be the — it’s called the extra temporary benefit.

Tim Ulbrich: OK.

Tim Baker: So yeah, that’s right.

Tim Ulbrich: And so for those that are listening like I was when I read this, like my goodness, just tell me what the number is please. So there’s a good calculator I found on Kiplinger.com we’ll link to in the show notes where you can enter in AGI, kids that are under 6, kids that are above 6, and it will project out what that payment will be. But of course, again, I think working with somebody and thinking about some of the strategy side of this can be really helpful as well. So Tim, how will this be paid out? Talk to us about the advance payments of credit and ultimately at least what the IRS is thinking right now, although to be fair to the IRS, they’re also in the midst of tax season, of course we have an extension to that as well. So I think there’s going to be further guidance coming in this area. But what at this point are we expecting?

Tim Baker: Yes, this is kind of a nuanced with this particular part of the bill is that this is actually going to paid out almost like a stimulus check versus like a credit, which you typically don’t see with this type of legislation. So you’ll likely get half of the credit paid out on monthly checks beginning in July. And I think one of the — I might have said it was based on the ‘19, but it actually might be based on 2020 regardless because the payout is going to start in 2021, in the summer. So this might be where it is tacked on to the 2020 versus ‘19. But another example, your AGI is under the $150,000, you have a child under the age of 6, the credit, the total child tax credit would be $3,600. And you would get basically $300, so $300 per month or $1,800 basically between July and December. So the idea is they want to try to get more money into people’s hands and then the rest of that, the other $1,800 would be when you file your 2021 taxes. So now, if you look at the benefit, when you stack it up, in other years that $2,000 credit, which we would just get basically at tax time, it goes from $2,000 to $3,600 and then they divide up half of it is coming to you in check form between July and December and the other half at tax time. That’s the big thing. And again, this is going to be — to clarify from what I said before — this is going to be for 2020, your 2020 taxes, and then basically pay out the rest of the year and then the credit or the true-up would be in 2021 when you file your 2020 taxes. So clear as mud.

Tim Ulbrich: And as I understand it, there’s going to be a portal where folks can enter in information, update it, so somebody that says, “Hey, Tim and Tim, we’re having a baby in 2021 will we be able to update that information?” or if payments go out without updated information that then essentially there would be a true-up when they go to complete that 2021 return.

Tim Baker: That’s correct. Yeah, the idea is that at the end of it, you know, if you filed in subsequent years and you’re in the following year that what the IRS or what the government is trying to do is make sure that you get those dollars that you wouldn’t have otherwise because of yeah. So from a behavioral perspective, it’s going to be interesting because, again, before this was all just kind of figuring out on the wash at tax time, but now you’re actually going to see people starting to receive checks throughout the course of the year, which is, again, a little bit different than what we’re typically used to outside of these bills that come around the economy starts to tank.

Tim Ulbrich: And I think the other thing, Tim, here that’s interesting and certainly we’ll keep the audience up-to-date for folks that are watching this as well is nothing has been decided yet, but my understanding is there are some policymakers that are considering, you know, is this expanded credit something that should become permanent? And so you know, obviously that has implications beyond what we’re talking about here but could be significant to many folks in terms of what that means for their financial plan. So that’s the child tax credit, as you said, clear as mud. So the last piece we want to briefly touch on is unemployment compensation. So we obviously know some of the challenges you referenced early on, Tim, in terms of some of the job loss. We suspect that some listening in terms of their pharmacy positions may have or are currently facing a situation of unemployment or a spouse or significant other, so I think this is noteworthy. What do we see in the American Rescue Plan Act as it relates to the unemployment compensation?

Tim Baker: Yeah, so the good part about this is that it’s been extended. So one of the big headlines in and around before they signed this bill into law and they were going back and forth between the House and the Senate was that, hey, these unemployment benefits were expiring. So typically that’s the beauty of deadlines, right? So the pandemic unemployment assistance, these benefits were set to expire March 14. They’ve been extended until September 6. So if you fall under that bucket, you’ll have a few more months of relief. And then the other big thing that is important to note that is the federal pandemic emergency unemployment piece, this is the additional check amounts. So you have the state benefits, so the state will pay you, you know, $500 a week for unemployment. But then what the federal government did is they added another $300 per week. So this has also been extended, which is important because there’s some states that the way they calculate their unemployment, it’s tough to live off of or survive. So these are the big things. And then the other thing that happens, happened, is that the first $10,200 of unemployment is tax-free. So what this means is that for per person, so if I’m unemployed, the first $10,200 of unemployment compensation received in 2020 will be tax-free. So the AGI must be under $150,000 AGI. So that’s the number you keep seeing. And this is all filing statuses. So it doesn’t matter if you’re single or married filing jointly. And this is a true cliff. So if you make $150,001 and you had unemployment, that unemployment will be taxed. If it’s just under that, then that will be tax-free. So this is a true cliff, there’s no phaseout whatsoever. So again, if you, you know, did file for unemployment and you received compensation, this will be another thing to take a look at to make sure that you’re under that because that could thousands of dollars in terms of your tax liability.

Tim Ulbrich: Tim, the last piece I wanted to ask you about, it certainly did not make as much of a splash in the news as did the stimulus components, the tax credits, or the unemployment compensation, but there was some news that came out related to a loan forgiveness that I suspect some of our listeners are trying to figure out does this mean, if anything, for my own personal loan situation? So specifically related to what we often talk about, Non-Public Service Loan Forgiveness and the tax-free component, tell us about the change here as it relates to loan forgiveness and what we saw in the American Rescue Plan Act.

Tim Baker: Yeah, you know, the big question that a lot of people were saying is like, what’s the loan forgiveness in the bill? And there really wasn’t much in there. And I think a lot of people think that this could be potentially a precursor to what President Biden wants to do in his tax bill. But the big thing that did come out is that it does include a discharge of student debt as taxable income for both federal and private loans. But this debt discharge has to occur between the years 2021 and 2025. So as most people know with PSLF, you know, if I am in that program and I do my 120 payments over 10 years and I have $60,000 that’s forgiven, because of that program, that $60,000 is not viewed as taxable income. But if I’m in a non-PSLF forgiveness option and I do that for 20 or 25 years, that’s $60,000 is then reported as taxable income in the year of forgiveness. So if I make $100,000 and that year I get $60,000 forgiven, it’s as if I earned $160,000 that year. So this is one of the things that they added. Now, for a lot of the non-PSLF forgiveness strategies, some of these won’t even become due until like later in this decade. So it doesn’t really move the needle much.

Tim Ulbrich: Yep.

Tim Baker: I think what this is really trying to address are you get excited or I’ll get excited sometimes when I see like oh, there was student debt forgiven. But it was a lot of these like for-profit schools that kind of misled borrowers and things — I think it’s really trying to address those people that have been forgiven, which are very, very small percentage of people out there that through legislation that they’ve been forgiven and they’re not going to be taxed as if they received that income. So very, very, very minimal in terms of what came out from the student loan borrower. Now President Biden has indicated a willingness to kind of do something here with student loans. I’ve had people that I’ve talked to, prospective clients who are saying, “Hey, I’m trying to figure out what he’s going to do.” I think what President Biden wants to do is have some type of bipartisan legislation and not use the executive order. I know Democrats are calling anywhere from they want $30,000-50,000 — I mean, you have some that are saying the whole, all of it. But typically more moderate Democrats are saying $30,000-50,000. President Biden I think has expressed a willingness to potentially the executive order to do $10,000 per borrower. But who knows, Tim?

Tim Ulbrich: You don’t have a direct line to Biden? I mean, what’s the problem?

Tim Baker: I don’t. I mean, he is an Eagles fan, as I am being from Delaware originally. So we’ve got that going. But nope, I don’t have the direct line to Biden, unfortunately.

Tim Ulbrich: So am I understanding this correctly, Tim, that this is in part potentially setting up tax-free forgiveness if something were to move in that area? So if this window of time, 2021 up through end of 2025, so let’s fast forward six months, 12 months, 18 months, whatever, whether it’s legislatively or through executive order, there’s some forgiveness that is granted, let’s just say for sake of conversation it’s a $10,000 forgiveness as an executive order. This is in part setting it up that that $10,000 would then be tax-free forgiveness?

Tim Baker: Yeah, I think that’s what they’re doing. Again, a lot of what’s in this bill I think is planting seeds for what could potentially come in the Biden tax bill, which could be very much a needle move or so. I think so. I mean, I think that a lot of people, a lot of borrowers are really — they come to me and they say like, “Tim, I don’t want to look at the forgiveness option because I don’t trust it, blah, blah blah.” And I get that. But again, especially when you look at the PSLF and you look at the math, it’s really hard to look at the numbers and say, “Yeah, let’s not at least consider that.” The reason I’m bringing this up is that I think because of all the rhetoric around student loans and how it can be suffocating to someone — we’ve talked about studies that people get married later, buying houses later, starting their families later, all of those things. I think it could potentially be breadcrumbs potentially to look at a forgiveness that’s similar to PSLF, even for working in the private sector but not necessarily the same timeline but the same tax, where it is tax-free. Or not. It could be — I could be completely off the mark there. I guess what I’m saying is that I think that the student loan, like the borrower, where we’re at today, it’ll be more generous to them in the future, not less. So a lot of people are saying like, “Oh, well PSLF could go away.” And I’m like, “It could, but I don’t think so.” Like if I’m looking at that, I’m thinking as a borrower, it’ll be more generous because I think it’s just something that the screams are going to get louder and louder, you know, in terms of like, hey, this is a — this system is not working where the price of schools are and things like that, it’s not working so we need to have some forgiveness. I mean, you look at $1.9 trillion, you know, that would do a whole lot in the student loan department because I think it’s — what, $1.6-1.7 now.

Tim Ulbrich: Yeah, pretty close. Yeah, great stuff. And I think we have covered a lot, Tim. And I think for our visual learners that are saying, hey, that’s great information but I need to see some of the numbers for myself, read through this, understand it in a little bit more detail, we’re going to link in the show notes to the treasury.gov information. We’ll also link to the Kiplinger calculator that I mentioned earlier when we discussed the child tax credits. And our hope is that you’ll be able to understand and apply that information to your personal situation and of course, we’re here and ready to work with you for those that are looking for a financial planner to be in their corner as well as to have a tax professional working alongside of them. So before we sign off for the day, I want to invite you again to a free webinar that we’re going to be doing on April 14 at 8:30 EST where we’re going to be talking about student loan strategies for 2021. So as we’ve discussed here briefly, we all know that administrative forbearance is set to expire at the end of September 2021, really making now the perfect time to determine the best way to tackle your student loans. So during this webinar, I’m going to share how to decide whether you should be paying on your federal student loans during the administrative forbearance, how to evaluate the loan repayment strategies that are out there, and what steps you need to take to pick the best repayment plan for your personal situation.

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YFP 197: How to Leverage What You Know as a Pharmacist to Start Your Own Consulting Business

Posted on April 1, 2021November 2, 2022 by yfpadmin

How to Leverage What You Know as a Pharmacist to Start Your Own Consulting Business

On this episode, Blair Thielemier, the creator of the Pharmapreneur Academy and the Elevate Pharmacy Summit, joins Tim Ulbrich to talk about ideas and strategies for how to monetize your clinical expertise, including where to start, how to know if you have a good idea and common barriers that pharmacists often have to face and overcome. Blair and Tim also discuss the upcoming Elevate Pharmacy Summit, where you can learn about building revenue with clinical service contracts so that you can help more patients while generating income along the way.

About Today’s Guest

Blair Thielemier, PharmD, is an MTM and business management consultant pharmacist specializing in pharmacy billing models. She consults on and produces e-learning programs for state and national organizations, pharmacy wholesalers, payers, technology start-ups. She has books and online courses available for individuals looking to leverage their pharmacy knowledge into monetized clinical programs at PharmapreneurAcademy.com She speaks internationally about trends in leveraging pharmacists to improve value-based care.

Blair is passionate about the advancement of the profession of pharmacy and believes the shift to a value-based healthcare model is an opportunity for pharmacy to play a bigger role in the system. She believes this shift will change the face of our profession drastically in the next 20 years and wants to help her colleagues prepare and adapt to those changes.

In 2015, she founded a pharmacy consulting business BT Pharmacy Consulting, LLC and currently helps train and coach other pharmacists looking to start their own consulting businesses through an online e-course and membership site at the PharmapreneurAcademy.com. Part of that business includes presenting at pharmacy conferences and pioneering the use of educational online courses for pharmacists interested in providing enhanced clinical services, such as immunizations, point of care testing, chronic care and transitional care management programs.

In April 2017, she launched the first online pharmacy conference in the industry. The Elevate Pharmacy Virtual Summit featured pharmacists of various backgrounds practicing pharmacy at the peak of the profession. There were over 1,800 pharmacists from across the globe who attended the free event.

In April 2020, the 4th annual Elevate Pharmacy Virtual Summit reached thousands of pharmacists across the globe helping them to identify and act on innovative opportunities. The five-day conference presented by the Pharmapreneur Academy has been leading the way in virtual education and events in the pharmacy industry for the past 4 years.

Blair’s interests include advocating for community pharmacy services that help providers in primary care and post-acute care improve quality measures and patient outcomes. She is dedicated to putting out helpful information about pharmacist billing options and the benefits of pharmacy consulting services.

In her spare time, she enjoys spending time with her husband and children, gardening and raising animals on their small farm and traveling abroad. She also enjoys reading personal development books, listening to business podcasts, studying meditation and human potential and learning about investing and personal finance.

Summary

Pharmacist and entrepreneur, Blair Thielemier, joins Tim Ulbrich on this episode to discuss how to leverage your skills as a pharmacist to start your own consulting business or side hustle. Blair touches on common barriers and hurdles to success in the mindset of the entrepreneur and ways to overcome self-limiting beliefs when it comes to your business. Pharmacists have such an impressive breadth of knowledge that can be applied widely. With some soft skills training, sales education, and business basics, that you just can’t get in pharmacy school, you can develop the mindset of an entrepreneur. This mindset shift means thinking about and actively asking about your clients’ and patients’ needs, anticipating those needs, and providing solutions to meet those needs and provide value. Consultation can be monetized in many ways, personalized to the pharmapreneur’s ideas, and applied through various methods whether consulting in an office, in a pharmacy-based setting, entirely independently or virtually.

Through her personal experiences, Blair discovered that she could use and monetize her own pharmacy skills and knowledge of the body to the cellular level, in countless ways to help others, ultimately leading to the creation of the Pharmapreneur Academy, her consulting business, and the creation of the Elevate Pharmacy Virtual Summit. The Elevate Pharmacy Virtual Summit aims to teach pharmacist entrepreneurs the skills necessary for building successful businesses and consulting programs, including methods for increasing revenue, relationship building, and a system for success.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Blair, welcome back to the show.

Blair Thielemier: Thank you so much for having me again.

Tim Ulbrich: Excited. This is, for the record, your fourth time on the YFP podcast. So we’re excited to have you back. Last time we had you on was Episode 117, all the way back in September 2019 where we talked about three bold predictions for the future of pharmacy. And I want to put you on the spot here for a moment. So we had talked about predictions you had around automation continuing to happen and evolve in community pharmacy practice, the shift that you thought would be happening to appointment-based models, and the third thing that you talked about was the continued shift in focus on pharmacists being embedded in primary care practices. So since September 2019, we obviously have had all that a pandemic has thrown at us, which I feel like for many pharmacists, we’ve been focusing on vaccine distribution, serving our patients the best that we can. What have you seen in your space, your world, in terms of these predictions and where we’re at in 2021?

Blair Thielemier: Yeah, I mean, those predictions, you know, that we were going to be shifting at least diversifying our revenue streams away from just a product-focused business model to now include services, I also kind of saw this opportunity for pharmacists to step in and have an impact on preventive and community population health. So yeah, the COVID pandemic really was a catalyst, I think, in a good way for clinical services led by pharmacists. And it’s something that I’m going to continue to talk about and beat this dead horse that pharmacists need provider status. But we can also do more and help our patients, even right now when we don’t have provider status. So you know, two of those predictions I’m still not reversing my stance on either one of those. And the third one, for us to start becoming embedded in physicians’ offices, especially when we start looking at quality metrics and some of the pay-for-performance models that CMS is really, really focusing in on, there’s going to be a huge opportunity for clinically-trained pharmacists in the future.

Tim Ulbrich: Absolutely. And we’ve seen — shoutout to my Ohio colleagues here have done an awesome job advocating on our behalf. We’ve seen some exciting evolutions here in Ohio with value-based contracts, embedding pharmacists, obviously the evolution of telehealth that’s happening. We’ve still got some work to do on the reimbursement side of that as well, but I think there’s exciting times ahead. And one of the things I often think about, if you think about telehealth as one example of if we could now move a model where you might have depended on a pharmacist being embedded in a clinic to be able to be accessible from a population health standpoint to serve multiple clinics and perhaps those are the highest risk or could improve those metrics to the greatest degree, wow. I mean, talk about really trying to leverage the pharmacist’s expertise. So 2019, we talked about some of that. It’s been exciting to see the movement and certainly more on the horizon. And today, we’re going to talk about ideas and strategies for how folks can perhaps think about some of their clinical expertise, their experiences, how might they turn some of that into a business or a side hustle? How might they monetize some of that? How might they think like an entrepreneur? Or what are some of the barriers, obstacles, case studies, things that you’ve seen from your experience? And so before we get into that conversation, remind our listeners who may not have caught one of the three previous episodes, a little bit about your background since graduating from pharmacy school, and the work that you’re currently doing with the Pharmapreneur Academy.

Blair Thielemier: Yeah, so after I graduated pharmacy school, long story short, went from being a clinical hospital pharmacist to having no job whatsoever. So you know, it was a rough time. I was six months pregnant with my first child. We now have three. And it was a small, rural hospital, declining reimbursements, just couldn’t afford to keep two full-time pharmacists on staff. And so I was really left out in the cold, kind of being six months pregnant and trying to figure it out. So what I did, fell back on my community pharmacy roots, and I went to a couple local independents and just offered my help. And they were like, ‘Well, we have this new clinical thing called an MTM and none of us know how to do it. We were kind of hoping that you might want to do it for us.’ And I did, I went through the first couple cases and worked with those patients and absolutely fell in love with clinical services and I thought, this is my purpose in life. I mean, I don’t mean to sound dramatic. But that was really the feeling that I had was like, this is my future. I don’t know what it’s going to look like. But this is the path I have to follow. So I really just tried to make myself as knowledgeable as possible on these clinical pharmacy services. And in doing so, I was talking about it on my blog and eventually ended up creating a training course in the Pharmapreneur Academy. And you know, now we work with pharmacists and independent pharmacy owner clients that just like you mentioned at the beginning, you want to work with a collaborative provider doing remote telehealth services for maybe three or four providers in your area and seeing 50-100 patients per provider? That’s a full-time position. You know, that’s creating new jobs for pharmacists and being able to really think outside the box and understand some of the nuances of the quality payment programs and pay-for-performance stuff. It really allows pharmacists to what I call think like an entrepreneur, which is to see these gaps in the marketplace and also see opportunities in the marketplace so that we can leverage those skills in new ways to impact our community’s health and also the health of people across the U.S. because with telehealth, I mean, I don’t see that going away.

Tim Ulbrich: Right.

Blair Thielemier: Anytime soon either.

Tim Ulbrich: And so you’ve made this transition obviously from a clinical pharmacist and the role that you had to now really what I see of educating, training, coaching, motivating various pharmacists, which is really interesting, I think is inspiring when you think about impact. And we’ll talk about the business side of it here in a moment. When you think about impact, when you’re able to help people take an idea and help frame, shape that idea, perhaps help them overcome some of the obstacles or barriers that may seem overwhelming to them in the moment and then think about seeing that service develop and hopefully thrive at some point and the impact that that will have on patients, obviously that’s far greater than the impact that you could have had alone. And I see so much of that happening, what you’re doing at the Pharmapreneur Academy. One question I have for you as you think back to your journey, would you have ended up here today doing what you’re doing if it weren’t for that job loss? And I ask that because I feel like when you talk with folks that I think have that entrepreneurial slant, itch, bug, whatever you want to call it, like it comes out eventually, right? I mean, it’s going to come out. You’re either going to get frustrated with the situation you’re in, see an opportunity, see a problem that can be solved. So as you reflect back on the journey, how critical was that situation, that moment, as difficult as it was to where you are today?

Blair Thielemier: I don’t actually know if I’ve ever told you this story, Tim. After I was working as an MTM consultant, like just kind of doing PRN for these local independents, it was probably my daughter was about 6 months old at the time and there became a director of pharmacy position come open at the local regional hospital one county over. So not the place I had been let go from but one county over. And I went there, and I applied for the job, and I got the job, of course. They offered me the job. And after the interview, they were walking me around the pharmacy, they were introducing me to the team, they were showing me my very own computer and all this stuff, and I actually that day was probably worse than the day that I lost my job the first time because I felt like there were like these two paths laid out ahead of me. And one was like the I know what that career path is going to lead to. I’ve been there, I’ve done that. There was more responsibility as the director but also I had what I thought was a pretty secure position at the other hospital. And you know, I just, I thought, how many more years am I going to do this before I finally go after what I really want, which is to own my own business and have the freedom and flexibility and autonomy to work the way that I want? And so I went home that evening and told my husband, I’m like, ‘Well, I got the job. Bad news is I’m not going to take it.’

Tim Ulbrich: But…

Blair Thielemier: Yeah. I got it, and I’m not going to take it. It was kind of one of those moments where my parents were concerned about me, you just spent a ton of money going to school, getting your pharmacist license, and you’re already like I’m going to try this other thing. But I really, I just at that time, I just felt like there wasn’t another option for me. It was really like, if you don’t try this, Blair, you’re going to regret it for the rest of your life. And that was the big turning point for me is like, you can still work your job while you’re trying to build up your side hustle. But there comes a point too to where you really have to decide, am I going to focus on this? Or am I going to focus on this? And that was the point to like just get that started. I think it was — I was originally pushed off that traditional path by when I lost my job. And then I actually chose the other path whenever I decided not to take the director position. So every day, I’m still choosing to show up at the Academy for my clients and to continue to really help them help their patients. That’s what I want to grow. And that’s the impact that I want to have is helping pharmacists leverage the stuff that they’re really good at that I can just support them with some of the business and marketing skills that we didn’t learn in school.

Tim Ulbrich: Absolutely. And let’s go there and discuss that further as I suspect many folks will be listening and saying, “Hey, I’ve got this really cool area of expertise,” or perhaps I have this idea, and I just don’t know exactly what I could do with it. And you know what, I was trained to be a darn good clinical pharmacist. But I don’t know about marketing, developing business plans, and financing my business. And oh, by the way, this is really scary to think about. Maybe I have a young family or I’ve got a stable income. We talk about it sometimes, the golden handcuffs, right, in terms of being able to — or I have $175,000-200,000 of student loan debt that might be getting in the way of what I’m doing, which obviously connects through the work that we do. So someone that has an idea or even knows that they’ve got something that is worthwhile sharing with others, having an impact in the work that they’re doing, where do they start? You know, I think this is the common thing I hear is, I don’t know where to start. And that fear can often come to be quickly where you can convince yourself that I either have to leave what I’m doing altogether to pursue this or I can’t pursue this because I have limited time and I’m working on this full-time, and sometimes we don’t get past the start line, right, to even see what might be potential going forward. So as you coach folks in the Pharmapreneur Academy, I would assume from all walks of where their idea is at from maybe I don’t have one but I know I want to do something to I’ve got something to I’ve validated it to I’m trying to scale it and everything in between, like what advice would you have for folks that are hearing this and thinking, I just don’t know where to start.

Blair Thielemier: You know, we really have a process. Like it’s a step-by-step framework that we — I encourage people to kind of put their blinders on. So think about what you want, think about the program that you want to build, put your blinders on, work towards that, and then test it. If it doesn’t seem to be something that the market is interested in, it’s OK to pivot too. So I think we get so attached to our ideas, when we have one, you know, usually people are like, “I have zero ideas of what I can do as an entrepreneur,” or “I have 50 ideas about what I can do as an entrepreneur.” So both of them I really tell them the same thing, like baby step No. 1: Look at your career and look at your past experience, look at your network, because what you have to offer is very individual. Your past experiences, maybe you know, you’re like me and my undergrad degree, I was studying plant biology because I’ve always been a little bit of a crunchy plant nerd. And I was like, maybe when I go to pharmacy school, I want to go to the Amazon and research novel drug development. And now, like I’m finally kind of seeing this come full circle as I’m getting my Master’s in Ayurvedic medicine. I almost forgot that about myself. Like I forgot that I was really into plants and herbal and like even growing a garden and nutrition. I had kind of forgot that about myself. So we’ve got some places where people can revisit some exercises that they can do to figure out if they don’t have an idea what their idea could be, if they have too many ideas how to scale down and start with just one thing. So that’s what we call our three pharmapreneurial paths, which is essentially are you going to be a consultant in a physician’s office? Are you going to be a consultant in a pharmacy-based setting? Or are you going to try to do kind of completely separate, on-your-own, like a virtual cash-based kind of business? So being able to really hone in, figure out which of those paths I want to take really makes figuring out your offer, so we talk about deciding on your offer, we’re going to talk more on this year’s Elevate Summit about how to scale your business from $1,000-5,000 per month in revenue to upwards of $25,000 per month in revenue using these techniques and things that I have learned throughout the past seven years in the online business industry and figuring out how to apply those things to pharmacy. And the other thing I really work with people a lot on when I coach them is helping them to identify their limiting beliefs. So you know, I know, Tim, you’re a big self-development person. And this idea of the growth mindset versus the fixed mindset, one of the things that I really see people in this static or fixed mindset deal with is imposter syndrome. And they, they might say, “Oh, well I’m not a clinical guru,” or, “I’m just a retail pharmacist.” I hate hearing that. I’m like, you’re not just a retail pharmacist —

Tim Ulbrich: With just a doctorate degree, yeah.

Blair Thielemier: You just have, you know, this amazing breadth of knowledge underneath your belt. You’re trained unlike any other healthcare professional on Earth. I mean, ask a doctor some questions about pharmacokinetics and see what happens. Like your training is so unique. Our knowledge of biochemistry and physiology, down to the cellular level, is what I think really makes for an interesting recipe for a pharmacist to be able to take influence from all these different seemingly unconnected areas of health and even looking into stuff like Ayurvedic medicine and meditation, how that has an impact on our mental health, on chronic stress, on our gut health, like all of these things really play together with the pharmacological interventions, the modern medicine can bless us with.

Tim Ulbrich: And so you mentioned one, Blair, which I would agree with, you know, some of the self-limiting beliefs, imposter syndrome, being a hurdle that folks may have to overcome and doubting whether or not they can do something, perhaps making the mistake of looking at others and you know, making assumptions that may not be true about what others are doing or looking at others and saying, “I’m not sure I can do that,” when in fact those folks may have been doing that for 5, 6, 7 years and they obviously had a place they started, which takes me to the question, like what are other hurdles that you see folks having to overcome? Common barriers of folks that are coming to you in the Academy that are just trying to get started, whether they don’t yet have an idea or they do have an idea, common hurdles that folks need to overcome or work through as they develop this business idea further.

Blair Thielemier: Yeah, so a lot of people come to me and say, “Hey, how do I get a job as an MTM consultant?” I’m like, “Well, it’s not really a position you can apply for, unfortunately, at this time, anyway.” And what I think that maybe we aren’t taught in school is how to talk with someone, how to have like a sales conversation or a collaborative business arrangement with someone. So really, like I kind of teach them — I feel like I’m teaching them the language of business to where they can feel comfortable going out and not feeling like, oh, I’m just going to hand somebody my business card and wait for a call because I don’t want to be pushy or sales-y or whatever. So what I teach them really has to do with building up your selling skills, building up confidence in what you’re talking about. The having conversations with people that don’t feel sleazy or sales-y, we have the four A’s of selling, which what I call first, you start with Asking what challenges they’re dealing with. What have they tried in the past? If you’re talking to a physician maybe like what quality metrics are you reporting on? Or what are some of your biggest medication issues with patients? So asking that question is the first A. The second would be Assessing. What are some things that I’ve heard? I’ve heard Blair talk about chronic care management, I’ve heard other pharmacists talk about pharmacogenomic testing or whatever. So assessing what type of program could I put together that can be customized to this person that can really help them? Because it’s not necessarily what I want to do. Like maybe I went in there thinking, oh, I really, I kind of want to do annual wellness visits for this place, but come to find they’ve already got somebody doing annual wellness visits and they’re happy with that service. But they don’t have somebody doing chronic care management. So you know, you go in with this like kind of a loose plan but then leave it open for —

Tim Ulbrich: That’s right.

Blair Thielemier: Leave it open for changes and pivots. And so being able to assess what their needs are and agreeing on this could be a good thing, would you want me in the office? Or would you want me in my own office? And would you want to do a collaborative practice agreement? Or should we just work under a collaborative business arrangement? And finally, the final piece of that is Accepting, accepting of the program, accepting of you as an employee, signing off on that legal agreement, and really just kind of going through the pilot and implementation phase of any type of new business relationship is going to go through that kind of four-step process. So when people go in and say, “Well, I talked to my physician’s office about it and I handed them a flier and told them that I was available for hire, but I never heard back from them,” I’m like, “Yeah, that’s not really the way I would have tried to get my foot in the door. And here’s what I would recommend to you to do. Go back and have that conversation with them because they may not even understand who you are or why you’re trying to help them or what it is you do. So first things first, just build a relationship and talk to them like they are a person and that you are a person, and you just are looking to see if there’s any opportunities to work together.”

Tim Ulbrich: In that last example you gave is such a good one because I think sales and accepting some of the success and challenge that can come from that is something probably many pharmacists struggle with. And this is an area where I see the community and the network being so valuable inside of the Academy because I know firsthand, this is an area where one of the coaches that I’ve worked with before calls this “head trash.” Right? There’s things that, you know, are barriers that we come to believe are going to happen or the example you gave of I dropped off a flier, I let them know I’m available, reach out to me if you want to, that is not sales. Right? That is a “I want to feel comfortable walking out of this scenario without putting risk for it that I might get a no.” And I think in that example, I would encourage folks to reflect on like, why is that the approach? Because at the end of the day, remember, we’re talking about if you have a business idea, you have a problem that needs to be solved. And if you believe so wholeheartedly in that vision, then the outcome needs to be — if I have a solution to a problem, then I need to make sure we get to that solution because I know I’m going to better serve that physician, better serve the patients that that physician also cares for, and so my primary goal in sales is to be able to further that mission. And in that mindset, which gets back to some of the growth mindset, is a totally different perspective when somebody is thinking about a sales process. But if you’re trying to go about this on an island — and I think this is where an academy and a group can be so helpful, you know, you can talk these things out loud, talk to folks that have different levels of experience, and start to learn through one another and also reflect on those conversations and get some feedback as well. One thing you mentioned, Blair, earlier was think like an entrepreneur. And I know many pharmacists that I’ve talked with, you know, when they may think, hey, I’m a really good clinician, but I don’t consider myself an entrepreneur. And that can feel overwhelming. I think sometimes we glorify the image on an entrepreneur, tech startup, big offerings of companies and so forth, and we often don’t think of what may be realistic in terms of the work that we’re doing. What do you mean by that concept of thinking like an entrepreneur? Break that down a little bit further.

