Book a Discovery Call
Book a Discovery Call

Author: yfpadmin

YFP 141: How to not wreck your marriage because of student loans

Posted on by yfpadmin


How to not wreck your marriage because of student loans

Steven Chung, tax attorney, joins Tim Ulbrich to discuss about a recent article he published titled ‘Student Loans Can Be the Homewrecker in A Marriage.’ Steven also talks about tax considerations as it relates to couples and why it’s so important to communicate this information.

About Today’s Guest

Steven Chung is a tax attorney in Los Angeles, California where he helps people with basic tax planning and the resolution of tax disputes. He also assists people manage their student loans. He also writes a weekly column on the influential legal news site Above The Law. Steven received his law degree from Whittier Law School and and LLM in Taxation with honors and high distinction from Loyola Law School in Los Angeles. He can be reached via email at [email protected]. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

Summary

Tax attorney Steven Chung discusses how to not wreck your marriage because of student loans with Tim Ulbrich.

He says that the relationships that often work out are the ones in which people fully disclose how much they owe and have a financial plan to pay it off or to pursue forgiveness. If the understanding or shared goals are there, carrying student loan debt shouldn’t affect whether a marriage stays together. On the other hand, Steven says that problems in marriages and relationships happen when the amount of student loan debt a person is carrying isn’t disclosed early enough in a relationship or if a couple has differences in how they want to pay off the debt, their spending habits or financial goals.

If a divorce does happen, there are some variables on what could happen to the loans. If a couple gets married and one person has a lot of loans and the other doesn’t but says that they will pay off the loans, it has to be determined if that was a gift or if the amount that person paid on the loans has to be paid back to them. If that isn’t the case, it’s possible that the loans could be split between both parties. Steven also mentions that if one person is getting a graduate degree during the marriage, the divorce court may say that those loans or tuition has to work collectively to pay it.

Steven also discusses community property states, tax planning with student loans, and what his outlook is on student loan forgiveness.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist. And I’m excited to have joining me tax attorney Steven Chung to talk about how student loans can impact a marriage and strategies that can be taken before and during marriage to mitigate the risks. Now, we’ve talked at length on this show about the student indebtedness pharmacy graduates are facing. And today we shift our focus to talking not about the amount or how to choose the best repayment option for your personal situation but rather, if you have a significant other, best practices for ensuring that you both are on the same page. Steven, welcome and thank you for taking time to come on to the Your Financial Pharmacist podcast.

Steven Chung: Oh, thanks for having me.

Tim Ulbrich: So you recently wrote an article, which we’ll link to in the show notes, and that article is titled “Student Loans Can Be the Home Wrecker in a Marriage.” And as I mentioned, we’ll link to that so our readers can learn more. And I’m going to use that article as the basis for our time together as I think it connects well with what many of our listeners may be facing, and that’s having lots of student loan debt and trying to figure out how to best navigate that if their significant other is in the picture. So for those listening that are not yet married that find themselves carrying student loan debt, what advice would you have for them in terms of how to best disclose or share this information with a future spouse? And why is this so important?

Steven Chung: Well, the thing is, I mean, student loans shouldn’t alone be a — shouldn’t prevent you from getting married. I mean, people come in — I mean, nowadays, a lot of people are coming in with student loan debts and unfortunately, some of them are quite large. But finances are an issue. But as long as both of you have the same financial goals and are willing — have a plan to pay it off one way or another, I mean, it should be doable. I think the problem becomes when No. 1, it’s not just — when the amount of loans is not disclosed early enough or if people just have — the potential spouses have basically incompatible financial habits, I mean, habits and goals. And that can be a problem.

Tim Ulbrich: Absolutely. And one way to wreck a honeymoon, right, is to disclose your student loan debt on a honeymoon. So we should be talking about this in advance, of course. And I think not only the amounts or do you have it but also philosophies around debt. We often talk about on this show that people view debt in different ways. And obviously, everyone has different competing priorities. And so how we’ve been raised and other variable can influence that, and I think so many conversations to be had among couples leading up to that point of becoming married. Now, I’ve seen a lot of data recently about student loans being a reason to delay starting a family. From your experience, do you think the same effect is being had regarding student loan debt impacting one’s decision to get married? Do you sense that for those that are coming out of school today and the debt load that they’re facing, that this is actually having an impact on their decision to get married?

Steven Chung: Oh, absolutely. A lot of people — they usually have two philosophies. One is that they feel guilty about having a large student loan, and they don’t want to burden their potential spouse and their kids. And they think they won’t be able to afford a nice house in a nice neighborhood to raise their kids properly. And the second group of people, they don’t want to get married — they want to marry someone who can either pay off the student loans for them or at least have the same philosophy on paying it off. And it seems like it’s become a problem, especially — it was more problematic during the Great Recession a couple years ago. But even now, the economy’s recovering, people are still kind of wondering about the potential recession and things like that. So it’s kind of making people feel a little — think deeper on financial analysis or some sort of background check, so to speak, on their potential spouse before tying the knot.

Tim Ulbrich: Steven, I was thinking before we recorded as I was preparing for this show, I could see specific situations that could cause difficulty between two individuals if there is not open communication. And three that come to mind — I’m sure there’s many others than three — but I could see a situation where one individual has a lot more debt than the other and a potential for resentment. So somebody that for whatever reason, maybe they don’t have debt through scholarships, parents helped pay for it, they worked, whatever, and somebody else has a lot of debt and potentially some resentment for that situation. Another situation I could see is just different feelings about the debt as I alluded to already and how to repay. You know, some, as we’ve talked about on the show, want to kind of go all in on debt repayment. Others want to take a slower approach with other priorities financially. And the third one I could see is whether or not parents are involved, you know, potentially cosigners or those that had family members directly loan them money. Do any one of these resonate with you more than the others in terms of experiences you’ve seen where this can cause some difficulties and resentment between two individuals?

Steven Chung: OK, definitely by far it is the philosophy on how people want to pay the student loans. There’s some people who want to pay off the debt as quickly as possible. And on the other end, someone just wants to be able to pay the bare minimum and pretty much have the YOLO attitude, You Only Live Once. Those two people, their relationship is probably not going to go anywhere. But usually, the ones that work it out are, like I said, the ones that have — I mean, they fully disclose how much they owe and knowing that, they have a financial plan to try to pay it off or a plan for loan forgiveness if that’s what they want to do and of course at the same time have a financial plan for retirement, buying a house, having children, that kind of thing. So as long as they have that kind of understanding and they’re OK with the spouse’s financial habits and have the same financial goals, whether or not one spouse has a lot more student debt than the other, it shouldn’t matter that much as long as they have some sort of plan to pay it off or to manage it. As for parents being involved or if they’re cosigners, I mean, it’s ultimately up to them. Some people have their parents cosign because they’d rather pay their parents back with interest rather than a bank. Also parents who are a third party might be more forgiving as opposed to a bank who will send collection agencies after them and impose collection fees and possibly sue them, ruin their credit. So there’s a variety of factors that determine whether parents should get involved. So I mean, there’s pros and cons either way, so to speak.

Tim Ulbrich: Yeah, and I think what you had said about, you know, couples working together with their goals is so important. And I think I don’t want that to get overlooked, something we talk often about on this show of why we think it’s so important that couples start with the goals and then of course they get into the budget and make sure they’re not looking at any one specific part of the financial plan in a silo. So you know, I’ll see this often where we may give a talk to a group of pharmacists or maybe a couple in the audience, they come up, and I can tell within 20 seconds if they have different philosophies on how to spend their money, you know, in terms of whether it be debt repayment or other parts of the plan. And I think if two people can agree on the goals and the shared vision, you know, debt repayment becomes a part of that and hopefully that mitigates any concerns or resentment might be there if there are different amounts of debt that people are carrying. Now, you mentioned in your article that for some married couples, as their joint income goes up, it might make sense for them to refinance their loans. Why is that the case?

Steven Chung: OK. Well, generally, what tends to happen is let’s just say a couple makes a lot more money, they were initially on an income-based repayment plan, paying the bare minimum, but it looks like based on their finances, assuming nothing goes wrong, they’ll probably pay it off within like six or seven years. It’s not going to make sense for them to continue paying on a income-based repayment plan for one reason or another, maybe the interest, maybe interest will increase too much and they probably won’t qualify for loan forgiveness. So basically, if they have a plan to pay it off within let’s say 5-10 years, I mean, they probably just want to refinance because of lower interest rates. So they’re basically saving money that way. So I mean, the only drawback is that if they go to a private bank, they don’t have a similar — they don’t have an income-based repayment program like the government does. And they certainly don’t have loan forgiveness programs. So that’s something to keep in mind. But yeah, it’s just really about paying less interest to the banks or to the lenders and their decision to refinance.

Tim Ulbrich: Yeah, and I’m glad you said some of those nuances that you may not get with a private company, obviously loan forgiveness, the potential for income-based repayment plan. And I know we’ve talked about before on the show, but I’ll reference our listeners to our refinance page information where they can learn more, YourFinancialPharmacist.com/refinance. What is it? Who’s it for? You know, what could be the potential savings? Pros and cons? And then we also have refinance offers there as well. Now, what’s your advice to those that are refinancing their loans where there may be a situation, whether that be the bank requests or better off, with both incomes included, where you have both spouses names that are on the loan or if one cosigns the other. What are some of the concerns that you have in that type of situation?

Steven Chung: OK, here’s the thing. If a bank does that, I would run. I mean, it’s just — I think the main drawback is you don’t want to burn your spouse with a loan. I mean, unless you’re absolutely sure that the loans can be paid off and the bank is offering a much lower interest rate, if there’s a cosigner, I mean, I would just run. I mean, there’s so many banks out there, there’s so many lenders out there. I mean, not a lot specialize in student loans, but there’s enough to make it competitive. But if a bank just says, ‘OK, well, we want your spouse to cosign or someone else to cosign,’ then run. I mean, I’d only do it if there’s like absolutely no other choice. It just doesn’t make sense. I mean, there’s so many red flags there.

Tim Ulbrich: And I think that’s a good reminder, Steven. What we have seen, as we’ve said before on this show, this is a $1.5 trillion market, student loans. So there is lots of competition out there in the market, and we often encourage our listeners go out there, shop around, do your homework. These companies I will say seem to becoming more and more aligned with how competitive their offers are, but I don’t think don’t fall into the trap of just one offer, one option. Now, your article brought up an issue that I honestly had not previously considered, which is for those that live in community property states, refinancing pre-marriage student loans during marriage could convert it into a community debt where each spouse will be liable for half of the debt. Can you first explain what it means to be a community property state? And then talk about the impact that this situation could have.

Steven Chung: OK, a community property state, which includes California and a few other states, it just means that anything acquired during a marriage is split 50-50 between each spouses, each spouse. So in the sense of refinancing, there is the potential that refinancing a loan could mean that a loan acquired before marriage turns into a community debt. For practical concerns, it doesn’t have that much of an impact if they stay married. I mean, they’re still going to pay their loans. It’s not going to — I mean, the banks will still go after a person on title, but ultimately, I think where it becomes an issue is when there is a divorce and when if the court will deem the loan a community loan and it might impact how the ex-spouses have to pay the community — the refinanced loan, whether the original spouse is liable in full or do both spouses have to pay 50%. So that’s probably going to be the issue in these type of things.

Tim Ulbrich: So let’s talk about that situation a little bit further with the very important disclaimer that we’re not here to provide legal advice and tax advice and every situation obviously can be different. We know we have people listening all over the country considering different state rules and nuances to each situation. But generally speaking, how does student debt get handled in a divorce situation in terms of shared liabilities? And what factors go into determining that?
Steven Chung: OK. Yeah, the thing is I’m not a family law attorney, so I’m not sure exactly how it works out in a divorce situation. And of course, 50 states have potentially 50 different rules, but the two nuances that kind of come up or at least — well, the big nuance where this might be an issue in a divorce is when, well, a couple gets married. One has no student loans and the other has a large amount of student loans. And then the first spouse offers to pay off the other spouse’s student loans. So in a divorce, what does that mean? Is that a gift to the other spouse? Or is it a loan that has to be paid back? So that’s kind of an issue that tends to come up in divorces. And then of course, even if there isn’t such a case, how would the loans be split? And would the couple have to pay their own loans? Or do they have to somehow pay the loans together? And usually, this situation comes up where a couple gets married and then one spouse during the marriage decides to get like a graduate degree or continues their education. But he needs student loan money to pay for basic living expenses like rent or things like that. So if that is the case, then chances are a divorce court judge will say that the couple collectively should pay a portion of the loans back and shouldn’t be responsible for — and shouldn’t just be responsible to whoever’s on the loan. So that’s kind of the issues that come up during divorce most frequently.

Tim Ulbrich: So my takeaways there are choose your spouse wisely and make sure you have open communication and conversations as far in advance as you possibly can. So let’s shift gears a little bit and talk about tax planning as it relates to student loans when we have two individuals that are involved. And again, important disclaimer, we’re not here to provide tax advice. And we certainly recommend they consult with a tax professional that can look at their personal situation in more detail. But it appears that the biggest consideration when it comes to student loans would be for those that are on an income-based repayment plan and determining whether it would be advantageous to file jointly or separately. What are some considerations here for our audience?

Steven Chung: OK. Let me add a third option and that’s just not getting married and living together. So they’ll just be filing single. But anyway, yeah, one of the things people have to look at when they’re on an income-based repayment plan is whether filing jointly will significantly increase their student loan payments. And of course, usually filing jointly, there is a small tax benefit. You’re usually in a smaller tax bracket. But let’s just say to make it simple you’re paying $10 more in student loans, but you’re saving $5 in taxes by filing jointly. Then you’re better off filing separately because even though you’re paying more in taxes, they’ll be paying even less in student loans, so that’s kind of. But usually for married couples who are both on income-based repayment plans or maybe one of them are, they should contact a tax preparer and have them do an analysis on what their tax situation will be if they file separately and then also look at what their student loan payments will be filing separately versus filing jointly. So and then make the comparison and then file the tax return on I guess whichever will save you the most money. And some people, like I said, there’s a third option. You could stay single. And interestingly, in California, you don’t even have to get married. You can actually choose to be a domestic partnership. I mean, that was an option given to homosexual couples before it became marriage was legalized. But now it seems to be making a comeback in people with large student loans. And this might be a viable option for them or just stay single altogether and just maybe live together, that kind of thing. The second biggest thing is — and this kind of could be down the road is when the income, when the loans are forgiven, that forgiven amount will be called cancellation of debt income. So it’s basically like the government kind of giving you — or somebody giving you money to pay off the loan, although you don’t actually get the money. Generally, there’s two things to consider. No. 1 is they tack the cancellation of debt income is based on your assets versus your liabilities. If your liabilities exceed your assets, then you’re considered insolvent and you will not be taxed on the forgiven debt. But if your assets exceed your liabilities, then a portion or maybe all of the forgiven debt could be taxable. Generally what I tend to tell people is don’t worry about it right now, especially if you’re just starting your careers. You know, maybe like the first 5-10 years, just focus on your career because you don’t want to live your life trying to plan for loan forgiveness. I mean, you’re pretty much throwing money away. And that’s kind of like putting the baby out with the bathwater, so to speak. So after the 5- or 10-year mark, once you kind of know what your salary will be, then you can possibly plan your finances to maximize insolvency or minimize your assets so you can minimize your taxes when loan forgiveness comes. The second thing to consider — and I think this is a very likely scenario — is that I think in about 10 years, that’s when I think the first income-based repayment forgiveness programs will begin. I think by the time, it’s probably not going to be taxed. The forgiveness is not going to be taxed. I think it’s just because a lot of potential candidates, especially Democrats, they are considering passing a law making forgiveness of debt income non-taxable. And as a precedent for that, back during the housing crisis when people were short selling their houses, the banks issued a cancellation of debt income on the amount that the banks lost or the amount of the mortgage that was forgiven, and then Congress immediately passed a law to make sure that the forgiven mortgage debt is non-taxable. So I think we’ll — I feel pretty good that there’s going to be something similar for student loan debtors when loan forgiveness comes. But just in case, I mean, you should probably make plans to maybe rearrange your assets, maybe lease or rent instead of buying, that kind of thing, at least around the time loan forgiveness happens. So yeah, so I think those kind of things you should consider.

Tim Ulbrich: Steven, let me ask you, you know, just this week I’m thinking about trying to reconcile this issue of where we may end up in five or 10 years when it comes to debt cancellation. You know, just this week, there’s news on both sides of it in terms of the Trump administration continuing to want to press forward with ending loan forgiveness and then obviously we have the campaign from the presidential Democratic candidates around debt cancellation, debt forgiveness and free college. And I think that often leaves people like in our community wondering, my gosh, what is the future of this going to be? What do I make of this? And how do I even begin to think and plan around it. And what I heard you say is you really feel like you think — obviously none of us have a crystal ball — but you think we’re going to move in that direction of not having that tax obligation based on some historical precedent. So tell me more about, you know, based on all that you have heard and based on your expertise in this area, tell me more about why you feel like that that’s the path that will go forward.

Steven Chung: OK. Well, the thing with Trump’s plan, he only calls for the removal of what they call the Public Service Loan Forgiveness. And that’s these student loan program where you work for the government or a nonprofit for 10 years and your loans are forgiven and without the cancellation of debt income.

Tim Ulbrich: Right.

Steven Chung: What he actually wanted to do was he wanted to simplify — there’s like several different IBR plans, and he wanted to simplify it into one 15-year plan. The thing is one 15-year plan for undergrads and then 30-year plan for graduate students. So he did not mention whether the loan cancellation will be forgiven. But let’s just say Trump’s proposal passes and loan forgiveness is not for another 30 years for people’s start. I mean, the way things are going now, the student loan numbers are just increasing. There’s no — I see no activity among students and schools to reduce it, to reduce tuition. I mean, just the cost of education is going up, and at some point, it’s just going to get to a point where people are going to be graduating with $300,000, $400,000, or even $500,000 debts. And I’m even starting to see that.

Tim Ulbrich: Yep.

Steven Chung: A few dentists, they’re even graduating like $700,000, $800,000 and even $1 million. There was one story in the Wall Street Journal, an orthodontist in Utah graduated with $1 million in debt. So I think with these numbers, I feel very good that this kind of relief is on the horizon. Of course, I’m not 100% sure, but I just feel good about it.

Tim Ulbrich: Sure.

Steven Chung: And it’s just going to affect so many people that there’s going to be a major outcry. And I think at that point, it’s just going to be a big — I mean, students and also their parents who also cosigned these loans will probably want them too. So there’s going to be an expanded voter base.

Tim Ulbrich: Yeah, I’ve thought a lot about that too. You know, and again, we don’t know what the future will hold. But I think when you think about the vulnerability of the borrower, the focus on costs in higher education and the political outcry that would come from something like that, I think that all of those are important considerations. One of the takeaways I’ve had, Steven, from our time together, which I really appreciate you sharing your expertise, is we often talk on this show — and I know this is second nature for you, but I think here we are in tax season, so it’s a good reminder that we often think about filing our taxes, which it really is just a mechanical retrospective look at what happened. And I think this has been a great reminder on the need to be more strategic, more prospective and to be working with experts, you know, especially as we’re thinking about things like single filed married, and some of those situations when it comes to income-based repayment and thinking on more of a strategic standpoint based on your personal situation. So again, I appreciate your time and appreciate your sharing your expertise. We’re going to link to your article in the show notes as well as your bio. But just here as we wrap, where can our listeners go to connect with you and to learn more about the work that you’re doing?

Steven Chung: Well, I write for a legal website called Above the Law, and my columns appear on every Wednesday. In fact, I just released a column today, although it’s more about tax law and video games, so totally off-topic. I’m also on Twitter. My Twitter is @stevenchung. I just post occasional tax stuff, usually nonsense, but that’s a good way to contact me. Or you can connect with me on LinkedIn or if you’re in the southern California area, you can contact me. My phone number is (818) 925-4699. I’ll be happy to answer any questions about tax planning or filing tax returns, especially this time of year.

Tim Ulbrich: Awesome, thank you. And again, to our listeners, Steven’s a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolves tax disputes. He’s sympathetic to people with large student loans. Many of us can certainly sympathize with that as well. He can be reached via email. We’ll link to that in our show notes or as he mentioned, you can connect to him on Twitter. You’ll also find him writing for Above the Law and also on LinkedIn. Steven, thank you again for taking time to come on the show.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 140: How Ryan Is Bringing in $11,000 a Month Through College Town Real Estate Investing

Posted on by yfpadmin


How Ryan Is Bringing in $11,000 a Month Through College Town Real Estate Investing

Ryan Chaw, clinical pharmacist and real estate investor, joins Tim Ulbrich on the show. They talk about how Ryan was able to accelerate his financial goals through real estate investing and how he went from zero rentals and zero rental income to $10,755 per month from 18 tenants in four years.

About Today’s Guest

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

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

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

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

Three of the properties are on 15 year mortgages and one is on a 10 year mortgage. Ryan took a HELOC out on the first house to help buy the 4th house.

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

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

Summary

Ryan, a clinical pharmacist and real estate investor, quickly found his investing niche: college town real estate investing. Ryan started investing in real estate right after he graduated from the University of the Pacific. He now owns four single family homes in Stocktown, California, a college town, and has 18 tenants. By renting out each room individually, Ryan has maximized his income and brings in $10,755 per month.

Ryan’s grandfather owned a couple of rental properties in the Bay Area which not only funded his early retirement but also paid for Ryan and his brother’s college tuition. Ryan saw how impactful real estate investing could be and has the goal of reaching financial freedom so he’s able to do what he wants to do and provide for his family without money restricting his freedom.

Ryan purchased his first rental property in 2016 and has bought another single family home each year after. In high school, he worked a couple of jobs and saved all of that money in mutual funds. After 5 to 8 years, that money turned into $30,000. For his first rental property, he put around 25% down and took out a 10 year mortgage. He also worked overtime at his pharmacy job to help fund it. He purchased his first rental property for $262,000. Ryan receives $2,600 a month in rental income and has a $1,900 mortgage payment.

With the cash flow he brings in from his rental units, he makes sure his emergency fund is funded and averages that he’ll need about $100-200 in expenses monthly for each house. Ryan uses the leftover cash flow to fund his next property.

Ryan said that he thinks investing in student rentals in college towns can maximize your income the most in a single family home. Even though homes are expensive in California, he’s still able to have a cash flow from his properties. In this episode Ryan also discusses how he looks for tenants, handles complaints from tenants about other tenants, and how he built systems and processes.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. It is my pleasure to welcome Ryan Chaw onto the show to share his experiences with real estate investing. Now, as you know, we’ve mentioned real estate investing as a goal we have for 2020 in terms of bringing more information, more examples, more stories, to the YFP community. And today is another great one for you in this area. Ryan has a unique niche of real estate investing in California in college town real estate investing. He’s doing it well in a high cost of living area, and I think his work could translate well to other parts of the country. Furthermore, he is setting out to teach others his game plan and how real estate investing can help accelerate one’s path towards financial freedom. Ryan, welcome to the Your Financial Pharmacist podcast.

Ryan Chaw: How’s it going, Tim? I’m honored to be on the podcast.

Tim Ulbrich: Thank you so much. So glad that you reached out to me, really, really inspirational hearing the work that you’re doing. I’m excited to share that with our community as well. Let’s start with your career in pharmacy, and then we’ll dig into the real estate investing. Tell us a little bit more about your pathway into pharmacy, where you went to school and the work that you’re doing now.

Ryan Chaw: Yeah, so I graduated from the University of the Pacific in Stockton, California in 2015. Soon after that, I started working for RiteAid, and I did a part-time job at Kaiser and eventually ended up doing full-time at Kaiser. And now, I am an infectious disease pharmacist full-time at Kaiser. And from there, I just started investing in real estate. I saved up a lot for a down payment, I worked a lot of overtime, and I also had some money in mutual funds as well, so I just put 20% down on that first property in 2016 and then I rented out per room to college students to maximize my profits. Then I just bought one — I repeated the model. I just bought one each year, and now I’m at four single-family homes with 18 tenants and $10,755 in rental income.

Tim Ulbrich: That’s awesome. And we’re going to dig in to dissect that much further. You know, I think for people that are hearing that that are thinking about real estate investing, it can seem somewhat overwhelming why you went from just starting to, as I mentioned in the introduction, you just mentioned, four units, 18 tenants, roughly $11,000 of real estate income. And we’re going to talk about how you got from where you started to where you are today, really try to break down that plan. But tell us about the why, the inspiration. You know, where did your motivation come from to say, ‘I want to do real estate investing.’ And not even necessarily where you see the long-term, talk about that, but even to take that first ‘risk,’ that first step, that first property, what was the motivation and reason of doing that?

Ryan Chaw: I would say financial freedom, honestly. I just wanted freedom to kind of do what I would like with my life, have more flexibility in my life, be able to provide for my family down the line without having to worry about financials and have money restrict my freedom. So that was the goal for getting into this because eventually, this rental property portfolio will provide me passive income that will pay for all the bills and also allow me to, you know, take vacations, travel, and all of that.

Tim Ulbrich: And so, you know, as I think about your journey, your story, obviously you’re in a higher cost of living area, so you know, I don’t — as someone who is in Ohio, I think wow, real estate, California, crazy expensive, do the numbers even work? But tell me more. So I love the connection of financial freedom. But why real estate investing? I mean, other ways you could have just squirreled money and saved, you could have done other types of investing, you could have started a business. What was it specifically about real estate investing that really peaked your interest to use this as the vehicle to achieve that goal of financial freedom?

Ryan Chaw: I would say part of it actually is — because when I got to pharmacy, I wanted to provide a service for people. It’s the same idea for real estate investing. You’re providing a service for people. And I do interact with my tenants, and some of them I actually help out through the college because I actually went to UOPA as well. So just kind of giving back to that community is one reason why I did this. Another reason why is real estate investing is one of really the best ways to have true passive income and a good amount of it. If you were to invest in stocks, you would need to make — you would have to have like a several million dollar portfolio to get $10,000 a month in passive income in dividends. Right? But real estate, you can achieve it a lot faster, it’s truly a way to create generational wealth. I was actually inspired by my grandpa to get into it originally because he invested in a couple properties in the Bay area when they were cheap, right? And now they just went skyrocketed, right? So the rental income from that paid for not only his life in order for him to retire early but also paid for my college and that of my brother’s as well, so I really realized, this is a great way to create generational wealth.

