YFP Media

YFP REI 133: How Property Owners Can Leverage Energy-Efficient Financing

Posted on by YFP Media

Attorney Colin Kalvas discusses PACE (Property Assessed Clean Energy) financing, including its origins, mechanisms, and applications for residential and commercial property owners.

Episode Summary

In this episode, Colin Kalvas, a public finance and economic development attorney, joins Nate Hedrick, PharmD and David Bright, PharmD to explore the intricacies of PACE (Property Assessed Clean Energy) financing. They discuss its origins, mechanisms, and applications for both residential and commercial property owners.

About Today’s Guest

Colin Kalvas is a public finance and economic development attorney with Bricker Graydon in Columbus, Ohio. Colin serves political subdivisions, financial institutions, developers, and special purpose districts in many different capacities. He represents clients on economic development incentives, public-private partnerships, project financing, municipal bonds, federal income tax law, securities law, contracts, property development, and governmental revenues.

Colin has been at the forefront of developing property assessed clean energy (PACE) financing in Ohio. His PACE efforts include serving as counsel to PACE administrators and energy special improvement districts, as well as serving as bond counsel and capital provider’s counsel to entities that finance energy efficiency and clean energy projects through PACE.

He is well known within the national PACE community and regularly speaks at national PACE conferences. He has extensive experience negotiating, documenting and closing PACE transactions, including as part of complex capital stacks. Colin is frequently called upon to advise PACE capital providers of all kinds on transactional best practices and documentation.

Key Points from the Episode

[00:00] Welcome and Introduction
[00:37] Colin’s Background and Legal Disclaimer
[01:51] Understanding PACE Financing
[04:27] Residential vs. Commercial PACE
[08:35] Pros and Cons of PACE Financing
[13:52] Regulations and Safeguards
[16:22] Practical Considerations for PACE Financing
[32:24] Future of PACE Financing
[35:09] Conclusion and Contact Information

Episode Highlights

“ One of the things about PACE that always has to be kept in mind is that because it’s a public financing mechanism, and it’s using this special assessment mechanism, it’s going to be state law specific.” – Colin Kalvas [6:58]

“ PACE is going to be most effective in a situation where you can replace a significant amount of either cash or partnership equity or junior debt that you would be thinking about putting into a project. That’s when it’s going to be the most effective.” – Colin Kalvas [31:24]

“ It’s when you kind of have a gap where, you’ve got the amount of equity in that you need, you’ve got your senior lending, but you’re still trying to figure out how to pay for these other items. That’s where PACE is probably going to be the most effective.” – Colin Kalvas [32:07]

“It [PACE] was originally conceived of as advancing energy efficiency and alternative energy policy goals, but where it’s actually been really effective is in promoting investment in buildings – kind of the economic activity of that – and job creation.” – Colin Kalvas [33:58]

Links Mentioned in Today’s Episode

Episode Transcript

Nate Hedrick: Hey, Colin, welcome to the show.

Colin Kalvas: Hey, thanks Nate. Thanks so much for inviting me on.

Nate Hedrick: Absolutely, man. We, uh, this is a cool moment for me. I don’t often get to interview old time friends. We go way back to ninth grade. So this is cool to have you on the show. I was, I said before he hit record, like, it’s weird that our goofy friends grew up into like actual adults who know stuff. So really happy to have you on the show talking about real stuff.

Nate Hedrick: This is cool. Cool.

Colin Kalvas: It’s funny how that tends to happen, right? Yeah, we all grow up.

Nate Hedrick: Sometimes I feel like I’m waiting for the adults to show up in the room and, uh, we’re, we’re them. So I guess this is it.

Colin Kalvas: There we go. There we go.

Nate Hedrick: So why don’t we jump right in, give everybody a little bit of just background on yourself [00:08:00] and some of your training. Um, and we can, we can dive in from there.

Colin Kalvas: Sure. Well, my name is Colin Kalvas and, uh, I am a lawyer. And I guess, uh, because I went to law school and, uh, you know, the punishment that I have for that, I should say, as we get into this, uh, I am a lawyer, but I’m not anybody who’s listening to this is lawyer. And so, uh, none of what I say is legal advice.

Colin Kalvas: And if you need some legal advice, I would suggest that you find or talk to, you know, the lawyer that you trust, um, coming out of law school, I was fortunate enough to find a job with a law firm that has. What we call a public finance practice, and that, you know, mainly deals with public entities and how they either pay for their own assets or can help in public private partnerships with private parties, uh, to make development work.

Colin Kalvas: So, uh, in that context, I got involved with a number of different kinds of public private partnership [00:09:00] tools that are used for development, uh, and one of them is property assessed clean energy or PACE financing, which is, uh, we’re going to talk about today.

David Bright: Yeah. So let’s jump into that then. The property assessed clean energy, which I hear more often as PACE financing, uh, can you walk us through what that is? Big picture zooming out. What does that mean and what kind of things might that apply to for a real estate investor?

Colin Kalvas: Yeah, absolutely. Um, the biggest thing to keep in mind with PACE is ultimately it is a, a source of financing. So when you compare sources of financing, you might think about, you know, traditional mortgage lending. You might think about partnership equity. You might think about equipment, leasing or equipment financing pace is another type of financing and kind of always have to keep that in mind.

Colin Kalvas: Because when we start to get into the details, there’s a number of different players involved. It can get a little bit complicated, but at the end of the day, this is a way [00:10:00] for a property owner to access funds to do upgrades to their property. Um, and it’s, it’s again, it’s a little bit different than some of those other sources, but ultimately it’s a, it’s a financing source. So pace is a financing source that uses a public mechanism. To pay for typically private improvements and what happened back, uh, going on about 15 years ago now, our local governments around the country sort of perceived that there was a need to invest in upgrading our building stock. We had a lot of aging buildings that really could use energy efficiency upgrades.

Colin Kalvas: There was also a lot of momentum behind trying to incentivize folks to look at alternative energy improvements like rooftop solar or micro wind or geothermal. And what a lot of policy makers perceived was there’s an opportunity for us to use what has traditionally been a public financing mechanism to [00:11:00] incentivize this public policy that we want to achieve.

Colin Kalvas: Increasing the energy efficiency of buildings, incentivizing alternative energy. So, what a number of different state legislatures did was authorize. Local governments to put what are called special assessments. On property as a way to both secure and repay. Upfront financing that the property owner can get to pay for those eligible kinds of improvements.

Colin Kalvas: So you can see where it starts to then get a little bit complicated because you’ve got a government involved. You’ve got a property owner involved. You’ve got a lender involved. Um, but again, it’s really just a financing source and it’s using special assessments rather than some of the other kinds of things that other sources of financing might use.

David Bright: Yeah. And then what, what would be some other examples of, uh, the clean energy updates? That might play in for, you know, especially some of the, uh, smaller residential units. Or is that not really the typical focus? [00:12:00] Is this typically more of a larger commercial building kind of thing?

Colin Kalvas: Yeah, it’s a really good question. And actually, over the history of PACE, the answer has probably been a little bit different at different times.

David Bright: Okay.

Colin Kalvas: So Pace really started out as a residential effort, um, in California and Florida as kind of the tip of the spear, there was a lot of investment in residential Pace and what homeowners in those places were experiencing, uh, and using Pace for were kind of standard things like HVAC upgrades, you know, you have an air conditioner that goes out, you want to upgrade it, you think, I might as well go for the more energy efficient model.

Colin Kalvas: This is a way to help me pay for it. There was a lot of investment, um, done in that kind of mode, but also the rooftop solar, as you can imagine, in places like California and Florida. Um, very good environment for rooftop solar. Incentives available to try to help bring down the cost of those things and then pace was a source of financing that could help pay the [00:13:00] costs that you are.

Colin Kalvas: You know, obligated to pay so for a while. It was really heavy in the residential space. Um, I think once. Things sort of started to develop in that area folks perceived. Well, we could really use this for commercial as well. And the capital markets sort of started to see pace as something that, um, they could understand and underwrite and that they could put.

Colin Kalvas: Bigger dollar amounts behind, and because of that commercial pace has kind of taken off and because of the project sizes and scopes, you know, it’s now a larger segment of the market than the residential side. Um, there’s also been some bumps in the road on the residential side, unfortunately, and that’s caused some contractions and a little bit of a, um, stagnation in terms of the expansion of residential pace.

Colin Kalvas: Um, but, uh, it’s still something that is is done and available in in Florida and to a lesser degree in California. Still.

Nate Hedrick: And so when, when you’re getting this financing, I guess my understanding [00:14:00] of it was that it’s not a typical loan, right? It’s still money being paid up front, but in terms of the payback, it’s not a typical loan payback. This is actually being attached to your property taxes. Is that, is that typical for all these projects you’re talking about?

Nate Hedrick: Or is that, is that the norm?

Colin Kalvas: Yeah, and, you know, 1 of the things about pace that’s, uh, always has to be kept in mind is that. Because it’s a public financing mechanism, and it’s using this special assessment mechanism, um, it’s going to be state law specific. So, you know, I was mentioning, like, residential pace in California and Florida that, um.

Colin Kalvas: In those states, you know, those things were authorized and the special assessment mechanism sort of followed the way that their property tax system works in those states. It’s a little bit different in every state, how that actually works, uh, but the key sort of fundamental thing with pace is that it is going to be a property tax item.

Colin Kalvas: And that has some advantages, and it kind of makes [00:15:00] pace work. The way that it does,

Nate Hedrick: And so how did you first get injected into this? Is it like something that, uh, you know, you yourself are not a real estate developer going out and getting these loans, right? You’re assisting the, these public entities with, with doing so. Is that, is that right? Or how are you involved in the day to day with this?

Colin Kalvas: yeah, it’s a great question. Um, you know, again, kind of coming from the public private partnership. Background, we had a number of local government clients that were interested in this. And, uh, kind of came to it from that lens, but over time have worked in a number of different capacities. You know, yes, on the local government side, but also a little bit on the property on our side and also on the pace.

Colin Kalvas: We call them capital providers is kind of the terminology on the pace. Capital provider side, that’s the folks that are, you know, giving the upfront. Upfront funding.

David Bright: So let’s, let’s unpack some of the pros and cons of where this might be a good fit, uh, different types of projects or different [00:16:00] ways that an investor could really leverage this as an opportunity to, to enhance their investing. So, uh, let’s start off with, are there, are there project types that really stand out to you as if you’re doing this?

David Bright: In this type of building, think about pace financing.

Colin Kalvas: yeah, that’s a great question. I think I can speak a little bit from what we’ve actually seen happen as maybe a way to address that. So, I would say that, um, on the commercial side. And when we say commercial, we should probably be clear in most states, a commercial. Asset is going to be something that has.

Colin Kalvas: For or more residential units, if it’s, you know, used for residential purposes, or then, obviously, anything that has purely commercial purposes, like an office building or retail or things like that. Um, but on the commercial side of the equation, I would say that, uh, multifamily certainly has been an area of a lot of pace investment.

Colin Kalvas: Uh, hospitality as well, by their kind of [00:17:00] traditional hotels, or even sort of more boutique bed and breakfast, things like that. Uh, senior living has seen a lot of pace investing over the years and, uh, to a little bit of a lesser degree office. And that’s a little bit tracking the overall market trend for office space, um, where we see pace, uh, a little bit tougher on the commercial side is on really specialty assets.

Colin Kalvas: So if you think about a big data center somewhere that’s built specifically for a specific user, or if you think about indoor agriculture, um, other types of really specialty assets, those can be hard, mainly because of the credit underwriting that the PACE capital provider is going to do. It’s not a super fungible asset, and therefore, They are going to have a hard time finding a new buyer in the event that there’s ever a need to sell the property in a foreclosure situation, and it just makes the underwriting tougher.

Colin Kalvas: Um, so it’s certainly on the multifamily side and hospitality and senior living, [00:18:00] uh, pace is kind of an easy proposition. The farther you get away from that and into more specialty types of assets, the tougher it can get.

Nate Hedrick: I guess it begs the question, is there like a minimum or a maximum? We’ve been talking about everything from, you know, big commercial, like a hotel down to like putting solar panels on a roof. Is there a minimum or a maximum for these types of loans or is it all across the board?

Colin Kalvas: Yeah, um, I would say there’s certainly no maximum, um, and that’s been an interesting development, uh, you know, even over the past year or so we’ve seen, um, you know, hundreds of millions of dollar amounts in in pace financing. Um, so the, the large side of the market is growing and there doesn’t seem to really be a ceiling to that on the small side.

Colin Kalvas: There’s probably sort of 2 lenses to think about that question from 1 is from, um, kind of a underwriting perspective. And another 1 is from sort of a cost [00:19:00] effectiveness perspective. So, on the underwriting side. Most pace capital providers are only going to be able to provide pace at up to maybe around 35%.

Colin Kalvas: At a, at the, at the most of a property’s value. And so when you’re talking about, you know, sort of small dollar value assets, um, the pace amount that could go in there, you know, might not actually be that significant. It might not be enough to pay for all the things that a property owner would like to do.

Colin Kalvas: Depending on the value on a cost effectiveness side, traditionally pace has been a little bit higher on the fee load because it is kind of complicated. You’ve got the government involved. You’ve got a number of different. Uh, sort of background diligence, things that need to happen. We can talk a little bit about that.

Colin Kalvas: That’s a little bit different than traditional lending. So the cost to actually transact and pace has been a little bit higher. 1 of the really [00:20:00] exciting things that we’ve seen in the last probably a year to 18 months are a number of. Small, local community banks and. Getting really involved in pace from the actual.

Colin Kalvas: Lending side. So there are traditional banks that are now using this as a source of financing with their customers and banks are really, really good at deploying capital and doing it at a cost effective way. So, uh, they are costs associated with some of the smaller balance pace. Have been significantly lower than the cost that we’re used to seeing kind of in the traditional pace market.

Colin Kalvas: So I think we would expect to see that continue and to kind of bring that minimum dollar amount from a cost effectiveness standpoint. Kind of continue to go down.

David Bright: Okay. So less, less of a fit if it’s like your furnace went out in your house and you’re trying to fund a few thousand dollar thing, more of a fit if it’s like a, an Airbnb beach house where you’re [00:21:00] looking to do new solar panels, new HVAC with air conditioning, with windows, with that kind of thing. Is that, is that my understanding that right?

Colin Kalvas: That’s probably right. David. Yes. And the other thing about residential versus commercial, um, you know, we kind of talked a little bit about, um, the fact that. The market developed for residential starting in California and Florida, there have been a number of sort of regulatory things that have come up over time in the residential space.

Colin Kalvas: Unfortunately, there were some issues that arose with contractors and kind of the way they were interacting with some of the property owners. Uh, and also there was a, I think, a rightful perception that this really is a financing tool. And for a while, it was not regulated the way that other forms of consumer financing were regulated.

Colin Kalvas: So, there’s been a push to kind of bring it more in line with the ways that other consumer loans are regulated. Um, and there’s been [00:22:00] sort of some fits and starts with that, uh, but in general, through that effort, um, on the residential side, we’ve, we’ve kind of seen a slowing of the increase in the use of pace.

Colin Kalvas: For just kind of that HVAC replacement that you’re talking about.

Nate Hedrick: I, I’ve heard those horror stories of like, and maybe this isn’t pace, you can correct me if I’m totally wrong, but like where the, the, the door to door, like solar salesman is like, you don’t pay anything. We just throw it on your roof and like, don’t worry about it. And then two years later, it shows up in their property taxes and they have no idea where it came from.

Nate Hedrick: They’ve never been underwritten on that loan. They might have fixed income and they have no ability to pay that back anymore. Like, is that, I mean, that’s the, yeah. The bad stuff, right?

Colin Kalvas: Yeah, unfortunately, you know, we’ve heard those stories too. And the good news on those is that I think the market has appropriately reacted and put a lot of safeguards in place. So, where residential pace is available, there will be things now, like, you know, a confirmation of terms call where [00:23:00] you have to speak with a live representative to confirm you understand that there’s going to be a special assessment on your property.

Colin Kalvas: You understand that you have to pay this back, you know, those kinds of things. There is, um, significantly more underwriting of not only the property, but also the actual property owner that now takes place. Um, there’s kind of truth in lending things that are involved. So, um, the market has definitely reacted to those horror stories and tried to address them.

Colin Kalvas: Um, but yes, you know, they were out there and I think that caused some hesitancy. In the expansion on the residential side.

Nate Hedrick: That’s good to

David Bright: Okay. Uh, what about. I know a lot of investors jump into a property and they kind of cashflow repairs over time, meaning they’re doing a few things here, then they’re going to wait and they’re going to do a few more things and a few more things. What about that person that has already kind of started on some renovations and is now hearing about PACE financing?

David Bright: Can this be used retroactively for reimbursing [00:24:00] recent things and putting a larger umbrella over a portfolio of renovations? Or is this only forward looking?

Colin Kalvas: It’s a really salient question currently, um, because a lot of folks, you know, are finding out about pace now and they’re thinking, whoa, I just did a bunch of stuff that I think could qualify for pace, you know, last year. Can I can I use this tool and in a lot of places? The answer is yes, but it’s a little bit state and program specific. So there’ll be different guidelines for kind of how far back you can go, what you may have had to do at the time that you were doing the improvements in order to kind of qualify them for later reimbursement, and then how the money kind of comes into the property or to the overall sort of capital stack that exists with the property.

Colin Kalvas: But in general, the answer is, uh, yes, for some period of time, you can look back and kind of capture some costs of some projects that you may have [00:25:00] already completed.

David Bright: What about contractors? Do the, do contractors need to be credentialed in a certain way, or is it just kind of basics like license bonded, insured, or is it, could an investor even do some of their own work on their own project and have materials paid for with PACE?

Colin Kalvas: Yeah, and that’s another one that has sort of evolved over time. Um, a lot of the models for the early pace development had contractors that would get kind of signed up on a platform to be able to go out and sell not only the improvements that they were doing, but also pace as one of the financing options for it.

Colin Kalvas: I think the market has generally moved away from that model to where, you know, any contractor that’s involved with a project. As long as they’re, you know, licensed, bonded, insured, like you said, it’s going to be able to perform the work in pace. Uh, we mentioned this earlier. There’s a little bit of extra diligence that’s needed [00:26:00] in.

Colin Kalvas: Ensuring that the improvements that are being financed qualify. Under the relevant rules, so, you know, in general pace can be used for those alternative energy and those energy efficiency improvements. But what that means in every state is a little bit different and how you prove that something really is energy efficient is a little bit different in every state.

Colin Kalvas: And typically, there’s going to be a professional that gets involved to actually show that by doing calculations, energy savings calculations that fit under those rules.

Nate Hedrick: Is that typically a consultant or do you have a contractor that gets to that level of knowledge that they’re doing that for the customer?

Colin Kalvas: Yeah, it can be, it can be different things. You know, there are folks out there that specialize in that kind of thing. Um, and they’ll, you know. Yeah, they’ll come into a project and they’ll do the analysis for you and they’ll kind of provide whatever it is that that you need. But a lot of times, you know, the [00:27:00] architect or the engineer or the contractor that’s involved on the project.

Colin Kalvas: Actually has somebody in their shop that can do those calculations as well. There are a number of free resources that are out there that can help with that to the Department of energy has some calculators that a qualified engineer can get on. And input a bunch of data about a building, and then it kind of spits out what the energy savings are.

Colin Kalvas: So, there’s probably a lot of different ways that you can. You can slice that, uh, just depending on, you know, who’s already involved in a project and what the local need may be.

Nate Hedrick: And I guess I didn’t ask this earlier, but it’s, it’s, it’s kind of churning in my head now. Like, so we, I get the loan. Um, I, I fund my project and do the rehab, then they start assessing it in whatever state way my property taxes follow. Um, how, how long is that typically like metered out over? And then what does that look like when I go to sell the house or want to pay off the loan early?

Nate Hedrick: Like, can I pay off my property taxes early to get my, like, how does, how does that all work? It

Colin Kalvas: Yeah, [00:28:00] those are really good questions and ones that a lot of times, you know, a property owner really needs to think through before they pull the trigger on using pace. Um, the term of pace financing is typically tied to the useful life of the assets that you’re financing. And, yeah, and, you know, in a lot of ways, that’s good for everybody, because it kind of helps match up the loan payments with the savings that you’re hopefully achieving from, you know, the energy efficiency improvements.

Colin Kalvas: But it also ensures that you’re not, you know, borrowing something that’s sticking with the property way past the time that you’re even getting the benefit of the improvement. Um, so a lot of terms will be, you know, 15, 20, 25 years, something like that again, kind of depending on the life of the improvements that you’re financing and industry standard and pace has been that it can be. Prepaid, um, so you can pay it off early and typically that is at, you know, the outstanding principal amount. [00:29:00] Plus any accrued interest, and then depending on where in the term, there might be a little bit of a prepayment penalty. Um, but that’s typically something like starting at maybe 5 percent and kind of graduating down over the first 5 or 10 years until then there’s no premium.

Colin Kalvas: If you’re beyond that period, you don’t have to prepay all of the future special assessment payments because fundamentally what the special assessments are. Are the full amortization of the loan. It’s not it’s it’s the principal repayment plus the interest plus any, you know, administrative fees or servicing fees that need to be collected.

Colin Kalvas: So, typically, you don’t have to prepay. All of those future assessments to get out of a pace loan, you’re just paying. Principal plus accrued interest plus any premium that might be due.

Nate Hedrick: it’s still a first position mortgage though. Right. So, or, or first position on, uh, on the property. Right. So if, if I go to sell it, like, do I have to get rid of that first?

Colin Kalvas: Yeah, and and, um, by 1st [00:30:00] position, we should actually be a little bit specific about what is in 1st

Nate Hedrick: why I brought the lawyer on the episode, not me.

David Bright: Yep.

Colin Kalvas: that’s a lawyer answer. Right? No. 1 of the big advantages of pace is that it cannot be accelerated. So, just like property taxes are only due for the year in which the bills are out there, you know, and they’re actually outstanding.

Colin Kalvas: You cannot force a property owner to pay. future special assessment payments in any given period. Uh, what that really means is that for the lien priority, only any unpaid special assessments have priority over private liens. You can’t accelerate the full principal amount of the PACE loan to become, you know, prior to a mortgage or some other type of lending.

Colin Kalvas: It’s only the unpaid amount. And that’s a big advantage for PACE because that. Makes it so that senior mortgage lenders [00:31:00] are willing to agree. That pace can go on to property, um, and it doesn’t interfere too much with, you know, with their mortgage. So, then 1 of the other advantages with the, the non acceleration is that typically there’s a corresponding ability to transfer the property to another owner. And you don’t necessarily have to pay off the pace loan. Um, that’s a negotiation that has to happen between the seller and the buyer. How do you want to handle this pace?

Colin Kalvas: That’s sitting on there and, you know. I would say sometimes the buyer says, you know, to the seller. Hey, we want you to pay it off just like the mortgage that’s sitting on there. You know, you need to pay that off for me to be able to buy this property. Um, but oftentimes we’ve actually seen that a buyer says, no, I get it.

Colin Kalvas: You know, I see the improvements that you did. I see the energy performance. That’s associated with that. I’m okay with stepping in and assuming these assessments going forward. Um, 1 of the advantages of [00:32:00] pace.

David Bright: And so in a refinance situation or sorry, in a purchase situation where someone’s coming in with financing on that. Like Fannie, Freddie, like some of the major lenders, they don’t really have a problem doing that. It’s easy to move that forward.

Colin Kalvas: I wouldn’t necessarily say, uh, with some of the federal programs that it’s easy. I think folks have found ways to kind of make that work, um, in different contexts. I would say, you know, the easier path is certainly when you’re not necessarily looking to some of those federal guarantee programs or underwriting programs.

Colin Kalvas: Um, as as part of it, 1 interesting thing kind of on the again on the commercial side is. Pace actually is compatible with lending. Um, and there are a couple of hoops to jump through with that, uh, but in general, it’s compatible and, you know, I’ve worked on a number of projects where there’s SBA lending and pace.

Nate Hedrick: That’d be cool. Yeah. Start up your own green business and get, get it paid for.

David Bright: Yeah.

Colin Kalvas: [00:33:00] Yeah.

David Bright: I’m imagining to some of the loan terms on, on PACE funding would be, uh, you know, better interest rates perhaps, or things like that to justify some of the fees. And so also then if someone’s purchasing or refinancing, it could be advantageous to keep that, that debt there in a, in a lower interest rate than what we’re seeing in the open market right now.

Colin Kalvas: Yeah. That’s definitely 1 of the advantages of pace. So that that high lean priority. That basically guarantees that the pace lender is going to get paid current. You know, they’re not necessarily going to get paid out of the deal, but they’re going to get paid current. That lean priority typically enables them to offer interest rates that are incredibly competitive versus other forms of junior debt.

Colin Kalvas: So pace is almost always cheaper than subordinate lending, mezzanine financing, partnership equity. It’s usually a little bit more expensive than mortgage lending, kind of [00:34:00] senior lending, but not always. And, you know, recently with where interest rates have been, some of those rate spreads have actually been very, very close.

Colin Kalvas: Pace versus traditional lending. So you’re absolutely right, David, that somebody might take a look at a property and say, I’d actually like to keep this pace on here because I can only max out my senior lending at 65 percent of the appraised value. I’ve got to figure out what I’m doing about the other 35.

Colin Kalvas: And it’s actually pretty cost effective in terms of cost of capital for me to keep some of this pace on here and pay it at a, you know, 8 percent interest rate instead of my other options.

Nate Hedrick: Alright, so Colin, you got my head spinning. I, uh, we’re going through a small addition at our house right now, and I’m kind of wondering, like, man, should I have gotten pay some financing on this? Um, it’s not an energy efficient upgrade. So it’s probably not a good fit. But still, I’m thinking about it. If someone is like, look, I have this project.

Nate Hedrick: I think it’s perfect. Just I heard this today. This is the most I know about PACE. Like, what are some of like first [00:35:00] steps to kind of get rolling on just figuring out if PACE financing is a good fit? Like, do I get a contractor first? Do I get a lender first? Do I call a lawyer first? Like, where do I go to get off the ground?

Colin Kalvas: I’d love to say you should call a lawyer first, but

Nate Hedrick: Nobody does that. We call the lawyer last once there’s a problem. Then we’re like, Oh my God, save me. Yeah.

Colin Kalvas: Right, right. Um, no, and really, it’s not the right answer. The right answer is probably that you want to check if you’re somewhere where pace is available because pace is pretty widely available, but it’s not available everywhere. So, currently, there are about 37 states plus the district of Columbia that have it.

Colin Kalvas: But, you know, that means that there’s a handful of states out there that still don’t have it. And even in those states that do have it, it’s, it’s not necessarily available everywhere in those states. Um, so there are a couple of good resources to kind of get you started with that. There’s a group in industry sort of trade organization called Pace Nation.

Colin Kalvas: Um, and they’ve got a [00:36:00] website and they’ve got a map of, uh, where Pace is currently enabled. And it’ll have a little bit of information about kind of what the program is called in that state. And then, you know, if you want to do some follow up research, probably look into what that program is and where all it’s available within the state.

Colin Kalvas: It’s kind of a first step. So first, just sort of checking. Could I even do it if I wanted to? Once you know that, um, probably actually getting in touch with that program. Is maybe the best way to go because they’re going to help talk you through exactly what is required for them, you know, in terms of the energy savings calculations, uh, they’ll also probably have a list of of lenders that you could talk to about, you know, who should I, uh, try and get some terms from or who can I talk to in terms of actually getting the pace financing and they might also be able to guide you through any contracting requirements.

Colin Kalvas: So, honestly, that’s probably if you’re starting from, you know, the starting line. That’s probably the best path to go is actually to kind of engage with the [00:37:00] programs because they’re going to be able to guide you through what to do.

Nate Hedrick: That’s good advice. And then the other thing that I’m thinking about is you mentioned earlier that it can take a little bit of time to coordinate all this, right? You’ve got the government involved, a lender, a contractor, like multiple entities. So it’s probably not a super fast process. What are you looking at for like typical, again, I’m sure it varies based on project, but like typical timeline, is it twice as long as mortgage lending?

Nate Hedrick: Three times? Like, I mean, where are we at?

Colin Kalvas: It’s a really good question. I think, um, a lot of the process, honestly, at this point is similar to other. Uh, types of financing, so a lot of what’s going to drive the process is going to be just. Underwriting diligence, things that would speed it up would be, you know, if you’ve kind of got your ducks in a row already with.

Colin Kalvas: financial statements that a lender is going to be looking for, you know, entity documents that they’re going to be looking for. A lot of the diligence that goes into it is going to drive uh, the process. I think a typical timeline from kind of [00:38:00] getting to a signed term sheet or, you know, a, a commitment or term statement from a lender to getting to closing is probably in the 45 to 60 day range.

Colin Kalvas: So it’s probably a little bit longer than, than traditional mortgage financing, but not a lot.

Nate Hedrick: That’s good.

David Bright: Yeah. And any other rules of thumb as you’re looking at this for, um, if it’s, you know, involving X number of. Uh, types of upgrades or X number of dollars, like make sure it’s at least this much for it to be worth the effort. Or is it, is it really just super project specific?

Colin Kalvas: Um, I would say that, you know, pace is going to be most effective in a situation where you can replace a significant. Amount of either cash or again, like partnership equity or junior debt that you would be thinking about putting into a project. Um, [00:39:00] that’s when it’s going to be the most effective where it’s not that effective is when you still have traditional mortgage lending capacity.

Colin Kalvas: That you can access. To pay for these improvements or just, you know, with whatever you’ve got going on with the project, or you’ve got a cash requirement and equity requirement that you’re not going to be able to get any lower and you’re just going to have to put it in. And the project scope is within that.

Colin Kalvas: It’s when you kind of have a gap where, you know, you’ve got the amount of equity in that you need. You’ve got your senior lending, but you’re still trying to figure out how to pay for these other items. That’s where pace is probably going to be the most effective. And I don’t know that there’s necessarily a dollar amount on that, but that’s kind of the situation.

Nate Hedrick: That makes sense.

David Bright: Um, so we’re recording this in early 2025 when there’s been a recent administration change. So, uh, I don’t want to put value statements on any of that or take a political stance in any of this, but there’s definitely a shift [00:40:00] in a lot of policies. In this realm. So do you see, uh, the, the shift on environmental aspects, global warming, some of those kinds of things impacting pace financing in this approach?

David Bright: Is this something that’s going to go away or it’s at risk where states will start dropping this? Or is this something that you see is safe and it’ll be here for a while?

Colin Kalvas: It’s a really good and important question and obviously timely for when we’re recording here. A couple of the things that I think make pace a little bit more resilient to some of the headwinds that. You know, the green new deal or green financing are facing currently. Are the fact that it doesn’t involve any kind of a cash outlay from the government.

Colin Kalvas: So, you know. We’re talking about private money coming from a pace capital provider going into a private project being repaid by a private property owner. There’s no governmental money anywhere in that equation. Yes, there is a governmental mechanism. [00:41:00] The special assessment mechanism, but it doesn’t cost anything to the local government.

Colin Kalvas: There’s no subsidy involved necessarily. So, I think that makes pace a little bit resilient to some of those headwinds. The other thing about pace that we’ve found over time is that. Um, yes, it was originally conceived of. As advancing energy efficiency and alternative energy policy goals. But where it’s actually been really effective is in promoting.

Colin Kalvas: Investment in buildings, uh, kind of the economic activity of that. And job creation, um, so there’s been a lot of. You know, contracting work that’s come out of the fact that pace is available. There are, you know, those energy engineers that are involved in these projects. Um, and just the fact of being able to do projects that may either bring new workers into an area or, you know, actually have, uh, jobs associated with the project has made pace [00:42:00] kind of, uh, economic development, job creation proposition for a lot of places.

Colin Kalvas: So I’m hopeful that pace, um, can withstand some of those trends that we’re seeing right now. And I think because of the fact that it’s not involving government money. And it furthers these goals of just investment and job creation, um, that we may see that be the case.

Nate Hedrick: I guess really good perspective, and it gives a good idea of why that that’s the case. I appreciate that it, Colin. This has been awesome information. And again, a topic that we have never covered on the show before. So really, really happy to have you on to kind of. Divulge your expertise here. If people want to reach out just to connect, learn more, um, or, or reach out to your firm, where, where can they find you,

Colin Kalvas: Sure, no, and thanks again for, um, the interest in this topic. It’s, you know, it’s kind of a little bit of a niche. Not everybody knows about it, but I do think it’s becoming more widely talked about. Um, so, you know, appreciate the chance to come on and hopefully share some information about it. [00:43:00] Yeah, I’m not super findable.

Colin Kalvas: I only have a linked in so you can try to find me on linked in. Um, but I’m not super responsive there. Um, but otherwise, you know, uh, just by email. Um, and, uh, I don’t know if you guys have that and can give it out or,

Nate Hedrick: drop it in the show

Colin Kalvas: happy to just give it. Perfect. There we go.

Nate Hedrick: Cool. We’ll call it again. Thank you so much for sharing all this. Really appreciate you coming on. And, uh, again, just really fun to get to interview a, a long, a long time friend. So thanks. Let

Colin Kalvas: Thank you guys. It’s been great.

David Bright: Thanks so much.

[END]

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YFP 401: Ask YFP: Roth IRA Eligibility & Estimating Life Insurance Needs

Posted on by YFP Media

Tim Ulbrich and Tim Baker tackle questions from the YFP community on life insurance needs for expectant parents and eligibility for direct Roth IRA contributions.

Episode Summary

On today’s episode, YFP Co-Founders Tim Ulbrich, PharmD and Tim Baker, CFP tackle two important questions from the YFP community.

First, they dive into how to project your life insurance needs when welcoming a new baby into the family and then Tim and Tim break down how Modified Adjusted Gross Income (MAGI) is calculated to help you determine if you’re eligible for direct Roth IRA contributions.

If you have a question you’d like featured on an upcoming episode, visit yourfinancialpharmacist.com/askyfp or email [email protected].

Key Points from the Episode

[0:00] Introduction and Episode Overview
[00:54] Question 1: Life Insurance Needs for Expecting Parents
[01:33] Tim Baker’s Advice on Life Insurance and Retirement Plans
[09:17] Question 2: Calculating Modified Adjusted Gross Income (MAGI)
[09:34] Understanding AGI vs. MAGI
[14:33] Conclusion

Episode Highlights

“Having a baby tends to lead to some reflection about a lot of things, including finances, you know, savings, life insurance, disability, estate planning, education planning, all those things kind of come to mind.” – Tim Baker [1:39]

“ If you’re talking about the retirement plans, when a spouse dies, their assets essentially transfer to the beneficiary. Most of the time it’s going to be you as the surviving spouse.” – Tim Baker [3:23]

“One of the things to remember with Roth IRAs is that you can typically take out your basis or what you can contribute without penalty or tax.” – Tim Baker [4:24]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Hey everybody, Tim Ulbrich here. Welcome to this week’s episode of the YFP podcast, where we strive to inspire and encourage you on your path towards achieving financial freedom today. YFP co founder, COO and certified financial planner. Tim Baker joins me to answer two questions from the YFP community.

Tim Ulbrich: One on projecting life insurance needs and another on how modified adjusted gross income is calculated to know whether or not you’re eligible to make Roth IRA contributions. If you have a question you would like for us to feature on an upcoming episode, head on over to your financial pharmacist.com/ask yfp to record your question or send us an email at [email protected].

Tim Ulbrich: And before we get started, I wanna let you know that we’re now publishing the podcast in video form on YouTube. If you wanna watch this [00:01:00] episode, make sure to subscribe to the Your Financial Pharmacist YouTube channel where we’ll publish. New shows each week. All right, let’s jump in with our first question, which came to us via email.

Tim Ulbrich: And that question is. My wife and I are pregnant and are reviewing our life insurance policies. If one of us passes away, does the other spouse have early tax free access to use the deceased spouses Roth IRA 401k SEP IRA or solo 401k, or would the spouse still have to wait until they are retirement age, typically 59 and a half.

Tim Ulbrich: To access. We’re trying to determine how much more life insurance we need to buy with a new baby on the way. My wife and I are in our thirties. Tim Baker, what are your thoughts on this?

Tim Baker: Yeah, so first of all, congrats on on baby coming. Um, that’s uh, that’s monumentous. I feel like Tim having a baby tends to lead to some reflection about a lot of things, including finances, you know, savings, life insurance, disability, [00:02:00] estate planning, education planning, all those things kind of come to mind.

Tim Baker: Um, you know, I think. If if I’m, if I’m answering this question, I separate these things in terms of, like, life insurance versus, like, you know, um, retirement plans. Um, because I think, especially when you’re young, you know, spending some money on a, on a fairly inexpensive term insurance to keep those.

Tim Baker: Retirement plans, um, unadulterated is worth it. Um, because, you know, 1 of the misconceptions is like, when you retire. You, your expenses are going to be, I wouldn’t say they’re going to be the same as if there’s 1 person versus 2, but it’s going to be, you know. It’s going to be pretty expensive. So like, I, I wouldn’t look at that as like, as insurance.

Tim Baker: So I think I would look at it in, in the, in the confines of like, okay, this is for the purpose of retirement. And this is the purpose of, you know, insurance. [00:03:00] So there are different rules for different types of accounts, um, and different types of beneficial, uh, different types of beneficiaries. So. Um, you know, if you’re both in your thirties, you’re having a baby, if you’re really healthy, I would look at term insurance.

Tim Baker: You know, I always kind of talk about the rule of 30, which I have to look at, but basically, uh, to see if that still holds Tim, but the rule of 30 was you could buy a half a million dollar term insurance policy. Um, 30 year policy. If you’re in your 30s for about 30 bucks a month. Right? So I’m sure prices have gone up since I’ve been talking about that.

Tim Baker: So I have to, I have to make sure

Tim Ulbrich: Sounds about right. Yeah.

Tim Baker: I think that is important to understand. So, um, but when, if you’re talking about the retirement plans, when a spouse dies, each. their Their assets essentially transfer to the beneficiary. Most of the time it’s gonna be you as the spouse, um, the surviving spouse.

Tim Baker: So there’s really five options with, with these types of IRAs. Now, 4 0 1 ks and 4 0 3 Bs will be a little bit different, but I’m gonna speak specifically about IRAs. [00:04:00] But first option you can do is you can keep the IRA so a beneficiary can withdraw the funds even if they’re younger. Then 59 and a half 59 and a half without paying a 10 percent early withdrawal penalty.

Tim Baker: If the deceased has already started taking distribution. So in this case, that wouldn’t be that wouldn’t be it because you’re younger. Um, a surviving spouse, a minor child or disabled person is required to take what’s called RMDs required minimum distributions based on the deceased person’s age. Rather than the beneficiary, if the, if the air is not a spouse and there’s different rules.

Tim Baker: So there’s, there’s kind of spousal rules and non spousal rules. One of the things to remember with, with Roth IRAs is that you can typically take out your basis or what you can contribute without penalty or tax. Right? So that’s important to know off, off the rip. The second option is, Roll over the IRA.

Tim Baker: So beneficiaries can roll assets into a personal IRA without paying income tax or early withdrawal penalties, unless they are 59 and a half. So a rollover [00:05:00] into an inherited IRA does not incur penalties. If the assets have been in the accounts for 5 year, 5 years. Um, and this option Tim is only. Uh, open to our surviving spouse who must transfer to the same type of account.

Tim Baker: So traditional to the traditional or Roth to Roth. Um, the third option here is to convert to a Roth IRA. So that in this case, you know, we’re talking about a Roth IRA. You could also disclaim part of the assets. You say, I don’t, I don’t want it or cash out the IRA. So in most cases, what I would say from a planning perspective, um, what I would say is Don’t think of your spouse’s, um, retirement house assets as a form of insurance.

Tim Baker: I would say by the insurance, but if you do get into a pinch from a, from a cashflow perspective, you can access those funds, especially, um, if you are the spouse and if you’re looking at basis without taking the penalties. So there’s, there’s a few different layers of sorts that I would go through before.

Tim Baker: You know, get into a point where you can [00:06:00] completely cash out the IRAs. But is, this is just like a, um, this is typically just like a. Um, like a backdoor Roth conversion, the flow chart on this can be very complicated in terms of, okay, when did they start distributing it? Did they not? How old’s the, the, the deceased spouse?

Tim Baker: How old’s the surviving spouse, et cetera. So it can be very complicated. So I think if I’m in my thirties, I’m basically layering a little bit more. Uh, term insurance where I feel comfortable and I’m, I’m treating that, um, deceased spousal IRA or 401k as if it’s, you know, my own retirement plan and not, you know, not an insurance, um, bump, so to speak.

Tim Ulbrich: Yeah. Tim, I like how you’re separating out these two things. And I do love the question, right? Because there’s a, there’s an intentionality and I can tell some in depth analysis going on that we’re not just applying blanket rules of how much term life insurance do I need, but actually trying to get to the question, which needs to be answered when it comes to buying term life insurance, which is what do I [00:07:00] need this policy to replace?

Tim Ulbrich: And in this question, there’s some background questions of, Hey, well, if there are retirement Will those be accessible or not? I’m with you, right? If someone’s in their thirties, you know, not advice for them, but I would think of it the same way you are. If I’m in my thirties, babies on the way, assuming relatively healthy, inexpensive term life insurance policy.

Tim Ulbrich: If I’m looking at these two things, just to put some numbers to this, and I’m looking at, Hey, maybe I’d need a million dollar term policy versus a one and a half or 2 million. If I were to exclude these, uh, retirement assumptions, when you consider the cost of these policies, again, we’re making some assumptions of health and other things, but based on age, like that feels kind of like a no brainer, right?

Tim Ulbrich: In terms of keeping it clean separation of these two things and relatively inexpensive, assuming that the monthly budget can handle the extra, whatever it’d be, you know, 20, 30 bucks a month to add on to the term coverage. So, um, I like that because I think sometimes we can make these things maybe overly complicated and, uh, you know, [00:08:00] I, I like the intent of the question, but, but I also like thinking of these buckets separately in there.

Tim Ulbrich: And there’s a peace of mind component here too, knowing that, Hey, we’ve got the life insurance piece that’s purely for the sake. Hopefully we never use it, but if it’s, if it’s there, you know, we have access to those funds.

Tim Baker: Yeah. And there, and there are other things that I would potentially pull levers before I would even look at retirement plans that could be. You know, leverage in debt or other things, you know, like, uh, a HELOC or something, I think, even before I would, I would start cashing in retirement plans. So, again, I think it’s, uh, all the reason to have, you know, this is about planning, not a plan, you know, all the reason to have a planner to kind of work through life events and hopefully nothing like this ever happens.

Tim Baker: But I think it’s a great thought experiment to kind of go down

Tim Ulbrich: One last thing I’ll say on this before we move to our second question is for those listening that maybe don’t have term life insurance or wondering about, you know, what’s all involved in a term life insurance policy. How do I begin to think about and evaluate what the [00:09:00] need is? Or if you have a term life insurance policy, uh, wondering if, if that coverage is appropriate, or maybe you just have an employer.

Tim Ulbrich: Policy and you’re wondering about your own policy. We’ve got a very comprehensive resource life insurance for pharmacists the ultimate guide Uh that will give some great background educational information on this topic We’ll link to that blog article in the show notes so you can read more and learn more on that Tim said you mentioned backdoor roth.

Tim Ulbrich: We got it. We got to go there, right? So

Tim Baker: my

Tim Ulbrich: your favorite topic. Yeah, so our second question Our second question is also came into us via email. How do you calculate? Modified Adjusted Gross Income to know if you’re eligible to contribute. To a Roth IRA. What, what are your thoughts on this one?

Tim Baker: Yeah. So a lot of us use magi and AGI synonymously. So modified adjust, just to adjusted to gross income is not the same as adjusted gross income. Um, although we, again, we use them the same. So to [00:10:00] determine, so just to kind of throw out some numbers, um, if you are filing single and you’re modified, adjusted gross income is.

Tim Baker: 150, 000, we’ll say it’s 150, 000, 165, 000, once it gets to 165, 001, the door for you to be able to, um, Contribute directly into a Roth IRA shuts. So once you make a, once your magi is $165,000 and 1, you can no longer make a direct contribution. So this is where you have to contribute to traditional, go through a bunch of steps and then, and then move it over to

Tim Ulbrich: Are you talking about for individuals or joint filing?

Tim Baker: That’s that’s for single file and for, for Mary phone jointly, the phase out is phase out is 236, 000 to 246, 000. So once you make 246, 001 dollars, you cannot directly put, you know, contributions into a Roth IRA. So how do [00:11:00] we get this number? The modified adjusted gross income. Um, so really what you want to do is you want to actually start with AGI.

Tim Baker: So AGI, I believe is line 11 on form 1040.

Tim Ulbrich: Nailed

Tim Baker: Um, awesome. So then you have to add back in. Certain deductions, um, to get your magi. So these would be things like student loan interest deduction, which, you know, a lot of people aren’t getting that because they make too much money, um, tuition and fees deduction.

Tim Baker: If that’s available IRA contributions, deduction, um, if you’re contributing to a traditional IRA and taking a deduction. Also, typically not available. It could be rental losses. If you’re, if, uh, the rental losses are subject to pass passive activity, uh, loss limits. Um, other things could be, uh, excluded foreign earned income.

Tim Baker: excluded employer adoption benefits, half of self employment tax deduction, any passive loss or passive income interest from series E savings bonds used for education. [00:12:00] And finally, losses from publicly traded partnerships. So once you add back these deductions, that gets your Modified adjusted income, and that’s, um, gross income.

Tim Baker: And that’s essentially the number that you use to say, okay, can I make a contribution directly into the Roth or do I have to do a backdoor strategy to go from a traditional into a Roth? Um, that’s Magi. So it’s often the case for a lot of people that they don’t have a ton there. So that’s why we kind of use it synonymously.

Tim Baker: But, but there is slight differences in that AGI and MAGI number.