Blair Thielemier: Yeah, so I really think that pharmacy’s origins started with people like my great-grandfather, who owned his own pharmacy in the Chicagoland area in the early ‘40s. And it was that kind of person-to-person service, it was the idea that like if I don’t make an offer to help this person, they may not be able to get the solution to their problems. They may not even know that this option exists for them. So even giving like just a very simple answer, so one of my friends, she was doing like a intermittent fasting, keto-type diet, and so she was mentioning having some issues with muscle aches. And I was like, “Oh, well make sure that you’re drinking a ton of water if you’re going to do one of those diets because you’re losing water. You’re also losing a lot of electrolytes, so you need a really high-quality vitamin supplement.” And you know, she was like, “Oh, I never even considered that if I was going to change my diet that I needed to think about supplementation.” And she was like, “Oh, but I can’t take those big horse pill vitamins.” And I’m like, “Well, they make gummy vitamins. And they make liquid,” like there’s so many options that you can do. But because she had never really thought to ask me about it, I never even thought to talk about the different ways that you could — we haven’t even gotten to compounded medications to where you could really help someone if they do have those types of issues. So even thinking about just basic pharmacy services from an entrepreneurial standpoint, you’re thinking about, OK, well what time of the year is it? What are people needing? What are my patients experiencing right now? It’s hayfever season. We’re going into spring and thinking through like, what are these people’s needs right now? And right now, they’re needing some COVID vaccines, for one. They’re probably also needing some Claritin. So being able to think like that and see the opportunities in the market, the gaps in the market, to have conversations and talk to people about their pain points. You know, Elon Musk didn’t wait for people to come say, “Hey, I really need an electric car.” He was like, this is what the country needs, like even if consumers aren’t screaming that they want an electric car, I’m going to create something because I see this opportunity, and I see it as impacting the highest good. So we’re going to make it, and we’re going to make sure it fits people’s needs and their pain point and also let them feel good about the investment that they’re making in their next vehicle. So same thing, you know, I think when we talk about investing in people’s health, so many pharmacists are like, “Oh, I would feel bad if I charged my patients for a consult on their nutritional supplements or a functional medicine consult or whatever.” I’m like, “Yeah, but people need to have some type of investment in the program or else they’re not going to take your advice.”

Tim Ulbrich: Yep. And value it —

Blair Thielemier: And value it.

Tim Ulbrich: — as such, right? I mean, I think that’s partly why we’re having some of the challenges that we have in the profession that we’ve largely given away what we have for free. Obviously that’s an overgeneralization in some regards. But I think the comfort may not be there of back to where we started the conversation, you know, any good business idea is a problem that warrants a solution, is one that you’re passionate about, and is one that people are willing to pay for. And if you can find that idea of what you’re providing value and providing a solution to a problem and you can obviously generate revenue from it, if that’s deriving value to an individual, it’s OK for them to pay for that, right? And it’s OK for that to be profitable because there’s a willing investment that’s being made as they see the return on the investment. And if we think about how we invest as a consumer, you know, I think that helps reshape our mind of, I invest in a lot of things that may not be a physical product, per se, but I believe has a lot of value and I’m willing to invest both time and money to invest in that solution that is going to provide some of that value. And I think this is a good transition, Blair, to an upcoming summit that you are hosting again, the Elevate Pharmacy Summit, which I’m excited about, April 9 and 10, and as folks are hearing this, thinking about OK, strategies that I might consider to monetize clinical expertise or I’ve got an idea and I want to think about how I might begin to flesh that idea out further or maybe I’ve started something, and you talked about kind of that growth phase from let’s say $1,000 in revenue per month to $5,000, whatever that growth would look like. And I know that some of what you’re going to be discussing on the summit. So tell us about the Elevate Pharmacy Virtual Summit, who it’s for, what folks can expect, and the theme of what you’re trying to accomplish in the summit this year, April 9 and 10.

Blair Thielemier: Yeah, so this year’s summit, we’ll be teaching our entire system over the course of two days. So it’s two days of live trainings, of live presentations that will help you really decide on the services and programs you want to offer. So like you just said, thinking about the solution that you could offer someone, how to put a value on that. So one example is a client that I’ve worked with. She had some issues with fertility and changed up her diet and nutritional supplement regimen and kind of fixed some of those issues with her microbiome and gut health and was able to conceive. And she, because of that experience she had, she really felt called to create a group program for other females that were of childbearing age who were looking to conceive. And you know, she was asking me about pricing and I’m like, “Well, if you help someone who couldn’t have a baby have a baby, what type of return on investment, you know, like what –”

Tim Ulbrich: Absolutely.

Blair Thielemier: Can you imagine how much more enriching that person’s life would be? And there is value in what we can offer. And there is value in our solutions. So you know, she was able to really think about the impact that she wanted to have. And so I really have worked with hundreds of pharmacists to overcome some of these issues from absolutely no idea of what they want to do to OK, now I’m generating $5,000 in revenue each month, you know, I’m thinking about leaving my full-time position, I’m thinking about hiring someone else to help me, you know, scaling to that $25,000 to $50,000 to $100,000 per month in revenue and how that works for someone using some of the processes that I’ve built in to my own business. So some of the automation and some of the marketing and lead gen and social media strategies. That’s exactly why we created the Elevate Pharmacy live this year is so that we can teach those. It’s going to be also a very small-knit group. So there’s only 300 tickets available in our Zoom room so that we can take Q&A, so we’re actually working with them. It’s really a two-day workshop that we’re going to be teaching and talking about and then of course, Tim, you’re going to come on and talk about like kind of your book publishing empire and how you’ve been able to impact so many pharmacists and helping them improve their financial health and then also what to do with it when you do get to that, you know, $25,000, $50,000 to $100,000 in revenue per month. Like that’s a fun conversation to have with the Tims is like, what do I do with all this money? That’s a great place to be. And you can really start thinking about how to have the impact you want and how to structure your services so that you can — if you do choose to leave your job, you can have this as a full-time position and it’s something you can grow and really build out. So that’s pretty much what we’ll be teaching on those two days. It’s our system from taking you to low five-figure revenue to six- and seven-figure revenue as a pharmacist.

Tim Ulbrich: I’m really excited for the event, not only participating as a speaker, as you mentioned, but also that this is available to pharmacists. When you and I talked a couple weeks ago, I was going through the list as you’re talking about marketing, lead gen, social strategy, building processes, I was like, yep, fumbled through that, fumbled through that, fumbled through that.

Blair Thielemier: Me too, Tim.

Tim Ulbrich: And every one of those was an incredible learning experience but, you know, to have other examples and I certainly read lots of books and resources and blogs and podcasts and all those things, which were incredibly helpful to see things outside of the industry as well. But to hear from folks that I can connect with and to begin to develop a community that I can connect with, I certainly know the value of that. So looking forward to the Elevate Pharmacy Virtual Summit, April 9 and 10 coming up. You can learn more about the summit and register and join me at PharmapreneurAcademy.com/YFP. Again, that’s PharmapreneurAcademy.com/YFP. Blair, thank you so much for joining. Appreciate the time, as always. Appreciate the work that you’re doing to better the profession as well as those that have some of these ideas and entrepreneurial dreams. And excited about what this means for them individually but also for the patients that they serve. So thank you very much.

Blair Thielemier: Absolutely. And thank you for having me, and thank you for the work that you’re doing as well, helping pharmacists create this firm financial foundation so that they can really build something amazing on top of it.

Tim Ulbrich: Absolutely. Thank you, Blair.

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How Much You Need to Hang Up Your Coat: All About the Four Percent Rule

Posted on March 28, 2021May 16, 2023 by yfpadmin

How Much You Need to Hang Up Your Coat: All About the Four Percent Rule

The following is a guest post from Dr. Jeffrey Keimer. Dr. Keimer is a 2011 graduate of Albany College of Pharmacy and Health Sciences and pharmacy manager for a regional drugstore chain in Vermont. He and his wife Alex have been pursuing financial independence since 2016. Check out Jeff’s book, FIRE Rx: The Pharmacist’s Guide to Financial Independence to learn how to create an actionable plan so you can retire early as a pharmacist.

By now, you’ve probably heard that it’s possible to retire not just early, but incredibly early; like in your 30s or 40s instead of in your 60s or 70s. As evidenced by the financial independence, retire early (FIRE) movement, many people are doing just that. Now while that sounds awesome, the big question (as with most things) is always “how do you do it?”

In an earlier post, “The FIRE Prescription: How to Retire Early as a Pharmacist,” I gave a really broad overview of some of the basic tenets of the FIRE movement: the four percent rule, reducing expenses, investing, and drawdown of those investments. Having a good understanding of those concepts is crucial if you ever want to reach financial independence, but I didn’t go into much detail on any one of them in particular. Time to remedy that. So for this post, I wanted to take a deeper dive into that first concept: the four percent rule.

Why that one? Because it was the first one I listed. Duh.

On a more serious note though, the four percent rule (and by extension the concept of a safe withdrawal rate) should be the first thing to understand when drawing up a game plan for FIRE as a pharmacist. This is because it can help define the ever-elusive concept of “enough.” After all, what kind of journey do you set out on without a destination?

What is the Four Percent Rule?

When people in the FIRE community talk about the “four percent rule” what they’re referring to is a concept known as a safe withdrawal rate for early retirement. A safe withdrawal rate (SWR) can be defined as the annual amount (as a percentage) you can expect to withdraw from an investment portfolio without having to worry about the portfolio running out of money in the future; even as you adjust the initial amount for inflation year over year. Basically, you can look at your portfolio balance and figure out how much yearly income you can draw from it without worrying about the portfolio going to zero by assuming a safe withdrawal rate.

The “four percent” part comes in when we’re making assumptions about what kind of safe withdrawal rate our portfolio might support and it comes from a very important study published by financial planner, William Bengen, back in the early 1990s. In a nutshell, Bengen found that a diversified portfolio of US stocks and bonds could support at least a 4% safe withdrawal rate for retirees looking to tap their investments for retirement income over 30 years (more on that a little later).

Why it Matters

For those looking to join the FIRE movement, the four percent rule is probably the first major concept you get exposed to. Why? Because the whole idea of early retirement and the four percent rule do something incredibly important: it tells you where the endzone is. If you know how much you spend per year, you can use the four percent rule to define how much you need to save so that you can cover those expenses. Once you reach that number, sometimes called your FI number, you can probably declare yourself financially independent and consider early retirement.

So how do you calculate a FI number? Well, to borrow a phrase, it’s shockingly simple. Just take the inverse of 4% which is 25 and multiply your annual expenses by it.

For example, say your annual expenses (taxes included!) are $80,000. What’s your FI number?

$80,000 x 25 = $2,000,000

By using the four percent rule to help determine the amount you need to reach FI, not only do you set yourself apart from most Americans who frankly have no clue how much they need to retire, you give yourself a real number to work toward. With that in hand, you can measure your progress toward what many consider to be the ultimate goal in personal finance.

Given that, it’s no wonder that the four percent rule has become a chief cornerstone of the FIRE movement. What’s more, not only does it give you a concrete goal to work towards, it also puts that goal more firmly under your control.

Think about this for a second.

Many of us have been exposed to the advice that you need to save some multiple of your income by retirement to retire comfortably. But how much control do you really have over your income? As pharmacists, the answer to that question has to be “less than we’d like.” Many of us are all too aware of how much the market forces of supply and demand affect what we can expect in compensation.

That said, the four percent rule does something pretty spectacular. Instead of basing your retirement number on your income, it bases it off your expenses; something much, much more under your control. Cut out $500 a month from your budget? That translates to $150,000 less you’ll need to retire. The math is simple but incredibly powerful. What the four percent rule does, and I really can’t emphasize this enough, is that it gives you the knowledge to take control of your financial destiny!

Where Did it Come From?

Here’s where we’re going to get a little more technical and go over some of the research the four percent rule was born from, so buckle up. The four percent rule, as it’s come to be known, originally came out of the study “Determining Withdrawal Rates Using Historical Data” published in the Journal of Financial Planning by William Bengen in 1994. Bengen’s goal with the study was to shed some light on what kind of income a retiree could safely live on given a standard portfolio of stocks and bonds where the income produced came from the portfolio’s total return. And what did he find? By using historical return data on US stocks and US treasury notes, Bengen was able to conclude that the worst possible scenario for a retiree using a 50/50 stock and bond portfolio was that their money ran out after 33 years following a consistent 4% initial withdrawal strategy, indexing the withdrawal each year to inflation; a level Bengen referred to as SAFEMAX, and the rest of the world came to know as the four percent rule.

So how did that withdrawal strategy work? Like this. Say you have a $1,000,000 portfolio at the start of retirement. The first year, you’d draw $40,000 from it (4% of the initial balance). Next year, assuming a 3% rate of inflation, you’d increase the previous amount by 3% ($40,000 x 1.03 = $41,200) and that would be the amount withdrawn. In the years that come, just rinse and repeat. Slightly more complicated math than the FI number math, but still not too bad.

Bengen’s study was a watershed moment in the financial planning world. Before his study on withdrawal rates, retirement income planning either followed something akin to a reverse mortgage on the portfolio, reliance on pension income, or the old-school rentier model of only factoring in the income generated by the portfolio (i.e. not touching the principal). With Bengen, now the concept of a safe withdrawal rate could be incorporated into a retiree’s financial plan. His was just the first of many on the subject though.

Another piece of research that gets a lot of traction in the FIRE movement is one conducted by three finance professors from Trinity University dubbed, creatively, “The Trinity Study.” The Trinity Study more or less supported Bengen’s initial findings in that a 4% withdrawal rate tended to coincide with minimal risk of portfolio failure (i.e. going to zero) over a 30 year withdrawal period. The only real difference with the Trinity Study vs. Bengen’s was that the Trinity researchers presented their findings primarily in terms of probability of failure rather than just focusing on the lower bound results as Bengen did.

This was important to the whole safe withdrawal rate discussion because when making forecasts (as you do in the planning process) viewing things through the lens of probability is essential. In this case, the authors of the Trinity study placed the odds of success with a 4% withdrawal rate after 30 years at 95% using a 50/50 mix of stocks and bonds; a conclusion very much in line with Bengen’s and the notion of a 4% safe withdrawal rate.

So What’s the Catch?

So…despite the presence of studies and journals, finance isn’t what you’d call a hard science. Many would dispute the idea that it’s even a science at all. So here’s the tl;dr on how we should view the four percent rule: like the pirate’s code, it’s more of a guideline, not a rule.

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Why is that?

First, let’s talk a bit about the works that gave us the four percent rule. Just like any of the drug studies you get to look at in your professional life, there are limitations; the most obvious of which is the sample size. For the vast majority of studies that look at historical withdrawal rates, sample sizes are quite small. Take, for instance, Bengen’s study where he looked at the experience of retirees from 1926-1976. Now that sounds like a big time period, but it’s really not. Each year studied assumed a January 1st retirement, so that gives us only 50 data sets. Try bringing a blood pressure med to market with a 50 subject phase III trial. Not gonna happen. To add insult to injury, many of the data sets he used included extrapolated (i.e. made up) data to get to their 50-year endpoints.

Now while the Trinity Study suffered from the same problem as well, some subsequent research has tried to increase the sample size to what you’d expect from a large-scale drug trial. For instance, in a 2017 paper titled “Safe Withdrawal Rates: A Guide for Early Retirees” published for the Social Science Research Network, Dr. Karsten Jeske (who runs the incredible blog Early Retirement Now) was able to expand the data set to 6.5 million retiree scenarios going back to 1871 and retirement periods of up to 60 years! To date, I’m pretty sure that his study is the most comprehensive and one that specifically targets a safe withdrawal rate for early retirement. Surely with that in hand, we can settle on some withdrawal rate as law right?

Nope!

Even such an incredible sample size is still too small. This is because Karsten’s study, like much of the popular research surrounding the four percent rule, is somewhat myopic in scope regarding asset allocation. Very few studies look at the impact of including international stocks (a very common diversification recommendation) in the portfolio, let alone alternatives such as real estate or precious metals.

Secondly, the studies in question didn’t consider investment fees and expenses (like taxes) whatsoever when drawing their conclusions. Kind of like the scenarios you find on a Physics 101 exam where you get to ignore friction, the scenarios described by the aforementioned studies may lack real-world applicability.

The third problem, and in my opinion the biggest one, is that, unlike a drug where we can reliably predict an average response given enough past data, markets don’t work that way. The only thing predictable about markets is that they’re unpredictable. The next 140 years may look like the last 140 years, or completely different. Who knows? Past data can certainly give you an idea of how they may behave, but they tell you nothing about how they will behave.

Perhaps a better approach here as suggested by Dr. Wade Pfau, a professor at the American College of Financial Services, would be to take the past data and use Monte Carlo simulations (remember those from stats?) to present the idea of an SWR in a more probabilistic fashion. I find this approach to be more useful as it can help you picture the relative odds of success based on how a portfolio tends to behave.

Should We Still Use the Four Percent Rule?

Absolutely, but not in the absolute sense. As I said earlier, it needs to be viewed more as a guideline instead of a rule. What I like about it in this way is that you don’t need to be precise with your math. If you can ballpark your yearly expenses using the four percent rule you can: set a savings goal for yourself, track your progress as you go, and, if you reach it, you can probably declare yourself financially independent.

Once there, should you quit your job, lock yourself into an automated withdrawal scheme, and move to the beach?

I wouldn’t.

Can you take some serious liberties with your career at that point?

Oh yes!

Despite its shortcomings, the four percent rule is all about giving you that goalpost where you can take those liberties. And the best part is that you don’t even need to get to that magical number to enjoy the perks! Just knowing where you are on the path can be incredibly powerful and open the door to new options in life.

For instance, when our son was born and my wife Alex wanted to stay home to raise him, we knew that we could do that from an income standpoint. But what about our goal of FI, how would the decision affect that? Thanks to the four percent rule, we could safely say that it wouldn’t matter that much. We knew where we were relative to our goal and we could go down to one income without really setting us back.

Or you could use it the way Cory and Cassie Jenks from Episode 134 of the YFP podcast are, in the pursuit of Coast FI. The four percent rule tells them how much they eventually need to be financially independent, but they’re not in a hurry to get there. Instead, they can take a look at their current savings and, using an assumed rate of return, determine the point at which they no longer need to contribute to their retirement savings. Once there, the money that would’ve gone to savings can go elsewhere…or not be needed at all! They can scale back work and not worry about sinking their eventual retirement.

But what if early retirement or stepping back from work isn’t your thing? No worries, the four percent rule has something for you too. Knowledge is power, and that power can present itself in many ways. One of which is knowing whether you’re in a position of financial strength or not when considering a job change, entrepreneurship, or some other calculated risk with your career. If you’ve done the math and you’re nowhere near FI, you may want to take a more defensive posture. But if you’re well on your way to FI or close to it, that calculus can change dramatically. It may even give you the license to pursue work that can better advance the profession even if it doesn’t pay much (yet!).

Conclusion

The four percent rule, despite its flaws, is a tremendously important tool in the FI toolbox. It allows you to create a concrete financial goal to strive for and one that you can track your progress towards. Once you have that, you can start down the path to FI.

On the path to FI, the four percent rule is just one of many concepts that you’ll want to learn to be successful. The four percent rule just tells you the destination, not how to actually get there; or perhaps equally important, what to do when you arrive. If you’d like to learn more about those things, I invite you to check out my new book FIRE Rx: The Pharmacist’s Guide to Financial Independence.

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YFP 196: How Cory Uses Improv to Create a Better Healthcare Experience

Posted on March 25, 2021November 2, 2022 by yfpadmin

How Cory Uses Improv to Create a Better Healthcare Experience

On this episode sponsored by Insuring Income, pharmacist, improv comedian, and motivational speaker, Cory Jenks, joins Tim Ulbrich to talk about how and why he got started with this side hustle, how it has improved his ability to connect with his patients, and how you, as a pharmacist, can apply the valuable skills of improv comedy to create a more adaptable, empathetic, and humanizing healthcare experience.

About Today’s Guest

Dr. Cory Jenks earned his PharmD from the University of South Carolina in 2011 and completed a PGY1 residency at the Southern Arizona VA Healthcare System in 2012. His past pharmacy experience has included time as a retail pharmacist, outpatient clinical pharmacist, and inpatient clinical pharmacist. Currently, he practices as an Ambulatory Care Clinical Pharmacy Specialist where he applies his passion for lifestyle interventions in the management of chronic disease. Cory is also an accomplished improv comedian, having started on his comedy journey in 2013. Since then, Cory has coached, taught, and performed improv for thousands of people. Today, Cory travels the country (or at least Zooms around) teaching other healthcare professionals how to apply the valuable skills of improv comedy to create a more adaptable, empathetic, and humanizing healthcare experience. When not working or performing improv, Cory enjoys playing racquetball, basketball, and golf, exploring the science of disease management through lifestyle, and is currently earning his Master’s Degree in “Dad Jokes” with the help of his two sons Jacob and Henry.

Summary

On this episode, pharmacist, improv comedian, and motivational speaker, Cory Jenks, joins Tim Ulbrich to talk about his side hustle in improv comedy. Cory details his journey in improv as a curious student, his experience as an improv coach, instructor, and performer, and how improv comedy aligns with his profession as a pharmacist. Through his various stages of development as an improv comedian, Cory noticed his ability to more easily connect with his patients, and his professional satisfaction as a pharmacist grew.

Cory walks through the mental shift to positive from negative, outlining the importance of applying the improv 101 phrase, ‘yes, and…’ in his life as a pharmacist. Because of the skills learned through improv, Cory tells us that instead of dreading difficult cases or patients, he began to see each experience like a puzzle to solve.

Cory further explains how, not only his own experiences with improv but also the experiences of those around him and those who he has taught, have inspired and motivated him to share exactly how improv comedy can be applied in the healthcare professions. Through nationwide workshop facilitation and public speaking events, Cory is able to reach healthcare professionals with his message – to create a more adaptable, empathetic, and humanizing healthcare experience. He notes that balance, an open line of communication with his wife, and the ability to dedicate time to his passion projects have contributed to his success.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Cory, welcome back to the show.

Cory Jenks: Hey, thanks for having me. It’s a thrill, it’s an honor, it’s a privilege, and I’m excited to be back.

Tim Ulbrich: Glad to have you back. And last time we had on the show was Episode 134, which aired in January 2020. Hard to believe more than a year ago, and a lot has happened since January 2020. Who would have known at that point we had a global pandemic in front of us? And in that episode, we talked about the journey that you and Cassie were taking towards Coast FI and some of the steps that you had taken or been putting in place towards financial independence. So how are you guys doing? What’s new? Give us the update.

Cory Jenks: Well, everything went according to plan, right?

Tim Ulbrich: Right.

Cory Jenks: It’s like, we’ve got this podcast recorded, we’re going to have a great 2020. It’s our year. And then COVID hit. But I think all things considered, we really have counted our blessings. I think being in a strong place financially set us up to weather that storm as well as we could, had hoped for. We had our second kid in June.

Tim Ulbrich: Congratulations.

Cory Jenks: Good time to have a kid, right in the middle of a pandemic, right? We’re home anyway, so we have to hang out with them. And I had a chance to continue to work and grow on my little business, which I think we’re going to talk about today. And Cassie’s had the opportunity to drop back further into a part-time role. So that was what that Coast FI journey allowed us to do was to reduce some of that income from her to spend more time with the kids. And she actually got an opportunity to work a little extra on a different, more passion project working on lifestyle for disease management and diabetes reversal. So that’s something that she’s been starting in the last few months that being able to go to part-time has afforded her the opportunity to pursue that passion. So guiltily good. We’re guiltily good in this 2021 now.

Tim Ulbrich: Well, we will link back to Episode 134 in the show notes. And I hope our listeners will take a listen back to your journey, really an inspiring one. And when we talk about financial independence or even FIRE at large, standing for Financial Independence Retire Early, I think sometimes we think about it as a finish line. And really, it’s more about the journey. It’s a trajectory. And I think about your story as an example of that trajectory, of that evolution. And so we’re going to talk to you about what that has allowed you guys to do as a family. Obviously a lot has changed, the addition to your family obviously with Cassie’s role changing, the work that you’re doing with ImprovRx, and all of that is in part possible because of the steps that you have taken related to the financial plan. So excited to talk about your side hustle, ImprovRx, and the work that you’re doing to help other healthcare professionals create a more adaptable, empathetic and humanizing healthcare experience. So before we dive into the nitty gritty of ImprovRx, remind us about your pharmacy journey, where you went to school, the work that you’re currently doing now, and even the other work that you have done as a pharmacist prior to your current role.

Cory Jenks: Sure, yeah. So I am coming up on my 1-year anniversary of graduating from the University of South Carolina, so go Gamecocks.

Tim Ulbrich: Go Gamecocks.

Cory Jenks: I’m wearing my Gamecock Pharmacy sweatshirt for all the — this is an audio podcast, so perfect segue there.

Tim Ulbrich: Yes, I can see it here.

Cory Jenks: Yeah, thank you. Yeah, it’s a beautiful garment color. So graduated 2011, and I grew up in Tucson, so I went out to South Carolina for pharmacy school because I just loved student loans and out-of-state tuition. And I ended up coming back to Tucson to do a residency here at the VA in Tucson, where I have been ever since. I’ve worked anywhere from in ambulatory care, inpatient pharmacy, I’m back in ambulatory care now as a clinical pharmacy specialist doing chronic disease management. So really cool job, getting to help manage patients’ health. And I have a real passion for helping sort of reverse the chronic disease, not just manage them but do my best to get patients off their meds and living a healthy life. And in between, I’ve worked a little bit of retail, I’ve worked in a community health center. And so I’ve kind of — it’s like the Johnny Cash song, I’ve been everywhere in pharmacy. So yeah, that’s where I find myself today in my day job.

Tim Ulbrich: And we’re going to make that connection here in a little bit for folks that are wondering, we’re going to provide that bridge between improv comedy and the healthcare practitioner and how that relates to the experience for the patient. Now, I know some funny pharmacists, Cory, but I don’t think about pharmacists and comedy that often and the two of those coming together. So give us the back story. Why improv comedy? Why did you start it? What drew you to that area? And tell us a little bit about the work that you’re doing.

Cory Jenks: Sure. So growing up, I loved Simpsons, I loved Saturday Night Live, I loved watching comedy. And so this was back before you could DVR stuff. You young punks in pharmacy school with your on-demand and your DVRs, so you had to watch the show on Saturday or Sunday night, and you’d talk about it with your friends the next day.

Tim Ulbrich: That is right.

Cory Jenks: And I loved it. And I mean, I enjoyed school, good at science, pretty bad at sports, that’s why I pursued pharmacy and not trying to play baseball. But always had this love of comedy. It’s always been a part of my life that I think as a pharmacist, a good laugh really is good medicine and something I enjoyed. And in undergrad and pharmacy school, there was an improv group at the University of South Carolina that I went and saw once, was like, ‘Oh my gosh, that’s amazing.’ And I didn’t do it because I was very committed to my academics. So I kind of put that dream and enjoyment on hold but always kept that sort of fire for comedy. And then when I finished my residency in 2012, Cassie was like, ‘Hey, you’re just kind of hanging around. You have this time on your hands. What do you want to do with it?’ And so I had a birthday coming up, and so I said, ‘Well, I’ve always been interested in trying to play the guitar or do improv comedy.’ So give me one of those two lessons or classes for my birthday. And so if you heard me play guitar, you would probably assume I did the improv. And that is correct. So it was 2013, I took my first improv class. And it was a local theater here where I live in Tucson. So just starting up, so the guy who’s now one of my best friends was — took a class, took another, and it was a matter of, ‘Hey, you have a pulse and you’ve taken these classes. We need people to perform. I’m trying to grow this theater. Do you want to do it?’ Yes. Love it. Let’s do it. Perform, get on stage, and it’s really a thrill. I had a ton of fun performing it. And then eventually, ‘Hey, Cory, you’ve been doing this a couple years. Can you help me teach my classes?’ Because he was scaling his business. So sure, I love teaching this. And so I got a chance to learn the intricacies of teaching it. And eventually, it was, ‘Cory, I need someone to run my comedy school. You’re a very organized pharmacist. Use those skills to organize my curriculum.’ Sure, let’s do it, would love to do that. And then while I was doing this and sort of bringing my wife back into it, she’s the real superhero of the whole story. She was in nurse practitioner school. She was busy every night, so I got my improv Master’s degree during her Master’s degree of her getting her nurse practitioner degree. So I was down at the theater 4, 5, 6 nights a week coaching, teaching, performing. And it’s a blast. It was fun. And along the way, I realized that these skills that I learned as an improv comedian, listening, communication, teamwork, empathy, all of these soft skills that we sort of talk about but don’t really find a way to teach or measure became better. I was connecting with patients, I was adapting, I was feeling like I was a better listener. And so as we had our first kid in 2018, as much as I enjoyed being down at the theater performing for 5-10 people in a very small crowd sometimes, the heat of the Tucson summer, I would get paid to teach classes but not quite the rate as a pharmacist, if that makes — if I’m making sense there. So and when you’re away from your kid and your family, you want to make sure you’re really getting a lot out of it. Not that I didn’t get a ton out of it, but I was kind of thinking like, what’s my next step with improv? How can I push this to another level? And auditioning for Saturday Night Live is just on the cards because I’m not moving to LA or New York or Chicago, abandoning the family to pursue this dream, which I don’t — it would be cool if I somehow SNL. I think I’d have to be some sort of unlikely national hero of something to be famous enough to do it, but then I realized, oh, I’m a pharmacist. It’s helped me as a pharmacist be better. What if I push it in this direction of applying it to healthcare? And so that’s where I found myself a couple years ago as I started the business of speaking and doing workshops.

Tim Ulbrich: I love the creativity in finding something that you were passionate about and connecting it to your skill set and experience and what you are trained to be doing as a pharmacist. I think sometimes we talk about side hustles or businesses, sometimes they’re connected, sometimes they’re not. And I think probably many folks like myself when I first heard about you and the work that you’re doing with ImprovRx, I was trying to find the connection, trying to see where that connection may be. And like yes, we can always use an extra lap, but when we talk about enriching our experience and interactions with patients and enriching the healthcare system at large, we all know there’s a lot of room for improvement. We’ve all been through it as a patient, perhaps some at the different levels than others. So I really start to see the connection of how pharmacists can benefit from some of the skills and training that we’ll get to hear about in a little bit. So dig a little bit deeper for a second on the connection between improv comedy and the ability to connect with patients as well as just your professional satisfaction as a provider. You mentioned some of the softer skills, but take me in the room. You know, Cory, I’m working in ambulatory care, I’m seeing patients, how do you begin to apply this personally in your patient care encounters?

Cory Jenks: Yes, so improv is actually — I would consider it very similar to a healthcare encounter.

Tim Ulbrich: Absolutely.

Cory Jenks: And here’s why. So taking it a step back, when I go and practice improv when we’re not in a pandemic and can gather, I tell my parents, ‘Hey, I’m going to rehearse improv.’ And they’d say, ‘Cory, it’s all made up. What are you rehearsing?’ And I’d say, ‘Fair point. But improv, like a sport, you have specific skills.’ Like basketball, you ought to practice dribbling. You ought to practice defense. You’ve got to practice your — if you’re me, you’re practicing your slam dunks all day long. You’re just flying above the rim, right?

Tim Ulbrich: Absolutely.

Cory Jenks: Well, with improv, we’re practicing characters, voices, playing on teams’ different format of improvisation. Like I perform on an improv hip hop team. I rap. I do improvised rapping. Much like an improv scene, we do have certain rules within improv. And I don’t need to get into the weeds of that, but there are rules within improv that help guide us in these scenes. Well, sports you have specific rules and then in healthcare, obviously we have this specific set of rules. But with improv scene, every basketball game, every interaction with a patient, anything can happen within that timeframe. No two basketball games are the same. No two improv scenes are the same. And certainly no two patient encounters are ever the same. So you’re able to take those skills of listening, being 100% in the moment, and adapting to what that patient is telling you and continue to provide them the best outcome. One of my best examples of this was one of my patients I was managing for diabetes. And he came to the room, was just demanding a prostate exam so he could get Viagra. Like this was just his connection. He was told he needed to get that checked out to get his Viagra. And I — how do I navigate — like I never had that question on a test in pharmacy school. No one gave me the “patient demanding prostate exam, what do you do?” but also continue to do the job that you’re assigned to do, which is manage their blood sugars but also make sure that he’ll trust you in the future to take care of what you need to do. And so pardon the graphic example of the patient, but the way I was able to navigate it, I was — the two words of improv are ‘yes, and.’ Those are the basic words. If you ever want a free lesson, ‘yes, and’ are the two words. We agree and build together. So how can I say yes to this patient who’s wanting a prostate exam from me, a pharmacist, who decidedly went into pharmacy so I did not have to do exams like that? And so I said, “Yes, I could give you a prostate exam. And you wouldn’t like it, and I wouldn’t like it. And you wouldn’t get the meds you want.’ So let’s focus on your blood sugar, and you talk to your doctor about that prostate exam. He said, “That’s great idea. Let’s do it.” So it was a way to connect with him without fighting him, right? I think a lot of times consumers, we as consumers will fight with the healthcare system. We agree, we get on the same page, and we work together as a team with your patient rather than seeing it as an adversarial issue when they bring something off the wall to your office.