Tim Ulbrich: I love that. So his experiences in doing real estate investing allowed you to get a jump start in terms of your financial plan by not having the massive debt load we see with lots of pharmacists, which allowed you to accelerate your savings. But even without the $170,000-200,000 of debt that we see with today’s graduate on average in the pharmacy world, I still don’t want to mitigate that it doesn’t mean there wasn’t hard work that was done to get to that first property. You know, often the objection I hear — and I know my wife Jess and I, we really felt like the hump of the first one is so difficult to get over, but for those that are listening or have listened to the Bigger Pockets podcast, they talk about this all the time of that first property, first property, you just got to do it. But I often hear as an objection — and there’s this disconnect between OK, I like the idea of real estate investing, I want to jump in, but my gosh, like where do I get the cash to even get started? So you talked a little bit about 2016, first property, 20% down, but talk to us, even before we analyze that property and that deal, talk to us about how you were able to save up money. What was the strategy that allowed you to have the cash flow to create the savings to get that 20% down?

Ryan Chaw: Yeah, so I actually worked a couple of jobs in high school during the summer. And I would put all my money, save it away rather than spend it into mutual funds at Edward Jones. And so that grew, that portfolio grew over the course of 5-8 years or so. And eventually when I took it out, it was around $30,000. So that was half of my down payment right there, plus I’m investing not in my directly local market, I’m investing in a city called Stockton, which is about an hour away from me in Sacramento. And the prices there for homes were around the $200,000s when I first started. Now, they’re around $300,000s. But compared to the price in Sacramento, you know, Sacramento costs $500,000 to buy a house. So for me, it made perfect sense, you know, I should just drive one hour away and create this system over in Stockton and then the cash flow would make a lot more sense. And yeah, that’s how I got started.

Tim Ulbrich: Yeah, and what I heard there is hustle and sacrifice, you know. And that was really my next question for you. I think many people, especially our California community members, might be thinking, my gosh, it’s an uphill climb to even be able to afford your own personal property, let alone being able to put 20% down on a second one. So how have you reconciled that to be able to cover your own expenses as well as then obviously be in a position to invest?

Ryan Chaw: Yeah, so part of it was a little bit of luck. First property depreciated like crazy. I bought it for $262,000. And you know California, it depreciates like crazy. So it went up to $315,000.

Tim Ulbrich: Wow.

Ryan Chaw: I was able to take out a HELOC from that to basically help pay for each house down the line.

Tim Ulbrich: OK.

Ryan Chaw: So yeah, that was one strategy I used.

Tim Ulbrich: And before we jump into more of that first property, are you living in one of the properties? Or what’s your situation to be able to cover your own personal living expenses?

Ryan Chaw: Oh yeah, great question. I actually do still — I have a great relationship with my family, so I do live with my parents. But you know, if I were to live outside, I would probably find a cheap, a very cheap place to rent, you know, nothing more than like $800 a month.

Tim Ulbrich: Yeah.

Ryan Chaw: But really, my real estate rents would cover that.

Tim Ulbrich: Yep. I love that, though. I mean, you think about the biggest barriers often and people getting started and this would obviously be their own housing expenses and student loans. And you’ve been able to overcome those barriers plus saving at a very early age, took advantage of compound growth, which allowed you to come up with a down payment, you got that first property, and then as you mentioned, you’ve got appreciation, you’re able to draw on the equity of that to be able to get into future properties. So first property, 2016, I think I heard you say $262,000? Is that correct?

Ryan Chaw: Yeah, $262,000.

Tim Ulbrich: OK. And it appreciated up to $315,000. So talk to us about just the numbers on that, roughly. You put 20% down. Talk to us about the rental situation and just so our listeners can get an idea of, you know, rental income coming in, your expenses and what those numbers look like.

Ryan Chaw: So the first house was basically a cookie-cutter property. It was a three-bed, two-bath, and what I do is I add extra bedrooms where I can. So I’ll either put up a wall or I’ll change an extra living room or family room into a bedroom where I can to maximize the profit because each room can rent out for like $600 a month. So for that house, I’m getting around $2,600 a month. And then for my mortgage payment, it’s $1,900 a month.

Tim Ulbrich: OK.

Ryan Chaw: So that’s $700 in cash flow. And this is on a 15-year mortgage, actually a 10-year mortgage.

Tim Ulbrich: Wow, OK.

Ryan Chaw: Yeah, I actually — I think I put a little bit more, like 25% down, but I did, yeah, a 10-year mortgage and you know, by renting it out per room, it really maximizes that cash flow you can get from the house. And then basically from there, we just reinvest the cash flow into the next down payment, into the next one, into the next one, right?

Tim Ulbrich: Absolutely. Tell our listeners about — a little bit more about why you decided a 10-year aggressive repayment versus a 15-, 20- or 30-year.

Ryan Chaw: I would say, you know, I did hear stories about overleveraging. So I wanted to start off a little bit safe, but then I realized it doesn’t really have to be that aggressive. I think another reason why is my end goal is financial freedom, so I want to pay them off as soon as I can because I want that passive, like complete passive income, you know, $10,755 per month coming in like period for the rest of your life.

Tim Ulbrich: Yeah, and I look at that example — this is a really good one. You know, you mentioned the rent at $2,600 a month across the tenants in that unit. And we’ll talk about the strategy and kind of the college town approach that gives you multiple renters. So $2,600 of rental income, $1,900 a month of a mortgage payment but that’s on a 10-year mortgage. So we fast forward 10 years, property is going to appreciate more, so the actual property will be worth a significant amount, which is a big impact on net worth. And then you get rid of a big part of that $1,900. Obviously, you’ll still have property tax, but you won’t have a mortgage payment. And in theory, rents will go up because of the market that you’re in and appreciation, all of these things. So I think hopefully our listeners start to put together the concept of the financial freedom. Break down a little bit further for me — I see in there $2,600 of rent, $1,900 of mortgage payment. I’m assuming that’s mortgage and taxes and insurance that’s in there as well. What would the rest of that $700, how do you reconcile that, you know — obviously you wouldn’t look at that as just being true profit because you’ve got other upkeep, vacancies, other expenses that you’re accounting for. So how do you determine, you know, what of that money, that $700 difference between $2,600 and $1,900, that you hold for those types of expenses? You know, versus that you account as more true profit?

Ryan Chaw: Yeah, so I always recommend having an emergency fund in case something breaks down, maybe $10,000-15,000 would be a good, reasonable emergency fund. I know some people say like six months emergency fund and all of that, but for me, you know, I do have my HELOC, so if I do have to use that, I can always take it out, which is — it’s basically like a credit card with a very low interest rate. So if I want to do that in an emergency, I could do that. But I would say my expenses are around maybe $200 or $100-200 a month or so average. But it really depends, a lot of times, things — because of the way I set up the house, things don’t break down too often. But when they break down, of course it’s a huge expenditure. And that’s what happened on my first house. I didn’t do my due diligence to make sure that everything was in working order before I bought it. And I made some mistakes, huge mistakes, actually. So one Monday, I got a call from a tenant who was saying, ‘Oh shoot, there’s sewage coming out the kitchen sink onto the kitchen floor.’ And this was like at 11 p.m. at night, right? I was like scrambling to call so many different plumbing companies, and it was hard to get ahold of someone because it was 11 p.m. at night to clean up the mess. So they had to put in a sump pump, they had to sanitize everything. That cost a couple thousand. And then we put a camera down the pipe, the sewage line, and then it was, you know, showed a lot of breaks in the pipes and routes in the pipes, so it cost me $6,000 to replace the whole sewage line.

Tim Ulbrich: Oh, gees.

Ryan Chaw: Yeah, it was crazy. So these things do come up, and they happen if you don’t do your due diligence. And so what I learned from that is during the escrow phase of the house, it’s very important to do a sewage line inspection. So that’s just sticking a camera down the sewage line, costs $200-300, but you know, they’ll find all the breaks, all the cracks and grooves in your pipes if there are any, and then you can use that as a negotiating point during the sale. Either have the seller repair it or have the seller cut a check for you to hire someone to repair it.

Tim Ulbrich: I love that, especially when you consider the cost of something like that, of the repair relative to the cost of the preventative, more diagnostic approach. So that’s great, great, great advice.

Ryan Chaw: Exactly. And I also learned not to buy houses that are over 100 years old when I can because that first house was like 100 years old. Crazy.

Tim Ulbrich: So you know, in California, knowing that you have multiple tenants, you’re in a college town — and again, we’ll talk about that more here in a little bit — do you not have to be as concerned about vacancy rates, you know, that you might see in other parts of the country? Or how do you think through vacancy?

Ryan Chaw: Correct. So I do one-year leases for all of my rooms, all of my 18 tenants. And it’s because the demand is so high for off-campus housing, I only charge $600 a month, right? And on-campus dormitories, they charge $1,000-1,200. So that makes sense for a lot of people. You’re getting more privacy, you’re getting a lot more space, right? And just more freedom in general, right? So a lot of people like that and they see that as a good — for them, a good place to stay. And I usually target third- or fourth-year students when I can. Sometimes I have second-year students stay. I rarely have first-year students stay because of the maturity level. Most of them, they’re already in professional school, pharmacy school, right, so they take — I mean, they mainly use the house to study and sleep.

Tim Ulbrich: Yep.

Ryan Chaw: To be honest, yeah. And not only that, the parents kind of visit them and they help clean up the house, so I cut down on the cleaning costs and all of that too. And so yeah, I do one-year lease. They can always sublease during the summer. Some schools like pharmacy school and dental school, they go year-round, so they actually go through summer. So it makes sense for them to do a one.

Tim Ulbrich: I love that. You know, the two objections I’ve commonly heard for college town real estate investing would be the summer period, but obviously you mentioned the one-year lease and the allowance of subleases or programs that have year-round type of offerings, as well as the potential damage and upkeep for a variety of reasons, you know, maturity and so forth and working with professional students — not that it’s immune to that, but obviously you have a lot better chance I think that they’re going to take care of the property and as many pharmacy students know, pharmacy is a small world, and you should be respectful, right, of somebody else’s property. So talk to us about the strategy of college town investing. I think that’s really the niche you’ve built here. And I think it’s really cool. You know, why? How? And what’s been the strategy that this is an area that you want to continue to go into further?

Ryan Chaw: Yeah, so I was first inspired by actually my friend who did this, his aunt basically bought a property right across the street from campus and rented it out to my friend’s friends. And so my friend basically lived there for free. In fact, if I were to go back, I would do the same strategy because for house hacking where you stay in the house, you can actually put down as low as 3.5% down, so I would have even started with that. But I guess I went into student rentals mainly — like I did examine the different tenant pools out there, but really, student rentals is the best way to maximize your profit on the single-family home because of that you’re renting out per room idea. So one of my houses, for example, appraised to rent out for $2,000. They estimated $2,000 in market rent, right? But I was actually — after I added the bedrooms, I was able to get $3,100 a month. So that house, you know, an extra $1,100 every month made a huge difference in my bottom line. And that’s how I’m able to invest in California where the rental rates — I mean, sorry, the housing prices are so high. If you were to do this in other states, you could get the same rent by $500-700 and the price of the properties are only hundreds of thousand — like $100,000 or $200,000. So the cash flow is tremendous. And that’s why I’m helping others and teaching others how to do this strategy because it’s really a great opportunity, especially in other states.

Tim Ulbrich: And it sounds like, you know, I’m guessing some of our listeners may be thinking about, hey, here we are in a really great, you know, 10-11 year run in the market.

Ryan Chaw: Oh yeah. They get the history, right?

Tim Ulbrich: Yeah, what happens to Ryan if this thing flips on its head? But a few things that I think you’ve done really well to protect yourself against that, obviously, it sounds like you’ve purchased properties at a good price point. You’re in a market that’s going to continue to have demand, regardless of what happens. Obviously being in a college town, you’ve got multiple tenants. You’ve built these year-long leases. But also, you’ve got some of your properties — I don’t know if you have all of them on a 10-year, but because you’ve done that and they’ve appraised and you’ve paid off a significant amount I’m guessing of some of those mortgages on a shorter time period, even that one you purchased in 2016, you’re essentially 3+ years in, so you’ve got this cushion with 20% down and this equity built in that even if housing prices go down, let’s say 10-20% overnight, you’ve really got some protection built in there, right?

Ryan Chaw: Oh yeah. For sure. They say you make your money when you buy, right? So I’ve got to make sure I look at several — oh, let’s say maybe 50 deals or so — just throughout the year. And I buy the best one, right? I constantly look at deals so I know what a good deal looks like. So that’s pretty key.

Tim Ulbrich: And what about getting tenants? What’s been your strategy of having a funnel of people that come to you? And I’m guessing this in part has to do with the relationships that you have. But how have you done that I guess initially? And then is there a point where, you know, after you have a good reputation with these students that I think it would be somewhat of a word-of-mouth of kind of passing it, you know, off to the next group that’s coming after they graduate?

Ryan Chaw: Yeah. Exactly. Nowadays, it’s word of mouth. But when I first started out, I did three things: I put signs or fliers up on the campus bulletin boards. That actually worked pretty well. I put a “For Rent” sign on my lawn. I mean, that’s usually how everyone starts out. That actually got me a lot of calls, but they weren’t from students. They were usually from people around the area. And then when I said, “Well, if you were to rent out the whole house, it would be $3,100 a month,” they’re like, “That’s crazy.” So usually, I would get some not very well qualified tenants to that. But then what really helped was the Facebook groups. All campuses have these Facebook groups for off-campus, there’s usually a textbook exchange group, there’s Class of 2020, you know, all these groups. I go onto them, and I write my targeted ads, right? I say, “Hey, we have this place that’s three minutes from campus.” I literally put up the map on there and show them where it’s at relative to their classes. And I get — I would say every time I post an ad, within the first three days, I would get like 10-12 people contacting me. No kidding, this is pretty average.

Tim Ulbrich: Wow.

Ryan Chaw: Yeah. So there’s a lot of people interested. It’s a huge market. You think about it, UOP I think has 7,000 students or so. I only need 18 of those. That’s like .1% of them, right? So yeah. It’s a great market.

Tim Ulbrich: Let me pick your brain on process. You know, as I’m hearing this — and I’m guessing our listeners as well — I hear you talk about things like advertising your properties and responding to interest and dealing with the sewage pipe issues at 11 o’clock at night and having to think about the strategy of finding these deals and you casually talk about adding rooms and putting up walls. And I’m guessing many people are like, oh my gosh, I just can’t even wrap my mind around —

Ryan Chaw: Right.

Tim Ulbrich: — how to process this. Tell me a little bit about your process, your team, what you’re doing versus maybe other things that you’ve really leaned on others to do.

Ryan Chaw: Yeah. So yeah, putting the systems and processes in place is key, so I’m glad you mentioned that. So I have a process for everything. Rental payment, I do through Zell. I require them to use an app called Zell. It’s a direct deposit app, so I don’t have to deal with a check being lost in the mail, right? And it tells you exactly when they pay their rent so I know when they’re late or not so I can charge the late fee if they’re late. Just putting everything in the lease, being very clear, having all clear, set terms and the wordings clear for any potential issues that could arise. Then you just refer back to the lease when the issue happens. I also have a system in place for like managing the properties if something breaks down. So if something breaks down, the tenant will typically send me a text. They’ll say the toilets not working. And so what I do is I just forward the text to my contractors. And I have a team of three contractors. One of them is more creative, he’s the one I use to help build walls and maybe create a hallway if I have to. He’s the creative guy. The other two, they’re more for like run-of-the-mill things like replacing a toilet, putting in a sump pump, things like that. But basically, I just forward a text to them. And then they let themselves in with the electronic lock on the door. So they just put in that code, right, let themselves in, do their job, they go home, and then I have someone else take a look at the work. And they just tell me, yeah, he fixed the toilet or whatever. And then he sends me the bill, and I send him the check. That’s it.

Tim Ulbrich: Awesome. Awesome.

Ryan Chaw: You know, I haven’t been down to Stockton in over seven months now. Right? So it’s great. Everything’s pretty automated.

Tim Ulbrich: And I think it’s hopefully an encouragement, you know, to me, to our audience, that the systems, the processes, you’ve built a lot of this, I can tell, over time. And as I talk about, again, they mention all the time on Bigger Pockets, really not hearing stories like this and feeling overwhelmed but just thinking about that first process. And there will be mistakes, you know, that’s part of the learning.

Ryan Chaw: Yes.

Tim Ulbrich: And really figuring out what the system and process, figuring out what you want to do yourself, what you want to hire out, what capacity you have time-wise, what’s the margins on the properties, you know, all of those things are really important. Now, considering your model where you have several tenants in a property, several students, I have to imagine you run into tenant issues, you know, just by nature of having people involved, probably often even between one another. Tell me about the issues that come up and how you handle those and deal with those.

Ryan Chaw: Great question, Tim. Yeah, so sometimes, you’ll get tenants complaining about other tenants about noise, maybe the other tenants smoking pot or something like that. And what you do, what I learned, actually — and I learned this the hard way — is you want to have the tenant talk to the other tenant face-to-face. Because if I go and call that other tenant, say, ‘Hey, this other guy complained about you,’ then the situation gets worse because the guy is saying, ‘Hey, you talked behind my back. I can’t trust this guy.’ So the situation actually escalates if you do that. So first, have them have a face-to-face discussion. And then if there’s still issues, then you can call up the tenant personally. And then if that still doesn’t work, you can call the parent because all these college students, they have parents, right? And usually after you call the parent, it gets straightened out pretty quickly. But I’ve only had to resort to calling the parent one time throughout my four years of investing. And most of the times, as long as you empower — and that’s the key. You have to empower the tenants that they’re adults now, they need to resolve these issues face-to-face with the other tenants. And once they kind of have that — once you empower them, then the issues get resolved very quickly. In fact, that’s all I have to do nowadays is just I’ll ask them to talk face-to-face. And after that, I don’t get any texts or phone calls or messages or anything like that.

Tim Ulbrich: I think that’s great advice. I didn’t learn that lesson in the real estate world. I learned that lesson in the academic pharmacy in terms of managing other individuals. But I think you’re spot-on. I mean, the second two individuals have an issue with one another and you jump in with one of them but they don’t talk face-to-face, things often get worse in the short term.

Ryan Chaw: Yes.

Tim Ulbrich: And even though the difficult conversation is difficult, it’s important to be had. What resources would you recommend to our listeners that are hearing this and saying, ‘Wow, I’m really inspired by Ryan’s story. I’m interested, I want to learn more.’ Podcasts, books, blogs, what is out there that you draw information from?

Ryan Chaw: Yeah, so Bigger Pockets actually has some great books on rental property investing to get you started. There’s one by Brandon Turner I think on rental property investing. But there’s also some great books for like mindset and kind of theory as well. I would say “The Millionaire Real Estate Investor” by Gary Keller is really good. That one teaches you how to build your teams and forms of that, of creating systems in place. There’s also “Rich Dad, Poor Dad,” of course. That’s a very inspirational book if you guys haven’t read that one. “Think and Grow Rich,” there’s “The Miracle Morning.”

Tim Ulbrich: Great book.

Ryan Chaw: I like that one. That was a great book, yeah, exactly. It teaches you how to take charge of your day. You know, journaling, meditation, those types of things to get your mind in the right place to really handle stressful situations if something comes up.

Tim Ulbrich: I’m really glad you gave some books that were around kind of more of the mindset, you know, morning routine types of things because I think while the x’s and o’s are important, the theme that I’ve now heard as we’re now 140-something episodes into the Your Financial Pharmacist podcast is, you know, those interviews that I reflect on afterwards and say, “Wow, there’s just something really special, something different, something unique in terms of how somebody’s operating, how they’re growing what they’re doing,” the consistent theme I see with you and others that I would say are really, really successful is this concept of mindset. And it’s just different. And I think it’s often this constant quench and desire to learn and to grow and naturally from that, you will see growth that will happen in a variety of areas. It could be business, it could be family, it could be many different things. So I know that you are kind of in this phase where you’re beginning to teach others how to do this, which I think is really cool. So tell us a little bit about that, you know, kind of what your vision is for that, and where our listeners can go to connect with you and learn more.

Ryan Chaw: Oh yeah, for sure. So I believe student housing — the student rental market is the best way to invest in single-family homes, hands down, because you can make the most profit. So I’m teaching others how to do this. I walk them through the whole deal analysis process to make sure everyone gets a good deal. I walk them through the renovations we make. We try to of course eliminate, do preventative maintenance for possible — like eliminating grass and replacing old mulch and cutting out trees and trimming branches and all of that. And then I walk them through the whole marketing process to get tenants in consistently and to screen them and how to manage issues down the line. And they can reach me at — or you guys can reach me at www.newbierealestateinvesting.com. That’s www.newbierealestateinvesting.com. And newbie is spelled newbie. And I have some great resources, you guys can put in, sign up for the newsletter, and I’ll send you some great information. I even have like a deal analysis calculator you guys can take a look at. It’s kind of like the Bigger Pockets one, but it’s more simplified and it has an amortization schedule and everything. And then I also have a great resource you can read through on the different areas of real estate investing because it’s not just student rental housing. Of course, I love that area. But there’s also fixing, flipping, there’s Airbnb, which is also known as short-term rentals. There’s apartments. But really, I think most people, the ones who aren’t millionaires or billionaires or whatever, the best place to start really is single-family housing and just doing the renting out per bedroom house hacking strategy.

Tim Ulbrich: Great stuff, Ryan. I really appreciate you taking the time, and I have a feeling this won’t be the first time that our audience will hear from you. So excited to see what comes for you in the future and as I mentioned to the community, we’re going to keep bringing more examples, stories, hopeful that will give our community some ideas of things to think about. I think this is another great example of a pharmacist who’s doing some really incredible things and is successful. So congratulations on the success that you’ve had. And thank you again for taking time to come on the show.

Ryan Chaw: Hey, thank you, Tim. I’m excited to be able to get on your podcast. Thank you.

Tim Ulbrich: Awesome. And as always, if you like what you heard on this week’s episode of the Your Financial Pharmacist podcast, please leave us a rating and review on Apple podcasts or wherever you listen to your podcasts each and every week. We appreciate you joining us. Have a great rest of your week.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

Life Insurance for Pharmacists: The Ultimate Guide

Posted on by yfpadmin

Life Insurance for Pharmacists: The Ultimate Guide

The following is a guest post from Dr. Jeffrey Keimer. Dr. Keimer is a 2011 graduate of Albany College of Pharmacy and Health Sciences and pharmacy manager for a regional drugstore chain in Vermont. He and his wife Alex have been pursuing financial independence since 2016.

For the first 24 years of my life, the only people who really cared about my financial well-being were my parents. Sure, I had a business relationship with my bank; but outside of getting the account set up and telling me to use a bankbook to keep track of it, they (or anyone else in the financial services industry) didn’t really seem interested in me or my money. As I neared graduation though, something curious happened. Seemingly out of nowhere, my email inbox was chock full of requests to meet with people wanting to be my financial advisor.

“Well, well, well,” I thought. Now that I’m about to be a pharmacist and make some real money, I must be important! Right? So I met with a few of these people, and in retrospect, I said a lot of dumb things that didn’t do me any favors. I remember when one guy asked me what one of my major financial goals was, I told him I wanted to buy an Ariel Atom. Now if you don’t know what that is, that’s fine. It’s basically a street-legal go-kart that can go 0-60 faster than a Ferrari and can peel your face back like this:

#LifeGoals

Source: Top Gear (UK), BBC

 

Yeah, looking back on it, I deserved what I got in the end.

After deciding to take one of these people on as my “financial advisor” we had a couple of lunch meetings to discuss my financial situation. I laid my cards out on the table including all of my account balances and all my debts. You’d think we would’ve come up with a strategy for me to build some cash savings and address my student loans, but did we? Not really.

However, there was one aspect of my student loans that seemed to pique this person’s interest.

Was it the balance? No.

How about the monthly payments? Getting warmer…but no.

It was the fact that my parents co-signed them for me.

If for whatever reason I stopped making the minimum monthly payment on my loans, my parents were at risk of assuming that responsibility. A truly unacceptable situation. This, of course, prompted my advisor to ask the question:

“Do you have life insurance?”

“Well…no, I don’t.”

A Basic Overview of Life Insurance

Life insurance is one of those things that no one really wants but many people need. Like any type of insurance, you hate paying for it when you’re not using it, but it can keep the world from falling apart in those rare situations when you need it.

If you have to send in a claim for insurance on your car or your home, you’ll reap the benefits of that claim. However, you’ll never personally reap the benefits of a claim with life insurance because, well, you’ll be dead.

So why get one?

Two words: income protection.

Rarely do people shuffle off this mortal coil without leaving behind some baggage for others to sort out. At the very least, it costs money to put you in the ground; and unless you know a way to work your day job from beyond the grave or set aside a burial fund, someone else will need to foot that bill for you.

But what about the regular bills your income used to pay for? While you won’t be living in your house anymore, I’m sure your spouse and/or kids still want to. How’s the mortgage going to get paid when you’re not around?

As a pharmacist, there’s a very good chance you’re the breadwinner of the house and your income is essential for making household ends meet. But here’s the rub: if something were to happen to you, the financial hit to your household could be catastrophic. And we’re not talking about “no more trips to Disney this year” catastrophic, we’re talking about fast-track to living under a bridge in bankruptcy catastrophic.

But it doesn’t have to be that way and that’s where life insurance comes in.

With life insurance, the people you leave behind can get a cash payout in the event of your death that can act as a replacement for your income. And, if set up properly, a life insurance policy (or policies) can bulletproof your financial plan in the case of your untimely demise.

So how should a pharmacist go about getting a life insurance policy and how do you know which one to get?

At first glance, it seems like a daunting task. But thankfully, getting yourself insured doesn’t have to be complicated. The team at YFP is here to provide tools that can make the process simple and straightforward.

Before we get into that though, we need to talk some more about the types of policies that exist.

Huh?

Isn’t life insurance just…life insurance?

Yes, and no.

A life insurance policy can be incredibly simple or one of the most convoluted financial products in existence. What’s more, individual policy options can complicate things to the point where it’s questionable if the person selling you the policy even understands it. Yikes!

Fortunately for us, there are really only two types of policies: permanent and term. One is good for pharmacists, and one…not so much. First, let’s talk about permanent life insurance, because I’m not done with my story.

Permanent Life Insurance

At this point, the topic of life insurance came to dominate my meetings with my financial advisor and honestly, I found it kind of boring. While I knew I had a duty to protect my parents from my loans if anything happened to me, I was much more interested in what I could do to make money in the markets. After all, isn’t the point of working with a financial advisor is to get rich? Yeah, I was an easy mark.

Picking up on this, my advisor pitched me a solution.

“What if you could take the death benefits of a life insurance policy and combine them with an investment component? Not only could you protect the ones you love, you could also set yourself up for life in the process!”

That’s a win-win if I’ve ever heard one. Sign me up!

And thus, I was sold quite the bill of goods.

The type of policy my advisor sold me on belongs to a family of life insurance policies known as “Permanent Life Insurance.” Permanent policies are just as they say, permanent, and they go by a few different names:

  • Whole Life
  • Universal Life
  • Variable Life
  • Variable Universal Life (VUL)

When you take out the policy, the intent is that you hold it till the day you die, pay premiums on the policy till the day you die, and your heirs get the death benefit when you die. Sounds good, right? But wait, there’s more!