Tim Ulbrich: Tim, I think this is a really good question. Not, not only from the Roth contribution, but you’re starting to dissect. The IRS form 1040 a little bit, right? As you’re talking through the different things, when we look at, you know, the terms we throw around income and gross income and adjusted gross income modified, adjusted gross income, understanding what are the above the line deductions, other deductions, credits, et cetera.

Tim Ulbrich: [00:13:00] Here, we’re talking of things that are above the line that you were, you were listing off. But the reason I’m going there and I’m not suggesting we need to go down the tax rabbit hole, but the more we understand. Okay. Thank you. Kind of the flow of dollars from a tax standpoint and what these terms mean.

Tim Ulbrich: We start to see some of the levers that we could potentially pull from a tax optimization standpoint, as well as being able to answer questions like this one, which is like, Hey, can I make direct contributions to a Roth? Do I phase out? Do I need to consider it back to a Roth? And then if so, you know, what does that look like?

Tim Ulbrich: And how do I make sure I’m doing that correctly? We’ve addressed that on the show previously as well.

Tim Baker: yeah, I’ve talked about this with tax. It’s like, you know, understanding the 1040 kind of gives you not the answers to the test, but you can kind of start to see visually how the form is populated. And then I think it can ultimately affect your behavior and how best to optimize. Again, I sometimes people do some crazy things just to get a tax benefit, which doesn’t [00:14:00] necessarily work.

Tim Baker: You know, fit with their overall financial plan. So it’s kind of just doesn’t make any sense. But I think if you understand the construct of, you know, the, the tax code and the tax form, then you can, you know, your, your behavior can then be, you know, slightly altered to, to optimize your tax situation.

Tim Ulbrich: Yeah. And if you’re listening, you know, here in some of these terms wondering what, what are these guys talking about in terms of, you know, a backdoor Roth versus a direct contribution, we actually talked about this recently on an RX money roundup, episode 18. And we answered the question, can I do a backdoor Roth IRA myself?

Tim Ulbrich: That’s why I was joking with Tim that it’s his favorite, favorite topic to talk about. So we’ll link to that in the show notes, make sure to check that out. And, uh, you’ll, you’ll find a good resource there that will help you, uh, in your own. Planning as well. Thanks again to the two questions that we had submitted, uh, this week.

Tim Ulbrich: And, uh, if you have a question as you’re listening that you’d like to have us feature on an upcoming episode, head on over to yourfinancialpharmacist. com forward slash ask YFP. You can record your question there, or [00:15:00] you can send us an email at info. At your financial pharmacist. com. Thanks again for listening.

Tim Ulbrich: If you like what you heard, please do us a favor, leave us a rating and review on Apple podcast, which will help other pharmacists find the show. And finally, an important reminder that the content in the podcast is provided for informational purposes only, and is not intended to provide and should not be relied on for investment or any other advice information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial product.

Tim Ulbrich: For more information on this. You can visit yourfinancialpharmacist. com forward slash disclaimer. Thanks so much for listening and have a great rest of your week.

[END]

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YFP 400: From Pharmacy to Podcasting: Anisha Patel’s Journey of Growth & Entrepreneurship

Posted on by YFP Media

In this episode, Tim Ulbrich chats with Anisha Patel, host of the Pharmacist Diaries podcast, about her journey through pharmacy, entrepreneurship, and personal growth, including her work at Oxford and Cleveland Clinic Abu Dhabi, and how launching her podcast during the pandemic opened new opportunities.

Episode Summary

In this episode, Tim Ulbrich, YFP Co-Founder, is joined by Anisha Patel, host of the Pharmacist Diaries podcast, to discuss her inspiring journey through pharmacy, entrepreneurship, and personal growth.

Anisha’s story spans from growing up in a family of independent pharmacists in the UK to working at Oxford University Hospitals and Cleveland Clinic Abu Dhabi. She also shares how she launched her podcast during the pandemic, which has since grown into a global platform. In this conversation, Tim and Anisha dive into the power of storytelling in healthcare, the intersection of entrepreneurship and pharmacy, and how embracing non-traditional career paths can open doors to new opportunities.

About Today’s Guest

Anisha Patel is a paediatric pharmacist turned podcaster and digital creator who’s passionate about showcasing the limitless possibilities within healthcare careers. Through her podcast “The Pharmacist Diaries” (174+ episodes strong!), she shares stories of innovative pharmacists worldwide while building a community that breaks free from traditional career moulds.

After 14 years in clinical practice, including stints as the Abu Dhabi Grand Prix pharmacist and working in emergency services in the UAE, Anisha has embraced entrepreneurship to help other healthcare professionals find their voice through podcasting. When she’s not recording episodes or coaching aspiring podcasters, Anisha is planning global adventures with her family or sharing insights about designing a life of impact and freedom.

Key Points from the Episode

[00:00] Welcome Back, Anisha Patel!
[00:24] Choosing Pharmacy: A Family Influence
[01:10] Cultural Expectations and Independence
[02:48] Educational Journey: From Virginia to the UK
[03:37] Confusion and Self-Discovery
[05:27] Retail Pharmacy: A Community Connection
[07:47] Falling in Love with Hospital Pharmacy
[08:24] Residency at Oxford: A Transformative Experience
[08:48] Night Shifts and Rotations
[12:19] Meeting Sunjay and Moving to Dubai
[19:12] Adventures in Dubai: Changing Laws and Building Pharmacies
[21:25] Returning to the UK: Balancing Work and Family
[23:24] Discovering a Passion for Pediatrics
[27:51] Starting the Pharmacist Diaries Podcast
[33:05] The Podcast Journey Begins
[33:47] Building Connections and Expanding Reach
[34:23] The Impact of Podcasting
[41:04] Mentorship and Coaching
[50:41] Balancing Work and Passion
[58:35] Future Aspirations and Vision
[01:05:05] Conclusion and Contact Information

Episode Highlights

“The connections that I make with people are genuine friendships and their lifelong friendships. And the reason why is because my podcast is not a traditional pharmacy podcast.” – Anisha Patel [36:45]

“As an employee, I’ve been controlled for the last 14 years and I just thought this is normal life, right? But now I’ve been exposed to doing things my own way, working in the style that I like, the time that I want, making the connections with people in, you know, a non-scripted way has just given me this spark of, “Wow, I can do so much more with this.” – Anisha Patel [38:28]

“ I now realize that there is this sort of vision that I could live anywhere in the world. I could have a digital business where I could educate, mentor, and support pharmacists or healthcare professionals to start a podcast and become a thought leader on a global scale.” – Anisha Patel [43:41]

“ One thing that I would say about Pharmacist Diaries that I’ve discovered in this journey is that it’s pure passion and I don’t want that to go away because I’ve realized when you fall in love with something, it never feels like work.” – Anisha Patel [59:22]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Anisha, welcome to the show.

Anisha Patel: Oh my goodness, it’s round two. I’m so happy to be back.

Tim Ulbrich: Well, it’s been a long time in the making and, uh, you and I have had a chance to connect, uh, and get to know each other a little bit better over the last couple of years, and I am thrilled to have you on the podcast and excited to talk, uh, career journey, entrepreneurship, family, life, who knows where the conversation will go.

So, uh, let, let’s start with the career journey in pharmacy. What led you To choose pharmacy as a profession. Mm hmm.

Anisha Patel: My parents owned a pharmacy when I was growing up. They’re not pharmacists. My dad’s an accountant, but they both owned a chain of pharmacies, independent pharmacies here in the UK. So they owned it [00:01:00] from a business perspective, had two or three pharmacies. I grew up. Working in the pharmacy, doing stock, like doing the old school, like price tags, um, yeah, filling shelves.

So I was, I was exposed to a community pharmacy environment from a very young age and being from an Asian background. Education was really important growing up, and I would say that we were very encouraged to go down a professional route. So whether that was medicine, pharmacy, lawyer, engineer, etc. Um, there was an expectation to go to university or college and, um.

Not only from the point of view of having a professional degree and a professional career, but also my dad always encouraged me as a female to think about being independent and not necessarily relying on my [00:02:00] potential future husband for income and salary. And one of the things that he talked about with pharmacy, because he was obviously exposed to the environment.

Being an owner was that he saw what locums were doing or what we call as UK or PRN pharmacists and how a lot of them were female and a lot of them were mothers who came kind of like chopped in and out of the career as and when they kind of had children and family life and. Knowing that the career was always going to be there for you when you return from say a maternity leave or if you want to take time out for two to three years while whilst you have young children in the house and then coming back to pharmacy that was always available even you know 25 30 years ago plus the fact that you earn a really good Salary, you’re well respected in the community.

It’s a professional degree. You learn so much and you’ve got all this [00:03:00] expertise. So I did really well in science. I actually moved to Virginia as a high school student, and then I did my first degree at Virginia Tech in biology and chemistry.

Tim Ulbrich: didn’t know that. All right. Yeah.

Anisha Patel: I did. That element of kind of us life. I totally understand how the undergraduate degree works there, but I missed London and I missed home a lot.

And I lived there for nine years and I made the decision to come back to the UK to do pharmacy afterwards.

Tim Ulbrich: Did you think going in that you were going to own your own pharmacy? Given, given the background, you mentioned your father owning pharmacies as a, as a non pharmacist, which I think is really interesting because there’s the entrepreneurial thread there that we’ll come back to here in a little bit. But did you anticipate going into pharmacy training that you were going to own pharmacies?

Anisha Patel: No, I, if I’m completely honest about my pharmacy degree as a choice, when I was in [00:04:00] my early 20s, I was quite confused about maybe, if I reflect back, I was confused about who I was. I’d moved countries quite a few times. I would have to Build relationships in new places. Living in London when I was growing up, I was private school educated.

It’s an all girls school. And then going into like Richmond, Virginia, where I’m exposed to a mixed environment, like no school uniform. Um, a very different way of living, you know, as exposed to high school parties and drinking at an early age. And it was just really different. And I think I got really confused about who I was and what I wanted to be.

And I was so focused on trying to fit in. I genuinely, I, I changed my accent. I got an American accent cause I got really frustrated with people maybe picking on me or exposing me for being different. They didn’t [00:05:00] understand that I had sort of, um, darker colored skin, but I’m from England. They didn’t really know what England was 1990s.

A lot of people who I went to school with didn’t have a passport and weren’t well traveled. So they, they were like, okay, well, what do you mean you’re Indian? But you’re from England, is American Indian, you know, so it was, you know, I was confused and going into my first degree, I felt like I was following an expectation from my family. And because I was good at science, it just kind of pharmacy just kind of fell into my lap. And When I started pharmacy school here in the UK, I worked in a retail pharmacy as, um, a student every single weekend and it was an independent pharmacy and I actually genuinely loved retail and the pharmacy that I was exposed to, it was such an amazing family environment.

You got to know the [00:06:00] customers and that time that I spent in the U S really helped me to build my confidence, go up to anybody and speak to anybody. Cause it’s completely different to the UK. You would find that people in England are quite reserved in comparison to the U S. Like even if you go to, I don’t know, Abercrombie or any clothing store.

Someone will say hi to you. Someone will approach you. Someone will ask you if you need any help. Someone will check whether or not you need support with buying and purchasing clothes while in England, no one, like no one would really speak to you’d walk into a store. And if someone approached you, you’d be like, mind your own business.

Like, why are you speaking to me? And so the, the lifestyle and my personality shifted and. I became really kind of extroverted from having to make new friends and live in this new environment and figure out who I was. So when I worked in retail, it was so nice to be able to get to know the community and [00:07:00] know everyone’s kind of family members, what medications they were on, how many children they had.

When people’s birthdays were and they’d come to the pharmacy to actually purchase like perfumes and, and different products and things like that. So that exposure that I had to retail pharmacy was also similar to what kind of pharmacy my dad owned. If I walked to the pharmacy from the car park to my dad’s store, which is about a three minute walk, we would be stopped about 15 to 20 times because everyone in the town knew my dad and everyone would just come into the pharmacy just to speak to him, say hi to him.

He was literally the heart of the community. And I remember this growing up and working in that retail pharmacy also then brought back some of those memories. So I did have a love for pharmacy, but I also didn’t just want to work in retail. I discovered that I really enjoyed the clinical aspect of pharmacy and patient education was a massive part of something that I really enjoyed.

[00:08:00] And I exposed myself to the hospital environment during Sort of hospital placements, um, during the university setting. And then when you do your kind of intern year, I chose hospital as my full year of internship. And I fell in love with it and I thought that’s it. I’m doing hospital pharmacy. There’s no turning back.

I’m going to be employed within the national health service, which is our government kind of hospital facilities. Like this is it I’m choosing my, my role and I loved it. And I just fell in love with it. And I thought that was what I was going to do forever.

Tim Ulbrich: So, let’s talk about that interest in, in clinical practice, clinical setting. You would end up doing a residency at Oxford University Hospitals, three year experience as I understand it, correct? Very different from our experiences here, uh, in the United States, as many of our listeners will know. So I’m curious about that experience and yes, the clinical aspect of it, but I’m, I’m more curious about how did that three year experience shape you as an individual, personally and [00:09:00] professionally?

Anisha Patel: so how the three year experience works in a residency here is, um, it’s usually the larger sort of teaching hospitals that have a residency service because they have a requirement for night shifts and support from pharmacy because it’s extremely busy. And at the time I worked there, we were covering around, I think, 1600 patients across four hospitals within Oxford.

And. Night shifts would include starting at 4 p. m. in the evening and you would finish at 8 a. m. in the morning. And between those hours, you would probably receive about 150 bleeps in that time. So it’s, it’s pretty busy. From 4 p. m. till 8 p. m. you have support from other members of the pharmacy team. And then from 8 p.

till 8 a. m. you are on your own. And most of us stayed on site, um, just because it was [00:10:00] easier. You had to live within a 10 minute distance of the hospital if you did choose to go home, because you would just need to come back, back in maybe for, for controlled drugs or emergencies or anything really. So most of us would stay on site and they would give us a room as well.

If we needed to just rest in between doing the work. And we would do that for sort of four nights in a row and then have three days off.

Tim Ulbrich: Wow.

Anisha Patel: Every three months we would rotate to a new clinical area. So in the first kind of year, it’s a lot of general medicine, general surgery. And then from year two, you would start going into the more specialist areas.

So pediatrics, maybe clinical trials, kind of the aseptics area, medicines information, um. The more complex surgery areas like upper GI, lower GI. I did infectious diseases. I did CF. I got exposed. Anything and everything because of the way this [00:11:00] hospital had access to everything. And you work with these incredible pharmacists with, you know, 15, 20, 25 years of experience in that area of expertise.

So you have these role models all around you, just inspiring you left, right, and center. And one of the best things about doing this residency is you get the exposure that you want to learn, which area of expertise you want to go into. You also get exposed to a ward environment. So the pharmacotherapy team, you get exposed to clinics and pharmacists can now prescribe in the UK.

So you’ve got these pharmacists who are running clinics like physicians. They’re able to physically assess, use a stethoscope, like palpate, percuss, order blood tests, take bloods, and prescribe medications. And you’ve got all of that side of pharmacy to look. Forward to, and then you’ve got the kind of skills that you get within a medicine’s information department, answering calls and inquiries and doing more of [00:12:00] the, you know, really detailed evidence based research and figuring out how to answer questions.

And then also how to deliver that communication, whether it’s a doctor, a patient, a nurse, et cetera. And during that time, I built so much confidence as a pharmacist. I really built my foundation. in terms of being a clinical pharmacist. I became really assertive. I could work on my own. I worked under pressure.

I built confidence to understand what the role of a pharmacist is. And during that time, I met Sanjay and he was already living in Dubai. I was flying back and forth from Dubai after night shifts. I’d finished my night shifts eight o’clock in the morning and go on a bus directly to the airport, fly out to Dubai for four days, come back on a night shift and come straight to work from the airport.

I did some crazy stuff, but you know, when you’re in your twenties and you’re, you know, you’re young, you, you have all this enthusiasm to do [00:13:00] crazy and spontaneous wild stuff. So it was a really exciting adventure for me. And then. Obviously unexpectedly, this relationship happened. And I made that decision at the end of my residency to go on this adventure to live in Dubai.

But if I hadn’t have gone on that adventure, I would have then had. To make a choice about the area of specialty that I wanted to go into. But if I didn’t know exactly what I wanted to do, we have roles that are available where it’s still rotational, but instead of three month rotations, it’s one year rotations.

So you could stay in the same hospital, you get a slightly better pay, and you would then have one year rotations and spend more time in that area, a little bit more responsibility, and then from there you would obviously start making decisions as to where you truly want to go.

Tim Ulbrich: I really like that model, Anisha. I think we often in our training model [00:14:00] here, which isn’t unique to pharmacy. I think we see it medicine and others as well. We put a lot of pressure early on to define a path. I felt that, you know, your, your journey resonated with me when you were talking about the decision making process in the pharmacy.

I went to a direct entry. Uh, farm D program on high school, 6 years started 18 finished at 24, uh, felt the pressure to go down a certain path and residency. And then that path and residency kind of put me on another path and it wasn’t really until I had some really good mentors that helped me kind of step back and see, oh, there’s a, there’s a path that’s open in all these different ways.

And. In particular, for me, it was really de identifying the identity to any title or role as a pharmacist or who I worked for, and more about the skills that I was acquiring, the interest that I had, and that was a light bulb moment of, Oh, like these dots can connect in all different types of ways, and so when I hear about experiences where it affords some of that [00:15:00] flexibility for those that aren’t yet ready to choose, I really like to hear that because I, I think that pressure can be significant and then I’ll often talk with pharmacists who, you know, might be in their mid thirties, early forties, they, they did two years of clinical specialty in a certain area.

They don’t have an interest in administration or management. They’ve kind of hit in the top of their opportunities from a clinical role standpoint. And they’re like, I’ve got 20 years left in my career. And I’m usually talking about it from the financial aspect. But, um, I think that’s a big consideration for many people to be, you know, thinking about, let me say, by the way, we are so uncool here in the U S we, we need to use beliefs.

Uh, when you’re, we, I’m guessing you’re done by like a PA a pager system. Am I, am I right?

Anisha Patel: Absolutely.

Tim Ulbrich: I love that bleeps. That’s

Anisha Patel: Bleeps. Though I worked for Cleveland Clinic, obviously, when I moved to Abu Dhabi, and then I used, I can’t remember what they’re called, but they sit on your neck. And, and. Sound comes out from them, [00:16:00] like a little speaker system, which I found very strange, but I also really liked working for a US system.

I really enjoyed. It was a massive change. I mean, one example of the differences is if, if a patient comes in to hospital from home and, you know, they come through an ambulance through A& E, the paramedics will pick up all their medicines and try their best to actually find them in that person’s house and bring those medications.

And part of the pharmacist’s role when you have a new admission on any ward is that you do your drug history, your medication history. And part of that is actually looking at that patient’s own medication. So it’s patient’s own drugs, which we call pods. And you look through that patient’s medications.

You’re speaking to the patient about. What they take, how often they take it, and you compare it to obviously [00:17:00] what they’ve brought into hospital. If things are labeled incorrectly and they’re taking it differently, we obviously send them down to pharmacy to relabel them. But during that process, we then obviously assess what the patient’s currently on, on their drug chart.

And what the doctors have actually prescribed and we do the medicines reconciliation to check if there are any changes, things that are stopped, doses, maybe that have increased or decreased, or maybe things that have been just forgotten because the doctors don’t do a thorough history like we do and getting all those problems, you know.

Reconciled standard pharmacist role, but what we also do at that point is that if the patient tells you that actually I don’t have much aspirin left, I’ve only got three tablets and I don’t have any extra supplies, I am running out of my besoprilol and I need some statins at that point, you would order them one full box of medication, which is a 28 day supply.

Generally, they would use that [00:18:00] during their admission. And then when you discharge them, yeah. You don’t have the lengthy process of them waiting for the discharge medications and they just go home with those boxes.

Tim Ulbrich: so much sense.

Anisha Patel: Yeah. So we don’t have this individualized dosing system in the, in the UK. It is trying to prep them for discharge and you usually have pharmacy technicians on the ward that you, you work on.

So they will be going around to patients. Lockers. We have lockers by the bedside. They will go around to the patient lockers every day and assess how much supply do they have? How do I replenish it during their admission? So that when you are discharging them, you’re literally maybe at a computer and you’re only really needing to, you know, screen it clinically.

And you’ve got the medications right in front of you. So you know how much supply that you actually have on the ward. So pharmacy actually have no involvement in patient pharmacy. At that point. And they don’t have to go to [00:19:00] outpatient pharmacy either to collect it. Everything’s given to you on the ward itself.

Tim Ulbrich: I really like that. Uh, lots that we can learn from, from that system and adopt. So before we shift to your entrepreneurial journey, which I’m excited to get to, tell us where you’re at today in your clinical pharmacy journey. So you did a three year residency at Oxford. You moved to the United Arab Emirates.

You had some international experience working for the Cleveland Clinic there. You’re back in the UK now. So tell us about the work that you’ve been doing since moving back from the United Arab Emirates and clinically what, what you’re up to today.

Anisha Patel: Yeah. So when I worked in the UAE, I had two jobs. I worked for Cleveland clinic for a few years, but I also worked for, um. The, the Abu Dhabi government, their emergency services. So the ambulance organization and part of that role was the very exciting Abu Dhabi Grand Prix role that I had, which was really cool.

And that role was mainly leadership and [00:20:00] operational. I was the only pharmacist employed. Um, part of the role was helping to. Change the law for the country because paramedics were unable to administer drugs on ambulances at the time they didn’t even have access to drugs. So part of the role was actually working with the medical director and the government to change law for the country, which is something that I did.

And just imagine I’m three years qualified in this job and changing law for a country. I built my own pharmacy from scratch. I designed it. I had, you know, companies come and give me quotes and I had a budget that I could use. I was importing drugs from all over the world and distributing them all over the country to ambulances.

We had helicopter service. We did the F1 project. So I went from this residency straight into that, which was completely unexpected because the job description did not say any of this. It was a bog standard pharmacy. You know, pharmacist description. And [00:21:00] the first month I had the formula one contract and had to just crack on with making that a reality, setting up a clinic, setting up a pharmacy, making sure everything’s legal, educating paramedics from all over the globe as to how we use medicines, how we prescribe, what we do with control drugs.

Cause the laws are completely different to the U S and the UK. And then I went to Cleveland Clinic because I really missed patient care. So that whole job that I had with emergency services was so operational and, you know, really good leadership position that I missed patients. And I went to Cleveland Clinic to get my exposure back.

And when I moved back to the UK, I wanted to continue on that journey. And I actually reached out to my old employer in Oxford. And I just said, Hey, I’m moving back. I really don’t know what I’m going to be doing. I’m going to be living close by. Do you have any opportunities for me to work part time? And you know, I’ve got a child now I’m dealing with, you know, daycare.

I don’t know what hours I’m going to be working. [00:22:00] And my old manager was like, yep, I have the funds come and work wherever you want, whatever ward that you want to work on, whatever hours that you want. We’d absolutely love to have you. So I work three days a week at the hospital. And in the meantime, I was looking for other opportunities and there was this really cool opportunity to cover a maternity leave, um, which is now a maternity leave of a really good friend of mine who, um, we’ve really developed an amazing relationship with, and she was covering.

The kind of educational services for interns who qualify from pharmacy school and they do that one year internship year before they actually become qualified pharmacists. And so the educational program, and when I worked in Abu Dhabi in my leadership role, I did a lot of education and training to paramedics to get them onboarded.

We were hiring. Paramedics from all over the world, all of them were used to different laws, different drugs, different rules. [00:23:00] And I just created this really cool educational onboarding program for pharmacy. And I used the skills from that role and sold those skills in the interview and landed myself a really cool educational position.

So I was part time working in hospital again, getting used to my kind of clinical role in the NHS, part time working in education. Two completely different hospitals. So I was kind of hustling, but I wanted to get used to life back in the UK and just figure out where I was going. And I was winging it at that point.

And I did that for a year. And at the end of that year, my, during my exposure in that hospital, I got to cover the neonatal ward and do a little bit of pediatrics just to help out. And part of the beauty of working in the UK is that if you. Have pharmacist general skills and you’ve, you know, you can, you’ve, you’ve got the confidence to go onto a [00:24:00] pediatric ward and you know, when you’ve rotated to different specialist areas, you’ve got that kind of clinical knowledge.

If someone needs help and you’re offering it generally, if, if they obviously trust what you’re doing, they’ll allow you to go and work on that ward. And I just offered to help out. You don’t have to have like a PGY1 residency in pediatrics to go and work on that ward. And that’s one of the beauties, like, the experience of working in the UK and just having exposure to lots of different areas, like, you are allowed to actually move to different specialist areas with ease, unlike the US, which is a little bit more difficult and a little bit more constrained, I would say.

So I did some neonatal cover and I fell in love, Tim. Like, I I just, I was a mother, you know, working with these tiny humans, like doing all the pharmacokinetics and the calculations. And the main thing was that the relationship with the physicians who worked with me in pediatrics was so different to working at adults, the [00:25:00] respect and the value.

With the relationship between pediatric pharmacists and doctors was so connected that I fell in love with that area of expertise. And right then a job came up another maternity leave cover, a one year contract to go and work in central London at a specialist. Pediatric hospital. So covering pediatrics in general for three days a week, and then teaching in a pharmacy school two days a week.

So my education hat and experience and my pediatric experience, it was that interview, I smashed it because I used all of my transferable skills from all of my previous opportunities. And I said to them. If you’re into interviewing lots of other pediatric pharmacists, you’ve got five, 10 years of experience.

Amazing. But this is what I can bring to your team. And I can learn with pharmacy. You can learn anything. If you put your mind to it, if you give it the time, if you give [00:26:00] it the love and you’ve got enthusiasm, you can learn. And I said, you can’t just put me into. You know, renal transplant and just expect me to crack on with it.

But if you treat me like a rotational member of staff and we have a program in place where I spend a few months on each ward area in this 12 month environment, but I focus a lot on the education side of building a program here at the Evelina hospital, plus doing my two days at the university, like you’ll see a different side of.

a pharmacist and, and they, they just love that and they love the enthusiasm and they gave me the job and obviously there’s been no turning back. They built a job for me and I stayed on as a permanent member of staff and obviously my journey with paediatrics has continued ever since.

Tim Ulbrich: I’m not surprised that they built a position for you, given what I’m hearing of your mindset, your curiosity, your desire to learn. the outlook you have on [00:27:00] transferable skills. I think it’s something that we desperately need from more pharmacists in our profession. I gave a quick example, kind of from my own journey of, of really detaching from that identity of a role or a specific employer or position.

And when you think about just the experiences you’ve described, which I know given the time that we have available, there’s much, much more. I’m sure to talk about all of the skills and experiences. And when you can think. Through them in that way and then be able to articulate it and bring that to an employer and add to that this mindset.

That, Hey, I’m, I’m ready to learn. I have a habit and a hunger to learn and to grow. If you’re willing to grow with me and to provide the time and energy. It’s of no surprise to me that they, they created that position for you. And I think that education I suspect is. In part related to your entrepreneurial journey, as I think about the work that you’re doing on the podcast, and we’ll talk in a little bit as you’re mentoring other podcasters, that’s teaching [00:28:00] you’re, you’re teaching others along the way as well.

So let’s go there. As I understand, Anisha, your entrepreneurial journey. It really stems back to starting a podcast during the pandemic and we’ll link to, to the show, uh, pharmacist diaries. If people have not yet checked it out, please do. It’s an incredible resource. Anisha does a fantastic job. Uh, so I hope you’ll check it out yourself and share it with others as well.

Talk to us about the moment when you decided to start that podcast and why you felt compelled to start your own show.

Anisha Patel: So we were in the height of the pandemic. I was working a lot of shifts at the hospital, but obviously I was still teaching students remotely. And during my experience of teaching first year pharmacy students, which is the cohort that was mainly teaching at that time, I and, and bear in mind. Pharmacy in the UK, you finish high school and go straight into pharmacy.

So you don’t have, [00:29:00] you know, the undergraduate degree before. So you’re, you’re looking at really young professionals who, you know, they’re so naive and green and they, they, you know, they, they barely have it figured out and some of them don’t know why they’ve joined pharmacy school really. Because. And again, like me, they’ve just looked at what they’re good at in high school.

And if sciences have been one of their kind of like strong suits, they’ve been encouraged to go down a medical or pharmacy route. And again, like an Asian background, a lot of students from an Asian background or the international pharmacy students, their families have heavily encouraged them to go into a medical.

Or healthcare professional field and having discussions with students, just getting to know them and just engaging with them. I truly discovered their lack of understanding of what is available to them in terms of career. [00:30:00] From what they know, there’s retail pharmacy, which there’s a lot of negative hype around it.

The burnout, the chaos, it’s boring. It’s not clinical. All of these kinds of terms were coming out and it wasn’t my experience of what community pharmacy was like, but that’s what they. We’re exposed to, or what they had seen or heard from other students or other pharmacists. They were really excited about retail and hospital pharmacy and the clinical side of using their degree in a hospital setting.

And then obviously they know about industry, but they feel like industry is. Like out of reach, that maybe the top, like two or 3 percent of each class would find a role in industry and it would be so hard to get into that they don’t even really bother trying because it’s so challenging and that’s all they know.

And from a university’s perspective, We are also chained. I, I genuinely, we are chained to the [00:31:00] traditional roles where we’re not looking outside of the box and thinking about all the different things that are actually happening in pharmacy. And every year there’s like a careers fair where employers come and students can come and talk to those employers.

But what you get out of that interaction between a student and, and, you know, an employer. Within an hour, most of the students come for free pizza and, and free food, and they have a mingle and then they leave. They don’t really gain that much knowledge or understanding or education or inspiration.

They’re not motivated to go and apply for a job in that location. And I really wanted to connect with my students on a deeper level and help them. And that podcast was just one of those light bulb moments where I thought a lot of my students commute, they live in central London, like New York city.

Super expensive to live in the city. They all live at home with their parents and they travel on the train like one hour to come to [00:32:00] university every day. That’s their routine. So I know they have phones in their laps or iPads. They have headphones in what could they be doing every single day to educate themselves about their pharmacy career, where they could find inspiration, motivation, and where they would get exposed to things that they wouldn’t necessarily see as a student on a day to day basis.

And when I thought about a podcast, I started looking out. On Spotify and Apple. Like what is that? You know, I typed in pharmacy into the search criteria and nothing came up. And I thought, Oh my God, this is a gold mine. Like I need to create something and I need to do it quick and I need to just, just try it like this, even if one student listens to me and is motivated or inspired, I’m going to be happy.

And I started having connections with pharmacists. You know, from all over the globe through social media. And at that time it was mainly [00:33:00] Instagram and also people that I knew. I felt comfortable interviewing people that I already knew, friends of mine. And then I got this itch to kind of interact with people that I would never meet and I found them on social media and I started DMing people and saying, actually, yeah, I’m starting this podcast.

Would you mind coming on to my show? And everyone was saying, yes. Um, and it just snowballed from there within the first year there was 10, 000 downloads and I did nothing but just sort of organic growth, social media, talking about it all the time. And in that first year in 2020, not many pharmacists even knew what a podcast was.

I was downloading Spotify for people on their phones back then. They were like, what do you mean? You’ve got a podcast, like, and I can. You know, listen to you in my headphones. They were so confused about that. And so I started off as audio. It was a great way to connect with people during the pandemic.

Cause we [00:34:00] weren’t having any interaction with people, but each person started then recommending someone else like, Oh, I have another friend who’s got a really unique career story. Maybe you should connect with them. Here’s the email address. Connect with them on social media. I’ll make a recommendation.

And that just snowballed into, you know, one episode to another. And here we are face to face episodes, have a mini studio at home. I’ve got my husband on board. I’m like touring around different places in the country, recording face to face episodes and 175 episodes later. And. A lot of downloads, 125 countries listening in, a YouTube channel.

It’s changed my life, Tim. It’s literally changed my life.

Tim Ulbrich: we’ll link in the show notes. So the, the YouTube link, uh, I, I think you’ve got to watch the YouTube, uh, cause you, you’re a great interviewer and I, I’ve often said Anisha that what our profession is lacking is. [00:35:00] A representation of the incredible stories of the impact that pharmacists are having every day in all these different roles, because the negativity, while warranted in many areas is so loud and amplified that we’re not hearing the stories that I know are happening every single day and your show is doing that you’re, you’re, you’re, you’re showing the diversity of roles that are out there that pharmacists can employ in a lot of different ways.

And I would guess you would say, if you feel like. Me and Nisha, one of the greatest benefits of podcasting I never thought about on the front end is just the amazing people that you get to meet and the networking that happens and the shared learning that happens when you’re doing 175 interviews like you’ve done, not only are you able to bring these stories out to people in a way that they weren’t Accessible before you started it, but you’ve now built some incredible relationships, I would presume over all of these [00:36:00] interviews that you’ve had along the way as well,

Anisha Patel: I wouldn’t have met you. I wouldn’t

Tim Ulbrich: which is wild.

Right. I mean, and, and the same. Yeah. Yeah.

Anisha Patel: Because I wouldn’t have needed to use LinkedIn. I wouldn’t, to the extent that I’m using it, I wouldn’t have come across. The, the YFP podcast. And I, during my search for pharmacist diaries, potentially a little bit before that I did find you. I was actually, no, I did find you before.

Cause when I was pregnant, I started listening to your podcast episodes. You were the first pharmacy podcast I ever listened to. And this is like seven, eight years ago now. And. It was quite exciting to, to listen and get that insight of these amazing stories of people like paying off their incredible amounts of debt from us pharmacy school and yeah, yeah, it was crazy.

And I was like, wow, but these stories are amazing and it was just really inspiring to learn about all these different pharmacists. The connections that I make [00:37:00] with people are genuine friendships and their lifelong friendships. And the reason why is because my podcast is not a traditional pharmacy podcast.

I’m not interviewing people like a Q and a session, which you will find in a lot of sort of podcasts that are. within the pharmacy space, this is a really intimate, deep dive into someone’s life where you will learn so many things about them that are non pharmacy related, whether that’s, you know, stress or they’ve gone through anxiety or mental health issues.

You know, some women have talked about miscarriages and how that’s impacted their life. How do you hustle as a parent with, you know, two, three kids and, and still have an amazing pharmacy degree, um, or a pharmacy career and going into entrepreneurship and all of these incredible stories have come out and.

The friendships have been amazing and I’m meeting people, especially in the UK on a regular basis, just to connect for coffee. And none of those interactions would happen [00:38:00] without the podcast. But another beauty from being a podcaster is that the opportunities that have come from that unexpectedly have changed my life.

And they’ve given me this sort of spark. For entrepreneurship and they’ve given me this motivation and drive to say that I don’t need to be an employee for the rest of my life. I’ve got control over this podcast, how many episodes I do, who I talk to, the way I speak to them, the content that gets delivered, the questions that I ask.

I’m not being controlled. And as an employee. I’ve been controlled for the last 14 years and I just thought this is normal life, right? But now I’ve been exposed to doing things my own way, working in the style that I like, the time that I want, making the connections with people in, you know, a non [00:39:00] scripted way has just given me this spark of, wow.

I can do so much more with this. And because I’ve been making connections with companies like pharmaceutical companies who have looked at my skillset and valued what I’m delivering on a camera and through video content, through social media, and it’s nothing to do with the. Pharmacy career aspect, it’s the fact that I can deliver information through video, that they’ve invited me to come to another country, either to speak at a conference or create educational videos for other pharmacists in other countries on topics, by the way, that I am not an expert. It is the delivery of the information and the way that you project yourself on camera that they. Need and that they want someone who’s got that confidence and charisma and energy and enthusiasm and excitement to [00:40:00] be on video camera, that’s what they see. And they really value that. And that, again, that skill has only come from practice because it’s not something I’m naturally good at.

It’s something that has come from. 175 episodes and putting in the work and the dedication and the consistency every single week for the last nearly five years.

Tim Ulbrich: Yeah. I think you just nailed it there. Right. When you’re doing something 175 times and you’re practicing the skills. And your preparation and your delivery and how do you succinctly communicate information? How do you effectively tell a story? How do you make someone comfortable in an environment that they’re willing to share and be vulnerable in a way that can help other people in their own journey.

You don’t just wake up and do that. I mean, I guess some people maybe have that natural gift, but you’ve practiced a lot and you’ve put in a ton of work. And I think as people hear you talking about the benefits of podcasting, I know there’s many people out there, pharmacists or non pharmacists are listening, saying.

Well, maybe I have something to [00:41:00] share, and that’s one of the beauties of living in 2025 is for better or for worse, you can put out content, right? Uh, whether it’s YouTube, whether it’s podcast, social media, all the above, and that’s why I love what you’re doing now, taking your experience as Anisha, and you’re now helping others.

Through a mentorship program called Behind the Mic. Again, we’ll link to that in the show notes. But taking all of what you’ve learned, yes. Some of the technical aspects, but aspects, but so much more and helping mentor others through this journey that wanna get a podcast started. Tell us about that offering, what you’re doing, what you’re trying to accomplish through that

Anisha Patel: So at the moment, I really love the idea of working one on one with individuals and being what feels like quite an early entrepreneur, I feel like I’m still figuring things out. I’ve considered whether or not I develop a course that would be something that someone could sign up to and, you know. Work through [00:42:00] at their own pace, but then I also considered like a group coaching program, but the one to one coaching really just spoke to me and it’s the connection that I’m craving.

It’s that deep dive that I want with an individual and it’s, it’s the relationship that I want to build with them. And part of that is just seeing them develop and thrive and. Their entire career could transform with the support of myself and my husband, who’s my secret weapon, the tech guru behind everything.

So in terms of the, the mentoring, he’s supporting with everything tech related. And even though I have some skillset, he’s an absolute genius and he can simplify things and make it easy. To reduce the overwhelm when it comes to the tech, because that is something that people struggle with. Right. And even though they have amazing experience, they’ve got incredible clinical knowledge.

They’ve got a voice [00:43:00] where they want to share their stories or their education, or that, you know, the inspiration to do different things through a podcast. They’re afraid of. The tech and I get that. So, you know, he is my secret weapon and it’s great that we, again, working together as a couple has been amazing.

We’ve absolutely loved working together as a couple and it’s just this two passions come together and it’s something that we’ve kind of had as passion projects individually, and now we’ve. Combined forces, which has been so much fun for us. And the idea, when you look at your life values, because at the end of the day, like now I’ve discovered that I don’t necessarily need a nine to five for the rest of my life and being chained to a hospital environment, which is what I kind of expected that I would be doing until I retire. I now realize that there is this sort of vision that I could live anywhere in the world. [00:44:00] I could have a digital business where I could educate, mentor and support pharmacists or healthcare professionals to start a podcast and become a thought leader on a global scale, not just to their patients in their clinic who could use, you know, advice on.

Say HIV medications and all the side effects and all the things that you could teach them that you don’t have time to do within your clinic, but you could reach people all over the world with that topic as an example and being a thought leader on social media, such as linked in that. You know, your life could be transformed and then partnerships with brands could come with that.

You could start speaking for pharmaceutical companies and you could create this quite incredible side hustle alongside your very clinical job, which is exactly what’s happened to me. But for me, it’s the idea that I can transition to full time entrepreneurship. I can spend more time [00:45:00] with my children. I can choose my hours.

I have the power to then, what I do right now is batch record lots of episodes. So. You know, I try to record 10 episodes or 12 episodes at a time across two to three days, and then I’ve got enough content for like three months. So in the background, we, we can get on with the editing and the social media, but the hardest part, the recording element is done in bulk and then everything else that kind of happens in the background and once.

You know, I’m earning enough money. I can, I can obviously outsource the editing to somebody else and reduce the burden. So I just need to focus on hosting the podcast and I can obviously outsource some other elements. Or if I want to get a virtual assistant, I know I can get help with some of the scheduling and the, you know, connections made with individuals who I might want to invite onto the podcast.

And all of that can be done digitally. And that for me is something [00:46:00] that really excites me because I want to be able to adventure with my children and with my family. I want to be able to explore the world with them and I don’t want to be tied down to one location. It’s something that has been ingrained into me since childhood.

My dad’s from Kenya. My mom’s from Uganda and I spent the first four years of my life in Kenya. And then from the age of six onwards, every summer holiday, my dad would send me and my brother on a plane to Mombasa in Kenya, uh, on our own. And that was the days when, you know, You know, flight attendants would basically look after you.

They’d upgrade you to first class and look after you. And my grandparents would be at the end kind of waiting for us. And they would even be able to walk up to the plane to pick us up. And all summer I would be like Mowgli from Jungle Book. I would just be exploring in Masai Mara, going on safaris, like going, you know, adventuring on the beach.

And when I think of that childhood and [00:47:00] what it gave me. I’m absolutely craving being able to give that back to my children. And every time I go on holiday with my kids, it’s like, I want to be able to spend more time doing that. And that’s why I have this really sort of like big mission now to work towards that goal.

And the podcast has given me the drive to do it. And I never knew it was possible. And. Yeah, I’m making a reality.

Tim Ulbrich: What you’re sharing, Anisha, reminds me, I suspect many of our listeners have read, uh, Simon Sinek’s Start With Why, and One of the concepts she talks about in that book, great book, but it’s one of those books like I constantly go back to in reference is if you think about three circles overlapping at the center of the three circles is the why, and then you move out to the how, and then you move out to the what, and we often spend so much of our time in the periphery.

Of the what of the everything the [00:48:00] things we do every day, right? We go to work. We spend time we do family activity. We do these things with little regard for what’s the why at the core of why we’re of the activities that we’re doing. And is that why? Is it strong? Is it clear? And is it the guiding star?

Is it the path for why we’re doing these things? If not, what we’ll feel is some of that misalignment, whether we can articulate it or not. Something just won’t feel right, that we’re kind of running down this path, but we’re not sure. Why are we on this path and where are we going? And what I just heard, and why I know you’re going to be very successful in the future, is there’s a strong why, and there’s a strong core and a motivation for you individually, for you professionally, but for your family as a whole.

And I, I think I was sharing with you last week when we met that we, we tend to try to separate out these personal and professional goals. And I’m a big believer that when the intersection of those come together and we can build our professional lives in a way that supports our personal [00:49:00] lives, and we’re not trying to live in these two different worlds, things really start to become a lot easier because we’re not.

in this multi identity state of mind. And when you talk about the vision that you have for building this business and being a traveling entrepreneur and what that means for your family and why that’s of value to your family, and then how can the business support doing that, that is going to be a really strong.

North stars. You’re going for it. The other things I’ve heard throughout this interview. You have an obvious curiosity and desire to grow and learn. That’s going to carry you leaps and bounds, a strong desire to help others. And the other piece that I want to highlight for our listeners is there’s a mindset piece here that is so important.

Because many pharmacists, and I’m speaking to my, my former self in part, many pharmacists live in this mindset where they put a ceiling on themselves and what is possible. And I think this comes in part from our training when you’re 18, years [00:50:00] old, and You’re obtaining a doctorate degree or an advanced professional degree, and you’re told you’re going to make a great income.

We start to build these ceilings in our minds that growing outside of that is hard to see. And when you talk about the future of what you’re building and what that might mean, in terms of time flexibility and financial flexibility, when you begin to lift off those ceilings, a whole new world is out there.

And the visual that comes to mind is like the ceilings been lifted. The curiosity is there and you’re now kind of crawling around like finding, Whoa, where can this go? Like, where can this go? Where can that go? And what does this look like going forward? It’s a, it’s a beautiful image and I’m excited for, for, for where things go in the future.

Anisha Patel: Yeah, me too. I’m so excited. And I’m in this incredible transition phase.

Tim Ulbrich: Hmm. Mm

Anisha Patel: just to highlight to your listeners, I’m still working as clinical pharmacist four days a week. And I’ve dedicated [00:51:00] one day a week, by the way, isn’t a full day. It’s 9am to 3pm, which is school hours. So six hours per week on the podcast.

And then I’m still hustling evenings and weekends. Doing stuff for the podcast and the business and the four days that I work as a clinical pharmacist, I’m still doing pediatrics. I’m still doing some education, but the hospital have been so kind to give me super flexible hours. I’m working at my local hospital instead of in central London.

So it’s. A 20 minute drive, or I can cycle if I really want to. And again, like my quality of life has changed instead of the three hour commute into London, um, or three hours in total of travel time is what I did for five years with one child, then a pregnancy, then, you know, I did a master’s degree. I then went back to work when my son was four months old, completely sleep deprived and, you know, really trying to hustle doing the podcast, plus being a great pharmacist, [00:52:00] plus being a great educator.

And the mindset shift that I needed to quit that job was. I mean, I did an episode on it saying I quit my job and it’s an amazing emotional episode where I really dive into exactly how I feel. And part of that, like you said, is we’re just like, we’re just trained to like. Believe certain things as pharmacists and my mindset has been so closed and I found it hard to let go of that clinical job because I genuinely feel less of a pharmacist if I’m not in the hospital, which is crazy.

And it’s something that I’m really truly having to work on now, but the shift from permanent to PRN job has been a massive. change for me. I’m now no longer responsible for a team. You know, I’m not really doing palliative care anymore, which was my area of expertise and my true [00:53:00] love in pediatrics. I’m covering general pediatrics and a very small neonatal unit, but I’m still providing a lot of value and I still love it.

I’m still seeing patients every day and enjoying it. But one of the biggest transitions that you are aware of, but your listeners don’t know is that we made the decision to sell our house.

Tim Ulbrich: Mm-hmm

Anisha Patel: And one of the massive kind of steps that I’m trying to make is that I want to be mortgage free. And we’ve realized that we have a beautiful home and we absolutely love it.

But in this massive transition phase of, you know, having a pregnancy, a second child, um, we renewed our mortgage and the interest rates were originally sort of 1%. And at the back end of COVID, the English interest rates Went to probably 5%,

Tim Ulbrich: Mm-hmm

Anisha Patel: so my mortgage doubled and this is while I’m on maternity leave getting no pay.