Tim Ulbrich: Yes, and I love that. What a tangible takeaway for folks that are interacting with patients. So is ‘yes, and,’ is that like a staple of improv comedy, improv training? Like when you’re teaching that and you saw that connection with the healthcare, is that something that’s commonplace?

Cory Jenks: Literally like Day 1 of Improv 101, you learn this idea of ‘yes, and.’

Tim Ulbrich: Really?

Cory Jenks: So if you’re doing an improv scene and then you say to me, “Hey, we’re on the moon and it’s so beautiful.” And I say, “No, we’re not. We’re in a bounce house,” well, I’ve completely negated your reality. We have to rebuild everything. And so that scene grinds to a halt, the energy stops. And I have to explain why I thought we maybe we’re on the moon. But if I say, “Yes, and it’s so beautiful up here,” or, “Yes, and we only have 30 seconds of oxygen left,” we’ve now agreed to our reality, built on a detail or a consequence and have gone down this journey together rather than trying to fight and have this adversarial reaction. And in healthcare, that’s what we’re doing. We want to build together in the moment. That’s all we’re doing with our patient. So to get the outcome, improv is to get a laugh, with our patients it’s to optimize their health. And I also am a big proponent of the experience because we don’t get to control their health all the time. Sometimes the diagnosis is beyond our control. So we can at least agree to their reality and build together.

Tim Ulbrich: I love that. And one of the questions I like to ask folks — and especially, Cory, of the journey like you’ve had is when you have such a clearly defined vision of where you are going and you have obviously thought a lot about how this interest in improv comedy can connect to patients and create a better healthcare experience, that doesn’t just happen without a specific passion, without a motivation or without a why, whatever you want to call it. Was there an “Aha!” moment when you realized that you could help other healthcare professionals have a similar experience, develop their skills to better their connection with patients and ultimately better the healthcare system? We know there can be improvement there as well as improving their own satisfaction as a healthcare provider. One of the things we hear, of course, from healthcare providers, you know, I’ve lived it, you’ve lived it more than I have, I talk with many pharmacists, physicians, veterinarians, etc., I hear, “You know what, I’m burned out.” And so there is also this piece of provider satisfaction in addition to the patient experience. So what was that “Aha!” moment for you where you saw this connection?

Cory Jenks: I’ve just done all of this talk of ‘yes, and’ and how I would agree with you. And I have to say, it wasn’t so much an “Aha!” moment as a slow boil or a slow burn. In my own professional life, I started to realize like I didn’t come home as cranky. I enjoyed the — like when someone would give you, ‘This patient is difficult,’ I stopped saying, “Oh no,” and started saying, “Cool. What are we going to do here?” Right? It’s that mindset shift that it comes — it’s solving a fun puzzle versus dreading not having the answer. So I think that was part of the puzzle. My wife Cassie went through improv training and she was like, “Oh, wow, this is really useful as in my career as a nurse practitioner. I enjoy this.” And then I’ve had — we’ve had nurses and I have a physician who’s now a friend here in Tucson that went through the training. And his like, he was like pure “Aha!” Like every class was like, “Oh my gosh, I could use this with my patients. Oh my gosh, I’m too left-brained. Oh my gosh, I need to say yes more.” And so I think seeing the light bulbs go off in those that I have taught through our classes in Tucson, I mean, you get all walks of life. You get — in our theater, we joke we have a rocket scientist. He’s an engineer. We have nurses, lawyers. But then we have the typical theater artistic folks who live with that right brain a bit more. But it’s just that consistent reaction from people who buy into the ‘yes, and’ philosophy. So I really see it as more of a philosophy than just a rule of improv. I try to live that ‘yes, and’ life as much as I can. But seeing those light bulbs and “Aha!” moments is just energizing back to me. And I realized, oh, this is an opportunity to take what I do 40 hours a week and what I do on the weekends and improve that 40-hour life, not just for myself but I think we could do something for the other people that, as you say, we struggle. Healthcare is hard. Like, to everyone listening, kudos to you. We have hard jobs. It’s OK. Admit it. So how can we make those jobs a little less hard and a little more rewarding? And I think this is one of those avenues to find that satisfaction.

Tim Ulbrich: So I have to ask as a father myself, you know, I suspect dad jokes are a regular. Is that fair? I mean, are the dad jokes getting better? Are they getting worse? Where do the dad jokes come in?

Cory Jenks: I give myself like a 6.5 out of 10. So like the littlest one just turned 9 months old, so he just sort of like, I smile at him and he laughs. So the bar is low for him. And my 3-year-old is just getting a little sense of humor and a little playfulness. But I can make Cassie’s eyes roll pretty good with a lot of my dad joke humor. And just kind of circling back to what you said, you say you don’t know many funny pharmacists. The interesting thing about improv is that you don’t have to be funny to be good at it. I think improv is perfectly suited for pharmacists because it requires you to listen, be in the moment. And if you are smart, which pharmacists objectively are very smart, you can be really good at improv because you learn the patterns, you learn the rules. And as kind of left-brainy pharmacist as that sounds, once you learn that, you can play up and find the funny. You can develop that sense of humor. And so if you’re listening to this at home saying, ‘Well, I’m not funny,’ first off ‘yes, and,’ yes, you can be funny. You can do this. And so that’s my bit of pushback. I think that the smartest people make some of the best improvisers. So just brushing my shoulder off here.

Tim Ulbrich: So this connection of obviously bringing your interest in improv comedy or experience as a healthcare practitioner, your opportunity is, I suspect, as a patient, perhaps a caregiver, other experiences, recognizing that this could be done better. Insert ImprovRx, so an opportunity to train other healthcare professionals. So let’s talk about more of what you’re doing with ImprovRx. What do you offer? You mentioned to me before we hit record that you’re going to be doing an upcoming session for a Rho Chi induction. So give me some examples of things like that. What would it look like to the person in the room when you’re doing a workshop? What does this experience look like for pharmacy students?

Cory Jenks: Yeah.

Tim Ulbrich: Give us some more of the nitty gritty of what these types of sessions would include.

Cory Jenks: Definitely. So I offer basically — I’m an improviser, so I can adapt to whatever session or issue or event you’d like. But I can do a good old fashioned speech or a talk on it where I’m talking to your crowd, revving you up, inspiring you, pretty much what I’m doing with the audience today, just giving you just a bunch of motivation and excitement about what improv can —

Tim Ulbrich: I’m ready to go.

Cory Jenks: Yeah, like I’m glad there’s no brick walls in front of you because you might run through it.

Tim Ulbrich: That is great.

Cory Jenks: But I think my bread and butter really are the workshops. So what I do with those is I provide, depending on the workshop — and I have a menu of those depending on what the event calls for, what the particular organization wants. So I could either get right into some basic rules and we just get in and play. And what we do is we have the participants doing improv within 10 minutes. You’re doing scenes, you’re building things together. And then what we do, regardless of those different workshops, is we break down what happened in those scenes. What happened with those skills? What made them work well? What didn’t work well? And then how do we turn this into making ourselves better healthcare professionals. So how are you going to take what you did during this particular game and utilize it to be more in the moment with your patients? And so whether it’s something where we jump right into the improv or whether we do a little bit of background, a little presentation on some of the literature that supports — because ImprovRx is evidence-based comedy. There is literature supporting the use of role play and improv in education and pharmacy and medicine. So we’re pharmacists. We like to have that data to show that what we’re doing is worthwhile. And so there is — so I can dig into the data, give you the good background, and then we jump into the fun. And what I think the most important thing that comes from this is that people are going and taking risks, they’re trying new things, and there’s no consequences. Like in pharmacy school, for example, you can take a test and if you fail the test, you fail the test, right? In improv, if you do a scene that’s not funny, the scene is over, we move on, it’s disposable comedy. It’s beautiful. And you can learn that lesson in the moment. And I think that’s something that students — it’s really resonated with students because they are under pressure 24/7, get the grades, go to residency, get your job, get your student loans paid to tie it back here to YFP. So for an hour, we’re going to try something. It could be difficult. We’re going to be growing some skills. But the thing that I love — and I’ve been doing all these virtually right now because of COVID — is I’m looking at my screen and I see smiles on faces of students trying new things that are hard. And when do we have those moments in life where we get to try something and have fun doing it? And I think that’s the — like at worst, we come out of this having fun. And at best, you have fun, you challenge yourself, and you realize that those limiting beliefs that I’m not funny, that I can’t listen, that I can’t create, are not true because there’s so much more lurking — in a good way — inside of all of us as healthcare professionals that are waiting to be there to help our patients.

Tim Ulbrich: You know, I’m connecting back to my experiences in academia and even as a student where while we have come a long way in providing I would say more digestible learning experiences for students in terms of not as high risk of assessments, making things more spread out, smaller, lower risk and so forth to help foster the learning experience and take some of the anxiety out of it and an effort to try to help students manage stress and other things that they have going on, I suspect for pharmacy students listening, they would still say it’s a very pressure-inducing environment. And you can see it among students currently. They feel the stakes are high. And they certainly can be in a session like this and see value from this. And I can see it happening in a classroom, in a student organization event, as a part of another event on campus, whatever that would look like, where there’s just an opportunity to grow, to have professional development, but to have fun and to do it in a safe place. I mean, what an incredible experience. So if I’m tracking with you correctly, Cory, these hands-on workshops that you described as kind of your bread-and-butter type of offering would be provided to a college of pharmacy or offered at a national organization or a state organization or an organization like Rho Chi. Is that correct?

Cory Jenks: Perfect. Yeah, exactly. Those are all places that I’ve done this. I’ve done it at a state association, I’ve done it at a national meeting for a — I’ll be doing one at a national meeting for a pharmacy organization here in a few weeks. And I’ve done them in a small group with Rho Chi. And one thing that I actually did too was a pharmacy residency. So something — you think of pharmacy residents that the high stakes, the pressure —

Tim Ulbrich: Absolutely.

Cory Jenks: So teaching them adaptability, some resilience, and having fun while doing it. So I had a lot of fun doing this with some pharmacy residents as well, doing it virtually, playing together and learning these skills in like a very — I hate to say zero gravity environment because it kind of — I don’t want to cheapen what I’m doing, but it’s just from a world where if you’re a pharmacy resident and you’re in training and you’re taking care of patients, like the stakes are incredibly high. It’s life and death, real life and death. So here’s a way to get a step away from the life and death but be more effective when those stakes are high and you need to communicate with that doctor in a life-or-death situation or that patient in a life-or-death situation.

Tim Ulbrich: Well, what is the reaction? You know, I’m thinking of my experiences with pharmacy students or other pharmacists and depending on where they are at, I can see that some might really get into this type of experience, others maybe kind of skeptical, maybe others warming up to it over time. What kind of reaction do you get from the audience during these sessions?

Cory Jenks: The beautiful thing is that it’s different with every session. So I’ve worked with student groups that they’re a little more tentative, they’re a little more self-conscious, and so it takes a little bit of we’ll say prompting from the organizer or the school to send me a private message on Zoom and say, “Hey, call on Davey or Suzy,” or whatever. And then they’re like, “Oh no!” And then there are some where it’s like they can’t get enough. Like, ‘We only have an hour? I want to go and I want to go again, I want to go again.’ And then there are the ones that they’re like, they’re really uncertain, but they do it. And then they realize, oh my goodness, that was fun. I did a great job. I had that in me. And so it’s like I said, everyone is going to be different. And that’s what makes it fun for me is that every group presents its own challenges. Some of them it’s like, we’ve got to slow this energy down, we’ve got to give someone else a chance. And some it’s like, OK, it will be more work to get you to come out of that shell. That is OK. That is my job. Let’s do it. Challenge accepted.

Tim Ulbrich: Which I think is a whole separate skill set, one I’m guessing you are continuing to hone and develop upon. I mean, there’s an art to it I think, interacting with folks, drawing things out of them, creating the experience and the environment that gives the best shot of participants engaging in the material. But it just depends sometimes on the group, on the culture, what is going to have those types of interactions, what’s going to lead to those types of interactions. And I can’t just roll by the fact that, Cory, we’re in the midst of a global pandemic where you are really just warming up to the work that you’re doing and things like traveling and being able to engage with other organizations and along the way comes a global pandemic, which I would suspect brings things like travel to a grinding halt. So for me to jump on to Zoom and to do a talk about personal finance, yeah, I would love to be there in person, but we can make it work at the end of the day. The information is the information. And I’ll try to do my best to inspire folks in that environment. Now, this, the work that you’re doing, feels like the experience that you would have with the learners in the room is so important to the outcome of the event. So talk to me about how you have been able to pivot with Zoom, with obviously what’s going on with the pandemic, and how you’ve been able to be flexible and the mindset that has allowed you to continue to press on despite the limitations that have been brought on by the pandemic.

Cory Jenks: So yeah, it’s a great, great point. I picked a wonderful year to decide to be a speaker, right? But don’t worry, what I speak on is drawn entirely out of what the energy in the room is. So no, I think that’s — you mentioned like the mindset. So one of the things we talk about in improv is that there are no mistakes, only gifts. So you don’t go to an improv show, watch it and say, “Well, they messed that line up there.” It’s not like a play where you’re expecting. You don’t know it’s going to happen. And so a good improviser will take whatever happens, whether it’s the tech person talking over your scene on a microphone, which has happened to me before, and turning it into some sort of narration of their life, we turn it into a gift. And so this past year of having to do everything remote, well, I’m an improviser. I teach adaptability. If I couldn’t adapt, you shouldn’t be dealing with me. And so I’ve been able to adapt the exercises to the Zoom or the virtual platform. It’s more of a challenge — like it is more of a challenge to get people engaged and involved, especially it’s very easy to have people just like, I want to turn my camera off and hang out on Zoom. So you have to work harder. Like in a way, it is harder to do to be able to do this virtually. But I have adapted the message, I have adapted the games, I’ve adapted the activities to make it much more interactive for those participants, even though we’re virtual. And in the world of seeing things as gifts rather than mistakes or problems, I will not anger your entire audience and say, “COVID’s been a great gift,” right? It’s been terrible for many people, myself included. Everyone has been affected by this. However, the gift of doing things virtually has allowed me to maybe reach some groups that I would not have been able to reach before. Doing Zoom sessions across the country from here in Tucson when the travel costs might have been prohibitive for a small organization. Well, you don’t have that barrier now. So I get to interact with your students, I get to share this message. And so the ability to adapt is baked into what I do. And so it’s been fun having that chance to adapt to see how these different things work and to get to talk to and interact with a bunch of folks that I might not have had the chance to otherwise.

Tim Ulbrich: Absolutely. And I think what you said is just so on point. I mean, the mindset being so important, the adaptability piece being so important, but also the opportunity to reach organizations and groups that otherwise might not have been open to a Zoom session and because of, whether we like it or not here, we are. And we are all comfortable with it now. And so you’re giving things like this a try and obviously continuing to have the impact that you want to have by reaching more folks through the technology and what you’re able to do. And you mentioned the evidence. You know, my academic perspective is thinking, when it comes to the evidence, Cory, that you reference, I know that there’s likely something there. And you specifically mention some of the pharmacy and medical literature that’s out there. Tell us more about the evidence behind some of the work that you’re doing.

Cory Jenks: Yeah, so I’ve got to give props to the University of Arizona here in Tucson. This precedes me, but there’s an article from I think the late 2000s, the late ots, I guess we call them, where they incorporated — they actually have incorporated improv into their pharmacy school curriculum. So it’s a lot of fun. I’ve been able to help out with those sessions once the world found out that, ‘Oh, you’re a pharmacist that does improv. Well, we do this improv thing for pharmacy students.’ Wow! I have a clinical specialty! Here it is, it’s improv. So I get to go participate in that. But they’ve written up the improvement in patient communication with the pre- before and after doing their improv sessions. So it’s improved subjective communication. In medical school curriculum, it again showed that it improved communication. They felt like there was a quote where I don’t feel like I have to do things off of a checklist, I could just listen to it back in the moment. And most of the medical school students, I think they got 10 hours of improv instruction in the article that I researched and read, is they felt it was worth repeating. And now, put your hand up out there if there’s any classes in pharmacy school or medical school that you wanted to repeat. It was like, I’m done with this one, moving on to the next one. So to me, that — it’s not like where we can objectively measure like, ‘You were a 7 on communication and now you’re a 9 on communication.’ But getting at that human side of healthcare, like if students are saying they’d repeat this, I think they find it valuable. And so trying to promote that evidence more so would be something that I would love to be able to continue to pursue and really with what I’m doing, trying to make that more of a reality in more places for more students to get that training and of course graduates as well.

Tim Ulbrich: And I’m going to for a moment, Cory, connect the work that you are doing here in the improv comedy, the impact that you’re obviously having, you know, one of the things that really strikes me is the compound impact this can have. So if you’re training, let’s just say a session where you’re doing a workshop with 75 pharmacy students. Let’s be glass half full and say 40 of them are all engaged and they’re going to take away some things that they can then apply with the patients who they probably also will share with others and their classmates and have an impact on other folks, could be families and friends, and hopefully have an impact on the practice sites and the patients that they serve and the culture within that organization and within those experiences. So the compound effect of the work that you’re doing to me is really interesting. And the influence that you can have on really transforming the healthcare experience through the pharmacists that you’re able to have an impact through obviously your training, your understanding of what pharmacists are doing each and every day. So I want to bring together that work. I know from our personal conversations that your family is incredibly important to you, a big motivation of why for everything that you’re doing, and I also know that your financial journey, as we talked about on Episode 134, is important.

Cory Jenks: Yeah.

Tim Ulbrich: So fast forward to us five years. What does success look like for you in terms of the work that you’re doing here as it relates to ImprovRx?

Cory Jenks: I think success to me would be that I am at least — I’ve at least gone down to part-time as a practicing pharmacist because I am doing too much speaking and training with improv.

Tim Ulbrich: Absolutely.

Cory Jenks: I think perfect world in five years, it’s really hard. I’m going to be vulnerable here in front of everybody. Like giving up this identity as a pharmacist would be really hard in this moment to think about not being. However, the energizing thought of being a full-time speaker and trainer, implementing this improv training, whether it be in healthcare associations, other hospital systems, in curriculum, at university level, that’s what I would love to be. Having that compound impact, as you said, is it’s one thing for me to go and teach this to a group of 70 people. But if I can go implement it into multiple curriculums in different healthcare settings, dental schools, pharmacy schools, nursing schools, that compound effect is exponentially more. And it’s just going back to this idea of something that you would not consider traditionally related to healthcare, improv. Like I would love to be known as, “Hey, it’s Cory. He’s the healthcare improv guy. Like he knows how to make that experience great by implementing these really fun, simple rules of improvisation.” And in five years, I would love to see cultures change. Like I talked about this ‘yes, and’ mindset. I think in healthcare, we often are stuck in a world of ‘no.’ Like the paradigm is ‘no.’ So like can I get more time with my patients? No. Is this drug covered by insurance? No. I had this new idea for this new service as a pharmacist. No, we don’t have the time or the budget for that.

Tim Ulbrich: Or did I bill for it?

Cory Jenks: No. There you go, right? See, you said you’re not funny. You just like followed the pattern right there.

Tim Ulbrich: Yeah.

Cory Jenks: That is textbook comedy. Beautifully done. But I would love to build a culture where of course we can’t literally say yes to every request. Like we can’t say, “I want 1,000 Percocet.” Boom, done. Right? That would be irresponsible. But when we say yes to the idea of some — so here’s this idea for a new billable service, or when a patient’s asking for an obscene amount of controlled substances, we say yes to what they’re telling us. That is they have something deeply going on that we need to investigate and help. So it’s not — ‘yes, and,’ does not literally mean yes all the time, although I have had a improv student come back married after their first week of improv class. It was like, “You said, ‘yes, and,’ and someone asked me to marry him, so I said yes!” I was like, that is ultimate commitment. Beautifully done. But it means at least saying yes and listening. I think that’s a big thing that Cassie hears from her patients, I hear from my patients is they’ll say, “You’re the first person that’s just listened to me.” It doesn’t mean that we fix their problem all the time. It doesn’t mean that we give them exactly what they want. But that ability to listen and empathize with that patient is to learn, why are they saying this? Why are they frustrated with their system? Why are they feeling like they haven’t been heard? And so in five years, if I’m helping create a culture of that for patients and as you said, for providers who are burnt out, I’ll have considered it a wild success.

Tim Ulbrich: One of the things, Cory, that I want to ask you because I think I see folks struggling with this when they’re starting a side hustle or business, whatever you want to call it, is that they’re just crazy passionate about what they are starting. And they see some initial success, and that’s starting to build momentum, hopefully over time, and they’re having an impact. You know, it can be incredibly fulfilling work. So I know, again, as I mentioned, your family is incredibly important to you, the time that you have with your family is important to you. So how do you balance and reconcile the work that you’re doing with ImprovRx, the time that you’re spending preparing for presentations, obviously pre-pandemic traveling? You know, you and I both know that you can sign up for an hour presentation, but it’s much more than that when you think about the before work, the after work, the time that you’re spending thinking about that. So tell me how you handle and reconcile that in terms of scheduling where you’re spending your time and ultimately your decision algorithm for what you decide to say yes to and what you decide to say no to.

Cory Jenks: I think the first step in this is marrying up. So my wife is — my wife Cassie is incredible. We have frequent conversations about what we want our life to look like, what our visions are, what our dreams are, and I know it sounds hokey, but it’s just — the line of communication is open so well. So when it comes to the decision algorithm, a lot of it runs through her because we are on a team together. And every time I’m doing something, she is taking the burden on it. Like right now, she is keeping our kids quiet so we can have this conversation. Mostly quiet, I think. So I think that’s part of it. But I also — we have blocked off time for ourselves. Like these hours during the week in the evening, Cassie is doing her extra little passion project. These hours, Cory’s doing his thing. Oh, Cory wants to do this thing in three months. I check with her, and we look at our schedule, we make sure that there is no other family things, and she’s like, “Go for it.” Like she’s all in too. Like she is in this for making these dreams happen. And I think that relating it back to our episode, being in that Coast FI world of really, I’ve been out of pharmacy school a decade, so a decade of hard work setting ourselves up to take some of these risks to pursue the dream, right, is what has set us up. So the algorithm for what I say yes to at this point in my business is very much saying yes to as much as I can to get that experience, to get those reps, to get that network built. And then the goal is, like my goal that I write down every day, is to have to turn things down at some point.

Tim Ulbrich: That is right.

Cory Jenks: To get to that place where you’re in such demand that I can’t do everything. And so that’s how I see it. But really, it comes down to we have our protected family time, we have our day job time, and then these other hours are for us to work on these things or if I wanted to sit and numb myself with Netflix, which is OK sometimes, you can. But don’t ask me what WandaVision is. Like I have no idea, like no concept of these shows because at night, from once the kids are down, it’s laptop open and if all I have is an hour of energy, I give it an hour, and then it’s get that rest and bedtime. So that’s how I try to balance it. A lot of it is just cutting out the nonsense and unnecessary things that in 10 years, will I be happier that I watched the Cubs spring training games? No, it’s fake baseball for a baseball team. Like, no, I will not. But will I regret not having given this thing that seems to be resonating with the people I work with, if I don’t give it my all, that’s going to be the regret. That’s the broad strokes, I guess.

Tim Ulbrich: Yeah, and I think some of the best businesses, you know, from a fulfillment/impact standpoint, are those that you can turn into a business, side hustle, again, whatever you want to call it, but that you do have an impact on others and that you feel a sense of contribution towards the work that you’re doing. And if you can build something that is also sustaining but is having an impact, obviously that’s a sweet spot that I think we often strive for when we’re working on things like that. Not just speaking, you also have a blog in the mix, you’ve got a book that you’re working on, so tell us more about those opportunities, in addition to the speaking, the things that you’re working on with the blog and the book, and what you’re hoping to accomplish with those projects.

Cory Jenks: Yeah, so as a fairly new side hustler, I think the struggle is I have this idea, how do I get people to know about it? And so is it a podcast? Is it social media posts? Is it this or that? And so for me, the blog is — I’ve always enjoyed writing. In undergrad, I actually wrote a blog for the University of South Carolina’s Admissions Department describing my day-to-day activities as a pull to get people to come to our college. So I’ve had that practice of writing, so it’s in a world, as you say, we have limited time, how do we say yes to what’s important? Well, writing is a low barrier to entry for me to get these ideas out that I have a chance to go deeper on, to take these seemingly unrelated concepts and put them together into something that’s really usable. So I’ve enjoyed getting the chance to write about that. Part of the gift of COVID — the “gift,” I’ll use my quotation marks here — is that I didn’t have the spring of — March of 2020, like everything shut down. What are we going to do? No one knows what’s going on. So I’ve had all of these ideas formed in my head, so I put them down in a manuscript for a rough draft for a book. So I’m hoping to publish that later this year, to provide that value that I can provide on a face-to-face basis but provide sort of the manual and the stories and the background as to why this is useful, to provide that support and that evidence and try to establish myself more so as an expert in this field. I think writing a book, as you have done, you’re the expert in this. So to the other improv pharmacists out there, let’s collaborate if there are others. This isn’t a — I don’t have to be the expert. Certainly not. Improv is a team sport. But yeah, I’m trying to reach folks with that message of application, really.

Tim Ulbrich: They are going to be coming out of the woodwork, Cory.

Cory Jenks: I know. We have a certain type that’s drawn to pharmacy. I know of all the pharmacist comedians, improvisers, you’ve got me on here. So I appreciate it.

Tim Ulbrich: What is the best way for folks to connect with you? You know, I’m suspecting that some of our listeners might be with academic institutions or state or national organizations, would like to have you do a speaking engagement or a workshop or just in general learn more about the work that you’re doing. How can folks connect with you?

Cory Jenks: Yeah, so I think my website, CoryJenks.com, that’s Cory Jenks — my parents were cheap and did not buy the vowel, no ‘e’ in Corey, so little dad Wheel of Fortune joke there. And if they want to find me on LinkedIn, that’s another great place to connect to. I am on Twitter, Facebook and Instagram, but I don’t post much. My whole goal with improv is to have people being in the moment, listening, going deeper with their patients. I’m not going to say social media is not useful. It certainly is very useful. I think the value that I’ll give to people is going to be from my blog, my book and my face-to-face interactions. So you’re welcome to follow me on Instagram. If you like periodic posts of — I don’t even know what I posted last — so you can do that or on Twitter too. Twitter is kind of a — can be hit or miss as far as fun or terrible. But or you can email me, [email protected] email. So the beauty of 2021, there’s a million ways to find me. And I love to talk about this. And I really want to express my gratitude. This is an honor to be a two-timer here on the YFP. I know that you have all helped Cassie and me on our journey so much. And my hope is that I will resonate with somebody and I will help them on their healthcare journey and help them with their patients. So much gratitude to you and the team for having me on.

Tim Ulbrich: I appreciate that, Cory. And we will link to the blog, we’ll link to some of the social profiles, specifically LinkedIn, your email address, in the show notes so folks can find that information. Go to YourFinancialPharmacist.com/podcast, you can find this episode and the corresponding notes. You know, you are contagious. I mean, the whole heart of —

Cory Jenks: I don’t know, you might choose your words better in a pandemic, here.

Tim Ulbrich: Yeah, that is true. Not a good choice of words necessarily. But you know, the energy that you have, the interactions you have with folks that you remember is something that I often think about. And I always describe these as bucket-filling interactions. So you know, sometimes we have interactions with other folks that can feel exhausting or feel draining. And then we have those interactions with folks that they really exude energy and they’re contagious to be around, and it obviously hopefully makes those folks better in the individual work that they’re doing and the desired outcome that they have through that work. And I can honestly say, Cory, my conversations with you, you are really that individual that is bucket-filling. I love the passion for what you’re doing. I love the purpose and the intent behind what you’re doing. And I think there are really exciting times ahead for you professionally and for you personally and the folks that you’re going to impact through your work. So congratulations on the success that you’ve had thus far. I look forward to following your journey. And please also send Cassie my regards.

Cory Jenks: Will do. Thank you so much.

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YFP 195: How to Save for Your Child’s Education

Posted on March 18, 2021November 2, 2022 by yfpadmin

How to Save for Your Child’s Education

On this episode sponsored by IBERIABANK/First Horizon, Tim Baker and Tim Ulbrich talk through strategies for saving money for your children’s college education. They discuss phases of planning for educational expenses, how to project how much to save, and various options for saving for kids’ college including 529s, Coverdell Education Savings Accounts, UGMA and UTMA Accounts, and Roth IRAs.

Summary

On this episode, Tim Baker and Tim Ulbrich talk through strategies for saving money for your children’s college education.

They discuss phases of planning for educational expenses including how to project how much to save. The two main phases of planning for educational expenses, the accumulation phase and the decumulation phase, are explained. In the accumulation phase, even before your children are born but before they begin attending college, parents will need to first assess their overall financial picture and situation, select the savings vehicle that fits the needs of the financial plan, actually fund the account, and check in regularly to make sure that the plan is on track to meet the educational financial goals. In the decumulation phase, parents are actively making financial decisions that directly impact the cost of the child’s education. The decumulation phase also includes actually paying for college. In both phases there are numerous ways to plan and save, each of which should take into consideration the retirement of the parent as well as their wishes for funding for the child(ren)’s education.

Tim and Tim also break down various options for saving for kids’ college including 529s, Coverdell Education Savings Accounts, UGMA and UTMA Accounts, and Roth IRAs, how they work, as well as the pros and cons for each when predicting the future expenses for your child’s education.

Mentioned on the Show

Episode Transcript

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

Tim Baker: Good to be back. How’s it going, Tim?

Tim Ulbrich: Good. I’m excited about this episode, one that we I know get lots of questions about from the community, from clients. I think it’s an anticipated episode. As I mentioned, a topic around college savings for kids that I believe is top-of-mind for many folks, of those that either have children or those that are thinking about having children down the road and the question is how do you best save for your child’s education? And as pharmacists, we’re all aware — acutely aware — how expensive school can be. 2020 graduate, $175,000 is the median debt load. We all know what that means in terms of our own education and therefore I think it’s probably front of mind as we think about our children’s education as well. Tim Baker, I suspect this is a topic our planning team gets lots of questions about from our clients. Is that accurate?

Tim Baker: Yeah. And it really comes from a place of like, I don’t really know how to approach this. So it’s more of a — I think more so than other things, it’s more of a blank canvas. Some people we kind of direct them if like, hey, if you don’t have a strategy here, we can talk through it. Some people are like, I don’t want my kid to go through what I experienced. I’m going to do whatever I can. And there’s every shade of gray here. So it is definitely something that we talk through with clients who are kind of in the phase of life where they’re just having kids all the way up into where they’re starting to go to college and trying to crack that nut. So it’s definitely something that is top-of-mind for a lot of the families that we work with.

Tim Ulbrich: Yeah, and I think it’s important before we get into account options and strategies — and we’re going to talk about 529s, probably the most well known option in the group, we’ll talk about coverdell account. We’ll talk about some taxable options, Roth IRAs and so forth. But i think before we get there, it’s important we zoom out for a moment, talk about really two phases of planning for educational expenses, the accumulation and decumulation phase. So Tim, talk us through these two phases, what they are, and thoughts that folks may have as they’re planning for kids’ college in these two phases.

Tim Baker: Yeah, so planning for education is very similar to planning for retirement. You know, we as employees will have a 30-, 40-, 50-year career, whatever that might look like. And typically, the overwhelming majority of that is in the accumulation phase where you are gathering assets and then you go through a decumulation or a withdrawal phase as you go into retirement. The same is true, to a lesser degree in terms of timeline, from an education perspective. So you have an accumulation phase, which is — could be before your kiddo is born all the way up until they’re 18 where they go to college and then you transition to a decumulation phase or a withdrawal phase where you’re actually paying for college. So a lot of families, especially with multiple kids, Tim, you’ll experience this with your boys potentially where you have four different one of these kind of rolling at the same time. So the accumulation phase is when you’re kind of just trying to assess what are your goals with respect to the education planning. So for a lot of people, it’s like, I don’t want my child to experience what I’m experiencing right now. For some people, it’s like, I think they need to have a little bit of it but to a lesser extent. And for some people, it’s like, that’s not part of my AO at all, like I’m not necessarily concerned about that. It’s kind of going through the process of organizing and selecting the appropriate investment vehicles to basically meet the goals that are in front of us, how do we want to fund it, so what is — how are we going to basically put dollars in those appropriate funds? And then just kind of those check in regularly along with the rest of the financial plan to see if we’re on track or off track, just like we would do for retirement and the like. And then really transition to the decumulation phase where it’s more about — and I kind of think about this in terms of the financial plan where you’re not a reactive spectator as I was when I was kind of going through this. I was kind of just I’m going to try to get into the best school that I can and I’ll figure out the price tag and everything later on but more of you’re making empowered, informed decisions about college. I think that’s needed, especially because of where the price of school has gone. So just being more in the driver seat and really work on saving on the cost for college, not just for the cost of college. So one of the big things that we’ll talk a bit about is just college is so ambiguous in terms of what it costs. There’s no price tag for everyone. And potentially help be that objective third party that’s removing the emotion and making an irrational home buying decision and do all this while you are taking care of No. 1, i.e. you and your retirement. It kind of goes back to that idea of put your mask on first before you can put your child’s mask on. The same thing is for education planning. So we don’t want to rob your own financial plan for your child’s college tuition. So those are really kind of the two broad phases that have different nuances as we’re going through them.