Remember when I said that these types of policies have benefits for you when you’re alive? This is where another part of the policy known as the “cash value” comes into play. In this part of the policy you have an account that exists outside of the death benefit. Depending on the specific policy, part of the premium gets added to this account and it will have either a set rate of return or exposure to the market. In addition, the funds inside can grow tax-free within the confines of policy and be protected from the claims of creditors depending on your state law.

What’s not to like?

A lot as it turns out.

And for most pharmacists, permanent life policies should be avoided like the plague.

But why?

Costs of Permanent Life Insurance

Above all else, these types of policies can be insanely expensive. Compared to the other type of life insurance you can get like term life insurance, you can spend on premiums in a month what you would spend in a year otherwise. How can that be? To answer that, let’s take a look at a snippet from the variable life policy sold to me when I was a new practitioner.

term life insurance

I know there’s a lot to digest there but let me distill it down to one word: fees.

While part of the premium goes into the cash value portion, a good chunk of the premium goes to paying additional fees that get layered into the policy. From sales commissions to general management fees, a lot of the money you pay into these policies doesn’t really go into the cost to insure you.

Oh, and these are just the fees that get taken out of the premiums, we haven’t even gotten to the investment side of things.

If you read my article on stocks, bonds, and funds on the YFP blog, you’ll know I’m no fan of investment fees and you shouldn’t be either. These are the fees that seem small when you first look at them, but over time can eat away a massive amount of your potential gains. The investment fees you’ll find within these policies (like the one above) are usually terrible compared to what you can invest in yourself.

Because of all these hidden costs and fees, permanent life policies are generally products designed to be sold. Sure, there are certain situations where they may offer a benefit, but those are usually limited to high net worth individuals and very well structured policies as part of estate trusts.

But for most pharmacists, especially the new practitioner who’s a HENRY (high earner, not rich yet – yes, that’s an actual industry term for you), the type of policy that gets hawked to you by the “financial advisor” down the street can be safely avoided.

You still probably need life insurance though. This brings us to the other form of life insurance; the one you should get. Term life insurance.

Advertising Disclosure

life insurance for pharmacists, term life insurance for pharmacists, pharmacist life insurance company, term life insurance quote

Term Life Insurance

Where permanent policies tend to be fraught with all sorts of riders and additional layers of complexity, a term policy is very simple to understand. It can be boiled down to two numbers: the death benefit and the term.

  • Death Benefit: The amount of money your heirs receive upon your death.
  • Term: This is the length of time that the policy is in effect.

How a term life insurance policy works is really simple.

If you die within the term window, your heirs collect. For example, if you take out a 30-year term policy on January 1st, 2020, and die at any point before January 1st, 2050, your heirs get to collect the death benefit. If you don’t die by that time, the policy simply terminates and the insurance company keeps all your premiums. That’s really all there is to it.

In addition to simplicity, the other main draw of term over permanent life insurance is the cost. Remember how I said that what you spend on a permanent policy in a month is similar to what you’d pay in a year for term? That’s not far from the truth! And, given the costs associated with investments within a permanent policy, it’s easy to see why the mantra “buy term and invest the rest” makes sense. You simply have a much better chance at building wealth when costs are low.

Here’s an example of how affordable a term life policy is. A 30-year-old woman who’s healthy that doesn’t smoke would only pay about $35 per month for a $1,000,000 policy with a 25-year term.

Costs of Term Life Insurance for Pharmacists

With a term policy, the cost to insure you typically comes down to a few factors.

Death Benefit Amount

A greater death benefit demands a greater premium. You don’t need to be an actuary to prove that one.

Term Length

As term length increases, so do the chances you’ll die within the term window. In order to cover that risk, you’ll pay a larger premium for a policy with the same death benefit over a longer-term.

Age

The younger you are, the less chance you’ll die soon and the lower your premium will be.

Sex

Sorry guys, but women tend to live longer than men and get the advantage here. Unless your state specifically disallows it, all else being equal, women can expect to pay lower premiums than men.

Personal Health

Most policies will require some sort of medical exam and/or documentation of your medical history as part of the underwriting process. Things that come up on your medical exam (bloodwork is usually done), evidence of pre-existing conditions, and most importantly your smoking habits can make your policy more expensive. In some cases where you have a serious medical condition, you might be uninsurable. If you are overweight or obese that can also increase the cost of a policy.

Family History

Usually not a make or break for the policy, but evidence of some hereditary conditions that crop up later in life can increase the cost to insure.

Recreational Activities

Do you enjoy base jumping? How about doing wheelies on the interstate at 100MPH on your new sports bike? If so, it should come as no surprise that the cost to insure against your “unexpected” death is more expensive.

#higherinsurancepremiums

Criminal History

Yes, blemishes on your legal record (speeding tickets included!) can make insurance more expensive.

Additional Riders

If you want bells and whistles on your policy such as the ability to collect ahead of time if diagnosed with a terminal illness, the policy is going to cost more.

While I know it seems like there are a lot of things that can make a term policy unaffordable, don’t worry. These factors go into the pricing of any life insurance policy, even the super expensive permanent policies. What makes term so much of a better deal though is that the simplicity of a term policy commoditizes these policies in the marketplace.

In other words, just like generic drugs, they get super cheap because a lot of companies compete in offering the same product. Unless you’re looking for a policy with a bunch of exotic riders on it, you can shop around to get a good deal. Nice!

What About Workplace Life Insurance?

Many of us nowadays can get life insurance coverage as a benefit through work. In fact, when you first started as a full-time pharmacist, you might’ve seen one of these benefits when filling out your new hire paperwork. In most cases, all you have to do is pick a death benefit and a set amount will get taken out of your paycheck. Simple right? While it may seem like a great idea to get insured this way, there are some good reasons you shouldn’t totally rely on workplace life insurance:

It’s non-portable.

When you leave your job, do you get to take your benefits with you? Nope. While there can be a grace period after you leave, by and large, that policy will be just as terminated as your employment.

It might not be enough.

Typically, the death benefits on workplace life insurance plans are limited. You’ll likely need more coverage than what your benefits allow.

It might be more expensive.

Since there’s rarely a medical exam associated with these policies, the premiums on them tend to be more expensive. If you’re young and otherwise healthy, you could be spending more than you should.

It might not be there for you.

You know what’s sad and sometimes happens when people become seriously ill? They’re forced to leave their jobs. If a serious illness were to result in your death, that workplace plan might not be there when you needed it most.

How Much Insurance Should You Get?

Good question!

Unfortunately, there’s no straight answer to that.

Oftentimes you’ll see the recommendation of 10-12x your annual income getting thrown about, but that doesn’t really take into consideration any of your personal situations. So how can you get a better idea?

Tim Ulbrich and Tim Baker tackled this question head-on in YFP Podcast Episode 44. In a nutshell, you need to make a projection of future income needs and use those projected needs to come up with a death benefit number. Huh? Don’t worry, it’s not as hard as it sounds.

Add these liabilities:

Debts: student loans, mortgages, and other debts

Future expenses: college tuition, burial, and other foreseeable expenses

Income support: How much you feel is enough to support the lifestyle enabled by your income for your loved ones, childcare support if applicable, dependent on the length of time you want to support (ie. 10, 20, or 30 years), include considerations for future inflation (ie. 3-4%/year), investment returns, and taxes.

Then, simply subtract the savings you have from the liabilities listed above and you’ll get a good estimate of what you’ll need for a policy. Want to get more into the weeds? Check out this handy calculator for estimating your coverage needs.

Now, does the number you come up with have to be exact? No! Chances are, things are going to change as life goes on. In the worst-case scenario, you can purchase an additional policy to layer on top of the one you just bought.

Speaking of which, getting additional policies to layer on each other is a legitimate life insurance strategy called “laddering.” As time goes on, most people’s need for life insurance will fluctuate. It might start out somewhat small, increase as a spouse and kids come into life, and then taper off again once the kids have left the nest. For this reason, many people choose to “ladder” multiple policies to accommodate this change in need.

If, at the end of the day, all this still seems daunting (don’t worry, it’s OK if it does), make sure to reach out to a professional that can help you put it all together. The team at YFP Planning is uniquely suited to your situation as a pharmacist and can help you build the best plan possible.

Where Should I Get Coverage and How to Do Get a Term Life Insurance Quote?

Remember how I mentioned that you can shop around for term policies and get a great deal?

YFP has partnered with Policygenius to help you do just that!

Policygenius allows you to compare and shop all of the top, A-rated life insurance companies on one, easy to use platform. Just answer a few questions to determine your coverage needs and you’ll get presented with a bunch of accurate term life insurance quotes to choose from. Plus, unlike other platforms, the information you provide stays private while you shop! That’s right, you won’t get bombarded with phone calls and emails as soon as you hit submit.

What if I Bought a Permanent Policy By Mistake?

Just because you made this bed doesn’t mean you have to lie in it. It is possible to get out of that permanent policy that was sold to you when you were a financial noob. But, and this is a big but, there’s probably going to be some pain. In all instances, you will be cashing out the policy and this will have one or a combination of the following consequences:

Loss of money

Typically in the first few years of the policy, the majority of the premiums you pay go toward sales commissions and fees, not the cash balance. Since you can only withdraw the cash balance, you may take a net loss on the difference between the cash balance and premiums paid. This was me when I finally got rid of mine. In the end, the VUL policy I took out ended up costing me several thousands of dollars lost to premiums.

In addition, there may be surrender charges on the policy. These charges are usually higher for the first few years of the policy and can eat up the entire cash balance in some cases.

Taxes

If you’ve had the policy for a long time and the cash value exceeds the total amount you’ve paid into the cash value through premiums (your cost basis), you’ll be required to pay taxes on the gains.

If that last one applies to you, there’s another strategy to get out of the policy without incurring a taxable event known as a 1035 exchange.

In this exchange, you basically exchange your permanent life policy for another insurance product such as an annuity. While annuities also get somewhat of a bad rap, there are annuities out there, such as variable annuities, that aren’t saddled with the types of fees annuities are famous for.

Finally, before you do anything with your old policy, make sure you have other life insurance! You should only cancel your permanent life insurance policy once your new policy is effective and fully replaces your old coverage.

Conclusion

Life insurance can be an incredibly important component of your financial plan.

From protecting your income and keeping your loved ones from living on the street to even help you sleep better at night, the benefits of having a life insurance policy are immense.

That said, there is a right way and a wrong way to do it. For most pharmacists, the right way is to buy term life and get the best deal on it by shopping around using a site such as Policygenius.

And, as always, if any part of this process seems confusing or you’re just looking to get a second opinion on what to do, make sure to book a call with the team at YFP Planning. You’ll be glad you did!

term life insurance, term life insurance for pharmacists, pharmacist insurance

 

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

YFP 139: Should You Refinance Your Mortgage?

Posted on by yfpadmin


Should You Refinance Your Mortgage?

Nate Hedrick, the Real Estate RPh, joins Tim Ulbrich to talk about all things mortgage refinancing. They talk about what it is, how to qualify, the costs associated with refinancing a mortgage, how to determine the break even point and how Nate recently evaluated his own mortgage refinance.

About Today’s Guest

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

Summary

Nate Hedrick, the Real Estate RPh, is back on the podcast to discuss mortgage refinancing. Nate explains that a mortgage is a bank or lender giving you money to pay for a home and you, the borrower, have a certain amount of time (term) to pay that money back. In mortgage refinancing a lender or bank gives the leftover amount to pay the existing mortgage off and you get a brand new one which essentially resets your loan. It’s possible to refinance your mortgage with the same lender. People chose to refinance their mortgage to reduce their monthly payment, reduce overall interest, get better equity in their home if the house went up in value, eliminate PMI or to reduce the term of the loan.

You likely qualify for a mortgage refinance if you already have a mortgage. To get a good refinance offer, three categories will be looked at: the equity in your home, credit score, and other debt load.

Since this is a new mortgage, you’ll incur the same costs as you did when you purchased your home (closing costs, title fees, etc). Nate cautions that advertisements for no closing costs may not be completely truthful as those costs might be rolled into the loan which you’ll end up paying interest on.

To figure out if mortgage refinancing makes sense for your situation, you have to know your current interest rate and monthly payment, what that rate and payment will change to, what your overall payment is going to be and how long you are going to live in that house. The length you’ll be in your house is really important to consider when looking at refinancing depending on the amount of closing costs you’ll have to pay with your new mortgage.

Nate and Tim suggest exploring several lenders and banks if you’re considering refinancing your mortgage. YFP recently partnered with Credible for mortgage refinancing. You can compare up to 6 lenders at a time and receive quotes in under 5 minutes. Click here to compare multiple lenders with Credible.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. Excited to be here and to welcome back Nate Hedrick, the Real Estate RPH, as we talk about mortgage refinancing, including Nate’s own experiences, and we’ll talk about a question we’ve had from a listener, a community member, as well. So Nate, welcome back to the show.

Nate Hedrick: Thanks, Tim. Nice to be here.

Tim Ulbrich: So I was doing some accounting this morning. I think you officially now may have the record for the number of times you’ve appeared on the podcast. So we’re excited to have you back.

Nate Hedrick: Yeah, I expect my championship belt to be sent in the mail as well. I’ll give you my address after this.

Tim Ulbrich: Awesome. So we’ve talked before. We know how things can get expensive. We’ve done episodes before on home buying, we know of course there’s lots to consider. We did a previous episode on all costs involved in home buying, evaluating the rent versus the buy. It’s not just the mortgage payment, of course it’s the taxes, the insurance, the HOA fees, utilities, etc. And you know, for our listeners, when it comes to the mortgage and how much of a factor that can play in your overall financial plan, it typically is a big chunk of their monthly budget. And unless you move or downsize, many of these costs that come along with home buying are things that you can’t change. However, one thing that you might be able to change is the interest rate. And that can be accomplished through a refinance, which we’re going to talk about here today. So Nate, here we are, 2020, and I think we take for granted rates today in 2020. But rates have not always been where they are today. So just give us a quick history lesson on kind of mortgage interest rates and probably for many of us, what our parents were dealing with back in the early ‘80s.

Nate Hedrick: Yeah, it’s funny. This is something that I actually learned in real estate classes and for some reason, never knew up until that point. But for years, even if you look 30 years ago, early ‘80s, end of the ‘70s, interest rates were like credit cards for houses. I mean, you’re talking 15%, 16%, 17%, 18% for a mortgage, which just — it feels absolutely crazy in today’s world. I mean, we’re at 3.5%, roughly 4% on prime, so that is such a huge difference for us. And it’s something that I don’t think a lot of people even realize if you’re in our generation.

Tim Ulbrich: Yeah, I think so too. And so here we are, as you mentioned, rates, depending on the term, depending on a whole host of factors, which we’ll talk about here today, much, much, much lower, whether that’s 3.5%, 4%, 4.5%, it’s still notably lower than interest rates that were in the teens. And I always give my parents a hard time, ‘Yes, you dealt with that. But also, let’s look at the prices of homes back at that time period.’ So basic definition, mortgage refinancing, what is it in terms of basic things our listeners should know before we talk about the reasons and the hows and all the qualifying factors.

Nate Hedrick: Yeah, absolutely. So a mortgage in itself is just basically the bank giving you money or a lender giving you money to pay for a house. And you have some term to pay that back, whether it’s a 15-year, a 30-year or something in between, you’ve got a period of time which to pay that back. Well, the mortgage refinance is effectively a resetting of that loan. You’ve either got the same lender or a different lender who is giving you the money to cover the leftover amount you have on your current mortgage, and you get a brand new one. And that can be the exact same term, that can be an extended term, a shortened term. There’s all different ways to do it. And we can talk about those details, but effectively, it’s a reset of that loan.

Tim Ulbrich: Awesome. And I think for many folks listening, especially with the rates where they are at today, most notably, we think of a refinance to reduce your monthly payment, reduce the overall interest that you pay over the course of the loan, but what else is out there? Why might somebody refinance beyond those two factors?

Nate Hedrick: Yeah, the ones that I see a lot too are your house has gone up in value, so you actually want to get a better equity on that property so you can actually get more cash back out of your property itself. You can use it to eliminate PMI, that’s actually why my wife and I did it. And we can talk through that, but we actually wanted to get rid of PMI, and it was the easiest way for us to do that. You can actually just reduce the loan term. Maybe if you’re really driving toward that FIRE movement like we’ve been talking about and you want to get that paid down that much faster, you can reduce the actual loan term to a reduced interest rate and a number of other things to basically get that paid off that much faster.

Tim Ulbrich: So if we have somebody listening, you know, I’m going to give them my situation for Jess and I. We moved here to Columbus fall 2018. You know, interest rates really were at — I say ‘peak,’ but again, if we consider this historically, peak is a relative term. But at the time, we got a 30-year mortgage for 6.25% was our interest rate, wasn’t too long ago. And here we are again with rates lower than that. So I’m guessing many of our listeners are thinking, OK, maybe I’ve got a rate where this makes sense. And we’ll talk about how you evaluate whether or not that makes sense and where the break-even is. But how does one qualify? And what are the steps that are involved that if somebody’s thinking or finding themselves in a similar situation, to determine if this is for me, how do I begin that qualification process?

Nate Hedrick: Yeah, so if you currently have a mortgage, you pretty much automatically qualify for a refinance. The tricks to how you get a good refinance come down to a number of factors. So one is the equity in your home. That’s probably the most important factor, quite honestly. Most lenders are going to ask you that up front. So what is your current loan, basically? So if you took out a 90% loan, basically you put 10% down on your house a year ago, you probably haven’t built up a lot of equity in that home, right? You’ve been paying it off for a year, but most of those payments are going toward interest, not toward principal. And the actual equity you have, the ability to refinance probably hasn’t changed very much. There’s not been enough time for it to go up in value. And similarly, you haven’t been able to pay down the debt that you have. So that really is the key factor. How much equity do you have in the home right now? And how has that changed from your original loan? That’s kind of step one. The next thing is going to be based on like your credit score. So if you’ve got a better credit score, you’re going to qualify for better rates. So if you’ve bought the house five years ago, let’s say, and your credit score has gone up 100 points since then, you may qualify for very different rates than you did just that five years ago. So that’s a question to kind of ask yourself. And then beyond that too, it’s just what other factors are going into it? Do you have other debtload that the lender should be concerned about? It’s basically all the questions they ask you on an original mortgage and making sure that you’re a qualified candidate for that original mortgage again.

Tim Ulbrich: And I think that’s where for so many of our listeners, you know, we think of the life stage that often pharmacists, especially new practitioners, are in in terms of so many variables changing where, you know, income may have gone up, credit scores may have gone better, other debt has come down, perhaps they’ve paid down some of their mortgage. And obviously, that would make them more favorable, depending on the personal situation. The one thing, Nate, I’ve seen a little bit — and I don’t know if you’ve run into this — is especially recently as some markets have gotten really hot, if people got into bidding wars on a home where they, you know, were making just crazy offers, well above whatever was kind of market value at the time, and depending on what’s happened in those markets since then and how long it’s been, the appraisal process is going to be very important here to determine what that equity position is, correct?

Nate Hedrick: Absolutely. Yeah, the appraisal’s really what it all comes down to, and that’s effectively the bank sending someone to your home or sometimes they do a desktop appraisal where they’re researching it online only and not actually driving out. But they’re determining what is the market value of your home? There’s no one else bidding on it, right? You’re not actually up for sale. So they have to kind of use other area comps to determine what is the effective value of your home? And we’re going to base our loan on that amount.

Tim Ulbrich: My favorite appraisal story recently, I think I shared this with you, as Jess and I are looking at the refi process — we’re actually in the middle of this right now — is about six months ago, we got a HELOC on the home as we were looking at doing some real estate investing, and we haven’t done anything with it. But at that time, as a part of that, we got an appraisal done. And that came in at $10,000 less than we actually purchased the home. And now as we’re going through the mortgage refinance, you know, it was at our local credit union that I work with. And obviously as lending has become a little bit looser here again in 2020, couple quick pushes of the button on the computer and that appraisal is $40,000 different than the one on the HELOC. Same institution.

Nate Hedrick: Sounds about right.

Tim Ulbrich: And that came out $30,000 higher than we purchased the home. So I think that just speaks to some of the variability you see in the appraisal process.

Nate Hedrick: Yeah, a lot of that speaks to too basically how the banks make their money and how they want to get those loans, right? It’s better to have you in there for a long time. A HELOC is kind of boring to them, so they’re not going to appraise it very competitively.

Tim Ulbrich: But we like to think it’s objective, right? So.

Nate Hedrick: Exactly.

Tim Ulbrich: So let’s talk about costs. I think this is certainly top of mind for folks. You know, of course we can look at it and say, hopefully we get a lower monthly payment, hopefully we’ll reduce the amount we pay over the life of the loan, lots of commercials out there advertising no closing costs. And if somebody goes out and starts to shop, you see a wide range of what’s advertised as $0 closing costs to, as we’ll share an example here from a listener, question what can be fairly significant closing costs. So what are the reason for the differences? And what are some of the costs that are involved in a refinance process?

Nate Hedrick: Yeah, so like I said at the beginning, this is effectively a new mortgage. You’re resetting the button on your actual debt. So the banks and the lenders are going to treat it just the same way. So there’s the same level of closing costs, the same level of effort. They’ve got appraisals, they have to pay for title fees and all sorts of things that need to be taken care of. And while it feels like it should be less because you already live in the house and you already have the title and all that stuff, a lot of those things still persist. So just like when you get a regular mortgage, you will actually get basically a good faith estimate that will lay out all of those costs and what it’s going to be. Now, you talked about no closing costs. And there are some situations where there are truly no closing costs. But a lot of times what that means is that no direct out-of-pocket closing costs. They’re going to roll them into the loan. So if you have $5,000 in closing costs and your current mortgage is $180,000, well, your new mortgage would be at $185,000. And the idea is you just roll that into the loan, you’ll figure it out with interest later. So those closing costs advertisements can be a little bit misleading at times.

Tim Ulbrich: Yeah. And I think that’s such an important point. I’m glad you brought that up is really making sure you’re digging into that good faith estimate and doing your homework to understand what exactly are the individual line item charges, especially — as we’ll talk about in a moment — if you’re comparing multiple offers, getting as close to an apples-to-apples comparison as you can and really understanding what are you paying for now versus what’s being rolled into the mortgage, which ultimately you’re going to pay back with interest, you know, along the way, which may not be a bad thing. It’s just you have to be aware of what you’re working on and weighing how much you want to pay out of pocket versus how much you want to roll into the loan. So to your point, you’re resetting the mortgage, so think of it as somebody who’s buying a home for the first time, all those closing costs, again, you’re going to be evaluating and hopefully something you’re preparing. So I’m somebody listening, Nate, and I’m looking at a situation where OK, maybe I’ve got a 30-year mortgage at 4.5%, I’ve paid off two years, let’s say, 28 years left of a 30-year term, I hear that rates are lower, I’m listening to this podcast, how do I determine whether or not this makes sense? Talk me through how do you think through this process?

Nate Hedrick: Absolutely. So just like when we go to buy a house, right, I recommend all my clients shop around for a couple different mortgages. Right now, lenders are chomping at the bit to get you to refinance with them, even if it’s — this is ridiculous — but even if it’s the current lender you have, they can’t wait to refinance your loan, right? They just want you to secure your business as long as they can. So you give a call to a local branch or a lender that you know or a lender that your listing agent has recommended, anything like that, and they’ll immediately be like, ‘Oh yeah, refinance, let me get you to our refinance department. Here’s our refinancing guy,’ or what have you. And so they’ll be able to tell you quite quickly, you know, based on a 10-question survey that they’ll have over the phone with you, ‘Here’s what we expect your rate to be, here’s what some of the breakdown of what you’d actually pay in closing costs,’ I mean, I called up when we did our refinance, I called up three different lenders and within, I mean, within an hour, all three of those lenders had gotten me a reasonable result of what I was going to be able to refinance with.

Tim Ulbrich: Absolutely. Yeah, and I did the same thing. So you know, I actually reached out to the institution that currently holds our mortgage, and to your point, I think I get something in the mail every three days from them. I haven’t got any phone calls, but I get lots of mail from the current lender. So I reached out to them, I used the Credible tool that we have on the site, which I’ll talk about at the end, and then I went through our local credit union that I’ve done other business with. And I wanted to just see both experience-wise as well as rate-wise and again, trying to compare some of those costs what’s involved as well. And three very, very different experiences. And I think it speaks to the value of making sure you shop around, just like we talk about with many other things on this show, life insurance, disability, professional liability, etc. So breakeven, how do I figure out does the math make sense on this? So instead of just looking at here’s my current rate, here’s my new rate, here’s my current monthly payment, here’s the future monthly payment under refinance. That’s a good start but one shouldn’t stop there, right? So how do I determine whether or not this makes sense and ultimately get to a breakeven point?

Nate Hedrick: Yeah, so the trick is to know your numbers up front. You have to know what your current interest rate is and what you’re actually paying monthly. And then once you start getting these quotes and start talking to these lenders, you’ll have new data to basically plug into that chart and be able to say, OK, if we’re at 4.5% now and we’re at 3.5% later, what is our monthly payment going to go down to? Or perhaps if I am changing my loan term, what is my monthly payment going to go up to or change to or whatever the case is going to be? But what does that look like? What’s that difference? And is my overall payment going to be lower, my overall interest payment over the life of that loan going to be better? Now, most people, not everybody, but most people don’t live the entire 30 years in one house, right? Most people move on. So the other question is how long am I going to live here? Because if you’re saving $1,000 a year, but the closing costs are $8,000, you better be there at least eight more years for it to make actual sense. So that’s a really important question. I think no matter what you’re doing, the breakeven analysis is how long am I going to be here to basically make up that difference in terms of the costs up front versus the costs saved over the course of years?

Tim Ulbrich: So I think that’s a great way of thinking about how long am I going to be here? And I’m looking at the math, right? So if you’re going to save let’s say $200 a month, taking that figure and then looking at the closing costs, let’s say your closing costs are $3,000, your $200 a month, how long does that $200 a month have to be saved ‘til you get to that breakeven of $3,000? But also looking at, as you mentioned, the total amount of interest, the total payout over the life of the loan. One of the most common things, Nate, that I think I see and I’m sure you see often talking with individuals is somebody who maybe started with a 30-year, they now are let’s say 26 years left, and they go to refinance and they reup a 30-year, so they restart the clock, but they only focus on the monthly payment, right? And they don’t consider the fact that they’re then going to extend the loan another four years, which is the progress that they’ve already made. Correct?

Nate Hedrick: I see people doing this with student loans too.