And then I had to send my son [00:54:00] to kind of daycare full time at the age of four or five months old, go back to work and spend 2, 000 a month on top of that doubled mortgage just to send him to childcare. And that I’ve been doing for the last two and a half years. And every single day that I go to work, every single penny and more is just going back into the system to survive.

And we’ve realized as a family that we don’t need a lot of the space that we have at this point. And because our mission is to be able to travel and go on all these adventures, we’ve, we, we just decided that actually a smaller space would be much nicer for us, and we’ve bought this. Beautiful little English cottage.

And if anyone’s seen the movie, The Holiday, it’s kind of like that house, but a little bit bigger cause that’s tiny and we’re a family of four,

Tim Ulbrich: Mm-hmm

Anisha Patel: but it’s got the fireplace and it’s just beautiful on the outside and you’re, you’re right in the middle of nowhere. There’s hardly anything [00:55:00] around. The only thing that we have is one tiny shop in the village and there’s, you know, you have to drive miles basically to, to.

See other, a lot of other people and a lot of coffee shops and stores and stuff. And obviously that’s all happening in the background at the moment. And we’re very hopeful that we will be mortgage free in the next year. I would say maybe less if I’m really hopeful. I’ve got a plan to speak to a financial advisor in the next couple of months.

So we can really dive deep into what our finances are going to look like. And then I know. That I can cut down my hours at the hospital and really go all in for pharmacist diaries, because right now I’m trapped. I am truly, I’ve been hustling for five years, working full time, plus doing the podcast.

evenings and weekends and during my kids nap times. I’ve now dedicated my, you know, Mondays to podcasting. And that is amazing [00:56:00] and has done really well now for a year, but it’s just not enough because there’s so much that I want to achieve. There’s so much that I want to be able to do. And I’m in this sort of trap of not really generating enough revenue yet to outsource.

Tim Ulbrich: Mm-hmm

Anisha Patel: At the same time, a lot of the income I’m generating is actually going back into my bill still. And until I have that opportunity to reduce that mortgage, reduce the kind of child care fees. And luckily at the age of three, you, the government do give you support. So you get 30 hours of free childcare. So that’s coming.

That’s coming in September and I cannot wait because that’s really going to shift things for us. So 2025 is going to be, I mean, so many beautiful things are going to unfold for me that I’m really excited about, but at the same time I’m building this like mentoring and coaching business. And obviously I have a goal to work with a few clients and again, that.

in itself is going to make a massive shift [00:57:00] a to my joy factor but also it’s allowing me to then cut back on my traditional job.

Tim Ulbrich: I know our U. S. listeners are saying, what the hell? I wish we got support at three years old. Uh, but no, I mean, the, the, the child care costs are really, it’s one of the things I shared with you before in the work that we do here at Y. F. P. you know, housing costs, child care costs, student loans. And transportation, you know, you put those things together and one of the things I hear on repeat Anisha is I make a great income, but I feel stuck your words, or I feel like I’m not progressing financially.

Someone looks up 10, 15, 20 years into their career. They’ve earned well north of 1 to 2 million without a whole lot to show in terms of progress because of those large fixed costs. So I love your story. An example of. When we’re clear on what it means to be living the rich life and the vision that we have for our family, that can inform some of these decisions and [00:58:00] potential sacrifices we’re willing to make in the financial plan to create some breathing room and space to be able to then pursue these other things, right?

Because otherwise, It’s that feeling of stuck. It’s that feeling of, you know, money in, money out, and I’m so excited to see where things go for you in 2025 and beyond, because I think with that breathing room, with the additional creative capacity, with the time that will be spent there, I think there’s going to be some incredible momentum and progress that’s ahead.

So that’s going to be fun to watch. And the example with the home is just such a good one of why, you know, The financial plan. Yes, it’s about the numbers, but it’s about what is the vision that we have for living this rich life. We often say today and thinking about tomorrow as well. Let me wrap up with this question.

It’s kind of a big one, but I’m curious. I do an exercise every morning where I write. It’s about 10 years into the future, so the date in particular, if anyone’s curious, it’s February 15, 2034 and on February 15, [00:59:00] 2034, I’m going to turn 50, so I write out this 10 year vision of, you know, what, what, what, what’s going to be happening in 10 years.

And so my challenge for you, and I’d love to hear selfishly, and he says, you think out 10 years. What does this look like for you in terms of your family? Uh, you’ve got what at that point, some teenagers, I think, right? Um, your, your family, the business, where you’re traveling, what you’re doing. Paint that picture for us 10 years down the road.

Anisha Patel: One thing that I would say about pharmacist diaries that I’ve discovered in this journey is that it’s pure passion and I don’t want that to go away because I’ve realized when you fall in love with something it never feels like work. Like here I am it’s 9 p. m. I should be going to bed right now, but here I am speaking to you because I’m, I’m so passionate. I’m so passionate about what I’m doing, being able to share my [01:00:00] story, genuinely have a conversation with you. It’s fun for me. So. It’s about making that connection with you as well and being, you know, part of your journey as well.

Tim Ulbrich: Mm hmm.

Anisha Patel: And what I see for the future is that like that financial freedom element is, is a massive part of my life.

I don’t want to have like a mortgage to be paying or, or kind of rent to be worrying about. I want to be, you know, financially free and comfortable. And I’m not talking about making millions here. Like, I really. Do not care about making millions. I’m talking about Just being comfortable and just not worrying because right now one of the things is that every month I am kind of worrying about like paying my bills and having extortionate outgoings It stresses me out and I want to remove that from my life.

But what I visualize Is a couple of things I’ve always wanted to go back [01:01:00] to kenya because it’s where I’ve spent a lot of my time and I really would love to like manage, um, an amazing camp in Masai Mara as an example where I’m actually running my own sort of holiday camp or hotel or, or lodge where people come and go on safaris and have this incredible journey.

But not only is it just managing that, um, it’s having people come and enjoy the safari element, but also the wellbeing element. So looking at kind of doing yoga retreats and kind of the mindfulness and the meditation and just enjoying being part of that and just being immersed in nature with nothing else.

Like I would love a life without internet and just being immersed. With pure nature animals and my children, ideally, I would really like to adopt a child in the future and having the finances would be really valuable to be able to do [01:02:00] that. Because again, like I’m thinking about if I’m growing my family, I did really struggle from one child to two financially.

I found that really hard and I wasn’t quite. as prepared as I should have been and I’m learning how to figure that out. But if I want to have a third child, which I do, and if Sanjay listens to this, he’ll be probably surprised to hear it. But I would love to adopt a child and it’s not that I can’t have my own.

It’s just that I really want Um, I would love to be able to adopt a child who doesn’t necessarily have a family and, you know, have them as part of mine. It’s been a dream of mine for actually a really, really long time. And I would like that to become a reality. And I would really like to be spending more time with my, obviously my children and my family, but from a pharmacy point of view.

What I visualize is that this podcast is still going to exist and I will be traveling around the world, adventuring with my family, but also recording face to face episodes with pharmacists from [01:03:00] all over the world. Yeah, like that and making money from that, obviously, whether it’s sponsorships, whether it’s affiliates.

And again, like you can hear that it’s all digital. I don’t need to be in one location to earn that money. And that is so important to me because I just want to be free to like, do whatever I want and be wherever I want and stay in Bali for a month or go to Kenya and do this amazing adventure or, you know, volunteer.

I want to volunteer at places. I want to go to like an, I don’t know. Somewhere where they look after animals, whether it’s elephants or, you know, orphanages for children and actually give back to society and, and do my part. Um, because at the moment I just feel like all I’m doing is work, working to, to live.

And I want that to flip. I need that to flip and I’m on this mission to make it happen.

Tim Ulbrich: the vision is strong and the energy behind the, the vision is contagious. [01:04:00] And, uh, I mean, that whole heart, this is why Anisha, we, we do, when we walk our clients through the financial plan, the very first thing we do, we call it, get organized. You have to have all of your documents information. We got to know what the balance sheet is.

What are we working with as painful as that can be? Sometimes step two, before we do anything else, we call script your plan. And what we say is we need to cast a vision. We need to light a torch that is going to get you excited every single day. And then we develop the financial plan, but the torch, it’s the guide.

It’s the vision for the financial plan. And I want people that are listening, go back to listen the last three to five minutes of what Anisha said, because that’s the kind of vision that you have to cast one that is going to be energizing. It’s contagious to your family and to others around you. And then when you’re making decisions about a home purchase or paying down debt or any of these.

What can be sometimes monotonous and grinding decisions financially. [01:05:00] There’s a vision that’s behind all of that. And that vision has to be compelling. And I love how compelling. The vision is that you created.

Anisha, as we wrap up here, where’s the best place for our listeners to go to be able to follow your journey and, and learn more about the work that you’re doing

Anisha Patel: So I spend most of my time on LinkedIn. I absolutely love that platform. So feel free to connect with me and DM me if you’re really interested in saying hello, I’d absolutely love to hear from you. Of course I spend time on YouTube and I would love for you to subscribe to the YouTube channel and comment on any videos.

And if you’d like to email me, um, feel free. It’s info at pharmacistdiaries. com.

Tim Ulbrich: great. We’ll link to all that in the show notes, uh, the pharmacist diary show, your email address, your LinkedIn profile, the mentoring program for the podcasting. So again, thank you so much for your time. Uh, this really has been a treat for me. I appreciate it.

Anisha Patel: You’re welcome. Thank you.[01:06:00] [01:07:00] [01:08:00] [01:09:00] [01:10:00]

[END]

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YFP 399: From Pre-Approval to Closing: Understanding the Mortgage Process (and Common Mistakes to Avoid)

Posted on by YFP Media

Tim Ulbrich, YFP Co-Founder is joined by mortgage loan officer Tony Umholtz to discuss the mortgage process. They break down key steps, from getting pre-approved to closing, highlighting important considerations and common mistakes to avoid when buying a home.

This episode is brought to you by First Horizon.

Episode Summary

In this episode, Tim Ulbrich, YFP Co-Founder and CEO is joined by Tony Umholtz, a mortgage loan officer with First Horizon Bank as they break down one of the biggest financial commitments you’ll ever make—buying a home.

Taking out a mortgage is a massive financial decision, one that can impact your life for decades. From getting pre-approved to signing those final papers at closing, there’s a lot to consider—and a lot of mistakes to avoid.

Tim and Tony walk listeners through the mortgage process step by step. They cover what you need to know before getting pre-approved, how the bank sets your max loan amount, and how to avoid common pitfalls throughout the process.

About Today’s Guest

Tony Umholtz is the Senior VP of Mortgage Banking at First Horizon. He 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.

Key Points from the Episode

[00:00] Welcome and Market Overview
[00:58] Current Market Conditions and Predictions
[01:20] Impact of Inflation and Unemployment on Interest Rates
[02:23] Regional Market Fragmentation
[03:15] Affordability Challenges for First-Time Homebuyers
[04:03] Understanding Your Budget and Financial Plan
[05:17] Lender’s Perspective on Affordability
[06:46] Debt-to-Income Ratio Explained
[09:27] Student Loans and Mortgage Affordability
[14:06] Importance of Credit Scores in Mortgage Lending
[19:29] Pre-Approval vs. Pre-Qualification
[23:41] Common Mistakes in the Lending Process
[28:18] Understanding Self-Employed Income for Loans
[30:31] Importance of Early Communication with Lenders
[32:05] Navigating Loan Options and Interest Rates
[39:55] The Pharmacist Home Loan Product
[43:21] Behind the Scenes: From Contract to Closing
[55:09] Final Thoughts and Resources for Homebuyers

Episode Highlights

“ We need to stop bemoaning the interest rates of 2020, 2021. Those days are gone. If those days come back, there’s going to be an opportunity to refinance, but we’ve got this new reality in front of us.” – Tim Ulbrich [3:04]

“ Banks and lenders have to show that the borrower has the ability to repay, and there’s certain documentation that’s required as a result of that.” – Tony Umholtz [05:41]

“ People don’t always realize that too. If one spouse or co borrower has lower credit scores that can influence the loan pricing.” – Tony Umholtz [09:12]

“ Credit is critical to to all of the lending world. Income is super critical too, because you have to show the ability to repay. But a lot of programs now have minimum credit scores. So if you don’t meet that threshold, you’re not qualified.” – Tony Umholtz [14:33]

“ It’s really one of the safest times that I’ve ever seen as far as lending goes to, to buy because the regulatory environment is very consumer friendly.” – Tony Umholtz [38:50]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Tony, welcome back to the show.

Tony Umholtz: Tim, thanks for having me. Good to see you.

Tim Ulbrich: Good to see you as well. And as always excited to have you on as our mortgage lending expert to bring great information to our community and audience. And we’re going to talk about the A to Z of the mortgage process, uh, all the way from pre approval to closing. But before we do that, as I always do, I want to ask.

I can get your take on what the heck is going on in the market. Where are we at? And what might 2025 bring? It feels like we’ve had this conversation a few times of, Hey, rates, rates are stubborn, supply is limited. Demand is high. What, what do you see out there in the market and what’s ahead for the year?

Tony Umholtz: Yeah, all good [00:01:00] questions, Tim. It’s definitely interesting times. Um, you know, a lot going on, different markets can vary a little bit, you know, across the country clearly, but we are seeing more inventory. So that’s the good news for buyers. There’s more inventory of existing homes on the market than there’s been in some time.

So the inventory levels are increasing. I would say that one concern, you know, obviously is inflation. Inflation is It has yet to be completely beaten in the fed’s eyes, right? So I think I think we’re going to see inflation ease down probably in the coming months because Year over year inflation it reports will factor in some lower months You know april may june of last year into the annual figures and I think you’re going to see That inflation rate come down also got to watch the unemployment rate too.

Cause the unemployment rate is near all time lows, but I think that could tick up a little higher. [00:02:00] And if that does even just fractionally, that can help with interest rates. So I do think there’s a chance rates could be a little bit better in the next six months. But I wouldn’t bet on like a really seeing anything like the 2021 or 2020, but overall, the economy is pretty healthy.

There’s just risks to watch. And I think rate wise, it’s inflation. And, um, you know, but then there’s some areas that have been hit, you know, obviously, L. A. with the fires, right, Florida with the hurricanes, housing markets. Are affected by that. And, you know, we see I’m based in Florida and we can see like this fragmented market where certain areas that weren’t affected by flooding have, you know, all time highs in prices were issues along the coast are, you know, some of those homes have been hit pretty hard and the values are down, probably an opportunity in the long run, but it’s just there is some fragmentation to the housing market.

But overall, I would say, um, you know, [00:03:00] inventory levels being higher is going to help buyers.

Tim Ulbrich: That’s good to hear. And I, I think we need to stop bemoaning the, uh, interest rates of 2020, 2021 and those days are gone. Right. And, you know, we, we’ve got a new reality, you know, maybe they come down slightly. If, if those days come back, there’s going to be an opportunity obviously to refinance, but we, we’ve got this new reality in front of us and Tony, what I’m hearing from a lot of pharmacists, homebuyers, especially first time homebuyers is.

You know, salaries have remained relatively flat. You know, some have seen a substantial increase. Student loan debt is still a thing very much for a lot of our audience. But the home prices and the appreciation that’s happened alongside of the interest rates that have gone up, it’s really changed the affordability question, you know, for a lot of Pharmacists, especially first time homebuyers, and for many, I think it’s changed that expectation of what might be within budget, and I want to start there as we talk about the A to Z of the process from pre approval to closing, because I [00:04:00] think first and foremost, we have to know our budget.

We have to understand that what are we able to afford and our own financial plan, and I’ll get your take in a moment here on kind of how the bank makes this determination, but it’s really up to you as the individual to determine what that is. Mortgage payment with principal interest taxes and insurance referred to as as pity works with your income, your expenses, your various goals.

Keyword being your right. Everyone’s situation is different and any mortgage calculator. And we’ve got a YFP mortgage calculator that we can link to in the show notes as well. Any mortgage calculator will ask you for inputs on what’s the target loan amount, what’s the down payment, what’s the interest rate, what’s the term, what’s the taxes, and and the insurance aspects of the buy as well.

And all of those things we have to factor into as we’re looking at how does this home purchase, how does this decision factor into the [00:05:00] broader financial plan. So Tony, I’m going to stop with my rant on, you know, how people need to be thinking about their individual purchase and how it fits into the broader context of their plan and their goals and get your take on how the lender determines what the buyer can afford.

Because early on in this process is going to come a pre approval, but before we get that pre approval, we have to understand how the bank thinks about the lending decision and what ultimately a home buyer can afford. Hmm.

Tony Umholtz: Right. That’s right. So all lenders are required to prove it’s called the ATR rule. The ability to repay pretty simple, but it’s. Banks and lenders have to show that the borrower has the ability to repay, and there’s certain documentation that’s required as a result of that. So that’s why lenders will ask for your pay stubs, tax returns if you’re self employed, bank statements, asset statements, uh, work history.

They’re required by law [00:06:00] to prove, you know, per that rule, right, the ability to repay the loan. So, I would say that, you know, you hit it on, you, you hit it right on there, Tim. I mean, you want to prove. First of all, backtrack before you go to a lender, get your own budget together. Like what can I afford? What really can I afford?

Cause the lender might be able to approve me for more than I’m willing to pay. Right. That does happen. You might have a travel budget. You might have, um, a savings goal.

Tim Ulbrich: Right. Right.

Tony Umholtz: And, and you, you come in and you say, well, wait a minute, I can qualify for the 800, 000 home, but I don’t, I don’t want that. Right.

It’s because my budget doesn’t allow that. So I think having your budget is important. I think the other thing. Us as lenders are going to look at your, your debt to income ratio. So that’s the buzzword here, debt to income ratio. So as a lender, we assess you based upon how much income to debts that [00:07:00] you have per month.

So let’s just say your income is 10, 000. Okay. That’s your gross income. And lenders always use gross income. If you’re W2, we use your gross, not your net. So that’s been a question over the years that I’ve received. And we use your gross income and let’s say your liabilities before the mortgage. Our 4, 000 a month before you get a mortgage.

Well, typically we’re not going to lend you more than a 43 percent debt to income ratio. So already right there, if you’re making, you’re paying 4, 000 a month in debt, let’s say it’s student loans. You have a couple of cars, it’s 4, 000 a month. There’s not a lot there to buy a home.

Tim Ulbrich: Mm hmm.

Tony Umholtz: that’s how lenders look at it.

It’s based upon the debt to income ratio. And that’s a simple way to illustrate it is if your gross income is 10, 000, Your liabilities are 4, 000 a month where you’re at a 40 percent debt to income ratio. Most programs are 43%. There are a few that will go up to 49 percent debt to income ratio, but [00:08:00] that’s generally where you’re going to be.

So, and that includes the new mortgage. So that’s how lenders look at you, look at you as a borrower. We have a ratio to your income to your liabilities, and that’s how we prove the ability to repay the loan.

Tim Ulbrich: So Tony, when a lender’s looking at that ability to repay the loan, the ATR rule that you mentioned, the debt to income ratio, um, inclusive of course of what that new payment will be. Is that principal and interest only? That they’re, they’re factoring in

Tony Umholtz: It’s P I T I,

Tim Ulbrich: P I T I.

Tony Umholtz: Yeah, it’s P I T I. So taxes and insurance matter as well. So it’s that whole, that’s entire collective amount. Um, so that’s, that’s how we review it. And again, it’s, and it’s all borrowers on the loan too. So if you have, um, a spouse that’s on the loan with you, obviously we use your spouse’s income as well.

So it would be collective income, you know, or if you have a co borrower, uh, it’d be collective income. So that’s how, it’s one way. Folks are able to qualify for more, [00:09:00] um,

Tim Ulbrich: too, right?

Tony Umholtz: debt as well. That’s right. That’s right. But, um, you got to remember that too. It’s true. Uh, it is collective debt and it’s collective credit scores.

People don’t always realize that too. If one spouse or co borrower has lower credit scores that can influence the loan pricing. Um, so that’s something to keep in mind too. Even if the other borrower, the main primary borrower has better credit.

Tim Ulbrich: have a question about credit that I want to come back to here in a moment, but I want to first tackle what I’m guessing many of our listeners are thinking as they hear you talk about the ability to repay rule and the debt to income ratio, which is my student loans, right? You know, we certainly do have people that may have some credit card debt.

Some car debt, um, other debt that may, may be hanging around as well. But student loans tends to be the grill in the room when we think of many pharmacists, especially first time homebuyers. Uh, we might have some listening that are thinking about a homebuyer that’s not the first time and maybe the student loans are [00:10:00] gone.

And certainly that would free up some things on the debt to income ratio. But if we think of a traditional pharmacy graduate coming out with 170, in student loans, Depending on their loan repayment plan, that can be a sizable monthly payment. So if you put that debt on a standard 10 year repayment, you’re talking about 1, 900 to 2, 000 a month.

On the other hand, you might have somebody that, you know, is looking at an income driven repayment plan and they’re, they’re really optimizing the calculation and they’ve got that down substantially, 700 a month. Wow, that can have a big impact. Tony on how that gets factored in. So given all the uncertainty right now about student loans and what’s happening and people that are on, uh, pauses because of the uncertainty with the save plan, how are lenders thinking about.

Student loans. Are they applying a generic calculation or are they getting to the level of detail of, Hey, this person’s on a standard repayment. This person’s on an income [00:11:00] driven repayment.

Tony Umholtz: Yeah, it’s a great question, Tim. So I, so a couple of things, uh, the, the first thing is most clients that come to us are already kind of ahead of the game. They have one of those two options. I find the income based repayment plan is what we like to see, right? That’s what normally is what I see. Um, because.

The, the, the payment is then gives them the ability to borrow more and buy a home, um, or pay rent or whatever it might be. Um, so normally we see that income based repayment and that’s what we encourage everyone to go to if we can. Um, there is a factor though for those that aren’t quite set up. There is a factor that we have on some of our programs that takes a factor of the loans.

So like, for example. One of our products is at half percent of the balances per month. So for, if you had a, um, a hundred, a hundred thousand dollar loan, that would be a 500 a month payment, right? [00:12:00] Where Fannie Freddie are typically 1 percent month

Tim Ulbrich: got it.

Tony Umholtz: conventional loans or FHA. So there’s some products out there that can give you a little bit more flexibility.

Um, which is, is needed a lot of times in with your clients, uh, in, you know, the audience. But, um, I find that the income based, I would encourage everyone if they can, if they have that option, the income based repayment is going to give you the most flexibility and allow you to have the, you know, kind of the best approach to, to, uh, financing a big purchase like a home.

Um, because if you have that 10 year, you know, like you said, 1, 900 a month versus maybe 500 a month really locks you in. You know, it doesn’t give you a lot of capacity to borrow.

Tim Ulbrich: You know, it’s interesting. There’s a lot of strategy here. And, you know, I’m thinking about more of the work that our planning team does where not Anyone decisions in a style. This is a great example where if you’ve got student loans that you’re paying off And you’re thinking about buying a home [00:13:00] You can’t look at those as independent variables and and of course there’s many other parts of the plan as well But knowing the debt to income ratio is based on gross income I’m specifically thinking about our folks that work in the non profit Sector that might be pursuing something like a public service loan forgiveness strategy that are on an income driven repayment plan and are optimizing that plan Not advice, but just kind of talking about how the calculations work and they’re optimizing that plan.

By really making contributions to, you know, traditional 401k’s or traditional 403b’s that might be making HSA contributions, other types of things where they’re reducing what that monthly payment will be, um, through the calculations of the income driven repayment plan, all the while making their debt to income ratio, you know, more favorable.

And of course, having you. More loans that would be forgiven and ideally forgiven tax free. So just a great example where, Hey, if I’ve got student loans and I’m going down this pathway, this strategy, and I’m also thinking about buying a home, we got to bring these two discussions [00:14:00] together and figure out how the different Uh, pieces of the puzzle ultimately work, work together.

So credit, I want to come back to my credit question, Tony, what role does a credit score play in getting a mortgage? I think the obvious being of course, better credit is, is going to be more, more favorable lending terms, but for our listeners that especially are going through this for the first time, like how much does credit matter when it comes to not only getting approved, but getting the best products at the best rate.

Tony Umholtz: right? Well credit is critical to to all of the lending world uh Obviously income is is super critical too because you have to show the ability to repay But a lot of programs now tim they have minimum credit scores. So if you don’t meet that threshold, you’re not qualified so, um Uh, and like us as an institution, as a bank, we have a minimum credit score, uh, depending on the products, you know, [00:15:00] some are lower than others, uh, but, but credit scores matter to rates as well, right?

Big, it’s a big influence on rates. So if you have, you know, a, a lower credit and that can dictate what product I’m going to recommend too, right? So if the, your credit score is a little bit lower, let’s say you have a, a six 20 credit score. And you come to me with less money down and I can maybe get you Qualified for conventional or FHA Well, I may say FHA in that in that situation because the rate may be better based on your credit score So everybody’s a little different everyone’s situations different but credit scores are very important and i’ll just mention a couple quick things um I’ll just add this in to him.

I just a couple things just for my years of doing this Uh 22 and a half years of this industry Is Mistakes. And I brought this up in the past, maybe a couple of years ago, but I’ll just reiterate it. And one thing where most people get caught up is I [00:16:00] find a lot of my clients are concerned about inquiries, right?

Oh, my credit’s run. I’ll have an inquiry. And inquiries are the least amount impactful on your credit. You don’t want a whole bunch of them. And you definitely don’t want a bunch from multiple creditors, you know, getting credit cards and things like that. But where I see the biggest mistakes is credit card usage.

So if you have a 5, 000. Visa credit card and you go and you buy something for 4, 500 and it’s not being paid down that hits your credit much worse than an inquiry. And the other thing I see is. Buying furniture, buying TVs, when they give you no interest for a year, it’s a great deal. And I even did it on one of my first homes when I was in my mid, my mid twenties.

And I’ll never forget my credit score and down 60 points because I had multiple maxed out credit cards for this no interest for a year. So that’s just a couple of things that, you know, younger buyers and any buyer can look at, but you want to make sure all your [00:17:00] payments are on time. And the credit score is very, very important.

And one other thing I’ll mention as well is monitoring services. The monitoring services do not always tell you exactly or specifically what your actual credit score is that, that a creditor like us is going to see. Okay. They’re going to give you trends. Like I have some people tell me, Oh yeah, my, my, my score is eight 60.

Well, they don’t even go that high. Okay. So, and then you’ll run the credit report and it’s seven 70. And it’s just because it’s still great credit score, but the tracking services are not the

Tim Ulbrich: Yeah. Mm-hmm

Tony Umholtz: what we’re looking at. So I try to encourage people to, to that. It’s great that you subscribe to that. It does give you overall trend, but that is not exactly what a creditor score is going to be.

Tim Ulbrich: So you’re talking about like a Credit Karma or some service out? Right.

Tony Umholtz: Yeah. Yeah. I think some of the credit card companies discover all they, they offer these services that track your credit and [00:18:00] people will even scan these to me and say, Hey, this is where I’m at. And, and, and it gives me a good trend, but that’s not what your scores are, you know? So, and then there’s three, there’s three scores that lenders look at as well.

Okay. So that’s another thing I want everyone to know is. There’s Experian, Equifax, and TransUnion. Those are the three large, you know, basically repositories of credit information. And when lenders, mortgage companies run your credit, we use the median score. The median score, so your mid score.

Tim Ulbrich: And I think your, your discussion of credit is just such a good reminder here in the home buying process, but as an overall part of the financial plan, I, I feel like credit, kind of like tax, right? It has a thread that runs across everything. Um. And we’ve talked at length, not only you and I, but we’ve also done some other episodes on understanding credit scores, you know, why it’s important to check your credit report, uh, understanding the components and make up of the credit score.

You were talking about utilization there just a few [00:19:00] moments ago, the more you know about credit, the more you can start to understand. And especially thinking about our listeners, Tony, that maybe they’re saying, Hey, I’m going to buy. A year out, two years out, or I’m not even thinking about it now. What a great time to really solidify your, your credit so that when you get to that point in decision of buying, you know, you’re, you’re ready to go and, and you’ve ultimately, uh, made your credit the best that it can be.

So such an important topic, all of this, Tony leads up to the pre approval. So as we wrap up this first section, we’re talking about pre approval budget. You know, the, the bank’s going to ask us to submit a bunch of information that’s going to help them determine what is that. Ability, right, that they have to be able to lend a certain amount of money and through the submission of information in terms of pay stubs, pay stubs and work history, we’re obviously doing a credit, uh, pull and check as well.

They’re going to then hopefully issue what would be a pre approval. So remind us of that pre approval. [00:20:00] Why is that pre approval so important and how that differentiates from pre qualifications, which I’m seeing more and more out there as well.

Tony Umholtz: Yeah, another good question. So a pre qualification is not validated data by a lender, right? So it’s basically, um, a lot of online Services and pages have this where you can pretty much or verbally supply your information. So if you were to call and say, you know, Tony, I make 100, 000 a year. I have 2 debts, 2 car payments at 500 a month.

And, um, that’s it. Right. And then you would send out, nothing’s validated, right? Credit score might not be run. I haven’t seen your, your pay stubs. Haven’t seen your W2s. Haven’t seen your credit. Like I mentioned. So it’s verbal data. Right. And, and that’s why. Those letters generally don’t carry much weight in the real estate community.

So if you go to a realtor and say, I want to [00:21:00] make an offer, or I want to work with you to find a home, a lot of times they’ll say, well, do you have a pre approval and if you answer, no, I have a prequalification, they. They’re not going to put much weight in that. So the prequalification is fine just for basic knowledge.

I think if you’re just trying to think ahead of time, you’re a few months away from your, you know, really getting into the home buying process. It’s fine to do that. Like I give verbals to people all the time. They’ll call me, especially past clients to say, do you just kind of thinking about this? And does this make sense? But we’re not going to give them anything in writing like that. It’s more just a conversation, but when you’re ready to go look at homes and walk into open houses, a lot of times they’re going to want that letter. So that pre approval letter carries a lot more weight because we’ve ran credit. We’ve seen your income, um, whether it’s W 2s or pay stubs, we’ve seen your liabilities.

So then we can say, okay, in writing. This client is approved for this 700, 000 [00:22:00] mortgage. And a lot of times the listing agent will want that before you even go into the house, you know, just depends on the, the area and the situation, but a lot more weight is given to that preapproval letter. And those are generally good for 90 to 120 days.

Um, so you got some length before you have to update them, but, uh, yes, it’s a big difference. It’s, it’s validated versus unvalidated would be a good way to say it.

Tim Ulbrich: Yeah, the way I think about it, Tony is, you know, that letter, that pre approval letter becomes the key, if you will, that you can really go out, work with a realtor and put in an offer, uh, and feel, feel good about the process moving forward. And I’m glad you mentioned the timeline, 90 to 120 days, because I think that’s one thing that first time home buyers, especially might not be thinking about is how long does that last?

And Ideally, you start this process because it’s going to take time, right? To gather all of your documents. And, uh, I’m thinking about the [00:23:00] last time, Tony, that even went through this with you guys, like you’ve got an online portal helps you kind of walk through each of the individual steps you can’t submit, right?

Until you, you have all the check boxes of the individual, uh, items uploaded and it could just take time to gather. those documents and make sure you have all the right information. And we all know from experience how quickly we can go from, hey I think I want to buy a home, to we want to put an offer. So If it’s within the realm of, hey, I think we might start to be serious about looking, I think moving that pre approval process forward, knowing that you’ve got a 90 to 120 day ish timeline, uh, can be a really smart thing to do for people that are in that, that search phase.

Tony, I want to tap into more of your experience, uh, to, to get your insight on some of the common mistakes that you see. Out there that are, that are made throughout the lending process. And then we’ll continue on talking about some of the different loan options, uh, as well as wrapping up with the closing side of things.

We talked about a big one [00:24:00] already, which was the credit mistakes. And, uh, I love your example of, Hey, if you go finance a thousand dollar piece of furniture and you max out that line, that’s a problem. And people might not be thinking about that. So beyond credit mistakes that people can avoid, what are some of the other big mistakes that you see out there that.

Uh, home buyers are, are making in the process that they could be on the lookout for, and, and ideally avoid.

Tony Umholtz: Yeah, I mean, again, in this kind of going over my career and mistakes that I’ve seen and, you know, it’s one of the One of the biggest things I feel like nowadays people are much more informed than they were when I started my career 20 plus years ago. I mean, there’s more people are more informed. I think where I see some mistakes now are this type of property you’re buying.

And what I mean by that is some clients are buying condominiums and they don’t always know the challenges that come along with that [00:25:00] condominium. Yeah. You may not have to mow the grass or take care of the shrubs or whatever it might be, but HOAs, special assessments. Especially in certain states like, you know, for example, Florida, we had the surfside incident.

There’s been a lot of regulatory challenges that have been placed on on condos and made them much more difficult to finance, much more expensive. And I’m not saying don’t buy condos. I don’t want, I mean, they’re especially in some states. They’re the best option available. Um, like if you’re in a more urban setting, sometimes that’s all that’s available.

It’s affordable, but I think doing your due diligence on the building itself is very important. And I’ve seen some people making mistakes recently in that regard. So if you decide you want to buy a condominium, just, you know, a lot of that’s property specific, right? Um, I think it’s also just, you know, making sure you understand the insurance.

Uh, what comes along with your coverages? Um, you know, uh, some of the insurance companies [00:26:00] now are doing roof schedules instead of an entire roof replacement and look, probably not a lot of worry about that in Ohio. But if you’re on the coast in Texas or in Florida and you have a storm, it damages your roof.

We’re seeing some problems with that here right now. Um, so just understanding the coverages you have. But again, it’s very specific to where you are in, in, in the country, you know, um, I, I think the other thing is, is, uh, floating the market sometimes. I mean, people come to me, what I mean by that is once you get a contract on a home, you’re eligible to lock your rating.

And I, I’ve mentioned this, I’ve always been a bit of a finance nerd. So I’m watching the markets. I’m watching bonds. I’m doing all these things. And I try to give my clients the best. Feedback. I can, and I pass it along to my team. We meet and talk about this daily. Um, but it’s volatile, right? It’s a volatile market and, and rates go up and [00:27:00] down. I have had some people, and I tend to be people who are feel like they’re more informed on the markets. Typically not medical professionals. It’s more like people in the business world that I’ve had. And I’ll kind of say my recommendation is lock. Well, I think I’m going to float it. And of course the rates go up a half point and things like that.

And look, I’m not saying I’m always right. I’m not clearly, I wouldn’t be here. I’d be trading on some Island if I knew everything and had a crystal ball. But I think sometimes taking too much risk is a problem. I kind of like a bird in hand. If you’ve gotten a gain, the rates have come down a little bit since you’ve gone under contract.

You might want to lock that gain in. It’s always been my experience, you know, take, take it off the table. Unless you really see a downtrend. We saw that during COVID, we could all identify it, but normally like in this environment, you get a gain, you should take it. Um, you know, the, the other thing is just not understanding the type of income you have, and most of your audience, Tim is [00:28:00] W2’d for the most

Tim Ulbrich: Yeah, most part. Mm

Tony Umholtz: but, but not everyone, some have 1099 income.

A lot of physicians are doing locums, right? They, they’ll come to us and they, they, they had some fragmentation in their income because they, they, they worked here for six months and lenders don’t treat all income the same. And you have to understand that. I had a gentleman in my office just before this call, past client of mine, and he took a lot of losses on his business, uh, the last few years.

And he had to do it because of some competition abroad. But the problem is the end of the day, we’ve got to use what he reported to the IRS. So you always got to remember lenders have to use what you, they, what they, what you reported to the IRS. And, you know, people will say, well, I actually made more than that, but there’s ways we can add back certain expenses, like especially non cash expenses, like amortization, depreciation, some things like that can be added back into your [00:29:00] overall income if you’re self employed.

But that’s another mistake I see, Tim. Again, not as relevant with all of your audience, but some, maybe someone out there is when you’re self employed, it’s important to understand how you’re getting paid and what you’re getting paid. Are you an S corp or your 1099 LLC? These things are important when you apply for a loan.

So there’s a little more complexity there, but I think it’s important. That’s the mistakes I see is they’re all, they’re almost, I’ve had, I mean, I literally have one person under contract right now who we’re going to have to scramble to figure out how to qualify. And they never came to us first.

Tim Ulbrich: Mm.

Tony Umholtz: and it’s, it’s pretty substantial contract on a home, like a dream home, but that should have been planned ahead of time and let us look, review everything before it comes to this.

So I know it’s long winded. I’m just trying to think of some current things I’m seeing right now in this environment. In the past, there was different risks. Now it’s just really property specific, your [00:30:00] income. I think the other thing would be how far away you are from your job is important to, uh, it’s gotta be reasonable.

Right. You can’t be buying a home to, you know, 200 miles away from where your daily commute is. I’ve had a few people do that. I’m scratching my head. I’m like, well, a primary home may not be a primary home, maybe a secondary home, you know? So I think those are the things, just make sure you have your plans accurately spelled out to the lender at application.

Tim Ulbrich: Yeah, I’m glad you mentioned the self employed income because you’re, you’re right. There’s not a large percentage of pharmacists. There are certainly some listening out there that need to be thinking about that well in advance. And, um, I think communication is, is what I’d recommend they’re just early communication with the lender.

So you understand how they would view the calculation and what information is, is needed and might take a little bit more work to get all that information and make sure you understand. Certainly a decent amount of number of people in our audience that might have a [00:31:00] spouse or a significant other partner that owns a business.

I just had a conversation earlier today where. A pharmacist is a ED clinical pharmacist, but their, their spouse owns a construction company. Um, so maybe their income is pretty stable and, and all W 2, but there might be, uh, some self employed income in there that needs to be, needs to be factored in for sure.

Tony Umholtz: Thing that, that a lender can do is if we see, and I’ve had this happen numerous times, even within your, your community, Tim is when we have pharmacists and their spouse or their partner has a business and it’s losing money. And we, we identify that and we say, well, this actually hurts your qualifications.

We can tell you that ahead of time, you know, and say, help with the guidance of. Well, you might be grossing 2000 a month cash in your pocket from that business, but you’re showing it you’re losing 500 a

Tim Ulbrich: Right.

Tony Umholtz: Right? So that’s important to that’s a mistake I run into as well. So,

Tim Ulbrich: on your [00:32:00] tax return? What’s on your tax return? Yeah. Um. I want to talk about loan options and a little bit about interest rates as we work our way through the process. So we started with the pre approval, the budget. We talked about some of the common pitfalls that happen along the way as well, and certainly getting to the right quote, right loan option is an important determination.

And we’ve talked at length on previous episodes about the different. Loan options. So I don’t feel the need that we have to go through every single one of those again. And the more you and I’ve talked, Tony, the more I’m convinced that it’s, it’s less about the borrower coming and saying, Hey, this is the option that I want.

And this is the rate, you know, that I’m looking for. And it’s really about. finding that good lender relationship where that person can understand your situation and ultimately apply and recommend what is the best loan option for your personal situation, right? Because you’ve given me many examples before where someone comes to you and [00:33:00] says, Hey, I really want to apply for the pharmacist home loan.

And maybe that’s a slam dunk, but maybe they’d be a better fit because of what’s going on with rates or credit scores or other things with an FHA product. And so Talk to us about that relationship a little bit and, and, and why it’s, it’s important for the lender and the lendee ultimately to come to that determination of what, what is the best loan option for their personal situation?

Oh, geez.

Tony Umholtz: environment is. Probably one of the most critical I’ve ever seen of, cause there’s been so much change in the secondary market to where there’s opportunities where like it during COVID, I mean, there was products that like I wouldn’t deviate from, you know, you know, everyone I could get into one product because the rates were so good in that one area I tried to, but now things have changed where the secondary market, there’s opportunities that, that arise.

So. Based on credit score, debt to income ratio, [00:34:00] there’s a lot of reasons why we try to make sure we find the best product. It’s not always the pharmacist’s product. A lot of times it is, but there are times, scenarios, where there’s programs that make more sense based on that individual’s debt to income ratio, just what we covered today, credit score, that matters.

Pricing can be much better with, for example, FHA. when your credit score might be a little lower. The FHA pricing has gone through times where it’s just incredibly good, even though there’s some PMI. So I really try to make sure we’re matching that best product. And then there’s some geographical programs, depending on where a home buyer is looking that, um, You know, we’ve used to that are that are kind of unique to that area based on a load of moderate, moderate income, even, you know, depending on the track you’re buying in census track.

There’s all sorts of different programs out there and I try not to limit or be short sighted. [00:35:00] Um, so, uh, we try to look at what the best opportunity is at a given time. And, and I have done that throughout my career, no matter where, you know, whatever the timing was. Um, I’ll never forget. I’ll tell one quick story just you guys might be too young for this, but it’s, but if you ever saw that movie, the big short, you’ll remember this.

But during 2004, five and six, 2004 and five, primarily Lehman brothers had this great program. I did a lot of a paper lending. I never did the, like the subprime lending back then. And I was young, but I was the second top producer at my mortgage, the mortgage company I worked for in the country. And I worked really hard.

It was 12 hour days. I loved it. I had one part time assistant, but different times, but Lehman brothers had this great product where with a second mortgage, we could do 65 percent LTVs and get the best pricing I’d ever seen a bit, but they were using it for non [00:36:00] doc, they actually had this stated income product, which I didn’t do a lot of, but this particular program had just the best rates.

Well, I ended up being invited to this call where they were telling me how, Oh, you, you know, we really like this, what you’re doing. And basically we’ll buy like a hundred percent loans with no income verification and all this stuff. So it was, it was crazy times and sure enough, a few years

Tim Ulbrich: Yeah.

Tony Umholtz: everything blew up.

But my point is this, we found that the best pricing was through that product and we utilized it. Right. So, and it helped a lot of, of our clients and I. Nowadays, there’s nothing like that out there. It’s basically pretty vanilla. You have, you know, um, you know, several different options, but we always try to find it the best option for that individual, but, um, I’ll never forget being on that call and having that pit in my stomach being like 27 years old, thinking it doesn’t sound right, you know, it, this doesn’t sound right.

And then a few years later, it all went

Tim Ulbrich: Here’s why it didn’t sound right. Yeah. [00:37:00] Yeah. I think there’s just a lot to think about here that can be so overwhelming for a first time homebuyer if they’re just Google searching, right? It’s, you know, they’re looking at, uh, different rates, fixed rates, uh, variable rates, adjustable rate, mortgage products are out there.

They’re looking at different terms that are out there. They’re looking about options that have points or don’t have points or reading about different loan types. And, you know, should I do a 30, a 20, a 15, and how much is it going to take for a down payment? And to me, this is where some of the internet searching, and I learned this the hard way one time where.

You know, you’re excited about buying a home, you put in your information, and all of a sudden the phone starts ringing 24 7, right? And, the problem with that is, it’s not only is it annoying, but it’s narrowing you down a pathway too early that may or may not even be the pathway that you want to be on.

And I always go back to, Can there, can there be a lender relationship and can you [00:38:00] pick up the phone and call someone, have a conversation about your situation? Hey, I’m looking in this area. This is about what we’re thinking, you know, budget wise. And then based on the products, based on all those factors coming together, what is the best product, you know, that that’s available in that moment for their situation and for the rates that are available.

So I’m going to keep beating that drum Tony, because I think it’s so important that. Someone might go in and we’ll talk here in just a minute about the pharmacist home loan product. And, and, you know, hopefully that’s a good fit. Um, but for some people that might go into that and say, Hey. That is a good option, but maybe there’s a better option, you know, that’s, that’s available as well.

Let’s talk about the pharma Go ahead.

Tony Umholtz: Oh, you’re exactly right. Cause you know, credit scores, the mark, the market, all of that applies. And we always want to evaluate what’s best at this current time. And one other thing I’ll mention too, is it’s really one of the safest times that I’ve ever seen as far as lending goes to, to buy because the regulatory environment [00:39:00] is very consumer friendly.

Um, there’s, there’s not a lot of, I mean, the, the rules are in place to, to prevent defaults. Right. And it is overwhelming to some degree, but also there’s no more prepayment penalties. There used to be prepayment penalties on lots of these loan products 20

Tim Ulbrich: to believe. Hard to

Tony Umholtz: Yeah. I mean, it was like everything had you to watch your prepay period and all this, that’s all gone.

I mean, so if rates start dipping, which. It could happen. Um, if we see inflation continue to fall, you’re, you could refinance in six months, eight months, whenever it made sense financially. Right. I mean, so it’s a very liquid time as long as you qualify. I think it’s, there’s a lot of, um, you know, from a financing side, it’s probably never been safer.

It’s, you just have to go in. Understanding that, you know, owning a property is not renting, right? You own it and you’ve got to take care of it. It’s your asset.

Tim Ulbrich: That’s right. When we talk about the different products, let’s finish this section by talking about the Pharmacist home loan [00:40:00] product, as I suspect many are interested. We’ve mentioned it a few times now. Tell us about The ins and outs in terms of why that product is unique. Minimum credit scores, maximum loan amounts.

So our listeners can get a feel of whether or not that may be an option, uh, that they want to look into. Um,

Tony Umholtz: is 700, but there is some pricing adjustments if you’re under seven 40. So that’s why one of the things we do, we will look at some conventional products. If your credit score is 701, for example, right? Cause, cause that, that it’s more sensitive rate wise when you get under 740.

So that’s the minimum of 700. Um, as far as like the down payments, down payments are 3 percent down if you’re a first time buyer. Okay. So only 3 percent down, no PMI. If you’ve owned before, it’s 5 percent down. Okay. 5 percent down again, no PMI. The maximum loan amount typically matches [00:41:00] the conventional loan limits for that area.

So most areas right now are about 806, 550. There are some higher cost areas, you know, that are, that are higher than that. Certain counties, especially around Washington, DC, California, um, higher cost areas, New York, uh, but for the most part around that 806, 550 is the loan amount max. So lesser down payment, still pretty high loan amount.