Tim Ulbrich: And one of the things you mentioned, Tim, in the accumulation phase is assessing the goal, starting to identify what the need is. And as a parent of a young child myself, multiple children, I struggle with the concept of projecting into the future to estimate educational expenses 5, 10, 15+ years into the future, although I know it’s important to begin to think about that and put some numbers around that as well. So how do you walk through this with clients when it comes to projecting the need?

Tim Baker: Yeah, it’s similar to like retirement. You know? Like we don’t really know what the cost of A, B, or C will be. We know that there’s going to be a factor that’s going to be inflation. We know that over the course of the last few decades that the cost of college education has increased threefold over a 17-year period meaning when your child is born, if it costs $40,000 to go to college today, by the time they’re ready to go, multiply that by 3 and that’s basically what a four-year education will cost. So you know, again, this goes back to the whole idea of like investing and time in the market versus time in the market and the time value of money. And for a lot of us, it’s just — it doesn’t necessarily need to be a completely balanced equation. It’s more about am I on track? And am I funding the education funds that are kind of in line with what my goal is? So there are some individuals — and I’ve actually had conversations with individuals where they’re like, we would love to have more kids, but we’re going to stick with the two that we have because if we add another one, we’re not going to be able to have that 100% solution for education. And those are conversations that I want to really dive into a bit more and really see if there is a potential way around it. So you know, just like retirement, we’re going to be tracking if we’re on track or off track. We do the same with education. The problem is that the cost, again, is ambiguous. There’s lots of components to the cost. There’s not like an itemized list that parents can go and say, “OK, this is exactly what it’s going to be. I’m going to know what that’s going to be in 17 years.” We’re just basically using all the tools, the data, we are making this almost just like we would in retirement. And we’re building the plan around that.

Tim Ulbrich: And I think that’s an interesting point, Tim, the ambiguous costs that are involved. There’s the sticker price of an institution, which from my alma mater, they’ve evolved that approach from big sticker price, discounting it with lots of scholarships, so the true cost is not anywhere near the sticker price to others where the sticker price, you’re in in-state tuition without scholarships and other things might exactly be that amount. And you’re looking at that times three or four or however long it takes. So talk to us about types of costs, types of expenses. What are things that folks need to be thinking about here in terms of the factors that would inform what that overall need may be? Or at least to project that need.

Tim Baker: Yeah, so you know, I think the way that a lot of the tools are built, the financial planning tools that this is kind of what we walk through clients on, you know, you have these different sectors of school. So you have maybe like a private nonprofit four-year on campus experience, which may be the most expensive. So like today’s dollars, it’s like $49,000 is the grand. And then we break those up into the different components: tuition and fees, room and board, books and supplies, transportation expenses, and other. So we have that but then we have all the way down to the public two-year kind of in-state commuter student that it’s a fraction of that, $17,000 all in. So we have the ability to, using the data that we have with some type of inflation number, to say OK, if you want your student to go to Ohio State and you’re in-state, it’s going to cost this much. And then we can build a plan around that. If you want your child to go to just the average four-year out-of-state or in-state, it’s going to cost this much. So you can be very, very granular on this. But really, the things to look at is tuition. So they say a rule of thumb is out-of-state tuition is roughly two times more expensive than in-state. Sometimes it’s a credit per hour, sometimes it’s a flat rate. Room and board, I’m going to do the don’t cut across my lawn, shake my cane at you — but like I remember looking at schools in the early 2000s when I was graduating high school and it being very much a bunk bed cinder block, not necessarily a great cafeteria expenses. And then listening to some of my younger cousins and saying like, “They do what?” And it’s kind of like an arms race, so to speak. And I think that’s one of the reasons that — you’re competing for students — but that’s one of the reasons why some of these have gone up. So room and board, does the school require on-campus housing for freshmen, even sophomores? That’s becoming more and more of a thing. A lot of schools have talked about freezing tuition, but room charges kind of remain unchecked. And a lot of these amenities kind of inflate the cost. It could be food where there’s meal plans. Typical meal plans could be $1,000-2,000 per semester. It could also be things like different fees that are for courses or parking or student ID and orientation, library, legal services, student government. It goes on and on. And these are things that can kind of just start really increasing — it could be textbooks. I know there’s a lot of things that are trying to disrupt that in terms of rentals and things like that. And then just transportation or personal expenses. I know you’ve seen back in the day like oh, like do you use student loans to go and travel and do that? And a lot of people are like, you know, let me live. A lot of people are like, I don’t want to do that because I don’t want to have that inflated student loan number at the end. So it’s very much a layered process in terms of what you’re paying. I think to be able to have some guidance and some counsel on this — and there are financial planning practices that specialize in this alone, especially for a lot of people that are working with Gen X individuals. So I think to have a person to help coach you and your teenager, which can be a little bit different. I know if I transport myself back to that, I’m like, I’m doing what I want.

Tim Ulbrich: That’s right.

Tim Baker: But I think if we reframe some of the conversations — and we see it when we talk to schools of pharmacy. If we’ll say, “Hey, the average debt load is $175,000,” that’s like funny money, right? But then if you actually equate it to like what does that cost per month in student loans and then you maybe multiply that by 12, which is close to $2,000, a year $24,000 if we go to the standard plan, that’s where you’re like OK, like maybe we need to have a more rational, less emotion, and make sure that, again, if you’re in pharmacy, all of that education equates to a higher income. But that’s not the case for everybody. If you go study something different that you’re not necessarily aligning what you’re paying in tuition with the expected salary.

Tim Ulbrich: Tim, one of the things you said, which is something that I’m struggling to think through — Jess and I — with our boys is I’ve heard you talk about taking current costs and projecting out for some factor of growth that we may expect and certainly we’ve all seen the numbers of tuition and fees, important point you made up — fees that are going up that far surpass inflation and historically have gone up at really incredible rates. But it’s important to note there is somewhat of a national conversation going on about the need for more affordable higher education or even perhaps in some cases free education. So this is something that I feel like I’m struggling reconciling is might I be overprojecting the need? And what’s the opportunity cost of that in terms of where else that money could be used and if it’s tied up in this account or that account? We’ll get into that a little bit with individual accounts, but what are your thoughts on that? Not asking you to crystal ball higher education over the next 20 years, but in projecting the need based on going forward and what we’ve seen historically with growth but also some discussions around perhaps this might be more affordable or in some cases free.

Tim Baker: Yeah, it’s a great question. And you see a lot of the political discourse around this in terms of like a more progressive political movement to forgive student debt and then offer free options. I’m going to talk out of both sides of my mouth in some degree. So like I think from a planning perspective, it’s tough to — you know, I kind of always default to the status quo. So just assume things are not going to change. But then when I talk about the 529, I’m kind of talking out of the other side of my mouth in that I think that over the last couple years and I think projecting the future, the dollars in those accounts are going to be able to be used for more liberal purposes even than what they’re used for today. So the free college discussion, I do think that there is a very real possibility that by the time, Tim, our kids go to school, that’s going to be an option on the table, an option that I think that a lot of people should seriously consider. I’m kind of putting myself back in that, like would I want to do that myself? And the answer is probably no, I wouldn’t have. But it might make more rational sense to do that, especially if you don’t know what you want to do, which again, most 17- or 18-year-olds don’t really know that. I think that’s going to be the real — the first big domino to fall is going to be kind of that free two-year community college. And I don’t know what stipulations are going to be on that, but I typically from a planning perspective, I plan as if it’s the status quo and hope that potentially there is an improved reality. So like one of the things they just announced with the latest bailout package was that they’re changing some of the rules to the income-driven plans that if you get forgiveness for a non-PSLF strategy between now and 2026, that that’s tax-free. Like you don’t have to pay the tax bomb.

Tim Ulbrich: No tax bomb, yeah.

Tim Baker: But the caveat to that — there’s not very many people because those are 20- to 25-year plans. There’s not many people that are in that boat. So it’s nice, but is that something that they’re going to extend permanently?

Tim Ulbrich: Right.

Tim Baker: Maybe, but do you say — you look at that, and you’re like, do you stop saving for the tax bomb? I don’t know if I would feel comfortable telling the client to do that. Now, the nice thing about the tax bomb was typically in a taxable account that you can use that and say OK, no more tax bomb, let me go buy a vacation home. That’s great. If it’s in a 529 account, maybe not so much. So yeah, I think it’s a great question. I think one of the things that a lot of people — and I had these conversations with prospective clients that were like, ‘Yeah, I’m kind of just waiting for this election to see if Biden gets elected what he’s going to do on the student loans to kind of push forward on my strategy.’ And I’m like, in my inside voice I’m thinking like, I wouldn’t hold your breath. And again, like could he forgive student loans? Maybe. But it doesn’t sound like he has an appetite to do it from an executive action. And if it’s — it’s going to be I think for most pharmacists very inconsequential. And again, I don’t know if I would hold up my life, my strategy, to wait for the politicians to come in and save it. So you know, whether that’s $10,000 or $30,000, it’s tough. So I think the big thing to kind of follow, which I think will be — is like that two-year. But then what are the stipulations for that? And then does your student, does your kiddo fit into that? I don’t know if that’s a — if it really, really affects my plan from an education standpoint. So that’s kind of what my take is on that.

Tim Ulbrich: Great discussion. And I think it’s important for folks to consider that on their own as well. And let’s shift now into talking about some of the accounts that are available for kids’ college. We’ll spend a decent amount of time on the 529. We’ll also talk about the Coverdell accounts, the UTMA accounts, taxable accounts, Roth IRAs, so different options here that we might consider. Tim, let’s start with the 529s. Obviously they come up in conversation probably the most often from my experience. What is a 529? What type of contribution limits are out there? How can it be used? And talk to us about these accounts at a high level.

Tim Baker: Yeah, so the way that I think about these are these are essentially like retirement accounts for education. But it’s really going to be dependent in terms of — so why do I say retirement accounts? Because most retirement accounts have tax-preferred status. Like if you put dollars in here, you can save taxes. But every state’s going to be different, right? So one of the big things that makes this attractive for a lot of parents is that the parent essentially owns the account. So a lot of these other ones that you mentioned, it’s like, these are Coverdells, UTMAs, UGMAs, these are custodial accounts that really belong to the student. So these are like retirement accounts, but for education that the parent owns. And one of the big things that I think is exciting that really happened over the Trump administration is that they’ve loosened up what these 529s could be used for. So back in the day, you would use these for a long accumulation period. So you would say, “Hey, little Johnny was born in 2000. He’s going to go to school in 2018.” And for those 18 years, you would basically put money in there and then whatever is left over, that’s what he would use for qualified education expenses. Now with some of the changes to the Tax Cut and Jobs Act under the Trump administration, you can now use it both as an accumulation account, so in future like when Johnny goes off to college, but then also today when Johnny starts kindergarten and he’s going to a private school or all the way up through 12th grade. So under the federal law, savers can now throw up to $10,000 to pay for students K-12 tuition. Now every state is going to be different in terms of what they allow. So that’s important to know what your state does allow. The other big thing that the 529 account — so this was under the SECURE Act, basically that it now allows, which is crazy that this is even a thing, but it now allows qualified student loan repayments up to $10,000 per beneficiary from the 529. So before this, if you had $10,000 in a 529 and you had $10,000 in loans, you couldn’t use that money without a penalty, without a 10% penalty to pay that off, which is crazy talk. Like there shouldn’t even be a $10,000 contingent on that. It should be if you have money in there and you have loans, you should be able to pay it off. And then the last thing that the SECURE Act does is it allows you to use the money for like apprenticeship programs. So like we talk about education — I know Tim and I, we talk about this kind of behind closed doors about like what does higher education look like in the future, what’s this going to look like for us versus our kids, and is there going to be a swing back to more of the apprenticeship type programs and that type of thing. And the 529 is opening up that. And you might be surprised by this, but even — like even when I started learning about the 529s, they didn’t allow you to use it for like a laptop or things like software, so it’s been a gradual thing. So I think that the restrictions are going to continue to kind of be loosened up, just because of the need to kind of solve this problem. So the 529, think of it as a retirement-like account that you can put in money and get a deduction on the state level, depending on the state, and basically grow that money tax-free. So if I put in $10,000 over five years and it grows to $20,000, I don’t pay capital gains tax on that as long as it’s used for qualifying education expenses. And I don’t pay any tax on the back end. I do pay a penalty if I use it to buy a car for my kid or something like that. The other big things in terms of flexibility is that let’s say Johnny doesn’t want to go to college. Let’s say he wants to start his own business, which I might be a big proponent of, maybe buy a franchise and learn that. So he can’t use the 529 for that. But maybe Jane, our second child, can. So you can basically use those — and let’s pretend Jane doesn’t want to go. Then maybe their grandkids do. You use it for that. So the money can sit there and grow. A lot of people think like, oh, I’ll never be able to use it. Like you can just keep changing beneficiaries, essentially, and use it for the children or the grandchildren that do need it. So I am a big proponent of it. I know some people, they kind of feel bound by some of the rules because it’s like, what if you don’t use them for qualified education expenses? But I think it’s a viable way to not only get a state tax deduction based on the state that you live in but also to allow those moneys to grow tax-free without paying capital gains that you would see on like a brokerage account or something like that.

Tim Ulbrich: Yeah, and the way I think about these, Tim, just to draw another example to how you explained the tax considerations, I think about these as like a Roth IRA for educational savings. So money going in has already been taxed dollars, it’s going to grow tax-free, you can pull it out tax-free for qualified expenses, which you outlined. I do want to just mention because I think it’s worth further explanation, you gave the example that these can now be used for not just higher education but let’s say I have a child who’s in a private education K-12. And some folks might be hearing that saying, “Well, what’s the purpose if I don’t have the long-term investment or gains?” If I have a 5-year-old or a 6-year-old, 7-year-old, they’re in private school and I put money in and then I turn around and take that money and spend it for that education, what’s the point without the gains? And really, the value, Tim — correct me if I’m wrong — would be on the state income tax deduction, right? You’re essentially passing it through, taking advantage of that state income tax deduction. And then of course if there is any time period of growth, you’re going to get some of that growth as well. But is that the main benefit of that type of approach?

Tim Baker: So if you live in the state of Ohio and you know that you’re going to have $10,000 in private school costs, you could put that money in, that $10,000 in, and then at least in the state of Ohio, I think it’s — what is it? $4,200 per kid. So you could at least take that off. So if you make $100,000 that Ohio recognizes income and you basically use it as a pass-through, so it goes right into that account and then you take it out and now the state of Ohio sees that you made $97,400 if I did my math right. Yeah. So $95,400. So the idea is that you use that as a gateway to lower your state income tax. So you’re not really getting any growth at all. It’s just a way to basically contribute, get the deduction, and then use those in more of the near term. It’s the same thing like you could argue with an HSA.

Tim Ulbrich: Yep.

Tim Baker: So the beauty of the HSA is that you can put those dollars in there. So if you put $2,000 into an HSA and then you use it right away, you’re not really getting any growth or tax-free growth on the accumulation of the asset, but you are getting the reduction on your federal and state income in that regard, which can be very beneficial. So and that’s the dynamic that has changed recently under the Trump administration where it wasn’t there before. It’s a great benefit, especially for those individuals that are sending their kids to private school K-12.

Tim Ulbrich: I’m still waiting for them to add the homeschool provisions, by the way.

Tim Baker: Yeah, that keeps getting cut out. And typically at the last minute too.

Tim Ulbrich: Yeah, I’ve got to dust off my lobbying skills. So get down at the statehouse. So some of the disadvantages I think about, you mentioned one of these with the 529. If it’s not used for educational expenses, which it has been broadened out as you alluded to, 10% penalty and tax on the earnings portion of that investment. Other things that come to mind here, Tim, would be as you’ve alluded to, not all 529s are created equal. So they’re based in different states. And this is where you hear folks say, x state’s 529 is the best one. So is it fees? Is it investment choices? Is it flexibility? Like what are the differences that we see in terms of state 529 offerings?

Tim Baker: Yeah, so like unlike some of these other accounts like the Coverdell and the UGMA/UTMA, the 529s are typically administered by the state. So the 529 will say, “Hey, Fidelity or Vanguard or American Funds, we’re hiring you to take care of our state’s 529.” So just like different custodians and institutions, they’re going to charge different fees and have different investments, the same kind of flows through to the 529. And it’s the same with the 401k and the 403b. So some companies will hire companies that are really efficient. So they’ll have good investment selection and cheaper fees. And some where that is not the case at all. Now, sometimes it’s inconsequential because even if the 529 is not great, the state tax deduction is such that it does make sense to pay the lesser fees to get the tax break. But that’s not always the case. And then there’s some states like North Carolina, they don’t care. Like they don’t have any benefit at all. What you essentially want to do is go out and find the state with the best 529 plan, which is often like Nevada’s typically at the top of the list of — the Nevada 529 because theirs is run by Vanguard. It’s typically lower fees and things like that. So a lot of it goes to fees, a lot of it goes to kind of investment selection that is really the driver of like, what constitutes a good 529 plan and what constitutes a not-so-good 529?

Tim Ulbrich: So I don’t want to spend as much time here, but just high level overview of the Coverdell education saving account, the UGMA, UTMA accounts, what are the main differences of those accounts from the 529s?
Tim Baker: Yeah, and to be honest, Tim, like I’ve seen this with clients. I can probably count on my hands how many times I’ve seen these accounts. So these are both custodial accounts, basically like self-directed. So where I was describing with the 529s are kind of administered by the states, you would just go to a financial advisor or even yourself, work with a banker or custodian, and you would say, “Hey, I want to open these up for the benefit of my kiddo.” So if we start with the UGMA/UTMA, these are just really trust accounts that you invest — basically you help invest a child’s money until they can take over it. So it’s owned by the child, but they don’t necessarily have control of it until they’ve reached the age of majority, which for every state it’s going to be different. So that can range anywhere from 18 years old to 25, depending on the state. So these accounts, what you contribute as the parent or the grandparent or whatever, it’s an irrevocable gift that basically means you can’t — there’s no takebacksies. So you give it and then you have no more control of that asset. So in a lot of ways, you’re kind of bound by the gift taxing limits. So these, you typically see these with very wealthy people that are trying to like spend down their estate so they’re not hit with a crazy estate tax. There’s not a whole lot of like tax benefit. So like if you put $10,000 and it grows to $20,000 for that child, they’re paying $10,000 in capital gains. And this could negatively affect the financial aid of the child because the asset is owned by the child. So I don’t really see these much because of the advent of like things like the 529. The other big thing is that I don’t think — then you can use it anything. So if Johnny reaches 18 and he’s like, I don’t want to go off to college and that’s what this money’s for, but I think he can spend it on whatever he wants. So he’s not bound by the education. The Coverdell, these used to be called Education IRAs. The name was changed. These contributions are not tax-deductible, but it does grow tax-free. So they’re very much like Roth IRAs in that the gains are tax-free and they’re self-directed versus state-directed. So you know, they’re — and the withdrawals are tax-free if used for those qualified education expenses, which are also K-12. So this was even before the 529, that was a thing, the Coverdell did have that. But the big downsides for these is that you can really only put $2,000 a year per student. So it’s very low contribution limits. And then you typically phase out like once you reach $220,000 as a married filing jointly or $110,000 as a single taxpayer, you can’t contribute to the Coverdell at all. So for many pharmacists, you know, you’re very quickly kind of out of that, especially if you have dual income. So I don’t really see these anywhere. I mean, I think primarily I see people save for their kids’ education either in a 529, a Roth IRA, a brokerage account, or I’ve even seen some people do it with real estate, which is an interesting concept as well.

Tim Ulbrich: What would be the advantage of a brokerage account? I want to get to the Roth here in a moment, but these ones, we’re obviously talking about some tax advantages that can be associated with them. So what would be the thinking of a brokerage account as a primary vehicle?

Tim Baker: I think for a lot of people, it’s just — it’s that perceived flexibility, which is there. But I think from a Roth, like you can take whatever you contribute to a Roth out any time penalty-free. Tax- and penalty-free. So that’s one thing that a lot of people don’t understand is that if you contribute, you can take that basis out of the Roth IRA. It’s when you start getting into the earnings, that’s when you get into the penalties. So I think for a lot of people, it’s kind of that idea of just flexibility. The problem is that once you start adding up — like if you’re saving for Jane and Johnny’s college over the course of 20 years or so, you could see real capital gains tax there.

Tim Ulbrich: Yep.

Tim Baker: Hopefully they’re long term capital gains so they’re taxed at a preferred maybe 15% versus a 22%, 25%, 30%. But that’s still money that you have to account for when you’re going to use that for education. So again, I like the 529. It’s not investment advice. I think for a lot of people it makes sense because of the flexibility that you can — you know, if one kid doesn’t use it, you can give it to the next one. It’s just my kind of go-to.

Tim Ulbrich: Speaking of flexibility, one of the things that I’ve thought of that I want to get your input on — I suspect our listeners may have as well — is the Roth IRA as an option for thinking of saving for educational expenses with the understanding that qualified educational expenses are an exception to the early withdrawal penalty and as you mentioned, the basis or the amount that you put in a Roth can be pulled tax-free without penalty at any point. So talk us through that strategy. I think of something like a Roth versus a 529, perhaps more investment options, perhaps an option to keep fees down depending on what you have in the 529, the idea that if Johnny and Suzy decide not to go to college and I don’t have anyone else to transfer it, I can continue those savings on for retirement. Downsides of course would be of maybe we’re not using that as the primary or one of the primary vehicles for retirement and savings. So where does that fit in in terms of strategy of folks when you’re thinking about where a Roth may or may not fit relative to the 529 specifically?

Tim Baker: Yeah, I mean, I’d probably default more so to the 529 first, at least get the state tax deduction. But there’s some people that are just like, I want to really use — because that is one of the exceptions in the IRAs that you can for higher education expenses and I think it’s cap, I don’t know if it’s the same for first-time home buyers, if it’s $10,000. I’d have to look that up. But I think it is. I don’t know, I think we talk about accounts like the HSA that has this dual purpose. But sometimes when you have a dual purpose, you have no purpose. It’s almost like when you have two quarterbacks, right? So for like the Roth IRA, like I look at that as a retirement account, not an education account. But it could very much be used as such. I think that yeah, to your point, is there more flexibility in an IRA versus like a 529? Absolutely. Is it even cheaper? Yeah, potentially. But I think that where the 529 is going — and I think you can have both, really. Some people will never reach their state’s benefit in terms of what the state tax deduction would be. But yeah, I think this is more of a conversation for clients that don’t have that benefit, like I said, North Carolina where the Roth is — or even the brokerage account, but I would probably say the Roth first would be the first avenue. So you know, I kind of, again, default rightly or wrongly to the 529. But I think the Roth can be a viable way to at least put some dollars aside for that purpose.

Tim Ulbrich: Yeah, and I like the thought on the 529 for the state income tax deduction. Maybe you build it from there, maybe you look at a Roth. The other thing, which I think goes without saying, is that if there is a way to earmark your Roth specifically for long-term retirement savings and still contribute to a 529, we can let that money continue to grow as you say on repeat on this show, it’s time in the market that matters, right? So if we can not have to pull that out for college expenses and let it continue to grow, obviously we’re going to reap the benefits of that compound interest. Last question I have for you, Tim, as we wrap up this discussion on kids’ college and savings: One of the thoughts that I have is coming out, I’ve talked about my story and journey on this show many times before, but I suspect for many other pharmacists that have six figures or more of debt, is there a tendency for folks to overcompensate for kids’ college savings at the expense of other areas of their financial plan, specifically for those that have come out with very high debt loads and because of that experience, might lean in that direction of hey, I don’t want my child to have to go through it, at the expense of their own retirement, at the expense of other financial goals that we might traditionally think come before kids’ college? Is that something you see among clients?

Tim Baker: I think that yes, I do. But I also see like a bit of every kind of approach on the spectrum where it’s like, I don’t ever want my child to ever have to go through this again or go through what I went through. But there’s also like some of it like I went through it, so they have to go through it. And then there’s some reservation of like, just because my loans are so bad, I don’t think I’m going to be in a position to help them.

Tim Ulbrich: Yes.

Tim Baker: Sometimes there is kind of the reaction, you know, equal and opposite reaction type of approach. But it’s all over the place. And I think for the most part, the default has often been I want to help my kids as much as I can, but I also need to make sure that I’m taking care of myself. And I wouldn’t say it’s uncommon, but you know, there have been not as many conversations as you would think where I’m saying like, we have to pull that back. So you know, one of the things that we do as part of the goal setting here is how do we want to go about funding this? And there’s a lot of different approaches where you can plan for 100% or you can plan for something that’s a lot less than that and feel good about that as part of your financial plan. So yeah, it is all over the board. But I think there are sometimes is a push to kind of overcompensate for that or some just like, hey, I had to deal with having to find my way.

Tim Ulbrich: Good luck.

Tim Baker: They do too. Yep. Yep.

Tim Ulbrich: Great stuff, as always, Tim. And to those listening and college savings may be on your mind of one of many financial goals that you’re trying to work through, we’d love to have a conversation with you about the comprehensive planning services that we offer at YFP Planning. Now serving more than 200 households across 40+ states of the country. Our team is well versed in this topic among other parts of the financial plan. And you can go to YFPPlanning.com, book a free discovery call to see if our services are a good fit for you. And as always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please do us a favor and leave us a rating and review on Apple podcasts or wherever you listen to the show, which helps other folks find out about the Your Financial Pharmacist podcast.

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YFP 194: How Karine Used Her Pharmacy Skills to Create a Successful Healthy Dessert Business

Posted on March 11, 2021November 2, 2022 by yfpadmin

How Karine Used Her Pharmacy Skills to Create a Successful Healthy Dessert Business

On this episode, sponsored by Insuring Income, Karine Wong, pharmacist, educator, and entrepreneur, joins Tim Ulbrich to talk about her journey starting My Guiltless Treats. Karine discusses how she uses her pharmacy skills in her entrepreneurial journey, how to determine whether or not a business idea is worth pursuing, why it is so important to have a clear purpose and vision, and why saying ‘yes’ is so crucial when starting and running your own business.

About Today’s Guest

Dr. Karine Wong spent her entire pharmacy career in the hospital pharmacy. She worked as a staff pharmacist, director, and clinical coordinator. Over time, she became frustrated about the lack of compliance with her diabetic patients. After countless hours of counseling at the bedside, the patients would return in a few short months with the same problem; uncontrolled diabetes. In 2013, Karine and a colleague had an idea to make protein candies. The idea seemed intriguing; simple and yet revolutionary. The company could provide a viable, sustainable solution to the non-compliant diabetic patient. By 2018, Karine has led My Guiltless Treats on a successful journey to popularity, sustainability, and profitability. To date, My Guiltless Treats is the only company that specializes in healthy desserts.

Summary

Karine Wong, pharmacist, educator, and pharmacy entrepreneur, joins Tim Ulbrich to discuss her pharmacy career, how she’s used her pharmacy skills on her entrepreneurial journey, and how she’s built a successful business, My Guiltless Treats, by going above and beyond the usual standards.

Karine has also learned how to determine if a business idea is worth pursuing and outlines practical benchmarks to evaluate when starting a new venture. She explains that great ideas can turn into great businesses if they can solve a problem that you care about and are passionate about, solve a pain point, have a market (with or without competition), and help people on a large scale.

Additionally, Karine shares her personal experience with the power of being positive, how the act of saying ‘yes’ can have a huge impact on your business, and practical ways to say ‘yes’ in your own business practices. Business owners, aside from providing free product (if the business can afford it), can also provide knowledge and time in various forms to their customers, building relationships that may potentially turn into lifelong sales.

Mentioned on the Show

Episode Transcript

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

Karine Wong: Hi, Tim. How are you?

Tim Ulbrich: I am doing well, excited to have you on. We had a chance to meet virtually a few weeks ago and had an opportunity to learn a little bit about your pharmacy career as well as the work that you’re doing with My Guiltless Treats and said, “Hey, we need to get this in front of the YFP community,” as I know many folks may have an idea that they’re wondering about, whether it’s a business idea, a side hustle idea, and I think featuring other pharmacy entrepreneurs is really an opportunity for them to see examples of what others are doing out there. So let’s first start with your pharmacy education and career. Why did you go into pharmacy? Where did you go to pharmacy school? And what type of work have you done in pharmacy throughout your career?

Karine Wong: I went to pharmacy school right out of high school, straight into University of the Pacific in southern California and endured a 5-year program, the accelerated program to be a PharmD at the end of 5 years. By the end of the 5 years, I really loved the clinical field. I actually wanted to be a doctor at that point, but at that point my parents decided not to support me anymore. So I was stuck being a PharmD. That’s OK. At the time, pharmacy was — it’s a world that can be anything you want it to be. You can be a CVS pharmacist, a Kaiser, nuc pharmacy, ambulatory care. It was — the world’s your oyster. I chose to stay in the hospital field. I felt that was the best place for me to be surrounded by the greatest minds of Edison. And so I stayed in hospital pharmacy when I graduated in 1999. And I have worked up the totem pole. So I was a (inaudible) pharmacist, worked up to outpatient pharmacist, did some floating here and there, became a director of pharmacy at one point but stayed put as a coordinator, which is a fancy word for clinical manager. So I was in charge of all the PMT minutes, agenda items, formulary additions, deletions, and in these settings. I also got the precep student from West University for 8 years and I’ve also participated in rounds with the teaching staff of the hospital. So I’ve always been in academic settings in terms of the hospitals. I was always teaching nurses or students, interns or residents and pharmacy students. So that’s pretty much my journey. Always learning.

Tim Ulbrich: Always learning, which is a good connection to business. And we’re going to talk a little bit about how your pharmacy career has played a role in the work that you’re doing in running your own business. So My Guiltless Treats — and we’ll link to that in the show notes for folks so they can learn more, check out the website, learn about the products that you offer — give us the 20,000-foot view. What is My Guiltless Treats all about?

Karine Wong: My Guiltless Treats is not something I intended to start at all. If you had told me 20 years ago I would start a business, I’d laugh in your face. I’d be like, no, no, no, I’m going to live and die in my pharmacy office. That’s what I thought I would do. Kind of changed now, I think I got burn out in pharmacy. I was really good at what I was doing, and I was writing codes, I was helping the pharmacy staff with all the difficult cases we had at our hospital. When 2008 rolled around, I took some time off to give birth to my child and I came across this fitness director who wanted to increase my protein intake. But it did not taste good. And she complained about why does it taste awful? Now, as a pharmacist, I thought, that’s kind of funny. I don’t take protein myself, but don’t you think it’s odd that we can make steroid solution taste really great but we can’t make something as simple as protein taste better?

Tim Ulbrich: Right? Yeah.