Tim Ulbrich: That’s right

Nate Hedrick: And you guys have more experience than I do, right? They say, ‘Oh, look at my payment’s lower, this is fantastic. Yeah, my interest rate is lower too. I’m sure it’s great.’ They’ve gone from having three years left to now jumping back to 10 years of loan payments. The overall interest paid over that life is tens of thousands of dollars more, potentially. So you have to factor all three of those things in.

Tim Ulbrich: So I think this is where I would encourage our audience to nerd out, create a spreadsheet, right? So you know what I did, as I mentioned, three different institutions, so I worked with my current lender, worked with Credible, which is then shopping around multiple options, which I’ll reference here in more detail in a moment, and then the credit union. But within each one of those, you’re then going to get different options in terms of 30-year, 20-year, 15-year term. And then even within those, you’re going to have different options that range in terms of whether or not you purchase points. So I think I ended up with the spreadsheet of, I don’t know, 20 or 30 different fields, trying to figure out not only what would that be in terms of monthly payment but then also looking at over the totality to try to determine, OK, if I were to continue on this path as is today, how much would be out-of-pocket? And then how would that work out with each one of these? What about the other side of this, Nate? So somebody who let’s say has a 30-year term right now, maybe they’ve got 26 years left to pay and they’re thinking, maybe I’m going to go down to a 15- or a 20-year, how do you think about this from an opportunity cost standpoint? Because on one hand, somebody might say, ‘Well, this is great. I’m going to save x dollars in interest,’ which they could calculate. On the other hand, they might say, ‘You know, do I really want to be making extra payments when rates are so low? Even if I can save interest, could I be using that money elsewhere?’ Talk us through your thought process there.

Nate Hedrick: Yeah. It’s a great question. It all comes down to kind of what your financial goal is, right? Do you want to be throwing extra money at your mortgage right now? Or are you saving that for something else? Maybe it’s more investing or investing in properties or whatever the case may be. So yeah, it’s a good question. It’s going to be different for everybody, but when we looked at it, actually, we had a 30-year rate when we did our refinance. And we took it down to a 15-year because the amount we saved in interest made our payment not that much different. So for us, it was like, well, we’ll just take 10 years off this mortgage to keep paying effectively what we’re paying now. But we’ll know that we’re saving money in the long-term of the interest paid. It was a feel-good thing for us. And sometimes that’s a better driver than crunching all the numbers.

Tim Ulbrich: You know, this reminds me too, Jess and I were recently talking about this as we were looking at, hey, maybe we go down to a 20- or 15-year, and then of course you have the conversation of OK, what pressure is this higher monthly payment going to put on our financial plan? How much margin do we have? You know, do you have a good emergency fund? All the things we talk about on the show. But might there be any life variables that will change that could either increase or decrease that pressure on your margin, right? So you know, I’m thinking of things like potential job loss or could go the other way, a promotion or addition in terms of children to the family or maybe you have children that are moving out of the household and you have more margin. So it can go either way. And I think the conversation that is so common, just like it is with student loans, is it’s easy to say, ‘Well, let’s just opt for the 30-year, the longer term, and then we’ll make extra payments.’ And not suggesting that’s a bad move whatsoever, obviously it depends on your personal situation. I would just challenge, you know, what’s the reality of that happening when push comes to shove? And I think for some, there’s value in kind of forcing that hand with the more aggressive payment whereas for others, that’s not the move to make. So you’ve got to really take a step back and say, behaviorally, what do we need for our plan? How much margin do we have or not have? Would this put us in a tight position? Do we need that type of behavioral solution? Or can we really depend on ourselves to make that extra payment each and every month, perhaps automate that, but have the buffer if you need it for whatever reason?

Nate Hedrick: Yeah, I think that’s huge. And to make it even more complicated, I know when I was looking at rates, the difference in interest between the 15- and 30-year rate were significant.

Tim Ulbrich: Absolutely.

Nate Hedrick: So they’re enticing you even further to go to that 15-year, and it’s like, ah, now I have to do even more math and figure out what I want to do.

Tim Ulbrich: Absolutely. What about points? You know, this is something that caught my attention — and we’ll talk about an example here from a listener that I think can make this process a little bit more confusing. And I know from personal experience, when my wife and I, Jess, purchased our first home back in 2009, I felt like this as I looked back through paperwork, either I didn’t have the memory of the conversation or it was so subtle that all of a sudden, you know, points were applied and I didn’t really have a full understanding of the process. And I think that’s all too common. So talk to us about what are points? Why might somebody consider them? And just make sure that our listeners feel educated and ready to have that conversation with the lender.

Nate Hedrick: Yeah, it’s funny, I’m seeing this conversation come up less and less. I feel like with interest rates where they are right now, points are not as big as they were a couple of years ago. I’m sure they’re still talked about plenty, but I just don’t see it with my clients as much. But what points basically are is a way to buy down your interest rate. So you pay some amount of money, the bank sets what those point values basically are, and you buy down your interest rate. So if it was 5% and you pay a certain amount that the bank sets to basically get that down to 4.75%, you can pay an upfront cost to reduce the interest of the life of that loan. So you know, the basic principle is that you’re giving away up front cash to pay less over the life of that loan. So in the case where you’re like, this is my forever home, we plan on being here 20 years, it may be very advantageous to give up a little bit more cash up front, knowing that you’re going to have a lower interest payment down the road. Now again, with interest payments this low as they are or interest amounts as low as they are today, I don’t see points as being quite as important. But it is a way to kind of if you really want to get that interest rate down as low as you possibly can and you’ve got some extra cash to throw at the problem, that’s not a bad way to do it.

Tim Ulbrich: And does this just come down again to running your numbers and doing a breakeven analysis, again, thinking of factors like time that you’ll be in the home and how much can you let go of that cash now, what other impact does that have on other financial goals, right? I mean, all of these variables come to play?

Nate Hedrick: Yeah, and it’s funny, this one more than any of them really matters on how long you’re going to be in the home. The bank is always going to make the points advantageous at some number — like it will be like, at 12 years, it will break even. So you’ll know. That point is very obvious. So it all comes down to how long am I going to be here for whether or not the points are worth it.

Tim Ulbrich: So let me — that’s a good segway into a question we had from somebody in the YFP Facebook group. And I think this will help us summarize a lot of what we talked about and just hear and give our listeners kind of an inside Nate’s brain look of how you think about this situation.

Nate Hedrick: Dangerous.

Tim Ulbrich: So this question to the group is, “Would you refinance your mortgage” — it comes from Alena — “Would you refinance your mortgage if current mortgage is 4.6% and new one will be 3.3%?” She goes on to say, “It will lower monthly bill by approximately $200,” so lower monthly payment about $200, “and saves $86,000 for the life of the loan.” And that would be over a 30-year fixed period. “But it will cost $10,000 in closing costs. Just want to hear your thoughts.” So Nate, how would you — obviously, we don’t know every variable here. So big asterisk in how we respond and really just meant for us to kind of talk through from an education standpoint, how would you think through this specific scenario?

Nate Hedrick: Yeah, so this is kind of the classic setup, right? The hook is you’re paying 4.6% right now, wouldn’t you rather be paying 3.3%? Everyone listening to this would say, ‘Yes, that sounds fantastic. I want to take a point and some off of my current interest.’ And then again, you take that a step further and you say, ‘How much does this reduce my monthly payment? Wow, it’s $200 a month. That’s great. What could I do with that extra $200?’ And then again, we’re like, ‘Well it’s a 30-year rate, but who cares? Look, we’re saving $86,000 over the life of the loan. Everything seems to make sense.’ Then that $10,000 number kind of jumps in at the end, and that’s when you have to have that, OK, well how long are we going to be here? Right? If I’m saving $200 a month, at what point am I going to be able to say, ‘Well, that $10,000 was now worth it?’ And how confident am I in that decision to say, I’m going to be here for 15 more years or whatever the case may be.

Tim Ulbrich: Absolutely.

Nate Hedrick: That’s when that — it’s no longer a numbers game. It comes down to what is your life looking like? And how long are you committed to that particular home? So that’s, again, this is actually exactly what I ran into when I was doing my refinance, looking oh, great, these numbers looks fantastic. Everything marches out, makes sense. But wait, how much is closing costs? Oh, I don’t know if we’re going to be here nine more years. That doesn’t make a lot of sense for me.

Tim Ulbrich: Yeah. And here is a great other reminder, get out the spreadsheet, start crunching the numbers, and don’t stop at the monthly payment. You know, what we don’t know here is where they’re at in the current term. So now she’s doing a comparison over the life of the loan. So $86,000 saved over the life of the loan, $10,000 in closing costs, so we’ve got to already subtract $10,000 to say what’s the net difference? $76,000. $200 a month savings, so we know that would be $2,400 a year.

Nate Hedrick: Right.

Tim Ulbrich: So we’re looking at roughly four years to get the breakeven. But the question is how confident are you? And the second question I would add is what else is going on? So how much is that $10,000 needed or treasured? So is this somebody that doesn’t have an emergency fund, you know, is paying off lots of student loan debt, is this somebody that has other goals, wants to strategically invest, to do some other things? Maybe isn’t taking advantage of an employer match retirement account that this could help get kind of that match component if they contribute? So lots of variables here that I think would really get to, again, as we talk about over and over again on the show, not looking at one part of your financial plan in a silo but really taking a step back and saying, what else is going on? Now, if this is somebody who has no debt, every other part of their plan is humming, full emergency fund, they’ve got retirement accounts that are being maxed out, they think they’re going to be in their home forever and they’ve just got cash laying around, which sounds like a pretty sweet position to be in, right, they might look at this differently, right, than somebody else who is a little bit more pressed.

Nate Hedrick: And watch too — it’s funny. This is another great example of when the bank will come and say, ‘Well, it’s $10,000 in closing. But don’t worry, we’ll roll that into the loan.’ So now all of a sudden, your math, it doesn’t actually track as well as it did. You’re paying interest on that $10,000. So watch that. Watch where they’re going to set you upfront with here’s $10,000 in closing costs, and then they’ll roll it into the loan at the back end.

Tim Ulbrich: So one of the things I want to mention as we wrap up here is we are excited about a partnership we’ve rolled recently with Credible. And this really mirrors what we’re doing with some of the other things on life and disability of trying to bring our audience as many options as they possibly can to be able to shop around. And so Credible allows you to, on our platform, check six lenders. You can check the rate with them, and they do a soft credit pull, so it will not have a negative impact on your credit. Very quick, I went through this myself, less than five minutes, very user-friendly platform. And I will say, as somebody who did not have such a great experience with a platform like LendingTree, where I was getting harassed with phone calls for I think really, a couple months, to be honest, I thought this here, they did a nice job here of allowing you to see rates, shop things around, but I wasn’t getting hounded with phone calls. And you only have to upload documents once. So again, as we always say, just as I did, I wouldn’t stop here. I think this is a great place to start. But go to your current lender if you’re refinancing, you know, go to a different lender if there’s a unique product that’s in your area. And again, compare multiple options. And I think Credible is a great resource to get started doing that. And you can learn more and do that by going to YourFinancialPharmacist.com/reduceyourpayment. Again, YourFinancialPharmacist.com/reduceyourpayment. So Nate, talk us through, you just did this. Right?

Nate Hedrick: I closed on it less than a month ago.

Tim Ulbrich: Yeah, and yours was somewhat unique. So I think it would be interesting for our listeners to hear that experience, your thought process, and how you arrived — even if that one may not apply to many people that are listening, I think it’s just a good reminder of thinking of all options that are out there and for them to hear how you and Kristin thought through that process.

Nate Hedrick: Absolutely. So we bought our house five years ago now. It was five years ago in September. And when that five-year mark kind of hit, that’s when I said, ‘We should probably look at refinancing. Rates are really low, we’ve been here for a couple years. Hopefully there’s some good equity built.’ So we started pursuing it, and one of the main drivers was the fact that we’d been paying PMI. So again, fast forward — or rewind before. I was a listing agent before I knew what I was doing in terms of buying a house. We bought early, we put 10% down, we said, this is going to be great. And then we were paying $100 a month in PMI.

Tim Ulbrich: Been there, done that.

Nate Hedrick: Yeah, exactly. Many, many listeners I’m sure are in the same boat. And we actually went to our lender first, and we said, ‘Hey, can you get rid of our PMI? We’ve been paying this much, we think our equity is this. I did my own listing agent appraisal, which is worth nothing, but here’s what I think the house is worth.’ So we applied and they said, ‘No, absolutely not. You have to have x, y, and z loan-to-value.’ They basically said no. So I said, ‘Fine, then I’m going to refinance out of it.’ And I started getting quotes. I went to our current lender, I went to kind of a big bank. I went to one of the lenders that I use for my investing properties, which is kind of a little bit smaller and they’re a little bit more crafty with what they can do. And I just started comparing quotes and kind of getting an idea of what the landscape looked like. And my first thing that I got hit with was, ‘Here’s all your closing costs. This is how much it’s going to cost you.’ And then Kristin and I had to have that discussion, OK, well, how long do we think we’re going to be here? And we’re really kind of in a tossup right now. I think, you know, sometimes we say three more years. Sometimes we say 10 more years. And it’s really hard for us to put a number on that. And so that made the conversation that much more difficult. So anyway, I went back to that small kind of hometown lender that we use for our investment properties and started having conversations about, what other options are there? Is there anything we need to get creative? And actually, she presented me with a pretty unique option that it’s effectively a mortgage, but it’s more of a home equity loan. So you have to have you’re already in the house. It’s only for refinances, and it’s a Home Equity Line of — it’s actually a home equity loan, a home equity term loan is what the official term is. And with this particular product, they had a deal going on where it was a new branch, they wanted to drive business and create value like every other bank, and they offered it with $0 appraisal fee, $0 closing costs, not just rolled in closing costs, but $0 closing costs. And a fixed rate interest, which is huge. No prepayment penalties. I mean, all the things that I was like, ‘Well, this is going to be the catch. And this is what’s going to stop this from working.’ But all of those things I worked through, and there was really no catch. So I had a couple more conversations. I actually called up Tim Baker, our financial planner, made sure it made sense with him too because I hadn’t seen this product before. And everybody said, ‘Yeah, this looks great. I think you’re good.’ And yeah, it’s been a really great way for us to refinance. We got our interest rate cut by a full percentage point, and we didn’t pay $1 in closing costs. The appraisal was free, all that was free. And the kicker, my favorite part of the whole process, was that again, we’d been in the home for five years, so when they came out to do the appraisal, they looked at the improvements we’ve done, they looked at the market around us. We actually — I scheduled the appraisal the day after I knew a house down the street was closing.

Tim Ulbrich: Well played, well played.

Nate Hedrick: It helps to be an agent, right? And so we had this great other property supporting our value. And we gained like $30,000 in equity — actually, $35,000 in equity from when we purchased the house. So immediately after we refinanced, we went out and we got a home equity line of credit for the extra equity that we’d built in. And it was a great way for us to kind of group those together and set ourselves up for more success.

Tim Ulbrich: Such a good example of reasons to refinance. Not only the lower rate, but obviously you mentioned the PMI piece but then also with the increase equity, opening up a HELOC option if you’re trying to do other things, which I know you are, real estate investing, things like that. So I think too, this was a good reminder — and I had a chance to talk with that institution, just trying to learn more — it’s a good reminder of just to think creatively and look at all solutions. And if I understand this specific product correctly, it’s not a new product. But it makes sense in the current interest rate market that we’re in whereas historically, maybe it hasn’t made as much sense. And what I’ve found is that as I compared that option for us where we think we’re going to be in the home for a very, very long time, it wasn’t as competitive rate-wise.

Nate Hedrick: Right.

Tim Ulbrich: But I think that was what was unique about your situation is that perhaps there’s a move in the shorter term. And to find a solution that had maybe not the best rate but a close rate but didn’t have all the costs up front made sense for your situation. So I think, again, just a reminder that there’s not one solution that fits everyone out there.

Nate Hedrick: And for us too, it didn’t even reduce our monthly payment. I think I mentioned already, but we dropped from a 30-year, which we had paid five years on, down to a 15-year loan, so the idea being that if we are here for a little bit longer period of time, now we’ve got — we’re overall reducing the cost of the total cost of the loan by taking off that 10 years. So we didn’t actually reduce our payment by that much every single month, but the overall value of it was there.

Tim Ulbrich: Awesome. So Nate, this is great stuff. And as always, love having you on the show, picking your brain. Here, we’re talking about refinancing. But I know there’s some listeners that maybe aren’t in a refinance situation, might be looking to buy for the first time or they’re in a home and instead of looking at refinance, they want to actually move to another home. And then I think we’ve got that unique connection with you and the concierge service that we do with obviously you wearing the dual hat of a pharmacist as well as a real estate agent. So tell our listeners more about for those that are in that situation, either buying for the first time or looking to move, where they can go to learn more and what that service is all about.

Nate Hedrick: Yeah, absolutely. So through our partnership together, we’ve kind of launched the YFP concierge services, which is a great home buying experience you can take part in for absolutely free. The way it works is you work with me, we have a 30-minute planning call, kind of go through some of your priorities, talk about budget, talk about what you’re looking for in a home, location, all that great stuff, to figure out what’s going to be a good fit for you. And then I actually set you up with a local real estate agent. One of the things that I do is interview a bunch of local agents in the area that you’re looking, make sure I’ve got somebody that’s going to line up with your priorities and what you have in mind. And then I get you guys connected and I stay a part of that process the whole time. So we’ve had a number of clients actually go through the concierge services to find a home. We’ve had some in Baltimore, I’m working with one in Washington right now. We’re kind of all over the place, which is really fun. And it’s been a great way to if you don’t know the area very well or if you don’t know any agent in the area or you just want that peace of mind knowing that you’re going to get somebody really good that’s been vetted by another real estate agent, it’s a great opportunity to kind of work with us to make sure that you’re getting the best experience possible.

Tim Ulbrich: Awesome. So to our community members, you can go to YourFinancialPharmacist.com, and then we have a page you’ll see there, you can click on at the top. We have a header “Buy or Refi a Home.” And from there, we have an option to find an agent, and you’ll see more information about being able to connect and work with Nate. So Nate, thank you as always, and looking forward to having you on at APhA this year. So for our community members that will be at APhA, Nate will be joining us out there at the booth. So we hope you’ll stop by and say hello. And as always, appreciate your contribution to the show.

Nate Hedrick: Happy to be here, as always.

Tim Ulbrich: Awesome. And as a reminder to our listeners, if you like what you heard on this week’s episode of the Your Financial Pharmacist podcast, please leave us a rating and review in Apple podcasts or wherever you listen to your podcasts each and every week. Have a great rest of your week.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 138: What You Need to Know About Retirement Accounts in 2020

Posted on by yfpadmin


What You Need to Know About Retirement Accounts in 2020

Tim Baker, our own fee-only CERTIFIED FINANCIAL PLANNER™, joins Tim Ulbrich to talk about key retirement and tax numbers for 2020 and the SECURE Act.

Summary

There have been several changes to retirement account contribution limits for 2020. In addition to these changes, the SECURE Act was passed at the end of 2019 which also carries several changes that affect retirement savings. On this episode, Tim Ulbrich and Tim Baker dive into some of these changes.

Although the increase in contribution limits is small, this will hopefully allow pharmacists the opportunity to save a larger portion of their salary to meet their retirement savings goals quicker. To start, 401(k), 403(b), Thrift Savings Plans and most 457 plans have an increased contribution limit of $19,500 with a catch up amount of $6,500. IRA accounts are typically used to supplement 401(k) or 403(b) accounts. While the contribution limits for 2020 are the same, what’s changed is the phase out numbers. Those filing married filing jointly aren’t eligible to contribute to traditional IRAs after earning a modified AGI of $206,000 and for those that are single that eligibility ends at a modified AGI of $75,000. There have also been changes to the Roth IRA and HSA deduction limits.

Tim and Tim also discuss the SECURE Act (Setting Every Community Up for Retirement Enhancement) which is effective January 1, 2020. This act carries several changes in retirement taxes, but three main changes are the change in the required minimum distribution age (RMD) to 72 years old, the elimination of an age limit for traditional IRA contributions and access to retirement benefits for part-time workers. Tim and Tim also discuss changes in 529s and the requirement for plan administration to offer projections for lifetime income and nest egg information.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. Tim Baker is back on the mic to join me as we nerd out for a little bit about changes to retirement accounts in 2020 and the recently enacted SECURE Act, including what you should know and the implications this may have on your retirement savings strategy. Tim Baker, welcome back.

Tim Baker: Hey, Tim. What’s going on?

Tim Ulbrich: What’s new and exciting in Baltimore?

Tim Baker: Oh man, just living the dream, yeah. I feel like I’ve been awhile since I’ve been on the podcast. I feel like I keep saying that. But yeah, things are good. Family’s good, good Christmas. And what’s good on your end?

Tim Ulbrich: Going well. I can’t complain. Excited to have you back on the mic. I know we’ve been doing the Ask a YFP CFP segment. We’ve been bringing you on, and we would encourage our listeners to continue to submit questions if you have them. That’s been fun. But exciting year ahead, looking forward to the American Pharmacists Association meeting coming up. Hopefully we’ll see many of our listeners out there as well in your backyard in D.C. So it’s going to be a fun year. We’ve got a lot of exciting things planned for YFP. OK, so we’re going to tackle, as I mentioned in the introduction, these important updates as it relates to retirement contributions in 2020, the SECURE Act. So first, let’s talk about changes to retirement savings contribution limits. And we’re going to nerd out a little bit here on numbers, but we’ll link in the show notes to some articles that if our listeners want to go back and see these numbers, reference tables, they can do that easily without having to worry about jotting them down or hearing them and remembering them. So we’ll go through that, and then we’ll dig into the SECURE Act a little bit further. So here we are, a new year, 2020, which means new limits on retirement savings accounts. And while we’re not going to in this episode dig into the ins and outs of investing, including terminology, how to prioritize savings, we did already talk about that in detail in our investing month-long series in November 2018, which included episodes 072, 073, 074, 075, 076. And we’ll link to those in our show notes. So Tim Baker, let’s start with the changes to 401k, 403b, Thrift Savings Plan and most 457 plans, which for the sake of our discussion, we’re going to group those together. So refresh our memory on how these accounts work and then the changes to contribution limits on those accounts in 2020.

Tim Baker: Yeah, so most of us have the 401k, a 403b, if you’re a Tim Church of the world and work for the VA or the government, the TSP, the Thrift Savings Plan. These are retirement plans that are typically sponsored by the employer. And the 2019 limits were $19,000. Going forward in 2020, they’re actually $19,500. And the catchup limits if you’re out there and you’re age 50 and older, the catchup limit after you’ve reached that age goes from $6,000 to $6,500. So again, these are typically the contributions that are coming out of your paycheck that get automatically contributed into this account and then invested for the purposes of retirement. So a little bit — and these get adjusted pretty regularly. I feel like when I was studying for the CFP way back when, these were in the $17,000 or $18,000.

Tim Ulbrich: Yeah, I remember that.

Tim Baker: And then they creep up. And it’s just kind of to account for inflation and that type of thing.

Tim Ulbrich: Yeah, and I think this number is important. So we’re talking about $19,500, obviously we’re talking about pre-tax savings here. So these are going to be taxed later on at the point of distribution. And we’ll talk about required minimum distributions here in a little bit as we talk about the SECURE Act. But I was thinking about this this morning as I was driving in, Tim, $19,500. While that may seem like an insignificant jump from $19,000, if you look back to when they were in the $17,000s — and I also think about this in the context of pharmacists’ salaries that are remaining somewhat stagnant or even in some spaces getting adjusted down, I think that these numbers continue to go up. And we’ll talk about the same thing on the IRA side. What this means for pharmacists is likely, in many cases perhaps, a greater opportunity to save a greater percentage of their salary if that’s something that they’re able to do. And just to refresh our memory, this does not include employer matches, correct?

Tim Baker: Correct. This is just your own contribution through your paycheck. It does not include what an employer matches. So that limit is actually much, much higher.

Tim Ulbrich: OK. So $19,500, as I mentioned just a few minutes ago, we’re not going to talk in this episode about the priority of investing, whether that be 401k, a 403b, or should you be putting money in an IRA? But we did talk about that back in the fall of 2018. OK, so what about IRAs, Tim? Give us again a brief overview of IRAs, the limits that we’re seeing for 2020 and the catchup provisions as well.

Tim Baker: Yeah, so the IRAs are pretty stagnant. So just to back up, the IRA is typically what you use to supplement what you’re putting into your 401k, 403b, so it’s something that you typically open up yourself, either at a Vanguard or Fidelity, a TD Ameritrade, and basically set it up and fund it yourself. Or you can do it through a financial advisor as well. The amounts are pretty much the same from 2019 to 2020. It’s still $6,000 that you can contribute into a traditional IRA and a Roth IRA in aggregate, meaning if you put $4,000 into a traditional, you can only put $2,000 into a Roth IRA. And just to back up a little bit further, Tim, just when we think of Roth, a Roth IRA, we think of after-tax. So typically, the example is if you make — and we’ll use lower numbers because of the number phase out — but if you make $50,000 and you put $5,000 into a Roth IRA, you’re taxed on $50,000. You get no deduction. If you make $50,000 and you put money into a traditional IRA, it’s as if you’re taxed on $45,000. So your taxable income goes down. So that money inside of the IRA grows tax-free. And then when it comes out, if it’s a traditional, which it hasn’t been yet taxed, it gets taxed. If it’s a Roth, which has already been taxed going in, it doesn’t get taxed. So the thing to remember is it’s either taxed going in or taxed going out. The growth it enjoys in the middle, in the actual pot, is tax-free. So the numbers are the same between 2019 and 2020. What is a little bit different are the phase-outs. So those inch up a bit. So as an example, if you’re a single individual in 2019, if you made $64,000-74,000 in Adjusted Gross Income, the deduction that you would receive would slowly go away. And then anything over $74,000, you would get no deduction. For 2020, that goes up $1,000, so now it’s $65,000-75,000. So typically the people that I’m talking to that still get a traditional IRA deduction are you students, residents, fellows out there that are going that route. And then same thing with on the Roth side of things. So once you make a certain amount of money, you can’t even contribute to the Roth. And that’s where we can kind of talk about the back door Roth conversion. So for 2019, for a single individual, once you made $122,000-137,000, it would start to phase out the contribution that you could make in there. Once over — and now in 2020, it goes from $124,000-139,000. So it goes up a touch. So if you’re in that low $120,000s, you can still put money into a Roth. But if you start creeping up to that number, then obviously the door slams shut and then we typically do a non-deductible traditional contribution that we bought back door into a Roth. So — and we’ve done, I think we’ve done podcasts on that before, I think Christina and I.