You know, it’s pretty viable. Um, no prepayment penalties, like I mentioned, there aren’t really a lot of reserve requirements either, so you don’t have to have a lot of, you know, of, uh, cash in the bank, so to speak, uh, in reserves. And then the seller is able to pay some of the closing costs as well, uh, which is helpful sometimes, you know, especially as there’s more inventory guys, sellers will be more willing to negotiate.

That is one of the benefits of inventory. So the more inventory grows, the more opportunity there is for buyers, they get a little bit [00:42:00] more leverage than they used to have. So, um, the ability to have closing costs paid by the seller, something that could be negotiated in, and this program allows that as well.

Tim Ulbrich: and available in the lower 48. One of the reasons that we’ve, we’ve

Tony Umholtz: Yeah.

Tim Ulbrich: on, you know, you’ll find, you’ll find some regional products or state specific products, but, uh, any pharmacist listening that that’s a living in the lower 48, this is an option and we’ll link to this in the show notes. But if you go to yourfinancepharmacist.

com forward slash home dash loan. You’ll find all the information Tony just mentioned as well. Some other resources, uh, for, for those that are looking to purchase a home. Tony, I’m glad you mentioned the reserves as well, because when I think back to my journey of being a first time home buyer, or for that matter, even buying our second home, that’s a place where a lot of people can get stuck, right?

Which is, Hey, we’re, we’re working hard to come up with a down payment. Um, and now we got to have a certain amount that’s in reserves as well. And liquidity we know is just a difficult thing for a lot of [00:43:00] pharmacists that are in the first five or 10 years of their career. Um, just given that there’s other demands on, on income, they’re paying off student loan debt, they’re working towards other goals.

So that minimal reserve requirement can be an important aspect that I think we probably don’t talk enough about, uh, when, when you and I talk about the pharmacist home loan product. So thank you for the reminder on that one there. Let’s wrap up by talking about what really happens behind the scenes from hey, I’ve got my pre approval, I go out, I find the home, I’m working with the realtor, I make an offer, we’re under contract, walk us through what’s happening behind the scenes from I’m under contract, yeah.

Ultimately to closing, because I think this is, it feels probably for a lot of people, like a black box of all these things that are happening. You guys, I know are working really hard. People want to close on time. They want the process to move forward without bumps. Spoiler alert. It’s probably going to have some bumps along the way.

That’s just part of the process that, that happens, but [00:44:00] what happens behind the scene from, Hey, we’ve got an offer. We’re under contract all the way to we’re signing out of documents and we’re getting the keys.

Tony Umholtz: Yeah. Great questions, right? There’s a lot that goes on behind the scenes and everyone’s situations different. You know, it’s it’s really amazing how many different things can happen. But, um, so, so once you go to contract, once you’ve gotten your pre approval, you’ve gone to contract on a home. Yes, have, you know, part of the battle’s done, but there’s still a lot more left before you close.

And so most contracts have a timeline, right? Of let’s say it’s a 30 day contract. Okay. There’s typically a commitment letter deadline. So that’s when your financing contingency is, is up, so to speak. So what that means is like any earnest money you gave, let’s say you gave 5, 000 to secure the contract contract.

That money is basically non refundable if you get denied for [00:45:00] financing after the commitment letter deadline. So it’s very important you have a lender that can meet that deadline to minimize that risk. So that’s the first thing we look at, like, when is that deadline? When’s the appraisal contingency? And we work on those contingency basis.

I’m very fortunate here, and I’ve worked at two other lenders in my career. I’ve been at this bank now for over, a little over seven years now, I think. Yeah, over a little over seven and we have probably one of the best operational systems I’ve been a part of and And basically having my own team, it’s made it a lot easier for me.

And the reason I’m going to mention this is I’m going to speak to a couple of different systems of how lenders work, because I’ve worked at different systems and I’ve seen it firsthand. So the black box, so to speak, is once you go to contract, you send all your financials into the lender, everything starts, right?

Normally that loan originator will send the file to the [00:46:00] processor, the processor on my team. Um, I have two or three that work for my group will then submit the loan to the underwriter. Okay. And we have a fast track policy as well. So a lot of our products, we can have a loan commitment. If we have a full file within like 48 hours of receipt, it happens very, very fast.

And that’s one of our advantages is it is the speed that we can get that proof approval and meeting those criteria. And then from there, the appraisals ordered as well, generally takes a week or two to get that appraisal back, I find most areas a week or two, and that’ll meet that, you know, as long as that appraises, okay, then that meets the requirement.

Right. And the appraisals were reviewed to. So going back processor submits to underwriter, you get the approval. Okay. So the loan’s been approved, formally approved. There’s [00:47:00] generally conditions with that loan. So you’re going to have conditions that have to be collected from the borrower to get the final approval.

During that time, the appraisals ordered, right? Um, typically all your inspections are done with your real real estate agent, uh, ahead of time, you know, before you get this far during that time, but this is all being worked on the same time. So conditions, a lot of times it’s just how quick do they come back from the borrower generally takes a borrower.

A week or so, you know, to get it back to you, right? It’s not something that they’re going to just shoot right back to you. Some people do, but some people just take their time. Especially if our underwriting approval happened quickly, we’ll get those, those documents back. We’ll resubmit it for. you know, to get the final or formal, you know, to clear up any conditions right before closing.

And sometimes there’s more back and forth, depending on if those conditions didn’t quite fit the, the requirements. Okay. Appraisal comes back, appraisals [00:48:00] reviewed typically a week or so prior to closing. Our closer will work with the title agent or the closing attorney to get the correct paperwork for closing and the correct.

Uh, documents prepared, so they start doing it ahead of time to meet the new requirement. I say new, but several years ago, TRID became a requirement where a borrower had to acknowledge the closing statement at least three business days prior to closing. So that’s why you have to sign off on a primary home at least three days prior to closing.

And review all of review, all the, um, financials, and then you can close, you know, three business days later. So that, that is done at least a week ahead of time with the settlement agent. So meantime, most transactions go pretty smooth where, you know, there’s some complexity underwriting when you’re self employed, but [00:49:00] most clients have W2s pay steps comes in, we get it underwritten quickly and the appraisals ordered and. We work to the final loan approval closer, gets the paperwork out, then the client goes, signs on. The closing day loan is

Tim Ulbrich: Mm

Tony Umholtz: so that’s behind the scenes black box. Now there was a, there’s a, there can be some moving parts. So I worked at a larger bank prior to coming here, and there was some years I was their top producer in the country even.

And they were big. They’re very big. I’m not gonna name ’em, but they’re, they’re a bigger bank. And we used to have operations that I could somewhat control, meaning my processor, right, and my underwriter, I had a group that knew me, knew me, our system, my team, they basically centralized that,

Tim Ulbrich: Mm.

Tony Umholtz: where I lost complete control.

And it would, it would truly be, I wouldn’t know what’s going on, right? So I couldn’t update my clients. And

Tim Ulbrich: All the while they’re asking questions and yeah.

Tony Umholtz: And unfortunately, a lot of [00:50:00] banks work that way, even to this day, especially the larger ones, because it can be, they’re not as nimble to manage smaller teams like we are. So that is one thing you see out there is there’s still some of that out there where it’s call center driven.

It’s centralized. It’s hard to move quickly. It’s hard to communicate. And that’s where some of these problems can arise. And that’s why I do think it’s important to have that communication because things happen, there is things that happen, like even in the appraisal process, we had an appraiser couldn’t find comparables, they’re coming back to our team.

Those are the things that happen. They just are out of our, all of our control. There’s things with job movement. Um, people take new jobs and, you know, I’m dealing with one right now where The, the employment agreement got kicked back a few months, which that could, they still want to close early. And it’s, you know, there’s always complexity, right?

You just want to try to get answers quickly and communicate [00:51:00] quickly, but there’s a lot that goes on behind the scenes. There’s, I mean, I don’t know how much more depth you want, but I mean, there’s flood certifications that are run, right? During the process, we track, we track any inquiries on your credit to make sure you’re not borrowing other

Tim Ulbrich: Not, not a good time to be,

Tony Umholtz: Yeah. Lenders do that. We have to do that. So we track people to make sure that’s why I say don’t buy stuff while you’re going through the process, but you’re being tracked during process, making sure your credit’s not being utilized. Um, there, there’s a lot of things. There’s a survey that’s ordered.

Typically the title company will do that. But you’re getting a survey on the home, you have to get homeowner’s insurance. Um, but the lender is working through a lot of little details. We’re doing, we do fraud guard. There’s different things we do to, to ensure that there’s no fraud with any of the parties involved, uh, seller, title company, all of that.

A lot of things are screened now that they weren’t in the past, you know? So. There’s a lot that goes on, um, but [00:52:00] if you have a system, it can be done quickly. You know, if you have it, if you get the materials, I will say one more thing for the audience. The better you are at responding to the lender with the items they need quicker, the quicker the process and smoother it’ll go for you.

So whoever lender, no matter what lender you use. You choose to use if you respond quickly and you’re proactive and you get them what they need when they request it The process will go much much better for you

Tim Ulbrich: Well, I’m going to give a shout out to our audience there because I would contend that most pharmacists, maybe not all, but most pharmacists are pretty responsive and communicative in the process. And probably, not probably, I know why that for many people having that relationship would be so important for all the reasons that you mentioned.

Right. And there’s really two things that I heard there, one, you know, a team that is not Decentralized, you know, in terms of, or I guess centralized in the way that you described it, where you don’t [00:53:00] have access to them and, and kind of that black, black box becomes what we were talking about. Um, so having that access to a team where you can get that information quickly back to the client.

And then again, just that personal relationship, I think matters a lot. Call me old school, but it’s what I say on the business side all the time. We work in a local credit union here where. Whether it’s related to, you know, some of our checking accounts or a line of credit or whatever is the question, I know I can call Meredith if I have a question and maybe Meredith won’t always be the direct person that answers my question, but she can help me get in contact with whoever is and, you know, when someone knows that, hey, I can talk with Tony or I can talk with Cindy or I can talk with Aaron, like, and there’s a real person who understands my story.

Scenario all the more important when we’re talking about a highly emotional, large purchase with lots of moving pieces and parts in a very short period of time. Right. That’s a recipe for stress and I, and I think having the right people in your corner and having access to them and having good communication back [00:54:00] and forth can make this go as, as smooth as it, as it hopefully will, knowing that there might be some bumps along the way as well.

Tony Umholtz: Yeah Absolutely. I think you know, one of the things about this industry is There’s so many little details, right? Even like, how can I bump my credit score up 20 points? You know, having that ability to talk through that it’s, it’s complex. It’s not something, you know, I remember thinking one time, well, maybe AI will, we’ll take, take away our, a lot of our business.

Well, it’s funny, the AI things I sit in on, listen to, it’s all just making our business more efficient. There’s just too much complexities. Everyone’s so different. You can’t standardize it. Everyone’s got a different situation. So, um, the personal approach, I think is always going to be needed. There’s a lot of complexity in lending, a lot of things that you can’t just put in a box, but, um, there’s a system behind it.

And I do think from what, I think there’s so many more protections now. [00:55:00] For the, for the end user and the client than there ever has been. It’s really a, even though it is an intimidating process, it’s as safe as it’s ever been.

Tim Ulbrich: Tony, this is great stuff. And we covered a lot from pre approval to closing. And we have a great resource that I’ve referenced once. I’ll reference it again. We’ll link to in our show notes called five easy, five easy steps to get a home loan. Even if you don’t have 20 percent down, you can find that by going to yourfinancialpharmacist.

com forward slash home dash loan. It’s a great resource for homebuyers. In there, you’ll find some more information about the pharmacist home loan offering, recapping much of what Tony described on the show as well. And again, we’ll link to that in the show notes. So Tony, as always, really appreciate your perspective.

And thanks for taking time to come on the show.

Tony Umholtz: Thanks, Tim. Always good. Good hanging out with you, man. Thank you.

Tim Ulbrich: Appreciate it. Take care.

[END]

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YFP 398: Is Your Income Your Rate Limiting Step?

Posted on by YFP Media

In this episode, Tim Ulbrich, YFP CEO looks at three powerful areas for growing your income: maximizing your compensation, real estate investing, and building side hustles or businesses.

Episode Summary

While cutting expenses is a key part of managing your finances, there’s a limit to how much you can cut. The good news? Your income has no ceiling.

In this episode, Tim Ulbrich, YFP CEO looks at three powerful areas for growing your income: maximizing your compensation, real estate investing, and building side hustles or businesses. Tim shares some personal experiences and examples from other pharmacists who have successfully diversified their income streams and created financial opportunities that go beyond the traditional 9-to-5 grind.

Key Points from the Episode

[00:00] Introduction to Financial Freedom
[00:50] The Importance of Growing Your Income
[05:01] Maximizing Your Compensation
[09:12] Real Estate Investing
[13:50] Side Hustles and Business Income
[26:06] Leveraging Extra Income for Wealth Building
[28:20] Reflection and Conclusion

Episode Highlights

“ Opportunities exist all around us to grow our income. I didn’t say that it was easy and I didn’t say it wouldn’t come without failures along the way. I said that there were opportunities all around us. And that it has no limits.” – Tim Ulbrich [1:43]

“ Is my value being compensated appropriately? If so, great. If not, are you advocating for yourself? And if you’re not advocating for yourself, why not?” – Tim Ulbrich [5:25]

“ Not all side hustles and not all businesses are a good return on time investment, and especially in the case of a business, yes, there is more upside than a traditional W 2. But there’s also risk and we have to assess what that risk is.” – Tim Ulbrich [14:46]

“ Real wealth building potential happens when you take income from these streams and have that money growing and working for you.” – Tim Ulbrich [27:12]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: [00:00:00] Hey, everybody, Tim Ulbrich here. And welcome to this week’s episode of the YFP podcast, where we strive to inspire and encourage you on your path towards achieving financial freedom. Today, I’m diving deep into a fun topic for anyone looking to build wealth. And that is the role of growing your income.

While cutting expenses is a key part of managing your finances. There’s a limit to how much you can cut the good news. Income has no ceiling. In this episode, we’re going to look at three powerful areas for growing your income, maximizing your compensation, real estate, investing, and building a side hustle or business.

I’ll share some personal experiences and examples from other pharmacists who have successfully diversified their income streams and created financial opportunities that go beyond the traditional nine to five. So let’s dive in to this week’s episode.

Hey guys, welcome to this week’s episode. I’m excited to jump in. As we talk about how your income just might be [00:01:00] the rate limiting step of your financial plan. When we talk about achieving our longterm financial goals, whether that’s building wealth, having more funds to invest in experiences. Whether that’s giving all of the above, it comes down to having cashflow to achieve those goals and cutting expenses.

We’ve talked about that many times on this show before it plays an important role, make no mistake, but at some point in time. You can only cut so much. And so we want to spend some time looking at the other side of the coin, which is growing your income and what potential that might provide when it comes to the financial plan.

So what if we shifted our focus more to the income side of the equation? Because opportunities exist all around us to grow our income. I didn’t say that it was easy and I didn’t say it wouldn’t come without failures along the way. I said that there were opportunities all around us. And that it has no limits.

And this is a big mindset shift [00:02:00] for many of us. That grew up in a profession where there was a ceiling, at least one that we put in our own minds on how much we would earn with the degree that we had. Many of us went through school and we came out with this story. I’m set or unsaid that, Hey, when you graduate, you’re going to make a good six figure income.

And objectively speaking, pharmacists do make a good six figure income. But because of that mindset, we often get uncomfortable. If we think about income growing beyond that number. The idea that it could be more, maybe double or triple that. It’s scary because it butts up against what we have known and what we have believed, right?

It butts up against our experiences. Now, my experience tells me. In my own situation and working with many other pharmacists that if we have a solid financial base and foundation to work from, the more opportunities that we actually start to see, [00:03:00] perhaps they’ve been there all along, but the more aware we are, because we’re now in a position and a mindset that we can entertain the idea of taking calculated risks.

Because when we have that strong foundation, we shift our mindset from a scarcity mindset to an abundance mindset. And we begin to see the opportunities for how we can not only grow our income, but how we can leverage that income growth to other parts of the financial plan. So the question is what opportunities exist?

To earn more income. Tell me more, Tim, what opportunities exist to earn more income. And I’ll speak from experience of those that I have, uh, have run across my own financial plan and those that I’ve come across in interviewing other pharmacists on this show, certainly it’s not meant to be an all inclusive list.

And if you have other ideas, whether you’re employing them in your own financial plan, or, you know, of others. That are leveraging strategies to grow their income and expand their income to accelerate their financial plan. [00:04:00] Send us an email at info at your financial pharmacist. com. We’d love to hear about it and be able to address those on an upcoming episode.

Now, before we jump in, I am not going to spend time on the one income growing idea that perhaps is the most obvious, right? Which is picking up. One of the blessings that we have in our profession is that we can, in many cases, pick up extra shifts, either at our employer or at another employer, at a really good hourly wage, that those additional dollars could be put to work in the financial plan.

So, if that’s available to you, and you’re interested in doing that work, that just might be the path of lease resistance. So I’m not going to focus on that, but I am going to focus on three other buckets of which I can, I think you can grow your income, maximizing your compensation, real estate, investing, and generating income through a side hustle or a business.

And again, I’ll feature several examples of [00:05:00] pharmacists all along the way. So let’s start with number one, which is your compensation. Right. Let’s address what you already have available to you to see if we can maximize that further. See if we can squeeze out more from our compensation while we also explore other strategies.

So if you are working a W 2 job, I want you to ask yourself this question. Is my value being compensated appropriately? Is my value being compensated appropriately? If so, great. If not Are you advocating for yourself? And if you’re not advocating for yourself, why not? Is there a potential for a raise within your organization and negotiating that raise or perhaps a, a new position externally that could give a boost to your income?

And now we all know from experience that when it comes to satisfaction in the workplace, it’s not just about the income. So I don’t want you to lose sight of those other factors, but if your value is not compensated appropriately, is there an [00:06:00] opportunity internally or externally? That we could pursue to grow that top number.

Now, my experience tells me that making a transition from one employer to another is a good opportunity. It’s a good time to right size compensation and negotiate. If you have the leverage to do so now, of course, if there’s an opportunity within an organization, and that is one that you already like working for that organization, we want to pursue that first, but if not, perhaps a transition.

Can afford us an opportunity to grow our income. Let me give you an example. In 2018, I made the transition from an academic role at Northeast Ohio medical university to one at Ohio state. In addition to having my partner, Tim Baker, certified financial planner in my corner, who’s an expert in negotiation, and he was able to coach me through that process.

In addition to that resource, there was one thing in particular. That allowed me to jump [00:07:00] my compensation by more than 30, 000 per year during the transition. And that one key ingredient that I believe is a really important ingredient when it comes to negotiation is that I had leverage. Now that’s not a bad word.

That’s not a greedy word. It’s a fact when you look at the negotiation process, do you have leverage or do you not have leverage? It’s an important self assessment. And the reason I had leverage is that I didn’t have an urgency. To make that move. And I applied for the position with a mindset that, Hey, if it works out great, if it doesn’t, that’s okay too.

And that really led me to approach the interview with an abundance mindset. I was able to cast a bold vision for the position that I was interviewing for. And I was able to do that, knowing that that vision was either going to be a home run, or it was going to be a strikeout. And because I love the work that I was doing at Northeast Ohio Medical University.

I like my colleagues. I was [00:08:00] afforded great opportunities there. I was curious about this new position, but it wasn’t a must have. And that leverage really helped me throughout the negotiation process. So back to the question, whether it’s an internal negotiation or an external negotiation, is your value being compensated appropriately?

Yes. Ideally your income is outpatient inflation, but asking for a raise for inflation sake, isn’t going to get you very far in the longterm. Rather, we need to focus on value, value that you bring to the employer and ensuring that that value is fairly compensated. And the key word here in the negotiation is fair.

If we’re talking about value and fair compensation, we’re now in an environment that allow us for hopefully a successful. Negotiation. If you’re curious to learn more about negotiation strategies, Tim Baker, and I talked about this several times in the podcast, but most recently on episode three 84, where we talked about beyond [00:09:00] salary negotiation, looking at your value in the workplace, so make sure to check out.

That episode that’s area number one, as we look at how we can potentially grow our income. And there we’re talking about compensation. Area number two is real estate investing, real estate investing. Now, outside of investing in the purchase of our office building for your financial pharmacist and doing some more passive hard money lending.

I’ll talk about that more here in a moment. I don’t necessarily consider myself to be a big real estate investor. It’s an area that I value as a diversified part of the financial plan. It’s one that I want to continue to grow as a part of our own financial plan, but I don’t consider myself a big real estate investor or pro in this area, but we have some great resources available through our community.

And those have been led by David Bright and Nate Hedrick, who are the co hosts of the YFP Real Estate Investing Podcast. They put out some great content sharing, not only their own investing journeys, but also [00:10:00] featuring other pharmacists that are doing real estate investing in all different types of way across the country.

So make sure to check out that resource. That said. While I don’t consider myself to be a big real estate investor, I do personally know many pharmacists in our community that have been successful in this space and they’ve done it in a lot of different ways. And one of the cool things about real estate is that it comes in many different forms and flavors that depending on your risk tolerance, depending, uh, depending on what level of involvement, how hands on you do or don’t want to be, some opportunities may be more interesting than others.

And many of you are likely already real estate investors and perhaps aren’t even aware of it. I’m talking about investing in REITs, what are known as real estate investment trust, which just might already be in your asset allocation inside of your 401k or inside of your 403b as one example. And what is a REIT?

Well, instead of owning and holding a property, a REIT or a real estate investment trust [00:11:00] is an investment in a company that pools money together to own or finance a real estate portfolio. So it’s one way that you can diversify your portfolio and get invested in real estate without owning the physical property and managing that yourself.

So what are the different types of real estate investing that are out there? Probably what comes to mind for many people, what I consider kind of the traditional real estate investing approach is what I call a buy and hold. So you buy a property, perhaps it’s, it’s undervalued. Maybe you do a little bit of fix up for the property.

Hopefully you have a long term tenant. If not, you’re dealing with vacancy and turnover and you’re, you’re charging a monthly rent that that’s. Ideally, positive cash flow and you have that for a long period of time and you can replicate that process potentially over and over again. So that, that’s a more traditional, a more active approach, depending on if you have a property manager, if you’re doing it yourself, that would be a buy and hold.

But there’s lots of other ways. There’s short and midterm rental. So think Airbnb. Right. There’s fix [00:12:00] and flips think, uh, HGTV fixer upper. So these are properties where again, uh, a property that often might be undervalued need significant repair work. You buy it at that lower rate, you fix it up. And ideally you set, you sell it for a profit.

There’s many other considerations to be thinking about there, but that that’s essentially the idea. There’s things that are more passive, like syndications and hard money lending, where you’re serving essentially as being the bank for other people that are doing. Real estate investing. There’s commercial real estate investing.

There’s house hacking where you’re living in a property while renting out a portion of the property to one or more individuals. Heck you can even buy a motel Schitt’s Creek style and turn that into an investment property, similar to what Stewart and Elizabeth only did as they shared on episode. 46 of the YFP real estate investing podcast.

We’ll link to that episode in the show notes. So there’s lots of different flavors of real estate investing, and it’s certainly not for everyone, but it can [00:13:00] provide some very tangible benefits. Including rental income or cashflow appreciation of that property over time where that equity could be leveraged There’s tax benefits and certainly for those that are thinking potentially something like an early retirement We can liquidate some of these properties as one avenue of creating some of that cash flow before we pull on other Investment accounts that might be tied up to that 59 and a half age that we think about with things like a 401k or an IRA.

Lots to think about there. Make sure you check out a real estate investment investment podcast shows. If you’re not already familiar with those, and I think you’ll find those inspiring, informational, and just give you ideas of how real estate investing may or may not fit in with your financial plan. So that’s number two, is we look at three different categories of how you can potentially grow your income.

The third one that I want to talk about. Is side hustle or business income. Now, these are very different, right? If someone owns a business and they operate a [00:14:00] business and that’s, that’s their full time thing versus side hustle. When we think about traditionally, you’re working a full time or part time job in addition to doing the side hustle.

But because many side hustles can become a business, I’m going to group these two things. Uh, together now, I think it’s important to know, right? There’s, there’s risk in lots of the different things that we’re talking about more so with the business and the side hustle, but because side hustles and entrepreneurship have become all the rage over the last decade or so, and, and I’m, I’m all in for a good side hustle or a business, but not all side hustles and not all businesses are a good return on time investment, and especially in the case of a business, yes, there is more upside than a traditional W 2.

But there’s also risk and we have to assess what that risk is. And when it comes to growing your income through a side hustle or business, this could be pharmacy related, or as you’ll see with a couple of examples, as I get towards the end, it might be not pharmacy related, especially if you have a creative outlet or hobby or [00:15:00] skill that is independent of your role or skills as a pharmacist.

So let’s look at a few examples of pharmacists. That have experience building a side hustle or a business. And I’m going to group these into different categories just to get the ideas flowing as you think about your own financial plan, the number one category and no particular order is medical writing.

I see a lot of pharmacists that are interested in doing medical writing. Yes. You can be a contractor. To do medical writing so this could be a side hustle or you could build and own your own medical writing business So I think about individuals like britney hoffman eubanks who we had on episode 126 that has her own medical writing business banner medical I think about megan freeland who was on episode 259 where we talked about building her medical writing business while she was also working Full time job.

I think about Austin Ulrich who was on the podcast who talked about Going on his own as an as an entrepreneur to build a a medical writing business and how he’s able to do that

I think [00:16:00] about Warda Nawaz who talked about in episode 280, how she was able to pivot to a writing career. Lots of cool examples of pharmacists that are dabbling in this from a side hustle as a contractor to building their own medical writing business. Another bucket I would consider here is clinical consulting, right?

In days gone by, this would be performing things like medication therapy management services for a local pharmacy or independent pharmacy in modern day. This would be doing things like virtual medication therapy management or comprehensive medication reviews through companies like Aspen RX Health. So there are opportunities to pick up extra hours, earn some additional income, applying skills that maybe you’re using in your everyday job, or perhaps is tapping into a different part that you’re not using.

Every day in your work, there’s opportunities in speaking lots of pharmacists. I know that are getting paid for speaking Now this can be a grind when you think about the travel if it’s in person speaking Um, sometimes the the money may not be as [00:17:00] as good as it you want Depending on what type of speaking you’re doing, what your audience is.

I know several pharmacists that have made additional income predominantly as a side hustle, this certainly could build into a career. One I think about in particular would be Corey Jenks. We’ve had on the podcast most recently on episode three 62, uh, talking about fatherhood, family, and fire. If you’re not familiar with Corey, he’s written a couple of books and.

On that episode, we got to talk about his book on fatherhood. He’s a comedian and he just has a great speaking package and keynote that brings his healthcare experience, formerly working with the VA now working for a different employer, but. Pairing that health care experience with his passion and love for comedy and bringing that in a way that helps Clinicians pharmacists and other health care professionals be more compassionate And light hearted and how they approach those interactions with patients and he gets paid For the speaking that he does and his book led to his speaking his speaking helped further his book sales So [00:18:00] that’s one example that I would throw out there The next bucket that I would bring forward is what I’m calling content creation or online courses or communities where people are monetizing their clinical expertise.

So they built a brand, they have an area of clinical specialty and expertise, and they’ve been able to monetize that in different ways. Several individuals here. That are worth highlighting one, Jamie Wilkie. We had her on, on a couple episodes of the podcast, most recently on three 59. Again, we’ll link to all these in the show notes.

She first built a pharmacogenetics, uh, course in community. She worked for a while in retail pharmacy, left that work, built her own, uh, course and community has now built a brand under the misfit farm D where she’s helping to. coach pharmacists that are looking at career transitions and how they can take the skills that they have and be able to apply those skills to perhaps a different work scenario and employment setting than the one that they’re in now.

So if you’re not already following her on LinkedIn, I would, I would encourage you to [00:19:00] check her out. She’s got great content. I think about individuals like Blair Teelmeyer. Who built the pharmapreneur Academy. And she took a difficult situation of finding herself unemployed to starting her own business and became really a thought leader in our profession, not only through that Academy, but through her personal brand, that is a lead to additional consulting opportunities for her as well.

She wrote a book as well, early in her journey. Uh, so, so lots of pieces to consider here. I think about Tim Gauthier, who’s an ID clinical specialist that we had on the podcast a couple of years ago, who has built. His has taken his clinical expertise to build and monetize, uh, an online community and paid courses.

He has a social following that he built early on in Twitter and now X all focused around ID stewardship. So it’s a work that he’s doing day in and day out, and he’s able to then package that and build a brand around being the leading expert in ID stewardship for pharmacists. I think about individuals like Jimmy Pruitt, [00:20:00] who’s worked full time in an ED pharmacy and has built, started with a podcast.

He’s got an online community and resource. He’s got now an in person, uh, live event for emergency pharmacists and other healthcare professionals. Uh, built that while working full time as an emergency clinical specialist. Again, taking the work that’s being done every day and using it to monetize that clinical expertise and be able to reach a broader group.

I also think about individuals like Kelly Carlstrom, the founder of Kelly C Farm D, who’s a PGY 2 trained oncology he monk specialist that said, Hey, why isn’t this information more readily available outside of large academic medical centers and PGY 2 trained programs? And clinical specialists. And so she built an online community and resources where pharmacists all over the country could have access to that type of information to grow their clinical skills so they could better serve their practice sites and their patients.

Lots of cool examples of pharmacists that are creating courses, communities, [00:21:00] content, finding monetize their clinical expertise. Another bucket would be being an adjunct professor or teacher. I know several pharmacists that work full time but then they adjunct teach at a, could be a college of pharmacy, could be a college of medicine, uh, could be with a nursing program, could be with another healthcare profession that has a pharmacology course, could be in person, could be virtual, online courses, lots of different ways to get involved and to be able to again tap into a different area of your skills.

And earn some additional income. Another area would be an expert witness in episode 112 of the podcast A phd trained pharmacist brent roland shared his story about becoming a pharmacy expert witness for law firms Primarily focusing on marketing cases in addition to standard of care cases And he was able to get this experience while he was in school with his professor Asking for help on a big case.

That’s where he got started and then he continued to receive Casework from there. Many criminal [00:22:00] and civil cases involve medications, involve toxicology, involve quality of care and negligence. All areas where pharmacists are positioned well to provide their expert, uh, opinion and, uh, potentially some expert witness and testimony.

Another area would be consulting. Lots of pharmacists that are doing consulting. I think about individuals like Jill Pallier, who has a background in patient safety, uh, who’s built a specialty practice and has really paired those skills to be able to build a consulting business. I think about individuals like Brooke Griffin, who we had on episode 379 of the podcast, where she talked about her journey, building the business, the bold idea group.

Where she’s a full time academician at Midwestern and was able to build this coaching business while she was and continues to work full time in academia. I think of another category, which would be software or app based businesses. So Derek Borkowski who built pearls, if you’re not already familiar with pearls, I hope you’ll check it out.

[00:23:00] Great drug information resource. When I was in pharmacy school, we had a very antiquated version of micrometics and Lexicom. This is a much more user friendly modern version of those tools. I often joke with Derek, I wish I had this tool and resource available to me when I was in pharmacy school and residency.

And we had Derek on episode 243 where he talked about his non traditional career path, going from a community pharmacy to becoming a software engineer, and then ultimately building his business at Pearls. Other software app based business, I think about PharmaSol and Natalie Parker, graduate of Ohio State, who built PharmaSol with her co founder from MIT.

And PharmaSol is a company that streamlines pharmacy communications with advanced AI. And helps to automate calls and messages with patients, providers, and payers. Really cool example of someone that took their interest with AI and technology and paired it with their background in pharmacy. Another category I think about would be developing a physical product based business.

Now this can come with high risk and [00:24:00] high reward, right? There often is some, some higher, uh, equipment and costs to get started when you talk about a product based business, but two in particular stand out for me, one that’s pharmacy related, one non pharmacy related. One would be Alison Brennan, who we had on episode 180 of the podcast, where we talked about her journey, where she used her pharmacy skills to start her skincare company called Emma Gene Co.

And she started the skincare company out of her house while she was working full time and then eventually part time as a hospital administrator. Eventually she left that work to work full time on the skincare business. Now has her own team, has a warehouse, business is doing really well. Really cool example of a product based business.

The other one I think about here would be Prickly. Prickly is a cactus, uh, base, uh, beverage company. And a shout out to Quan Yang and his team and his co founder Mo who have built Prickly. We had Quan on episode 289, talking about how they built that. What was the vision behind it? Why did they do it? Uh, [00:25:00] really cool example of a pharmacist that appeared on Shark Tank and was able to leverage their entrepreneurial interest to build a product, uh, in what is a very competitive market, right?

The beverage industry. And last, but certainly not least, I think about some of the non pharmacy Uh entrepreneurs that are out there or the side hustlers that are out there as well Individuals like landon connor who’s a pharmacist who has a passion for photography and has built a successful photography business I think about pharmacist stephanie roberts who built an apothecary art business.

I think about pharmacist rosie chun who built a calligraphy Artist business successful business out in California that does a lot of events and high end calligraphy work for celebrities and Corporations again several different ways. There is no one right way, right? The purpose of me sharing these was to give you some examples and hopefully spark some creativity ideas of pharmacists That yes many of who have stayed in their pharmacy careers But are also building some really [00:26:00] cool things on the side or eventually some of those Were were evolved into a business

now here’s the kicker when it comes to earning additional income, whatever avenue that might be, whether it’s growing our compensation, perhaps generating income through real estate investing, whether passive or active or generating income through a side hustle or business that extra income while it’s nice, and we can apply it towards certain goal, that extra income itself.

Is not where the real wealth building potential happens, right? Let me give you an example. If, if you were to take an extra 10, 000 that you earn and you apply it towards a, let’s just say a student loan debt payment, that’s at 6%, and there’s certainly a time and place for that. So don’t, don’t mishear me on this, but in that instance.

The value of that extra 10, 000 is limited, although valuable, limited to paying down that debt by 10, 000 and any of the interest that we would save that would have otherwise accumulated, but over time is we’re able to build a [00:27:00] strong financial foundation. If we can turn that extra income into assets that will produce further income and hopefully do so at a rate that compounds over time, that’s where we really start to see the money.

Working for us. Real wealth building potential happens when you take income from these streams and have that money growing and working for you. So what does that look like? Again, lots of ways that you can do this, but for me, it has included turning extra income from different sources into more traditional compounding assets, right?

Like equities inside of a 401k or four or three B IRA, HRA, HSA, taking that income and investing it as a hard money lender for others that are doing real estate investing, taking that extra income and purchasing a cash flowing. Appreciating property, taking that income and building equity and another business.

taking that income and investing in other businesses and taking [00:28:00] that income and growing an existing business, therefore increasing the value or the equity of that business over time. Those examples I think are really where you start to see the flywheel of how that income and taking off the ceiling of your income, how that income can be leveraged.

Towards that longer term plan to building wealth. So as we wrap up, let me leave you with a few questions of reflection. As you think about how to apply this in your own financial plan. Number one, do you believe that the income that you have and your potential of income for the most part is fixed? If so, why is that the case?

Where does that mindset come from? I think it’s really important to explore that. Second question. If you work for a traditional W 2 job, are you being compensated fairly for the value that you’re bringing? If not, what has been holding you back from asking and negotiating additional compensation? And number three, what opportunities [00:29:00] are there for building wealth?

Investing in experiences and giving beyond those that I mentioned throughout this episode. And if you have an idea, as I mentioned at the beginning of something you’re doing or something, you know, someone else is doing, send us an email at info. At your financial pharmacist. com. Thank you so much for listening to this week’s episode of the podcast.

If you like what you heard, do us a favor, leave us a rating and review on Apple podcasts, which will help other pharmacists find the show. And finally, an important reminder that the content in the podcast is provided for informational purposes only, and is not intended to provide and should not be relying on for investment or any other advice for more information on this.

You can visit your financial pharmacist. com forward slash disclaimer. Thanks so much for listening. Have a great rest of your week.

[END]

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YFP 397: The Art of Rebalancing: Maintaining Your Investment Portfolio

Posted on by YFP Media

Tim Baker, CFP®, RICP®, RLP® and Tim Ulbrich, PharmD discuss the importance of maintaining a balanced asset allocation, the nuances of risk tolerance and capacity, and the different accounts you should be rebalancing.

Brought to you by First Horizon.

Episode Summary

In this episode, Tim Baker, CFP®, RICP®, RLP®, and Tim Ulbrich, PharmD, explore the essentials of rebalancing your investment portfolio.

Tim and Tim discuss asset allocation, risk tolerance, and key accounts to rebalance. They also highlight common mistakes and effective rebalancing strategies for long-term investment success.

Key Points from the Episode

[00:16] Introduction to Rebalancing Your Investment Portfolio
[01:34] Defining Asset Allocation and Rebalancing
[02:43] The Importance of Rebalancing
[04:37] Accounts to Consider for Rebalancing
[09:23] Risk Tolerance vs. Risk Capacity
[17:44] Common Mistakes in Rebalancing
[22:43] Timing Your Rebalancing
[25:38] Conclusion and Financial Planning Services

Episode Highlights

“ What we’re really talking about here is like maintaining the amount of risk that you feel comfortable with.” – Tim Baker [1:04]

“ Rebalancing is the process of realigning the asset allocation of your investments to maintain whatever your desired level of risk is.” – Tim Baker [2:30]

“ But the question behind that is like, Where are we going with these investment accounts? What’s the overarching goal? What’s the target amount that we’re trying to achieve?” – Tim Ulbrich [7:06]

“ The longer time horizon that you have, the more capacity that you have to take risk because the more likely that that portfolio can recover over those 30 years.” – Tim Baker [11:06]

“ Risk tolerance is what you want to take. That’s kind of your emotional response. The risk capacity is what you should or need to take.” – Tim Baker [11:54]

Links Mentioned in Today’s Episode

Episode Transcript

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

Tim Baker: Good to be back with what’s new, Tim.

Tim Ulbrich: I think this is back to back, right? It’s been a while, uh, since we’ve done a back to back. So last week we talked about couples working together with their finances, certainly a relevant and important topic. And today we’re going to go pretty narrow and pretty nerdy.

Uh, as we talk about rebalancing your investment portfolio and Tim, let me start with that. We talk a lot [00:03:00] about. our savings rate and how much we’re going to save and how much we need to save for retirement. And sometimes what we lose in that conversation, certainly not with clients when our team’s doing this one on one, but maybe in a broader education sense is how we actually allocate those assets.

Where, where do those dollars go? And then what do we do when that asset allocation perhaps get it out of whack over time, which is our topic, uh, with rebalancing. So I think, I think naturally there can be a focus on the accumulation, but we might lose some of those details along the way.

Tim Baker: Yeah. I mean, it’s an important thing to consider because what we’re really talking about here is like maintaining the amount of risk that you feel comfortable with, with, and for a lot of people are like, I don’t even know what you’re talking about. So I’m just putting in a target date fund. Um, so if you’re in a target date fund, Um, you know, primarily this episode won’t apply to you, but if you’re kind of pulling the strings and want a little bit more precision, um, want to pay a little bit less, that’s one of the, the, the, the beast that I have with target a fund, this’ll [00:04:00] be an episode to kind of tune in and, and, and listen to in terms of, you know, at least how we approach it.

Tim Ulbrich: So let’s start with just defining rebalancing and maybe at the same time, define asset allocation, because those are going to go hand in hand.

Tim Baker: Yeah, so asset allocation is really just the percentages between stocks and bonds, um, at a high level. Um, so. Um, you know, if you’re, if you’re in, say, an 80 20, um, portfolio, that means 80 percent is in stock. So you think traditionally more exponential growth, um, you know, more, more stocks and an accumulation phase.

And then bonds are, I, we typically explain as more like linear growth, which is where you’re, you know, it’s fixed income, you’re, you’re being set, you know, being paid, um, you know, interest and those types of things. So typically the higher the bonds, the more risk. Um, avoidant you are. Um, and typically this is for people that are approaching retirement or in retirement.

So the percentage of stocks and bonds is really what we’re talking about with [00:05:00] that asset allocation. Rebalancing is the process of realigning the asset allocation of your investments to maintain whatever your desired level of risk is. And, you know, return. So over time, Tim, Tim. The market fluctuates, obviously it goes up and down and certain investments may grow faster than others.

So this causes your portfolio to drift from its original target allocation. So give me an example. Let’s say your target allocation is fairly conservative. It’s 6040. So 60 percent in stocks and 40 percent in bonds, a strong stock market, which we’ve been experiencing lately, um, over the last couple of years, although volatile could shift that to a 7030.

Um, ratio. So if you’re in a buy and hold strategy, which is basically you, you buy and set it and forget it, you’re going to continue to drift 20, um, which, which ultimately increases your portfolio’s risk. So what rebalancing [00:06:00] basically involves is selling some of the stocks and buy in bonds to return it back to that original 60, 40.

So basically. You know, you sign up for a certain amount of risk, you know, whether you’re working with advisor or just in your own mind and as the market does what it does the You know the percentages shift and you just want to basically reset that so In the event, you know, I always kind of think about in the event of um, you know the market taking a significant downturn Um, you’re protected as much as you can be with the the percentages that you signed up for.

Tim Ulbrich: Yeah. And for the DIYers out there, right? This is something they have to keep on, on their radar to come back to at some frequency. You know what, whatever that might be determined, or of course, we’re big advocates of, Hey, this is one of the many things that a financial planner can help you with. Like, I, I selfishly know that, hey, I’ve got Kim, uh, on our side, you know, in our corner, one of our CFPs, that like, I’m not thinking about risk.

You know, I’m not thinking about the rebalancing, you know, of course we’re constantly re [00:07:00] evaluating what are the goals, what’s the risk tolerance, what’s the risk capacity, but that aspect’s being taken care of as naturally market fluctuations will happen. So Tim, what accounts should people be thinking about here with rebalancing?

You know, perhaps the obvious people are thinking, Oh yeah, my 401k, but it’s, it’s bigger than that. Right,

Tim Baker: Yeah, it’s pretty much all of your investment accounts. So, um You know, IRAs, HSAs, if you’re invested in your HSA, 401ks, 403bs, TSPs, brokerage accounts, um, you know, and, and, and to kind of drill down a little bit more, Tim, it’s not just like. You know, stocks and bonds. You, if you look in the equity side of your portfolio, you know, it could be that small, small cap has performed, you know, outperformed.

So, you know, we have to sell some off the, some of the small part, a small cap to maybe redeploy that to a merging market or an international exposure. So, um, but it really is anything that you have. You know, investments, right? Which could be IRAs, HSAs, [00:08:00] 401ks, brokerage account. Um, these are the, these are the accounts that you want to pay the most attention to.

Now, I would say that 401ks, Are typically less, there’s a less of a need to rebalance a 401k. And the reason for that is typically 401ks are contributing to every pay cycle. So if you get paid 24 times a year, every time some of your paycheck goes in, it’s almost like a natural rebalance, right? There’s still some drift there.

And it’s still important to look at this because oftentimes this is the biggest asset that many of us have outside of maybe a home. Um, so it’s a big asset on the, on the balance sheet that needs attention, but, but oftentimes you kind of have that natural rebalance because of how regular the contributions are made into your 401k.

Tim Ulbrich: And I would add to this, you know, you mentioned kind of the, the various accounts, right? So 401ks, IRAs, [00:09:00] TSBs, 403Bs, HSAs, 529s would fall in there, right? As well. If we’re,

Tim Baker: Yeah, 457s. Yep, exactly right.

Tim Ulbrich: I think too. It’s worth mentioning this. I’m thinking of the DIY or in particular where, where I often see this overlooked him that there’s a question behind this question that we can’t overlook.

Right? So the question we’re addressing is what is rebalancing? And we’ll talk some about the strategies, what accounts need rebalancing and ultimately how does that connect and relate to your risk tolerance and capacity, all important stuff. But the question behind that is like, Where are we going with these investment accounts?

What’s the overarching goal? What’s the target amount that we’re trying to achieve? And how are we balancing that with all these different goals? Once those decisions are made in those conversations happen, then within that, we can begin to think about, okay, how do we make sure we rebalance and keep on track with the plan that we set?

Tim Baker: Yeah, if you’re, [00:10:00] if you’re looking at a checklist of reviewing your financial plan. You know, this is probably item number

Tim Ulbrich: Right.

Tim Baker: and all of the other things, you know, that are going to be important of like, Hey, where are we at? Where are we going? What’s the purpose of this are the things that we talked about, you know, last year, the year before still important.

So, I, I think this is very much the technical after all of those really value based conversations and questions are answered, but it’s important all the same. Right? So I think that. You know, um, And this changes, right? So, so what, what your, there’s so many people are like, ah, like nothing’s going on. Like I got this, but I always like do the thought experiment is like, you know, even for us, Tim, if we look back at like two years ago, how much things have changed over these last two years.

And I think as humans, we, we think. We kind of, we kind of lose sight of that and we think that the next two years are not going to be, [00:11:00] you know, kind of laissez faire type of thing. So I think, I think, yeah, the, this is, this is a, an item on a long list of things that need to be answered. And I think it’s just important to ask that question, um, kind of do that mental azimuth of like, is this still kind of serving me and what I’m trying to accomplish with my financial plan?

Tim Ulbrich: Yeah. And I want to make sure to say that out loud and we don’t miss that because, you know, the thought that was coming to mind, Tim, that stimulated that, that comment was there’s a lot of work that has to be done to determine what percentage of our income are we saving and why are we saving it? And then within that conversation, what vehicles are we going to use?

And then within that conversation, there’s the risk tolerance, risk capacity rebalancing. So making sure we just don’t get lost in the weeds, right? Especially for people that are, that are DIY in this. Um, let’s talk. I keep throwing around these terms, risk tolerance, risk capacity, but so important, right?