Karine Wong: So I told her, I can make it for you. I’ll make you a protein candy. And that’s how My Guiltless Treats came to fruition. I did create a product that was a delicious treat. At the end of the 5 years of working with her with RMD and sales, we decided to split up. She went to pursue a different career path, but I stayed on board. The original treat that we had, they’re actually protein gummies, was not scalable. It wasn’t something that people wanted to buy. We had no sales to warrant the continuation. We had people who loved it, but it wasn’t like a lot to justify a $50,000 investment into buying a million gummies, OK? That’s a lot of gummies to sell. It’s almost like two pallets. And it wasn’t scalable, it wasn’t something that we could sell. So she took off, which is fine, but I stayed on with the company because I still believed it had so much potential for it. So I looked at Guiltless Treats as a vehicle to deliver treats or desserts to diabetics, to those who really need it. And this Aha! Moment came back to me when I was working at the hospital. I remember counseling at the bedside and doing diabetic teaching to our patients diagnosed with diabetes, and I would teach them how to use insulin and the syringes. One gentleman stuck in my mind because he was very noncompliant, his A1C was double digits. I had to tell him, “OK, senor, no more bread, no more rice,” and he said, “OK, I would love to do it. But senorita, I want my bread. I want my (inaudible) bread. I want that.” And I looked at him and go, “OK, I guess I’ll see you in 3-6 months,” you know? Right? What can I do? He told me he’s noncompliant. He’s not going to change. He gave me a dare. He said, “Unless you can tell me something that is good for me and delicious, I’ll eat that.” And I had no answer for him. That was the Aha! moment. That was the moment I realized, oh my gosh, he’s right. So I go downstairs, and I ask my dietician friends, my physician friends, “What do you tell patients what can they eat that’s good?” And you know what they all told me while they’re eating their Twinkies and their Ho-Hos, “You tell them to eat their kale.”

Tim Ulbrich: Oh gees.

Karine Wong: Quinoa’s good, brown rice is supposed to better. This is what they’re telling me. But they weren’t eating it. And I’m thinking to myself, OK, that’s — I can’t use that, OK? Because they don’t know how to make kale salad or quinoa rice. They don’t know how to do that. It’s not part of their culture. So I was up against the wall. So when my fitness instructor friend mentioned the protein gummies, I thought, that actually sounds interesting because I can take out the sugar and replace it with another macronutrient like protein. So even though the gummies didn’t come to fruition, there was a point to make the treats. There was a reason for it. I needed to make something for that gentleman. I needed to make a dessert, something that he can have that doesn’t taste medicinal, that doesn’t use artificial flavors or sweeteners, something that he can grab at the store, not have to make it, not have to thaw it or bake it but can eat it right out like a protein cup. So aha! Six months later, after intense RMD, I created or actually made a version of my own kind of pork bun, (inaudible) a type of dessert similar to flan or custard. It’s very soft in texture. I don’t use (inaudible) cream or eggs or gluten or milk. I just use coconut cream, which is better for you, doesn’t cause the same problems as animal fat. And I layer over real mango, pineapple, or guava. So it’s a tropical dessert. And then I fortify the dessert with protein from the protein. But it’s also filtrated, so there’s no lactose, there’s nothing that will make you bloated. I deliberately made my products allergen-free. I took the top seven allergens that we see in the States and took them away, so nuts, there’s no seafood, there’s no tree nuts, stuff like that. I avoid that. Coconut is not considered a same nut as a tree nut, so it’s OK to use that. And yeah. I’ve been successful with the panna cotta desserts, people love it, it’s a thing now. People know me as the kind of the panna cotta lady. I’m the only one that makes it. And I make it healthy. So it’s the only dessert that you can find that’s actually good for you. So you can eat it instead of your ice cream at nighttime, you can eat it instead of yogurt at breakfast or like my friends at the hospital, they eat it during their shift. So when they have a long shift, the protein sustains them for the entire 10-hour shift that they have. So it’s a great option for everybody. You don’t have to be diabetic or pre-diabetic to enjoy it. You could be anyone. It’s just a dessert that’s healthier. Other manufacturers can’t do that because they put lots of sugars in their products. They don’t really know what we know as pharmacists. And that’s why being a pharmacist really helps your product if you’re going for the food industry. Because you know so much.

Tim Ulbrich: Yes. Yes. Absolutely. That makes sense. And one of my favorite stories, Karine, from our conversation several weeks ago was, you know — and get the story right if I have it wrong, but you had mentioned at the gift shop of the hospital, you know, this being distributed and sold and how quickly it would come and go and that you knew you were onto something in terms of folks that obviously appreciated the product, the quality of it, and certainly those that could benefit from it from a health perspective as well. And it has me thinking, you know, we’ll take a little bit of an aside here, but many folks may be listening that have an idea, right? And so you had an idea of something that could be done better. You mentioned the protein gummies, which ultimately didn’t come to its full fruition. So what ultimately does make a good idea? As you’re thinking of this not only with your own business here and other experiences you’ve had but also potentially advising and giving input to other folks that have business ideas, what makes a good idea? What’s the framework in which you think of what is this idea and does it actually have viability going forward?

Karine Wong: That’s a great question. And I’m going to say lots of time and energy because I could break it down for you in this way. I actually have a lot of students or mentees that I work with who have ideas, and ideas come in and out of your mind all day long. Doesn’t mean you act on every single idea. So what makes a good idea, an idea that you probably want to sit on. First, the idea that you have, whether it’s a service or a product, should be there to solve a problem. And the problem could just be just to you, but if you find that this problem bugs you — let’s suppose that it bugs you that every year, your smoke alarm will run out of batteries and always at 2 o’clock in the morning, right? Every night.

Tim Ulbrich: Amen.

Karine Wong: I don’t know how they do it. And that’s the night that you can’t sleep, that’s when you jolt out of bed with almost an MI because it’s like, beep, beep, and it won’t stop, especially if you have like 5 in your house and you don’t know which one it is, right? What if that’s a problem for you? If it’s a problem for you, it’s a problem for someone else and probably many others that have smoke alarms. No. 2, if you could develop a product like a battery or a monitoring system that tells you when your battery is low, like if you can find a way to make an app that bluetooths the battery life to your smoke alarm, that would be superb. And you don’t have to physically make the app, you just have to hire someone that can code it for you. You tell them what you want, and they make it for you. It’s pretty simple. But you have to have the idea, you have to do the research and find out is there a market for it. So if I know every house in the United States has to have smoke alarms, right? That’s a law.

Tim Ulbrich: Yep.

Karine Wong: No. 2, so the market’s very big. No. 3, does anyone make that besides you? Like is there an option out there? Now if there is, it doesn’t mean don’t do it. Just know that if there’s no competition, you have a more difficult road because you have to pave the road for yourself. You have to do all your market research and find out how to get the pricing down, find the right coder, for example, and get the best pricing for that. But if you have competition, follow them and see how are they doing it? OK? I’ll give you an example. Protein gummies was my first skew. We had three competitors. That was back in 2010. Today, they’re all defunct. Why? Because no one wanted protein gummies. Interesting. They all went bankrupt. We didn’t go bankrupt, we just changed our name. Going into No. 3, you have to find out if there’s competition or not. OK? No. 4, if it’s a good idea, it’s an idea that will come back to you the next day.

Tim Ulbrich: Yes.

Karine Wong: So an idea that’s OK goes away the next day. You don’t remember. You just like, eh, whatever. I don’t remember the idea. It just came and go. It didn’t stick around. But if the idea is awesome and you find there’s potential in it because of what you know, whether it’s a pharmacist or a handyman or living your house and hearing that every year, the smoke alarm chirping, then that idea will come back to you. And you’re like, you know what? I won’t let it go. I can’t let it go. Because it’s a really good idea. And that’s how you know. So those are four benchmarks. And just like when you sig a patient, check them off, right? Do you have a problem that you’re solving? Check. Can you make a service or a product that will solve it? Check. Competition, is there any? Check, yes there is. That’s fine. OK? That doesn’t stop you.

Tim Ulbrich: Yes.

Karine Wong: It just means that, hey, there’s a market for it because so many people have tapped into it. Now if there’s too many competitors, you might want to like not do it because it’s too hard. Like I would never go into the beverage market now because it’s so supersaturated. I would not go into the frozen industry because you know the frozen aisle is very coveted shelf space because it’s frozen. So I can’t get in there if I had the best tasting item ever. I could not break into that. And No. 4, like I said, if the idea comes back to you and you won’t let it go, then you have a really good idea.

Tim Ulbrich: I love that, Karine. Very tangible advice. Checklists, we like checklists. We like thinking about things in sequential order. And I think your comment that resonates — several things in there — but you know, multiple ideas that may come to focus doesn’t mean we need to act on every one. What I actually do at home, my wife and I like to brainstorm various business ideas. And we write them down on a legal sheet, you know, 8.5×11 yellow piece of paper. It’s in my office. And then what I find is some of those we keep talking about, right? We come back two days later, four days later, six days later, eight days later, even some of those we may determine for other reasons in your four steps aren’t viable. But those that we find we can’t let them go, like that means you’re at least at the beginnings of something that obviously is important to you. The other thing I think about here, Karine — I’d love your input — is I think folks often struggle with is this an idea that I really care about solving this problem and I have a solution that I’m going to be really passionate about? And is it financially viable? Am I after the money? Am I after the purpose and solving this problem? Or both? And what advice would you have with folks, you know — here as I hear your story, obviously at the end of the day, you’ve got to run a business but also something that you saw could have a tremendous impact on patients. It was a problem that needed to be solved. And so the concern that folks might be chasing becoming rich or having a home run of a product and how important it is to be passionate about the problem that you’re trying to solve.

Karine Wong: The way I look at it is your company is a baby. If you’ve lost interest in your baby, the company, literally dies. So imagine yourself, like you’re in charge and you decide, you know what, I’m going to take a break and do something else. Guess what? The company that you built falls apart. It may take awhile, but it will fall apart because you are the glue that holds it together. So you’re the why. Why are you doing this has to be something that you will use every morning you wake up, every morning you clock in, you turn on your recording or you reach out to people for your interviews, that is your why, why are you doing it. And if you say, “money because I want to be a millionaire,” or “be featured on Ellen, the show,” you’re going to have issues, OK? Because the likelihood of that is almost as high as winning the lottery. It’s very rare. Just like people who want to be on TikTok and they want to make it big. That’s pretty rare. What’s your why? It should be because you’re solving a problem that is important to you, that bugs you. And you want to solve it. We as pharmacists I consider are problem solvers. Right? We fix people’s ailments with drugs and we tailor their regimens. And so the same thing happens with products or services. If I could fix your life to be better, even by a little bit, hey, that’s so neat. That is your why. I love that I know that my products help those that are enduring chemotherapy or those with the canker sores from the chemotherapy or has protein loss because of dialysis or they just can’t eat because they’re kekectic, be able to thrive. Hey, my stuff is better than Ensure+. My stuff is better than most medicinal foods. So that’s my joy. That’s my why. And if I stop my company, those customers are affected. And that’s why I don’t stop. And there’s more than one person. There’s a lot. In fact, in about a month, I’ll be celebrating my milestone — I had to tell you this, Tim — but I’ll officially have sold 25,000 units.

Tim Ulbrich: Hey, congratulations.

Karine Wong: That is not an easy feat. And I did it in about 18 months, so that’s a lot of panna cottas.

Tim Ulbrich: That is awesome.

Karine Wong: Yeah, I mean, I’m sure if I was a big company that packs and manufactures it, I’m sure it makes a lot. But a single person by myself using pharmacist-grade benchmarks, yeah, it’s not easy. It takes awhile to do because I’m very picky. When I make products, I go beyond, beyond the food safety measures. OK? Food safety measures are pretty low, OK? It’s like, don’t put stuff in there like debris. Yeah, I get that. But I don’t put piologens in there. I don’t put bacteria in there. My stuff is vacuum-sealed, sterile, no piologens. It lasts for six weeks without any bacteria count of significance. And I do this with technicians in laboratories, so it’s all certified. OK? So I go beyond the scope of a food manager because I’m a pharmacist. I don’t want to give people stuff that — it’s not a liability, it’s more like what makes you feel good? I don’t want my patients — or not my patients, consumers, to eat something healthy and that’s not dirty or have full of debris or particulates. That’s our nature as pharmacists, right? So going back to your question about your why, yes, your why, my why is because I want to help people be on the medicine. I want to help people at the marketplace, give them teaching, counseling. I do more patient counseling now that’s more viable, that’s more significant to them, than I would have at CVS. Because CVS is very fast-paced and you only have so much time. But at the marketplace, I’ve got time and they’re much more open to me. So when I give them advice or valuable tips, they love it. And they get to go home with that, and that’s going to help them from this point on. So I give them a lot of hope and insight into their management of their disease state, whether it’s diabetes or eczema or Crohn’s Disease. I’ve heard it all, so I am able to talk on that not as their doctor but as a pharmacist. And they trust me in that. And so it’s not about sales, but they end up buying it because they like who I am and what I represent. So the why for everybody should be that you want to help people or you want to solve a problem. Those are the best whys you can have in your life. But if you’re going to say money or stardom or fame, you can still do it. I won’t stop you. But your journey every morning will be so much harder because it’s tough. And so if you’re hoping to be on Ellen’s show and every morning you wake up and you make 1,000 panna cottas, you might go, God, is it really worth it? You’re going to be tired. You’re going to be kind of burnt out real fast. And that’s why those are really not good reasons to start a business. I’ll give you an example, Tim. I actually had an investor that offered me lots of money to make CBD gummies. This is right when the legislature passed the state law that legalizes like CBD and marijuana for recreational use. And he asked me to make it. He said, “You’ll make millions of dollars.” And I believed him. I would make a million dollars. And I said no, not because I couldn’t do it, not because I didn’t want the money, because it’s not my jam. It’s not my why. I could not make CBD gummies because it’s not like I don’t think it works. I think it works great, I don’t think it matters how much money you throw at me, I wouldn’t do it. It just doesn’t make me happy. It doesn’t solve anyone’s problem — at least, it does solve a problem, but it’s not a problem that I want to solve. Does that make sense to you? It is a problem. But it’s not my jam, it’s not my passion to solve that problem or to help those patients. It could be yours, maybe someone else’s, so that’s what I did. I deferred.

Tim Ulbrich: So important. And I can’t echo enough of what you just said there. Even thinking of what we’ve been working on at YFP, hearing your story here, hearing other stories of pharmacist entrepreneurs that I’ve talked with, you know, having that motivation and a why of something that you care about, a problem that you care about, that you want to solve is so critically important to invest in the time and energy that’s going to have an impact. Karine, I want to talk for a moment about the gap between having an idea and from there, getting to a minimum viable product and perhaps from there, being able to actually grow and scale something. Big separation, big gap between having an idea and actually being able to grow that idea perhaps into its full potential. And I think pharmacists may hear your story or hear other entrepreneurial stories and hear from folks that have been successful, however you may define success. And for you, selling 25,000 units in 18 months, that’s overwhelming. You know what, I have this idea and I hear Karine talking about RND, about growing, scaling, manufacturing, hiring a team, wow. Maybe I should just stop pursuing my idea right now because that feels overwhelming. What advice would you have for folks that are listening that say, “You know what, I have this idea, and I just don’t know where to go from here.”

Karine Wong: The fear of pursuing an idea is very common. It’s not unusual to hear an idea or come up with one and go, you know what, it’s a good one, but nah. It’s not going to work. And to have self doubt because you’re afraid. And I think as pharmacists, we’re more risk-averse. So we don’t want to take chances on something that we don’t know much about. That’s understandable. There’s a few things that I do in my career and my company that help minimize that risk. First, when you hear an idea, obviously we don’t put every single penny we have towards every idea. But look at the idea that you’re thinking about. A good idea is the idea that will solve a problem that is going to affect many consumers, not just you, not just your family, but other pharmacists or other people in your industry or your role as a mother or father, some of the frustrations you see as maybe a student. And that is a problem that if you have had it, and other people have had it, then that’s a good market. That’s why. You check that box, that’s a pretty good market, a pretty good idea. Second, you have to create a solution. An idea basically tells you that we need something to help fix that problem. Your job is to find a solution, and whether it’s a product like my product, a dessert, a snack, a service, or even a device that you create, then that is what you need to come up with. And that’s probably what you’re talking about when it comes to the minimum viable product. It is a product or service that will bring in people to buy your product or service in exchange for money to solve that problem. And that is what investors look for is how good or awesome is your end EP. Many pharmacists always tell me, oh, I’m not creative or I don’t know how to make dessert or I’m not a baker, I’m not an engineer. Neither am I. But you are resourceful. You’re a pharmacist. So you can easily hire a coder to perhaps make a software app for an iPhone that would track down smoke alarms in your house and find out when that battery is going to run out. You can hire engineers to create a device for you. My whole point is that designing, creating a product doesn’t have to be a solo mission. In my case, it’s a solo mission because oh heck, we’re always into compounding in laboratories and we’re always making something. And I’m a mom, so I’m always baking new recipes. It’s a small experimentation. So you don’t have to be a chef or a professional engineer or a writer or anything like that to pursue a product or device or something that solves a problem. So that’s No. 2 is find a solution, create it. No. 3, now you’ve got to test it. You’ve got to find out if your market that you’ve identified, like the other moms in your area, the pharmacists in your industry, like what you’re selling. And I don’t mean people like your mom or your dad or your brother or sister or husband. They don’t really count. Not to say their opinions don’t matter, but they’re really nice and they love us. So they’ll say whatever makes us happy. You want to know if your friend of a friend of a friend is going to buy your product or MVP. So this is a person that doesn’t know you, has no connection with you, and is more likely to give you an honest opinion. If they’re willing to give you money in exchange for that service or product you’re providing for a problem that you both share, you have an awesome idea that is worth pursuing. With that being said, if you get like a thousand ideas in a given month, maybe one or two might be feasible or fit all of those check boxes. To me, the ones that really require more attention are the ones that stick around. I have a lot of ideas, and I don’t always move on every single idea. But if an idea comes back to me in two or three consecutive days or weeks, like I just can’t let it go, I dream about it, I obsess about it, I think about it when I’m running, now that’s an idea worth pursuing because your subconscious knows it’s a good idea, Karine, don’t let it go. It’s something worth pursuing. That’s why if you look at my bio, I do more than just My Guiltless Treats. I’ve actually written a book, I have created an app for pharmacy students to help prepare for the board exam and medical students to help with their SEP boards. So I’m not just limited to the role of pharmacy. I’m not limited to the food industry. If I feel there’s a problem, in which I did, I hire coders, I learn how to write, I hire editors, I had a publishing team that all helped me get to my purpose.

Tim Ulbrich: That’s great. And one of the questions, Karine, that I’m thinking of as you’re sharing your story is when I hear 25,000 units in 18 months, obviously you are solving a problem that people are interested in that are raising their hand to purchase, but you haven’t scaled nationally into large retailers, despite the opportunity being there to do so. And that has been an intentional move, as I understand it. So my question here is how and why did you arrive to the decision that you wanted to control your growth?

Karine Wong: There are two reasons why I chose to control my growth. In the food industry world, there’s a saying, you go hard in your backyard. That means that all your marketing, all your efforts to brand, to market, should be in your local region. It doesn’t make sense for me to let’s say get in Costco or Whole Foods nationally when I’m here in California. Nobody in Chicago or East Coast knows who Karine Wong or who the Guiltless Girl is or what panna cotta is that’s made of coconut cream. They don’t know. So it’s going to be a very hard sell. And now with COVID, it’s even harder because I can’t hire marketers to go out there to demonstrate the product. That’s the first reason is to always market your product in your area. If you’re able to do a service remotely, that’s a little different. But the point is that people are more likely to buy your product, buy my product when they know you, heard about you, seen the car, seen your Instagram posts and are more familiar. So in California, in Orange County, I am very popular as the Guiltless Girl. Selling product is very easy, I sell in a few stores, and they sell through it, which means that nothing is left over. They always run out. That’s a positive sign. I’d rather have those benchmarks than to be in let’s say 200 Whole Foods stores and sell 10% of what I stocked. There’s no glory in that. There’s no fame or money to be made when you’re only selling a little bit at those stores. And eventually, those stores will discontinue you because you could not show velocity in their stores. So that’s the first reason why you want to go hard in your backyard. And the second reason is that there has to be a balance. If all I did was My Guiltless Treats and nothing else, then yes, I would go national. I would go and find investors and get seed funding to go national. I would even go on Shark Tank because that’s all I got going on and my role is to go national. And I would actually hire a larger team and brokers to get those milestones. But I am not just the CEO of this company. I’m also a professor. I teach remotely for PharmD students for PGI West University and Yogi (?). So I’m busy with that, and I do love teaching pharmacy students. I’m also a pharmacist. I’m doing remote pharmacy from my home, and I’m a pharmacogenomics counselor. So there’s a lot going on my plate. So I’ve got to be home, and this is a good balance because I can spend maybe three days a week doing Guiltless work, including weekends, and the other days are spent doing teaching, being a parent, working out, kind of having time for myself. And the balance is fantastic because I’m very happy and I feel successful because I do make money. I have enough money to pay for my staff. I have enough money to hire people to design logos for me, I can basically sustain — the company is sustainable on its own. So that’s a sign of success. And I don’t need to make a million dollars from this. I just need to make it run on its own, which it is. And I need to have time for myself, my kids, my family, and teach. If I lost all that, there is no glory. There is no fame. So controlling growth is about finding a balance where you have time for yourself and your family and your other hustles and passions but also time for yourself and the company. It’s a balance, really. And you know, I’m OK making what I’m making right now. I am making profit. But yeah, I’m not a millionaire. And that’s OK. I’m very happy with what I’m doing. You’ve got to be OK with all those things. Other entrepreneurs, for them, it’s all about, I want to get in Costco, I want to get in Whole Foods, I want to be in all these Krogers and Vons. OK? That’s your jam. It’s not my jam. Just because they’re saying it and they want it and their business coach is saying it doesn’t mean it’s for you. So you have to look at yourself and your life and see is that for me?

Tim Ulbrich: That’s great wisdom, Karine. I would encourage folks, you know, to spend some time getting clear on your personal goals and why. In addition to what we’re talking about here today, which is the business goals and why, as Karine shared her personal goals, the balance obviously informed her business goals and the direction that she is taking with the business. And Karine, I’m glad to hear what you said about controlled growth. I think we have glorified the grind and hustle and working hard at all costs. Perhaps it’s the Shark Tank effect, you know, I’m not sure. But I think it’s a good reminder of us each individually thinking about what success may look like. So Karine, tell us about a lesson that you shared with me before we hit record, which was the power of saying yes. Tell us about for you and your journey, saying yes to folks, why this was so important, even recently, in terms of the value and the power of saying yes as a business owner.

Karine Wong: Being positive and affirmative is an attractant to other consumers. Consumers, when they buy a product or service, they’re not just buying a product or service, they’re buying from you. They’re buying you. They love you. They want to be in your life, they want to be engaged with you. If you’re negative or cheap or frugal or penny-pinching, they’re probably not going to come back to you. One of the things I adopt is generosity is key. If I can do it, I will, whether it’s emotional support, physical support, knowledge, expert advice, I’ll do it. I have no problem at all. I consider ourselves a drug expert. So if someone asks me a question randomly in the aisles of Target, I’ll be happy to help them. I have no qualms about holding back information because oh, I don’t work here or I’m on break or whatever. If you need help, let me help you. It’s better that I help you than for you to find the answer yourself on Wikipedia, which is not something I recommend. So when you say yes, the rule is this: Say yes to people if you can do it. For example, when you have a product or service and especially in the initial phases of the company, a lot of the times will be giving away product for free. And that may sound counterintuitive because you’re trying to make money. But the first couple years, you’re not going to make money. And your goal is to let people try your product, even if it means giving it away for free. Most people will not try a product and pay for it just to test the waters. It’s better for you to give it away for free, gift it, donate it, mark it as a tax writeoff on your income tax returns. And that allows people to try your product and go, you know what? She’s quite generous or he’s quite generous. They let me try it for free, there’s no contingency offers, there’s no like alternative motives. They’re going to feel warm and fuzzy with you. And they’re going to love the product because hey, you know, this is a good product. And I like it. And yeah, I would come back and ask for more and I would probably pay for it. So offering the first dose or first service or first product for free actually is a really awesome marketing idea if you could afford it. And usually, you can because you have the capital for that. If you can’t afford it, don’t do it. The other things you can offer for free would be your knowledge. If you know something, if you are very well read up on gluten diet, gluten-free foods or celiac disease or eczema and they’re going to shift to dairy, definitely talk about it. A lot of consumers will come up to me, once they discover who I am, they’ll open up their hearts and tell me their medical problems. So I know a lot about their eczema, rosacea, diabetes and other problems. And I’m happy to help them. And they feel pretty much open because I’m not timing them, I’m not charging them, I’m not going to ask for their medical insurance. And it’s a great exchange of information. So they value my input, and they usually walk away with a panna cotta, they usually walk away with something that I provide because they like who I am. So there’s the generosity of knowledge. The other thing you can offer is your time. You didn’t know this, but when the COVID hit, a lot of my colleagues were being fired for obvious reasons. So I offered free CV reviews because I have experience hiring pharmacists and technicians. I said, “Submit your resume to me and we’ll help brush it up.” And it was great because people were sending me — I actually opened up publicly to everyone in my community, my neighborhood, and all I could reach. And I got so much response, and people even said, “I liked it because I don’t know who you are, Karine, but I love it that you’re doing it,” so they were referring me, shared my post, and I didn’t charge them for it. I just wanted to look at their CVs, make recommendations, and I send it back to them. So I do it now for pharmacy students and those applying for residencies. Just my opinion, just make it nicer, cleaner. And usually I could find one or two errors, and they’re very appreciative. ‘Oh my gosh, I forgot to add this,’ or ‘Oh my gosh, I didn’t know I had to add a header or footer.’ Those are kind of core things you look at as a director because we get so many resumes for one position in a hospital pharmacy. So it helps to have page numbers and footnotes and lists of references instead of me asking for it. So those are little things that I want people to see what I see. That’s what I offer is my knowledge, time, free product if I can do it, free service. At the end of the day, it makes the consumer, the other person, just like you more, like your company more and guess what? All those people I helped the first few years of my career, of my business, have come back as repeat customers. So I didn’t charge them the first time, but guess what? They’re total lifetime revenue for one customer is well over $100. So is it worth it? Yes.

Tim Ulbrich: Great advice. And the resume service is a good example of serving others, whether it’s product, whether it’s time, you know, I think offering and bringing something valuable and serving others without necessarily a return in mind but just providing that value in the moment, we know reaps great benefits. So I think you articulated the value of saying yes well. I try to follow that advice from mentors I’ve received before. And it’s not about being reckless. I mean, as you mentioned, being the face of the brand, folks are looking for that energy, they’re looking for that enthusiasm, they’re looking for that we’ll figure it out type of mentality as you go along and build some of those relationships. Karine, I really appreciate the time that you’ve taken, the wisdom that you’ve shared. What is the best way for our audience to connect with you to learn more about your journey as well as to follow the work that you’re doing with My Guiltless Treats?

Karine Wong: Very simple, just go to MyGuiltlessTreats.com. On the very bottom of the home page is “Send a Message.” That goes straight to me. All of my emails and phone numbers and even an Instagram/Facebook, you can go onto My Guiltless Treats, it goes straight to me. I don’t believe in hiring a third party marketing agency for that because I want to engage my customers. So if you want to engage with me, just go straight on board to the website, email me, run by your ideas with me or any questions you have about possibly starting a company or a product, and we’ll talk about the feasibility of it. It’s better to rule it out or rule it in as early as possible before you need to put money towards the product or whatever.

Tim Ulbrich: Absolutely. We’ll link to the website in the show notes. We’ll link to some of the social media connection opportunities as well. And again, appreciate you taking the time, sharing your journey and your willingness to also support and encourage other pharmacy entrepreneurs that are out there. So Karine, thank you very much.

Karine Wong: You’re welcome. It was a pleasure, Tim. If you decide to come up with that smoke alarm app, you owe me 10% of the royalties.

Tim Ulbrich: You’ve got it. It’s a promise. Thank you.

Karine Wong: Thanks.

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YFP 193: Building vs Buying a Home: What to Consider

Posted on March 4, 2021November 2, 2022 by yfpadmin

Building vs Buying a Home: What to Consider

On this episode, sponsored by Live Oak Bank, Nate Hedrick, the Real Estate RPh, joins Tim Ulbrich to discuss considerations for building vs. buying a home, the pros and cons of building, lending considerations when building a home, and common pitfalls when choosing to build a home.

About Today’s Guest

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

Summary

Nate Hedrick, the Real Estate RPh, digs into some important considerations to keep in mind when planning to build a home versus buying a home, how the process for building a home differs from purchasing a pre-existing home, the main approaches to building, and important questions to ask your builder or developer when building in a development or on raw land.

Nate shares his personal experience with his clients in the real estate market and the various motivations for building a home instead of buying. Those who choose to build a home over buying a pre-existing home may be motivated by both the nature of the current housing market and a desire for a variety of customizations to the home.

Nate outlines the many pros and cons when building a home. Benefits of building a home include the level of customization on design based on the builder, creating the home that you want but can’t find in the market, and that new home feeling. Cons when building include the time it takes to complete the home, usually around 9 months, as well as the financial process differing for building a home from the process for buying a pre-existing home.

The two main approaches to building a home are examined: working with a builder or developer to purchase and build on a lot or buying a plot of raw land. When working with a builder or a developer, clients can expect to have a concierge type experience, whereas buying raw land may require purchasers to perform more tests and do additional research to ensure that the land will be viable for the build. To avoid major issues, buyers should include their real estate agent and builder in the entire process of buying and building on raw land. Similarly, when working with a builder or developer, buyers should include their real estate agent in the process as your agent acts as an advocate throughout the buying and building process.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Nate, great to have you back on the show. How you been doing?

Nate Hedrick: Tim, great. Always good to be here.

Tim Ulbrich: Excited to have you back. We had you on Episode 197, Ways to Reduce Your Monthly Costs, and we have some exciting news coming up. Details will be forthcoming. But we’re going to be launching a YFP real estate podcast. Our goal is weekly content for real estate investors, either current investors, pharmacists that just want to learn more, that have been thinking about it but haven’t pulled the trigger. We have heard loud and clear from the YFP community that they want more information on real estate as an investing path. We’ve brought more content in 2021, at the end of 2020. We’ve got more coming ahead. And more information certainly will come. Nate Hedrick is going to play a big role in that effort. So Nate, exciting times ahead, right?

Nate Hedrick: Yeah. I’m really excited. It’s going to be a pretty cool podcast, and we’re bringing back another YFP past guest. We’ll keep it a surprise for now. So excited about all that.

Tim Ulbrich: I love it. And I think you and I, we’ve talked about this extensively, but we know that many pharmacists have inquired about real estate investing. And we have seen firsthand the value that can come from showing examples, stories, the good, the bad, the ugly. And for pharmacists that are thinking about this or even have begun this journey that can see other examples all across the country and of course connect with those folks. And so we’re excited to bring this community together of pharmacist real estate investors. Stay tuned. We won’t announce the exact date of launch or any of that at this point, but wanted to put that on folks’ radar that we’re going to have some more great content coming for you related to real estate investing. So Nate, we’ve been talking a lot about home buying on this show. But something we have not talked as much about is building a home. And I’m excited to dig into this topic and talk through some important considerations to keep in mind if you’re planning on going that route and how the process may differ from buying a home. And this information that we’re going to draw for this episode of which we will link to in the show notes comes from a post on your blog, The Real Estate RPh blog, and that post is 20 questions to ask if you’re building a home. So we will link to that. And this episode is really meant for folks that have been interested in this topic, are thinking about building a home, on the fence about building versus buying. And so we’re going to dig into topics surrounding that. So from what you have seen, Nate, with your clients and in the real estate market, you know, how prevalent is this? Are folks often thinking about building a home instead of buying a pre-existing home?

Nate Hedrick: Yeah. It really depends on the market, but I’m seeing more people going this direction simply because the inventory has been so low recently. With the way the market’s been — actually, I just heard about a client recently that looked for a house for about 2.5 months and there was just nothing. Anything that was coming along was going $20,000, $30,000, $40,000 over asking. And it just became untenable. So they said, ‘Look, we’re just going to sit back, we’re going to renew our lease for another year, we’re going to go ahead and build.’ So I think sometimes it’s something that’s being forced upon people, but other times, you just have someone that goes in and says, ‘Look, we know what we want in a house. We can’t find that in our market today. We’re going to go out and build it, right? We’re going to find the specific spot that we want it to be, and we’re going to get the exact house that we want. This is how we’re going to do it.’

Tim Ulbrich: Yeah, and I just had a similar conversation a couple weeks ago with a pharmacist down in the Raleigh, North Carolina, area. Same thing, you know, very hot market let alone just what we’re seeing national trends in that area specifically and prices where homes were going relative to asking said, ‘You know what, we’re just going to build the thing,’ which I’m guessing is easier said than done as we’ll talk about but is certainly a consideration. What other motivations might folks have? I mean, is it typically just demand? Is it I can’t find anything, these custom aspects that I want? Like what are you seeing from folks in terms of motivation to build?