Tim Ulbrich: Yeah, we have. Episode 096 with Christina Slavonik, How to Do a Back Door Roth IRA, so I would point you to that episode. So just to summarize, Tim, contribution limits for IRAs remain unchanged from 2019 to 2020, $6,000 in 2019, $6,000 in 2020. But what we did see is some changes to the income limits going up in terms of where those phaseouts and contributions are allowed. So we’ll link again in the show notes to some articles of tables that you can look at those in more detail. So if we put the two of these together, Tim, we know for many pharmacists, you know, they’re thinking about saving for retirement in the context of a 401k, 403b, TSP, 457, as well as an IRA. So now between the two of those, excluding the employer match portion of a 401k, 403b, we’d be looking at north of $25,000 that they’re able to contribute between those. So not too bad, right?
Tim Baker: Yeah. And the other thing that we haven’t talked about that’s worth mentioning is the HSA. So the HSA has changed a bit, you know, for — this is assuming you have a high deductible health plan, you can couple that with a Health Savings Account, which for a single individual, the contribution amount moves from $3,500 to $3,550. So a little bit. And then the minimum annual deductible moves from $1,315 to $1,400. And then for a family, it’s $7,000 to $7,100 and then the deductible moves from $2,700 to $2,800. So that is, again, we’ve talked about that I think at length before. That’s the black sheep of all the different accounts out there because it has that triple tax benefit, which is a really nerdy way to say it goes in tax-free, it grows tax-free, and then it comes out tax-free if it’s used for qualified medical expenses or once you reach a certain age, you can use it for whatever you want. And the nice thing about that, Tim, is that it doesn’t matter how much money you make. You could make $50,000 or $50 million. You still get that deduction, that $3,550/$7,100 deduction.

Tim Ulbrich: Yeah, an extra $50 or $100, you know, matters, right? So from $3,500 to $3,550 for individuals in 2020, and up from $7,000 to $7,100 for individuals that have family high deductible health plan coverage. So we talked about HSA, we’ve talked about IRAs, we’ve talked about the 401k, 403b’s, etc. And so again, I think the take-home point here is making sure people are aware of what these contribution limits are, how they’ve changed, and what opportunities they have for them because ultimately, as we think about prioritizing savings and how this fits in with the budget and where you’re going to allocate your dollars, these three buckets typically are a big part of the long-term savings strategy. And really taking the time to say OK, among all of these priorities, these options that I have available here, obviously you’ve got other options in the brokerage market as well, what am I going to be doing in terms of savings? And which of these do I have available to me? And we know that HSAs aren’t available to everyone, but it seems to be we’re seeing this certainly is a growing area. And I would reference our listeners all the way back to Episode 019, where we talked about how HSAs fit into the financial plan. Obviously, the numbers then were different than what we’re talking about here. But the concept of the HSA remains the same. OK, so that’s Part 1 where we wanted to talk about the 2020 contribution limits and the changes and make sure our listeners are ready. One thing I want to ask you, Tim, before I forget and we jump into Part 2 here and talk about the SECURE Act, remind us of the timing of when those contribution periods end. So end of calendar year, going up until the tax limit deadline of April 15, so when — what is the timeline if somebody is listening who said, “You know what? I could have contributed $6,000 in a Roth at the end of 2019, but I only did $5,000. And here I am at the end of January. What options do I have?”
Tim Baker: Yeah, so for most of these retirement plans — not necessarily the 401k, the 403b, but for the IRAs — you can contribute all the way up until April 15 of this year for 2019.

Tim Ulbrich: Yep.

Tim Baker: Now a callout here because I’ve seen this with our own custodian who we manage client accounts with, and I’ve actually seen it when I logged into a client’s Betterment account here recently because we were in the process of moving that over. It’s kind of a weird thing, so I would caution — or I’d have our listeners look at this is the — when you turn the calendar — so let’s pretend, Tim, that you have at the end of 2019, you have $4,000 into your 2019 IRA contributions. So you still have $6,000 to go, right?

Tim Ulbrich: Yep.

Tim Baker: When the calendar turned — I’m not sure because I don’t know all the custodians — that January contribution actually gets counted towards 2020, which makes no sense at all because most people, the reasonable thing is like OK, fill the 2019 bucket before you start doing 2020. So you actually have to go back to the custodian, like Betterment or in our case, TD Ameritrade, and say, “Hey, let’s backfill that bucket that we still need to kind of top off before we go into 2020.” So it’s just one of those things that we have this first quarter of sorts to finish off our contributions. But the logic in a lot of these — you know, the way we contribute to our IRAs is just flawed, in my opinion. And I’ve seen this pop up a few times. So definitely something to kind of call out if you are doing this on your own.

Tim Ulbrich: So is the suggestion there then they reach out to the custodian and make sure that gets allocated correctly?

Tim Baker: Yeah. Like to me, and to me, it’s like something that I, I’m kind of talking to TD and some other institutions like why is this a thing? You know, 99 out of 100 people I would think would say, OK, if I still have 2019 contributions to make, it should be coded — I’m not a developer — but it should be coded as such as a default. So what I do is I would log in and typically, when you log in, you can see your contributions year-to-date, and it will show you basically in this period of time, it will show you your 2020 contribution, which should read $0, and your 2019 contribution, which should be — if it’s not $6,000, you should still basically backfill that until you go to 2020. It’s just this weird quirk that — and I kind of expected more from Betterment because they’re a newer kid on the block, and it was just one of these weird things that’s off. So to me, it’s use all of that up before you go onto the kind of the current year.

Tim Ulbrich: Come on, Betterment. We expect more. No, I’m just kidding.

Tim Baker: I know, I know. I don’t know, we’ll probably get a letter from them, like an angry letter.

Tim Ulbrich: Yeah, I’m sure. Yeah. Alright, let’s jump into the SECURE Act. We’re going to continue to nerd out a little bit here as we transition from numbers to talking about some recently enacted legislation that has fairly significant implications.

Tim Baker: Yeah.

Tim Ulbrich: And really a shoutout here to Tim Church, who kind of brought this forward to say, hey, we need to be talking about this. There’s some really unique provisions in here that may apply directly to our audience or at least to be aware of as we think about retirement saving strategies for the future. And I think in the midst of end of year, as this was passed at the end of December, obviously we’ve got a lot going on at the federal level that I think is drawing attention away from things like this. I think it got lost in the mix. So let’s talk for a moment, Tim, just start with what is the SECURE Act? And then we’ll talk about specifically some of the major changes that may be of interest to our audience.

Tim Baker: Yeah, so the SECURE Act stands for Setting Every Community Up for Retirement Enhancement, SECURE Act of 2019. These acronyms kill me. And being former military, I can appreciate a good acronym, but come on. So this is really the second piece of major legislation in the last 24 months, the first being basically the Trump tax code, the Tax Cut and Jobs Act, which had pretty fairly sweeping changes. And this is really — you typically don’t see this in a 24-month period. These typically happen over decades. And when we actually dug into the Act, pretty significant. This was passed by the House I believe in May. And then language in the Senate, and we kind of thought it would be buried. But in kind of the final days of the year, I believe it was passed on the 20 of December. It became law and actually became effective on January 1 of this year. So I was caught a little bit off guard, to be honest, about the big change. And I had heard about it and was kind of following it from a distance. But when it actually came through, I was actually surprised because obviously, with everything going on Capitol Hill, it’s just a lot swirling around. And they were able to actually get something done.

Tim Ulbrich: Well, and I think to be fair, like things don’t typically move this quickly, right? So we see something that passes December 20, 2019, and then with a couple exceptions here, really the Act is effective January 1, 2020, although some of the pieces are coming further behind that. But I think there’s some major, major things in here. And we’re not going to hit everything about the SECURE Act or we would I think put our audience to sleep, perhaps induce a couple car wrecks for those that are driving. So we’re going to hit the high points. We’re going to link in the show notes to some additional information that our listeners can go learn more about this. So please don’t interpret that we’re talking about every single piece of the SECURE Act. But why don’t we start, Tim, I think what really got a lot of press, even though it may not apply directly to where our audience is today, is around the changes in the required minimum distribution age. So talk to us about what that is. It’s not a concept we’ve talked a lot about on the show. And then what were some of the changes that happened related to that distribution age from this Act?

Tim Baker: Yeah, so — and I have a pretty, I want to say a pretty great graphic that I designed way back when that I sometimes will dust that off. But to kind of talk about RMDs, so — and maybe we need to post that somewhere. But so an RMD, a Required Minimum Distribution, is basically — so let’s pretend, Tim, you have a bunch of retirement accounts. And you have $1 million in a 401k, $1 million in a traditional IRA, and $1 million in a Roth IRA. How much money do you actually have? The answer is not $3 million, unfortunately because those — the traditional IRA and the 401k are all basically pre-tax dollars. So Uncle Sam has yet to take the bite of the apple. So when that gets distributed, they basically take their taxes. So in those $1 million accounts, if you’re in a 25% tax bracket, you get to keep $750,000. And then they keep $250,000. The Roth IRA, because it’s gone in after-tax, it goes free. It comes out tax-free. So after awhile, you know, after you work and you retire and you reach 70.5 years old, the government raises their hand and says, ‘Hey, Tim Ulbrich, remember all those years when we allowed you to basically have that money grow tax-free? We want our piece. We want our piece of the apple.’ So what they do is they force a required minimum distribution, which it looks at the balance of the account and then a ratio based on your age, and it applies it to that. And let’s say the first year, when you’re 70.5 years old, you have to distribute $2,000. And then every year, it gets bigger.

Tim Ulbrich: So it’s a forced contribution — or a forced withdrawal, right?

Tim Baker: It’s a forced withdrawal, right. So then you can invest that somewhere else or spend it or whatever. But for a lot of people that are like, oh, I don’t really want to use this money. I want to keep it growing so it kind of can be a disruptor, especially if we’re moving retirement to the right, which we’re seeing. So the big change, which is — I think it’s really a minor change because I think like it’s something like only 20% of the people are actually being forced to take RMDs. Most people are spending it down before that. I believe that’s the number. It moves from 70.5 years old to 72 years old.

Tim Ulbrich: OK.

Tim Baker: So they give you a little bit more runway on the back end to not have to touch those kind of those pre-tax accounts, which is typically the IRA, the 401k, 403b, that type of thing.

Tim Ulbrich: So it gives you an additional year and a half to let that money sit and grow before you have to take those forced withdrawals. But I think this — I’m glad we’re having this discussion because, you know, we talked before in the investing series about some of the strategy around taxable — you gave a great example. You’ve got three buckets of $1 million in a 401k, traditional IRA, Roth IRA, you don’t really have $3 million for those two. Now the third one, in the Roth IRA account, you’ve got $1 million there.

Tim Baker: Yeah.

Tim Ulbrich: And I think that’s one of the other advantages of a Roth account is you don’t have a required minimum distribution age, if my memory serves me correctly.

Tim Baker: Correct. Yep.

Tim Ulbrich: So you know, again, if we think about what’s happening to lifespans and as you think about where you’re at in your retirement savings and the potential whether you will or will not need that money at that age, I think that’s a really important consideration as we think about retirement savings strategy. Even though this year and a half may not be, you know, something that is monumental, I think it’s just a good reminder of how we’re thinking about the back end of taxes when it comes to our savings.

Tim Baker: Yeah, I kind of like the — it’s like, to me, it’s like who makes these rules up? It’s like 59.5 years old, 70.5 years old. It’s like, can we just use round numbers please? It’s like what? And again, it kind of is like the theory versus the application. And it’s just — it’s crazy. Yeah, I don’t understand it.

Tim Ulbrich: So in addition to the change in required minimum distribution age, we also saw that there is no longer, with the SECURE Act, no longer an age limit for traditional IRA contributions. So you know, again, obviously it may not be as meaningful for our audience in the moment. But this is really, really significant news in that previously, you couldn’t make traditional IRA contributions if you were 70.5 or older, but that’s no longer the case, right?

Tim Baker: Yeah, and it’s kind of — to me, I’m still kind of unsure how this works because if you think about it, it’s like, so you would basically be able to — now you’re able to contribute that if you’re still working and you have compensation, you can still contribute to a traditional IRA. And before, you couldn’t once you reached age 70.5. So they take that age limit off. I guess the question I have is like, OK, let’s pretend I’m 73 and I’m still working. Do I take a RMD and then just put it right back in?

Tim Ulbrich: Oh, right.

Tim Baker: You know what I mean? I don’t know. And I actually just thought about this now. Before, once you reached 70.5 years old, you typically just put it into a Roth. But again, like the idea is that the government wants you to spend that traditional, that pre-tax bucket down because they want their tax revenue. But I guess you can, I don’t know, maybe you can contribute that? I don’t know, I don’t know.

Tim Ulbrich: Yeah, maybe if we asked the representative that posed that about the age as well as that provision, maybe we’ll get a “I don’t know,” you know?

Tim Baker: Yeah, yeah.

Tim Ulbrich: And talk about that.

Tim Baker: Yeah, so you take the money out and then you just contribute it again? I guess if you have compensation, I guess that’s OK. But yeah, so again, what they’re trying to do — and I think we’re going to see more and more of this because I think the whole of traditional retirement, it’s going to go away. And I think they’re going to — even like the 10% penalties and things like that, I would imagine in 10, 20, 30 years, it’s going to look a lot different.

Tim Ulbrich: I would agree. So third thing here I want to talk about, because I think especially as we’ver seen more pharmacists that are transitioning to part-time work for a variety of reasons, is some interesting changes to your access to retirement benefits for part-time workers. So here we’re talking about employer-sponsored retirement plans. So talk to us about where we’ve been on this — and you know, this was actually kind of new news for me as I got up to speed — where we’ve been and what’s changed here as it relates to part-time workers and access to retirement benefits that are employer-sponsored.

Tim Baker: So one of the ways that a lot of employers are kind of getting around some of the costs of manpower and FTEs is to hire mostly part-time employees. And one of the reasons they could do this is if they had a 401k, you could basically exclude that from as a benefit. So the rule before the SECURE Act was that part-time employees who have worked 1,000 hours or more during the past year must be granted access to the 401k. That rule stays the same with the SECURE Act. The difference is now that part-time employees who have worked more than 500 hours per year for three consecutive years now must be allowed to enter into the 401k. Now, the caveat here, Tim, is that this sounds great. And I think we’re in alignment, obviously we’ve set up our 401k recently at YFP and we’ve included our part-time employees as part of that because obviously this is kind of the stuff that we talk about and we believe in it. The problem with this rule, though, is that the earliest a part-time employee can participate in a retirement plan due to this kind of second three-year rule that’s now still with the 1,000-hour rule doesn’t take effect until 2024.

Tim Ulbrich: Right, because of the delay.

Tim Baker: Yeah, the plans don’t start counting until 2021.

Tim Ulbrich: Yeah.

Tim Baker: So it’s good, but not for a couple more years. So I think we’re heading in the right direction. And again, I think what we’re seeing — and sometimes we hear it on the trail with politicians — is that one of the problems is employers are just hiring temp workers and part-time workers, which — it’s really because of an economics play because the true cost of a full-time employee with health benefits and retirement benefits and all that kind of stuff can be pretty steep. So I think this is a step in the right direction to kind of open up the door for a lot of part-time employees to save for retirement.

Tim Ulbrich: I agree with you. I think it’s a step in the right direction. I think the time period, because of the three years, because this doesn’t start until 2021, I’m a little bit disappointed by that. I mean, to me, this is a sooner rather than later thing. And I think from what I was reading, it looks like there’s still final rules that are in development here. So I think this is a stay-tuned type of thing. And to be clear here, this does not mean that employers have to contribute in terms of a match but rather that they will be required to allow the employer to participate if they meet the requirements that are set forth and that we just talked about.

Tim Baker: Yep.

Tim Ulbrich: And I share — you know, I’m pumped about what we’re doing at YFP in this area and some of our other benefits that we’re offering. I think it’s — it’s fun to be probably one of the most rewarding parts of 2019 is to be thinking about it from an owner’s standpoint of saying, “How do we want to invest in our employees? Why do they matter?” And philosophically, we’ve all been in employee roles and here we now are on the other side of it and how can we enact things that will increase employee satisfaction, retention, or we just feel like is the right thing to do?

Tim Baker: Yep.

Tim Ulbrich: What about — I mean, I think those got a lot of the headlines. What were some other things that stood out to you in the SECURE Act that, you know, might have been or is of interest to our audience?

Tim Baker: It’s funny because I was actually just talking about this. We do — as part of our financial plan, we do like an education presentation. And I’m going to have to go back because I was like prophesizing about, ‘Oh, I think the 529 will look a lot different in the future and blah, blah, blah,’ and I had not dug into the specifics about it yet. But so a little bit of the backdrop is that the Tax Cuts and Jobs Act a couple years ago expanded the use of 529s for K-12 expenses.

Tim Ulbrich: K-12, yep.

Tim Baker: Which was big because basically before that, the 529 was kind of like the retirement account for education where you had this long accumulation phase before your kid was born to 18, and then you would basically decumulate when they went to school. Now, the 529 — and now I say ‘now,’ but a couple years ago when they changed it, it could actually act as a pass-through. So you could put money in to get your state tax deduction and then pay for private kindergarten, first grade, etc. So the further expansion in the SECURE Act, the SECURE Act qualified education loan repayment is that it allows the 529 to basically distribute to make loan payments, which sounds like it would be an automatic thing. You have loans, and we have a balance in the 529, like that should have happened before. But the law basically includes an aggregate lifetime limit of $10,000 in qualified student loan repayments per 529 per planned beneficiary and $10,000 per each of the beneficiaries’ siblings. So again, you know, maybe not like a — I think this is a good foothold, but to me, I don’t think there should be a limit, to be honest. If there’s a 529 balance, put it towards the loans. So now homeschooling expenses still didn’t make the bill. They didn’t make an effort —

Tim Ulbrich: Come on now!

Tim Baker: I know, it’s like, get with the program. So still, that needs to happen. And then the second thing that happened is that, with the 529, it includes expenses for apprenticeship programs now. So if you’re going for an apprenticeship or your kid’s going for an apprenticeship, fees, books, supplies, required equipment, the program does need to be registered and certified with the Department of Labor, but that’s big. And that’s one of the things with a lot of parents that are like, ‘Well, what if little Johnny doesn’t want to go to education — get college?’ And my belief is that still, I think we’re going to keep going in that direction of opening up what the 529 can actually be used for. We just need to. We need to.

Tim Ulbrich: Yeah, that one, although it seems small, got me fired up, you know, in a positive way. I just think that we’re seeing certainly a transition of more people going into trades and other things.

Tim Baker: Yeah.

Tim Ulbrich: And I think from a parent concern, it’s something I think about often that hey, I’ve got four boys and maybe two go to college, two don’t, maybe four don’t, maybe four do, whatever. But to have that flexibility, you know, and that option available I think is huge. And I agree with you, I think we’re going to see more in this area. There were certainly other changes in the SECURE Act. You know, one of the things that stood out to me was a new requirement for plan administrators to offer projections for lifetime income at least once a year, info about the nest egg size, so you know, we might see, individuals might notice some more paperwork and things that are coming as a part of their 401k. But lots of changes here, and I’m glad we were able to talk about these as well as the 2020 changes to the contribution limits in the retirement accounts and the HSA component that we talked about a little bit earlier. So Tim Baker, excited to have you back on the mic. And I think this is a good place to remind our listeners as we’re talking about saving for retirement and new contributions and how do you prioritize these and where does this fit in with the rest of your plan, we offer fee-only comprehensive financial planning at Your Financial Pharmacist. Obviously, you’ve been leading that service for us. And we’ve got some exciting developments coming in 2020 with that. And if you want to learn more about that, YFPPlanning.com, you can set up a call with Tim Baker and see if that’s a good fit for you. And then we’ve also got some great calculators that Tim Church has been working on, one of them around projecting retirement savings and nest egg, so you can find that over at YourFinancialPharmacist.com. As always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, don’t forget to leave us a rating and review in Apple podcasts or wherever you listen to your podcasts each and every week. Thank you for joining us, and have a great rest of your week.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 137: How to Monetize Your Clinical Expertise

Posted on by yfpadmin


How to Monetize Your Clinical Expertise

Diana Isaacs joins Tim Church on this side hustle edition to talk about her journey in becoming an expert in diabetes and how she has been able to monetize her clinical expertise through speaking engagements, advisory boards, consulting projects and CE articles.

About Today’s Guest

Diana Isaacs, PharmD, BCPS, BC-ADM, BCACP, CDE is the Continuous Glucose Monitoring (CGM) Program Coordinator and Endocrinology Clinical Pharmacy Specialist at the Cleveland Clinic Diabetes Center. Her role includes clinical practice, teaching, and research. She provides medication management and runs a robust CGM shared medical appointment program.

Summary

Diana Isaacs shares how she monetizes her clinical expertise in diabetes on this side hustle edition.

Diana’s training after graduating college was in pharmacy practice and ambulatory care. She gained clinical expertise and took additional training to receive certifications and specializations. She fell in love with diabetes and started working more and more in the field. She now works as a Continuous Glucose Monitoring (CGM) Program Coordinator and Endocrinology Clinical Pharmacy Specialist at the Cleveland Clinic Diabetes Center. Diana was recently awarded the 2020 AADE Diabetes Educator of the Year.

Her passion for diabetes is palpable and has allowed her to become an expert in the field. When she’s working at night on her side hustle as a clinical diabetes expert, she doesn’t feel as though she’s working but more that she’s doing a hobby she loves. She’s monetized her passion and expertise in several ways, including speaking engagements and presentations, advisory boards, consulting projects and CE articles and courses. She earns the most from honorariums which varies between $500 to $3,000/event. Advisory boards come in occasionally and bring in between $1,000 to $2,5000/board. Diana receives $500 to $4,000/CE article and if she works on a consulting project she usually earns $1,000 to $2,500.

The biggest reason for her success has been her willingness to say yes to opportunities and to reach out to organizations or conferences in which she’s interested in speaking.

Diana says it’s hard to quantify how many hours she works, however she makes it happen! Her side hustle has increased over time so she didn’t feel the brunt of working several additional hours on top of her day job at once. She has a very supportive husband that works part-time and is able to take on more with the children and household tasks. She works at night after her children go to bed but takes off Saturdays and Sundays when she can to make sure she’s present for her children and husband.

Mentioned on the Show

Episode Transcript

Tim Church: Diana, thanks for stopping for and for being part of this side hustle edition.

Diana Isaacs: Oh, you’re welcome. Thanks so much for having me.

Tim Church: I first want to congratulate you on your recent award. And that is the 2020 AADE Diabetes Educator of the Year. And this is an award that honors a diabetes educator who has made a special contribution to the field through dedication, innovation, and sensitivity in patient care. Now Diana, this is a really big deal, and I wanted to ask you, what does winning this award mean to you?

Diana Isaacs: Oh, well thanks. Yeah, it’s been a really exciting year. Winning this award has been tremendous. I mean, I’m so grateful to be recognized for it. And it’s definitely opened up a lot of opportunities for me in terms of it almost seemed like overnight, people were like, oh, she’s an expert in diabetes. And it’s given me a lot of new opportunities to pursue.

Tim Church: That’s great. And when was the last time a pharmacist won this award? Because this isn’t something specific to pharmacists. This is really anybody in the diabetes space.

Diana Isaacs: Yeah, that’s one of the things I really love about the organization AADE, the American Association of Diabetes Educators, is that it is, it’s a multidisciplinary. You’ve got nurses, nurse practitioners, DAs, exercise physiologists, you’ve got dieticians, you’ve really got everybody. And so it’s just — it’s really special I think to be recognized by all the different disciplines. And in terms of the last time a pharmacist, I think when I looked it was like 12 years. So it definitely had been a long time.

Tim Church: That is so cool. And it’s really awesome to see you being recognized because as we’re going to jump into, you really have done a lot for diabetes in terms of your scholarship activities and a lot of the committees and things that you’ve been on. So I’m excited to jump into that. But obviously getting this award is not something that happened by accident. So I want you to talk a little bit about your career path.
Diana Isaacs: Yeah, sure. So let’s see. Going all the way back, I graduated from SIUE, it’s about 10 — actually exactly 10 years ago now. I did a pharmacy practice residency with an emphasis in ambulatory care at the Philadelphia VA. And then I was really fortunate to get my first position as a clinical assistant professor with a practice site at the VA, getting to manage diabetes. And I think through that, I really was able to gain clinical expertise in managing different types of patients and seeing different types of things. And I pursued my certifications, like my CDE and the BCEDMs, I’m board-certified in advanced diabetes management. And really, I think one of the things that really stands out is I say yes. I definitely say yes to different opportunities and also seeking out whenever there was an opportunity to be able to speak at a meeting, whether a local program or anything, really trying to grow myself professionally.

Tim Church: So a lot of those opportunities, did you have to be very intentional about getting? Were some of those given to you?

Diana Isaacs: So that is a great question. So yeah, the golden ticket, right, is when you get one of those emails that says, “Hey, will you do this? And we’ll pay you all this money, and we’d like you to present here and write this.” Those emails come sometimes, and they have fortunately come more often since getting this award, but no. For the most part, I sought things out. When I saw that a meeting was accepting abstracts to be able to speak, I drew up an abstract and I submitted it. I, you know, submitted lots of proposals for lots of different things. I worked really, really hard. And some of the things stuck, and many times, they didn’t get accepted. But I kind of just kept trying.

Tim Church: And did you have any failures along the way when you submitted those proposals?

Diana Isaacs: Well, I don’t like to think of it as failure, right? Because you’re trying to think of it as you’re growing. But yeah, I like to think of it as like I throw 100 darts at a board, and two of them stick. And that’s great. I’ll pursue those two things. So yeah, I feel like I apply for lots of things. I’ve tried to really do a lot of different things and yeah, sometimes I don’t make it, they choose someone else, I don’t get it this time, but I just kind of keep trying. And I really try to keep my ears open for opportunities. That’s something I’ve been pretty good about paying attention, you know, sometimes you get those emails where it’s like, you can apply for this. Like for example, with the American Diabetes Association, they have these special interest groups. And I’ve been wanting to get involved with ADA, and so I applied for that. And I ended up being appointed as communication director for the pregnancy and reproductive health group. And that was just an opportunity that hey, I paid attention to my email, I filled out the application, I submitted it. And it worked out. So I think, you know, a lot of it is reading your emails and seeing what opportunities are out there.

Tim Church: At what point in your career did you realize that you had become an expert and really had authority in this space?

Diana Isaacs: So I don’t — I guess I’m still growing, and I like to think I’m still definitely growing and evolving and there’s so much to learn with diabetes that I don’t know if anyone is a full expert. But I think, you know, definitely earning this award this year has solidified some of my confidence. And I think over — especially in my current position, so right now, I’m at the Cleveland Clinic Diabetes Center. And I think in this space, I see such complex cases. I get to do so many cool things here that I think I just realized, you know, when I interact with other people that I am seeing a lot more, a lot more diverse things that I’m becoming an expert, I guess you could say.