Because that ultimately is going to inform What is your [00:12:00] asset allocation, which will then inform, what are we going to do with the rebalance? So talk to us about risk, tolerance, risk capacity, and then even a, uh, peek behind the curtain for those that are financial planning clients, how we handle this through something like an investment policy statement.

Tim Baker: Yeah. So the way that I simply put risk tolerance versus capacity, risk capacity is risk tolerance is a risk that you want to take. The risk capacity is the risk that you should or need to take. So I’ll give you an example, you know, I could be a 35 year old pharmacist and I, I could be very risk adverse, right?

So when I take a questionnaire about how I view my investments and how I view about money, I’m like, I just want to keep, you know, I don’t want to lose anything. I just want to, you know, I’m, I’m much more comfortable putting everything into a high yield savings account and, and, and doing my thing there.

The problem is, is because we know about things with inflation and. [00:13:00] Um, uh, taxes that we have to do more than the 3 percent or whatever high yield savings accounts paying these days. Like, we have to outpace inflation. We have to outpace. Um, if you’re 35 or 40 years old or younger, or even a little bit older than that, you have more capacity.

Take risk. If we’re thinking about it in terms of retirement planning, because I might have 30 years To invest. And the idea is that the longer time horizon that you have, the more capacity that you have to take risk because the more likely that that portfolio can recover over those 30 years. So as you get closer, I could be the most, you know, so I’m, I pretty much like pretty aggressive with my investments, but once I get to, if I’m going to retire at 65, once I get to 55 or 60.

I don’t have the capacity to take the [00:14:00] risk because my time is so short. So even though I’m aggressive, you know, I need to know I, in the back of my mind, I’m, I’m fighting what’s called sequence of return risk, where if my, if I’m 58 and I’m trying to retire at 60 and I’m super aggressive. And my portfolio, you know, drops by a third.

It’s hard for me to recover in a 22 year period. So risk tolerance is what you want to take. That’s kind of your emotional response. The risk capacity is what you should or need to take. And sometimes if you’re 50 years old, 60 years old, and you’re trying to retire in the next 5 or 10 years and you haven’t done much.

Your risk, you have, you know, you have to take more risk because you have no choice or you’re going to just be working forever. So there’s, there’s this Venn diagram, Tim, of what we kind of look at your risk tolerance, which is typically a result of a questionnaire that we do. And then we overlay the demographic of how much you have saved, what your age is, what’s your time horizon.

And we come to that asset allocation [00:15:00] of, you know, the magic percentage of stocks to bonds. And then to kind of answer your question, what we typically do, um, at YFP is we just have a one page document. We call this the investment policy statement. This is kind of our North Star of how we’re going to manage your investments, both the ones that we are managing at our custodian directly, but also held away investments, which are typically 401ks or 403bs that you’re contributing directly, you know, cause you’re still employed.

Um, so that investment policy statement is kind of like our instruction manual of how we’re going to, you know, what the asset allocation is, how we’re going to rebalance. You know, the, how you, how you have visibility yet that you’ll receive statements and all that kind of stuff. So it’s really kind of a, a, um, North star of how we’re going to handle the investments that gives us kind of a, a scalable way to manage millions of dollars for our clients, but also for the client to understand, okay, this is what the [00:16:00] team at YFP, this is how they’re, they’re handling, you know, my long term investments, et cetera.

Tim Ulbrich: Yeah, and I think that helps people, especially if they’re new to that relationship, feel comfortable, like, hey, we’ve been through the evaluation of risk process. We’ve agreed upon these set of terms, but I’m also, in part, delegating. This work to the team I hired, but I’m delegating this work to the team that I hired within the sandbox we’ve agreed upon.

Um, which I think is, is really important. And I love your visual, the Venn diagram, right? Because I think it encompasses when we talk about risk capacity, risk tolerance. Yes. We’re thinking about the emotional part, how much risk can I stomach, but we’re also considering how much risk do I need to take Based on all these goals.

And that’s where a third party can really have a valuable role of like, let’s talk about both of those things and where there may be differences. Let’s have a conversation and kind of figure out what gives, right? Are we willing to push ourselves maybe a little bit in a direction that we weren’t thinking, or are we willing to adjust the goals?

Oh, [00:17:00] 2 people doing this partner spouses, thinking of others, you might have 2 different. Risk tolerances and risk capacities that you’re dealing with and to have those conversations can be really valuable.

Tim Baker: Yeah. And I think one of the things that I, you know, ultimately say, you know, when I was working with clients back in the day is at the end of the day, it’s your financial plan. So even though I might reckon, you know, you might come in at a seven 30, a 70 30, and I think that you can be more aggressive, you know, 90, 10, or even a hundred zero, you know, all equity portfolio.

I’ve had some clients will say, like, let’s start at 80 20. And then I just say, like, I’m just forewarning you every time we meet because you’re 28 or whatever it is, like, I’m just going to bring this up that. You know, we need to be more aggressive and, you know, ultimately clients might step into that over a couple of years because I think they realize it’s, it’s working smarter, not harder because again, typically the more conservative you are, the harder you have to work, i.

save. Or work longer to kind of reach that [00:18:00] portfolio amount that we can have a sustainable paycheck. So, and that goes back to, you know, in the past, I’ve talked about aggressive Jane and conservative Jane and everything being equal and the delta between their portfolio after a 30 year career is significant.

Um, and the only thing that really changes is, is the asset allocation. So it’s 1 of the most powerful things. And I think, tending to that. IE through a rebalancing strategy over time is going to be really important as well. So, um, yeah, at the end of the day, you know, you have to feel comfortable, but I think what most people realize is.

Hey, even the portfolio goes down in 2025 and I’m retiring in 2055, who cares, right? It doesn’t matter. We’re not even going to remember that. And in fact, we’re going to probably have, you know, six, seven more of those. It’s just, is this, when we get to that eye of the storm close to retirement, um, that’s when we really need to be hyper focused and conservative on the, on the asset allocation.

So we don’t, you know, again, fall to sequence of return risk.

Tim Ulbrich: Yeah. And it’s worth noting, Tim, especially for [00:19:00] newer investors, how you think you’re going to feel and how you actually feel might not always line up. Right. Until you go through a dip where you have a sizable amount of assets and kind of experience that. I do think some people go into that thinking. Hey, I’m in this for the longterm.

I can stomach it. And it market drops 30 percent and they still feel the same way. Like that’s fine. You know, I’m in it for the long run. I think other people might go into that with that mind, same mindset, see that number go down on their accounts. And all of a sudden there’s this gut feeling of, of like, whoa, I didn’t think this would impact me in the way it did.

Tim Baker: yeah. And, and sometimes that gut feeling leads to that whole idea that I talk about is like, I want to take my investment ball and go home. And then that could lead to really. Um, the word is not inappropriate, but really, um, unproductive decisions and actions with your portfolio when you’re selling into cash, then you start feeling a little bit better because the markets recover and then you buy back into the portfolio higher.

And it’s [00:20:00] probably 1 of the biggest mistakes that novice investors make. And it’s basically playing on our loss aversion that affects all of us. So.

Tim Ulbrich: Let’s go there to common mistakes investors make when rebalancing, you’re, you’re talking about one really important one right there. And specifically, I’m thinking about the DIY investor where, Hey, when the hands in the cookie jar, you know, we might, might make some mistakes or be more prone to making mistakes than we would be otherwise.

If, if we had, um, a financial planner advisor, someone in our corner kind of talking through some of these things. So what, what are some of those mistakes that folks should be. Aware of that. Hey, we can avoid these if, if at all possible related to rebalancing.

Tim Baker: Yeah, so I think it’s, it’s kind of what I just said is like that emotional reaction, um, to, to this, uh, or taking a short term view of a, of a portfolio that has a long term outlook. Um, you know, I think sometimes like, and rebalance in itself seems [00:21:00] unnatural because you’re taking your highest performing asset class, some of it selling some of it and putting it potentially in your lowest performing asset class.

So it feels weird. Um, Uh, you know, again, if you’re overwatching your portfolio, it could lead to you making irrational decisions to time the market, which we know over the course of a long investing career, you just can’t do. Um, You know, I think the other thing is not considering the shifts in risk tolerance over time.

Right? So if, if you set this and forget it early in your career, and then your mid career and late career, and you’re still in that same asset allocation, there’s a problem there. Um, and I think, I think the other thing too, that is kind of related to this, but tangentially so is. Like if you’re in, if you’re thinking like, oh, I’m going to target date fund.

I don’t have to worry about that. Like in my 401k, that is true to an degree. But the, the other thing is like, we’ve talked about like, not all HSAs or 401ks are create equal, not all target date funds are created equal. [00:22:00] So you could be in a 2060 target date fund. That’s actually too conservative to what you actually need to be in.

And even, you know, all of those as they lead up and they had to have this glide path of, you know, taking out equities and re you know, re um, reinvested in the, in the, Stocks and bond or, uh, bonds. It’s, it’s not necessarily lines up with what you’re thing, it’s all those, it’s the easy button. I would think.

I would say look at the fees and look at the, the actual asset allocation within that fund to make a good decision. Um, I also think not considering tax cons, consequences in certain accounts or chasing something because of a tax benefit. So the big, the big thing that we haven’t talked here, um, is like rebalance is, is different in a brokerage account versus a.

401k or an IRA. Um, and what I mean by that is we’ve always talked about like the, the tax benefits of a 401k or, or an IRA or a Roth IRA, the, in those accounts, [00:23:00] the money that is in those accounts is either tax going in, so that’s in the case of a Roth or tax going out, which is the case of the, the traditional, the, the added tax.

Um in a brokerage account is that when you buy and sell a Stock bond mutual fund inside of a 401k you pay no capital gains. So the growth is tax free, which is which is another benefit Um of those accounts inside of a brokerage account you’re paying capital gains on any gain or or loss Um in the side of those accounts.

So sometimes we do weird things because of tax Ramifications and I think it’s losing, not losing sight of that, you know, as well. And then, um, I think also kind of related to this, Tim is, is account location. So this is kind of related to rebalancing, but having a good amount of, you know, I just, we just signed on a client, um, recently that they’re in [00:24:00] their early forties, forties, they want to retire in their early fifties.

So they have about a decade left, but they have nothing in a brokerage account. Um, which is typically what we’re going to use for an early retirement paycheck. So this is kind of the do we have a Do we have enough in? Uh, a taxable pre tax than an after tax to basically build a sustainable paycheck. So not necessarily related directly to rebalancing, but important to know again, as you’re asking yourself those questions and we’re getting to that 80 second step of rebalancing that we, we could look at the situation and be like, our account location is off.

So we need to, we need to reallocate assets that way. And then obviously rebalance the portfolio in general.

Tim Ulbrich: That’s a great example, right? Because that’s one of those in the weeds types of things where we can be, you know, neat, neat, deep, and trying to rebalance within an account, thinking about the asset allocation, maybe even trying to think about some of the tax benefits, especially if it’s not in a retirement account all the while, you know, bigger question of, Hey, might I.

Need these funds [00:25:00] prior to traditional retirement age. And do we have the right account locations? A really good example of, of the bigger, the bigger puzzle that we need to be thinking about.

Tim Baker: Yeah,

Tim Ulbrich: Last question I have for you here is on timing, Tim. So we’ve established that, Hey, once we set an Alice asset allocation based on risk tolerance, based on risk capacity, based on goals, that risks, that asset allocation will inevitably shift as the market does its thing over time, which then.

Puts in the, the need for what we’re talking about here, which is rebalancing. Um, so then the next natural question is, well, how often should I do that? Is this a once a year? Is this a twice a year? Is this a, it depends based on market volatility and you know, some seasons of the market may be more volatile than others.

What are your thoughts here on timing?

Tim Baker: yeah. So typically, the three common approaches to rebalancing is time based rebalancing, which is kind of what you’re talking about. So rebalance at regular interviews, you know, I quarterly, annually, maybe in semi annually, it could be [00:26:00] threshold based rebalancing, which is rebalancing when an asset class deviates from the target by a certain percentage.

So if it drifts 5 percent or 10 percent Transcribed by https: otter. ai Then we rebalance and then there’s a hybrid approach. So combining time and threshold methods for more flexibility back in the day, Tim, this was a concern because, um, and even, I think even today it’s a concern depending on how you’re invested is, um, you know, we, we would rebalance in, in my previous firm, we would rebalance like mutual funds.

We didn’t use ETFs, which is what we use now. And those would generate like. Ticket charge and commissions. Um, and some of the listeners might have heard of things called like churning where an advisor is kind of selling, not unnecessarily, but in a rebalancing to kind of earn a commission. Um, and even like even ETFs or stocks, anytime that you, you buy and sell, sometimes there’s a ticket charge.

Now, a lot of those have kind of gone to zero. So you’re able to, to do this kind of at will. [00:27:00] Um, Um, but that was a, that was a, that was a, something that you had to be aware of back in the day of either, you know, what’s the ticket charge related to the trade or like, what’s the commission that you’re going to pay an advisor?

Um, so obviously being fee only, we don’t earn commission since that’s not part of what we do. Um, today, a lot of these, a lot of these methods are going to be. Threshold based. Um, so if you’re working with a robo advisor, it’s going to, it’s going to look at a drift at a certain percentage and then basically realign you.

Obviously, you’re paying a fee for that, which you need to know what that is. Um, but we kind of do a hybrid approach of, of both. Um, you know, some people, Okay. Want to overdo this and rebalance this, you know, if you’re a tinkerer and that’s typically not the best approach. So I would say at a minimum, at a minimum, you know, at least once a year you should be looking at this and rebalancing back to a target percentage.

And again, having those conversations with yourself about, is this what I still want and need? And how is this best supported my financial plan?

Tim Ulbrich: [00:28:00] Awesome, Tim. Great, great stuff. Uh, appreciate your perspective as always. And for those that are listening and saying, Hey, I could use help with rebalancing asset allocation, making sure I’m thinking about my risk tolerance, risk capacity, and other investing goals, as well as other parts of the financial plan.

That’s what our team of fee only certified financial planners do at YFP. Again, we’re talking about a very narrow aspect of the financial plan and there’s so much more opportunity Beyond just this topic. As we look at all of the different parts of the financial plan, whether that’s investing in retirement planning, whether that be debt management, credit, estate planning, insurance, and so on.

So to learn more about what it means and what it would look like to work one on one with a YFP fee only certified financial planner, head on over to our website, yourfinancialpharmacist. com. You’ll see an option there to book a discovery call. We’d love to have an opportunity to talk with you, learn more about your financial situation.

You can learn more about our services and ultimately we can determine together. Whether or not there’s a good fit there again, your financial pharmacist. com and click on the link to book a [00:29:00] discovery call. Thanks so much for listening. Have a great rest of your week.[00:30:00]

[END]

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YFP 396: Managing Money Together: Strategies for Couples

Posted on by YFP Media

In this episode, Tim Ulbrich, PharmD, and Tim Baker, CFP®, RICP®, RLP® dive into the challenges and rewards of managing money in a relationship.

Episode Summary

In this episode, Tim Ulbrich, PharmD, and Tim Baker, CFP®, RICP®, RLP® dive into the challenges and rewards of managing money in a relationship.

They break down how different approaches—whether merging finances completely, keeping some things separate, or managing everything individually—can impact your financial harmony. Through real-life insights, Tim and Tim highlight the power of open communication, understanding each other’s money habits, and creating a shared financial vision. They also discuss when and how a neutral third party can help navigate tough conversations.

No matter where you are in your relationship—just starting out, engaged, or years into marriage—this episode offers practical advice to help you and your partner build a financial plan that works for both of you.

Key Points from the Episode

[00:00] Introduction and Setting the Stage
[00:56] Poll Results and Initial Reactions
[02:06] Cultural and Societal Influences on Financial Management
[03:21] Personal Experiences and Financial Dynamics
[04:36] Client Trends and Financial Planning
[08:06] Understanding Money Personalities
[21:11] Pros and Cons of Merged vs. Separate Finances
[30:42] Starting Financial Conversations
[31:43] Joint vs. Separate Accounts
[32:31] Managing Household Finances
[33:57] Setting Financial Goals
[35:45] The Importance of a Financial Plan
[36:47] Cultural Differences in Financial Planning
[40:20] The Role of a Third Party in Financial Planning
[42:25] Balancing Present and Future Wealth
[49:51] Creating a Shared Vision
[59:20] The Value of Financial Planning Services

Episode Highlights

“There is no one right way when it comes to managing your finances with a partner, significant other, or spouse.” – Tim Ulbrich [0:50]

“ The more we understand how we grew up around money and how that shapes the perspective we have today, the better chance we have to be able to come together and figure out what this plan looks like going forward.” – Tim Ulbrich [10:05]

“ What I think is best is everything comes into a joint account. So all of the paychecks come into a joint account. And then I think if you do have separate accounts, some dollar amount or some percentage of that can go to an individual account for you to do whatever you want with.” -Tim Baker [31:43]

“ If you’re always just living a wealthy life tomorrow, what’s the freaking point?” – Tim Baker [43:37]

“M ost financial planning firms and financial planners are making financial decisions without a vision. And that is backwards.” – Tim Ulbrich [50:24]

Links Mentioned in Today’s Episode

Episode Transcript

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

Tim Baker: Good to be back. [00:01:00] How’s it going Tim?

Tim Ulbrich: It’s going well, Valentine’s day, right around the corner. And so it’s only fitting that we talk about love and money. And let me, let me just start, Tim, before we get into the weeds on this, that we are coming from our experience and perspective. And of course, we’re going to talk about a broader perspective, hopefully in different options that people can consider as they’re working with a significant other spouse or partner to manage their finances.

But inevitably. We have a bias of what has worked for us, right? For Jess and I, and for you and Shay. And so we’re going to try to broaden that perspective, but I think it’s important that we acknowledge that right up front and that there is no one right way when it comes to managing your finances with a partner, significant other, or spouse.

And Tim, I want to start by getting your take on a poll I recently. Posted on LinkedIn. And I asked the following question for those that are working with someone else on their finances, which of the following best describes your situation is everything merged or something’s merged, something separate, or is everything separate?

And about [00:02:00] half people said everything was merged. 40 percent said some merged, some separate, and about 10 percent responded that nothing was merged and everything was just separate. What, what are your thoughts on that? Does that match with what you hear typically from, from clients and prospects? Hmm.

Tim Baker: think that the The half of everything merged seems really high to me Like I didn’t I didn’t expect that at all. Um, and I think the the 10 percent um You know where nothing is in merge is merged seems pretty low to me

Tim Ulbrich: Interesting.

Tim Baker: I thought I thought that we would see more of an even dish like not an even distribution, but um, the the all merged Is something I don’t want to say I rarely come across but like I feel like the most common the most common is some merge some separate

Tim Ulbrich: Mm hmm.

Tim Baker: in my experience, so I was a little bit surprised when I saw that poll um but that was the outcome because again, I I think most I think [00:03:00] most and I think I think a lot of like our culture and just how like how we We operate these days of affects this right like we’re getting married later.

Tim Ulbrich: Mm hmm.

Tim Baker: you know, I know I’ve talked about my wife being brazilian like in her culture You you know You you live at home until you get married and I know that some some people here in the united states do that too right, so like um, I think some of some of like well just what’s going on with our Socioeconomics like it’s it’s has changed this but I think by and large I probably see more of a hybrid model Which I think we’ll talk about here in this episode

Tim Ulbrich: Yeah. I think your point about, you know, timeline of when people get married or when they have a significant other spouse and that shifting is significant, you know, again, speaking from my perspective or Jess and I, we got married relatively young, 24. Uh, and so we didn’t, neither of us had really a strong process of our own.

Right. So it kind of made sense. And, and we’re in, I guess what you’re calling kind of that, that where a smaller group where everything is merged, [00:04:00] but that would have been very different. I think if we got married at 30 or 35, right. And we were doing things on our own for a while.

Tim Baker: Yeah, I think very, and then I also like, like divorce, right, too, if you’ve experienced that, like your, your, especially if there’s money things that have come out of like, you know, so I think if people have been in serious relationships, and then, you know, are not, and then are in another serious relationship later, like, I think, or, you know, I know, divorce can be traumatic, or just trauma with finances growing up, I know, you got one, just like things, you know, with your family business and things like that, I think there’s all paints, Part of how we, how we look at this.

Um, so yeah, I, I know there’s some people that have gone through, you know, relationships. It’s like, I’m, I’ll never merge again. You know, our finances, like it has to be separate. Now they’re still working and trying to row the boat in the, in the same direction, so to speak. But there has to be kind of a little bit of a separation for them to feel comfortable.

And I, I understand that. And again, it’s not necessarily [00:05:00] something that I’ve had to deal with personally, but. Um, I get where that, where that can come from.

Tim Ulbrich: Yeah. And to be clear, this is not a scientific Gallup poll, right? This was a poll I just put out there and LinkedIn. I do think we had, I’ll have to go back and look. I think there was 150, 170 people that responded. So it was a sizable group, but certainly not representative of a larger group. Tim, the other thing I wanted to just get your pulse on, because you sit in front of prospective clients every day where you’re having conversations in a very intimate way about their finances as they try to Discover or learn more about our services, see if they’re a good fit.

And as a part of that, naturally you get a inside peek and everything that’s going on, you know, financially. And of course doing that confidentially is you aggregate some of those conversations. What, what are some of the trends that you are seeing? You know, is it what one person who’s typically initiating this conversation and they’re, you know, they’re dragging someone along to be there.

Is it maybe one person who’s making all the [00:06:00] decisions and the second person’s not there at all, or do you see. more cases where it’s, it’s really a shared decision making process to people present at the table.

Tim Baker: Yeah. And, and, and again, probably not an even distribution, but all of those things, Tim, like, I think there’s sometimes where, um, and there, I think there might be some gender dynamics at play and I don’t want to like, you know, uh, generalize or anything, but like. Sometimes it’s, you know, a lot of pharmacists are female, so it might be like, Hey, you know, I’ve been listening to you since like our P2 year on the podcast.

So they feel like they know me or know you, but obviously I’m the one mean with them. Um, and then they might tell their husband, we’ll call husband Brian, they might tell Brian that we’re mean with Tim, um, you know, like five minutes before we actually do, and they don’t know who I am from Adam. Right. So, um, You know, there’s some people that are that are both like in it and and most of the time when I asked a question Like hey, like when you hire a financial planner, like who is the decision maker?

Who are the stakeholders? Like a the overwhelming answer. It’s like it’s the two of us, right? We’re gonna be we’re gonna you know, [00:07:00] basically make this decision together now who takes point and who? Might be our main contact that can differ. Um It’s really really hard at least in in where with what we do to work and this is one of the things that happens a lot and i’m i’m i’m Sometimes unsure how to navigate where you know a person will book a meeting They said that i’m married, but i’m looking for a financial planner just for me And I think again we look at the whole picture.

Typically. We’re not looking at just like a project here and there We’re looking at a holistic kind of longitudinal relationship and sometimes it’s hard If the, if the partner isn’t represented in that. And I, I would say at a minimum, like I want, I need, we need to know like what the joint balance sheet is, right?

We know that like retirement accounts, they’re always individualized. You have an IRA in your name, Tim, right? Uh, you know, there’s a 401k in, you know, Shay’s name, like that type of thing. Like those are not joint accounts. Um. But we want the joint, we want the individual and the [00:08:00] shared balance sheet there, and then we also want like the shared goals, right?

What are we, and again, you could have a goal of, I want to do this and this, and Jessica would have a goal. I want to do that and that, and then we can have shared goals. And I think those have to be in the plan or we’re not really not doing you justice. Right? So all of the things that you mentioned, um, are.

Are are present right and I try to weed out people that are going to be less engaged because again like We want people that are engaged that take our advice for the most part You know, we we feel like the advice that we give is in your best interest. That is the client’s financial plan um But you know both partners are are somewhat, you know plugged into what’s going on but uh, yeah, it can be all over the map right and um You know, it’s just interesting to see how people approach.

And, um, again, people have, I don’t know if we talk about this, but people have different money personalities in terms of how they view money, you know, what, how they’re raised [00:09:00] around money, what is the vocabulary for money, like all that kind of stuff. And again, some, some of that could just be inherent to how, you know, how they are, it could be also like the environment in which they grew up in.

Tim Ulbrich: And I wanna start there, Tim, because I think before we talk about strategies or ways that people may think about. Working on their finances together. I think it’s so important that we first just recognize and understand and reflect on how did we grow up around money? And, you know, what I, what I call kind of know thyself in terms of the money personality, because when you bring two different money personalities together.

Right. Even if you end up having accounts that are, let’s say, completely separate or some combination of merge or separate, and we’ll talk about that more detail here in a little bit, inevitably, there’s going to be conversations where things start to overlap. You mentioned kind of shared goals and visions, and we all come with different money perspectives that shape our money personalities that we have today and what I have found, and I’m making this sound much easier [00:10:00] than it is for the sake of just the time on the podcast, like Jess and I came from very different money personalities.

And it took us a while. I think to really be able to articulate that out loud and say, Hey, these are the strengths that I bring to the table growing up in this environment. And these are the weaknesses that I bring to the table growing up in this environment. And I really felt like that took the pressure off some of the conversation that, you know, we can think about, Hey, because we grew up in this environment and our family maybe budgeted this way, or in my finance, my, my household growing up, everything was merged and I have vivid memories.

Of how my parents did the budget and the conversations and how the small business was a part of that conversation. Of course, that shaped the perspective that I bring good and bad right perspective. And so I think I want to get your thoughts on that because my experience, my personal experience says the more we understand how we grew up around money and how that shapes the perspective we have today, the better chance we have to be able to come together and figure out what this plan looks like [00:11:00] going forward.

Tim Baker: Can I, can I put you on the hot seat, Tim? I’m interested to see, like, cause I, I view again, working with you and Jess in the past, like I view you guys as kind of like similar. In terms of like money, if you don’t mind, like walk, walk us through, like, it might, maybe this will be a good way to kind of talk a little bit about the money personalities and like what those are, but like, where, where, where do you see you?

Because so when I think about many personalities, like the umbrella, and I’ve talked about this before, is you kind of have that person that is like open hand, like more of the spender, right? And underneath that, I think that’s the. The spender, um, the risk taker, and then the other umbrella is the closed hands that people are just like saving, you know, are afraid to part with their dollars.

So that’s typically the security seeker, the saver, and then the, the, the, the person that’s kind of in the middle is the flyer, which they’re kind of more like laissez faire, like money is a thing. Like, I don’t necessarily [00:12:00] worry about it too much. It’s very easy going. And you’re kind of like. in the middle somewhere, right?

So walk me through, if you don’t mind, like what, where do you, where would you say you kind of were and then where Jess, Jess was in, in, in those, uh, you know, in the, in those personalities?

Tim Ulbrich: Yeah. Let me reference for, for people that are interested in learning more about what you’re talking about. There’s several assessments out there, but what one that matches up with the terms that Tim’s using. Around like saver, spender, flyer, risk taker is called the five money personalities quiz. And we’ll link to that in the show notes as well.

I’ll say that I think where we have similarities, let’s start there as we, we both grew up in households where the finances were merged. Um, and we both grew up in households where I would say there was shared decision making, but one person who was clearly taking the lead. With the finances and so that that’s the similarities.

I think we’re coming with um For for better or for worse. I I would say I grew up in a household that was uh, [00:13:00] very frugal There was more of a scarcity mindset around money and very much a focus on Saving for the future trying to do everything that we can to plan and prep for the future now Some of that I think comes from growing up in a small business.

Like I have vivid memories In conversations that my parents were having, you know, I remember my mom talking about, Hey, how hard my dad is working in the business. And, you know, we, we necessarily can’t do a, B or C. Because we’re trying to save up for this vacation a year or two years in the future. I remember my mom talking about, Hey, we’re able to go on this vacation that, that we maybe did once a year, once every other year, but it was paid for by coupons and clipping coupons.

And I remember mom kind of worked in the coupons on the living room floor. Right? So those are core memories. You know, I think of inside out, right? Core memories like, and I have carried those very much in. To the way I have approached money for, for better or for worse. I think the, I think the frugality has real benefits, but I have really struggled and have had to work [00:14:00] hard to evolve and have had to have your help and the planning team’s help and Jess’s help to really get outside out of that future only mindset and that scarcity frugality mindset to loosen the reins and ask some of the questions of like, what’s the, so what if today, and how do we find this balance, right?

Of living the rich life today and in the future. And I think on the flip side, Jess. I would say grew up in a family environment where there was some stress and fear and anxiety, uh, around the money, but I think there was, uh, more of an openness to the present moment and, uh, some of the experiences that are in front of us today.

But on the flip side, there was some of that scarcity mindset towards the future. Uh, as well, but there was definitely more of a present that I think she really brings that perspective today, where, where I’m kind of balancing us out to think about tomorrow. She’s really helping us focus in the present.

Tim Baker: yeah, and I think, I think, you know, sometimes I think people think that like if you have [00:15:00] multiple personalities in a, in a planning relationship, like, so if you, if you think about the security seeker, you know, someone who values stability, planning, uh, long term financial security and the saver, you know, they have satisfaction saving money and minimize the expenses.

Like, that end of the spectrum, I think, goes a long way in a financial plan, but I think it’s good to be counterbalanced by a spender, someone who views money as a tool for enjoyment, convenience, um, maybe some immediate gratification, YOLO, I’ve kind of talked about this with my own journey, like, I’ve kind of Going back and forth on this risk taker, right?

That might be someone because again, like it’s funny you say that because like the growing up in my household Like if you ran a business like you’re a risk taker if you’re an entrepreneur, you’re a risk taker, right? And maybe not so much right? So risk taker thrives on opportunity Adventure and potential for big financial rewards and again that flyers, you know money’s not a central focus they prioritize other values like [00:16:00] Relationships or passions.

Um, I think it’s good to have, I think if you have all of one thing, if you have two savers or two people, security seeker, you’re, you’re a mess and a fortune hopefully, but for the purpose of what? Right. If you have someone that again opens the hand is spending or taking, you know, big swings and risking it all, you know We want to avoid having to like bag groceries in the future So I think having having that balance in a relationship is good And I think this changes over time like I mentioned, you know I grew up and again, my mom was a teacher.

My dad made some more money. We, we, we were fine. Right. But like my mom did the coupon thing and we scrimped and we saved. And when, if we did go out, it was, you know, we’d order a meal, no, no, no drinks, no desserts. Right. Um, so like, and they put a lot of their money into the house and like where our family spent time.

And, you know, growing up, I was in charge of [00:17:00] like, you need to get to a certain age. I was, I was working like in Russia. I was never allowed to work. Yeah. On a school night. So I’d work on the weekends. I was, I worked at an Irish restaurant where I grew up, but it was like, Hey, if you want to buy a car, like that’s on you, pal.

Like if you want insurance or gas, you know, if you want certain items, that’s on you. So I kind of, you know, fell in line with my mom who was a saver. Um, but then I, when I went into the army and nine 11 happened and it was kind of like Yolo, right? Like it was, I don’t really know if tomorrow’s going to happen.

So like that shaped. Yeah. More where I was more of a spender, right? And then I think I got positives and negatives from both things. And, and, you know, I, I’m kind of at where I am now, which is probably somewhere in the middle, I wouldn’t say I’m a flyer cause I kind of think of that as more maybe like, you know, off, but I would say I look more to the long term and, and Shay, as I’ve said on this as more like, bro, we have kids like,

Tim Ulbrich: This is the

Tim Baker: have one, yeah, this is the season.

We have one shot at this life. And I’ve kind of come around to that [00:18:00] too, because. You know, I do think that because we’re planning and we’re doing the things that we do and, and again, the numbers are, are, um, confirmed by our plan. Like, I feel more at ease. And more, um, um, comfortable spending, spending money, like, you know, especially if it’s for those things that, you know, um, are for our family and, and experiences and things like that.

But this is a hard thing too. And I, like, so we talk about the person that was, I don’t know if a lot of us just have the vocabulary ourselves to have the conversation conversations with ourselves about money versus having it with a. Uh, uh, a person, you know, that you’re in a relationship with, like, we don’t have the vocabulary ourselves.

So how can we expect, especially if we come from different places to be able to, you know, have the conversation, have the vocabulary or ask the right questions. Because again, like, you know, growing up, like money was kind of a taboo thing. Like, I never talked to my parents about how much [00:19:00] money they made, or how we, like, we never really talked, I know we would save, and I think we knew that money was a scarce thing, but, like, we didn’t really talk openly about it, um, and I think that, you know, that not having those conversations is a big deal too, so.

I think that’s why this is really important. This, this topic is really important. It’s, and it’s apropos, we’re doing this around, you know, Valentine’s days because it’s, it’s difficult for ourselves, let alone introducing a completely, you know, new set of beliefs and that type of

Tim Ulbrich: Mm hmm. So, first of all, I need you to stop hitting on people that are bagging groceries. Cause that was my first job and my, my favorite job. Uh, I loved it. I loved it. Like every time I go to the grocery store, I get to get the warm and fuzzy still. Like, I don’t know. There’s just something about like the methodical nature of it.

And I felt like it taught me a ton around communication skills, dealing with people like my mom that show up with their box of coupons. And I’m like, Oh my gosh, this is going to take forever. Right. Not now you just scan like an app and it has all [00:20:00] your coupons

Tim Baker: Yeah.

Tim Ulbrich: but, um, I loved it and I’ll give my boys a hard time every once in a while.

I’ll, I’ll throw out a produce code off the top of my memory. It’s

Tim Baker: No way.

Tim Ulbrich: presses them every time. Yeah. It’s awesome. Well, I used to impress them. They’re getting too old for

Tim Baker: So did you like it because it was kind of like Tetris too? Like, like bagging

Tim Ulbrich: yeah. Like I, I can’t stand how kids these days, right? Bad groceries, like so inefficient, so inefficient, but

Tim Baker: man. Maybe, maybe we need to get you, uh, back, back. I mean, the whole point of, of, uh, financial plan is hopefully to have to avoid that, Tim. So you don’t have to moonlight. But maybe a, but maybe no hate. Maybe that’s a, maybe that’s a good kind of a sunset job. I mean, I could see, I could see that being a cool job, especially you’re talking to people.

Um, no hate on

Tim Ulbrich: I liked it.

Tim Baker: my end. Yeah.

Tim Ulbrich: So fun fact for the YFP community, my IPMs, which is the items per minute. That’s the KPI for the cashiers. My IPMs were top at the top [00:21:00] supermarket in Western New York. So fun

Tim Baker: Whoa. That’s a quite, quite the, quite the flex.

Tim Ulbrich: but I, I think your point about emotional vocabulary is, is so important, right? Because my experience, Tim tells me that. When the emotional vocabulary isn’t there to be able to first identify yourself, where does some of these money scripts come from to then be able to initiate a conversation? This comes out sideways, right?

And I can think about some early experiences in our marriage where, you know, might, might lead to passive aggressiveness or, you know, internalizing some of what really is underneath that, which is the scarcity or the fear or the other things that has nothing or almost nothing to do with what actually is being spent.

But it’s activating an emotion that may be related to how we were brought up financially and, and being able to put a name to that, I think is so important. So let, let’s shift gears. We talked at the beginning about in terms of, of managing, [00:22:00] practically managing accounts and month to month finances, whether it’s credit cards, checking accounts, you know, some, some partners, some couples decide to have everything separate.

Some decide to merge everything and then others do a little bit of both. And from a high level, what, what do you see as the pros and cons to those approaches and functionally, like what, what does that potentially look like? And I’m, I’m specifically thinking about the group that maybe you said is the, is probably the largest group that has some merge and some separate.

How, how does that practically work?

Tim Baker: Yeah. So we divide these into three groups. We’ll, we’ll kind of go through the completely merged, the completely separate and then the hybrid. So I think if we look at the completely, the completely merged, I think some of the pros. For that group is simplicity and transparency, right? You know when one hand is washed on the other type of thing so you’re managing One a set of accounts to track expenses.

It makes budgeting and saving a lot easier Um, you know, I think full visibility can [00:23:00] foster Trust and reduce the chances of surprises Um, I think it’s easier to kind of align your financial goals. So it encourages more of a teamwork approach um You know, whether it’s a big goal or even something that’s, you know, less so, um, I think it promotes regular conversations.

Like, Hey, can you transfer that, you know, or can you, can you make sure that the money’s there? Because this bill is coming out, um, and it helps partners are on the same page. Um, I think it increases efficiency in, in money man, management. I know one of the things I was jealous about that you said, where you’re taking a lot of those like, um, uh, expenses that you always had, you know, we had to buy paper towels every three months or whatever.

And you’re like automating that with like, Amazon or whatever it is like in my house. So I couldn’t really do that because kind of shade takes care of that. So it’s kind of out of sight, out of mind for me. Right. Um, it could be with managing debt, you know, if you’re again, everything is, if you, if you have a shared credit card that, you know, kind of got out of whack, you’re seeing it, you know, together, um, and even investments again, most, most, [00:24:00] most of it, uh, retirement accounts are, are separate, but you know, you can, you can have joint investments.

Um, I think it helps streamline things like the redheaded stepchild of the financial plan estate planning. Um, that people often, you know, forget about if a partner becomes incapacitated, it’s easier to find stuff. Um, you know, and I think just easier during like life transition. So again, in the case of an emergency, um, a death, hopefully not, you know, the, the surviving partner has immediate access to all funds without any legal hurdles.

I think the cons here are, and I think this is probably the big thing is like loss of financial autonomy. So where, you know, like, hey, I was a grown up. I got my big boy job, big girl job. I’ve been kind of living on my own. And all of a sudden, um, Mary, I’m getting married and you want me to like combine everything like that.

It feels restrictive. I don’t I don’t like that. Um, I feel I feel controlled and that can lead to conflicts and spending habits and things like that. Um, [00:25:00] I think it could be potential for like power imbalances is like if one partner earns significantly more and everything is joint, they might feel entitled to have more control or, you know, the tiebreaker and that could create tension.

Um, the, the, I’ve definitely seen this where the lower earning partner might feel guilty about spending, so they don’t, they, they themselves don’t feel like they’re on the same level because. You know, they feel like that what they’re bringing to the table is not equitable. Um, could be conflicts over spending priorities.

So just, you know, the spender versus the saver can lead to frequent agreement, uh, agreements, disagreements where, you know, if you have kind of your separate playgrounds, your separate accounts that maybe that’s less so. Um, and then complications again, in case of divorce or separation, um, you know, Things, things like that, you know, and, and there’s probably a risk there too.

Like if one partner is less financially responsible, their actions can negatively impact both partners, credit scores and financial stability. So that’s

Tim Ulbrich: merged, right.

Tim Baker: Yeah, if they’re merged, so that would probably be the pros [00:26:00] and cons for the, for the merge. If they’re separate, the pros for it being separate is I think you maintain that financial independence that a lot of people kind of establish for a number of years, maybe before they get married.

Like you said, you and Jess were really young when you got married, right? I was, I was older. Um, you know, it’s simplifies, uh, personal spending. So I think like if you have hobbies or gifts, or I just want to spontaneously buy Shay a gift. I don’t want her to see that on a credit card statement.

I feel like this happens for us at like Christmas where I’m like, I’ll see something on Amazon, but she sees everything that we buy. So it’s like, there’s no surprise. So I’ll just say like, don’t look at the Amazon

Tim Ulbrich: to go take cash out. Although

Tim Baker: Yeah, yeah, exactly. Yeah. She’s like, why are you taking cash out? Like, you know, are you, you know, what are you buying?

Um, it could potentially. Yeah, yeah, exactly. Yeah, that’s those are few and far between. Um, it can reduce those power imbalances. So you’re avoiding situation where one feels partner, one, one partner feels dominant, um, easier in the case [00:27:00] of divorce or separation. Again, we don’t plan for that. Um, and again, potentially protects against financial mismanagement.

I know there we’ve had people that we’ve worked with shades as she has experienced this. I had to a degree where a partner Runs up a huge credit card bill. And if you’re on that account, like you’re on the hook. Um, so cons for completely separation is increased complexity with managing shared expenses, right?

So there’s more coordination when you’re, you’re split in household bills, who pays for what some people, and they can do this. In either scenario, but you have some people that will live off of one income and everything The other income is is is cream. It’s you know, so that doesn’t matter but like it could be there um, there could be potential secrecy and mistrust like You know, sometimes we get scared of something that we don’t understand or see.

So, you know, that, that could be there. I think it takes more of a lift to have alignment in financial goals. Um, it could be inequity and kind of the lifestyle contributions of like, how are [00:28:00] we, how are we doing this? Cause again, in this model, a lot of it is, um, completely separate. So like, if I’m just paying for the electric bill, but you’re paying for the mortgage, like, how does

Tim Ulbrich: do we work that out? Yeah.

Tim Baker: and more complicated in emergencies, that type of thing. So that would be the second, the second bucket. And then probably the most common that I see is kind of some merged, some separate. So the pro here is you kind of get the best of both worlds. You have, you have some financial independence with the benefits of shared financial management.

Um couples can maintain autonomy over personal spending while working together on joint goals So you kind of have you know the venn diagram so to speak you have you know And I think that again, I think for the most part the venn diagram that shared shaded area should be the Biggest and then you have like the outlier of kind of your own maybe accounts um simplified shared expenses Encourages healthy communication.

So couples still need to discuss and agree on contributions um Promotes transparency, but also allows you to [00:29:00] have, you know, a little bit of space Um reduce financial stress. I think the cons here is again. You still have that potential for financial imbalance Um, there’s still complexity in the money management if you’re again managing multiple accounts I think you still have a risk of you know, what’s yours versus ours and then how does that does that create?

A space or, uh, an arm’s length in your, in your marriage, um, and then I think less financial, you know, visibility and things like that. I think regardless of approach, no matter where you, and I, and I think more so than others, like it’s clear communication. Right. So sometimes you’re clearly communicating by default.

So if I have, everything’s like shake and see, she knows that I can, I just spend a hundred dollars on a bottle of Brown, right? And she’s like, dude, what, what the

Tim Ulbrich: She’s used to it by now.

Tim Baker: she’s used to it. So I think clear communication, regardless, I think regular check ins, you know, scheduling periodic financial discussions.

And again, sometimes that’s with the help of financial planner. I [00:30:00] also think that you doing that as a couple is really important. I think clear agreements and setting expectations of, of how things are going to be split or whatever that looks like can prevent conflicts. I kind of think of our partnership charter like, hey, if these things happen, this is what we’re going to do.

I think those are important. And then just being flexible. I think the, the key to any financial plan is not the, you know, nothing is poured in concrete. Right. We need to have flexibility because Things change. Life changes, right? And it is, you know, I’m sure the listeners have heard this, me say this, it’s about planning.

So that’s for you, Corey, planning with an I N G, not the plan, right? Like, cause the plan, once we have it, something happens in the world and you know, the plan goes out the door. So it’s about, it’s about the process of planning.

Tim Ulbrich: Tim communication, and we’re going to come back to talking about the value of a third party. I know it’s something Jess and I have benefited from Tremendously, um, and so we’ll talk about the role is but in terms of couples and [00:31:00] communication, you know, whether you’ve been married for 20 years whether you’re been together for 10 and you’re not married, whether you’re, you know, just started dating.

I think there’s a space for some of these conversations regardless of your situation. And we compile the list of 25 financial discussions for couples. If people want to download that guide, your financial pharmacist. com forward slash a 25. And I often joke with people like, Hey, this is a third party list, right?

So if you’re wanting to start some of these conversations, you know, it’s not, it’s not me coming with the ammo. It’s the, Hey, I read about this. I heard about this on a podcast. We should have these conversations, which, you know, jokingly, but I think that that speaks to some of the value, uh, of the third party.

Hey, give me a visual on the Venn diagram. Cause I do think for a lot of people. That resonates you talked about some merge some separate and in your opinion, you know You want to see that center part to be the the largest part knowing everyone’s situation is different So, you know that might be something like [00:32:00] 70 percent merge 15 15 60 20 20 right something along those lines, but there’s of course variations of that like it is Is all the money coming into the central and then we’re dividing the percentages or are we waiting it, you know, according to what we make.

So, you know, if we’re both contributing toward the mortgage payment, but one person makes 70 percent of the household income, you know, are we contributing equally? Or is it weighted any more details? You can share on that of what you’ve seen people do.

Tim Baker: . What I think is best is everything comes into a, a joint account. So like all of paychecks come into a joint account. And then I think if you do have like separate accounts, some dollar amount or some percentage of that can, you know, go to a, um, an individual account for you to do whatever you want with.

Right. I think what most people do, because again, I think it’s, it’s, you know, the, the inertia of this is here. It’s like, I think what most people do is they put, they [00:33:00] get paid in their normal accounts and then they feed into a joint account. That’s what Shay and I do. And I have always kind of complained about that.

And I think it got to a point, cause again, she’s experienced things in her own life that I think, you know, we are a team and I have no, but like, I think it’s just more of a comfort thing for her. Um, You know, but I don’t even know what the percentage, you know, essentially the way we do and we kind of follow with no budget budget and like we look at all of our expenses and basically she, she’s the tracker, you know, I’m the financial planner, but she actually does all this like so she has a spreadsheet that she says, okay, you know, Zoe’s now in daycare that’s costing us a million dollars a week.

Um, you know, we have this project coming up or whatever. And she basically says, this is how much money you need to put in every paycheck. Right. And then I always push the envelope with like, okay, what are we saving for, for vacations? What are we saving for retirement? Like that’s my role in all of this.

So she kind of does the. the kind of like what is it to run the household and then [00:34:00] we kind of talk about our goals or our major projects and I kind of shared with you how we kind of get up like get the Priority of things and then that’s what we essentially do, right? So that works for us again I think if it were up to me, I would be more of a hey into the joint and then maybe some money out to an individual The percentage is again very widely Um, but I think that for for us, it works because again, it allows me to kind of do some things that have interest that I know she would roll her eyes at.