Nate Hedrick: Yeah, a lot of times, it just comes down to if you know what you want or if there are specific things that you want in a home and it’s difficult to find in that particular market, then you can go out and build it, right? So if you are — and actually, it’s funny. My wife and I were running into this recently. We’ve been kind of casually looking at other houses, just to see what else it out there, and keep coming back to the fact that like if we were to really move, I don’t know that I’d want to go get this big, gigantic house, right? I’m more interested in the land and putting our kind of style house on it. And there are other people that fall into that same category. So I think there are a lot of different motivations. But if you want that true customizability and that feeling of like the brand new car, right, that’s where that home building usually tends to come in.

Tim Ulbrich: Now Nate, you and I both know — especially you as an agent — that when you say we’re “casually” looking, that’s a done deal, right? I mean —

Nate Hedrick: No, I look at enough real estate to be able to look at it casually I think. Hopefully.

Tim Ulbrich: That’s true. So high level as we start this conversation, and we’ll dig in in more detail about what are some specific considerations when you’re considering building, whether it’s working with an agent or financing, common mistakes that folks make, but high level, pros and cons of building. You know, for folks that are thinking, yeah, maybe it’s us, maybe it’s not us, like what are some things that folks may want to think of when it comes to making this decision.

Nate Hedrick: Yeah, the biggest pro is the full customizability. And this can vary based on the actual builder, right? Some builders are going to give you absolute customization from floor plan to design to fixtures. And even if you don’t get that level, right, there are going to be 10 floor plans to choose from. And within that, you can pick your countertops and your cabinets. Again, it gives you that full range of customizations. If you know exactly what you want or are close, 80% of that you know and you can get the rest of the way, that building allows you to get that full customizability. The real con, though, right — or the couple of cons I guess would be timing. So obviously it takes time to build that house, especially if you’re customizing it from the ground up. You’re looking at the very minimum nine months from that date of contract, usually longer, to really get that home built. So waiting game is there. You’ve also got a different type of lending that goes on. And we can talk about this more. But construction loans are very different than your traditional conventional mortgage. And so there’s other stipulations that go with that, some other fees, and it can make it a little bit more tricky, basically.

Tim Ulbrich: And when you talked about customization, Nate, never have gone through this process. You know, I’m sure some folks look at that and they’re like, that’s incredible. I’ll get to choose every detail. I look at that and say, my gosh, I don’t even know what shirt I’m going to wear on any given day let alone what the knobs are going to look like. So is there a wide range of like if you want to keep it simple, builder may say, ‘Here’s Option A, Option B, Option C.’ And then the details are already contained within that? All the way to every little detail is negotiable along the way.

Nate Hedrick: Yeah, it depends on the builder. A lot of times what I’ll see — for the most part — is they’ll offer 3-5 options for a given set of whatever, right? So they’ll say, ‘Your countertops are coming from this supplier. And you’ve got from marble to granite, and these are the preferred options.’ And you’ve got an allowance for that is how they often do it. So they’ll say, ‘Cabinetry allowance is $14,000, and we’re getting it from x, y, and z cabinet maker.’ So then you can go to that particular site or they’ll a lot of times have handouts that you can look through, and it narrows down your options, right? That’s the most common setup. The other cool thing I’ll see a lot is where high end, especially high-end purchases and high end builders will offer a designer as part of that process where you can sit down with them for x number of hours as part of that fee or the cost of building that house, you get x number of billable hours with that designer to pick and choose all those things. And a lot times, those designers will bring with them ideas and collections where they’ll say, ‘Well, if you’re going to choose these cabinets, these are the drawer pulls I recommend.’ Again, you can totally get into the weeds, but that can make that analysis paralysis much, much easier to manage.

Tim Ulbrich: And it always stays on budget, right? I mean, it’s always on budget.

Nate Hedrick: You know, it’s funny, again, these allowances, they offer those but you can pretty quickly break them if you want to.

Tim Ulbrich: I’m sure. I’m sure. Well, it just reminds me like, no judgment here, it’s just human behavior. If I were looking at a home and there were some options involved, like you kind of make one decision that I would suspect has a domino effect on other things that you want to do. So since you talked about the lending piece being different, let’s start there. You mentioned construction loans, which are of course a different animal than conventional home financing, which even within that we’ve also got multiple options we’ve talked about on the show before. Most recently, we had Tony Umholtz from IberiaBank, Episode 191. We talked about 10 common mortgage mistakes but in there talked about some of the financing options. So Nate, talk to us here about lending considerations. You know, what exactly are we dealing with when it comes to construction loans? What’s different? How does this change or not change things like pre-approval and down payments and timing? Walk us through that.

Nate Hedrick: Yeah, it’s fairly complicated, actually. I’ve been meaning to like put together a post and digest this because there’s not a lot of great resources out there that actually walk through this. But the idea is that you’ve got two phases to think about when you’re thinking about a construction loan. And again, a lender is probably going to beat this up and say, ‘Well that’s not what you call it,’ but this is how I explain it, right? So you’ve got — we should have Tony back with me, right?

Tim Ulbrich: Yeah.

Nate Hedrick: But you’ve got this kind of pre-build phase where you’ve got to pay for either the land and the lot, right, the location, and then you’ve got to start paying that contractor, that builder, for some of the materials. So before there’s ever a house there, there’s still costs being incurred. So there’s this construction phase of that loan. And then after, when it’s done, you actually have a mortgage. You have a house that’s paying a 30-year fixed rate mortgage or whatever. And so there’s a number of ways that lenders will break that down. Sometimes they’ll do separate loans. You apply for one, you get the construction loan, you go through that, then you will create basically a mortgage that will pay off that construction loan and then go from there. Sometimes you can do a combined process where the loan will be all in one. They call it a single close often where you’ll close once on that construction loan and it will convert to a 30-year fixed mortgage at the end. It varies by lender, there’s advantages and disadvantages to both. It’s a whole separate podcast episode just to talk about that. But the idea is that you want to make sure you have a conversation. It’s not like going out and getting pre-approved for a $500,000 house. There are considerations in terms of well, is the lot or the land included? Right? Is that included in the finance or do I have to pay for that lot in cash? Again, a number of considerations that come up as you start down that road.

Tim Ulbrich: And so speaking of finding a lot to buy and where folks look and buying land, you know, that to me seems like something that could be both exciting and overwhelming. And I’m used to my typical searches for a home on Redfin and Zillow and things like that. Is it same type of process, you know, in terms of finding a lot to buy, where folks look, what makes a good lot, a bad lot? What are things that folks need to consider here?

Nate Hedrick: Yeah, so there’s two main approaches to this. So one is that you’re going to — that is kind of the more traditional option, which is that a builder or developer has purchased several acres and they develop that into a neighborhood, right?

Tim Ulbrich: OK.

Nate Hedrick: We see this all the time, right? Coming soon, houses starting in the $300,000s, join Orange Village or whatever it is.

Tim Ulbrich: Yes.

Nate Hedrick: You see these. And a lot of times what happens with that is you’re not going out and finding and hunting down a lot. It’s the full concierge package all put together. You go out to the builder, they say, ‘We have 40 lots that we’re preparing to be built upon. You can pick your spot on the street. Here’s our preferred builder or builders.’ A lot of times they’ll have anywhere from one to three builders that they work with on those development lots. And you basically find your lot that way. The other option is to go out and buy raw land. And you can find these on the MLS, you can find them on Craigslist, you can drive around and see some with a sign in the yard. And you can buy raw land and then go out and find your own builder who will come out and custom build on that particular lot. And so the two approaches are very different. One is a much more kind of put together process, going out and actually going to that developer on that particular build lot whereas the other can be much more flexible and a lot of times, you get your truly customizable builds when you’re talking about going out and buying a plot of land and then bringing in a builder to come do that plot.

Tim Ulbrich: And in the first example, Nate, you’ve given, which I drive by those all the time, right? So you see homes for sale. That seems obviously, you know, concierge is probably a good way to think about things kind of customized and put for you together, it’s packaged together, it’s .25 acres or whatever be the lot size. You know it’s ready for water, sewer, all that stuff taken care of. You have comps of that obviously based on the neighborhood. The other one to me is both intriguing/overwhelming. I was just driving by a property yesterday here in Columbus. It was 131 acres for sale. And I’m like, that’s interesting. I don’t know, it’s by the interstate. I was like, there could be something cool you could do with it. And then I stopped right there, right? Because you start to think about like, what is a comp for 131 acres of land like this? And what about being ready for sewage and water and things like that? So any thoughts for folks that are going more that route of I’m just looking for random land that’s out there and putting a home where it may not be as put together for them, if you will. What are those things? I’ve listed a couple, thinking of comps for land, water, sewer, things like that.

Nate HedricK: Yeah, absolutely. So you have a due diligence period on raw land like that where you can start to assess those things, everything from getting like a geotechnical survey, something as simple as a soils test to determine if the soil is appropriate for bearing the structure that you’re talking about. This is a particular problem in certain areas like I think about my in-laws that live in Pittsburgh. So there’s a lot of hills, there’s a lot of old mine shafts, quite honestly — that sounds ridiculous, but that’s a real problem that you contend with as a developer out in Pittsburgh. And so you have to do these site and soil samples to make sure that you’re going to have supportive structures to be able to handle the house that you want to build there. You mentioned hookups, that’s a huge one, right? So if you are out in the country, you might not have access to city water. You might have to put in a septic system and dig a well and again, that well might need to be 100 feet deep, 200 feet deep. Like who knows? Right? If it’s truly, truly raw land, these are all things that you would need to figure out. And so a lot of times what you’ll do is you’ll find a piece of land that you’re interested in and either the seller of that property has done all that work for you and they can say, ‘Here is the site and soils test. Or here’s the survey that we’ve done. There’s already a well. There’s — whatever, you name it.’ Right? They may have done that up front or you can order that yourself. And there are companies that specialize in this. And a lot of times, your agent will actually help you coordinate with those companies. You can often go to your builder because your builder will have the specs needed to make those decisions. And so I often recommend that if you’re going to be doing this, it’s not a buy land, find a builder later. It’s do it all at once because you want that person involved.

Tim Ulbrich: Yes.

Nate Hedrick: You want the architects involved, you want the surveyors involved, the builders involved, all at the same time to make sure you’re not going to run into a problem.

Tim Ulbrich: Now I suspect the question I’m going to ask here is, ‘it depends,’ but I’m going to ask it anyways. One of the other thoughts I have as I look at raw land periodically just out of interest that folks may be wondering if they’re doing the same build a home is resale value. So especially when you get into perhaps unique pieces of land, unique customized properties, I could see an argument on both sides of that, either hey, it’s a unique piece, it stands out, there’s not a lot of other things like it. Or maybe not as many people are in the market for something like that. So is it a ‘it depends’ situation, just every property, every area where when you get into a customized home, customized piece of land, in terms of resale?

Nate Hedrick: Yeah. I’m stealing from Tim Baker, right? It definitely depends. But there is some speculation to draw in too. There’s actually a number of investors out there that will buy raw land for the sheer purpose of saying, “OK, I know that this market is booming and it’s starting to expand. I think it’s coming this direction in the next 10 years, so I’ll go buy this property that I expect to be worth 10 times this, but I have to wait 8 years to get there.” So it can be very speculative in terms of that value. But the other thing that’s nice is that if you are in like a municipality or a city and there’s land there, you can often compare that land value on a cost per acre to other land in the area. So if you — especially like something where we live in Ohio, everything’s flat and easy to kind of figure out. If you’ve got a 1-acre parcel in x city, it’s potentially pretty similar to another 1-acre parcel in that same city. And here’s why. And so you can compare those somewhat easily in certain areas. But in others, it’s almost impossible.

Tim Ulbrich: That makes sense. And you know, you had talked about some key people of the team. And I think you do a great job when you’re talking about home buying or home building in this case and considerations, how important the team is. So we talked about the lending piece and we’ve mentioned the agent piece and the builder piece. But we haven’t talked about that in detail. So let’s start with the agent piece. How does a real estate agent support someone building a home? And how does this differ from those that might be looking to buy a pre-existing home in terms of who they might be looking for?

Nate Hedrick: This, again, kind of depends on if we’re talking about building in that development or building in the middle of nowhere or on raw land. But in both cases, you absolutely want to have an agent on your team. I think it’s obvious a lot of times if I’m going out and buying raw land and getting a builder that it might be helpful to have an agent in that case. But it doesn’t seem as obvious when you’re talking about, again, that concierge model we talked about where you’re going to a site plan, they’ve got a model home, their office is open, they’ve got all these friendly real estate agents there. It often feels like I shouldn’t even need anybody to help represent me. But the reality is you absolutely should. And it costs you almost nothing to do that. The agent being involved is your representative, right? The person that’s selling that property, they are trying to sell that property for as much as they possibly can. So even if you’re going to a development, 50 homes available, everything’s done for you, you absolutely want to have that agent as the core member of your team to help with things like negotiating the contract. I’ll give you a great example. I have a client that I’m working with right now. And our early conversations with the builder, they cited this great, gorgeous rooftop deck, OK? And they said, the rooftop deck, you can add it on for I think it was — I don’t know — maybe $15,000. Let’s just say it was that. And it was this awesome like you could see downtown and you can see the lake from downtown. This place is gorgeous. And they quoted it at $15,000 early on. Well that property started blowing up in popularity. And it got really hot really fast. And so we were in but kind of negotiating the contract still. And so we get to kind of the closing bit of figuring out this contract, and they said, “Oh yeah, and that rooftop deck. It will be $22,000.” We said, “Hold on.” And you know, at the time, the buyers were like, “Well, that’s just what we have to do.” I said, “No, I’ve got some notes here.” So I went back and we looked at it, and we had clear indications from the buyer — or from the builder that it was a $15,000 add-on.

Tim Ulbrich: Yeah.

Nate Hedrick: And so I was able to help negotiate that back down and save them that $7,000. So having an advocate on your team, somebody that knows this stuff inside and out is absolutely essential.

Tim Ulbrich: Yeah. And not only an advocate, but an advocate that takes good notes and is ready to act on your behalf as well.

Nate Hedrick: Helps to have a detail-oriented pharmacist as your agent I suppose. But really, again, that agent is going to also grow the rest of your team from there, right? So if you need inspectors, if you need a lender, if you need a title company, again, most of the time the seller’s going to have the preferred title company that they’re working with or the preferred lender that they’re working with. But you still want someone on your team that can grow that, the rest of that process if you need it.

Tim Ulbrich: And for those listening to this episode, if you’re looking to buy or build a home in 2021, as you likely have heard us talk about on this show before, we’re excited about our partnership with Nate, The Real Estate RPh, for the Real Estate Concierge service that he can help get you connected with an agent that is local to your area but also be alongside for the process, talk to you at the beginning, walk you through along the way, be a second set of eyes, help you think about the beginning to the end, and work with that agent locally as well. So you can learn more at YourFinancialPharmacist.com. You can click on “Buy or Refi a Home,” and then “Find an Agent,” and that will get you Nate. And you guys can schedule a quick discovery call to see if that’s a good fit for what you are looking for. So we talked about the agent, Nate. The builder is one that comes to mind as well. You know, we’ve all heard horror stories of I was working with this builder, they went bankrupt, something happened. I feel like any neighborhood I’ve been in, there’s always been a story of like, oh this stopped here in the neighborhood because this happened. So talk to us about — of course it depends on some level, but considerations when working with and finding a builder.

Nate Hedrick: Yeah, this is exactly why I put together that blog post that you mentioned about the 20 questions to ask if you’re building a home because there are a number of things that I see my clients not even realize they should be asking up front. It starts very, very simply, right? You want to kind of get an idea of how long they’ve been in business, look at the number of homes they’ve built, look at the number of homes they’ve built in your area as well. So you know, if they’re brand new to Cleveland, Ohio, they’ve never built here before and they’re used to working in a different state, they may not be ready for some of the things that come up with building in this particular location. So getting questions about have you built in this municipality before? Have you dealt with the city, the planning committee, the zoning committee, this architect, you name it? All that stuff, you want to make sure there’s some sort of background going into that. So a lot of the questions that I often mention to my clients revolve around proving that that person is experienced enough to handle what we’re dealing with and then also licensed and insured in all those things as well so that if something does go wrong, you’ve got kind of this backup to make sure that you’re not going to lose your money or anything like that. And from there, it really grows to questions about the specifics in terms of are you looking for more energy saving features? Are you looking for more customization? Right? Because certain builders are going to be more customizable than others. Or perhaps maybe they only do certain types of appliances, and you really want the top-of-the-line. So those are all questions that you want to ask as you get into the weeds. But always start with those broader questions about experience and making sure that they’re appropriate for the job.

Tim Ulbrich: Great stuff, Nate. And again, to the community, the conversation we’re having today comes from an article that Nate wrote on the Real Estate RPh blog, “20 Questions to Ask if You’re Building a Home.” We’ll link to that in the show notes. And again, if you’re in the market for buying or building a home in 2021, make sure to head on over to YourFinancialPharmacist.com, click on “Buy or Refi a Home,” and we’ve got additional resources available to you right on that site in addition to an option to find an agent, which Nate can help you throughout that process. So Nate, as always, appreciate your time and your willingness to share your expertise with the YFP community.

Nate Hedrick: Absolutely. Thanks for having me, Tim.

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YFP 192: Findings from the 2021 Pharmacist Salary Guide

Posted on February 25, 2021November 2, 2022 by yfpadmin

Findings from the 2021 Pharmacist Salary Guide

On this episode, sponsored by Insuring Income, Alex Barker, founder of The Happy PharmD, joins Tim Ulbrich to discuss takeaways from the 2021 Pharmacist Salary Guide, including the current state of the job market, trends in salary and compensation, and contributors to job stress and dissatisfaction.

About Today’s Guest

Alex Barker is a pharmacist, entrepreneur, author, and creator of The Happy PharmD and the Happy PharmD Summit.

Summary

Alex Barker, founder of The Happy PharmD, breaks down the 2021 Pharmacist Salary Guide, a helpful resource for pharmacists to understand trends in salary, the job market, and job satisfaction and stress. Alex and his team gathered data from multiple sources and reports to help share trends about the pharmacy job market. Alex shares that pharmacists are still well paid, earn a salary in the six-figure range, and are seeing a small increase in pay, however there are trends that pharmacists should be aware of when it comes to salary changes.

Alex first digs into the low ceiling pharmacists have on their salary. While pharmacists are very well paid when just getting out of college, especially when compared to other similar professions, after 20 years they may only see an additional $12,000 added on to their salary even if their job performance exceeds expectations. Some salary starting numbers may be even lower and it is difficult to work your way up to a top tier salary. He discusses that pay is based on what type of pharmacist position you hold. The highest paid positions are in management, pharma, and nuclear pharmacy, however a small percentage of pharmacists hold those types of positions.

He explains that the reason for such a small increase in pay is due to a ‘perfect storm’ he’s seeing in the pharmacy job market. Alex describes that due to the supply and demand of pharmacists, this perfect storm has been created: 13,000-14,000 pharmacists graduate each year, ⅓ of current pharmacists (~100,000) are looking for a new job, and a negative job growth is predicted due to the oversupply of pharmacists (321,000 jobs decrease to 311,200). Because of this, it’s important to consider your career trajectory. Alex also talks about satisfaction and job stress and Job Rx, a new job board that pulls open pharmacy positions from employment sites.

Click here to download a free copy of the 2021 Pharmacist Salary Guide.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Alex, welcome to the show.

Alex Barker: Thanks for having me, Tim. I enjoy hanging out with you.

Tim Ulbrich: It’s been awhile, specifically Episode 092 when we talked about creating an indispensable pharmacy career all the way back in March of 2019. But for those in our audience that may not know you, I know many folks do know you and the work that you’re doing with the Happy PharmD. But tell us a little bit about your pharmacy career and the work that you are currently doing with the Happy PharmD.

Alex Barker: Happy to, but first I want to acknowledge — was it Episode 092?

Tim Ulbrich: 092.

Alex Barker: So you had me on 100 episodes later.

Tim Ulbrich: Nailed it.

Alex Barker: Wow, good job.

Tim Ulbrich: That was planned. No, I’m just kidding. It wasn’t.

Alex Barker: Yeah, so I’m Alex Barker. I’m a pharmacist. I graduated in 2012, did a residency, went into clinical practice, did not enjoy myself and struggled to find my way with my career. That led me to business, led me to coaching people, led me to creating a few other media companies and other crazy, random ideas. And then I saw, unfortunately, the need of our profession. A lot of people are burned out, a lot of people are unhappy, unfulfilled in their positions. So I took coaching along with our profession and kind of married it into this Happy PharmD where we help pharmacists and coach them into better careers and jobs, doing that since 2017 now.

Tim Ulbrich: Wow.

Alex Barker: We’ve got — yeah, it’s crazy.

Tim Ulbrich: It is.

Alex Barker: If it was back in 2019 that I was last here, I think we only had maybe four coaches including myself. We now have 11. And we have an awesome team, support team, we’re doing research. Lots of crazy stuff. And a good colleague of yours now is our lead coach, Jackie Boyle.

Tim Ulbrich: Yes.

Alex Barker: Who is at NEOMed in Ohio. So yeah. That’s what we do here at the Happy PharmD. And I know why you brought me on was to go over trends and what’s going on in the job market and specifically in pharmacists’ salaries. So, happy to be here.

Tim Ulbrich: Awesome. And for those that are not familiar, make sure you check it out, TheHappyPharmD.com. We’ll link to it in the show notes. And Alex, as you mentioned, today is a topic that I know is of interest to our community, one that I enjoy talking about on the show as well as our folks are certainly interested. What’s happening in the job market? What’s happening with the current state of jobs? And you have an incredible annual salary guide of which we will link to in the show notes and I mentioned in the introduction that distills data about pharmacist salaries, salary changes, job stress, job satisfaction, and overall the pharmacy job market. And one of the things you talk about in there, which we’ll get to towards the end of the show is the perfect storm and what that means as it relates to where we are as a profession. So you’ve been doing this now for several years, is that right, Alex? The salary guide?

Alex Barker: Since 2015, which meant we were looking at 2014 data. So yes, we’ve been doing this many, many years. We have a lot of data, and it’s — frankly, it’s all over the place. It’s a little frustrating. But we’ve got a good — you’ll be able to see in charts and graphs, you’ll be able to compare yourself to others. I’d recommend you look at yourself where you’re at rather than the trends as a whole, but we can dive into those here. Where would you like to hit first?

Tim Ulbrich: Yeah, so my first question, Alex, is there’s other resources out there, you know, a couple that come to mind, several state associations do this, I know we do here in Ohio, there’s the Pharmacy Workforce Survey, which I believe happens every five years, one published last year. So what’s the need for this? Tell me more about why you felt like there was a gap and an opportunity to fill that gap with this resource.

Alex Barker: So one of the things that I like to do whenever I’m looking at a complex problem is multiple resources. You know what, that’s not really unique. I think every pharmacist does that, especially when we’re researching a disease state or a new drug. We’ve got to have the whole picture, right? And one of the things that frustrated me about the multiple reports were the indiscrepancies and the different numbers. So I didn’t really see anyone else putting all of this information together in one place. So that’s why I started way back in 2015 working on this report. I think I published it originally on Pharmacy Times. And we had since now put it on our website because obviously we weren’t around in 2015. I like looking at seeing multiple sources of data, multiple reports, to see and to look for those trends. Right? Because I think we all have hearsay and, you know, secondhand stories of —

Tim Ulbrich: Absolutely.

Alex Barker — what’s happening in the job market. And there is some truth to that. And then we actually have some solid data for some of those hearsay stories. But overall, we can say that pharmacists are still well paid. We’re still in the six-figure range. We are continuing to see a very small overall increase in our pay, albeit that it is very slow and it is slower in comparison to the majority of other health professions. But we are seeing some trends that we should all be aware of when it comes to salary changes.

Tim Ulbrich: And Alex, one of those that you talk about in the guide that I know is something that is of interest to me and the financial plan because these topics are very connected I think for obvious reasons is that when it comes to pharmacist’s salary, of course we’d expect to see some difference based on experience, depending on areas of practice of which we can dig into further. But one of the things you mentioned is that there’s an extremely low ceiling for pharmacists. And this is one of those things — speaking of hearsay — that I have always thought is of course varies based on positions and we know that some areas, there’s more long-term upside and maybe some longer term growth opportunities, but for many pharmacists, outside of cost of living adjustments, if that sometimes, that there’s a relatively low ceiling of where you start, which is a great blessing, may not be too far off from where you end. And you know, that matters for a whole lot of reasons when we talk about the financial plan. So give me your read on that. You know, tell us more about what you’ve found and why is that so significant?

Alex Barker: We should be well aware as pharmacists, we are very well paid for just getting out of college. If you compare our education, the length of it as well as the job market and compare it to other similar professions, we are more likely to be paid higher. So according to a report by Pay Scale, which was the only one, unfortunately, that looked at years of experience with an annual average wage, you’re looking at about $113,000 is the average starting salary for less than years experience, which is, I mean, insane. If you told that to a high schooler, you’d get their ears to perk up.

Tim Ulbrich: That’s right.

Alex Barker: However, if you add on years of experience, so if you work in the profession 20+ years, according to this report, you’re only adding about $12,000 more per year to your salary, which I never realized that when I went through education. I never had my eyes open to that problem, but like that should be a sinking feeling that it doesn’t really matter how much harder you work, it doesn’t matter how long you work with a company, chances are your salary will not increase. In fact, for an institution I worked for, it was very clear that after a certain amount of time, years of experience, that my salary would increase incrementally up to a point. And then at that point, I was locked at the rate at which, you know, the cost of living increases, which in my area, is very low. So —

Tim Ulbrich: Regardless of performance, regardless of performance, right?

Alex Barker: Right. Right. And I would not say that I was an above-average pharmacist. I would say that I was just kind of in the middle. And it didn’t matter. And what made me the most frustrated was that finding out the amount of money that people got for doing insanely well. We had a few amazing pharmacists on our team. They worked really, really hard. And I found out that their — when they exceeded expectations was the measure that they had to get in their annual review, that when they got that, it equated to about $1,500. $1,500. And if you take that, you divide it by the hours that you work, I mean, it isn’t worth it. It isn’t worth it at all to even try harder. And so what we’ve kind of created, unfortunately, in this perfect storm, one factor of it is we have a profession where we are not rewarded for effort. And that’s disconcerting. It creates complacency, I would say for sure. I mean, it did within me when I was a clinician.

Tim Ulbrich: Yeah, and I think especially at a time where you and I both know, we need some innovation, we need some risk-taking, we need some great ideas coming forward. And you know, compensation of course isn’t the only way that’s going to drive that. But certainly, you know, a low ceiling, as you mentioned in the report, may subtly not encourage high performance. And I think that’s a noteworthy thing. And of course, it goes without saying, we’re generalizing here. As you look at this data across the profession, there are certainly areas of the profession where there’s more upward mobility, I would use management/admin type of positions on the health systems side as one example. But there are certainly others. And of course when it comes to the financial plan, what screams to me here, Alex, is that you have to if this is going to be true for your career and the trajectory, you have to be that much more diligent about the financial plan from Day 1. Right? Because naturally what happens is expenses are going to go up if we let them. And so over time, if expenses go up proportionally but salaries do not, we’ve got a problem in terms of being able to achieve all the financial goals that we do. Another way of looking at this if we want to be a little bit more half-glass full is that you do have a great salary at a very young age coming out of school. And if you’re able to keep those expenses down, you’ve got a long trajectory where that money can be saved, you can have compound growth and other things where other professions, while there might be more upwards trajectory, it might take them longer to get to a point of savings. But of course, we haven’t talked about the $175k of debt that our graduates are taking on. Separate story for another day. So when we look at the pharmacist’s salary based on job sector, we know that there are a lot of avenues pharmacists can take in their pharmacy profession throughout their career. So tell us a little bit more about the variation you see in terms of jobs that have higher salary ranges, jobs that have lower salary ranges.

Alex Barker: I don’t think people will be too surprised, but perhaps maybe by the amount. So based on where people are working and the kind of job that they’re working, which by the way — don’t try to do this yourself, OK? Don’t go to look at all these reports because they call pharmacists by different names. I mean, the Bureau of Labor Statistics, which is a U.S. government organization, defines one of our professions as working at food and beverage stores. Tim, I’ll be honest, I don’t know what a food and beverage store is. It’s not a gas station. And they already have general merchandise stores and pharmacies and drug stores. So maybe I’m missing — I live in Michigan, so I haven’t been all over the world. I don’t know what this is. So where are the great paying jobs? Like you said, it comes down to management jobs, they are clearly paid more. We’re looking at ranges anywhere from $15,000 to even $25,000 more. We know that pharma jobs, particularly higher management jobs, pay extremely well. Nuclear pharmacist is one of the top-paying patient care jobs. JobRx reported that their average was at $157,000, which is very, very high. And again, we’re also seeing similar trends that where there is more responsibility, so more prescribing ability, we see pharmacists being paid higher, so clinical pharmacist roles, whereas where we’ve seen the lowest paid pharmacists, we’re seeing those typically in mail-order and PBMs. We’re seeing it in medical marijuana places, mail pharmacies. And as everyone would expect, we are seeing lower salaries, trending downward, in chains and of course independents, long-term care. Now, to clarify, everyone’s got opinions on these things. ‘Oh, well, I know of this person who got this. And I’m paid this.’ It’s trends. We have to keep all of this with a grain of salt because the reporting from each of these sources varies greatly. So I’m herding cats here, and I’m just telling you about my experience with it, OK? It’s challenging.

Tim Ulbrich: Sure. And it’s a good point, I mean, I hope our listeners will take it with a grain of salt. But it’s a great opportunity to see what’s out there. And what’s of concern to me, Alex, is I’m thinking of the distribution of pharmacists by practice, and that first group that you mentioned, management/admin positions, industry and nuclear pharmacy I think were the three you mentioned, that is a small sliver of the pie. Right? The bigger chunk of the pie is the community positions, is the managed care positions. And so I think it is something that we have to consider and we have to take seriously in terms of the significance. Now, hearsay — speaking of hearsay — one thing I have heard that I think is easy for us to hear and say, “Oh my gosh, the salaries of pharmacists, it’s falling apart,” and that is the instances of somebody starting at $35 an hour, $40 an hour, you know, and is it because of a saturated market? Is it because of this or that? Are they perhaps part-time? You know, 32 is kind of the new normal, what we’ve seen here in Ohio. Tell us more, give us the data. What are you actually seeing when it comes to these numbers of, “Hey, I’m starting at $35 or $40.” Is this isolated? Is it more widespread?

Alex Barker: Hearing you say that makes me feel like maybe I’m the one that needs to collect those reports and that data because no one is. You’re right, it’s all anecdotal. I’ve seen it in your Facebook group, I’ve seen people report some of the offers that they’re getting. It’s abysmal. The worst I have heard is $28 an hour. That’s a floating position. I think it was in Austin, Texas or one of the major cities in Texas. And we know that these typically are retail chain positions that are offering these insanely low salaries. We also do have reports of it happening as well in hospital positions. And we also know that there are a few remote clinical positions that are very low as well. And so we’re talking like MTM jobs where you’ve got a lot of flexibility. You work when you want to. But you’re looking at an annual salary of maybe $70,000-80,000. That’s not true across the board, but that’s what we are receiving reports from from the people that get jobs because occasionally, we do salary negotiations for people as well. But the only evidence we have as far as an actual report that’s been shown that I enjoyed seeing this year was drug topics. So if you look at their 2020 base salary, you see this very concerning skew of data — and I’ll send you a picture of this as well so you can put it in the podcast notes if you can do that, I don’t know — but you’ll see that 13%, which is a huge number of people, at the end of their report were receiving less than $70,000 a year or less. And unfortunately, what they didn’t report in this data is the number of people in that bracket who were full-time or part-time. But we do know that the total amount of people was only 13% as well that worked part-time. So I’d have to venture a guess that that 13% that worked part-time, you know, potentially were majorly in that bracket of 13% reporting that, I don’t know. But unfortunately, what we are seeing is because of the glut, because of how easy it is to hire a pharmacist, particularly in a very generic role, we are seeing a lower salary being offered to those pharmacists. And we — based on what we just talked about, that low ceiling, you should assume that you will not — you’re not going to work your way to the top tier salary, $120,000-140,000 if you’re being started at $70,000 annual.