Tim Church: So what would be some of the examples of complex cases or things that maybe most pharmacists kind of in an amb-care setting may not see every day?

Diana Isaacs: Yeah, so I get to do a lot of work with the post-kidney transplant population. And that’s a lot of fun. So there, we do a bunch of kidney transplants there. And unfortunately, our patients were kind of falling through the cracks. That was a need when I came here, that they weren’t getting good glycemic management right after that transplant. It was hard to get into endocrinology. So that’s a service that I took on. And now I see a lot of those patients. And so it’s just, it’s very interesting because they’re on high dose steroids, they’re tapering over a month’s time, they just had a transplant so they’re acutely sick. Many of them, even if they didn’t have diabetes before, now they have steroid-induced hyperglycemia, and it’s really an art to it because there’s no specific protocols. It’s really every person’s different, and you have to very closely manage it. And then in addition to that, sometimes you see the pancreas-kidney transplant. Like I have a patient this week, she had it, and you know, you would hope, right, the dream is that if you get a pancreas transplanted, you don’t need insulin anymore. But it doesn’t always work like that. They call it like angry pancreas. Like it takes some time for that new pancreas to adjust. So then we have her on Metformin and like we’re trying to see, are we doing a DPP4 inhibitor and what else are we going to do? And so it’s just — man, it’s a lot of cool stuff, a lot of cancer patients, a lot of just everything, like post-bariatric surgery, hypoglycemia, people doing keto and de-escalating therapy, lots of CGM, diabetes technology, insulin pumps, just lots of cool stuff here.

Tim Church: So it sounds like that the providers are how they come in through the clinic, they’re like if they’re complex or it’s going to be difficult, we just send them to Diana. Is that pretty close to how it works?

Diana Isaacs: So I am so fortunate. I work with like the most amazing doctors, and I have an amazing, amazing team. So what I try to do when coming here — because I was the first full-time pharmacist put into the diabetes center — was I tried to find where would I be most useful? And some of the areas I recognized that were one, we were underutilizing diabetes technology, so like insulin pump adjustments and getting more patients on CGM. And then the kidney transplant need was really two areas where I decided that I would really be best utilized, and so those are kind of niches that I’ve I guess developed. But yeah, I try to be helpful wherever I can for the team.

Tim Church: That’s really cool, and I think those are obviously niche areas within diabetes itself, but through the organization that you work for, obviously if those are very frequent types of patients that are coming in, there’s certainly going to be a need. And I think that’s really cool how you positioned yourself to basically say, what are the needs out there and how can I best be a part of this service and impact patient care in that way? So I think that’s really cool the approach that you took.

Diana Isaacs: Thanks. Yeah, and I try — you know, a lot of times, pharmacists will come and ask me what they can do and how they can get involved, and I think it’s really every place is unique and it’s about assessing the needs and making sure you’re not stepping on other people’s toes but you’re adding value to the team.

Tim Church: So besides kind of positioning yourself as an expert by taking on very difficult cases, very unique cases that many people may not see all the time, you know, one of the things I thought about prior to our interview was the book “Outliers” by Malcolm Gladwell. And essentially, one of the conclusions of that book is that in order to become an expert, you need 10,000 hours. So a lot of people out there — obviously you don’t become an expert, you don’t become a member of the Beatles like overnight. The Beatles don’t become The Beatles overnight. It takes a lot of time and practice in order to get to that point. So what do you think about that in the context of your personal journey?

Diana Isaacs: Yeah, that’s a great point. And yeah, hard work is required. I mean, I work hard. But the thing is, it’s not boring or tedious. I just, like I really love diabetes. And I love that I can use my skills in diabetes to be able to help people. Almost 10% of people now have diabetes. So wherever I am, I’m able to make an impact and to directly help people. And so like for me, I love doing it so much that I don’t think of it as work. Like if I am working on a project or I’ll do this stuff in the evenings, and I don’t really think about it because I’m enjoying doing it. But absolutely, like the hard work is necessary. And I think on one hand, that should be inspiring because it’s not that you have to have like some special secret skill or talent. Like every person or every pharmacist should know, like if they work hard enough in a certain area, they can become a clinical expert.

Tim Church: And I think too — and I think obviously, you’ve already kind of talked about this, but just that repetition of seeing the number of patients over and over and over, and you start to develop certain patterns. You know, obviously you’re going to have some complex cases that you’ve never seen before, but it’s almost kind of like it adds to the — your own repertoire of knowing OK, I’ve seen a patient like this in the past and this is how he or she has responded. And I’ve kind of instilled that in the training programs is when we take residents — because for those that don’t know, I also do primarily diabetes management, but I’m always pushing the residents and students to really see as many different types of patients as possible because that repetition is so key, even if it seems monotonous and tedious at the time.
Diana Isaacs: Yeah, and I think the great thing about kind of the ambulatory care environment too is you’re interacting, you’re communicating with different types of people. So you can always learn from every person. And so that’s really the art of it that makes it really unique and something — I have a lot of trainees, a lot of residents and students that I work with. And that’s something, you know, you can have two exact same clinical situations but what you do may be different depending on like the patient’s attitudes and other factors. So yeah, that communication and, like you said, repetition, is very helpful for navigating different situations.

Tim Church: So who or what really inspired you to become an expert? I can tell like just from your voice, obviously this is where you’re already passionate about. But is there anyone who inspired you to basically continue to achieve, continue to get to the next level?

Diana Isaacs: Yeah. So I want to highlight, so Jess Kerr, who is faculty at SIUE where I went to pharmacy school, was very inspiring. She was faculty and had a practice site — or still has a practice site at the VA. And I wanted to do what she did. I guess that passion I saw, she had that passion for helping people and I really wanted — she seemed so happy — and I really wanted to be that. I was very fortunate to get a position like that. I think something else that actually stands out is my math teacher, actually in high school. I had a really bad attitude about math. And I was like, fine, like this is too hard. Like I’m just getting C’s, like I don’t care. This is just way too hard, I don’t feel like doing it. But she invested all this time in me. And she encouraged me to have a positive mental attitude, PMA, and she said things like, “Dream it. Believe it. Achieve it.” And that really shifted things. Like I learned that my attitude really dictates how situations will turn out. And just through changing my mindset, having a positive attitude, things can go really well. So I turned myself around, I went from C’s to A’s. And I think that that message really stuck with me in a lot of different areas, not just pharmacy and diabetes but in other areas of my life too.

Tim Church: That’s really cool. And I think that a lot of people, they would not be where they are unless they heard some message, received some encouragement from somebody. So that’s cool. And I think it’s great that you highlighted those individuals. So obviously you’ve reached this expert status in managing diabetes and along with that comes some engagements and proposals and things where you can really show off those skills but also help other clinicians help patients. So talk about some of the ways that you were able to start monetizing your clinical expertise.

Diana Isaacs: Yeah. So it’s been exciting because I’ve done a lot of things over my career for free, put a lot of sweat and tears — not usually tears. But yeah, now I’m getting paid to actually speak and things like that. And I love — it happens to be that I love giving presentations. And so that now, you know, I get paid to give presentations. And part of actually what I’m doing with this Educator of the Year is I get to give presentations and then beyond the five that I will give and that I kind of already received an award for, I can do additional ones where they pay me and I’ve been able to set my price. And so that’s been exciting. And then another side benefit has been that industry has been interested in me too. So now I’m speaking for DexCom as well as I’m on the speakers bureau for Novo and for Zerus, and so that is very exciting.

Tim Church: So take a step back for the award, the Diabetes Educator of the Year, they’re already guaranteeing you five speaking spots? And are those individual speaking gigs, those are paid for? Is it one lump sum that they’re giving you?

Diana Isaacs: Yeah, so what happened is I got $5,000 up front for that. And in that, I agreed to speak at five places, which I got to choose — or places could request me, and then I got to choose from the list of people that requested me. And then beyond that five, then additional places can request me. But they won’t get the financial assistance. So they would have to pay for my travel and then pay for my honorarium on their own.

Tim Church: So besides speaking, what are some of the other ways you’ve been able to monetize?

Diana Isaacs: Yeah, so things like CE articles, so places like Pharmacy Times, Power Pack, they will basically — they will pay you to write CE articles or like give webinars. So that’s one thing I’ve been able to do. Also, like in the webinar and course development — so I actually do a lot of stuff with AADE. There’s a whole CGM course. And it’s going to be turning into a certificate. But I was involved in that. And so that’s led to a lot of honorariums along the way. We even most recently created videos for it on how to counsel on CGM. And so there’s been a good number of honorariums for that as well.

Tim Church: That’s great. So can you break down kind of the different ways you’re earning and what they would typically provide in terms of an honorarium? And that could be like a range.

Diana Isaacs: Yeah, so it really varies a lot from place to place. Like some places, you do a local program, and you speak, and you get $1,500. And that’s to cover — it usually would be like a one-hour program. Depending on the company, sometimes they’ll give you the slides. And sometimes, they’ll have you pick from slides or they’ll let you put together slides, depending on how much freedom you have. Usually, many places will pay — if it’s not done that way, they’ll pay you an hourly rate and then they will pay for presentation development. So like usually, that honorarium ranges from I would say from $200-300 an hour. And so that would, you know, if it takes 10 hours to prepare, say that would be $2,500. And then the presentation itself usually will be like a $2,000 honorarium as well. So I would say like usually, when I speak, I’ll get anywhere form like $1,000 to $5,000. $5,000 being the best and not usually so normal. But that’s kind of a range. And then they pay for travel and hotel and all that, flight and all that good stuff. Recently, I was asked to speak as part of this diabetes program, which is training people for CDE. And that, I think we agreed on like $600 per hour of speaking. But that wouldn’t be prep time, that would probably just be like the time. So if I speak for five hours, then it’s $3,000. So that’s kind of for the speaking stuff, that’s usually how it works out.

Tim Church: And then have you been able to cross — I mean, obviously with AADE, ADA, those are multidisciplinary organizations — but have you gone and done presentations specifically for physicians, for nurse practitioners, physician assistants?

Diana Isaacs: Yes, so I was just recently asked to speak for like the dietician organization. So I think that’s beginning to happen. I was asked to speak also for ADA post-grad sessions, which is in early February. So that’s exciting because that’s an organization, there’s a lot more physicians in that organization. And of course, I do a lot of speaking AADE. So I think I’m starting to tap into these other organizations as well.

Tim Church: You mentioned to me before we jumped on the call that besides speaking, besides CE articles, some of the other ways you’ve been able to monetize have been being a part of advisory boards and then also consulting. Can you talk a little bit about that?

Diana Isaacs: Oh yeah. Advisory boards are like the greatest thing in the world. They’re usually like these — it’ll be like four hours and you’ll get paid like $250 an hour, plus if there was any travel. But the best is when they’re local, and you just like go for four hours and you get $1,000. Those are wonderful. I love when those happen. Other things, like for consulting, just different types of like writing or I get asked a lot of stuff about CGM type of stuff. Like now, I’ll be working on a supplement for the Diabetes Educator for InPen by Companion Medical, so stuff like that pays. Oh, recently I got asked to do this Medscape thing, which that sounds actually really cool. It’s like about time and range. And they’re — I guess it’s more kind of like an interview. They asked me to pick a nurse that I like working with, so I picked my favorite nurse. And we’re going to go I guess to like New York to film this brief thing. But that was like another kind of cool thing that I was like, oh, wow. That’s interesting. So all that stuff’s been cool. And I guess one of the things I’ve learned is, you know, I’ve done lots of things for free in my life. And I love doing it. So sometimes, it’s like easy to get to be like, oh yeah, I’ll just do this. But recently, I’ve tried to set my boundaries that hey, if someone’s asking for a good amount of my time, to make sure that I am getting paid fairly for my amount of time.

Tim Church: Sure, I mean, I think that’s absolutely reasonable. And you’ve done a lot of the things in the past to get to the point where you are where you weren’t necessarily compensated. But I think it’s incredible all the different ways you’ve been able to monetize. And obviously, along the way, you’re providing a lot of value, whether that be organizations or education that ultimately gets in the hands of patients itself, which is really cool. Can you break down in terms of percentages — so all of these different things that you’re doing to monetize — can you break down kind of what is the highest in terms of bringing in the revenue? Without specific amounts, just kind of what percentages does speaking bring in versus advisory boards, consulting, CE, etc.?

Diana Isaacs: So I think speaking definitely brings in — if it’s like a big program where — like I’ll give you another example. Like at AADE, I had a bunch of presentations, but then I had this one presentation, it was sponsored by Abbott. And so the honorarium was like $2,000. So that’s something that just brings in money, I feel like quickly, especially if it’s a topic that I’m pretty comfortable with. Like another example was a CE article that I did, it was also on CGM, and that paid $4,000. And so those are topics I’m very comfortable with. So those are easy and much faster, I guess, to earn the money. Other things, like writing sometimes. You know, writing can take awhile, so especially if it’s a topic you’re less familiar with. So now I try to stay in the diabetes realm. But I actually, like last year, I wrote an article about hyperhidrosis, which was not as familiar to me as other disease states. So that one took a little bit more time. So I guess what I’m saying is it’s hard to completely break it down. But I think for sure speaking, advisory boards pay a lot, but those are really unpredictable. So you know, I could have two advisory boards in one month or I can go almost a year without an advisory board. It’s just, it really depends on the needs of the company and what area they’re targeting and everything. So I think it just really varies. Another thing that brings in revenue, though, which is kind of cool, is speaker training. So whenever you speak for one of these companies, they want you to get trained. And so like that, that’s amazing because you get your hourly rate for a bunch of hours and you’re not presenting or anything, you’re just learning. And so that’s pretty cool.

Tim Church: How does that work?

Diana Isaacs: Yeah, so like with Dexcom, I was really fortunate because I missed the original training, and two people came out to me and like just trained me for four hours. And like I earned $1,000 and it was amazing. Other ones, like I’ve been invited now for this year to go to a Dexcom and to a Novo training. And so those, I’ll be flying out to like to Florida in the winter, so it’s not like it’s so bad. I think the other one’s California. But it’s just basically like a day, and they’ll be paid an hourly rate. And the good thing about those is it will be with other people on their speakers bureau. So the opportunity to interact — but those are really interesting because you learn more about their product. And so I mean, I just find it’s incredibly helpful and interesting, and I get to earn money. So it’s really awe — I mean, it’s really cool to get to do that kind of stuff.

Tim Church: Yeah, it sounds like you’re getting just a tremendous amount of opportunities, which is really cool. Would you say that now at the point of where you are that most of these opportunities are already being asked of you where you’re not having to reach out as much anymore to get them in motion?

Diana Isaacs: So yes and no. So yeah, like fortunately with the pharma stuff, that’s been really exciting. But I think it goes both ways because I was pretty interested in Zerus and definitely let them know that I was interested in being a consultant for them. I’m definitely getting asked more, but I’ll tell you, there’s still things I apply for. So I think it depends the caliber of what it is. I am, fortunately, getting asked a lot more. But there’s certain things that I — I’ll give you an example, OK? So this isn’t so like — this makes sense. So like ADA Standards of Care, I would like love more than anything to be on the committee that develops the standards of care, OK? So that’s something you have to apply for. So that is something that I hope to apply for and if I were to get selected for something like that, that would be like a career dream. So I think it goes both ways, maybe my dreams are even higher now than they were before. But yeah, I still, I’m open to new opportunities and still — will still apply for things.

Tim Church: So looking back, now that you’ve obviously been able to monetize, you’ve been able to bring in extra income, what are you doing with the additional income that you’re bringing in with your side hustle?

Diana Isaacs: That is also a great question. So honestly, I just live my — I don’t want to stress about money, and I think bringing in the extra money allows me to live a very comfortable life without stressing. I work very, very full-time between my regular job and all these extra consulting opportunities. My husband, fortunately, is able to work part-time, which is good because then someone is home more for the kids and I feel like we have more balance, and he’s able to take care of some more of the stuff at home. So I think for us, it’s just really about not having this stress, being able to buy what we want, and then whatever extra, college funds, all that good stuff.

Tim Church: Cool. So how much time do you think in most weeks you’re spending kind of on consulting and all these other activities that are outside of your scope of your full-time positon?

Diana Isaacs: Yeah, that’s hard to quantify. I will say every Saturday, I completely disconnect and I am not using the phone, I’m not working, I’m like really just with the family. So I always have that day. And even Sundays, I try to really make family day. And I’m fortunate that I have a position that’s Monday through Friday so that I have my weekends off. I try really hard to do my extra work in the evenings when my kids go to sleep and like evening-weekend — or weekend-evenings. I try not to take too much time away when my kids are awake. It’s definitely a balancing act. I feel like I make it work. I don’t know. Maybe it seems like I work a lot, but I try — somehow, it all works.

Tim Church: I was going to ask you, what other tips do you have? Because I mean, you’re doing so much, you have a family, I mean, I think a lot of people when they think about the thought of taking on something in addition to their full-time job, it almost seems like it’s impossible.

Diana Isaacs: So I guess it’s built up like over time, so it hasn’t felt like oh, it’s this massive thing all at once except when I have an article that’s due and I waited until the last second to do it, which isn’t great. But I don’t know, I just, I don’t do — like I don’t watch TV really. I don’t go to movies, I try to minimize distractions. I’d like to say I’m perfect about social media, but I definitely like to post things on Twitter and stuff. But I try to really minimize the outside distractions. And when I am home with my family to really focus on my kids and not be distracted. And that way, when they go to bed, like I can really devote my time, you know, like whatever, from 8:30-10 on whatever I want to work on. So I just — and I think I just love what I do. I just love it so much that for me, it’s like my hobby, right? Like if someone else likes to paint or likes to do whatever, they would make time for that. So for me, this is kind of like my hobby. I just really enjoy it. And so I just — like I make time for it.

Tim Church: And it sounds like too that it sounds like your husband is very supportive in you doing these extra activities and things like that. And obviously, you said it makes it a little bit easier that he’s part-time. But would you say that he’s played a big role for you to be successful with all these other ventures?

Diana Isaacs: Oh my gosh, yes. Yeah. I mean, he’s the only reason that I can do what I do. He’s like really good at managing the kids, going grocery shopping, like he’s really on top of it, but also I have cleaning help. Like that’s a must. I definitely, I have cleaning help, a lot of cleaning help. So that’s another thing I use my money for lots of cleaning help. But yeah, I mean, you have to have that support. And he knows that I love doing this stuff, so he is supportive as long as I’m not out of town too much. And that’s the part I have to balance because all these speaking gigs, trying to just make sure — I like to be home on the weekends when I can and stuff. But yeah, it’s a balancing act, but it’s fun.

Tim Church: Well, Diana, this has been a great time. And obviously, it’s just cool to hear your passion in your voice. I mean, obviously, this is an area where you’ve become an expert and be able to impact not only clinicians but patients just in your full-time job but with all the work that you do. So what tips or suggestions would you have for others who want to become an expert in a particular clinical area?

Diana Isaacs: So this is going to go against all that burnout, resiliency talk that you hear. But just say yes. Like this whole thing about saying no to avoid burnout, I just, I disagree with it. And I think in order to be an expert, to have new opportunities, you’ve got to say yes. You’ve got to open yourself up to that because you never know, like when you say no because you’re worried, oh, it might overwhelm you, what you’re going to miss out on. And the thing is when you say no a lot, that really closes doors and people don’t want to ask you again. So I just, I like really encourage people to say yes or at least really, really think about it before being so quick to say no. And then the other thing is just look for those opportunities. Don’t expect that people are going to hand you things. You do have to work hard. It doesn’t happen overnight, but that’s OK. And just look for new opportunities.

Tim Church: Diana, if somebody wants to learn more about you and what you’re doing, what’s the best way to reach out?

Diana Isaacs: Yeah, so you can email me, you can find me on Twitter, @DianaMIsaacs. Yeah, I’d be happy to chat with anyone who’s interested in talking. So yeah, feel free to shoot me an email. If we’re going to one of the same meetings, we can meet up there. So yeah, happy to connect with anyone who’s interested.

Tim Church: Diana, thank you so much for coming on the podcast, sharing your story and your tips and suggestions. It’s been a lot of fun.

Diana Isaacs: Oh, you’re very welcome. Thank you so much for having me.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 136: The Ins and Outs of a Pharmacist Home Loan

Posted on by yfpadmin


The Ins and Outs of a Pharmacist Home Loan

Tony Umholtz, a Mortgage Branch Manager for IBERIABANK/First Horizon, joins Tim Ulbrich on the show. They discuss the considerations for financing a home purchase, the biggest mistakes people make when applying for lending, and a variety of lending options available to pharmacists including the Professional Loan Program (aka Doctor’s Loan).

About Today’s Guest

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

Summary

Figuring out financing is critically important in the process of buying a home. However, the decision to buy a home and how much home has to start well before digging into financing options. If you’ve decided that purchasing a home will work for your situation after you know your budget and understand all of the costs involved, you’re ready to start looking into financing options.

On this week’s podcast episode, Tim Ulbrich interviews Tony Umholtz, a Mortgage Branch Manager for IBERIABANK/First Horizon, to learn the ins and outs of the Professional Loan Program (Pharmacist Home Loan), a doctor’s loan that pharmacists are able to qualify for.

Tony talks about where you can go to look for current rates, different types of lending options that are available and the biggest mistakes people make in purchasing a home. Tony also discusses the interest aspect of loans, including a deep dive into adjustable rates.

Tony is happy to offer a Professional Loan Program through IBERIABANK/First Horizon. Programs like the Professional Loan Program are sensitive to the high student loan burden pharmacists carry. With this pharmacist home mortgage loan program, pharmacists can buy a home with 3% down and not be charged PMI. Compared to others, this is a lower cost to enter into a home. There is the option to put more down and you don’t have to take the full approval amount. This loan program also typically offers debt to income ratio thresholds as a protection to the borrower. The majority of people in this loan program opt for a 30 year fixed mortgage. The Professional Loan Program is offered in 48 states and is unique because most of these doctor loan programs do not include pharmacists.

The downsides or considerations to the Professional Loan Program are that if there is a market correction the borrower could be in a position of negative equity. Tony mentions that borrowers also need to understand what kind of investment needs to be put into the property (new roof, water heater, etc).

To learn more about the Pharmacist Home Loan, connect with Tony here.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I hope everyone is having a great start to the new year and to 2020 as we turn the page onto a new decade. Today’s show is all about financing a home purchase. So in previous episodes of the podcast where we’ve discussed home buying — most notably, this would be episodes 040 and 041 where Nate Hedrick and I talked about 10 things every pharmacist should know about home buying, and then again in episodes 064 and 065, where Nate and I discussed six steps to home buying. In these previous episodes, I’ve emphasized that one of the most important decisions in the home buying process is figuring out the financing piece of the puzzle. Now, going through this process twice for my primary residence and now again with the start of refinancing my current home and working through the financing details with a couple investment properties, I can honestly say that this decision, although at times complicated, although at times it gets in the weeds and it can feel overwhelming considering all the options that are available, this decision of the financing is critically important. And so before we jump into our conversation with Tony about financing a home purchase, I’d be remiss if I didn’t emphasize, perhaps re-emphasize, that the decision to buy a home and how much home should start well before digging into the financing options. And this really starts with two key things: No. 1, knowing your budget and No. 2, knowing all the costs involved with home ownership to figure out whether or not you’re ready to purchase a home. Now, when it comes to knowing your budget, the question here is what can you afford? Not necessarily what the bank says, but what can you afford based on the rest of your financial goals and competing priorities? Because we know that there’s multiple costs involved with owning a home. We’ve talked about many of these in previous episodes of the Your Financial Pharmacist podcast, things like the down payment to purchase a home — and we’re going to talk about an option today that will help you there — things like closing costs, property taxes, insurance, interest, potentially HOA fees if you’re in an association, PMI if you don’t have 20% down and you’re pursuing a financing option that doesn’t eliminate PMI, and of course monthly utilities, upkeep, maintenance, and so-on. The costs of owning a home are real, and you have to know where do these costs fit in with the rest of your financial plan? And does this purchase make sense with the rest of your financial goals? So just a couple of quick notes before we jump in about evaluating mortgage rates and offers and first and foremost, where can you go to look for current mortgage rates? So many of you are probably trying to figure out if I’m ready to buy a home, what’s this going to cost me in terms of the mortgage and the interest, and if you head on over to FreddieMac.com/PMMS, again, FreddieMac.com/PMMS, you can find the most up-to-date rates that are out there. And that will help you as you’re evaluating different options and rates that are available from your local bank or perhaps some of the options that we’ll talk about here today. And as we talk about in many other areas, multiple quotes is always preferred. We talk about this with student loan refinance, we talk about this with professional liability insurance, life insurance, disability insurance. And here when we talk about purchasing a home, not necessarily just starting and stopping with your local bank or your parents’ bank perhaps but ensuring that you’re getting multiple quotes and you can find the best option and offer for your personal situation. So we fast-forward and let’s assume that you evaluated the decision to buy a home in the context of your goals, the budget, and the costs involved, and you determined that you’re ready to buy a home. Now we are ready to evaluate all the options that are available to you from a financing perspective. And one of the options that exists is a doctor or pharmacist home loan, which has some very unique features that can be attractive. And that’s why I’m excited to bring onto today’s show Tony Umholtz and the partnership that we have with Tony and IBERIABANK/First Horizon. Now, full disclosure, IBERIABANK/First Horizon is not the only lender that offers a doctor type of loan. And when I say doctor loan, these are generally those loans that are defined for higher income professionals that are lower risk to the bank and therefore, the lender requires a lower percent down, less than 20%, competitive rates, and they eliminate the PMI concerns. And we have explored several of these other doctor type of loan options, and what we have found is that the rate-limiting step of these products is the No. 1. They typically, many of them exclude pharmacists, and No. 2 is that they may not be offered widely enough across many states that it makes sense for us to bring this forward to the YFP community. So therefore, as we do with everything else, you know, we want to make sure that we’re bringing products and services to you that are as widely applicable as possible but also that we feel confident and comfortable in the partnership and product that we’re bringing forward as a consideration among others that you’ll evaluate. Also, we do have a relationship with IBERIABANK/First Horizon. And as with our other relationships, we want to be fully transparent with you about that relationship. We remain committed to bringing you solutions that we have vetted and have the chance to bring value to your personal financial plan. And yes, while we do get paid for several of these solutions, whether that be refinancing student loans, solutions for life and disability insurance, or here with a lending solution for home buying, we are committed to maintaining this approach of vetting solutions and ensuring they are of value to you, the YFP community. Alright, without further delay, let’s bring Tony in to talk more specifically about mortgage financing with the professional loan program that’s available through IBERIABANK/First Horizon. Tony, we’re excited to have you. Welcome to the Your Financial Pharmacist podcast.

Tony Umholtz: Thank you for having me, Tim. I really appreciate this.