And I’m just like, you know, she’s like, you know, kind of not absent from that. But I, I look at it as as long as we’re taking care of those. Shorten medium term goals in terms of how we operate the household. And then I know that, hey, we’re maxing out retirement, that’s not even hitting the paycheck, or we’re maxing out an HSA or an IRA, like as long as the, and, and we’re funding, you know, that trip that we’re going on next and we, we calculate that’s gonna be X amount of dollars.

Um, and typically what we just do is we just say, Hey, this is [00:35:00] what we’re paying on the, you know, spending on vacations. We divide that by 12 or or 24, we put that number in and then the, the following year we just kind of check in. We like. Hey, we had to like reach into our pocket a little bit more because mickey mouse is super expensive or or not typically for things like that We’re continuing to push the envelope in terms of what we are saving Um, so having those sinking funds, um, and sometimes we’ll have to you know, they’re not necessarily Um emergencies, but we’ll have maybe we’ll move some money around in our sinking funds that that makes sense So that’s kind of what we do.

I think a lot of um clients They do some version of that in, especially the hybrid clients where it’s mainly like we have separate accounts and we put X amount of dollars in and that’s how we spend our bills. But I think there’s, there’s levels to this in terms of like what’s comfortable. Again, like I feel like if I had my druthers, like I would just have everything joint kind of like you and Jess, but you know, again, it’s a, it’s a little bit different dynamic I think in terms of where we come, where we come from.

Tim Ulbrich: [00:36:00] Yeah. Yeah. And I want to make sure I recap to understand and so our audience can understand as well. So you guys have. Uh, paychecks coming to individual accounts, then you fund through Shea’s kind of monthly process and tracking. You fund the joint account. Um, Shea’s kind of boots on the ground month to month tracking.

What do we need to be doing short term? And then together you’re working on some of the prioritization of the goals. And then you’re pushing some of the conversation of, of the long term. Am I tracking? Okay, cool. And there’s something there that you said, I want to make sure we don’t brush by that is so important where I see a lot of stress and anxiety and frustration and arguments coming in is in the absence of understanding what those goals are long term, short term midterm, and whether or not we’re on track to achieve those.

That to me becomes a space where things get dynamic to say the least. Right. Because, you know, when you talk about like, Hey, we’re, we’re going to see Mickey mouse and we’re, we’re [00:37:00] planning for a, B or C and we’ve got a bucket and it’s the Mickey mouse bucket and we’re planning for it or longer term things like retirement or, and days gone by, you guys were buying the RV, right?

Whatever are those shared goals, if you know what they are and whether or not you’re on track or a progress for them, to me, that just alleviates so much. Of the financial stress and pressure that can come, uh, it’s in the absence of knowing that where I think that uncertainty causes the anxiety and the feelings of, of overwhelmed.

That can be the divide to getting on the same page.

Tim Baker: Yeah, like I always joke around that You know Shea is definitely more of and again, like I think culturally like the idea of saving for retirement is very foreigner because in brazil You kind of just work and then you have a pension like it’s very different. So Like trying to get her on board with that has been harder.

And again, she looks at our young family and she knows that the time is now to really, um, [00:38:00] enjoy them and, and, and the experiences. And, you know, I, I keep joking around with her because I’m like, one day, you’re going to get to a certain age where you can start to see retirement. And you’re going to say, Oh, like Tim, you’re so wise.

For, you know, basically, you know, getting me to put, you know, max out my 401k or

Tim Ulbrich: Words that will not come out of Shea’s

Tim Baker: it will never come out of her mouth, but she will eventually wake up one day and might think that, you know, so, um, so, but I, but I take solace in the fact that, again, knowing the plan and knowing, like, Most people you ask, like, are you on track for retirement?

They’re like, I don’t know. Like I, there’s a calculator when I sign into my 401k that tells me, which I, which I think is very like irresponsible if I can throw that out there because like. You know, Shay, like going through, I’m sharing all the, like the emotional conversations that, but like Zoe, our youngest is 10 months old and she just started going to daycare.

We [00:39:00] had a, um, a live in nanny, an au pair. And if you finally got to the point where we did this, this didn’t work out. So we’ve gone through this emotional thing of like transitioning Zoe to the. Um, to daycare, and that invites an extra expense and, um, sickness and all the, all this stuff, right? And, um, and the emotional sides of that, and, you know, Shay will exasperate it through this process.

Like, oh, I wish I could just stay home and, like, just be with my baby. And I’m like, well, you can. It just means that we have to, like, make changes. Like, we have to tighten the belt a lot. And, um, It’s the same thing with retirement. Like, like you can, a lot of us, if we’re living off of beans and rice and our living expenses are low, like you can retire.

Right. It’s just maybe not a like the lifestyle that you are. But I think like, I know that we are like, I know being more of the longterm planner, like that we’re doing well. Right. And that’s not to say it’s always going to [00:40:00] be like that because things come in cycles and, you know, jobs changes and things like that.

But where we’re at and what we’re doing. Yeah. Yeah. I feel really comfortable. And to be honest, like the rest of it, it really doesn’t matter where it goes. Like we want to, we have the same values that we want to spend it on our family or right now it’s on our house. Um, so like I don’t, I don’t think twice about that because I really, I trust in the plan.

You know, I trust the process to, um, take that adage. And if I didn’t though. You know, it’s the same thing we talk about like student loans or retirement plan and like, unless you have the math, like you have, you have emotions related to money, but unless you have the math to confirm or deny that you’re kind of flying blind.

Right? So like, I have the math and I know that what we’re doing is, is going to set us up for the future. So I don’t care if we spend money, even though that’s not necessarily my money personality. I don’t care if we spend money today. Um, yeah. So I think, [00:41:00] again, it goes back to having a plan and plan in because things consistently change.

And if you don’t have that, and I think again, a lot of, of tension and, and disagreement and, you know, and I, and I think having, I think having these discussions one on one, but I think having them with an objective third party that knows your balance sheet and knows your goals is very, very powerful. And sometimes.

I can, I can say something to Shay, like, why are you like this? Or why do you think this way? Um, and I’m asking the wrong accusatory question or says somebody that is a professional can, and, you know, they can ask some more neutral sounding questions to kind of get to. How does she think about money versus how do I think about money in a non judgmental way?

And again, that goes back to like, a lot of us don’t have the vocabulary or know what questions to ask because we just, we’re not raised like that and we just don’t, don’t know.

Tim Ulbrich: Let’s talk more about that in the value of a third part. I think we’re dancing around it, [00:42:00] but you’re getting, you’re giving a really good example. Um, you know, when we talk about something like nest egg and retirement and I, and if Jess were here, I think she would say as much that for her, like there’s the numbers in the Excel sheet and then there’s the reality of the feelings.

Right. And when retirement is a question mark is an unknown is a, I never think there’s going to be enough. That very much informs how we feel today and how we act, whether or not that’s based on reality. And so I think this is one example where having a third party involved can not only take us jointly through an exercise.

You know, versus me punching in numbers and saying, Hey, look at the sheet. Look at the sheet, look at the sheet. Like let’s walk through this together and challenge the assumptions, but then also include the emotional piece of, Hey, like I recognize that this says we’re on track and perhaps we’re even over saving, which is a conversation we’ve talked about before on the show.

All the while we’re feeling the pressure [00:43:00] today of, Hey, I wish there was some more cash around to experience the things that we want to experience with the boys, well, maybe there could be. Right. Because of what we’re, we’re doing for the future. So to me, that’s just one, one example. And if you want to pay back off that, or otherwise where you’ve seen having a third party, of course, we’re biased in what we do in the planning where it can be so valuable and helping partners work together.

Tim Baker: Yeah, we just signed on a new client recently that, you know, she’s podcast forever and, you

Tim Ulbrich: Shout out.

Tim Baker: Yeah, much, much love for the support. And the big reason that she came, she finally booked an appointment with us was because she just recently found out that her grandparents are gonna be leaving a pretty sizable amount of money to, um, her parents.

And she’s kind of, and she’s, she’s kind of taking advice from like the family. It’s like, save, save, save, like max out your retirement. And they’re feeling the tightness in like the, the day to day of having young kids and a [00:44:00] family and things like that. And she’s like, for what? Like, so that I can pass on millions or hundreds of thousands of dollars to like, what’s the, like, why?

Like, I don’t want to repeat that. Like I want. That balance of I want to live a wealthy life today And she kind of called you out of like that’s kind of what you say live a wealthy life today a wealthy life tomorrow Um, like there’s balance there. So if you’re always just living a wealthy life tomorrow, what’s the freaking point?

Right? What’s the point of? Of taking on this debt or earning this income or or or having a family like you want to make sure that That you know, you got one crack at this and I think for her it was like i’m i’m maxing everything else out and if I told Like if if I if I were to whisper like i’m not going to do this anymore like her family would think she’s crazy I’m like, well, they don’t know you, right?

They don’t know like the, like, it’s just like, oh, like, you know, I should pay off my student loans as quick as possible, or I should invest like this. It’s kind of that water cooler. I should, I should, you know, I should get, I should [00:45:00] claim Social Security this way, like that water cooler, like that. They don’t know your balance sheet.

They don’t know your goals. They’re trying to help you as best they can, but like, that’s not advice. So, and we’ve had clients that have done those things that I’m like, well, maybe we don’t need to do that anymore or right now, right? Maybe when we, when we build a plan, we see that there’s room there for you to take care of Tim and Jess in 2025 and maybe not so much Tim and Jess in 2065.

Tim Ulbrich: Yeah.

Tim Baker: And that’s okay, right? Um, but I think, I think sometimes having these conversations, whether they’re the discovery meetings to see if, if like we’re a good fit for, from a, from a planner to a client perspective, or when I used to do what the planning team does a lot better than what I did, like the scripter plan meetings, where there’s a lot of emotion there in both of those meetings, probably more so in the scripter plan where we’re talking about, you know, asking very pointed questions about like, like what are, what are the things that matter to you most?

And I remember those. [00:46:00] Meetings, there was tears, there was kind of the, the one partner like crane in their neck at their other partner, because they’re saying something, they had no idea that they felt, or it was a passion of theirs. Um, and I think that goes back to just not having the vocabulary or sometimes I always talk, I always tell the story of when I got out of the army, I was working in a where I was working.

Uh, I worked for Sears Kmart. They had just merged. We’re like, we’re going to buy for retail supremacy. And I was like, yeah, exactly. I was like, yeah, we’re going to beat Amazon and Walmart and all that. So it’s hilarious now, but I had a great interview with them and it was kind of more operational leadership than what I was experiencing in the army.

And, um, and it was, it was long hours. So I would, I would get up, I would leave my house at five o’clock and I would get there at five 30. Um, and then I would stay until probably six, six 30 drive the 30 minutes home and it was dark both ways, but I don’t ever remember most days. I don’t ever remember the [00:47:00] drive.

It was just like I was on autopilot when I got into my car and then when I, you know, basically part and I think a lot of the times that’s our life because we get so freaking busy, Tim, that we don’t slow down and actually like. Like reflect or ask ourselves these questions and again that goes back if we go back to like the third party And again, i’m biased Like if we’re meeting with you regularly, even if it’s just annually or semi annually Um, obviously we do a lot of work on the front end of a plan But even if we’re just taking the time twice a year To kind of check in and actually view that dashboard and not just stare out the windshield for 30 minutes, you know, on your commute to and from, I think that that action, um, and doing that with a partner to kind of tie it back to Valentine’s day is really, really powerful.

And I think just because of the hustle and bustle and the distractions that we have, um, with technology or whatever else, it’s hard for [00:48:00] us to kind of slow down and say, like, is this really what I want? Shay, is this really what you want? And I think like, you know, one of the things that Shay and I like to do when, so we do like a monthly date night, and then we kind of do ad hoc stuff, but like, we’ll talk about, it’s more of like dreams.

Like, like what, where do we want to go next? Right? So one of the exercises that we’ve done is, you know, we’ll put, I’ll make a list of all like the projects or things that I want to do. So whether it’s buy an RV or redo the kitchen or you know, redo our backyard. So we kind of have this list. And we both basically rank order the list in order, you know, basically what we want the most.

And then I basically combined that in a weighted, a weighted ranking. And then we talk about that and that’s kind

Tim Ulbrich: come up with a shared list first or do you have your own list? And then,

Tim Baker: we come up with a shared list that we’re both basically ranking. And then what’s come, what, what, some of the things that have come out of that. Where, you know, one of the things since we moved [00:49:00] into our house in 2020, she’s like, I hate this chandelier in the, in the front of the house.

And, and I’m just, and I, I could not care less about it, Tim. I, it’s not something that I even noticed, but she’s like, I hate it. It’s like this crystal thing. It’s gets dusty and cobwebby. Like, I don’t like

Tim Ulbrich: get it done and

Tim Baker: And I’m like, well, what is it, what would it cost us just to kind of get a new fixture and replace?

She’s like 1500 bucks. I’m like, why are we even wasting any more? And that, that’s probably not the way, the right way to ask it. Cause that sounds accusatory, but I’m like, what, well, what can we do just to make this go away, like, you know, so, so those kind of get knocked off, but then some of the major projects, like, Hey, we’re redoing our backyard.

Like we both put that at the top of the, uh, top of the list. And like, that’s what we’re attacking next. Right. So then the next one, you know, we’ll attack next, or we maybe we’ll, we’ll do the, the, the ranking again. But I think like, those are more of like the exciting, like nobody wants to talk about, well, some people do, but like.

Like paying off debt is like, nah, like it can kind of be a drag. Um, or some of these other more mundane parts of the financial plan. I [00:50:00] think, you know, aligning things that, and for us it’s like, you know, having a green space that we really want and is invited in that, you know, we see our family, you know, just enjoying was really important.

And we’re not going to move because of, you know, where the market is, the interest rates, like we’re going to put the money in the house that we have. And I think we’re excited about that. So like, those are some of the discussions that we have. And I think, you know, what you do is then you then plug that into a financial planner, um, and you say, okay, like, how can we make this happen?

Where are we, where are we pulling this money from? How long is it going to take for us to save? Do we use debt? Do we leverage, what does that look like? So.

Tim Ulbrich: Tim, one thing you said that is so important and Jess and I experienced this working with you and the rest of the planning team. You said, is this what we want? And a question that we have to come back to. And one of the things I love about our process, you know, step one, as we get organized, we really can’t do anything else until we have a good record and system of, you know, where’s everything at?

What’s the balance sheet? And do we have eyes on everything [00:51:00] that’s out there? Step two, how What’s the vision? We call it script your plan and, and once we set that vision, which I will go on record by saying, most financial planning firms and financial planners are making financial decisions without a vision.

And that is backwards. The

Tim Baker: even without like a balance sheet,

Tim Ulbrich: without a balance sheet.

Tim Baker: you have a pulse. Let me sell you this insurance product that you don’t need. Yeah.

Tim Ulbrich: And the vision, I always describe it, the vision should be the window in which you’re looking through. And the other side is any financial decision you’re making, how are we gonna handle, you know, the debt? What are we looking at in terms of investing and saying for the future?

Should we buy this investment property? What about this vacation? What about that? Right. And that shared vision, which you talked about is so important in terms of two people working together. But once we set that vision, you know, this is not the strategic plan at your workplace where it sits on the shelf and becomes dusty.

Like this comes back in the meetings to say, Hey, Tim and Jess in 2023 or whatever it was last time we did this, you guys said that tangibly, these were [00:52:00] the things that meant. You were living your rich life with your family. Have we done them? Have

Tim Baker: Yeah. You hold the mirror up, right?

Tim Ulbrich: hold the mirror up. And when we think about how we measure the ROI, right?

Of the financial plan. I know, I know a topic you’re passionate about. Sure. There are X’s and O’s that we want to look at. We’re spending so much investing of time and money working with the financial planner and what’s the potential return on that if we didn’t have that relationship. Yes. Let’s have that conversation, but what is it worth?

To say, this is the vision for rich life. And we’re actually going to make this happen and tracking whether or not we’re achieving that. Like we all know when we look back in 30 or 40 years, that is going to be what matters, not did we get our nest egg to 3. 9 versus 3. 6 million. So that vision and having someone that can facilitate the conversations to get to that vision, and then to hold that mirror back up and say, how are we doing?

Right. How are we progressing?

Tim Baker: and, and, and I think it could be a little bit of tough love, you know, a little bit of the [00:53:00] stick of like, Hey, you know, and if I’m talking to myself here, it’s like, Hey, Tim, like nowhere in your script, your plan meeting, your goal session, did you say that you had to lead the league in like bourbon purchases?

If that’s important, then like that should be in the financial planning and we should, we should, you know, we should account for that. But if it’s not, then like, what are we doing? You know, I know people can relate to like shop therapy and things like that. You know, that some of the things that goes on there, but like most of the time people are like, Oh, I have to have like, I don’t have to have these things, but that’s what we typically spend is empty calories.

That’s what we spend our. Our dollars on. It’s more of the and I’ll, I’ll shout out one of our clients. It’s been working with us probably since 2018. Um, I talked to each other yesterday. Like one of the big things to, to major things, um, that we’ve worked on so she good amount of credit card debt. Large amounts of student loans didn’t necessarily love her her job when she was working with us initially.

Um, You know, she w what was uncovered in her script or plan when [00:54:00] she had this passion for horseback riding

Tim Ulbrich: mm

Tim Baker: you have to do this. Like, this is obviously a passion. When you talk about it, you, you’re glowing. And she’s like, oh, but like credit card debt and I have to work more. And, and my student loans and you know, you, you fast forward today, you know, she has, the loans are forgiven.

She’s left that hospital system. She’s working in industry now. She loves their job, a flexibility, better money. Um credit cards are gone She has pickles the horse She she moved from one part of florida to another to be closer to like the national questioning center So like so like that was the big and then that was the big things and then when I talked to her yesterday And you know, her, her other big thing was she wanted to do an African safari with her mom when she booked September, early September, right?

She’s doing it. And she was one of these people where I was talking about like seven figure pharmacist. She’s like, yeah, right, Tim. Like that, that’s, that’s made up, but we looked at her portfolio again. This is not [00:55:00] indicative of like future performance, but her IRAs that were managing grew a hundred thousand dollars year over year.

And she’s like, Oh. Okay. Like I’m now I’m starting to get it, but like super pumped up about like these trips and like the passion and things like that. So like we talk about ROI, like we can see her net worth and her investments growing. Like that’s, that’s, that’s. That’s happened. But if you were to say like, what are maybe some of the things that are better about the life plan that we’ve built out, that’s financial, that’s supported by the financial plan or these passions of like this once in a lifetime trip, the fact that she’s, you know, making it happen with her, you know, with, with showing horseback riding and things like that.

So, and, and again, like, I think this. Can be harder with two, like, with two people to go back to the couples. Right. And you know, I think the way that Shay, I Shay and I do it in terms of rank ordering and, and, and talking through things like that. I think the help of a financial planner goes a long, long way because there’s different dynamics in [00:56:00] different couples.

You know, there’s some people that are a bulldozer, some people that you know, are more timid. And I think bringing. To light both both partners contributions and viewpoints and what their passion are is that’s, that’s what’s going to like save the financial planning profession from the robots, it’s those types of engagements and that type of care and about about our clients and what we’re doing.

It’s not. Some of these other things, right? Like, like invest in or whatever, those things are going to eventually be, you know, everything’s going to be by robots. But, um, I think it’s important again, it’s, it’s really hard to do this by yourself. It’s even harder to do it, you know, with a partner that has a different, you know, value structure.

And I think making sure that you’re rowing that. Boat in the same direction is, is vital. Or you, you know, you get, it’s passive aggressive or, you know, you, you bury, you bury things down deep and, um, you know, you, you hold onto them and [00:57:00] it’s not productive either.

Tim Ulbrich: Tim, perhaps obvious, but I’d like to wrap up here. And I think it needs to be said, knowing that many of our listeners might be the nerd and their relationship, right? Um, and if one person is taking the lead and if that’s you, which is very common that you might have one person kind of take the lead, it’s critical that the other person, the other party is informed, right?

Delegation does not equal uninformed. And I think this is where something like a third party, Um, can be a really valuable asset. This is where making sure you have periodic meetings. You talked about that earlier in the show, making sure you’ve got good systems and documents like legacy folders. We’ve talked about that on the show before.

And it reminds me back to an episode four years ago, we’ll link it, link to this episode in the show notes. One, I often referenced back to with Michelle Cooper, who wrote a book. I’ve still got me a widow’s journey to love happiness and financial independence. And during the show, she shared her personal story.

Of after losing her husband [00:58:00] to suicide and realizing shortly after his death that despite herself being an attorney And working in the financial industry for years She was out of the loop of their family finances and was left to navigate everything while also grieving the loss of her husband And you know again if one person’s taking the lead and that function works great.

But what are the systems? What’s the third party solution? What are the conversations that need to be happening to make sure that both people are are informed in that process?

Tim Baker: yeah. So important, Tim, and, and like I said, you know, I think, I think the best results are when you have two engaged parties most of the time. Um, that more or less take, take our advice. I mean, we do use tools that. Can keep maybe an absent partner or a spotty partner up to speed whether that’s emails or Recap emails or things like that, but I think the goal here just ultimately You know when you’re working as a couple on your money You want to the goal is to win most of the time and I think you know You’re never gonna be perfect.

Some people, you know, will will have bad [00:59:00] months or make bad decisions and and they feel despondent but you know, I think I think it’s really exciting and, and can be very relieving, you know, especially when you have the plan in place to know like, Hey, we’re okay. So we can maybe do things that are outside of the comfort zone, whether it’s saving or spending.

Um, whatever spectrum you fall on. And again, obviously we’re super biased because we believe in what we do. And we’ve seen, you know, great results from a lot of our clients. Um, but you know, it’s something that again, we just don’t do well because we, it’s not something we have the vocabulary for. So I love, I appreciate the topic.

Um, and, and like, like we mentioned at the top, like it’s not a one size fit all like, like there, there’s a lot of ways to kind of a tackle the financial plan and how your, your finances are set up. And I think it’s trying to, it’s the same thing with the budget, trying to find what works best for you. Um, and running with that and then kind of iterating [01:00:00] and making sure that, you know, you feel that all parties are kind of represented and feel good about it.

Tim Ulbrich: Let me end him by putting a plugin for our services. Cause I think our team just does this incredibly well. Shout out to our team of certified financial planners. If you’re listening, thinking, Hey, I’d like to learn more about what it would look like in working. With one of YFP’s fee only certified financial planners, whether you’re single, engaged, married, partner, we’d love to have that conversation.

You go to yourfinancialpharmacist. com. You’ll see an option there to book a discovery call. Uh, Tim leads those discovery calls, opportunity for us to learn more about your situation, uh, learn more about our services and ultimately determine, You know, whether or not there’s a good fit there, we’d like love to have that conversation.

And I think that, you know, we look at our process and our system, as I talked about briefly in terms of making sure we have everything organized, scripting that plan, setting the vision. Uh, we, we just do this effectively. And I think that not only are we trying to move the net worth forward, that’s an important part, but we’re also looking at, you know, beyond the numbers, what does it look like to be living a [01:01:00] rich life and how do we get clear on that?

And how do we develop a financial plan that could support. Living that rich life. So Tim really, really enjoyed the conversation and, uh, we’ll, we’ll catch everyone back here next week. Take care.

[END]

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YFP 395: What to Look for in a Real Estate Agent (And Why It’s More Important Than Ever)

Posted on by YFP Media

Tim Ulbrich & Nate Hedrick break down 2025 housing trends, agent tips & the new buyer’s agreement.

This is brought to you by Real Estate RPH.

Episode Summary

Tim Ulbrich, YFP Co-Founder talks with Nate Hedrick, PharmD and Founder of Real Estate RPh as they break down the key trends shaping the 2025 housing market, from declining home sales to soaring interest rates. Nate shares what to look for in a real estate agent, why local market expertise matters, and how the new buyer’s agent agreement affects you.

Key Points from the Episode

[00:00] Welcome Back, Nate Hedrick, PharmD!
[00:44] Current Housing Market Trends
[02:37] Home Improvement Decisions
[03:49] Hiring a Real Estate Agent
[04:07] Understanding Buyer’s Agent Agreements
[06:36] Key Qualities in a Real Estate Agent
[07:49] Researching and Interviewing Agents
[11:03] Local Market Knowledge
[15:17] Communication Expectations
[16:51] Buyer’s Agent Agreement Details
[18:57] Changes in Buyer’s Agent Compensation
[19:37] Negotiating Buyer’s Agent Fees
[20:17] Impact on First-Time Homebuyers
[20:52] New Agreement Structures
[22:02] Alternative Fee Models
[27:25] Important Contract Details
[31:42] When to Start Looking for an Agent
[33:14] Real Estate Concierge Service

Episode Highlights

“And let’s not forget..it’s a low bar of entry right into the field. And because of that, not all agents are created equal.” – Tim Ulbrich [05:41]

“ I would recommend knowing what your goal is and what your specific kind of target is. If I am an investor buying an investment property, that’s a very different agent. If I am looking for a farm with a hundred acres and a 10 horse horse stall, like that’s a different agent. If I’m looking for an apartment in New York city, like that’s a different type of agent.” – Nate Hedrick [06:50:]

“ Typically I recommend three to six months before you think you’re sort of ready to buy a house. If your lease is running out in June, then January or February is your time to start talking with agents and start that process.” – Nate Hedrick [31:58:]

“A good real estate agent can be an important, not just team member, but the quarterback of the team.” -Nate Hedrick [33:00]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Nate, welcome back to the show.

Nate Hedrick: Hey, Tim, always good to be here.

Tim Ulbrich: Well, we had you and David on REI real estate investing episode one 32, we talked about rent versus buy. Not a new conversation, but one that is relevant in today’s market and how today’s market might ship that conversation a little bit.

We’ll link to that episode in the show notes in case folks miss that. But today we’re talking about what to look for when hiring a real estate agent. And similar to our last episode, while we’ve touched on this periodically, there are some new things in the market related to, uh, buyers agreements and other things that we need to talk about that really are shifting this conversation a bit.

So we’re going to do that, but first let’s get your take Nate on kind of what’s happening in [00:01:00] the housing market in 2025. You know, if anyone’s been watching the news on this existing home sales. You know, fell again last year to lowest level since 1995, interest rates continuing to stay pretty high where they’ve been.

And people like you and I are saying, Hey, there ain’t no way we’re moving. And we’re not giving up the interest rate. We’ve had all of that contributing to what appears to be an ongoing challenging market for first time homebuyers. Right.

Nate Hedrick: Yeah, I, a lot going on just in the last 12 months and even in the short term, just in the last couple of weeks. Um, I’ll say all of this with the caveat that all real estate is local, right? So I might give a global trend or a local insight into. Cleveland, Ohio market that doesn’t apply to you, right?

Because it’s all going to be specific to your locale. Um, so that’s, that’s important to keep in mind that none of this stuff applies globally everywhere. It’s just sort of what we’re seeing in terms of trended data. So as you mentioned, we did see a new sales, new existing home sales, rather existing home sales.

[00:02:00] Um, and a lot of that analysts feel like was because of the rising interest rates, it reduced the amount of affordability that was out there. Um, if your interest rate goes up, that means your monthly payment goes up, which means you can’t afford as much house, which means, Hey, if I need a four bedroom because my family size is X and how I’m priced out of a four bedroom, like, My only choice might be to rent now.

Right. Um, so we saw a lot of that. The other thing, like you said, so astutely is just, we’re not moving, right? If you’ve got a sub 4 percent rate and you go to sell that property, your only option is to then go buy something that is. Either cash or above seven and a half percent. Right. Depending on the time that you were buying.

So a lot of people felt like, Whoa, I’m just going to put the brakes on, on moving and I’m just going to stay where I’m at. And so those existing homes kind of just sat there and didn’t move as much.

Tim Ulbrich: And I think what you’re seeing, Nate, which both you and I can attest to in our own situations and the pandemic really spurred this, but it’s continued as people saying, Hey, I’m not going to move. Maybe I was considering, I’m not going to move, [00:03:00] but I’m going to make improvements and updates to our house.

You know, we finished our basement this past year. We had talked about moving a year or so ago and decided, you know, what. Interest rates are what they are. And, and we had a much lower rate, mathematically doesn’t make sense. Let’s kind of focus on some improvements on the house. And just before we hit record, I heard the hammer in the background, right on your house.

So you’re, you’re doing something similar.

Nate Hedrick: Yeah. We, we, we basically have been talking about this for years and kind of this past. Within the last year, my wife and I sat down and said, look, I, I think this is it. I don’t think we’re moving. We’re pretty locked into this house. We love our location. We love where the kids are at. We love access. We have all the amenities we have here in our particular spot.

And so we said, let’s, let’s put on the sunroom. We’ve always talked about doing like, let’s just, let’s be here. And so, like you said, it just, if we wanted this exact property somewhere else, it’d be one, it’d be really hard to find and to pay an absolute ton for it somewhere else. So just make the improvements you want here and enjoy it while we’re here.

Tim Ulbrich: Yeah. Great [00:04:00] stuff. Well, today’s topic, what to look for when hiring an agent, again, not a new topic, but is. Updated information that we have to talk about. We’re going to get more in the weeds on this, but really the piece here that’s new is the implementation of a buyer’s agent agreement. So Nate, at a high level, kind of tell us why this new wrinkle has thrown a new factor into the equation for people to think about when they’re looking at hiring an agent.

Nate Hedrick: Yeah, I don’t want to get too deep yet. Let’s dive in as we kind of get through the pieces. But to, to, to set the 10, 000 foot stage, there was a settlement last year. We had an episode on this. Actually, um, the NAR settled on a lawsuit that was, that was pending. Um, they basically said we want it. Buyer representation to be very transparent, uh, by that extension or because of that ruling, um, the national association of realtors said, okay, before you work with a buyer’s agent, you have to have a contract in place that says what that buyer’s agent is going to be paid.[00:05:00]

And that compensation is going to be provided in a very clear laid out fashion. Um, again, we’ll go through some of the specifics, but in most cases, what those terms of those agreements say is that the buyer is agreeing to pay. Their agent, typically they’re going to try to get that amount from the seller as a, as a contingency of, of purchasing the home.

But technically the buyer is on the hook and they’ve sort of always been on the hook, but this is really laying it out to say, look, before we start working together, this is the contract. You have the sign that says how much I’m going to get paid. And that’s a very big difference from where it was years and years ago.

Tim Ulbrich: Yeah. And as you and I were planning for this episode, we said, Hey, Hey, these pieces now. Really raise the bar for this decision of hiring an agent. I mean, it’s always been important, but now we’re talking about signed agreements need to be in place, potentially financial implications on the buy side, if we can’t get the seller to take care of it.

And let’s not forget no offense to, uh, the real estate agents that are out there. Uh, but Nate, it’s a low bar of entry right into the [00:06:00] field. And because of that, not all agents are created equal. And we’re talking about what that means, but all the more reason that. On the buy side, we’ve got to be doing our homework and first time homebuyers.

Inevitably you’re excited about the home you’re looking. And this is where it’s like, Hey, aunt Susie’s third cousin’s neighbor is a good agent. You should work with them. And, and, you know, I remember being a first time homebuyer. We kind of run in that direction. That’s how I got connected to our agent, which thankfully worked out, but it wasn’t the best homework that we did in that process.

So. All the reasons we’ll, we’ll get into it during the episode of, Hey, as the buyer, what responsibilities do you have and looking for an agent? What are some of those things that you should be looking for to make sure you got someone in your corner, that’s really going to help you through this process.

So let, let’s start there. Nate, as I, as I mentioned, not all agents are created equal. So if that’s the case, what are some of the key qualities or traits that home buyers should be looking for when hiring an agent?

Nate Hedrick: Yeah, I think you could go down a bunch of different paths here. Um, I think [00:07:00] to start where I would recommend is know what your goal is and know what your specific kind of target is, right? So let me explain. If I am an investor buying an investment property, that’s a very different agent. If I am looking for a farm with a hundred acres and a 10 horse horse stall, like that’s a different agent.

If I’m looking for an apartment in New York city, like that’s a different type of agent. Right? So first start with what your goals are. Like if it’s just single family home in the suburbs, you have a bunch broader pool of people to be looking at. If you are looking for a specialized target, like. That that’s narrows your pool of options as kind of a first step.

Tim Ulbrich: Yeah. And I think that to your point, right. If someone’s looking at. A commercial property versus a residential. Is this an investment property that they’re thinking about doing Airbnb? And, and does that agent understand some of the local rules and regulations? Right? So start with the vision, start with the goal.

And then from there, what else are we thinking about on more of a micro level?

Nate Hedrick: [00:08:00] Yeah. So that’s where I would recommend you go out and you do kind of a background Google search, right? Or you’ve got great access to online information about these agents. You can get a good feel for something like transaction volume. You can figure out if they’re on a team. Um, if you look up their Zillow profile, their realtor.

com profile, you can see like, is it just Nate working as an agent by himself or does Nate have a team of people that I might be working with? And there, there are pros and cons to that. But if you set aside and you’re like, no, I want my guy or gal and I only want to work with that person. And that’s the way I want to operate.

Like you can do that background research without ever having to interview an agent that’s on a team or vice versa, right? You want someone that’s available all the time. Great. If you have a team of people, then you’re always guaranteeing somebody’s around. So you can do a lot of that background research to see things like that.

I also encourage people to look at agents, Facebook posts, their Instagram. Uh, I personally am and kind of terrible about being on social media, but you can get a pretty good feel for an agent’s style, their personality, their, how [00:09:00] they list a property. Um, a lot of agents will have walkthrough videos of their listings and you can feel out that person without ever having to interact with them, which is, which is nice, right?

You can just kind of start that book from. The very beginning without having to, to make a bunch of extra phone calls, interview a bunch of extra agents. You can, you can weed people right out over the internet.

Tim Ulbrich: Yeah. And I was joking, half joking about the referral, right? I mean, referrals matter and if people have a good experience, that’s great. But I, what I’m encouraging people to do is not stop there. Right. And what other information can we gather about that agent to understand, you know, whether or not they’re a good fit in our industry, in the financial planning industry for a firm like ours, that’s regulated by the sec, you know, a lot of this information is publicly available that people can look up.

You know, if they, if they want to read pages and pages of documents, they can read up forms that we have to publish in terms of services that we offer and fees that we have. And if there’s things like marks against or complaints against a firm or an advisor, you know, you can get to that information as well.

[00:10:00] Is there something similar that’s out there or what are these sources look like in terms of checking an agent’s experience in history?

Nate Hedrick: Yes. And no, um, a good agent will have a good review system somewhere, right? They’ll have either on their website or on Google reviews, realtor. com, Zillow reviews. One of those, hopefully if they’re a seasoned agent is going to have some sort of review system, um, where you can look at their actual reviews of their service.

Right. And if they’ve got. 20 people in the last year that have bought and sold a home and went on and left a glowing recommendation on Google. Like that’s a better indicator, uh, than, than if you don’t have anything out there. Right. Um, so that’s sort of one, you could also go to the national association of realtors website.

Um, you can actually dial down by your state. So like we have the Ohio realtors board and you can see if there’s been a complaint lodged against that particular agent or whatever. Um, it’s pretty rare to have that and have that agent be actively practicing, but. It might be worth looking up, um, and then ultimately you can just Google that individual, see if something’s come up, especially in [00:11:00] like the higher profile cases, you might see something where there’s an article published about somebody that, that maybe it’s, you know, good or bad, and you can kind of get a good feel for that.

So while there’s no national database that you can easily reference, there’s a lot of source material out there for you to go after.

Tim Ulbrich: One thing you said a little bit earlier to Nate, which is worth going back here is, is the importance of understanding the local market. And, you know, as we talked about on the real estate investing one 32 show, it’s not just the city or even the suburb or the area it’s, it’s, it’s the markets within the market, right?

It’s the school district, it’s the neighborhood. So what advice would you have for. Buyers that are out there to find an agent that really understands their market. Especially like I think about Jess and I, like, we’re not from Columbus and we’re looking for a home. Like I’m really leaning on that agent to help us out

Nate Hedrick: This is where the actual like agent interview might come into play. So again, you’ve done this sort of background research, you’ve narrowed it down. You can see that I have sold a bunch of homes in, you know, this particular city or this particular suburb. So now you’re going to add me to your [00:12:00] list of potential interview targets.

And, and I think a lot of people get like, Either overwhelmed or just turned off by this part of like, I have to set up like three interviews with three agents. Like that sounds like a lot of work. It can absolutely be worthwhile, right? This is a step that is a bit of a pain, but doing it now, we’ll make sure that you have a good process throughout.

And this is a huge purchase. Like you don’t want to get it wrong. So When you get that list, right, you’ve narrowed it down to two or three or four agents, whatever it might be, actually interview them, ask them questions about the local market. If they’re like, Oh, uh, yeah, there’s a, uh, I think there’s an apartment going in somewhere or like, you know, if they’re pretty unknowledgeable about the area, it’s going to come out pretty quickly.

Uh, if they understand it inside and out, you’re going to be able to hear and understand that right over the phone. So it’s something I recommend doing. Um, ask them questions about the local market, ask them about their experience. You can ask them for references, say, Hey, would you be if, and if your clients are willing, would you be willing to send me, you know, three people you’ve worked with and, and their contact info.

So I can just ask them how you were, um, [00:13:00] agents should be willing to give you this kind of stuff if their clients will allow it, of course, but, but they should be willing to give you this kind of stuff to support the fact that they are someone that’s good to work with.

Tim Ulbrich: Yeah. And they, just as you were talking, I was thinking about and jotting out some notes of things that just since living here. You know, we’ve come to understand that I probably could ask better questions about upfront, you know, school districts probably is the obvious one, but like in our neighborhood, we have this notorious issue with, we’re a smaller community.

And so where we draw water from, like, it’s really hard water and it just beats on your appliances. You better be ready for like costs associated with, uh, you know, appliances and soft water tanks and things like that. And everyone in the neighborhood knows it, but the buyer doesn’t know it. Right. Coming into the neighborhood.

I think about some of the HOA. Types of rules and specifics. And every HOA is different in terms of like, do they actually uphold the rules? Do they not? What does that look like? What are the fees? And that stuff, easy to find, you know, property taxes. Like we’re on the line of Franklin County, which is where [00:14:00] Columbus is and Pickaway County.

Well, if you throw a stone, like, and you’re in Pickaway County, property taxes are a whole lot different than they are in Franklin County. Right? So these are the things, what’s the economic development going on in the area? What’s the growth and population look like? I mean, so many things that a good agent.

Proactively hope is getting out in front and supporting you in that way.

Nate Hedrick: you can even ask them. Uh, I kind of like this question. I’ve, I’ve done this before with clients where you ask, you can ask the agent, um, you know, anything going on with city council, I should be aware of. And if they look at you like with deer in the headlights, right, that, that might be a bad sign. They should be involved in the community in some fashion.

Now, again, can I be involved in every single community around all of Cleveland where I start? No, but if you’re really specifically looking at like, Hey, I want to be in Brecksville, Ohio, or, you know, pick a spot, like Then you better know the nuances of that specific location. Uh, and what’s coming, right? If there’s a new trail going in, if they’re going to be rebuilding the bridge that you’re accessing your house from, right.

And you’ve got to go around an extra five miles for the next two years. Like those are the kinds of things you really want to have [00:15:00] an insight to.

Tim Ulbrich: Yeah. Nate is a first time homebuyer. Maybe you can relate to this. If somebody would have told me those things, I’ve been like, yeah, yeah, whatever. It’ll be fine. Right. But those are the things like, I think about the Metro parks and how we use the Metro park, like these things matter day to day in terms of quality of life and, and how you’re interacting with your community.

Nate, one other thing I want to ask you about here with this idea of interviewing agents, love this idea. Um, and I think we should have a similar conversation when it comes to like lenders, interviewing lenders and getting a feel. For what’s a good fit there, but how about communication? You know, what, what conversation, what questions can people ask?

I know first time home buyers, right. They’re eager. They want responsiveness. What’s reasonable. What’s not reasonable. How, how can you guide our listeners as an agent of maybe what buyers should be thinking about or think about asking an agent around communication?

Nate Hedrick: Yeah. I think setting a stage of like, what is realistic? So what are you looking for? Right? If someone came to me and said, look, I expect you to be answering a text message within five minutes from 7 a. m. to 10 p. m. I’m like, [00:16:00] I might not be the agent for you. Like I’m going to be with other clients. I have responsibilities.

I have kids like I’m going to get back to you in a reasonable amount of time, but, but this is what it looks like. So I think asking questions, knowing what your expectations are and just. Delivering that to the Asian and saying, Hey, here’s what I would like. I prefer to communicate via text or I prefer an email.

I really like a weekly phone call to understand where we are. If you can set that up with the Asian and they say, yeah, that’s absolutely reasonable. That works well with me. Or you know what? Like. That’s not how I operate. That’s how you’re going to get good communication. I don’t think it’s just coming at them and saying, do you have good communication skills?

And they’re like, yes, I do. Uh, because everyone’s going to say that you have to kind of make it a two way street of like, here’s how I expect to communicate. How’s that going to work?

Tim Ulbrich: Yeah, especially in this market, right? Timely communication, really important. So clear expectations upfront, what specific communication modalities, expectations around hours and timeline of responsiveness, all really important. All right, let’s talk about that buyer’s agent [00:17:00] agreement in more detail, because this is the new rankle.

As we talked about the beginning, really heightens the pressure on the buyer to make sure they have an agent that’s the right fit. As you mentioned the, the backstory for this, and we’ll link to it, it was episode one 18 of the Real Estate Investing podcast that you and David talked about the settlement from the National Association of Realtors.

We don’t have to get into the whole weeds of, of that all again. Uh, but that really led to this implementation of a buyer’s agreement that if anyone’s listening and bought a home, let’s say what? Eight months ago or yeah, since August. So anytime before that, you’re like, what buyers agreement, right? This wasn’t a thing.

So tell us a little bit more about what that looks like practically right now. So if I’m a first time home buyer or perspective, first time home buyer listening, and I’m starting to search, what should I expect in terms of these agreements and what the intent is of those agreements?

Nate Hedrick: Yeah. And it’s funny. I actually just went through this conversation earlier this morning. So like this is super relevant to what we go through every single [00:18:00] day. Um, but essentially what has changed is that before you can look at homes with a particular agent, they are supposed to have supposed to have a buyer’s agency agreement in place.

They basically says, I am going to be representing you. Here are the terms of that representation. Here are all the things that I’m going to do for you. Here is how I’m going to represent you when I’m talking to other agents. Here’s how I’m going to represent you to potential sellers. So on and so forth, right?

It lays that all out for my efforts. My compensation is X. And for the point of this conversation, let’s just say it’s 3%. Okay. I’m going to make 3 percent on the, as a percentage of the home sale. So if the house sells for 500, 000, I’m making 3 percent of that. If it sells for 200, 000, I’m making 3 percent of that, whatever it is.

And we’re going to establish that that is the, that is the amount that I’m going to be compensated. Now, where we get that from is up for negotiation. And that’s the big, the big nuance, the big difference from what it used to be. It used to be that the sellers would just offer whatever they were going to offer.

When you got a listing agreement in [00:19:00] place, you negotiated right then and there with the seller. Hey, it’s going to be two and a half for me, two and a half for a buyer’s agent. And when I would go show a listing, I would know it would actually display it. It would say, Nate, if you help a buyer by this house, you’re going to get two and a half percent, right?

It was listed right there. That is gone. There is no buyers. Uh, agreement that’s listed or advertised by a seller. Now, when I go to make an offer, and again, I just did this today with a client, uh, actually last night. And we said, look, here’s the offer. It’s 250, 000 in a 3 percent buyer’s agency.

Compensation agreement, right? And so that, that 3%, we pre established that that’s what I was going to work with the buyer for. And now we’re trying to get it from the seller. Interestingly enough, again, since this is, this is happening right, right here now with this client that I’m working with, they came back and they said, okay, we’re going to counter and we’re countering at this, this slightly higher number than what you’ve, what you’ve come up with.

And we’re only willing to pay two and a half percent of your buyer’s agency contract. And we said, okay, let’s talk about that. And so I went back to the [00:20:00] buyer and, uh, Ultimately, what we decided was that that’s fine. We’re going to take two and a half from the seller and that 0. 5 percent is actually going to come from my buyer.

And they’re going to, they’re going to pay that out of their closing costs. Um, but all of it is very transparent. All of it is very negotiated. Um, and that’s just how the agreements work now. So you’ve got to establish that before you ever look at houses, which is just way different than it ever used to be.

Tim Ulbrich: So different, right? I mean, days gone by quick recap, days gone by seller’s going to pay all the fees. So you were expecting as a seller, it’s going to cost me five or 6%. Right. And I’m paying for both the listing agent and I’m paying for the home buyer’s fee. It’s going to come out of that. So first time for the home, any home buyer, but first time home buyers, especially where we think about money available for things like a down payment, closing costs, things like this, they weren’t thinking about this fee.

Okay. On the front end. And so now we have this new piece, which is, Hey, we have to have an agreement upfront. It’s going to clearly outline what the buyer’s agent fee is that can no longer be on the listing. And the hope is we can negotiate [00:21:00] that from the seller, but I’m guessing you can tell us more here in a moment that, Hey, there’s going to be variances of this.

And depending on the market, there may or may not be more pushback. Right from the, the seller on this. So is this what you’re seeing? Like, are you expecting more of this? Like what you just had yesterday where, Hey, the seller is still going to kind of like days gone by pay for most of it, but we’re going to negotiate a little bit of that and now we got to put that on the buyer.

Nate Hedrick: Yeah. I think, I think this will be kind of the norm. I think you’ll see just more nuance to it of like, you know, let’s push back a little bit. Let’s adjust this number here. I’ve had some competitive bids where, uh, you know, there’s a lot of bids going into a house and the buyer’s compensation that the seller, that that was being.

Requested kept dropping, right? It’s, Oh, it’s only 1 percent for this offer. And ultimately it’s all money. Like if we take a step back, right, this was all baked in, even in the old way, it was all baked into the purchase agreement, right? If you were paying a 6 percent commission on a listing, like that was baked into the price.