Tim Ulbrich: And where you start matters for obvious reasons. It matters when you’ve got $175,000 of student loan debt, it matters when hopefully if you have something like an employer retirement match, you know, 4% of $70,000 versus 4% of $120,000, that matters over time and compound interest and growth. So question for you here — and I know this is more complicated than we have time to unravel, but what’s the reason? You know, is it simply that we’ve got supply and demand, we’ve got 13,000+ grads coming out per year, pharmacists aren’t retiring at the rate that we thought they may. Is it more about the evolution of the pharmacist’s role and we’re seeing faulty business models and not only those that are being strained financially from existing models but new, innovative ones not popping up that can just find new positions? Like what do you see as the main culprit here?

Alex Barker: Supply and demand. I am not a labor or economics expert.

Tim Ulbrich: Come on, Alex! No, I’m just kidding.

Alex Barker: I did consider getting a PhD once, but no. Not my thing.

Tim Ulbrich: And then you saw the light.

Alex Barker: I did. But now what we have is this perfect storm, as I alluded to in further of our salary guide. The perfect storm is approximately 13,000-14,000 pharmacy students graduating every year entering into the job market, approximately one-third of the current job market — so about 100,000 pharmacists — is looking for a new job — and that’s based off of the AACP national workforce study — and then we also have the U.S. Bureau of Labor Statistics predicting a negative job growth from 321,000 to I think it’s like 311,000.

Tim Ulbrich: Correct.

Alex Barker: So by the way, if numbers confuse you, if I’m saying a lot of numbers, check out the report. It’s all there. Because if I was listening to this, I’d be like, what did he just say? But you’ve got this gestalt of a problem where each factor is creating a much more complex issue. But ultimately, what we have is the main positions that pharmacists take, i.e. hospitals and community pharmacy, and we’re a dime a dozen. I asked on LinkedIn managers, approximately how many applications do you get per job? And it was anywhere from 60 on the low end to I think the highest was over 210. And so if you are a smart manager, you are going to think what is my biggest cost? Employees. So if I have that many people, am I going to give them a compelling offer when if I don’t get my top pick, I probably will get my second, third, fourth, fifth —

Tim Ulbrich: Who are all pretty darn good.

Alex Barker: Maybe even my 15th pick.

Tim Ulbrich: Yeah.

Alex Barker: Because someone’s going to take this offer. Right? We’re pharmacists, we have a PharmD, we’re doctorates, we’re insanely capable people. So you know, getting your 15th pick isn’t the worst thing in the world for them. For our profession, however, what suffers ultimately is our salary, our buying power. We no longer have that. And back in the 2000s, we had that inflated need, right? We needed pharmacists. You got signing bonuses, you got cars when you got offered a job. I don’t know if students are told that anymore, but that’s the way it was. And now, everything’s flipped on its head. We’re in the exact opposite situation, albeit that there is a huge hiring phase happening right now simply because of the COVID jobs.

Tim Ulbrich: Yep.

Alex Barker: We’re seeing a ton of people readily take those. But these pharmacists are just probably going to be in the same situation once this vaccination rush passes through. It isn’t like we’re going to need all those pharmacists again to vaccinate every single year. They’re going to figure out cheaper ways. And everyone knows you can pay a nurse a lot less to vaccinate people. So this temporary demand is not going to last.

Tim Ulbrich: Now, I am — and I’m be remiss if I didn’t say, Alex, my audience knows this — I am a half-glass full type of person. And I will say the one thing — and it does not mitigate the concerns here — but the one thing that stands out to me here is, as I alluded to early today, I do think we desperately need some innovation, thinking a little bit differently, people taking calculated risk. And when you’ve got $175,000 of student loan debt and you have $120,000 contract that’s there to sign, it’s very hard to make an otherwise decision, right? I mean, it’s classic golden handcuffs situation. And I do think there’s a lot of pharmacists out there that have great ideas. And one of the reasons we’re so passionate about the financial plan side of it is that we know the financial pressures are very much connected to the career opportunities, the willingness to do either, whether it’s starting something or even just enjoying the work that you do and having some choice. So I am hopeful. I am also concerned that lower salary and a debt load that continues to climb is a compound problem. But there is also perhaps an opportunity out there where folks may now say, “OK, I can make $70,000, or I might go do this.” And that, “I might go do this,” might be something that’s of perhaps more interest or even an opportunity to pursue.

Alex Barker: You bring up a really good point that I didn’t consider in writing this guide is particularly for new grads, considering your career trajectory is insanely important for determining your financial plan because if you think right now that now’s a good time to be a clinician, trends are showing that clinicians, people who are able to prescribe or have some sort of agreement with a doctor, those jobs, we’re not seeing a major increase in those salaries. In fact, we’re seeing students — or I should say residents being offered less and less money. So you know, if you think you’re wanting to make a lot of money later in your career and you’re willing to work up to that, there are plenty of opportunities out there. We didn’t even go over the fact that as a pharmacist, you’re more than qualified to be a pharmaceutical sales rep. And that has an amazingly high ceiling. You could be paid insanely well. It is not a pharmacist job. It’s not a typical one. But you are overqualified to do it, and if you have the ability, if you have those natural gifts to sell, the ceiling’s really high. And so I think — you know, this is something I didn’t consider, so I’m glad you brought it up, Tim — that when considering your financial future, there is a space for you to take a job that pays you less if the trajectory, if the potential plan of that path could pay you a whole lot more because the reality is that as a clinician, your salary is not going to dramatically increase. One minor report that I didn’t touch on in my report is that Drug Topics said 41%, but in their report reported additional income in 2020, anywhere from the majority of them making around $1,000-5,000 in extra income. Now, they didn’t say how they made that money, but the case is that people, they want to make more. They’ve got things to do with that money.

Tim Ulbrich: Yeah.

Alex Barker: So consider your career trajectory wisely. If you’re looking at the $175,000 and thinking, I need to pay this all down, you know, don’t make the mistake of rushing into a job that just pays well but is a dead end.

Tim Ulbrich: That’s right. Yep.

Alex Barker: That’s just a risk to take.

Tim Ulbrich: Got to think about the 30- to 40-year timeline. And here, we’re talking salary, which is one component but certainly not the only, right? We could have a pharmacist who’s got multiple job offers, is making great money, but they may not like the work that they’re doing or it may be stressful. So talk to us about satisfaction, job stress. Obviously we know job stress correlates to the rate of dissatisfaction that pharmacists are feeling in their work. What did you find here in the reports as far as the number of pharmacists, percentage of pharmacists generally speaking that are either satisfied/dissatisfied in their work and tell us more about those findings.

Alex Barker: Your term earlier, golden handcuffs, I think captures the feeling that most have. According to Drug Topics, they reported 44% are unhappy with their jobs. But a third of the entire group that they surveyed was looking for another job because of their unhappiness with their current one. I think they asked some wrong questions in their survey, but in my interpretation, we’re looking at 7 out of 10 pharmacists were not satisfied with their jobs. And we all practically I think know the reasons why pharmacists are unhappy across the board. But there are some other reports that show that we actually have a higher satisfaction score than that. Pay Scale said that we’re about 74% satisfied, which was higher than what I thought. AACP said 58%. But the pharmacists that were the most happy were those that were in independent community pharmacies, ambulatory care, or non-patient care, which kind of goes back to our problem — you and I have talked about this numerous times. We as pharmacists, we’ve got an identity crisis. If we’re supposed to be patient care-oriented, then why are people who are not in patient care more happy than those that are in patient care. Another survey question in that AACP report was that only 27% of people said — agreed to the statement, “I feel happy at work.” Grinds my gears. I’m supposed to be the Happy Pharmacist, but I’m not happy about that.

Tim Ulbrich: I mean, it’s heavy. And you know, again, this goes back to your comment — I hope the new practitioners and even the students listening are really thinking about the long horizon and trajectory. And this again goes back to me — for me, obviously, the financial plan and cost of living. If you rise your cost of living and everything that comes with it right out of the gates because you’re now going from -30 and debt every year to make $110,000 or $120,000, it is very hard to walk that back. Very hard to walk that back. And if you can hold the line — and I understand certainly this is easier for me to say in Ohio or you to say up in Michigan that may not be as easy for folks that are in higher cost of living areas. But if you can hold that line, especially as you’re going through this transitionary period where you’ve got multiple competing financial priorities, you’ve got typically big student debt loads, you’re trying to really understand what you do or do not like in the work that you’re doing, give yourself options. You know, we talk about all the time, put yourself in the driver seat rather than that being dictated for you. And I think, of course, this discussion certainly emphasizes that as well. Alex, I want to wrap up, you mentioned earlier in the episode talking about the Job Rx. Tell us more about Job Rx. You talk about that in the guide as well. What is Job Rx? And what can folks expect to get from that resource?

Alex Barker: Yeah, Job Rx is a website from a friend of mine, mutual friend of yours, Kevin Miro (?). And I included in this report simply because of some of this newer data that he’s been finding in his job board. If you look at the powers that be, there is a pharmacy demand report, which stated in the 4th quarter of 2020, only 12,000 new pharmacist jobs were created, which is not great but not awful either, which you know, kind of just makes me think like OK, doing the numbers in my head, it makes sense why we’re getting 100 applications per job. But Job Rx is — essentially, it’s a job board where it pulls in all these jobs from employers’ websites into one place so you can apply and get notified when the newest jobs are created. He reported to me that in December of 2020, they added 12,800 pharmacist jobs in one month versus this other demand report that said that that’s how many jobs were created over the entire quarter. This gave me a lot more hope than I’ve ever had before because I’ve never been able to have access to that kind of information or technology that says OK, what exactly is the job reports and how are you getting that data? He also — and I share this in the report as well — that 16,000 pharmacist jobs were added in January of 2021. So when I hear these numbers, I am a lot more hopeful. I do think that they are slightly probably more than what we would expect simply because of the COVID hire push that is going on. But ultimately, this is potentially an amazing resource for pharmacists to finally find the jobs that are out there. And I’ll make one final note that from what I could tell, the vast majority of these jobs, though, were community and health systems-related, long-term care, hospitals, things like that. So right now, I still know that the majority of the buzz, what everyone is selling as the promised land, is the nontraditional roles, right, the pharma, the work-from-home, the remote. And those are still out there, they are possible. But they are certainly not as available as hospital and community jobs.

Tim Ulbrich: Absolutely. And our community can check that out, JobRx.com. We’ll link to it in the show notes. I think certainly a resource that’s going to afford us an opportunity to have some more real-time data, some more up-to-date information that I know will be helpful to not only pharmacists looking for positions to perhaps — I often found myself in a faculty administrative role trying to advise and help students looking for jobs. I see some value there as well. So JobRx.com, again, we’ll link to in the show notes. Alex, where is the best place that our community can go to connect with you, to follow the work that you’re doing and to stay up-to-date on information that we’re talking about here today?

Alex Barker: I’d love it if you connect with me on LinkedIn, that’s where I hang out, it’s where I spend the most amount of my time. We do have Instagram and Facebook, but after watching The Social Dilemma, I don’t know. I’m just trying to stay on one and not try to give away too much information about my life. But yeah, connect with me on LinkedIn. I’d love to have a conversation with you and I try to have one with every single person that connects with me. So that would be a great place to check it out. Otherwise, you can go to TheHappyPharmD.com where we’ve got a lot of resources, blogs about career paths and of course this salary guide.

Tim Ulbrich: Great stuff, Alex. We’ll link to Alex’s LinkedIn profile in the show notes as well as of course TheHappyPharmD.com and the salary guide. Alex, thank you again for joining us and sharing your insights and expertise on this important topic as we talk about the state of the job market and our profession. Appreciate it.

Alex Barker: Thanks, Tim, for having me.

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YFP 191: 10 Common Mortgage Mistakes to Avoid

Posted on February 18, 2021November 2, 2022 by yfpadmin

10 Common Mortgage Mistakes to Avoid

On this episode sponsored by LendKey, Tony Umholtz, a Mortgage Manager for IBERIABANK/First Horizon joins Tim Ulbrich to discuss 10 common mortgage mistakes homebuyers make and steps you can take to avoid them.

About Today’s Guest

Tony graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine and Mortgage Originator magazine.

Summary

Tony Umholtz, a mortgage manager for IBERIABANK/First Horizon, digs into 10 common mortgage mistakes to avoid what he sees people make in the home buying process. The first is not fully understanding in advance the common loan types and considerations or differences of each. Tony breaks down what conventional, FHA, VA, and other unique products, like the pharmacist home loan, are and what borrowers need to be aware of. The second falls into the category of credit blunders, like overestimating your credit score, relying on third-party services (which often provide inaccurate credit scores), utilizing no interest credit cards which could negatively impact your credit, and waiting too long to resolve issues you have with it. The third common mistake is not shopping around for a mortgage lender. Tony expresses that it’s important to find the right product and that some internet-based companies may be great for a mortgage refinance but are hard to work with for a home purchase. The fourth mistake is searching for a house before you get pre-approved. Tony shares that a pre-approval letter shows sellers that you’re serious and can also make you aware of any red flags you may have on your credit report. The fifth is underestimating how much cash you need to close. Tony explains that not only do you need money for a downpayment, but you always need to have money saved for an insurance premium (as well as possible flood insurance coverage), taxes, and closing costs.

The sixth is delayed communications with the lender, title agency, and real estate agents which can make or break a transaction. The seventh is making a home buying decision before you’re ready. Tim shares that you can’t make a decision about any part of your financial plan in a silo and have to consider how each will affect another. Number eight is not thoroughly evaluating how home buying fits in with other financial goals you may have and number nine is not thinking about the money you’ll need after you close for items such as furniture, lawn equipment, etc. The last common mortgage mistake to avoid is misunderstanding or misevaluating mortgage discount points. Tony explains that you should always ask for a no-point quote initially. He shares that points are essentially prepaid interest and that by purchasing a point you’re buying down the interest rate. However, he says that you really have to evaluate this decision and that it’s not always the best move to make.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tony, welcome back on the show.

Tony Umholtz: Tim, thanks for having me.

Tim Ulbrich: Excited for this discussion here in 2021 as we have you back, talking about 10 common mortgage mistakes homebuyers make and steps that folks can take to avoid these mistakes. And many of these come from either personal experience or ones that we know are often being made, so we’re going to go through these one-by-one and certainly lean into your expertise to hopefully give folks a guide of what are some things that they can be aware of going into the lending process, whether that’s a first-time home buy, second time, third time, or refinance and then hopefully put in some steps to prevent those from happening in the future. So Tony, the first one I have here that I know often comes up is that folks may not fully understand in advance the common loan types and the considerations and differences for each. And so before we talk about the pharmacist home loan through IBERIABANK/First Horizon aka “the doctor loan,” give us an overview at a high level of conventional, FHA and VA loans as I suspect those are the main ones our community will already have some familiarity with and perhaps some experience with. You know, generally speaking, how do these work? What’s the difference between them? And what are some important considerations for lendees when pursuing these types of loans?

Tony Umholtz: Yeah, sure. Great question. And that’s definitely the most common types of loans that are out there and that you’ll hear about. Fannie Mae and Freddie Mac, we call them the GSEs, which is Government-Sponsored Entity, they provide conventional financing. And thank God we have them, right? I mean, they really keep our housing market alive. And then we have of course FHA and VA loans, which are backed by — we call it Ginnie Mae, which is HUD, which is also a government program. And those are the main key loans that are out there. There’s also portfolio products, unique, nichey products such as the pharmacist product that we’ve discussed that banks, individual banks, can hold on their balance sheet as well, which don’t have a traditional investor, government-backed sponsors. But not to get too into the weeds here with that, but high level, I would say is conventional products, the main differentiation on that is they will allow a loan amount up to $548,250 in most markets. There is some markets around the country where that’s a higher number. So it’s just around San Francisco, Los Angeles, there’s going to be higher loan limits in certain counties in higher priced areas. But that’s one of the main pieces with them. And a conventional loan above 80% loan-to-value, PMI is required. And that mortgage insurance is required to deliver the loan to Fannie and Freddie. So that’s why it’s so important that you have this mortgage insurance, lenders require it, and that can be costly, right? That can be very costly. FHA and VA — let’s just kind of pull the two apart here — FHA, the Federal Housing Administration loan, is designed for a little bit more flexible credit. Although conventional loans can get pretty low on credit score too, FHA tends to be better if you have lower credit scores because it will allow lower interest rates, for the most part. FHA loans, though, typically don’t have a loan amount max as high as conventional. So for example, if a market’s $548,250 for conventional, it might only be like $325,000 for FHA. So I usually utilize FHA as a last resort, only when it’s the best loan for the client. And then VA of course is for veterans. And the VA loans are great. They allow 100% financing with no PMI. The only downside with VA is there’s a funding fee that’s rather expensive. So I’ve actually had a few veteran clients that we’ve actually gone conventional because it’s cheaper overall. But I could talk a long time on this subject. But hopefully that clarifies the main points.

Tim Ulbrich: Great overview. And to our listeners that want to learn more on each of those, you can check out Episode 169, Tony and I talked through helpful tips for getting a mortgage, going through different loan products, talked about the pharmacist home loan. And tony, we’re going to segue here and talk about that for a moment as I think your discussion on PMI is a good lead-in. And so as we think about the pharmacist home loan, you know, Tony, common barriers to pharmacists being able to purchase a home that I’ve seen is student loan debt, which of course can impact debt-to-income ratio, as well as their ability to save for a down payment. You know, they’re coming out of school, looking to buy a home, six figures or more of debt, and I think that’s where the pharmacist home loan can have its values. Tell us more about the pharmacist home loan option that IBERIABANK/First Horizon has, including minimum down payment, terms, requirements to qualify, PMI considerations and so on.

Tony Umholtz: Sure. The product we offer to pharmacists, it allows very little down payment and there’s no PMI. So it’s probably the key point to it. If you’re a first-time home buyer, you can actually put 3% down and have no mortgage insurance. And if you’ve owned before, it’s 5% down again, with no mortgage insurance. The minimum credit score is 700. And the one piece to this — and again, I don’t — I always try to avoid interest rates because they’re volatile and the market can move, bond market can move, but I have found over the last 18 months that I can offer better rates on this product than if I had a non-pharmacist customer come and put 20% down. I mean, it’s very strong interest rates. So it’s kind of — that’s been the few lead pieces that I’ve noticed. It’s just very strong 30-year fixed loan rates. And that no PMI is just huge. I mean, in some cases if you’re buying a $500,000 home and you’re putting 3% down, you’re talking about a $400 a month savings just for the PMI. So it’s a pretty substantial number. In regards to student loans, it has a — it doesn’t completely waive them. And I find most of my clients that I work with are under an income-based repayment plan anyway. And that’s what we’ll use in calculating a debt-to-income ratio. But in the case where there isn’t a payment, it uses a factor that’s lower than a traditional conventional loan or an FHA loan. So it enables more buying power.

Tim Ulbrich: Very good. And we covered the pharmacist home loan in a fair amount of detail, Episode 139, Ins and Outs of the Pharmacist Home Loan. Also, if you go to YourFinancialPharmacist.com, click at the top “Buy or Refi a Home,” you’ll see more information there to the IBERIABANK/First Horizon product as well as to the real estate concierge, Nate Hedrick, for those that are looking for an agent as well. And we’re excited about the partnership that we have with IBERIABANK/First Horizon because it’s nationwide. And we’ve got a nationwide community here in the YFP community. I have had the chance to work with Tony now for the better part of a year, love what he’s doing, his passion to educate and help folks on this decision and understand how it fits in with the rest of the financial plan. So that’s No. 1, not fully understanding in advance the common loan types and considerations and differences for each. No. 2 here, Tony, is credit blunders. And I’m thinking of those that perhaps may overestimate their credit score or perhaps not have a good understanding of how credit scores impact rates, maybe waiting too long to resolve credit issues and so on. What are some of the common mistakes and blunders that you see related to credit?

Tony Umholtz: The credit and the overestimate — you mentioned overestimating credit. I see that a lot. And you know, I think a couple things I’ll just touch on here with credit. One of the things as a lender, I try not to run credit unless we absolutely have to, right? There’s a lot of clients that’ll call and just want some high level information, but credit is so important because it’s such a critical part of the product. If you have a minimum credit score of 700 and you’re under that, it’s good to know why. And some lenders can — and we offer this service as well — we can give you ideas on how to improve it. We actually have score models that tell us what your score could go to by doing certain activities. But anyway, one of the big blunders I see is just totally following like a third-party monitoring service. And I don’t want to name too many names because there’s a lot of them out there, but traditionally, these third party services are going to overinflate your credit score more than what we would see. You know, like us as a — so for example, a creditor can see a score that is maybe 30 points on average lower than what you might see on one of these services. And I’m even — I subscribe to a service. I will say I do. But it gives me good trends as to what I’m doing, but it’s not what a creditor would see. So in my lifetime of lending, the highest credit score I’ve ever seen was 820, and it was an 80-year-old gentleman who had perfect credit his whole life. So it’s one of those things where, you know, a customer will say, “Hey, my score is 850!” Well, that’s what the monitoring service says, but it’s really not going to be that way when we see it. So that’s one thing, a blunder that I see. The other is a misconception on an inquiry as well. A lot of inquiries is not good. But a couple inquiries at one time for a loan is not going to have an effect on you. There’s a window of time where you can do this. That’s another piece. And then the other really important one — and I can’t stress this one enough — is the no interest for a year type cards and promotions that are out there. And it’s very tempting to go to Best Buy and they’ll offer a $5,000 credit limit for $5,000 worth of stereo equipment and maybe a CD or whatever it might be. And you don’t have to pay interest for two years, which is great, right? It sounds great. But what they do, they report that to the credit bureaus, to Experian, Equifax, and Transunion, as a 100% maxed out credit card. And I’ll confess as a young man, I was in my early 20s, I bought furniture for one of — my first house with a store called Rooms To Go, and I did this. And that’s how I learned. And of course, I’ve seen many clients do this since that time. But it actually happened to me personally. I said, “Wait a minute, why did my credit score go from 750 to 660?” And that was one of the things that happened. I did this credit, you know, it was a maxed-out credit card. That’s how it’s reported to the bureaus. So that’s another big blunder, Tim, that I’ve seen.

Tim Ulbrich: Yeah, and credit — great summary, Tony, great insights there as well. Credit, credit optimization, credit security, such an important part of the financial plan. Obviously we’re talking about here related to securing a mortgage, but generally just an important piece to consider. Tim Baker and I talked about this on Episode 162, Credit 101, talking about what is a credit score, breaking that down, six factors that can impact scores. So if you want more information and better understanding your credit, we’ll link to that episode in the show notes. So that’s No. 2 here, credit blunders. No. 3 is not shopping around. And I know, Tony, that rates, especially in a market where I feel access to information has become easier to find, if you will, that rates may be not necessarily what I’m referring to as much here, although that of course is a consideration. And I think in some cases, if you’ve got good communication with a lender and rates are changing that they’ll be in communication with you. So I think that relationship certainly is important. But obviously we know not all offerings are created equal. So here, we’re talking about the pharmacist home loan. Folks may or may not be aware of that. And so looking at a few different institutions, understanding the products that are out there, but what else, Tony? What are some things that folks may notice beyond the offering and perhaps beyond the rate that would be different from one bank from another? I’m thinking about things like application fees, document fees, other things like that that folks should be thinking about as they shop around.

Tony Umholtz: I really think the — and it can be very challenging sometimes with the shopping around because there’s different levels of knowledge out there. And some of the companies are just set up as call centers as they funnel internet leads in. You know, so there’s different knowledge bases that you’re going to speak to sometimes. So I find that that sometimes adds some confusion. But I think it is very important to find the right product. I think that is very much a critical element, so finding the lender that has the right product for you is important. And I never want to — I’m very sensitive to relationships. So I have people call me and say, “Hey, I have used this lender for 10 years and they’ve always been good to me,” and we’re a competitive industry but sometimes if I think something’s better, I’m very quick to tell that person, “This other lender has a better product.” So I think — and I actually have a lot of lenders that love to send me clients that they know we’re better fitted for. The fee part is important because there’s only really one set of fees the lender controls, and that is there’s a lender portion of fees. The rest are third party. So they’re going to be through third parties. It’s going to be the same, really no matter who they use. So that’s one thing I find that confuses a lot of people is consumers will lump in the prepaid expenses, taxes, insurance, title insurance as well, and doc stamps for the state we’re in or the county recording fees. But those are going to be the same costs no matter what. There’s really only one line item of lender fees that are going to be different, that could vary. So that’s one way to look at the lender is just lender fees and interest rate. Really, it’s as simple as that. But the big things I find when you’re looking, when you’re out there — and again, I’m not going to name names of companies — but when you’re looking to buy a home and you have a — there’s a lot of companies that have popped up, especially internet-based companies that are really just feeding off the refinance market. It’s hard to be equipped for purchases because when you go under contract for a purchase, you have a commitment letter date, right? There’s a commitment financing contingency, there’s appraisal contingency, there’s all these contingencies in a contract, and you want to make sure the lender is watching this and can meet these milestones. A lot of lenders that are set up for refinances just aren’t set up for purchases. It’s OK to use one of these lenders if you can wait 90 or 120 days to close your loan for a refinance, but on a purchase, you can’t do that. So service is very important when you’re buying a home. It still can be with refinancing, but you can always just wait longer, you know? It’s one of those things. But I would just say, you really have to be careful with the service aspect when you’re buying because it’s a very competitive housing market right now, and a lot of these sellers have backup offers. I get calls a lot too because people are under contract and something went wrong with their lender, and I have to jump in sometimes. So I see it even as a secondary lender when things go wrong with the original lender. So I would just say the big thing is a comfort level with that person and that organization. The best rate and product is important too but also making sure that you’re in the best fit for you because one other thing I will say is, you know, if you can get a better rate putting 30% down than you could putting 5% but that’s going to use up all of your liquidity and maybe impact other financial planning aspects of your life, well, the 5% is much better, even if the rate’s a little higher. So I think it’s very important to plan, look at your overall plan. That’s why the folks at YFP are so great to work with because they can look at everything and say, “Hey, this is better for you in the long run because of this.” So I hope that’s helpful. I mean, there’s a lot of components to it. There is a lot of things to think about, but I think it’s really finding a comfort level with the group that you want to work with and especially if you’re buying a home.

Tim Ulbrich: Absolutely. So point No. 3 there, not shopping around, I can speak from personal experience working with more of a big box company, obviously having the opportunity to work with you guys, open communication lines, feeling comfortable with the process, getting questions answered, all of that really matters. No. 4 here is looking mistakes — again, we’re talking about here looking beyond the simple Zillow or Redfin search before you get preapproved and know what you can borrow, which is not necessarily, of course, the same thing as what you can afford, right? We talked about this with Nate Hedrick on the podcast a lot, the Real Estate RPh, what you can borrow, what you get approved from the bank, is not necessarily what you can afford. And that connects, Tony, to what you just said about connecting this home buying decision with the rest of the financial plan. So talk to us here briefly about the importance of the preapproval process.

Tony Umholtz: The preapproval process is critical just to know what you can afford both ways, right? To see if that Redfin search popped up a house that you can’t buy. I’ve also seen it the other way around where, you know, with the rates being so low, clients have said, “Hey, I’m paying $2,900 a month for rent and I can buy more house than I thought I could.” So it’s really just critical in the education process. You know, knowledge is so important. And just knowing what you can and can’t do is important. And the preapproval process will allow us to see if there’s any red flags as well. We’ve had lots of clients that we’ve been able to help get their credit scores up a little bit higher, we’ve had lots of clients that both ways have said, “Hey, I don’t want to buy a home this large because I didn’t realize that this is the cost and the taxes are this.” On the other side, I’ve seen it the other way too, like I mentioned. It’s very important to get pre-approved before you start walking into houses. And I will say that the realtors are very proactive right now because of the tight inventory. We get a lot of phone calls from the listing agents, even. And of course, we can’t give much information away, but they’re calling us, “Hey, are these clients approved?” I mean, it’s a different market in a lot of parts of the country right now.

Tim Ulbrich: That makes sense given where we’re at and the climate of the market. So No. 5 is underestimating the cash to close. So what I’m referring to here, Tony, speaking from personal experience in our first home purchase a little over a decade ago is I think many folks when they’re looking, you know, look at the sale price of the home, they might say, “OK, I’m going to be able to negotiate this or this,” which might be overconfidence, especially depending on what’s happening in the market. And they’re probably thinking about the down payment, whatever that would be, 5%, 10%, 15%, 20% down. But they might not be thinking about other costs that they’re going to need to consider having cash to come to the close. So tell us about not numbers, per se, but what are some of those other things that folks need to be thinking about when it comes to cash to close beyond just the down payment?

Tony Umholtz: One of the big pieces too outside of the down payment is your insurance premium. And insurance is due upfront, full year premium upfront, even if you paid cash, you have to pay for your insurance premium upfront if you want your home insured. And I find that — and this is flood insurance as well if you’re in a flood zone, that’s due as well — but the insurance component is something you have to take into consideration. The other piece outside the down payment is your tax allocation. So normally, lenders will take anywhere from 3-4 months of your property taxes for the escrow account. And for example, the reason for 3-4 months is there’s always a two-month cushion that’s collected. But there’s also, you know, let’s say we were to close today, right, on a house, Feb. 5, your payment is not going to be due — your first payment’s not due until April 1. So we have to collect February and March to be on pace to pay it for you, so we’re going to collect four months of taxes at closing to kind of cushion things. And then of course you have closing costs as well. So there’s a prepaid element and then we have the closing costs. So in addition to the down payment, you have those elements as well. The other thing to keep in mind too that is some confusion that I see a lot with first-time home buyers especially is when you give a deposit on the home, so let’s say when you give your realtor, your realtor goes to help you with the contract, you have to put $5,000 in escrow or deposit — terminology is about the same but different parts of the country call it something differently. That $5,000 gets credited back to you at closing. OK? So it’s a contribution to the overall transaction. It’s not something that you lose or gets lost in any way. It comes back to you. So if your cash to close let’s just say was $10,000, and you’ve already given $5,000, well, you only are going to bring $5,000 to the closing. So that’s another piece just to — questions that come up.

Tim Ulbrich: Very good. And I think the point here I want to make, especially for folks that are on the home buying process for the first time is making sure you’re appropriately considering what might be the cash needed, down payment, closing costs, you mentioned the insurance, the taxes, and some other things as well. So making sure to plan for that in advance and of course thinking about how that impacts other parts of the financial plan. So we’re halfway through our list of 10 common mortgage mistakes to avoid. We’re going to rapid fire these last five. No. 6 here is delayed communications with the lender, title company and agents. Lots of folks involved, Tony, in this process, lots of moving pieces and parts, and I suspect this is the time to overcommunicate and set communication expectations with the team in advance. So talk to us about from your perspective, you know, what you’re expecting of your — obviously your team but also in terms of folks that are working with your team when it comes to communication.

Tony Umholtz: I mean, communication is critical. And that’s what makes the transactions — makes or breaks them in a lot of ways, the communication. So we really try to communicate — overcommunicate with the client. The title companies can be tricky because some of them are, you know, larger, big box, and they’ll just send blanket emails out and it’s hard to get in touch with someone individually. But I think it’s — you know, one of the things that I think is critical is that we know who the realtor is, and we know who the title company is. And then we know the individual in contact. And it usually goes very smoothly if that’s the case. So just having everyone on board. Normally the realtors are very important for us to know because we have to coordinate, we have to give the appraiser their information typically, just to show the house. But yeah, the title company portion is very important, especially as we get closer to closing because the bank or lender’s closing department is going to communicate with them and balance the figures for closing.