Tim Ulbrich: So we’re really excited for our collaboration and to have you on the show to share your expertise in this area of mortgage financing as well as the collaboration to bring our audience forward an option that we, as I mentioned, haven’t been able to find as widely applicable knowing that we serve people all across the country. So Tony, before we jump into IBERIABANK/First Horizon’s professional mortgage loan program, give us a little bit of background on you personally and what led you into the role that you’re in with IBERIABANK/First Horizon.

Tony Umholtz: Oh, it’s a good question. You know, it’s funny. The mortgage business is an interesting one to get into. And I’ve been in the industry now for over 17 years. I started in the fall of 2002, and I was a finance major in college and also a football player. And I had a little bit of chance to play, bounce around with a few NFL teams post-my college career. And then always loved people and loved working with numbers. So I started working in the mortgage business, as I mentioned, a little over 17 years ago. And here I am today. I guess I look back, and time has flown. But I think we joke and we say, I think my team and I have done $1.4 billion in production probably over that timeframe. Over the years, we’ve really tailored our focus to helping many professionals, many different types of borrowers. But we’ve had a very dedicated audience in the medical professional field, so it’s been a big niche for us over the years.

Tim Ulbrich: Well, it’s been an opportunity to meet you and to get to know you a little bit more of your background. And as I’ve joked with Tim and Tim as I got to know a little bit about your background in football and obviously the mortgage business, as a diehard Buffalo Bills fan growing up in Buffalo, New York, when I saw that you played for the New England Patriots, you know, I think that’s the only knock that I have on you up until this point in time.

Tony Umholtz: Don’t hold it against me. And the Bills actually had a great year this year. So they’re coming back, Tim. They’re coming back.

Tim Ulbrich: They are coming back, although my wife reminds me I say that each and every year. So we’ll see if that will continue. So Tony, what are some of the biggest mistakes that you see people making when it comes to applying for lending and purchasing a home?

Tony Umholtz: You know, I think you really hit on it in your introduction there, Tim. It’s the planning aspect. This is the largest investment that most people make in their life. And it’s planning ahead and thinking through their budget. And I think that looking at where they’re going to be in their careers is another one too, you know? Planning ahead — and I typically recommend that if you’re going to be somewhere five years or more, it makes sense to buy. But if it’s only maybe one or two years, it may not make sense to buy. But I think just planning ahead because everyone’s needs are different.

Tim Ulbrich: Absolutely. And we see that a lot, you know, with our audience. We know we have a lot of pharmacists that are in transition potentially with residency training as one example or there’s some instability in the job market right now and they may be wondering, is this a temporary job? Am I going to pick up and move? So I think that timeline is such a critical piece. And obviously, you know, as we all know, the market can be so specific geographically. So the market here in Columbus versus D.C. versus New York City versus rural Iowa in terms of potential timelines of being there and breakeven and different lending products that are out there of course all influence that decision. Now Tony, in terms of lending options, before we talk about the professional mortgage loan option that is here applicable for pharmacists, walk us through, you know, even just at a high level — and I know we’ve talked about some of these in previous episodes — the different types of loans that are out there: conventional loans, VA loans, FHA loans and obviously here we’re talking about the professional mortgage loan. What are some of the nuances and differences between those loans?
Tony Umholtz: Yeah. So there’s really three main core products that are out there that are traded. I don’t want to get too much into industry jargon in this, but they’re basically supported by the secondary market. And that is going to be conventional loans, which are backed by Fannie Mae and Freddie Mac, the government-sponsored entities or GSEs. And then you have what’s called FHA and VA loans, which are backed by the federal government, and those are typically the core majority of loans are either going to be conventional or a government-backed program. Then there’s also what’s called jumbo mortgages, which are above the threshold, like the local limits for Fannie Mae and Freddie Mac and vary by state. But those loans are going to be above the conventional limits and are called jumbo loans. And oftentimes, those programs are held on a financial institution’s balance sheet. So they’re basically held by the bank or that institution. So that’s another type of product in the mortgage market. And then there are unique products that fall under that umbrella like the professional product, for example, or some other programs that focus on — whether it’s doctors or attorneys — oftentimes, they’re held by an institution directly on the balance sheet.

Tim Ulbrich: So those, again, the different types of loans, you outlined conventional, VA, FHA, the jumbo loans, and then the professional loans. And we’ll talk more about that last category here in a few minutes. When it comes to interest on the lending side, you know, often you see commercials or you hear terms thrown around, fixed rates, variable rates, adjustable rate mortgages, ARMs or ARM-hybrid types of loans. Talk us through just for a moment, you know, basic terminology. Fixed versus variable, adjustable rate mortgage, types of definitions.

Tony Umholtz: Sure. So obviously the fixed rates are going to be permanently locked for the term of the loan. So for example, a 30-year fixed, which is very common, has got a fixed rate that amortizes, meaning it pays itself off, incrementally over 30 years. Then you have a 15-year fixed, which is going to pay itself off over a 15-year period, so that’s going to have a 15-year amortization. So those are the most common fixed rates. Adjustable rate loans, there’s a couple different kinds. They’re what I call hybrid adjustable. And what I mean by that is when you hear the term a 5-year ARM or a 7-year ARM or a 10-year ARM, they simply mean that the rate is fixed for a 5-, 7-, or 10-year period. So they still, in most cases, are 30-year loans that are going to amortize themselves over a 30-year period. But they’re going to have a fixed rate for only that set period of time, whether it’s 5, 7, or 10 years, that is going to be the fixed rate period. And the advantage to those programs is sometimes, they actually have better rates than maybe a fixed rate program would. But they still are a 30-year loan. And then after that fixed rate period, they adjust based upon the terms of that agreement and that loan, whether it’s annually or twice a year for the rest of the life of the loan.

Tim Ulbrich: And so in that example, Tony, one of the common concerns I would have or others would likely have is I might get better rate up front, but then obviously once that adjustable rate period kicks in, what are the variables that one should be considering? You know, things to me that would come to mind would be like, what margin would you have in your budget if your monthly payment would go up? What might interest rates be in the future? So talk to us about some of the unknowns that can happen in the adjustable rate market and that type of product and how one might plan for that if they are considering a product that would adjust because of a lower rate and potential savings there.

Tony Umholtz: Yeah, absolutely, Tim. I mean, it’s definitely a program you want to plan through and think through because if you know you’re going to have a loan for at least seven years, let’s say. So a 7-year ARM or a 10-year ARM would be applicable in that case. We wouldn’t want to do a five because that could open up a little bit more risk in most cases. But rates do move up. They move down. Right? It’s hard to forecast. And typically, most ARMs are going to tell you several months in advance of the adjustment date what you’re going to adjust to. And how ARMs is they typically have an underlying index. And that could be something backed by the treasury market, it could be LIBOR index, it could be some other index that is basically a floating index where that rate is adjustable. And then the financial institution will have some sort of margin above that index. And that’s how you calculate your rate. So ARMs can actually sometimes be good, especially in a higher interest rate environment, because if rates go down, your rate will go down. But there is an element of risk because it can adjust upward. The other thing I’d recommend is to know your caps. And what that means is the absolute highest the rate could go to. And often, most ARM products or a lot of ARM products that are out there in the marketplace have both a yearly cap that the rate can move to and a lifetime cap, meaning the highest the loan could ever go. So in your scenario with planning this and looking at an ARM, one of the best calculations would be just saying, hey, what’s the max this rate could ever go to? And run your budget and your payments off that max rate. And if it’s affordable, then the ARM may be a good fit for that person.

Tim Ulbrich: And that’s a great way of thinking about it, Tony. I know we talk about something similar on the student loan refinance side of things where, you know, again, borrowers will get presented variable rate options, fixed options, and the conversation I’m always having is recommending folks run the numbers, obviously, on the introductory variable rate. Where do those numbers lie compared to the fixed rate options they’re giving you? What are those savings? And then run the worst case scenario, obviously, on a cap type of situation, and how do you feel about that? What do the numbers look like? How does that fit or not fit your budget? What are the potential savings? Are they convincing enough? And all those variables can help you make some of those decisions. And speaking of student loans, student loans are one of the biggest barriers, we know our audience knows well. Many of them are living this pain in real time. We have the average indebtedness now of today’s graduate coming out of more than $170,000. So student loans are such typically a big barrier for pharmacists being able to purchase a home. I know that was true for my wife Jess and I. And for conventional loans, most type of conventional loans, student loan debt can obviously have a significant impact on their debt-to-income ratio and their ability to borrow. But the other big concern that we see, which takes us I think to discussing more of the professional mortgage product, is that big student loan debt balances plus lots of competing financial priorities typically may prohibit somebody from being able to save up a significant percentage down while they also have aspirations to purchase a home. Now, we always have talked about ideal situation, 20% down, you don’t have to pay Private Mortgage Insurance, you’ve got some built-in equity into a home, and I think for those that are able to go that path, that still is a great solution opportunity. But we know that reality is many people are not putting 20% down. And they may not be in a position to get there in a timeline that is reasonable for their own personal situation. So this is a nice segway into the professional mortgage option that’s available and specifically talking about the option that we have available in our partnership with you and with IBERIABANK/First Horizon. So talk us a little bit more about the product, you know, how the down payment differs from a conventional, 20% down type of model and then obviously the next evolution of questions that would happen in terms of the terms, how Private Mortgage Insurance works, maximum loan amounts, those types of things with a product like this that would be available to pharmacists.

Tony Umholtz: Sure, Tim. And you hit on it absolutely accurate. I mean, student loans are very much a challenge for pharmacists, for many professionals. We see it all the time. And we see the cost of higher education continuing to rise. So I think that that’s going to be something we’ll be dealing with for a long time. But at the same time, programs like the professional product are sensitive to that. So you can, in many cases, be a first-time home buyer especially, as little as 3% down, you can buy a home without PMI and have the ability to get into a property at a lower cost than most people can, right, because of your profession. And there’s options to put more down. That’s not mandatory to put 3%. But that would be the minimum down payment in that situation. So and typically, there is debt-to-income ratio thresholds that we go to because we want to protect everyone, right? And the other thing I want to hit on too is just because we can approve you for a certain amount doesn’t necessarily mean that’s what you should do. Everyone is unique, and everyone’s budget is different. So you can definitely buy below your means and below what you’re approved for. But at the same time, we do calculate debt-to-income ratios, we do keep some accountability there where there’s a threshold of where everyone can qualify, you know, that it’s a standard percentage that we look at.

Tim Ulbrich: And such a great reminder, Tony, as we mentioned earlier in the show, just the individual setting the budget, not the bank, and really separating those two things out, the threshold the bank is using to evaluate your risk to the bank and the institution and what you’re able to purchase should be, most likely, a very different comparison and evaluation for the individual determining what they’re able to afford and how it fits in the context of all their financial goals. One of the best examples I like to use is when Jess and I moved down here to Columbus and we kind of had set our budget and we’re looking at homes and it was really the peak of the market here in Columbus. And so that was pushing a little bit of the boundary of our budget, what we were comfortable with. And then we went to the bank, and they basically said, “Double that, and that’s what you can have.” And it just made us obviously uncomfortable to go anywhere near that amount and we were able to hold true to the budget and the original numbers that we set. But if you don’t first establish that, I think it’s easy to get into a trap where you then start looking based on the numbers the bank provided you. And all of a sudden, you may be looking at homes that are going to take you out of reach of your other goals. And the bank isn’t necessarily thinking about all the other financial goals and what disposable income do you want to have available to achieve your other goals? So I think that’s such a critical piece. So Tony, obviously we can’t and shouldn’t talk about rates on a show like this. We know they can change and this wouldn’t be timely let alone there’s individual situations, credit scores, debt-to-income ratios, other things that will determine rates. So rates aside, can you talk to us a little bit more about beyond the 3% down as a minimum, obviously people can put more down than that, no Private Mortgage Insurance, are we looking at 15-year, 20-year term, 30-year term? Are these variable? Are they term rates? What’s some more details on those types of options that are available in the professional mortgage loan?

Tony Umholtz: You know, Tim, we find the majority of our clients opt for the 30-year fixed option. And that seems to be — especially given the market that we’re in right now, we’ve seen the federal reserve really compress interest rates again. And then we saw interest rates fall last year in 2019, so it’s made fixed rates very attractive. So a majority of our clients in this space have been opting for a 30-year fixed option. So that’s the majority of what we’re seeing. There are some other options available, but to answer your question, the majority of our clients just given the safety of it and just the fact that the federal reserve is really in the mortgage bond market has compressed and elongated the curve and caused fixed rates to be very attractive. So that’s where we’ve seen most people go, but there are some other options as well, ARM, ARM options as well. But the fixed has been where most people go.

Tim Ulbrich: And Tony, looking at this program, I alluded earlier in the show about there’s several other doctor loan type of programs out there. Many of them exclude pharmacists. And I mentioned geographically as well being a limitation. So for us and why we were so interested in bringing this opportunity for our community is I understand that not only are pharmacists eligible for this, but you also have coverage to 48 states in the United States, which obviously increases the accessibility. So talk to us a little bit more about the advantages of this program versus other doctor type of loans that are out there in terms of the applicability to the pharmacy population and our community here at Your Financial Pharmacist.

Tony Umholtz: Sure. And we have several different programs here for professionals. But some will only cater to MDs and DOs and veterinarians. But this particular product encompasses pharmacists, which is very unique. I haven’t — that is something that a lot of the industry has not really targeted that profession, our profession here. And the advantages — and the geography is great. I mean, that is one thing that I’m very excited about, the ability to help a lot of different people in different areas of the country. But again, the unique nature is many of the banks in our industry have only focused on MD and DO physicians, right? And that’s been the majority of the institutions that have a doctor product. And we have one too, and it has a little bit higher thresholds on loan amounts. But I’ve been very excited about this program. It’s been very well received by our clients.

Tim Ulbrich: And obviously I would be remiss if we didn’t make our audience hopefully think about, as we’ve already done a little bit here already, what might be some of the downsides or considerations? And we’ve talked about one, but I want to even get there a little bit further in that, you know, obviously making sure that somebody is setting a budget and they’re determining what value of a home fits in with the rest of their financial goals. Other potential downside I see is if somebody perhaps is not ready to buy a home and they’re able to get into a home with only 3% down, lower equity position in terms of the market changes and home values go down depending on their individual market, they obviously could be in some difficulty there. Are there any other downsides that you see as we think about the education side of this and where this product may fit well and for individuals that it may not necessarily be a good fit?

Tony Umholtz: Well, I think that in everyone’s planning, the nice thing about these loans is they’re amortized. So they’re paying principal and interest in the payment. So over time, even if your house value did not go up at all, you’re slowly building equity just through making your payments. And there is no prepayment penalty to pay the initial principal if you’d like to. But clearly, the downside is if there is a market crash and you put very, very little down and you have to move for one reason or another or relocate to another part of the country, you could be in a position where you have negative equity, you know? And I mean, obviously case show and there’s different positive forecasts for the nation, but every market is different in this country, right? And I think that that would be – the biggest risk is just what happens to the individual? And the other side of it is what kind of investment do you have to put in the property? Does it need a new roof, right? Does the air conditioner need to be repaired. These are things that are costs that you as a homeowner have to take on that if you’re a renter, your landlord does. But in your case, you’d have to take on those costs. So that’s just part of owning a home. And so just cost of ownership, maintenance, those to me would be the things you’d have to plan for. But clearly, it’s the low down payment versus having to move quickly that can be the most impactful downside of the program.

Tim Ulbrich: So I would remind our listeners too — and credit here to Tim Church who built out some great content and information, Five Steps to Getting a Home Loan — if you go to YourFinancialPharmacist.com/home-loan, again YourFinancialPharmacist.com/home-loan, you can go there to compare multiple lenders. You’ll also see there an option that says, “Apply for Pharmacist Home Loan.” And if you click on that, it will take you to a page that has Tony’s information, including his email address and I see here some beautiful palm trees. He’s based out of Florida while we’re freezing here in the blistering cold of winter in Ohio. But one of the things that most excited me about this opportunity, in addition to finding a product that was competitive, that was available to pharmacists as well, and that also covered a wider range of states, was the idea that we have an individual in Tony to work with, to connect with, and for those that are going through the process that they can work with an individual and build that relationship. So Tony, we appreciate you taking the time to come on the show. We’re looking forward to this collaboration and this partnership. And what would be the best way for our listeners to get in contact with you if they have more questions about this interview, about the product, or they would like to learn more?

Tony Umholtz: Well, Tim, first of all, thank you for having me. I’m very excited to be a part of this with you guys. And you guys are doing some great things here for your audience. And I’ve got obviously my contact information is accessible on the website. But one of the biggest joys I have in this industry is helping others. I’ve always been kind of a pay-it-forward person. But I do have a staff, a team, and several of my team members have been with me as long as 14 years. So I have three assistants and myself, and we’re all very, very much industry veterans and can answer questions. So email, call to the office, our office line is the best way to reach us. But we’re very accessible and excited to help. And thank you again, Tim, for having me here, for having me on.

Tim Ulbrich: Absolutely. And for our listeners that want to get directly to that email, it’s [email protected]. So again, [email protected]. So as one final reminder, if you’d like to learn more about the steps, considerations to getting a home loan, make sure to check the post on the YFP website, Five Steps to Getting a Home Loan, by visiting YourFinancialPharmacist.com/home-loan. And as always, if you like what you heard on this week’s of the Your Financial Pharmacist podcast and our episode this week, please leave us a rating and review in Apple Podcasts or wherever you listen to your podcasts each and every week. We appreciate you for joining us on this week’s episode, and we hope you will join us again on next week’s show. Have a great rest of your week.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 135: How Jessica Applied KonMari Principles to Jumpstart Her Financial Plan

Posted on by yfpadmin


How Jessica Applied KonMari Principles to Jumpstart Her Financial Plan

Dr. Jessica Louie joins Tim Ulbrich on this week’s episode. Dr. Louie is a Certified KonMari Consultant and Coach, creator of Clarify Simplify Align, host of The Burnout Doctor Podcast, Board-Certified Critical Care Pharmacist and Associate Professor of Pharmacy Practice at West Coast University College of Pharmacy. She shares about her journey being trained as a critical care pharmacist, how she quickly found herself burned out, how the KonMari method helped her and how she applied the KonMari method to her financial plan. These small intentional daily steps led to big changes in her financial plan including being completely debt free and having over 6 figures in savings.

About Today’s Guest

Hello there! I’m Dr. Jessica Louie, the founder of Clarify Simplify Align & The Burnout Doctor Podcast where I help BURNED out pharmacists get out of overwhelm and live with LESS clutter and MORE energy. As a former shopaholic, workaholic and pharmacist struggling with burnout, I know how it feels to live a life in overwhelm without clear goals or a clear purpose. Fortunately, I was saved by decluttering and simplifying my life and now my simple framework – Clarify. Simplify. Align Method – helps YOU go from cluttered & stressed to leading with confidence & curating a life YOU love! Are you ready to get started?

Summary

Dr. Jessica Louie shares how she became burned out as a pharmacy resident, how the KonMari method helped her recover from that burnout and how she applied the KonMari principles to her financial plan. Jessica realized that she was burned out in 2014. She thought that she was going to enjoy life after all of her pharmacy training but ended up not being fulfilled as she got closer to the finish line. She turned to shopping as a coping mechanism and wasn’t living intentionally. Her aunt suddenly died and she had a wake up call that life is short.

Jessica discovered the KonMari method which saved her from the burn out. She started looking at her life and seeing what things in her life that she spent her time and energy on sparked joy. Jessica shares that the KonMari method can be applied to not only your home but also your life.

Jessica went to a private school that cost $500,000. After grants, work study and an internship, she had to pay $300,000 out of pocket. When she finished her PGY2, she had $35,000-$40,000 in debt. Jessica was looking for another Japanese philosophy that she could use to take control of her finances and discovered the Kakeibo method which translates to “household ledger”. With this method, you track your spending with a pen and paper and break up your expenses into four categories: survival, optional, cultural and extra. Jessica reflects on her purchases each day to see where her money is going.

With this tracking system, Jessica was able to become very intentional with her spending, delay gratification by not purchasing items on a whim, and really put quality purchases and experiences in front of the quantity of them.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. It’s a pleasure to welcome back onto the show Dr. Jessica Louie. Dr. Louie came on in Episode 086 to talk about how to spark joy as an entrepreneur. And on today’s show, we talk more about her applications of the KonMari method and principles on her financial plan and the transformation that that has had. Jessica, welcome back to the show.

Jessica Louie: Thank you, Tim, for having me on the podcast.

Tim Ulbrich: Very excited. It’s been fun to track so much of what you have been doing in your own journey since Episode 086, so I look forward to bringing our audience up to speed as well as talking about some of the wins that you’ve had and how you’ve been able to tackle your own financial plan. So while I know that some of our audience is already familiar with your background from listening to Episode 086 or potentially following your podcast and the work that you’ve been doing, I certainly don’t want to make that assumption for all, considering that your background is such an important part of this story that led to the transformation that we’ll talk about in detail today on the show. So you do hold, as I mentioned in the introduction, you hold several roles, both as an entrepreneur and as a healthcare professional in the academic setting as well. So let’s start in the pharmacy space. What’s your current position at the university? And can you share about how you got into that work?

Jessica Louie: Yes, of course. So I currently am an associate professor of pharmacy practice at West Coast University School of Pharmacy in Los Angeles. And I’m a 2013 graduate from University of Southern California. And I then went on to pursue a PGY1 in pharmacy practice and then a PGY2 in critical care at University of Utah. And after I finished my residencies, I joined as an assistant professor at West Coast in 2015.

Tim Ulbrich: Awesome. So you know, as I think about, Jessica — and I know you and I have talked about this before offline, obviously you went to pharmacy school, we all know the work that needs to be done before you even get to pharmacy school. You then go through extensive residency training. And as you’ve talked about before, it took you nine years to get through the training and become a board-certified critical care pharmacist, which our listeners know it takes a lot of time, a lot of effort. But I think many people think, wow, you’ve got everything that you needed and you’ve wanted. You’ve got obviously the PharmD, you’ve got residency training, you’ve become board-certified, you finally have made it to the finish line, it’s time to enjoy life. But that really wasn’t what happened when you got to that point. You found yourself burned out. So talk to us more about how you got to that realization of getting to that point of getting burned out.

Jessica Louie: Yes, that’s a great observation, Tim. I think that a lot of us feel that when we get to the end of our training and we get all the certifications, you know, life is going to be great. We’re going to be happy and fulfilled by it. And I definitely felt that that was the path I was on. I was going to enjoy my life. So back in 2014-2015 when I was finishing up everything, I realized that getting to the finish line was not fulfilling. I was so burned out from residency, my first year in academia, and to cope with all of that, I was turning to other things. And one of the things I was turning towards was shopping to try to fill these feelings of frustration and unfulfillment. So you know, I’ve talked a little bit about my journey before, but basically, I wasn’t living intentionally, I wasn’t bringing joy into my life. So when a life event happened, it really woke me up to show me how I was living and how life can be so short. So I invested a lot of time, a lot of money, into changing my situation. And you know, that’s how it’s led into my business. And I can go into a little bit more details if you’d like.

Tim Ulbrich: Yeah, and we will — just real quick, we will link in our show notes to The Burnout Doctor podcast. I know you’ve documented more of your journey there, and I think our listeners, many of whom may be struggling with similar challenges, would get lots of value from not only hearing more about your story but also the great content and work that you’ve done with that podcast. So you mentioned some of the behaviors, you know, you mentioned the shopping piece that was really kind of a coping mechanism and that. How did you self-realize that, you know, something’s got to change? And then ultimately, talk to us about the KonMari method, what that is for our listeners that may not know and how that played such a big role in helping you get out of that cycle.

Jessica Louie: Yes. So I think that what really woke me up was the combination of a few things: realizing that I was still keeping residency hours during my first career. And you know, 60-80 hours a week wasn’t necessarily sustainable in the long term. And you know, one of the things that played into that was my partner and boyfriend was also in residency in medicine, so he was keeping long hours. So I realized, you know, maybe this isn’t normal in a full-time job situation. And I was putting work first all the time and still was not enjoying friends and family. And then when my aunt passed away suddenly from a very aggressive cancer, that’s really what woke me up and realized that wow, I really hadn’t been traveling and spending a lot of time with family that I really wanted to. So the KonMari method is what I consider saving me from a lot of my burnout. You know, it is a decluttering and simplifying technique, popularized in Japan by Marie Kondo. So it really is about how you spark joy in life and what you focus your time and energy on so that it is about decluttering a physical space first because that’s what is closest to you, that’s what has the largest impact on most people and can create a lot of distraction and overwhelm in your life. So you apply it to your home first, and then you’re able to apply the same techniques to other areas of your life. But you know, what made it a little bit more popular I would say is the technique creates this life-changing transformation because people don’t rebound when they go through the technique from beginning to end. So you’re not consistently organizing or hiring professional organizers multiple times in your life. You’re doing it once, however long it takes, one month, six months, a year, and then it really changes your habits of how you view physical items and that leads into how you spend your money and things like that.

Tim Ulbrich: So before we get into the weeds about the application of those principles to the financial plan — because I think that’s a really neat connection that those that are even familiar with the KonMari method may not see that. I know many people are aware of this through the Netflix series and others that came out. And I think people think about it — many people I think think about it more as just an organization, simplifying of your stuff at home, which obviously has impacts on your finances. But I think we’re going to talk in more details about how that can result in tracking spending and reflecting on spending. But for those that may not be as familiar, I want them to be able to visualize this, even about the physical space, before we talk about the financial aspects of it and how you apply to that. So if you’re working with somebody, and you’re going into the home and the goal is to simplify, walk us through like what does that process look like? And what are the common things that you see that are barriers that people may not even see themselves, right?

Jessica Louie: That’s a great question, Tim. So when I’m working with clients in their homes, the first step that I think a lot of people miss in the KonMari method is we don’t just start pulling things out and decluttering right away. We really take this intentional moment and my clients usually work on this as a pre-work in our workbooks to really set up the ideal vision for your life. So that’s what I call the Clarify step in my method. And you’re clarifying your why, your purpose, your values and really visualizing how you want your space to feel when you’re standing in it. So it’s not only about what it visually looks like because, you know, honestly, I don’t live in a Pinterest-worthy home or anything. And most of us don’t. So it’s more about what it feels to you when you’re standing there. And many people want that feeling to be calm, peaceful type of sanctuary in their home settings. So we’re really diving deep into that and getting into why you really want to get this done. You know, if you get stuck during the process, what’s going to help propel you forward? So we get that very well written down and on paper so it’s a good goal and very clear. And I think that you and Tim Church have talked about this as well with how you clarify in the financial process. So it’s very similar.