Now it’s just very out in the open and it’s part of the negotiation. So it’s not [00:22:00] like it’s actually changed. It’s not actually more dollars out of the buyer’s pocket necessarily. It’s just out in the open and it’s a fully negotiated point.

Tim Ulbrich: Yeah. So if we just put some numbers to this, Nate, if we think about a 300, 000 home. Let’s say a typical buyer agent, I know some might be a little bit lower, but let’s say a typical buyer agent says, Hey, my fee is going to be 3 percent to you. First time home buyer. So if we get the home for 300, 000, that 3 percent would be 9, 000.

Now, if we can get that all from the seller, great. Nothing out of pocket, but if we can’t, let’s say the seller extreme circumstances, not nothing it’s on you. The buyer’s got to come up with 9, 000, or if it’s a variation. Like the one you just gave two and a half percent. Most of it would come from the seller.

And then a little bit is going to have to come out a pocket from the buyer. Do you, do you think most, I guess we’re assuming all agents are following the rules. Let’s start there,

Nate Hedrick: I hope so. God.

Tim Ulbrich: Yeah. But do you think a lot of agents in the instance you just gave where the seller says, Hey, we’ll do two and a half percent.

Um, that’s, that’s what [00:23:00] we’re going to negotiate. Do you think most agents are going to hold the line on their 3 percent fee and put that remaining point on the buyer? Or do you think people will start to discount? Their fees to not have the buyer. Can they do that

Nate Hedrick: So yeah, I think, so it’s, it’s, well, the, the, can you do it is very broker specific. So, so if you, if you kind of take one step back right behind me, like ultimately I’m representing my broker, right? So they’re actually the one that’s being paid when we close and then they give me a chunk of that payment.

So that 9, 000 or whatever we get, that actually, it goes to my brokerage office, first title office sends it to them. And then I have a contract with my broker for what my compensation from them is. I can only do so much in terms of like, well, just make it 1%. Like the broker is actually establishing these negotiated fees so that they can run a business, right?

It’s just part of, part of how that works. So that’s kind of part one. Um, there is, there is some adjustment that can take place. You could absolutely go back and say, you know what? Let’s renegotiate this. Everybody’s drawn a hard line in the sand that says that 0. 5 percent is going to be a deal breaker.

Like, okay, maybe we can work this out and waive some of the [00:24:00] compensation. Um, I think the risk for agents out there that is, is you could just start to dilute. You know, your work down so far that it’s not worth doing

Tim Ulbrich: the bottom. Yep.

Nate Hedrick: exactly. Um, so I think, I think it’s, there’s a lot of, of nuance to it. Um, but I do think we’ll see this continue where you’ll get this kind of negotiation on that, on that one to 0.

5 percent piece, uh, every single time.

Tim Ulbrich: One of the other things we hypothesized when we discussed this back in the summer was would this, or would this not disrupt the traditional. Right? So you, you gave the example of it’s a, it’s a percentage, right? Whether it’s a 300, 000, our home or 500, 000, our home, let’s say it’s 3%. Obviously that that’s very different dollars, right?

We’re talking about 9, 000 versus 15, 000 in that instance. Um, so we, we, we wondered, would we see a transformation to alternative fee structures, flat fee models, some hybrid things that might be out there. Are we seeing that or not yet?

Nate Hedrick: Absolutely. Yeah. They’re out there for sure. And, and we’ll even [00:25:00] 3 percent up to a certain cap or, you know, there’s ways to get around it, um, and, and make it more flexible because you’re right there, there. even in the old days, right? So, so higher end listings and higher end for Ohio, right? Like in like the 800, 900 million range that that’s higher end for Ohio.

Um, you would see that, that fee get diluted where, okay, it’s 3 percent up to 500, 000. Then it’s 2 percent of the next 200, 000 and 1 percent after that. So that you would see that fee come down as, as price points got higher anyway. Um, so yeah, I’m seeing people that are putting caps out there. I’m seeing people that are dropping their percentage based on it.

Purchase price. Um, I’m seeing, um, I’ve only seen a few of these and they’re not really taking off, which I think is interesting where people will do like a flat fee where it’s like, Hey, look, I am 1, 500 to negotiate a contract and I’m a thousand dollars per 10 showings or whatever the number is. Right.

And you can just agree to that upfront. And every time we hit 10 showings, you get, you’re going to pay me 2, 000 or a thousand dollars cash. And we’ll, you know, and it goes to my [00:26:00] broker. We figure all that out. So like there’s ways people are getting creative. I think that’s Not taking off yet, but I could see a world in which like someone looks at that and goes, that for me is what I want.

I want this a la carte option. I’m going to go with this person.

Tim Ulbrich: here’s my theory for why that’s not taking off Nate. And you can tell me if I’m wrong, cause you’ve got a lot more experience than I do is because so many first time homebuyers in today’s market may go searching and actually not find something. I don’t know if they’re willing to incur the costs to be empty handed at the end of it.

Right. Because the way the agreements are structured it with, with a 3 percent model, we got to get to the finish line before a fee is paid. Yeah. And now I would argue if I’m an agent, I’m doing work. I could show somebody 10 homes. And if they come up empty handed, like that’s unfortunate, but I just spent a lot of time showing them 10 homes and hopefully we’re doing it well.

And it takes an investment of time. So I can see both sides of the coin and the story, but I, I would guess in a different market than we’re in, that might take off a little bit more. But, uh, I, I [00:27:00] suspect many people might think about, Hey, I could spend a thousand dollars going to see homes. And then actually, actually don’t ever end up getting one for whatever reason.

Maybe there isn’t, isn’t enough inventory or they just change your mind. Right.

Nate Hedrick: no, I think you’re right. I think that’s probably, that’s probably right. I think that that may start to shift if, if people change their mind or if inventory changes, like you said, or if it becomes more of a buyer’s market, um, that may start to change, but you’re right. You could go to 10 showings, put in 10 offers and still get nothing because you know, the housing market’s crazy and you’re getting beat out on offers.

Right. So yeah, I, I totally see that.

Tim Ulbrich: We’ve talked a little bit about this, but I want to pick your brain some more. This, this to me adds a new layer of attention to detail that’s needed that I’m not sure if I think back to my first time home by herself and in 2009, come out of residency, like. Give me the documents. I’m signing the papers.

We’re buying the home, right? I don’t know how much I’m reading the details of it, but what’s in this agreement now, I think is really important information, right? So what should people be looking for in [00:28:00] terms of, of course, read it, but are there specific parts of these agreements or things that may vary from one agent, one broker to another, that, that might help them determine what’s a good fit?

Nate Hedrick: There are a few. Yeah. So the first one is to look for, uh, the actual compensation and how that’s delivered. Right. So, um, is it delivered at closing? Like, is it delivered, uh, you know, even if you don’t close on the house, like, so I’ve, I’ve seen agreements out there and we don’t do this, but I’ve seen agreements out there where if you bring a willing and able buyer and you.

They back out for a non contract reason. Maybe we get to five days before closing and you get cold feet and you’re just like, look, Nate, I can’t like I can’t. It’s too much. I’m done. They can have my earnest money. I don’t care. There are contracts that are built. I’ve seen these out there where the agent still gets paid legally.

They should get a compensation of 3 percent or whatever. for that deal because they brought a willing and able buyer. They were ready to close on house. The seller was ready to close and you screwed it up, right? So watch for language like that, that says how that payment is made and when, right? [00:29:00] Super important.

Um, also look for how you can get out of these agreements, right? So it’s a lot of stress to say, Hey, I want to agree to work with Nate or whoever, um, for six months, let’s say under a, an agency agreement, right? Whoa, I’m not sure I’m ready to commit. How do I get out of that? So our contract, our standard language in our contract is that if you notify me within 72 hours, like we’re done, only the houses that I showed you, are we, are we responsible for?

So I can’t like show you one, two, three main street. You write me a letter, say, Nate, we’re done. And then you go to the seller directly. Right? If I’ve showed you the house, we’re, we’re together on that. But if you were like, Nate, it’s not working out like this is how you can walk away. So look for what that walk away language looks like and make sure that you’re comfortable with it.

So those are the big ones that I, that I think can, can try to trip people up. Um, and then also look for the last pieces where that compensation is coming from. So again, the goal is to get it from the seller. Um, but it should be listed pretty explicitly in the contract that that is the goal. The way our, our contract is written, uh, it basically says [00:30:00] like we are trying to get this from the, the goal is to make this a piece of the commission or the piece of the compensation from the seller.

Uh, the goal is not to make the buyer just pay for it out of pocket. So I think that language is important to have in there just so you can be, make sure that the goals are aligned with, with what your goals are.

Tim Ulbrich: The time piece is really interesting, Nate, and I’m connecting some dots. Now I had a conversation with a connection through one of my boys baseball last summer that was bemoaning a, uh, by this must’ve been actually right after the implementation, probably late summer, early fall, uh, was bemoaning this relationship he was in.

I think he said a year. Um, and it’s just a really good example of the 72 hours, right? Makes sense. Whatever you showed them. There should be a, an agreement and understanding for it, but there also should be an opportunity to change relationship, change. Maybe it’s not a good fit. We thought it was a good fit, whatever might be the case.

And man, you don’t want to be tied up long term if you don’t have to. So I don’t know, maybe there will be some rules and stuff that come around that a while, but that to me [00:31:00] seems really a long, a year.

Nate Hedrick: Yeah. I think that typically what I’ll see is, and you’ll see this, you have like listing agreements, right? So it’s the same idea. Uh, and this has always been the case. This has been the case for years. If I list a home and I have 25 people that see it in a six month period, well, you can’t. And the listing agreement on January 1st and then on January 3rd, except an offer from one of the people that, that saw the house.

I get like six months after that. Anybody that saw the house, if I can prove that they saw the house when I was the one that’s trying to show it, then I’m, I’m due compensation. That’s always been there. And so I think that’s pretty similar. Hopefully that person wasn’t actually locked up to that agent for a year.

They were just locked to the listings they saw, but perhaps, I mean, that could be out there.

Tim Ulbrich: Oh yeah, that’s true. That might’ve been it. Hopefully, uh, he was not happy. I remember that.

Nate Hedrick: I can, I can imagine. That sounds awful.

Tim Ulbrich: So Nate, I’m a prospective homebuyer listening, um, you know, um, I want to be in this crazy market at some point, maybe in the spring or summer, when is a good time to be thinking about looking for an [00:32:00] agent to begin that, that home buying search, that home buying journey.

Nate Hedrick: Typically I recommend three to six months before you think you’re sort of ready to buy a house. Like if you can see yourself, if your lease is running out in June, January or February is your time to start talking with agents and start that process. Um, just to kind of work backward, right? Like if you have a goal of like, Hey, we want to be moved in by.

The fall for the school district. Typically, you’re going to have a 30 to 40 day closing, right? So you got to work backward from that. And then you could have anywhere from a week to five months of looking for a house, right? It depends on your market and what the kind of averages are. So building in that.

three to six month window, make sure that you have a pretty good chance at getting everything done in time. Um, longer than that, if you’re, if you’re a year away, you’re probably looking too early. Interest rates are going to change. The market’s going to change. Um, you’re just going to be wasting you and your agent’s time if you’re looking at that stage, but that three to six month window tends to be kind of the sweet spot.

If I, if I, [00:33:00] based on my experience.

Tim Ulbrich: Yeah, Nate, as we’ve talked about before on this podcast and in other webinars, like the, the, a good real estate agent can, can be an important, not just team member, but the quarterback of the team, right? There’s a lot of questions that can come, uh, in the home buying process and that individual, especially with good experience can help you navigate a lot of those.

So we really believe this is one of the first puzzle pieces of the puzzle, not the first piece of the puzzle that we have to put in place, which is a good segue in to talking about the real estate RPH concierge service. Many of our listeners, if they’ve, if they’ve heard the show before, know that we’ve had the opportunity to partner with you now, five years, six years, seven years, and, uh, we, we love what you have done to help pharmacists, home buyers all across the country.

And you’ve actually had on a couple of previous buyers that have worked with you on the show, and we’ll link to those episodes in the show notes. If people want to get a feel for what that is all about, whether someone lives in Cleveland, in your backyard, in my backyard, in Columbus. Tulsa, Oklahoma, you name it across [00:34:00] the country.

The goal of the concierge service is to get them connected with a local agent that is a good fit, not only a good fit in that agent relationship with that buyer, but that also then has you in their corner and with them along the process, uh, throughout the home buying journey to help hold their hands.

So tell us more about that concierge service, whether it’s a first time home buyer, second time home buyer. Investor. It applies across the board.

Nate Hedrick: Yeah, I mean, you nailed it. The goal is really take the guesswork out of this process, right? We’re talking about all these interviews. We’re talking about it. It’s a lot of steps and a lot of things to figure out. And when I first did it, especially, uh, as a first time homebuyer, I had no idea what I was doing.

Like, and I don’t know if a 30 minute podcast is enough to like make me an expert on interviewing real estate agents. Right? So, so we said, why don’t we develop this service? It’s completely free. It starts with a 30 minute phone call with me. We’re going to go through and answer any questions you have.

Okay. figure out your goals, look at your budget, figure out where you want to buy, like what kind of property you want to buy, all those important questions. So we can narrow in on [00:35:00] what is going to be the right agent fit for you. Then we’ll go out and either connect you with one of our network agents, people we’ve worked with in the past that we’ve vetted, that we know have really good backgrounds and are working with clients right now.

Um, and either connect you with one of them or we’ll interview agents on your behalf until we can narrow down to somebody we think is a good fit. You move on, you work with that agent, you can either, Stick with them like we’d recommend, or if it’s not a good fit, come back and we can, you know, redo the process, right?

That only happens a fraction of the time, but we’re, you know, you’re not locked into anything. The goal here is to make this a great process. And so that’s, that’s kind of how we, how we build it. So completely free service. Uh, the idea being that it just takes the guesswork out for everybody.

Tim Ulbrich: So you can find more information on that real estate, rph. com. Uh, you can get to Nate’s website, get connected with him. You can also send us an email at any time info at your financial pharmacist. com. And just say, connect me with Nate and we’ll help make that introduction. Uh, as well, and, you know, Nate, I, I’m thinking about the [00:36:00] small percentage of people that are listening in Northeast Ohio, which obviously have you in their backyard.

That that’s an easy win, but to clarify again, it’s really the intent is no matter where you live in the country, uh, that, that Nate can be alongside of you to help you, uh, engage and find that agent, which is we’ve outlined in this episode today. All the more important in evaluating agents, making sure that’s a good fit in the context of the new, uh, buyer agreement.

So again, real estate, rph. com. You can get more information or send us an email info at your financial pharmacist. com. Nate, as always really appreciate your experience and, uh, the perspective you give. Thanks so much for coming on.

Nate Hedrick: Tim, thanks for having me on the show.

[END]

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YFP 394: Crafting a Rich Life in Retirement: Insights from David Zgarrick, PhD

Posted on by YFP Media

Tim Ulbrich, YFP Co-Founder welcomes back David Zgarrick, PhD to share his journey into “preferment,” balancing retirement, financial planning, and staying engaged through teaching and consulting.

Episode Summary

In this episode, Tim Ulbrich welcomes back David Zgarrick, PhD, as he shares his journey into what he calls the “preferment phase” of life. Dr. Zgarrick opens up about his transition from academia to retirement, the joy of new routines, and the power of early financial planning. He highlights the importance of staying engaged—through consulting, teaching, and meaningful activities—while keeping financial health in check.

Key Points from the Episode

[00:00] Welcome Back, Dr. Zgarrick!
[00:10] The Preferment Phase Explained
[01:56] Living the Rich Life Today and Tomorrow
[05:11] The Importance of Early Financial Planning
[07:48] Navigating Retirement and Financial Management
[10:58] The Value of Community and Personal Fulfillment
[14:38] Staying Engaged Through Consulting
[38:33] Advice for Different Career Stages
[44:42] Final Thoughts and Wisdom

Episode Highlights

“ Dave, take a deep breath. You’re not going to run out of money. And here’s why you’re not going to run out of money because you never ran out of money before and you’re not, you know, unless you turn into some different person who starts spending money in a different way, you’re not going to run out of money.” – David Zgarrick [8:37]

“ One of the conversations that my advisor has been having with us is reminding us it’s okay to spend a little bit more money. It’s okay to, you know, go on that trip or do those things.” – David Zgarrick [9:49]

“ So long as I feel that sense of value I choose to engage myself. And, you know, on the other hand, there are places where I no longer feel that sense of value and I have made conscientious efforts to step away from those things.” – David Zgarrick [20:37]

“ Maybe one of the aspects of the transition that has been more challenging is, is feeling like you are part of something that is important or has a higher purpose.” – David Zgarrick [21:55]

“ I’ve come to realize that’s okay, because the people that I do have influence with, and the people that I am, shall we say, involved with, is a smaller group of people, but in some ways we have deeper and more meaningful types of relationships.” – David Zgarrick [23:44]

“ Nothing is forever. And you do want to make sure that you are taking the time to spend time with people who are important to you and to do the things that are important to you.”- David Zgarrick [43:37]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Dave, welcome back to the show.

David Zgarrick: Thank you, Tim. Good to see you.

Tim Ulbrich: Well, we had you on almost two years ago to the date, and that was episode 291. We’ll link to that one in the show notes. And one thing that stood out from that interview for me, David, that I have shared with many other people was your mention of shifting, not to retirement, but a quote, preferment phase after over 30 years in academia, quickly recap for us, what, what you mean by that, the preferment phase, and maybe what’s that looked like now, two years later.

David Zgarrick: perform it. And just to kindly borrow a phrase that many of, you know, Lucinda Maine. She was the executive VP at American Association of colleges and pharmacy. And I served on their board of directors for a number of [00:01:00] years, got to know, listen to many other folks at very well.

We send it. I were kind of on the. Same timeline in terms of making this shift. And she, and I know she, she heard this term from another fellow CEO of another professional association in DC same timeline that she did is there’s the sense that, you know, when it’s time to change paths, so to speak, it wasn’t that I was retiring, you’re totally stepping away and, you know.

Sitting back and not doing much of anything. It was the sense that I’m going to, um, I am going to in some ways step away, but I’m going to also remain engaged in doing things, particularly things that I really like to do and I value doing, and that was that sense of that’s where preferment came from. I’m, I’m doing things that I really prefer to do both for myself as well as things within our profession.

Um, And at the same time, um, you know, [00:02:00] not having the same schedules and the same demands that we did when we were, you know, working as part of other organizations.

Tim Ulbrich: When you say Dave doing the things that I really like to do and value to do, you know, we talk often on the show about the importance of yes, the X’s and O’s financially, but also finding that way that we can live the rich life today and tomorrow. And, and I think we’re saying the same thing in a different way.

What are those things? So when you think about the performance phase, we were talking about skiing before we hopped on the show, but what, what are those things that you’re, that light you up?

David Zgarrick: Well, you know, in some ways, you know, they start with the real basics that I think a lot of us have the routines, maybe that many of us enjoy. You know, it’s interesting as I’ve moved into this. Phase mornings, you know, your your regular everyday working phase mornings can be a very hectic busy time for many families and many people because you’re obviously getting ready to get up and go to work and all that kind of stuff.

In this phase right now mornings are actually [00:03:00] one of my favorite times a day because it’s I, I You know, it’s probably fair to say I ease into my mornings. I have never considered myself a morning person. I’m not one of those people that, you know, jumps up and goes on a 10 mile run and then goes off to work or something like that.

That was not me. Um, I get up, I. Do my Sudoku. I do several of the New York Times puzzles that, you know, the word, all the connections that that kind of stuff. Um, I have a cup of coffee. I eat my breakfast. I think about what I’m going to do. Um, you know, one of the things that preferment has meant for me is taking better care of myself.

Um, and so things like, um, am I going to go to the gym and do a workout? Yeah, I do. The weather’s nice. Am I going to go up for a nice bike ride? You know, those types of things. If it’s a ski day, am I, you know, yeah, I’ll get up and get ready to put my stuff in the car and head off to the mountain and go skiing and all that kind of stuff, [00:04:00] even though so those things I do in the mornings are not nearly as rushed.

They’re just. Basically doing the things that that means something to me in our value to me and, and, and, and, and fit well with, with what I want to do. So, so from a, from a very personal sense, you know, that’s, that’s a lot of what performant is, is meant to me.

Tim Ulbrich: Dave, what I love about that is I think sometimes when we think about retirement or what we’re calling here a preferment phase, we have these grandiose vision of these big things, these big experiences, which there is a time and place for

David Zgarrick: Yeah. Oh, yeah. Very much

Tim Ulbrich: But often, I, I think it’s what you’re talking about.

It’s, it’s the flexibility of the day and kind of how you spend your time. And, you know, you talk about investing more in yourself and kind of the pace of the morning. Like these are the things that when we talk about living a rich life, you know, that really resonates with me. Like, and by the way, like [00:05:00] those aren’t crazy expensive things.

Um,

David Zgarrick: no. Exactly. Exactly. No, no. It’s, you know, doing my Sudoku and the New York Times crossword and a wordle and those kind of stuff. Those are those are pretty inexpensive things to do, uh, you know, going down to the gym to work out. Yeah. I pay a little bit for a gym membership, but in the big scheme of things, that’s, that’s not a terribly high expense.

Tim Ulbrich: Dave, one of the things in our previous conversation that really stood out to me was your mention of how important the early planning was, the, the foundation bricks that you laid early in your career that allowed you to get to a point of financial security, allowed you to get to a point of having the option, right, having this phase that we’re talking about now that you’ve been in this season for a bit of time, how has that planning impacted?

Day to day. Right. We talk so much about the accumulation and getting to this point. We don’t talk as much about, well, what actually happens [00:06:00] when you retire

David Zgarrick: Those are great points because obviously you’re still planning. You’re still utilizing financial management and financial management skills. It’s it’s not like you get to the end of the road. It’s like, okay, I’ve got all my money and now I don’t have to do anything to worry about. You know, you still have to be engaged in in plan.

Um, you know, now probably more, you know, let’s just say this. I’ve always been engaged. Um, not just in saving money. I mean, I re I was reflecting on it. It wasn’t in our previous conversation, but I think you had posted this once. It’s like, you know, what’s, what’s your favorite fun way to spend money? You know, does every, everyone has a fun thing they like to spend money on and everything.

And I, I kind of answered that in a kind of a smarty pants way. But it’s like my, my favorite thing to do was actually save money. It made me feel good when I actually had some extra money that I knew that I could. And, and that was, um, you know, that sense of it’s going to give me options [00:07:00] down the road, you know, you know, whether it be maybe going on some fun vacation or something like that, or buying something that’s important to me, or, you know, being able to move into performance earlier than I probably had planned on doing.

And, um, you know, you know, having done that. You know, save that money really gave me those options, you know, spending money. Of course, you know, spending money is part of life. We all spend money and managing those skills, you know, the way you keep tracking your funds and the kinds of things you spend money on are things that I still pay attention to.

I still use Quicken, you know, all the time to basically track my expenses and, and keep tabs on what’s going on. Um, You know, I, I think it’s, it’s good to really remain engaged in that. I, you know, what, what I had a conversation with my financial advisor a few weeks ago, as we were going through, [00:08:00] you know, as we do most of the time, he goes to the Monte Carlo simulations of.

You know, how long is your money going to last under various situations and that kind of stuff. And, you know, his experience has been, you know, what, one of the things that most people who, especially people who retire relatively early, they, they do get somewhat, I don’t know if paranoid is the right word, but they’re, they’re concerned or somewhat overly concerned about running out of money.

Everyone thinks, Oh my God, I gotta be really, really careful. I’m going to run out of money. And my financial advisor basically told me, sit back, Dave, take a deep breath. You’re not going to run out of money. And here’s why you’re not going to run out of money because you never ran out of money before and you’re not, you know, unless you turn into some different person who starts spending money in a different way, you’re not going to run out of money.

I mean, yeah, maybe the markets go up and down. Maybe, maybe your resources become different. [00:09:00] You know what, you know what we all do in situations like that. We adjust, you know, um, you know, you know, one of the good things, I guess, about our lives. I mean, both myself and my wife were both pharmacists. So we were fortunate to have a fair amount of resources to be able to work with.

And when those resources are working with us, we’re. Enables us to do some really nice things, and that’s great. If, for whatever reason, those resources were not available to us, you know, we have a fair amount of, let’s say, discretionary in there, and we can certainly cut back on those discretionaries if we had to, and focus on, you know, what are the real absolute needs.

And, um, like I said, you know, I’m not really worried if anything, one of the. Conversations that my advisor has been having with us is reminding us it’s okay to spend a little bit more money. It’s okay to, you know, go on that trip or do those things. [00:10:00] Or, you know, our big thing this last year was buying a generator.

There’s an exciting way to spend. 20, 000, but you know, it’s, it’s actually something that was important. Um, especially given our, our move that we made over this past year, uh, moving from Colorado to Maine.

Tim Ulbrich: Yeah. And, and I’m glad you’re mentioning this, this behavior of learning how to spend on some level. Well, at the same time, like Dave’s not going to become a different person that got him to this point. Right. And I think that’s important that we objectively look at the facts, not only in the Monte Carlo simulation, but also in like, how have you gotten to this point?

David Zgarrick: Exactly, exactly. I, I got to this point because yeah, I, I, you know, saved money and I was judicious of how we spent it and, and I, I remained that way, you know, those things have not changed because I’ve moved into the performance stage. [00:11:00] Mm

Tim Ulbrich: about that because we had a really good brief conversation before we recorded about, you know, yes, it’s the X’s and O’s when we talk about retirement, but it’s also about. You know, community for many people and everyone’s plan is a little bit different.

And for some, you know, it’s, Hey, let’s get to the warm, warm weather and be a snowbird and that’s a good fit. Others, you know, we were joking. It’s, Hey, let’s get in the RV and travel and see the country. That’s a good fit. But for many other people, it’s, Hey, what, what is the sense of community and why is that important to us?

And I think your move to Colorado and then your move back to the Northeast is a really good example of that.

David Zgarrick: That’s that’s a great example of that. You know, I’ll go back in time, you know, two, three years, um, when we first started thinking about, you know, going down this path and my wife and I were having conversations about where did we want to be? It’s funny, you know, we lived in Boston for a number of years and, Had originally thought, yeah, we’re probably gonna end up in Maine somewhere in retirement and all that kind of stuff.

And we were out driving around one day and my wife was like, well, [00:12:00] why don’t we check out? Colorado is in Denver is placed to retire. And it’s like, I love to ski. That would be great. And we did. And so we made the move out to Colorado and, um. Let’s say, obviously, there are a lot of positives from about Colorado, especially from a skiing standpoint and being out in nature and all kinds of things, but but there were things that we really missed, too.

And I think that sense, you know, having been in particularly the Northeast for as long as we had, you know, there were there were a lot of things that we missed about the Northeast and and. You know, again, I consider ourselves very fortunate in that we, you know, we made this decision to move out to Colorado and then a couple of years later, we made a decision decision to move back and I’m glad that we did, that we, you know, didn’t feel locked into our original choice.

You know, we are happy, very happy to be back [00:13:00] to the Northeast. Um, we do have, you know, you know, community here, you know, between folks we knew in Boston and folks we knew in other parts of the mid Northeast. Um, we, we’ve had, you know, people come and visit us here. I mean, I, I was joking, you know, we, we had more people probably visit us in our first two months in Maine than we did in our two years in Colorado.

And, um, And, and so it was, it was just nice to be able to host people here. We did something here when we moved to Maine that we had not done. And my wife and I’s essentially 35 years of being together. And that was actually build a house. You know, the house that we are here in Maine is we, we worked with a builder and essentially designed and built something, you know, literally from the ground up, um, it was.

Kind of good. I feel very happy that we waited that long, you know, to do that. I know a lot of people build new houses fairly early on and that kind of [00:14:00] stuff. And, you know, sometimes, you know, it, let’s just say it helps to know what you want as well as to know what you don’t want when, when you build a home.

And that’s probably a conversation for a whole nother episode of your, of your podcast to people that are thinking about building homes and, um, You know what, you know what goes into that process. And I’d love to be part of that if you never want to go down that road. Um, but, but, you know, yeah, we moved here back to the northeast and built a home.

It took about a year to get that home built. But, you know, we’ve been here since last May and are really, really happy to be back.

Tim Ulbrich: shift gears, Dave, and talk about your decision to stay engaged in consulting work while your financial plan doesn’t require it. You just talked about your conversation with your advisor. It’s going to be okay. You, you’ve made an intentional decision to stay engaged in doing consulting work. Tell us more about that decision.

David Zgarrick: I’ll say [00:15:00] what part of it goes back to what we were just talking about with community and we have various different types of community. I mean, you know, for many of us, it’s our friends and neighbors and people that we knew in the areas where we lived and that kind of stuff, you know, a community.

That’s very important to me is is the higher education community, particularly the pharmacy education community. It was a very. Mm hmm. Important part of my, of my being for, you know, essentially 35 years and, and there are, um, many folks within that community that I’m still very much connected to, um, and I, and I stay engaged with them.

And now, in some ways that staying engaged is through doing little bits of teaching. I still, um, you know, have colleagues at various, I think this last year, I, um. Taught anywhere between one in six courses at six different universities. So, [00:16:00] um, you know, and much of that online. Some of it. Some of it. I actually did go, you know, visit campuses and that’s that’s I can’t begin to tell you how much I appreciate that.

I like. The teaching in person as opposed to, you know, what so many of us have done over zoom and all that kind of stuff over the pandemic. So, so getting back into classrooms and physically meeting with students. Um, other, you know, a couple of universities I’ve been working as a, as a consulting, doing some faculty development work, doing some leadership development work.

Um, again, it keeps me engaged and involved. Um, yeah. You, we and our listeners know that, you know, there are challenges and very significant challenges in pharmacy and particularly pharmacy education right now. And, you know, what, one of the things I recognize as a consultant is I don’t have all of the answers.

I don’t have a magic wand. I’m not, you know, bringing me in as a consultant is not going to make your problems go away. Um, [00:17:00] But, um, but what I do bring is a perspective. You know, I bring a perspective by bringing experience. Um, I can help others who are dealing with issues similar to what I and other experienced leaders have dealt with over the course of our careers.

And we, we share a little bit about what we’ve learned. And at the end of the day, I, you know, I, you know, especially when you’re a consultant, I, you know, I recognize Transcribed What I am and what I’m not, and you know, what I’m not is a savior. I’m not, you know, somebody who comes in and solves all the problems.

What I do bring is a perspective. And at the end of the day, you know, I take a step back and say, ultimately, this is your problem to solve. It’s not my problem to solve. I’ll, I’ll provide you with this information and this feedback and this help, and at the end of the day, you’re, you’re, you’re, you on your end, they’re going to decide what you want to do.

And, and that’s, I guess that’s another nice thing about being in the performance [00:18:00] stage of life is I’ve gotten very good at saying that’s not my problem.

Tim Ulbrich: Yeah. Yeah. Or here’s what I can do and I can’t do.

David Zgarrick: Here’s what I can do and here’s what I can’t do or won’t do. So, I mean, you know, one of the things from the teaching, I mean, I’ve made a conscious decision. I’ve had colleagues at other universities come to me and say, Hey, Dave, would you like to? Teach this course, you know, not just a lecture or two, but come in and teach an entire course.

And that’s something I’ve taken a step back from and say, no, I won’t do that. I don’t want to be in charge administratively of all of the aspects that are involved because because teaching a course is, as you well know, is so much more than just coming into a classroom and giving lectures

Tim Ulbrich: You’ve served your time there. You’ve done it. Ha ha ha.

David Zgarrick: Exactly. And, and that’s, yeah, no, that’s, that’s, that’s not an area that I, that I want to be involved in anymore. Yeah.

Tim Ulbrich: And your story is such a good one, Dave, for me, uh, and it’s an inspiration to me when I, when [00:19:00] I think about retirement, um, I don’t foresee a point in time, you know, outside of, of health concerns or something that doesn’t allow me to work of not doing, you know, something, money aside, you know, I, I just value.

That feeling of being engaged, of contributing, and it’s a two way street, right? So when you’re consulting with universities, whether you’re teaching or, you know, consulting, uh, with the leadership teams, whatever you may be doing, of course, you’re providing your experience and offering value. But that’s a two way street back to you of, of that sense of feeling of, of contribution and, Hey, you built a career and have gained these experiences and skills and to be able to share those.

Yes, you’re going to get paid for it as a consultant, but I would argue there’s, there’s perhaps even a greater value that comes from a sense of contribution.

David Zgarrick: Yeah. No, I mean, it all comes down to, I mean, I, I have a pretty simple mantra these days. I mean, I, I want to do things that I value and I want Okay. [00:20:00] What I do to be valued by others. I mean, and there’s all kinds of ways to define value. I mean, you know, there’s, there’s what one gets paid, of course, but, you know, there’s other things that you and I both do that, you know, maybe the sense of value isn’t in what we.

Get paid for doing, but it’s in how we’re making that contribution. And is that contribution important to yourself? And is that contribution important to the others that, that you work with? And, um, you know, so long as I feel that sense of value, I, I choose to engage myself. And, and, you know, on the other hand, you know, there are places where I no longer.

Feel that sense of value and I have made conscientious efforts to step away from those things. Um, you know, I, I don’t, you know, again, it’s, it’s, it’s a, it’s very nice being at a [00:21:00] point in your life where you don’t feel you to do something.

Tim Ulbrich: Yeah. Dave, I remember probably three months or so ago, you and I had had touch base. And one of the things you mentioned was how stark of a transition it was. To go into retirement where you’re no longer day in, day out, interacting with colleagues. Uh, and I know that shifted a little bit with the pandemic.

Maybe that was a, a, a, a little bit of an off ramp, you know, and, and reduced that. But tell us more about that. Was there anything else that really surprised you about the transition?

David Zgarrick: Well, I was gonna say, when I when I think about the transition, I mean, on one hand again, I think about mornings and working out and taking better care of myself and all those good things that I know that I’m doing a better job of now that I that I was doing before, um. Maybe one of the aspects of the transition that has been more challenging is, is feeling like you are [00:22:00] part of something that is important or has a higher purpose.

Um, you know, when we, most of us, when we work within our jobs or careers, we are working as part of organizations and there’s a reason we’re there. We want to be there. We want to contribute to, to something that we know is, is important. Bigger than ourselves, whether it be taking care of patients or, you know, educating students or, or doing the research that we’re involved in and that kind of stuff, we, we know that there’s that higher, bigger purpose to, to what it is that we’re doing.

And as, as you transition into retirement preferment, um, you know, you’re, you’re kind of stepping away from that. And, um, one of the things I, I had this realization a few months ago and, and. You know, we, we think about our spheres of influence and, you know, when I was, um, doing my work in higher education, you know, there’s a lot of value that’s put into how big [00:23:00] that sphere of influence is and, and how many people are you influencing?

What types of influence are you having on them, and that kind of stuff. Yeah, as I’ve, as I’ve made this transition, one, one thing you, you have to realize is, you know, for the vast majority of us, our, our spheres of influence are, if anything, becoming smaller as, as we step away, as we make that transition, I’m no longer, you know, in a position to, you know, influence as many people or, you know, make as many decisions that, that I had, um, previously, um, Um, And I’ve come to realize that’s okay, because the people that I do have influence with, and the people that I am, shall we say, involved with, is a smaller group of people, but in some ways we have deeper and more meaningful types of relationships, you know, the people that come and visit us here in Maine, the people that I go and visit [00:24:00] In, in other places and that kind of stuff, they’re, they’re the people that we have really made conscientious decisions about staying engaged and involved with, and I’m, I’m not going to name names here.

I mean, those people know who they are and I know who they are and we, you know, make very much, um, Decisions to to be part of each other’s lives. And I and I can’t begin to tell you how much I value those relationships. And I and I get the sense that those people value me. That’s that’s why they’re they choose to have me involved in their their circles as well.

And, um, again, I, you know, as we I’m now I I judge not so much about it. You know, what’s the number of people that I influence or the number of clicks I get or anything like that. It’s just how much do I value the ones that are really, really important to me.

Tim Ulbrich: [00:25:00] Yeah, what I’m hearing there, Dave, is, is depth over volume, right? Obviously in the,

David Zgarrick: much

Tim Ulbrich: in the role that you were in, you had a significant opportunity at the institution level, at the association level with your involvement to have a volume impact. And not to say you also didn’t have a depth of impact. Of course you did.

But here we’re talking about a more intimate number of individuals with an opportunity to go. Go much deeper. So that’s beautiful. I do want to talk about X’s and O’s for a moment. And you know, you, you retired at a time, as we often say that the time at when someone retires is one of the most important decisions are going to make.

David Zgarrick: it is.

Tim Ulbrich: There’s things that are out of our control sometimes, but there are things that are in our control. Like how have we prepared for entering into something like a volatile market? And while you retired into a market that has continued to overall trend up, it’s, it’s had its fair share of volatility. And so how have you planned for that in advance and how has that played out?

So that the volatility really isn’t impacting [00:26:00] you a whole lot.

David Zgarrick: You know, one of the things I’ll go back to it. I know this is something I touched on in the previous podcast is the important role of working with others, including financial advisors. There’s a tax advisor that I also have for many, many years. My tax advisor was actually my father. Father, um, my, my father, while he’s still alive and is still doing others, people’s taxes, I, I, I have a good laugh.

He actually dropped me as a client, uh, the, the, the, the year that my wife and I, um, had three different state tax, um, you know, taxes to filing in addition to our federal and, and move to from one part of the country to another part of the country, that kind of stuff, my, my dad said, you know what, I’ve had enough, you find yourself somebody with, uh, you know, who can help you deal with all of that.

The different things of that kind of stuff. And so it’s important to work with those things. I mean, we’re pharmacists, we’re smart people, we like to think that we [00:27:00] can do a lot of this work ourselves, and we do a lot of this lifting ourselves. But there’s also things that are Very, very helpful to get advice on that are not inherent to who we are, the kind of work that we do.

And I have certainly come to appreciate the contributions that our financial advisors add, um, farmer, um, that our, our tax person has had, um, you know, they, they keep me, they give me information. That’s, that’s very, very helpful. Um, so that you don’t necessarily have to, shall we say, worry about. A volatile market, you know, you know, the, the, you know, you know, starting with, let’s say, the value of having some cash sitting around.

So, so that, you know, one of the realities of life, of course, whether you’re retired or not, is you will have expenses and you will need cash for those expenses. And so how, how you deal with. You know, having that cash [00:28:00] and where that cash is and how accessible it is to you and those types of things that, you know, I’ve gotten very good advice over, over the course of the years, um, from the folks that I work with and, um, and they, they’ve really helped us, um, you know, not worry about, gee, the market went up.

2 percent the other day or down 3 percent the other day or something like that, you know, um, you know, I’m, I don’t worry about, gee, do I have to time that out or anything like that? I mean, yeah, timing is important and you always want to sell into an upmarket. So to speak, um, and, and so, so the good news is, yeah, making sure that you have a cash reserve set aside so that you’ve got the cash when you need it.

And when you need to raise some more cash, you can have the luxury of waiting until, yeah, the market’s doing a little bit better. Let’s, let’s sell off some assets now and, and then keep that back in our [00:29:00] cash reserves.

Tim Ulbrich: The, the visual that’s coming to mind for me, Dave, as you’re talking and thinking back to our previous interview is, you know, if we think about your nest egg. You’ve, you’ve built this bubble kind of around it, uh, to protect it and, and to give you some options and flexibility of if, or when you need to pull from it.

Right. It’s the cash on hand. Uh, it’s the consulting work that you, you’ve been doing, obviously the hard work and diligence that you’ve done to maintaining a lifestyle that you have, uh, some margin, you know, uh, month to month. And in two 92, you talked about, you know, what was your WTF fund and how your emergency fund.

That thankfully you didn’t have to pull from very much, was able to just grow, grow, grow. You didn’t borrow from it. And then eventually that became an important cash resource when you got into

David Zgarrick: is. And essentially it’s, you know, when we think about a nest egg, of course, you know, a nest egg is no one single, you know, asset for, for most of us. It’s, it’s a variety of assets. Um, it was the WTF fund. It’s our. [00:30:00] Base retirement savings funds. It was equity that we had in real estate and other types of assets for us.

There’s some, uh, life insurance assets in there as well. You know, there, there’s a variety of different assets and, you know. Good news is, I mean, we, you know, you know, we had retirement savings. We have not touched a single dime of those retirement savings yet. And that’s by plan. Um, you know, you know, we’re honestly the, the other assets that we had that allowed us to make this transition, you know, we’re, uh, you know, the, the plan was that we would have five to seven years of assets, um.

Set aside before we would even think about starting to utilize our retirement assets and, and that’s still very much the plan. Um, you know, we’re, we’re sitting here right now, you know, still, in essence, using the WTF fund to finance, you know, what our life is now. And in terms of. You know, real estate. [00:31:00] Yeah, we were able to make the transition from Massachusetts to Colorado back here to Maine, essentially working within the equity envelope of the real estate that we owned and still still work within that envelope.

It’s, you know, you know, making this move did not create, you know, additional obligations or additional expenses. You know, really, you know, we’re, you know, honestly, the cost of living in Maine is even a little bit lower than what the cost of living in Colorado was. So we’re, you know, probably even coming out ahead a little bit, even though we had, of course, you know, expenses involved in making that transition.

Tim Ulbrich: rename Dave, my emergency fund bucket, my WTF fund, because what I like about calling it that is it, it’s a mindset shift, right? Because when, when things happen, you know, I’m thinking about an issue we’ve got going on right now with our roof and, uh, you know, it’s those moments, especially when you’re working so hard on other goals that [00:32:00] if we have prepared for that.

And we can be somewhat lighthearted about it, which is like, that sucks, but let’s write the check and move on. That’s a totally different mindset shift than like, uh, like I’m so mad and frustrated.

David Zgarrick: I’ll go back to one of the things I mentioned a little bit earlier. I mean, my wife and I, it’s not exactly the sexiest or most desirable purchase that we made over the course of a year, but, but we, we made a decision to, to buy a whole house generator, um, for this house. And one of the things we learned relatively quickly after moving to Maine is the power goes out.

And the power may go out for days at a time and, um, and you want to be prepared for that. And yeah, one could go down to Costco and buy just a little generator that might keep your house, you know, keep something going or something like keep your refrigerator running or something like that. But that’s probably not what you really wanted to rely on or depend on.

Um, so, so we did buy a whole house generator [00:33:00] and yeah, there were expenses involved in getting the generator and having it professionally installed and all that stuff. But at the end of the day, I was, I was happy that, yeah, not only that we could do that, but we just had the resources to be able to do that.

Um, Going back to even the, the, the major decision about when to retire, you know, one, one thing I reflect on it, you know, most of us don’t, you know, it’s interesting. A lot of us think, yeah, I’m going to, I’m going to work at age 65 or 67. And, and if you do that, that’s great. You know, I, I, I think in, in our case, you know, we had just both gotten to a point where our, our personal values, let’s say we’re increasingly becoming different than those things that were valued by our employers and, and there was.

Not much that either of us were going to do to change how our employers actually did things. The only people we could actually influence or change were ourselves. [00:34:00] And, and the decisions we made was to consciously step away. Um, and, and we, you know, again, our ability to be able to do that was predicated by a large amount by the fact that we did have a fund set aside that set was, yeah, maybe originally was like, if there was some emergency pop up or something like that, like I said, we were very fortunate.

We never had that emergency. The fund kept growing. And at the end of the day, the fund was such that it It provided us with a bridge to be able to step into performance, maybe a bit earlier than, than either of us had originally envisioned. And, um, at the end of the day, I was really, really happy that we had that fun.

Tim Ulbrich: Dave, a subtle, but important thing I’m picking up on is the, the frequency of the we and our language. And I bring this up because I would remiss if I didn’t ask, you know, transitioning into retirement for couples. [00:35:00] It’s a household decision, and sometimes those timelines align, sometimes they don’t.

Sometimes people are on the same page. Sometimes there’s not. Uh, and everyone’s situation of course, is different, but any any wisdom you can shed there in terms of how you have navigated this?

David Zgarrick: terms of how we navigated it. It was interesting because I think for many, many years, my wife and I had actually quite different visions about how we were going to approach this. I, you know, retirement was probably something in retirement. Financial planning was probably fair to say a little bit more on my radar than it was on my wife’s.

You know, I. Yeah. My father was a good example for me in that he too retired relatively early age 57 and 27, 28 years later is still around and is still a retired still doing what he likes doing and is doing very well. And that was a great example for me. Um, I think my [00:36:00] wife originally was going to. Had every intention on keeping on working even after I took a step back.

Um, it’s fair to say then COVID happened and, um, you know, for all of us that work in healthcare and work in the healthcare fields, um, you know, that was a real seminal event. for a lot of people. And it was interesting, you know, while I as a college professor made this transition and was, you know, all of a sudden started working from home and doing zoom meetings and all that kind of stuff, um, which had its own set of challenges.

Um, my wife was a pharmacist at a hospital. Um, and as we all likely know, hospitals kept Working during the pandemic and those people that worked at hospitals kept on going in and, um, which, of course, had its own set of challenges. And I think going through those challenges, um, really. Change my wife’s mindset as well, [00:37:00] in terms of, you know, how much longer do I want to keep doing this?

And do I feel valued by, um, the organization that I, that I work for? And, um, you know, we, you know, as 2020, 2021, 2022 is happening. I think we both Increasingly, we’re on the same page that, you know, this, this is a good time to make a make that switch. And we, we know that there have been many others of us that have have joined us.

If anything, it has created, I’ll say one challenge in retirement and moving from one part of a country to another part. Now, back to this part is finding health care. Uh, we, we know that there have been many other health care professionals that have taken the last few years and have said, yeah, I’m going to step away.