Tim Ulbrich: Very good. Yeah. I think with lots of parties involved, communication — always two-way, but making sure that you’re being proactive in that and of course if there’s questions that are outstanding, making sure you’re reaching out and vice versa to stay on time and on track with closing. I’m going to take No. 7, 8 and 9 because they hit home for me personally. And then we’re going to bring back Tony here to talk about No. 10 related to mortgage discount points. No. 7 is making a home buying decision before you are ready just because “rates are good” or because I’m renting and “throwing money down the drain.” Now we’ve talked about this extensively on Episode 113, Is Your Home an Asset or a Liability? We’ve talked about not only the pressures to buy a home but also the costs of home ownership and comparing renting versus buying. And so I would encourage folks, as we say on the show over and over and over again, to avoid the trap of making any financial decision in a silo. So here, if you’re talking with somebody and rates are good or you see commercials about rates or that’s the center of the conversation or somebody says, “Hey, why are you renting? You’re just throwing money down the drain,” now, you may conclude that it is the right time to buy. But the point I’m making here is to take a step back, what else do we have going on in the financial plan, working with hopefully a financial planner to help you evaluate that decision, look at all pieces of the puzzle, and then proceed with the home buying decision and the budget to buy a home if it makes sense in the context of your plan.

And that really is No. 8 in terms of these mistakes is not thoroughly evaluating how home buying fits in with other financial goals. And so I think as we talk about extensively, you know, if you’re looking at six figures of student loan debt, you’re looking at investing goals, you’ve obviously got other competing priorities for your finances, home buying just being one of those, how does it fit in? And of course, YFP Planning, our fee-only comprehensive financial planning team can help that. You can schedule a free discovery call, learn more, at YFPPlanning.com.

No. 9 mistake here is not thinking about available cash post-close. So we talked about how much money you’re going to need to be able to come to closing. But what about things like a rainy day fund to make sure that if something goes wrong in the home? What about things like furnishing the home? What about things like yard equipment? And so thinking about not only the cash that you’re going to need to bring to closing but also do you have some reserves? Do you have some cushion? What will that look like month-to-month as well as some funds that you have in reserves to be able to handle some of those expenses that will inevitably come after you move in?

And Tony here, No. 10 in our list of 10 common mortgage mistakes I think is misunderstanding or evaluating mortgage discount points, especially as folks are comparing rates among institutions or even within a lender. So talk to us exactly about what are discount points? And ultimately, how folks and tips for folks as they’re evaluating discount points as an option.

Tony Umholtz: I would recommend that you always ask for a no-point quote initially because, you know, some lenders will put that into their pricing. It’s funny, even the Freddie Mac that are posted in the Wall Street Journal, they typically have .6% points in the quote. So you know, I always say that if I put that in there, the rate would be even lower. But that’s really the important element is discount points — let me explain what those are. They are actually — it’s defined as prepaid interest. So you’re basically buying down the interest rate and for a finance person, it’s like you’re buying down the bond rate over time by paying the points at a premium. It sometimes can be a good investment. But most of the time, I don’t recommend it. And the way that you can tell if it’s a good investment is traditionally, on a 30-year fixed, 1 point will typically buy down a .25% in rate, typically. Sometimes ⅜ of a point. Well, over — let’s say it’s .25%. Over four years, you basically pay off the point you paid and then you’re kind of in the money, so as long as you own the home more than four years, you’re in the money. And then a lot of times, depending on your tax bracket and everything, you can write off that point in the year that you pay it. So if it was 2021 and you paid 1% on a $300,000 home let’s say, that would be $3,000. But you know, the spread in rate is important in determining if paying points makes sense. But I find that it typically is not the best way to go unless there’s a big spread. Like I had a — there was a time earlier in the year, especially on jumbo mortgages, larger loans that are above the conventional limit, where we were getting a half point for 1% fee. Well, that made sense all day because you had a two-year payback period on a 30-year fixed. Then you were in the money for a remaining 28 years if you stayed there. So for long-term people who are going to be in the home or own the home long-term, it can make sense sometimes. But to compare lenders, you really just want to ask, like if one lender offers you 2 — this is just throwing out numbers — 2.75% with 1 point and the other one offers you 3% with no points, you can ask the 3%, “Hey, if I was charged 1 point, what could I get? What could my rate be?” And if they came back and said, “It’s 2.625%,” well the offer from the higher rate person is actually better. So that would be one way to compare. But that’s a quick summary of points.

Tim Ulbrich: Yeah, great discussion there of points. I know that comes up a lot, and I think what we’re trying to get to, Tony, is an apples-to-apples comparison the best that we can to evaluate it. And I think you bring up another good point in that discussion, which is the longevity that you may be in the home. And I know that’s an important consideration, one that folks may not be able to predict in advance but to try to objectively evaluate that the best you can because that’s going to impact when you think about rates of the loan, you think about things like points, when you think about down payments and other issues and having to be able to expense a move in the future and closing costs and selling the home, you know, if that runway’s going to be long versus that’s going to be potentially short, that could have a significant impact on many parts of the home buying process. So there you have it, 10 common mortgage mistakes home buyers make and steps that you can take to avoid these mistakes. And to learn more about considerations when getting a home loan and to get more information about the pharmacist home loan offered by Tony and his team at IBERIABANK/First Horizon make sure to check out the post on the YFP site titled, “Five Steps to Getting a Home Loan.” And you can get there by visiting YourFinancialPharmacist.com/home-loan or if you just go to the main page, YourFinancialPharmacist.com, top you’ll see “Buy or Refi a Home,” and that will get you there as well. So Tony, appreciate your expertise as always and appreciate you taking time to come on the show today to talk about this important topic.

Tony Umholtz: Tim, thanks for having me. Really enjoyed it. I always do, and you know, appreciate being a partner with you.

Tim Ulbrich: Thank you very much. And as always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please do us a favor and leave us a rating and review on Apple Podcasts or wherever you listen to the show each and every week. That will help other pharmacy professionals find this show. Appreciate you taking the time to join us. Have a great rest of your week.

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YFP 190: 7 Ways to Reduce Your Monthly Housing Costs

Posted on February 11, 2021November 2, 2022 by yfpadmin

7 Ways to Reduce Your Monthly Housing Costs

On this episode, sponsored by Insuring Income, Nate Hedrick, the Real Estate RPh, joins Tim Ulbrich to discuss 7 ways to reduce your monthly housing costs.

About Today’s Guest

Summary

It’s no secret that housing costs, whether that be your mortgage or rent payment, make up a large chunk of many people’s budgets. For some people, housing can be 30% or more of their income. Nate Hedrick, The Real Estate RPh joins Tim Ulbrich on this episode to share 7 ways to reduce your housing costs. Reducing your housing costs allows you to have more disposable income to fund your other financial goals. It’s a win-win, right?

The first is downsizing your home. Many people think downsizing means moving into a tiny home or to an apartment that’s drastically smaller than where they currently live. If that’s what you want to do, that’s great, however downsizing can simply mean moving into a house that’s a bit smaller to help reduce the costs of taxes, insurance, utilities, and maintenance. The second way to reduce your monthly housing costs is to house hack. While house hacking may not be for everyone, this is a great stepping stone into real estate investing and can allow you to, hopefully, live for free. The third strategy is to get a roommate. Like househacking, this may not be an option for everyone, but having a sibling, friend, or even stranger live with you can allow you to significantly reduce your housing costs.

The fourth is geo-arbitrage, a concept that’s been picking up some steam over the years especially among those in the FIRE community. Essentially, in order to save money on housing costs, healthcare, or the general cost of living (think gas, food, taxes, transportation, etc) and get more for your dollar, you pick up and relocate to a new place. We know that the cost of living can vary greatly between cities but that your income may not increase or decrease accordingly, so this can be a powerful way to save money if it’s an option for you. The fifth strategy is to use Airbnb to increase your income. Although COVID-19 may make it difficult to put this in action at the moment, this is one to definitely consider when state’s start to re-open more in the future. Renting out your home, in-law suite, or room in your home can bring in extra cash and help you pay down your mortgage. The sixth way to reduce housing costs is to re-evaluate your homeowner’s insurance policy. Just like you’d shop around for car or disability insurance, you can do the same with homeowner’s insurance. You can also check in with your current company to see if there are any discounts available for installing certain security measures or for paying yearly vs monthly. The last strategy is to refinance your mortgage. With historically low interest rates, you may be able to significantly reduce your monthly mortgage payment. However, it’s important to keep in mind the total cost of the loan and any additional fees and costs you may incur when refinancing.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Nate, excited to have you back on the mic. How you been?

Nate Hedrick: Good, Tim. Thanks for having me.

Tim Ulbrich: It’s been I think a hot second since you were last on the show, Episode 178, where we talked about 5 lessons learned during your most recent investment property purchase. But I don’t want to assume that everyone listening knows who you are and what the Real Estate RPh is all about. So give us a brief background of you, your role in pharmacy, and how and why you started the Real Estate RPh.

Nate Hedrick: Absolutely. So I am a full-time pharmacist. I work with an insurance company here in Cleveland, Ohio. But I also moonlight or side hustle as a real estate agent. So I have my real estate license, have had that for four years now. And I work with local pharmacists and other health care professionals to help them buy and sell property here in Cleveland. And then that expanded a couple years ago into Real Estate RPh, which is a website that I run to educate pharmacists about the real estate process, help them find agents all over the country through our concierge service that we’ve partnered up with YFP for. So we do a lot of interesting stuff. And that’s really what my focus is on this year is really growing that network and being able to help more pharmacists around the country.

Tim Ulbrich: Yeah, it’s been fun to see that grow and more and more that are reaching out to you that are in that home buying process. So we will link in the show notes, obviously, to your site. We’ll also have some more information about the real estate concierge service for folks that want to learn more. We’ll come back to that throughout the episode. So today we’re talking all about ways — specifically, 7 ways — to reduce monthly housing costs. And I don’t think it’s any secret, I know from personal experience, that housing costs, whether that’s your mortgage or rent payment, make up a large chunk of many people’s budget. Now, check this out. According to the U.S. Bureau of Labor Statistics, people that fall into the top income quintiles, many pharmacists of course would be included in this, spend around 30-32% of their pre-tax income on housing. 30-32%. That’s a big chunk of your earnings that immediately are being spent on housing each and every month. And when you think about other competing financial priorities, the ones we talk about all the time on the show: student loans, child care, food costs and so — it may feel like there isn’t much money left to put towards other goals. So of course, thinking about strategies for reducing monthly costs I suspect is relevant for many. So Nate, when working with clients looking to buy a home, do you ever give them any insight on how much of their income they should aim to allocate toward those housing costs? And how do you determine that?

Nate Hedrick: Yeah, so you have to be a little bit careful as an agent, right? We are not financial advisors. You know, I don’t want to step outside my shoes a bit. But we always — whenever I’m meeting with a new client, I do make sure we talk early on about the importance of budgeting and making sure that they’re the ones setting the budget. I’ve had numerous clients come to me and said, “Hey, Nate, I got pre-approved for $600,000. What do you think about that?” And I said, “That’s great. What is your budget, though?” It’s a totally different question. So I always make sure that I bring that up, make sure that they understand that they need to set their own budget and then it’s my job to help keep them on budget. So if they come to me and say, “My budget is $300,000. I don’t want to spend a penny over that,” it is very easy for them to fall in love with a house that is $350,000. And it’s my job to make sure that they don’t go that direction, right? Especially if they’ve told me upfront, “This is our number. We want to stick to it.” I’ve seen it time and time again where if you start looking outside of your price range, all of a sudden, your price range goes up. So what I take my own role as is, “Look, I’m not going to tell you how to spend your money, but I’m going to help you stay on goal if that’s what you want me to do.”

Tim Ulbrich: Absolutely. And I can’t overemphasize enough, you know, what you’re pre-approved for and what the budget is likely are two different things. And so really taking some time up front, you know, what are you looking for? How does that fit in with the rest of your financial goals? Obviously biased on our end — working with a financial planner to help do that. And then you go through the home buying process and make sure that that home buying purchase fits in with everything else that you want to do. Nate, when you heard that BLS statistic, you know, 30-32%, of course we recognize we’ve got listeners all over the country. Cost of living here in the great state of Ohio is very different than cost of living up in the Northeast or out West. So we recognize that. But generally speaking, is that statistic, 30-32% of pre-tax income on housing, is that pretty common what you see among pharmacist clients?

Nate Hedrick: Yeah, if not a bit higher, right? I think that’s probably about right, but it tends to be that or more, I would say.

Tim Ulbrich: OK, makes sense. And of course, we have friends, family that are spending much more than 30% of their income on housing, maybe even spending 50% or more. And again, sometimes that’s subject to cost of living in certain parts of the country. So Nate, why is spending this much money on housing something that folks should — you know, I don’t know if avoid is necessarily the right word. Obviously for everyone it’s a personal decision. But that they should at least be aware of the impact that this might have on other parts of their financial plan.

Nate Hedrick: Yeah, absolutely. I think sometimes it’s easy to look at it and say, “Well, I can handle that payment today. It won’t be a problem. But what does that look like in five years? In 10 years? You know, are you going to be working as much? Are both of you going to be working if you have a spouse? There are a lot of things that you want to plan for the future, and getting yourself into the highest possible payment right up front kind of cripples some of the opportunities you have later. So you could easily become house poor, you could — honestly, I’ve seen pharmacists, I’ve talked to pharmacists, who feel like they’re living paycheck to paycheck because that housing cost is so darn much that they have to commit such a large portion of their income to basically staying on track. Up front, if you can make that decision to pare that back a bit, it makes your options that much better down the road.

Tim Ulbrich: Yeah, makes sense. And I think we have a bias and a tendency — I know I do — to tend to look at our future state through the lens of today, right? It’s just natural. So of course things could change, you know, incomes could go up, but also incomes could go down. So do you have margin? You know, what about financial emergencies and being ready for those things, things that we may not be able to anticipate happening at this point in time? So it’s obvious that reducing monthly housing costs, if we’re talking about 30% or more of pre-tax income, can have a huge benefit on your financial plan. We know that when it comes to the financial plan, obviously income and disposable income is what we need to be able to allocate towards our goals. So whether that’s short- or long-term goals. So let’s dig into seven ways that people can reduce their housing costs. No. 1, Nate, we’re going to talk about is downsizing. And I think when people hear that word, they immediately think of living in a tiny home, moving to an apartment that’s drastically smaller than where they currently live. And if that’s what people want to do, great. You know, we’ve talked with several pharmacists that have had very creative housing situations. I think of Rena Crawford that we had on this show talking about her housing situation out in San Diego and her creativity with renovating a van while she was completing residency. And certainly those are exceptions probably to the norm. But what do we mean here when we talk about downsizing? And why can this be such an impactful way to reduce housing costs?

Nate Hedrick: Yeah, I mean, anytime you’re talking about a larger home, more expensive home, it’s not just the house itself, right? You’re talking about more utilities. If you have more square footage, you’ve got more to heat, more electricity, all those different things go into it, more maintenance costs. If you’ve got a larger footprint of house, there’s more stuff that can break. So all of those things start to stack up. It’s not just a bigger house is it. So that’s kind of important. And what I find is that it’s not always about necessarily downsizing but making sure that when you start, you’re not upsizing, right? So downsizing can be a good move if you’re already in a house where you’re like man, this is really crippling our budget. We need to make a decision. But what I see most often is that people who take this ahead of time, before they ever buy their first house and think about OK, I don’t want to have to downsize later, what can I start with now and then work my way up down the future?

Tim Ulbrich: Yeah, that makes sense. And I think your point is a good one, being proactive — and not even just focusing on necessarily things like the square foot and the mortgage, of course, and those things but other things. You know, you mentioned taxes, you mentioned maintenance, you mentioned utilities. What about the lawn care? And really considering everything that’s involved — could be association fees and other things. How do clients that you work with — you know, I know one of the things folks may not necessarily be as obvious is OK, what is it going to cost me all-in per month? You know, of course you’ve got the mortgage and insurance and they’re thinking about those things. But they may not necessarily be thinking as much about utilities and other things. Of course, taxes are readily available information. I mean, is this information that’s typically forthcoming from the seller? Do people have to prod to try to get some utility payments and things like that to be able to best estimate what this is going to be for their budget?

Nate Hedrick: Yeah, I usually recommend to my clients to ask. I’ve seen some sellers — and I’ve done this once — where we actually posted, not our bills exactly, but I had the seller pull their previous utility bills and say, “Look, let’s just put this number out there. That way a potential home buyer can feel good about it, that it’s going to be $300 a month for all this,” or what have you. That’s definitely something that we’re seeing people ask for, and it’s a great way to get a true estimate of what that particular property might be costing someone.

Tim Ulbrich: Awesome. And I think it’s worth mentioning here, of course when we talk about real estate transactions, you know, there’s costs that are involved. So making sure you’re factoring that in. If you’re going to pick up and move, how great — this is a conversation my wife and I have all this — you know, what’s the true net difference, right? So you might look at, hey, we’re going to sell for $350,000 and we’re going to buy for $250,000. But when you really consider the transaction costs, obviously the fees involved, the moving expenses, really trying to evaluate this and understand what the net difference is. So that’s No. 1, looking at downsizing. No. 2 is house hacking, I think a topic that you and I love, love talking about, one that we have both said on this show several times, “Man, if I could do it all over again, I would have house hacked.” So something we talked about Episode 130, I had Craig Curelop on from Bigger Pockets, episode talking about house hacking your way to financial freedom. And that episode I thought was a great overview in his book of the house hacking process. And it’s a real estate investing strategy that we love but also can serve your primary home needs. So Nate, break it down for us. For those that aren’t aware or perhaps a refresher, what exactly is house hacking? And how can it be a powerful way to reduce housing costs?

Nate Hedrick: So house hacking at its core is the idea that you are buying a property in some way, shape, or form that you are going to live in part of it and you are going to have a renter live in another part. And so traditionally with a house hack, you’re looking at like a duplex, a triplex, or a quad, which you can buy as a — the bank looks at it like a single family home. But you can live in one unit and then you can rent out the others. And ideally, with a proper house hack, you’re having that renter basically pay for your mortgage or pay for your mortgage and your taxes in an ideal world. But the idea is that if you can live in part of the house, rent out the other part, you’re going to have far less housing expenses because you’ve got someone else paying for it for you.

Tim Ulbrich: Absolutely. And I think it’s certainly can look very different for the reasons you mentioned. And one of the things I like about Craig’s book on house hacking, he gives a lot of different examples from his personal situation, others that did it, that I think will give folks a variety of ideas about what house hacking may look like for them and how it may or may not fit into their home buying goals. So Nate, have you worked with clients that have done a house hack? And if so, what was their motivation?

Nate Hedrick: Yeah, actually, I’ve got one right now that I’m working with locally here in Cleveland that’s looking to house hack, which is fun. We’ve been doing — running numbers on houses recently and looking for opportunities. And right now, this pharmacist is actually living in a house with a couple of roommates, wants to buy his own place but doesn’t want the housing prices or the housing expenses to jump dramatically, right? If you go from living in a $400 a month room or whatever the cost is there to this big housing payment, it might be a shock to your budget. But if he can transition to only a couple hundred dollars because the house hack is paying for some of that cost, you can get your own place, start building equity, all the advantages of owning a home without this huge uptick in expenses. So I’ve been working with him to try to find that opportunity. And then we’ve got a ton of concierge clients throughout the country that have done this. I think we’ve talked with a couple here and mentioned a couple in the past that have primarily been searching for a house hack when they’re looking for their first house.

Tim Ulbrich: Love it. And speaking of roommates, let’s talk about roommates. No. 3 here on our list of seven ways to reduce your housing costs, No. 3 is get a roommate. Nate, I thought this wasn’t college anymore. So similar to house hacking, getting a roommate obviously could be a way to reduce housing costs. Talk to us about the role that this can play.

Nate Hedrick: Yeah, especially again, I think people overlook this because like you said, once you buy a house, like I can’t — I can’t go backward, I can’t have a roommate now. But it’s a great way — if you’re in a personal situation where it makes sense, it’s a great way to reduce your expenses for both people. And you can take this as simply as, you know, I’m going to have my brother move back and he’s going to pay me a little bit of rent, or is as severe as putting an ad on Craigslist and having a stranger come live with you. You know, we’ve actually gotten a chance to talk to a couple of individuals here that are experts in this, I would argue. Ryan Shaw on Episode 173 knows all about how to deal with roommates and keeping them sane. And then Bryce Platt, one of our concierge clients that actually went out and bought — Episode 160 for those that are looking for it. He actually went out and bought a condo basically that had — was set up to have three other roommates with him. And so that’s part of that process. So it’s not uncommon anymore, and it’s a great way to reduce your overall expenses.

Tim Ulbrich: Yeah, and I think it’s worth, you know, the reminder or maybe the obvious statement of your first housing situation will likely not be your forever situation, right? So whether it’s a roommate directly living with you or in a situation like Bryce, that may work for awhile and then you decide you may move on. But now you’ve got an investment property that perhaps you can hold onto as well. So that’s No. 3, get a roommate. No. 4, perhaps the most interesting, my favorite on the list, but also likely very unpopular to some folks that love where they live. This is geoarbitrage. And Scott Rieckens, author of “Playing with FIRE,” mentioned this on the podcast last week, Episode 188. And I think it’s such an interesting way to reduce your housing costs. And I think this actually stems back to some of Tim Ferriss’ work talking about geoarbitrage. So Nate, what is geoarbitrage? And how can it help someone’s budget?

Nate Hedrick: So it’s a concept that basically you are — and we’re seeing a lot of this grow in the FIRE community, like you mentioned Scott but many others in the FIRE community are embracing this idea that in order to save money on housing costs or the cost of living based on a certain area, you basically you pick up and move to a new place. And we’re seeing this really taking off, especially with the changes in how people are working during the pandemic and hopefully after the pandemic is over. Work from home is just totally different than it’s ever been before. And you can basically do your job from anywhere now. If Option 1 is to live in downtown New York in a tiny apartment for a huge, huge cost, but Option 2 is to do that exact same job in Cleveland, Ohio, here, your costs go down dramatically. And so a lot of people are looking at this like, are there other areas that I can live in that I can either find a better job or keep my same job and work remotely that are going to improve my overall housing costs without dramatically impacting my life?

Tim Ulbrich: Yeah and again, I think this is not a forever situation, right? I know I’ve brought this up to various groups when I’ve been speaking before. You know, often you get that look of like, Tim, are you really suggesting that I pick up and move? You know? And it’s not necessarily for everyone, right? Sometimes there’s family situations, other things, where this is not even a possibility for a variety of reasons. But I think sometimes, this is a way to think a little bit more creatively, especially for those that might be in an area where jobs are also saturated. You know, if you could get to a lower cost of living area and perhaps open up some additional job opportunities, this might be something to consider while also accelerating your financial goals. And I think, again, it really depends on one’s personal situation. But I think what makes this so attractive for pharmacists, Nate, you know this, I know this, our community knows this, we do see incomes change slightly in higher cost of living areas but nowhere near what they should proportionally to the expense of those areas, right?

Nate Hedrick: Right. Absolutely.

Tim Ulbrich: So an ambulatory care pharmacist in Cleveland, Ohio, and an ambulatory care pharmacist in San Diego, that salary difference — while there likely is one from my experience in talking with folks — it does not represent the cost of living differences between those two areas.

Nate Hedrick: Definitely.

Tim Ulbrich: And so you know, I think that because of the nature of how that is treated with pharmacy jobs, this concept might also be attractive. And check this out for a minute, Nate. We pulled some data from RentCafe. The average rent for a 700 square foot –703 square feet, to be exact — in Manhattan is around $3,800. But the average rent for a slightly larger place, 883 square feet, in Little Rock, Arkansas — shoutout to our community in Arkansas — is $830.

Nate Hedrick: There you go.

Tim Ulbrich: Of course, Manhattan and Little Rock are not the same thing. Very different cities, right, in terms of what people are looking for and so on. But it just highlights, you know, what does that mean for monthly cash flow, what are your options. And you know, when I see $3,800 a month for 700 square feet, you and I both know what $3,800 a month can buy in Ohio, right?

Nate Hedrick: Seriously. Yeah, it’s crazy.

Tim Ulbrich: It could go a long way. So again, you know, obviously leaving family, friends, your job can be tough. Certainly not for everyone, but I think it’s one thing to consider and for — you mentioned the reasons of mobility now with some jobs having some more remote capabilities. So that’s No. 4, geoarbitrage. No. 5 is Airbnb. Nate, this is one that I think really pushes people to be creative in how they are cutting expenses or bringing in additional income. And we had Hillary Blackburn on Episode 121, where she talked about creating another stream of income as an Airbnb host and specifically talked about how her and her husband rent out their Nashville home for about $600 a night. So talk to us about how folks can use Airbnb or a similar model, of course, we’re just mentioning Airbnb, and use their home to bring in some additional money.

Nate Hedrick: Yeah, I think it’s gotten a little trickier during COVID having somebody in your house or what have you. But still, the idea there is really solid. If you can use the space that you already have — and maybe this is an extra bedroom or maybe it’s a whole extra in-law suite or a pool house or you name it, right — if you’ve got a way to rent out some of that portion of that property that you already have, and it’s a desirable area especially, you can pull in a lot of extra income to offset some of those housing costs. And again, like you talked about Nashville being $600 a night, if you’re in an area that people want to travel to, especially as things start to open back up, I really think that there’s opportunity there for you to get some serious income for that place.

Tim Ulbrich: Yeah, and again, this is one that may make sense for some, not for others. We’ve got an Airbnb calculator on the site. You can see, you know, roughly what you may be earning as an Airbnb host. That’s YourFinancialPharmacist.com/airbnbcalculator. We’ll link to that in the show notes. So that’s No. 5 on our list of seven ways to reduce housing costs. No. 6, Nate, re-evaluate your homeowners insurance policy. I just did this, so this one is top of mind for me. But I think this is something, you know, we haven’t talked a whole lot about on the show but certainly could be a way that folks may be able to shave off money off of their monthly budget, especially if their policies may have creeped over time. And because of escrow and other factors, they may not be aware or as closely aware as they could be of that. So talk to us about re-evaluating your homeowners insurance policy.

Nate Hedrick: Home insurance policy, if you have a mortgage, right, it’s really one of the only things that you can change. Your taxes are consistent, right? The county’s going to set those. The mortgage and the lender payment is set by the lender. HOA fees, that’s all fixed costs. But the home insurance policy, kind of the other piece that usually gets wrapped into that, is somewhat flexible. And it’s not — it’s not as common to mess with the home insurance policy as someone might shop around for like car insurance or disability insurance or life insurance.

Tim Ulbrich: Right.

Nate Hedrick: But realize that you can actually make quite a bit of difference with your home insurance policy. And it can change dramatically based on a number of factors. So if you change your deductible, for example. If you go from a $500 deductible on a home insurance claim to $1,000, you might save 25% on your home insurance policy in some cases. The other thing I’ll see a lot with home insurance is that if you are what’s called escrowing your home insurance or your housing insurance, a lot of times that bank will say, OK, well, we’re going to pay — and escrowing, just briefly, is that you actually pay the bank, you pay the mortgage lender to handle paying your insurance company for you. So usually you’re giving them money every single month as part of your normal housing payment. They’re taking a portion of that, setting it aside in an untouchable account called an escrow account, and then from that account, they basically pay your insurance company. But what I’ve found is that if you have that money in escrow, you don’t get a lot of flexibility with how that payment works. And if you can pull that out — and some lenders will allow you to do this free, some may charge you a small amount — but if you can pull that out, you can get even more creative with how you pay it. I’ve noticed that if you pay your home insurance premium monthly versus yearly, you can get a huge discount by paying it all up front. And so if you know you’re going to be there and you have the funds to do so, you can actually pay it Day 1 of the year and get a whole year’s worth of that payment taken care of at a much lower rate. So there are more flexibility here than I think people really realize, but a lot of it comes down to what are you allowed to do with your lender? And what are you willing to do in terms of that negotiation process?

Tim Ulbrich: Yeah, and I think too — great stuff there, Nate — I think it’s important to note, as you mentioned, these policies vary, you know, in terms of what they coverage, what the coverage includes, obviously personal belongings, other features of policies, and one thing I notice in this process, which certainly makes sense for those that have gone through this one or more times before, is that it’s easy to get focused on price shopping and not necessarily do an apples-to-apples comparison on coverage. So you know, some of these policies may present themselves as oh, well, you know, we could save you $300 a year or whatever. But when you look at the close details of the policy, you might be changing some of your coverage components. So I found it helpful, if you want to keep coverage the same, essentially as you’re going out and getting quotes, say, “This is my coverage. These are the eight things that are included. Here’s my deductible, here’s what’s covered in the policy. And basically give me a quote for this coverage.” You know? So you can do an apples-to-apples type of comparison.

Nate Hedrick: And watch because some will call things something different, right? They’ll have this special feature with Company A versus Company B and it’s literally just the same thing but with a different name. So watch out for that. The other thing I wanted to mention too is that some of them will offer discounts based on certain parameters of your home. So if you live in a disaster-prone area, ask them about what you can do to your homeowners insurance policy by doing some disaster-proofing. Maybe it’s adding storm shutters or maybe it’s actually a security discount. I’ve seen where if you put in electronic locks or deadbolts, just simple deadbolts versus a regular door lock, they will give you a discount on your overall insurance policy. So there are a number of things you should ask about too, like is there any way for me to get a discount on this? What can I do to improve this?

Tim Ulbrich: Yes. Always ask for a discount, right? Yeah, and as some of you are looking to shop around, you know, certainly many ways that you can go about this. Policy Genius is somebody we’ve talked about before, allowing you to compare life and disability insurance quotes, now also has a platform to compare homeowners insurance quotes. Also, renters insurance as well. If you go to PolicyGenius.com/YourFinancialPharmacist, you can learn more. So that’s No. 6 on our list of seven ways to reduce your monthly housing costs. No. 7 is refinance your mortgage. Again, something that’s near and dear to me. We went through this process last summer. We’ve talked about how low rates have been recently for purchasing a home, for refinancing your mortgage over the last year. Nate, talk to us about what mortgage refinancing is and how this can ultimately lower monthly housing costs.

Nate Hedrick: Yeah, so think about refinancing as basically resetting or getting a new loan. Effectively, what you are doing is you are clearing out your old loan, someone is paying that old loan off, and you’re establishing a brand new loan. So it’s similar to — we’ve talked about student loan refinancing. It’s the same idea, right? We’re paying off what you currently have with Lender A, and we’re moving that to Lender B at a new rate or at a lower monthly payment. And so the goal here would be obviously to lower the interest rate and then hopefully as a result, your overall payments are going to go down. So you’re going to eliminate your — hopefully maybe eliminate PMI if you have that in place today. You can, again, drop your interest rate from maybe a variable to a fixed rate that is much lower. You could lower the term over which you’re paying that loan. So you could go from a 20-year rate to a 15 or a 30-year to a 15. And now your overall expenses for the longevity of that house are going to go down. So there are a number of ways that you can use refinancing to cut your costs. But if you’re looking to lower your monthly housing payment, a lot of times it comes down to finding an interest rate that is lower than what you have today and finding a term that makes sense for your financial plan and is less than what you’re paying already.

Tim Ulbrich: Yeah, and I think it’s, although obvious, worth reiterating one of the traps that I see folks often falling into is yes, you know, you can lower the monthly payment, but if you’re extending out the term, keep in mind the total cost of the loan, right?

Nate Hedrick: Yep.

Tim Ulbrich: So trying to make this as apples-to-apples as you can. If you’re already five years into a 30-year term, and you refinance out to a 30-year, obviously you’re tacking on five more years. So yeah, monthly payment might go down, likely will if interest rates are lower, but what does that mean in terms of the total amount paid over the life of the loan? And keeping that in mind as you’re evaluating various options.

Nate Hedrick: And don’t forget, you’ve got closing costs as well in there, right? So you’ve got to make sure that the actual process of buying that loan, you’re getting a new loan but there’s going to be closing costs associated with that to factor in as well.

Tim Ulbrich: Absolutely. Great stuff, Nate. Seven ways to reduce your housing costs, certainly a topic for the reasons we mentioned at the beginning I think folks are interested in. This won’t be the last time that we hear from you and so if you’re listening and you’re looking to buy your first home or you’re looking to move and you want to work with an agent, you don’t currently have one, as Nate alluded to, we’ve got the concierge service working with Nate. It’s free to our community to work with Nate, who will help get you connected with a realtor in your area. And you can go to YourFinancialPharmacist.com, click on “Buy or Refi a Home” at the top, and once you do that, you’ll see an option to find an agent and that will get you connected up with Nate. Also, if you’re looking for a loan, looking to refi your mortgage, want some additional information, again, YourFinancialPharmacist.com, and then you can click on “Buy or Refi a Home” and get some additional information. So Nate, as always, appreciate your time and expertise and thanks for your contribution on the show.

Nate Hedrick: Thanks for having me.

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