And, um, that has, of course, created some challenges for a health care system that was challenged to start with in many ways. Um, and so, um, yeah, there is, [00:38:00] there’s been a challenge. It’s been, um. You know, getting health insurance, um, finding health care providers, getting appointments with those health care providers and all that stuff.

But again, that could be a whole nother show for another day. Okay,

Tim Ulbrich: I didn’t give you a heads up about this one, but I think it’s so important that we lean on your wisdom as we think about our listeners in different phases of their career. So Dave, I’m thinking about three groups.

Obviously everyone’s on their own path, but I’m thinking about those that are in the first five to 10 years, new practitioners, those that are in the middle of their career, and then those that are coming up on retirement. Uh, in the next five or so years. And so let, let’s start with those that are on that front part of their career, first five to seven years, new practitioners, they’re facing, you know, significant amounts of student loan debt, expensive phase of life might be starting a family, trying to buy a home.

[00:39:00] Getting started with investing, all these things. What advice would you have for that group?

David Zgarrick: Start early. Jump in. Don’t be afraid. I mean, yes, you you do have obligations, particularly student loan debt and everything that you that you are going to have to take care of and do take care of those things. But get into the habit of saving money being, you know, being mindful of how you spend money.

And that’s not to say don’t do things that you want to do. It’s not just It’s about taking care of your needs. It’s about, um, you know, having your wants and, and making sure that you’re taking care of those as well. But, but jump in, don’t, um, don’t get into, um, analysis or paralysis by analysis. Don’t, don’t, you know, basically say, oh my God, there’s all these things that I have to do.

And then at the end of the day, you end up not doing anything. Um, jump in.

Tim Ulbrich: How about those pharmacists, Dave, like myself and that midpoint of their career where, where they’re looking at retirement and it’s [00:40:00] still perhaps off in the distance, but they can feel it. It’s, it’s coming, uh, often in a very expensive. You know, phase of life, maybe, maybe the student loans are gone. Maybe they’re not.

Uh, you know, I think about our situation, uh, for, for kids in the house, expenses are, are high. We’re thinking about kids college where maybe perhaps some listeners, they’ve got elderly parents, they’ve got young kids or they’re kind of in that middle. What, what about advice for them?

David Zgarrick: Have a plan, develop a plan, and then let that plan work out. Uh, you know, one of the things that Really helped us was, shall we say, being able to save for retirement to do things without having to make a lot of day to day conscious decisions. I mean, you know, for example, you know, most of us work for organizations where we can set aside money.

And and have that money, you know, basically, you know, it’s going to go into certain pots and it’s going to work and do certain things and just so have a plan. Let it [00:41:00] do that. You know, don’t don’t necessarily. You’re right. We all people in the middle of their careers are have very, very busy lives and a lot of other obligations.

And so the less you know, the less that you have to even Think about, you know, financial management is probably a good thing at this stage of your life, yet still having that plan in place. I’m not saying don’t be engaged in financial management and don’t do these things, but but have a have a pathway or a plan such that, you know, try to make things as automatic as possible so that you don’t have to put a lot of day to day effort into into managing these things.

Uh,

Tim Ulbrich: well, like put the plan in place and then automate it so important and Dave, that final group, those coming up on retirement, maybe in the next five or 10 years about to make that transition. Yes, financially, but also for the things beyond the numbers.

What, what advice would you have

David Zgarrick: [00:42:00] you know, take some time to think about what you want your life to be moving forward. I mean, there is, you know, most of us are not in situations where we have to retire or step away at a, at a certain time at a certain date. Um, you know, and, you know, to those folks that are still really enjoying what they are doing every day, if that’s, if that’s what makes you, you.

Then then do that. Keep doing that. I guess in some ways, you know, when it comes out to have that conversation with yourself, what makes you you? What is it that that you really value and is really important? Is it time with your spouse time with your family time taking care of yourself? Um, your community?

Where do you want to be? Who do you want to be with? You know, ask yourself those types of questions and and then think about how do you make Those things happen. Um, I’ll say people in our age [00:43:00] frame right now is the ones that are getting later in our careers and so forth. Um, you know, we, we still have a variety of obligations.

We think about to, you know, one of the things that I think is very incumbent upon many of us in our age age, we’re, we’re fortunate in many ways and it’s that many of us still have parents around and so forth, but they are aging. And one of the things we see is my, my wife’s, uh, my wife’s mother passed away about a month ago.

And you’re constantly reminded of Nothing is forever. And you do want to make sure that you are taking the time to spend time with people who are important to you and to do the things that are important to you. Whether it may be take that big trip or go spend time with family or whatever, because, because you do realize.

You know, even though we plan for, yeah, retirement could be 20, 30, 40 years. Um, nothing’s guaranteed. Nothing will be forever. [00:44:00] And, and, and so I think as you approach, you know, moving into making that transition with the mindset of who do I want to be, what’s important to me, what are my values and then how do I live those values?

Um, You know, that that’s certainly been our mindset as, as we’ve approached, um, you know, especially the last two, three years. And, and I anticipate that’s what it’s going to be as we continue moving forward.

Tim Ulbrich: Dave, such wisdom there. We really appreciate you taking time to come on the show. I know you’ve been an inspiration to me and this is certainly going to be valuable to our listeners and our community. So again, thank you so much. And, uh, looking forward to following up in the future again.

David Zgarrick: Thank you. Thank you so much, Tim. Uh, again, you provide such a wonderful service to, to so many of us, um, in our profession and beyond, you know, there’s so many people that can benefit from the type of work that you do, and I’m just happy to be part of it.

Tim Ulbrich: Thank you, Dave. Take care.

[END]

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YFP Real Estate Investing 132: Rent vs Buy: Does Buy Still Make Sense?

Posted on by YFP Media

Tim Ulbrich, YFP CEO talks with Nate Hedrick, PharmD and David Bright, PharmD as they break down the rent vs. buy dilemma in today’s market, tackling equity, flexibility, financial strategy, and key market insights.

Episode Summary

Tim Ulbrich talks with real estate investors Nate Hedrick, PharmD and David Bright, PharmD as they dive into the rent vs. buy decision in today’s housing market, offering practical insights and real-life experiences. They explore the financial benefits of both options, the role of equity, and the flexibility renting provides. Their discussion highlights the importance of understanding local market dynamics, strategic use of home equity, and aligning decisions with personal and financial goals

Key Points from the Episode

[00:00] Introduction to Rent vs. Buy Discussion
[05:00] Market Perspectives: Optimism vs. Pessimism
[09:58] Analyzing the Rent vs. Buy Decision
[14:48] Benefits of Renting: Flexibility and Cost
[20:09] Understanding Equity in Homeownership
[25:02] Leveraging Equity: HELOC and Financial Strategies
[24:30] The Stability of Homeownership
[27:16] Navigating the First-Time Homebuyer Dilemma
[30:19] Starter Homes vs. Forever Homes
[32:13] Understanding Micro Market Dynamics
[34:44] Defining Your Vision for Homeownership

Episode Highlights

“ If you were buying in 2020, 2021, you looked like a genius if you sold the house a year later because the property values were just skyrocketing so quickly. That is not going to be the case anymore.” -Nate Hedrick [8:50]

“ We have to remember that not any decision should be one that we look at in a silo. So we can run the numbers on a rent versus buy and maybe we have a clear answer. But then when we zoom out, things might change.” -Tim Ulbrich [11:34]

“ There’s a big chunk of cash right there that we’re then locking up right into that home. And that could be very valuable, but also there’s an opportunity cost that we have to consider where those dollars could be used elsewhere in the plan.” -Tim Ulbrich [18:03]

“ You can’t paint an index fund to make it worth more, but you could paint your house to make it worth more, right?” -David Bright [26:06]

“ Renting is not always bad. And if we’ve been told that story, like. I think we need to unwind that a bit.” -Tim Ulbrich [35:34]

“ Take your time to assess what you want and then assess it for yourself. Like, don’t listen to what your best friend is saying, or the guy at work who is frustrated with his rental properties. Figure out what you want to do. Figure out what works for your local market, investor or buyer and then make a decision based on that information.” -Nate Hedrick [37:43]

Links Mentioned in Today’s Episode

YFP Real Estate Investing 131: Revisiting Our 2024 Projections and Looking Ahead to 2025
NY Post Article “Here’s how much more a single-family home costs to buy than rent”
Real Estate RPh Concierge Service
NYT Rent vs Buy Calculator
YFP YouTube Channel
Subscribe to the YFP Newsletter
YFP Disclaimer
YFP Real Estate Investing Facebook Group
Nate Hedrick on Instagram
David Bright on Instagram
YFP Real Estate Investing Website
David Bright on LinkedIn
Nate Hedrick on LinkedIn
Tim Ulbrich on LinkedIn
YFP on Instagram
YFP Facebook Group

Episode Transcript

Tim Ulbrich: David and Nate, welcome to the show. Hey, always good to be here. Thank you. I should have said welcome to your show, uh, as, as I’m having a chance to, uh, take the mic and, and pick your guys brain on an important topic, rent versus buy. And really excited to talk about this since it’s a topic we’ve talked about at length before in various shows, but today’s market adds a, as a whole new wrinkle to how we think about the rent versus buy decision.

Your last episode, 131, we’ll link to that in the show notes, revisiting your 2024 projections, looking ahead to 2025. Now that we’re two weeks into the new year, anything you guys feel the need to correct on your projections, or you still feel good on what you’re thinking for 2025?

David Bright: I guess I’ll throw out there, I’m, [00:01:00] I’m cautiously optimistic, uh, and I would say, I, I can’t be a pharmacist to not be cautious, right?

So that’s just how we roll. So I’m cautiously optimistic that there’s opportunity out there. But I think one of the things we, we talked about in the last podcast is just really knowing your numbers, really being intentional, just double checking your math. And that’s something that pharmacists are good at.

So if you can be disciplined in doing that work, I think there’s still good opportunity here in 2025.

Nate Hedrick: Well, I’ll take the flip side. I’m cautiously pessimistic at the moment. I just ran numbers on like 20 deals just this past week and none of them worked. And I just, I’m in a funk right now. So I’m going to, I’m going to play the bad guy card.

I I’m sure it’ll, it’ll figure itself out. But I was like, I was bummed last week. I was looking at just dough van. It was like, I got to find something here and nothing worked. But that’s, that’s just how it goes sometimes.

Tim Ulbrich: We caught Nate on the back end of running some numbers that didn’t work out. Didn’t work out,

Nate Hedrick: but that’s all right.

You got to run like a hundred deals before you have like two or three you can offer on it. Just how it goes. So I had [00:02:00] a bad week. That’s okay.

Tim Ulbrich: If we get more specific, I’m curious to hear from both of you guys as investors that have experience in several different types of real estate, buy and hold, fix and flip, syndications.

You know, how are you looking ahead to 2025? I know, David, you said cautiously optimistic, Nate, cautiously pessimistic, but is there, is there pockets or things that you’re excited about or things that you’re like, I’m kind of staying away from, from this in 25, David, let’s start, start with you.

David Bright: Yeah. I, I think that just from, from talking previously on the show, I, I really enjoy the fix and flip and the single family rental.

Like I feel. Most experienced and most comfortable in those two spaces. And so I think that the single family rental still has opportunity. I think there’s some real difficulty with that traditional 1 percent rule where. You, uh, you can generally think of a house as a viable rental if you can make 1 percent of the purchase price of that house as a, as a monthly rent [00:03:00] figure.

And you know, people have debated the 1 percent rule for forever, and some say it should be higher or lower than that. But at least that, that gets you in the ballpark of if it’s time to do. What Nate did in doing the more complex analysis from there to see if it really, really works, but that kind of just quick litmus test might, might be helpful.

And so I was really excited that we found one this morning and then I got beat on the offer. So we, uh, we didn’t get it, but, um, yeah, I think, I think that those opportunities are going to be out there. I think that they’re just, they’re going to be more difficult to find, but I still think that there’s a need, particularly in an overarching housing shortage.

For good, respectable, safe, single family rentals.

Nate Hedrick: I think you’re right, David. I think the trick is going to be finding those like diamonds in the rough. You kind of have to find something that needs some work. Um, like I said, I was just running numbers and everything that was like even vaguely move in ready, just like the prices were just through the roof and with interest rates where they are.

Uh, we just had a tax increase here in Cuyahoga County. [00:04:00] So they did the, um, every six year, like reassessment. So like property taxes are up for market value. And so I think all those things are kind of running into each other at the same time, and it’s just making the numbers really tight. And so you have to have something where you’re going to be able to put dollars into it, inject value, and then you can get it out on the back end.

Tim Ulbrich: Funny, you mentioned property taxes, Nate here, fresh on my desk. I got our, uh, notice, uh, yesterday and I was reflecting on the increase. And related to our discussion today, right, you know, the, the fixed 30 year mortgage at 3%. Great. I’ll take that all day. Uh, the escalation in property taxes that we’re seeing here, both with our primary home and our commercial property up in New Albany is, is wild.

Um, and you know, I, I think it’s just one of those factors that we think about when we discuss, you know, should I buy or should I rent is. You know, do, do we have some of that margin, right? That we’re going to have these increases in utilities, in property taxes, in upkeep and [00:05:00] maintenance and so forth. And, and I bring that up as a challenge to our community, where I think for many pharmacists, they might, you know, see somewhat of a flattening of that income and those expenses can be felt more over time.

And so we need to constantly be asking ourselves is, Hey, is our income keeping pace with these are hopefully beating, but at least keeping pace with some of these expenses that are going up. Over time. So let’s transition into our discussion for today. Buy versus rent. Again, an age old question with a new wrinkle and that new wrinkle being today’s housing market, the economic environment that we’re in, you know, I often hear David and Nate from pharmacists, especially if I speak to a group of pharmacists that are maybe just coming out of school, you know, where there’s that blanket advice from mom and dad, right?

Which is like always buy rent, destroying money down the drain. You got to build equity. And David, you sent over an article from the New York Post that we’ll link to in the show notes that I think it’s just challenging this question again in today’s environment and in today’s uh, interest rate environment and the housing shortage that we have.

And so before we get [00:06:00] into specifics on the value of buying versus the value of renting, I want to get both of your perspectives. Nate is a realtor, also is an investor, and David is a buy and hold investor. On what you’re seeing out there in the market related to this buy versus hold in today’s And today’s climate, Nate, let’s start with you.

Nate Hedrick: Yeah, so I, again, like you mentioned, I, as a realtor, I’m going to be a little biased on this. Um, but I have some numbers behind my bias, so maybe that’ll back it up. But, but generally speaking, uh, if you’re going to be in a place for, uh, a longer period of time, and I would define that as, as a couple of years or more.

Generally speaking, it’s going to be better to, to buy, right? You’re going to be able to mitigate some of those costs. Um, and of actual purchase price, right? Like the, the loan closing costs and the taxes and things like that. Um, with the appreciation that houses is likely going to see over time. Um, shorter than that, I still think it’s, it’s viable to rent.

I will say like typically if you’re going to be there for a shorter period of time, the renting can be [00:07:00] better because the price can be lower. But what I’m seeing now is that rent prices have gone up so much that even that is starting to fall away. And where you could have a situation where it actually might be better to buy even if you’re only going to be there a year because you can hold on to it, rent it out when you’re done or sell the property later when you’re done and it actually might be a wash at that point.

So that, that timeline for me in, in, in our target market here in, in, you know, Northeast Ohio, um, has really kind of shifted down. I know that’s not the case in higher cost living areas, but rent has just gone up so much that it’s making it, it’s making it harder.

Tim Ulbrich: Nate, as we see appreciation starting to come back closer to historic norms, right, we had a, uh, massive appreciation, you know, I think about post pandemic and, you know, that changes the decision of, of maybe how long you have to be in a home before you can break even when you think about closing costs, fees, taxes, et cetera, as we see that appreciation level returning more to quote normal, Yeah.

Yeah. Yeah. Does that impact how you think about the timeline at all in terms of being at home to [00:08:00] break even? Yeah.

Nate Hedrick: I mean, absolutely. Right. You have to kind of factor that in. But, uh, I think that, so it’s funny, you mentioned the getting your property tax bill. So like I said, here in Cuyahoga County, we do it every six years where they’ll reassess your home when it, when it transfers.

And then if you’re sitting in that house, they’ll reassess all the houses every six years that have just been kind of sitting there, not selling. And in our market, the lowest. City like municipality increase was 22 percent the highest markets were closer to 70 percent increase in market value 70 percent all coming at once right every six years, right?

So they’re just hitting everybody at one go. And it’s just, I mean, it’s a huge, huge increase that’s taken place. So I think, like you said, that has shifted down, right? We’re not nearly that crazy. I don’t think we’re going to see that level of crazy over the next couple of years. So it does impact that, right?

You can’t just, uh, David and I have talked about this on the podcast in the past, that if you were buying in 2020, 2021, you looked like a genius if you sold the house a year later because the property values were just skyrocketing so quickly. That is not going to be the [00:09:00] case anymore. But even despite that, you’ve got to weigh that with how rent prices have increased because that’s the, that’s the flip side of that, that decision.

And we’ll come back

Tim Ulbrich: to this in a little bit, but I think it’s important because when we hear things like, Hey, buy a house because you’re going to build equity, certainly when we zoom out over a long period of time, history would tell us that that’s true. And in fact, many people, uh, the data suggests that they’re building their wealth and part of the retirement plan through their home value going up over time.

Now, I don’t think that’s necessarily the case for many of our listeners that are probably saving substantial amounts outside of that. But what we have to remember is there’s a difference between equity and cashflow today. Right. So, you know, I, I’ve seen, uh, we moved into our house in 2018. We bought it for three 45, five, it’s funny how you never forget the numbers, right?

Certain numbers, uh, three, three 45, five. And I think last I checked, you know, Redfin or whoever says, Hey, it should be worth, you know, five, 10 or whatever, whatever the number is. That’s great. But guess what? My property taxes are coming up today. That impacts the budget today. [00:10:00] The equity, unless I’m borrowing against that equity to leverage and use it elsewhere in the financial plan.

I don’t feel that equity. You know, right now, so we have to also consider that in the decision, David, from a buy and hold investor perspective. How are you viewing the rent versus buy debate in today’s market?

David Bright: Yeah, I think it’s going to be very, very market specific is Nate. You gave some great examples of Cleveland area and what it’s looking like there.

Um, I was talking with someone else in a different market and they were saying that to buy their house would be about 3, 000 a month and to rent their house would be about 2, 000 a month. And that’s just the house payment. So not, not counting the furnace that’s going to go out, the roof that’s going to need replaced the, even if you just want to do paint and flooring, like just paint and flooring can be really expensive in a house too.

So with those kinds of considerations there, when they were describing that they probably only want to be in that house a couple of years while they get to know the area better and find their more forever [00:11:00] home, it started to make a lot of sense to. to rent instead of buy in that, in that market because of that spread on the monthly cost.

And Tim, to your point about the monthly budget, allowing you to save up for that down payment for that eventual, uh, forever home. So I think that it, I think that the market specifics are really going to play into this decision for different people based on what the rent looks like in the area versus what a monthly mortgage payment would look like.

Tim Ulbrich: Yeah. The other thing I would add to this discussion is I think about the work that we do at YFP and looking holistically at the financial plan. We have to remember that not any decision should be one that we look at in a silo. So we can run the numbers on a rent versus buy and maybe we have a clear answer.

But then when we zoom out, things might change. What else do we have going on, right? Are we, you know, looking at student loans and for someone who’s pursuing a loan forgiveness pathway versus an aggressive repayment, two very different strategies and impacts on On a monthly [00:12:00] cashflow. So as we look at the rest of the plan, you know, what else do we need to be saving?

Are we on track for investing in retirement planning and all the other goals that we talk about, how does this home piece and within that, the decision to rent versus buy fit within the broader context of the financial plan. And that’s so important because when we feel this pressure, you know, to buy, and if someone’s telling us, buy, buy, buy, maybe that’s the right move.

Maybe it’s not. Um, but. Are we looking at it in the context of, of everything else that’s going on as well. Let’s talk more about the potential benefits of renting. Nate, we’ve been alluding to the importance of flexibility, um, as we’re having this discussion, especially in today’s market where moving can mean significant transition expenses.

When we talk about the cost of transition, the cost of moving and why that timeline piece is so important. What are we actually referring to here in terms of these costs?

Nate Hedrick: Yeah, I think, I think you said it perfectly, like flexibility is, is [00:13:00] that, is that piece, right? Because if you buy And you are locking yourself into that home, right?

Like we said, if you want to get value on it, if you want to make a financial decision, you have to be able to, uh, uh, sell it at a certain period, or you have to be able to rent it out and make it viable, or else it’s going to be this, this handcuff that you’re kind of stuck to if you, if you end up having to move.

If you go the rent route, you build in that flexibility. You let yourself be able to make a change much more rapidly. I’ll give you a perfect example from my own real life. My brother lives out in California and bought a house a couple of years ago. Loves it. Great house. Fantastic. Um, but decided this summer like, Hey, I want to take some time.

I can work from anywhere. I work for a tech company. I want to like travel to Europe for a couple of months. And I want to live in Japan for a while. Well, there’s a whole house that he has to like figure out what to do with, right? He has to rent that out, get someone to take care of it, make sure the lawn is cut, make sure that, you know, if there’s a storm, the solar panels haven’t flipped off the house or there’s a lot that goes into that, that just really brings down your flexibility.

So I [00:14:00] think in today’s day and age where people are, are looking for that, where their jobs are more flexible, they’re, they’re changing jobs more frequently. They. Are doing things like a sabbatical, I think buying a house actually locks you into something that makes it just a little trickier to do that.

And so when you’re talking about like, Hey, I might rent just because financially I’m going to lose a couple hundred bucks a year or whatever, but the flexibility is worth my, my peace of mind, like that’s a completely viable option. Yeah,

Tim Ulbrich: I’m especially thinking about the people that might be in a known state of transition, right?

You know, I’m coming out of a residency or coming out of the fellowship. You know, sometimes we have this idea and, and there’s no judgment here. I remember having these feelings as well, where it’s like, Hey, we’re in an area and we’re going to be here forever. Well, like that changes, right? We thought we’d be in Northeast Ohio, uh, forever.

And then I realized I can’t listen to Brown sports radio anymore. It’s atrocious how depressing it is. So like, we got to move, we got to move to Columbus, right? Um, but that was a move I would, we would have never anticipated. [00:15:00] Now, thankfully we’re in that home long enough that, you know, we mitigated the costs of that transition, but.

Sometimes what we think is known may become unknown, and you know, that flexibility piece is a really important one that we have to consider into the equation. Now, on the flip side of that, we’ll talk about how one of the big values, I think, of having a home is just that sense of stability and community and being in a place that we often can’t put a number to.

Um, and so that, that flip side has to also be considered. David, beyond flexibility, what else comes to mind when you think about the potential benefits of renting?

David Bright: Yeah, I think the the dollars and cents really ring true like if I put on a fix and flip hat I tend to budget Whatever the sale price is, I’ll walk away with 91 percent of that, that I, I tend to figure 9 percent of the final sale price will go to, uh, realtor fees and transfer tax, closing costs, and some of those things, and that percentage is going to be different at different price points and different [00:16:00] markets, uh, but, but that can give you a ballpark figure to think about, and in addition, when it’s your own house that you’re living in, if you’re going to hire movers, if you’re going to Buy different furniture in a different house.

There’s a, there’s a lot of costs there. So I think that plays into the flexibility piece of if this is a temporary house, then that starts to make me nervous from what those costs are going to be. I think another factor might also be the timing of all that. So if you buy a house and you’re thinking of like Tim, your equity example is fantastic.

Like how much equity has gone up. And then I think a lot of us tend to think, well, that creates great equity as the down payment for the next house. The issue being then you have to sell the first house to unlock that equity. It’s, it’s trapped in that house until it sells. So it creates this timing issue of you sell to access those funds to put down in the next property, or you need to be saving for that as well.

So I think the dollars [00:17:00] and cents bring some, some complexity to that. Yeah.

Tim Ulbrich: And, and I harped on this a little bit, but I’m going to go back to it because I know so many of our listeners can resonate with this. And it’s something that Jess and I felt in our own journey that they might see their net worth trajectory going in a very positive direction, but they don’t feel that they don’t feel that right.

Because often it’s, it’s, it’s net worth that might be locked up in equity in a home or it’s net worth that’s locked up in a 401k or an IRA. So part of the financial planning process is when we’re making some of these decisions There’s an important liquidity piece as well that if we want to find this balance between growing and building our net worth for the future, yes, it’s important, but living a rich life today also important part of living that rich life today is having some liquidity and flexibility to do things, the things that we want to do, um, and sometimes not always market specific.

Sometimes renting might give us more of that flexibility, um, and allow us, especially when we think about if we use a traditional 20 percent [00:18:00] down on a home. Now, I know a lot of pharmacists may not necessarily do that. There’s a big chunk of cash right there that we’re then locking up right into that home.

And that could be very valuable, but also there’s an opportunity cost that we have to consider of where those dollars could be used elsewhere in the plan, whether it be other goals or experiences or other things that we haven’t touched on. I also think about from, from our experience, we rented a condo.

Uh, I know Nate, you’ll know where this is. Monroe Falls, uh, was our first rental. Um, and there was significant savings on time and money on upkeep and maintenance. Um, you know, someone took care of the property. I think about the amount of time in our current home, whether it’s hiring contractors or dealing with downed trees or, you know, taking care of the lawn and, you know, we can’t grow grass because the kids are playing and whatever it is, like there’s a lot of things that we have to factor and consider that’s both time, mental energy and financial related.

And so that could be one of the other, uh, benefits potentially of, of, of renting that we need to be [00:19:00] thinking about. Let’s turn the page and look further at the benefits of buying. So Nate, the one that typically gets the most attention, we’ve, we’ve mentioned a few times now is building equity, building equity, building equity.

We throw that term around a lot. What, what does that even mean? And does it really matter as much as we think it does, especially as we’ve been talking about this question of liquidity?

Nate Hedrick: Yeah, it’s, it’s actually a good thing to like take a step back on. Right? So, so equity by definition is just the, the, the intrinsic value that’s sort of like left in the house.

Right? So if I buy a hundred thousand dollar house. With 20 percent down, right? I’m putting 20, 000 into it. Uh, and, and 80, 000 loan. Well, over time, I’m paying down that loan, right? I’m paying down the balance and hopefully the property is also going up in value. So, let’s say we’re five years down the road and it’s worth 150, 000 and my loan balance is down to 75, 000.

Well, now I’ve got 75, 000 in equity, meaning if I were to sell the house today, That’s the difference in value that I’ve sort of created for myself. [00:20:00] Uh, some of that is, is the original down payment that you put in. Some of it is appreciation. Some of it’s loan payoff. But all those things are basically increasing the buffer between what you owe and what something might be worth.

Now tapping it is, is there’s lots of ways to do that, right? We could sell the house to get that money back out, to get the equity back out. Like David said, we’re going to lose some of that to fees and things like that. You could also refinance, uh, but you can’t usually tap all of that equity. Just like when you put down 20 percent to purchase a home, when you refinance to get either a HELOC or do like a cash out refinance or something like that, you have to leave some of that equity in the property as collateral for the bank.

So they might do Uh, 90 percent loan to value, meaning that they’ll give you 90 percent of that 150, 000, but you got to leave that other 10 percent locked into the property. So we can tap that equity in multiple ways, or like you said earlier, Tim, if you just kind of sit back, right, and do nothing, uh, that equity is sort of stuck in there, right?

You might see [00:21:00] that on your net worth balance sheet, but you’re not putting it into your pocket if you’re just kind of sitting back. So. So equity is this thing, this kind of elusive thing that you really only see when you go after

Tim Ulbrich: it. Let’s talk about the leverage of the equity a little bit more, uh, when we think about something like a HELOC.

So what Jess and I have done Pretty conservative, probably overly conservative is we’ve taken out a HELOC and, uh, probably time to increase the HELOC just with what’s happened with appreciation. Um, but we’ve never drawn on it. So I kind of view it as a, as a backup to a backup of an emergency fund, or if, if the right opportunity comes up, whether that be real estate or business or something, uh, where the calculated risk makes sense.

Obviously that calculation has changed just given the interest rates on the HELOC. Then it’s there, right? And we have access to it, uh, when, when we need it, I think both of you, correct me if I’m wrong, have used a HELOC before it actually leveraged that in terms of real estate transactions and kind of getting some of that off the ground.

Can you speak to that a little bit [00:22:00] further? And that may or may not be right for other people, but it’s, it’s something to consider of, Hey, we’ve got this equity building and maybe want to be more conservative. That’s just a tomorrow thing. It’s part of the retirement plan, or maybe there is an opportunity to leverage it today.

Nate Hedrick: Yeah, I’ve done it myself and I’ve had investor clients do it as well where they’re using that HELOC for either, uh, purchasing the, the property itself or doing the rehab. Um, we use ours most recently on a rehab where we actually tapped the HELOC to help fix up a house. Um, and then once we refinanced, they immediately paid that off, right?

The, the advantage years ago was then you HELOC at three and a half percent. It was like free money essentially, right? Now ours is closer to prime. Um, I think ours is most recently a credit score got us down to like prime minus, which is really cool. Um, but it’s still like 7 percent on the HELOC. So, uh, you can tap that money and use it for whatever you want.

It’s, it’s, it’s free cash, but you’re paying 7 percent of that every single year. And so you have to, you have to keep that in mind. So, um, yeah, it’s a completely viable option. But [00:23:00] the, David will tell you this every single day. You have to have a plan for that because if it just sits there. Now, all of a sudden you’re losing money by, by tapping that because you got to make sure you’re, you’re making up the difference in the, in the value that you’re, you’re adding with the money that you’ve taken out.

Tim Ulbrich: It reminds me of one time my dad shared with me, uh, you know, when it comes to a business, line of credit’s a really good thing if you have a plan. Line of credit without a plan, not a good thing. Yeah. Right. I think a VLOC with a plan, because what I hear you saying in that example is, Hey, even if it’s seven, seven and a half percent, whatever it is now.

If you’ve run your numbers, you’re, you’re just factoring that into the equation. And by the way, if something changes, a delay or whatever, you’ve got a backup plan and, and, you know, are able to work through that. So David, what about, what about for you?

David Bright: Yeah, I, I love the emergency fund philosophy for it also, because I think particularly as you get into real estate investing, emergencies can get bigger.

If something goes wrong. And I think as you are buying a house and making some of these bigger life decisions, emergencies get bigger than what [00:24:00] they may have been prior to that level of complexity in your world. So when you have, uh, kids growing older and multiple cars and, and all kinds of things like that, I think it, it.

Can help me sleep at night as the conservative pharmacist, just knowing that there’s access to that kind of money and that kind of liquidity when necessary.

Tim Ulbrich: Yeah. And I think in theory, everyone’s risk tolerance was different, but it does open up the door, you know, to take some more calculated risk in other areas.

When you know, you’ve got that as, as a backstop as well, David, in addition to building equity and, and potentially leveraging that equity, what, what other benefits of buying come to mind for you?

David Bright: I think one huge thing that’s, that’s hard to put down in dollars and cents is just the stability of that house.

And so if you’re looking for something in a specific school district, in a specific area, part of town, something like that, if you’re renting, depending on the, the laws in that state, once that lease is up, you may need to move [00:25:00] whether you’re ready to or interested in moving or not. So. Uh, that’s, that’s a potential complexity.

So the stability because you own it and you can stay there as long as you reasonably want to is, is something. There’s some predictability in that as well with the, with the payments. I think what we’ve talked about already with property taxes is a really good asterisk on that equation. I think another one that I think is gonna, I think we’re already seeing headlines and I think we’re only going to see more headlines on it is.

Property insurance as well has gone up quite a bit. And as we see things like, uh, like the fires in Los Angeles and things like that, there’s some really significant expenses coming up. And if that continues to drive, uh, property insurance up, then. You know, we need to budget for those kind of increased costs.

So, but at least some predictability on the principal and interest payment on that loan. Um, plus I think that one of the things we’ve, we’ve talked about too, is when your different [00:26:00] investments allow you different opportunities to, to push those yourself and, you know, Maybe what we’ve talked about before is you can’t paint an index fund to make it worth more, but you could paint your house to make it worth more, right?

So there’s some opportunities, whether it’s hiring a painter, whether it’s doing the sweat equity yourself of getting in there and taking a property that’s not all that pretty, but by making it pretty and nice, you can, you can increase the value to even if you’re not, uh, the handiest person on earth.

Tim Ulbrich: Yeah, I love what you said about the predictability, at least on the principal and interest side, assuming it’s a fixed rate mortgage, um, you know, while also recognizing we talked about property taxes. You gave another good example, homeowner insurance. That was one of those bills I got in December. We pay it once a year where I was like, what percent increase, what are we talking about?

Yeah. Right. And we need to remember the way insurance works, right? Natural disasters in Florida or natural disasters in California. Have a far reaching impact from an insurance standpoint beyond just those areas, you know, and I think we’re seeing that happen [00:27:00] in terms of, of premium increases. I want to talk to our first time homebuyers, Nate, and let’s start with you, you know, this is a question I get a lot, which is, hey, we’re looking at buying a home, maybe we’ve been sitting on the sidelines.

We’re wondering, right, do I keep sitting on the sidelines? I was hoping rates would drop in, in 24. Maybe we saw that a little bit. Rates trending back up ish. I think we’re hovering back around 7%. Do I wait? Do I make a move? We’re talking about long term appreciation, you know, obviously there’s a, there’s a shortage of housing.

We’ve got lots of buyers in the market that pent up demand is only going to potentially get worse. What, what, what, what words would you have to share to those first time home buyers?

Nate Hedrick: Yeah, I get this question all the time. In fact, I just had a brand new pharmacist client that, uh, is going to start looking here in Cleveland.

And the last question she asked me as we were kind of going through like our buyers presentation was, uh, is it, is it actually a good time to buy? Like, should I be doing this right now? Right. And that question comes up all the time. And I think it’s a really hard thing to answer because Baker says it great [00:28:00] on the podcast all the time, right?

Like trying to time the market is really difficult. Time in the market is better than timing the market, right? And so it’s the same with housing. It’s a very difficult thing to say, well, this is the perfect time because prices are blah, blah, blah. And interest rates or whatever. It’s a very difficult thing to get, to get right.

Um, so what I would say is if you are in a market where things continue to appreciate. Right? And most markets are that way right now. Uh, Every month you wait, is more down payment you’re going to have to find, is more house payment you’re going to have to make down the road, right? If things continue to go up.

Now, if things pull back and things, things decrease, like that’s a different story. But what we’re seeing is that as these appreciations continue to go up, people are like, well, I’ll wait because then my payment will be lower when the interest rates are lower. The payment is actually going up because the houses have gone up and the price they have to spend has gone up.

They could always refinance down the road if interest rates come down, uh, but you can’t change the housing costs if, if [00:29:00] appreciation continues. So I would love to say, just sit on the sidelines until all the housing prices come down. Um, but what I’m seeing is that there aren’t a lot of market factors.

There’s a housing shortage right now, right? And so there aren’t a lot of market factors that seem to indicate housing prices are going to come down dramatically. And so waiting doesn’t really seem to be a benefit at this stage. I just, I just, I don’t see the point in that quite honestly.

Tim Ulbrich: And the number of buyers sitting on the sidelines is compounding now, right?

So, you know, I think we’re, we’re obviously dealing with a competition piece that’s there as well. And, and Nate, I’ll put a plug here because the timing’s good in terms of what you’re doing with the real estate RPH and the home buying concierge service. So if we have folks that are listening and saying, Hey, I’m wondering.

Uh, about, you know, the home buying decision, whether you’re in the mix right now or thinking about on the horizon. Uh, we’ll link to, uh, Nate’s website, real estate RPH on the show notes, but, uh, be a great chance to get connected with Nate and have that conversation and, uh, find an agent that would be a good fit for you.

David, what are your thoughts from, from the, uh, investor perspective?

David Bright: Yeah, I think [00:30:00] that a lot of this discussion depends on what you’re buying. So I know it’s really tempting the brand new grad getting out of school first job with a real paycheck where you can buy like brand name mac and cheese instead of generic mac and cheese.

Let’s go. All those like big life changes. I feel like that’s the point at which a lot of pharmacists want to find their forever house right away. Um, and I think we’ve talked about some of those risks of job changes and life changes and things like that, where that forever house that you think you want it at, you know, 25 may not really be that forever house.

So I think that there’s something in there about, uh, if, if you’re, if you’re looking for more of that starter home, that creates so many more options because it’s probably at a lower price point. It’s probably going to then have a lower down payment, lower monthly payment consideration. And one thing that we’ve.

We’ve kind of hinted at, but we haven’t really said out loud yet, is the opportunity to, to buy that house with the intention of it being a rental and you’re really just thinking of it [00:31:00] as renting from yourself, retaining it as a rental down the line. You may find the best of both worlds though, where you’re thinking of it as, as a rental.

This doesn’t need to be my forever home. This doesn’t need to be the home that I’m truly in love with. But this is as good, if not better than somebody else’s rental. Instead, I can be the landlord and I can have that stability. And then when I’m done with it, it can be a great investment when I go buy my forever home.

So I think depending on what you’re looking at, it could be a, a really good time to jump in. That’s

Tim Ulbrich: a really interesting perspective, David. And I think just some of the pre planning that would have to be done to go in with that mindset. And then also thinking about certain associations, rental restrictions, other things, making sure you’re buying with that in mind, if that’s the goal and looking accordingly.

One other area we have to talk about is the micro market considerations. We’re talking global trends here. Um, I always think about Ramit Sethi on his podcast. He lives in New York city and he’s like the rent, rent, rent guy, right? [00:32:00] Like. You know, don’t feel the pressure to buy. And he’s obviously come in his perspective of like buying a home in New York city, doesn’t make any sense.

We’re coming from the perspective of the Midwest, the micro market considerations have to be considered because then we start to really look at the numbers and not just talking these generalizations of a buy versus red. Nate, what are your thoughts on, on the micro market?

Nate Hedrick: I mean, the classic line is that real estate is local.

I mean, you have to know your own market to be able to make that decision. I mean, like you said, everything we’ve been talking about, we’re, you know, we try to keep a global perspective on it, but we are so biased toward the Midwest. I think when you look at a 200, 000 starter home being four bedroom, two bath, like you don’t get that.

Anywhere on the east or west coast, like it’s just not a thing. Um, and we’re used to that as like, it’s a normal, like, Oh yeah, I can get those in this market and that neighborhood and that school district. And like, it’s just very different. And so I think you have to know your local market. Um, and if you don’t know your local market, get somebody on your team that does.

Get a really good local real estate agent to [00:33:00] actually explain this stuff, because you, you have to know it. It makes the decision. It totally changes how you can make that decision.

Tim Ulbrich: Yeah. And David, we’re not just talking city, right? You know, I think about Columbus. Like Great example, we live south of Grove City here in Orient, probably no one’s heard of Orient, smaller rural town, you know, vastly different in terms of when I think about property taxes, school district quality, other factors versus 15 20 minutes away in Upper Arlington, New Albany, Westerville, etc.

So, David, it’s not just the city, but it’s, it’s the, it’s the micro micro, right, that we need to get, even within neighborhoods, to be frank.

David Bright: Absolutely. I think, yeah, you, you look at those cities within a city, you look at the school district, you look at the, even down to the area within that. Is that kind of a path of progress?

Is there something going in across the street that’s going to change that neighborhood? Is there a A new development happening, uh, one block

Tim Ulbrich: to

David Bright: a next. And, and even, uh, I think the example that a [00:34:00] lot of people overlook when they’re shopping online and looking at beautiful listing photos is. What are the, you know, the neighbor’s houses?

It could be a gorgeous house next to two completely run down, boarded up properties, or it could be a gorgeous house next to more gorgeous houses. And the, those factors on that block could even make up a significant impact into desirability and price points and those kinds of things.

Tim Ulbrich: I want to wrap up by.

Just giving some global perspective from each one of us on, on really answering the, so what question? What, what do I do with this information to really inform my own decision making whether I’m a first time home buyer, or maybe I’m looking at potentially making a move, or I’m thinking about investing in a property and I’ll kick us off for, for me, it’s really going back to what is the vision?

What is the why? So what, what are we trying to accomplish? And David, I think your example is a really good one. Like if I’m looking at purchasing a property that. Maybe I can start to build as an investment property and, and really be the, the renter and eventually, you know, have [00:35:00] my first investment property.

That’s a very different philosophy than potentially, you know, I’m, I’m in a state of transition or I want to experience different parts of the country, or we’ve got a young family and we’re looking for stability. We’re starting in kindergarten, whatever would be the case, what’s the vision and, and really trying to move away from the generalizations of, Hey.

You know, buying is good. Equity is good. Renting is bad and really layering on what are your goals and desires. And then overlapping that, of course, with what’s happening in the markets in which you’re looking at. And I think just reminding ourselves that every market is different. Renting is not always bad.

And if we’ve been told that story, like. I think we need to unwind that a little bit. It can depend on the market, um, in terms of what’s happening that year, in terms of the local geography of that market as well. And one more time, making sure we’re zooming out. So, you know, what else is going on in the financial plan?

And when we think about the vision and the why of buying or renting and what that means to us, and [00:36:00] we overlap that with other goals, whether that be paying down student loan debt or other debt, saving and investing, traveling, experiences. What actually moves the needle for you? And where does this home buying decision, where does it rank among these other things?

I think sometimes we can feel these pressures to like buy something. And then I sit down with someone and really what matters most to them maybe is travel or experiences or giving or other things. And as Ramit Sethi, I think often says so well, like let’s spend money on the things we care about and not spend as much money on the things that we don’t care about.

And so. I often use cars as an example, but for people that might be housing, where some people, that sense of community and having your own place. Being able to make it your own, being able to work on projects around the house, that derives significant value and for other people, not as much. And I think just having that honest conversation with ourselves is, is so important to inform this decision.

Nate Hedrick: Nate,

Tim Ulbrich: what about for

Nate Hedrick: you? I think your last point was actually just really worth reiterating about like, do what is valuable to you. [00:37:00] Um, I talk to so many people, both investors and buyers, that just like buy a thing. And then six months later, like, why did we buy this house? Like we didn’t actually want this.

We didn’t actually need that. We didn’t realize we couldn’t sell it. We have to hold it. Like, there’s all these things that like, it’s easy to get wrapped up in the, well, this is what I’m supposed to do next thing. And not actually taking a step back of like, what do I actually want to achieve, right? Maybe it’s, I want to take a year to assess if Columbus or Cleveland or Miami is the place I want to live.

And it’s a great idea to rent there for a year while you figure that out, right? Uh, and then decide, okay, well, now that we’ve lived here, we realize we do need an outdoor space, or we absolutely need a basement, or, you know, whatever those things are. Like, take your time to assess what you want and then assess it for yourself.

Like, don’t listen to what your best friend is saying, or the guy at work who is You know, frustrated with his rental properties, like figure out what you want to do. Figure out what works for your local market, investor or [00:38:00] buyer, uh, and then make a decision based on that information.

Tim Ulbrich: And sometimes to your point Nate, you’re surprised by when you get into the area or get into the home.

Oh, I never really thought about the value of this feature of the home or this aspect of the community. I’ll give a small, maybe what feels like a silly example. But when we moved in our home, currently it had a wood burning fireplace. And I’m like, Oh, that’s cool. Like That’s a deal breaker now if we ever move like I love the wood and like the memories that have come from like for us It’s Sunday night football and we’re throwing you know, wooden the fire and we’re hanging out like That’s the rich life, you know, for us.

And, and I couldn’t have anticipated that. That seems small, but it’s a big

Nate Hedrick: deal. Super funny that you say that Tim, because that was actually on our must have lists and our realtor at the time, this is again, like 11 years ago now, thought we were bonkers for being like wood burning fireplace is a must have.

He’s like, don’t you mean like 2, 400 square foot and above? And I’m like, no, I mean, wood burning fireplace. So I totally get it. And for other

Tim Ulbrich: people, they’re like, I don’t want to deal with the hassle of that. [00:39:00] That’s fine. They’re like, can I convert this to gas? And I’m like, stop,

Nate Hedrick: you can’t.

David Bright: David, what about for you?

Yeah, I think it’s, it’s a season of really cautious, really honest math and making sure, you know, we, we’ve talked about all the surprises that can come out there, whether it’s property taxes or homeowner’s insurance or moving costs or. Uh, the cost of furnishing and fixing up a house every time you move.

I think just being really honest with that math is, is helpful. Whether that’s, whether you’re thinking as an investor and needing to also think through additional costs like property management and major repairs coming, or whether you’re thinking through as a, as a short term or long term homeowner in that space with what repairs are coming up soon.

And because I think as we do that math, you can, you can start to more objectively identify, well, if the, if the price point. Is really high, but the rent would be much lower. Maybe it does make sense to rent or if, uh, if they’re [00:40:00] really close, maybe we think about one versus the other. I think the math can really help as long as you’re really comprehensive and what that math means.

Tim Ulbrich: Yeah. And speaking of intentional, comprehensive, cautious math, there’s a great rent versus buy calculator tool out there that I often like to reference. I’ll link to that in the show notes. It was published by the New York times. I think it really helps to. Just put numbers and try to make it as apples to apples as we possibly can, right?

We all know the emotional feeling when you’re looking at homes. Nate, you and I have often joked about this on the show before where someone’s, you know, I’m thinking about buying in one or two years and then they start searching and like, we’re buying tomorrow, right? It can happen and, and I think really looking at the numbers and trying for this to be an apples to apples comparison or at least as close to possible and then layering on top of the calculations can be some more of the, the emotional factors that we’ve been talking about throughout the show.

Great stuff guys. Uh, as always, Nate, David, appreciate your expertise. Appreciate your perspective. Thank you for letting me hijack your show, uh, as the [00:41:00] host, uh, for, for this episode and, uh, looking forward to your, your content throughout the year. So thanks so much guys. Appreciate it. Thank you.

[END]

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