Tim Ulbrich: Ah, the ever-talked about why, right? We talk about that a lot on this show, as you mentioned, and I think it’s so important to the financial plan but also important here in what you’re talking about, certainly connections. And I know for you, speaking of the why, “Start With Why,” Simon Sinek’s book, which is such a great read, we’ll link to that in the show notes, was so critical for you in your own journey. So talk to us for a moment about that concept, the concept of start with why and why that’s so important as folks are thinking about this and how they may apply it to their own personal situation.
Jessica Louie: Yes. So Simon Sinek’s books are definitely transformative for me. It was actually my brother-in-law, who is a former pharmacist, who recommended them to me. It took about nine months for me to actually read them when he saw that I really needed that process. So Simon Sinek’s “Start with Why” process, he has three or four books now. And it’s really about we live life, and a lot of times, we live it on autopilot and we don’t realize a lot of things in our lives connect to one another and really sitting down and writing out how our life experiences have shaped us and getting clear on why we get up in the morning, that’s really what it comes down to. And we don’t get up in the morning for a tangible things like money and family members, we get up for a larger purpose that we won’t necessarily achieve in life but we have in the forefront of our mind when we’re making decisions. And that kind of plays into our value system and how we do things the way we do them. So I actually went and trained with Simon Sinek’s team in New York back a few years ago. So it was really helpful to get those down on paper so that what you do is not what you’re defined by. It’s why you do things and how you make decisions then. So I definitely recommend the process. It’s a great read. Also an audiobook as well. It’s really helped me in how I view life and then how I view leadership as well.

Tim Ulbrich: Absolutely. So good. And I know he’s got some really cool resources, obviously the book but also some workbooks and things that you can do that help you to articulate and go through the activities that will help you define your why. So important to everything we talk about on this show. So before we talk about the method and the steps of how you paid off your loans and have put yourself in the financial position that you’re in that I think our listeners will be able to apply as well to their own personal situation, let’s start with the position you were in. So talk to us about the debt that you accumulated through school and what was the amount that you were working with before we actually get into the how you paid that off.

Jessica Louie: Yes, definitely. So I will say that my dad was really influential in this. My dad is Chinese, and he actually kept all these Excel spreadsheets. So I actually have pretty exact numbers. So looking at it, so I went to a nonprofit private, so USC is private. And I was there for seven years for my bachelor’s degree and pharmacy school. So the school cost about $500,000. And I received $115,000 in school grants, so that’s money you don’t need to pay back. I took out $50,000 in student loans — so that was about $14,000 for undergrad. I spent three years getting my bachelor’s degree for that; I shortened it by a year intentionally — and $36,000 for pharmacy school. And then I rounded it off with about $40,000 in work-study and my intern pharmacist position at the hospital at USC. So out-of-pocket costs were just under $300,000 for my schooling.

Tim Ulbrich: Wow. Wow. So obviously big price sticker tag for what’s known as a great school, of course. And obviously, you mentioned having some grants, which is money you don’t have to pay back. You mentioned having some work-study components but still a huge out-of-pocket component. So when you found yourself — let’s fast forward and roughly, if you don’t have the exact numbers, but it sounds like maybe you do. You know, you’re at the point of graduation, you start one year of residency, two years of residency. Obviously, we’re talking big numbers, limited income during residency. So take us to the point where you finish your PGY2. Where were you at there at that point in terms of debt that you were working through and trying to pay off? And what was the mountain that you were after at that point?

Jessica Louie: So during residency, I was paying on my student loans. I wasn’t paying a large sum, I would say, but I still was paying probably about $300-500 a month, I would say.

Tim Ulbrich: OK.

Jessica Louie: And I came out, I want to say around $35,000-40,000 left. And after my PGY2 — so I started working in July of that year at the university. And it took me seven months to pay off the rest of the loan. So I want to say it was around $35,000 when I came out of residency.

Tim Ulbrich: OK. So even though — and I think it’s important for our listeners to hear that. You know, we obviously talk a lot about the national debt loads right now, Class of 2019, the average was about $172,000. So here we’re talking about a lower payoff amount but a very aggressive window in which you were able to do that. And obviously, we’ll talk about the method that you were able to do that. Short period of time, aggressive repayment, but there was also things that I don’t want our listeners to lose that you were able to do through working, through work-study, through pursuing grants that helped to minimize that while you were in school as well. So let’s talk about the method that you were able to use to help ultimately pay this off in an aggressive period of time based on the KonMari principles, the Kakebo method. Talk to us about what exactly is that? How is it used? And then we’ll dive in further of exactly how people may apply that month in and month out to their own plan.

Jessica Louie: Yes, of course. So you know the KonMari method is a Japanese philosophy, so I actually was also looking for all their philosophies, and I came across the Kakebo method. And you know, translated, it basically stands for “household ledger.” And it is a really simple philosophy and concept, in my opinion where you’re able to track your finances on this ledger. So you basically use pen and paper, going back old school, to track everything. And each month, you come up with a plan of what are your fixed expenses and you’re going to track everything that you spend money on. So I consider this a daily practice as part of my evening routines. And then you have a savings goal as well. And then at the end of the month, you look at how you did. And I also do a weekly practice to check in and then the end of month practice. So when you’re tracking, it’s not the typical tracking, I would say. It’s broken into four different pillars. So the pillars are Survival, Optional, Cultural, and Extra.

Tim Ulbrich: So you’re categorizing as you’re — let’s say you’re making charges on a credit card, those charges are coming in, you’re manually tracking those. And then you’re assigning those to one of the four categories. Is that accurate?

Jessica Louie: Yes.

Tim Ulbrich: OK. So break those down. Let’s go through those one-by-one. Survival, Optional, Cultural, Extra. So give me some examples — probably this one more self-explanatory than the others — but Survival items would include things like that?

Jessica Louie: So those would be things that you need to survive, so a lot of your fixed expenses, so your housing cost, if you have transportation costs, general food costs like groceries, and like health insurance, things like that. So things that are more difficult to change but things that are probably a large portion of your overall expenses.

Tim Ulbrich: So we often, as we’ve talked about budgeting before on the show, we would categorize these as necessary or essential expenses. So same idea. And I like to think, you know, making the connection here to something like an Emergency Fund, this is usually the number that I’m using when I think about 3-6 months of what I’m basing that off of. So that’s the survival category. What would you then put in the Optional category that I think we often refer to as the discretionary expense?

Jessica Louie: Yes, so these would be things that aren’t necessarily survival mode. So instead of groceries, this would be eating out, fast food, and those luxury type of expenses, so clothing that’s not necessary, skincare, nail salon, things like that.

Tim Ulbrich: OK. And what intrigued me is we — I see here that again, we have four buckets: Survival, Optional, Cultural, Extra. And when we tend to think of discretionary expenses, I see some crossover between the Optional and the Cultural bucket. So break down for us what would be some examples of things that would be in the cultural bucket. But why also is that important to separate that out from those things that are considered Optional?

Jessica Louie: Yes. So I think that the Cultural really plays into the Japanese philosophy of how we invest in ourselves, personal and professional development. So this is getting back into thinking about going to the theater and things like movies, music, that we consider more cultural nowadays. So it’s really about putting those experiences and memories into play. So the KonMari method really emphasizes creating memories and experiences in your life over investing in stuff. So this method also goes into that with how you view things that give back to your community or just have great memories that you don’t necessarily need to travel to.

Tim Ulbrich: I love that. I’ve never seen that separated out before, Jessica. But I love that because I think it does exactly what you just said is it forces you to be a little bit more intentional about prioritizing those things whereas I think especially if you’re in a mode of either trying to cut, cut, cut to pay off debt or you’re just a really aggressive saver and you have a hard time spending money on experiences and things like music and theater and books, things that would fall into that category, I like that there’s a manual process to keep yourself accountable to that and calling it out as a separate category. So that’s the cultural bucket. What would fall, then, into the Extra category?

Jessica Louie: So the Extra category would be kind of a sinking emergency fund. So these would be things that like unexpected car repairs, unexpected health things that come up that, you know — it can also be holiday gifts or gifts throughout the year that are just extra that aren’t always monthly expenses.

Tim Ulbrich: So car repairs, maintenance, gifts, holiday types of things. So are you saving for these in advance like in a sinking fund mode where you say, OK, I’m going to — I don’t know — put away $200 a month and then as these expenses come I already have the money saved? Or are you simply just tracking these expenses as the Extra category when they come to be?

Jessica Louie: So in the Kakebo, it’s really just about tracking. But you definitely can create those funds for you in different buckets.

Tim Ulbrich: OK. So each day, you’re tracking your spending, which I think what I love — and I hope our listeners are catching the intentionality here. When you’re doing this daily and you’re thinking about this daily, you’re manually tracking this daily, you’re doing it old school pen and paper, you know, I think there’s power — obviously there’s effort and work — but there’s power, as you and I talked about before we hit record today, in really making that emotional connection back to your financials. I think with the advancement obviously in credit cards and great apps and tools — and I’m not suggesting people shouldn’t use those if that works as a system, I know it does for my wife and I — but sometimes that manual process is really what allows you to take a step back and reflect on and have probably some of those Aha! moments of wow, I had no idea I was spending this much here or there. And I know my wife Jess and I often have conversations where it’s like, oh my gosh, we forgot we spent this charge four days ago and how quickly that can happen, and obviously the tracking helps bring that back into play, back into perspective. So each day, you’re tracking your spending, you’re categorizing them into these four different categories, Survival, Optional, Cultural, Extra. And then at the end of the day and the week, you’re reviewing them, end of the month, you’re asking questions such as how much do I have right now? How much am I spending? How much do I want to have? How can I change my habits? So give our listeners some reflection, some example. What are some of the things that you’ve identified or you and your boyfriend have identified as you’ve gone through this that might some of those Aha! moments that you wouldn’t have otherwise identified if you aren’t using a method like this.

Jessica Louie: So I think that just seeing it on paper can be really impactful because, you know, I do use credit cards and I rarely use cash. So it is being able to see that without just scrolling through an app on your phone or your desktop. So in terms of some Ahas!, I think that really seeing how much some of those luxury type of things cost, you know, I used to have my nails done at salons, I have since don’t do that almost at all and I learned how to do that at home if I really wanted to. And just seeing restaurants — so one of the things that we’ve talked about, my boyfriend and I, is when we go to restaurants, we love to have like a main meal together because we don’t cook very complex meals at home. We’re very simple at home, so we enjoy that at a restaurant, but we don’t indulge in extra things we can have at home. So beverages besides water, we don’t usually order. And we don’t usually order dessert or appetizers. So those are all things that we can just have at home if we really want to, make our own cocktails at home, have some desserts at home and not spend that extra money when we’re going out for an optional type of item.

Tim Ulbrich: OK. And I’m guessing there’s already tracking sheets and things that exist to help people do this. Or is that something that you developed to do this categorization?

Jessica Louie: Yes, so you can pull a journal out. I do have a template that walks you through this and reminds you. You can write down what you want in each of the four categories. So that’s all on my website, free to download in a short workbook. And it has the template in there.

Tim Ulbrich: Awesome. We’ll link to that in the show notes. And I’m curious to hear more, Jessica, from you on the reflection piece. I think we talk a lot about reflection, we know it’s important, you hear people say how valuable it is, but it’s often hard to put a finger on what does that look like? So talk to us, what does that look like for you? As you’re doing this reflection piece, like what are some of the things you’re reflecting upon? And how detailed is that method? Is there any guidance there? Or are you just looking and kind of making some observations and notes along the way?

Jessica Louie: So in terms of reflection, you know, it’s obviously adding up some of the categories and then putting numbers, real numbers down of what are you able to put into savings this month? What are you able to put towards your loans or other sinking funds that you have going? I also track other benefits like retirement benefits when I’m going through my monthly check-in process. But really for the reflection journaling process, I think that it’s important to think about the method really emphasizes being able to invest in quality items instead of the quantity of items. So it really helps you with that delayed gratification step of we’re saving towards something that is going to be a quality trip and experience for us or quality item that’s going to last years in our home or some other place in our lives. So you’re able to take a step back and say, “Oh, I really want that now. But we’re waiting and we’re going to have this anticipation up to getting that trip or thing in your life.”

Tim Ulbrich: Absolutely.

Jessica Louie: So one of the things that we’ve done is that relates to our cars. We’ve been able to — even though we would like to both have new cars, we’ve still delayed that gratification step because it’s still kind of an Optional category for us. It’s not a Survival category yet.

Tim Ulbrich: Yeah, I’m glad you brought that up. It’s such a richer experience when you save up for something, you think about it, you anticipate it, and then you enjoy it, knowing that you’ve had that much effort and intentionality along the way. I think that’s a great reminder for me and hopefully for our listeners as well. So a couple fun questions I have for you before we wrap up here. This has really been excellent. I know I’ve taken a lot away myself. You know, I have to ask you, as somebody who is running and created a podcast, The Burnout Doctor podcast, obviously we know that burnout and wellness is a big issue right now in our profession. Many are struggling. I can’t help but think here you are, working a busy, full-time academic job. And I know as myself as an academic, usually that’s not just a 40-hour a week job. You also have multiple businesses that you’re working on that I’m sure are taking up lots of time. You have these experiences that are important to you, obviously relationships that are important to you. So I’m assuming time is limited for you, and often you may find yourself in a position of being stressed and potentially burned out. So how do you functionally deal with that as somebody who teaches on this topic but obviously also needs to apply it in your own life?

Jessica Louie: That’s a great question, Tim. So I think you know, when you go through burnout, I don’t think that you ever solve it, you ever cure it. You really come up with strategies that are going to work in your life to really help you reset those feelings of burnout and make sure that it’s under control and you’re still thriving in life instead of just surviving. So what I teach my students as well and other pharmacists has been to come up with strategies where you are able to focus your energy levels because, you know, energy and time are some of our limited resources. So that’s really about — I focus really on the personal, what things you can control in your life versus outside things. A lot of people in the burnout world focus on organizations and leadership, but that’s really not my focus. So for me, it’s really focusing on how do I feel throughout the day? So that means that you’re time-blocking out your day and taking these intentional breaks every hour and getting up and moving. You’re really mastering transitions throughout the day to save up your energy levels. And when you’re not at work, you’re physically and mentally not cluttering your brain with thinking about work. So that means having healthy boundaries related to email and how you work and integrate your work into your life. And I think that’s been really helpful and that’s how you really align everything together in your life so you find harmony. So those are a couple things I do. I definitely go into individualized type of plans with my clients so that we can really figure out what’s going to work for them and really tackle the biggest struggle they’re having first before we tackle other items in their life.

Tim Ulbrich: That’s great stuff. And I hope, you know, for our listeners, one word of encouragement I would send out there, which I heard from what you just had mentioned, has been so important in my life is just starting with reflection. Like being aware and building some of that self-awareness of what are the moments where I’m carrying extra stress? Or what are the moments where I find myself, work is melding with home and cluttering my mind? And being able to feel those and identify those first obviously I think is such a critical step before you even put in solutions towards those. So I know you’re a big reader, and I know you draw from lots of different resources for inspiration. Is there a book or potentially two or something that you are currently reading, have read recently, that you’ve drawn inspiration from that you would recommend to our listeners?

Jessica Louie: So many great books, I would say. But I’m going to pull from not necessarily a business book. But I really have enjoyed Tonya Dalton’s “Joy of Missing Out” book. So if you’ve heard of the acronym JOMO versus FOMO, it’s really about how do you look at life and find joy in missing out on things and experiences that maybe you compare yourself to others. So I think it’s a great read. It has some very similar philosophies to the KonMari method and Simon Sinek and everything.

Tim Ulbrich: Awesome. I’m putting it on my GoodReads wishlist right now and on my Audible list as well. Thank you for that. So where can our listeners go to learn more about your work and connect with you?

Jessica Louie: So they can go to my website — it’s my name, Dr.JessicaLouie.com — and get free resources on The Burnout Doctor podcast. And I’ll be launching a free Master Class on five ways to cultivate joy at work this month as well. So you’ll be able to listen to that for free and see if one of the programs on burnout is something that you are interested in. My next 12-week program launches in March 2. So we’re taking applications now through March.

Tim Ulbrich: Great. So we will link your website in our show notes. And really appreciate 1, you coming on the show and taking time to share your journey but also, it’s been fun to watch from afar here in Ohio the great work that you’re doing in California, helping many, many pharmacists and professionals that are struggling with many of the things we talked about here on the show. And I continue to look forward to watching your success in the future. So thank you for taking time to come on the show. We really appreciate it. And to our listeners, as a reminder as always, if you like what you heard on this week’s episode of the podcast, we would really appreciate if you would take just a couple minutes to leave us a rating and review in iTunes, Apple podcasts, wherever you listen to your podcasts each and every week. As always, thank you for taking the time to join us on this week’s episode of the Your Financial Pharmacist podcast. And we look forward to having you back again next week. Have a great rest of your week.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 134: One Couple’s Coast FI Journey

Posted on by yfpadmin


One Couple’s Coast FI Journey

Cory & Cassie Jenks join Tim Ulbrich to share their specific path and plan towards achieving financial independence through a Coast FI approach. They talk about why and how they have aggressively saved for retirement early in their careers, how they have worked together to achieve their goals, and how Cory’s side hustle doing improv comedy has helped their financial plan all while filling a bucket of doing something he loves.

About Today’s Guests

Dr. Cory Jenks PharmD, BCPS, BCACP, earned his PharmD from the University of South Carolina in 2011 and completed a PGY1 residency at the Southern Arizona VA Healthcare System in 2012. His past pharmacy experience has included time as a retail pharmacist, outpatient clinical pharmacist, and inpatient clinical pharmacist. Currently, he practices as an Ambulatory Care Clinical Pharmacy Specialist where he applies his passion for lifestyle interventions in the management of chronic disease. Cory is also an accomplished improv comedian, having started on his comedy journey in 2013. Since then, Cory has coached, taught, and performed improv for thousands of people. His passion for improv comedy led him to start ImprovRx, where he provides seminars and workshops for businesses and healthcare organizations on applying the skills of improv comedy for their employees and leaders.

Dr. Cassie Jenks, DNP, earned her Bachelor’s Degree in Nursing from the University of Arizona in 2009, and her Master’s and Doctorate of Nursing Practice from the University of Arizona in 2015. She currently practices in the Outpatient Pulmonary Department at the Southern Arizona VA. Beyond her pulmonary practice, Cassie holds a Blue Belt in Brazilian Jiu Jitsu and loves pursing her passion for physical fitness and nutrition. She lives in Tucson with her (very handsome) husband and 20-month-old son.

Summary

Cory and Cassie Jenks share their unique journey to achieving financial independence through a modified Coast FI approach. Cory, a pharmacist at the VA, and Cassie, a Nurse Practitioner at the VA, were born in Tucson, Arizona and live there today. Cory became interested in personal finance when he came across the Mr. Money Moustache blog. He thought that they were doing a good job with their finances, but quickly realized there was a lot more they could be doing. Cory was empowered to dig into personal finance and saving for retirement and knew he was capable of learning it. This ultimately sparked his interest and really pushed him to focus on where their money was going.

Cory and Cassie are using a Coast FI approach to financial independence, which is a variation of FIRE (financial independence, retire early). A purist FIRE approach says that you should save enough for 25x your annual expenses which you can then withdraw indefinitely at a 4% rate. To get to that point, you have to work really hard for 10 to 20 years. Cory explains that FIRE is a very viable path and if they would have discovered it in their mid 20s before they had kids, they might have taken that approach.

After having a child, they realized that they wanted to spend as much time with him as possible. They worked with a financial planner previously who mentioned three different pathways to saving. One of those pathways sparked their interest and Cory later learned that they were using a Coast FI approach. Coast FI (financial independence) says that if you save enough at a high rate for a short period of time early on in your life and career, it’s going to have time to compound and grow to what it needs to be by the time you want to retire. This allows you to scale back your work, or stop entirely, and use your time in a different way. Cory and Cassie don’t want to hit a number and then completely stop working and contributing to retirement, however they do want to contribute less and work less while spending more time with family and doing things they really want to be doing. Cory and Cassie’s why behind pursuing this approach are that they want control and flexibility in their schedule and are ultimately seeking more time, not money.

To figure out your Coast FI number, look at your current spending and expenses to see what you need now vs what you may need in retirement. Currently, their savings plan will give them $80,000-$100,000 a year in income. They are saving for retirement by maxing out their thrift savings accounts, a backdoor Roth IRA account and they then put any excess into a tax brokerage account all while paying extra on their mortgage principal each month.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. Joining me today is Cassie and Cory Jenks to talk about their journey towards financial independence. Now we’ve talked before on this show about the Financial Independence Retire Early movement, aka the FIRE movement. And we did that in episodes 104 and 111. And we’re going to talk today with Cassie and Cory about a modified approach to FIRE, the Coast FI journey. And I think this is really going to resonate with many of our listeners that don’t want to necessarily grind it out with super aggressive saving rates for a long period of time but really also don’t want to follow a traditional path to retirement, which is work for 40+ years, save up a bunch of money, and then sail off into the sunset and hope there’s enough time and health to enjoy all that life has to offer. So Cassie and Cory, welcome to the Your Financial Pharmacist podcast.

Cory Jenks: Thanks so much for having us on.

Cassie Jenks: Yeah, thank you. We’re excited to be here.

Tim Ulbrich: I am excited as well. And I’m typically a ladies-first kind of guy, but I’m going to break that pattern today and Cory, have you introduce yourself first as you are the pharmacy representative here in the relationship. So give us a quick background on your path into pharmacy, where you went to school, and the current work that you’re doing.

Cory Jenks: Sure, well, I grew up — we live here in Tucson, and I grew up here in Tucson. And so I made the obvious choice of going across the country to the University of South Carolina for undergrad and pharmacy school. And so when I was there, I had chosen pharmacy as a path in high school, and so I picked my college based on the availability of a college of pharmacy. And really enjoyed my time as a Gamecock, and when I was finished, I realized that all of my family was here back home in Tucson. And as much as I loved it out in the southeast, I wanted to come back home. And so I came back to Tucson and did a residency here at the VA in Tucson. And I’ve been there ever since I graduated in 2011.

Tim Ulbrich: Awesome. So you have one of the highly sought-after VA jobs that I feel like many pharmacists — Tim Church, our very own at YFP, works at the VA in West Palm Beach, Florida, and loves it for many reasons. And I think it’s just such a good example of the level of practice that we often think of as the ideal level of practice for what a pharmacist should be doing. So Cassie, with that background, tell us a little bit about the work that you’re doing, your background, and a little bit about where you went to school.

Cassie Jenks: Sure. I’m also in healthcare, so I stayed here in Tucson. I went to the University of Arizona for my undergrad. And then got my bachelor’s of nursing in 2009. And after doing that for a few years, got a little restless. I toyed with the idea of med school but decided I wanted to have a life.

Cory Jenks: She met a strapping young pharmacy resident in 2012 that sort of —

Cassie Jenks: Yeah, met Cory —

Tim Ulbrich: That’ll happen.

Cassie Jenks: The year we met, I ended up starting grad school that year and became a nurse practitioner. And I finished with that in 2015. So I’m at the VA also, and I’ve been there pretty much since before I was even a nurse. So I’ve kind of grown up at the VA throughout my healthcare career.

Tim Ulbrich: So do you guys get to commute together or are schedules different enough that you’re kind of off sync with one another?

Cory Jenks: We had a good run of commuting. And then we had our first kid, and so the coordination of day care dropoff and pickup has sort of put a damper on the carpooling. But we did for a long time. And despite what many couples might experience, we actually really enjoyed the extra time together in the car. It’s something I kind of miss.

Tim Ulbrich: Awesome. And I was curious, we’re going to talk in a little bit later about cutting expenses and just curious if that was one area you were able to become more efficient on in terms of obviously gas and car maintenance. So let’s talk — before we dig into the Coast Fi and your journey to financial independence and how that differs from both the traditional, purist FIRE model as well as a more traditional retirement approach, I would love for our listeners to know why did you even become interested in this topic of personal finance to begin with? I’m always fascinated about where does this spark of an interest in this topic of money come from? Because I think you really see when people catch fire with this, it really just takes off. And often, in a couple, it can be for different reasons and maybe even different motivation levels, which is OK. So Cassie, why don’t you start? Talk to us a little bit about why and how you became interested in the topic of personal finance.

Cassie Jenks: Well, I’m going to have to give Cory some credit here. I hate to admit this ever. And especially so publicly. But he really started this for us when he came across the Mr. Money Mustache blog. He can tell you a little bit more about how he found that, but he kind of dove into that rabbit hole. And we both were always reading books and trying to learn new things, so whenever one of us learned something, the other person usually is at least willing to entertain the idea. So I started diving in myself, and it was kind of like a red pill moment. Once we started looking, we couldn’t stop.

Tim Ulbrich: So Cory, let’s talk about the triple M, the Mr. Money Mustache. So what was it about Mr. Money Mustache or even maybe some of what else you were reading that really ignited this passion to really get your financial house in order and then ultimately be on this path toward financial independence?

Cory Jenks: I think it was the gut punch of thinking that we were doing really well and realizing that there was so much more that we could be doing. We had worked with a financial adviser, and he actually had laid out — as we’ll talk about later — the different paths of savings. And so we were saving what we thought was well, and we had a couple vehicles we were using that maybe we regret, whole-life, for example, or high fee investment, after-tax investments. But it finally empowered me to feel like I can learn this. And so it’s just you read one article and then another, and it links to another blog that talks about it. And so from there, that like sparked our interest of wow, we’re spending — we’re saving “well,” but we could be saving so much more. And where is all of this money going that we work so hard to earn?

Cassie Jenks: Yeah.

Cory Jenks: And it was like a couple — it was like two periods. It was like the initial, this was 2017 of this freakout of like, oh my gosh, what are we doing? And then the sort of second impetus was as we got pregnant for the first time, thinking about moving to a new house, raising a family at a different place, we wanted to save for a down payment on our next house, and we looked down, and we’re like, well, we’ve read through Mr. Money Mustache, we’ve cut a lot of expenses, but where else is this money going that we’re going to save for our next house? And so it was just coming across YFP and any number of other different podcasts and books. And because we had done Mr. Money Mustache, it was a lot of library time. But.

Tim Ulbrich: Yeah, and I think you hit the nail on the head, you know, the magic question of where is all this money going? That’s what we hear a lot from people in our community. I know Jess and I often talk about that. We’ve talked and thought that in our own journey. And one of the other, Cassie, you said, and Cory, you alluded to, which I’ll ask you a question at the end about what are some of the recommended resources or books, but I sense from both of you really a passion to learn, you know, a passion to read, to read blogs, to read books, to listen to podcasts, and I think that’s such an important takeaway for our community that man, once you catch that fire, it is a rabbit hole that you go down. And I think that’s true of so many things in life. But here, we’re talking about really catching that personal finance fire to say, OK, what would financial independence mean for us as the Jenks, as a family, what would this mean for us? And what are we willing to sacrifice to get there? And what would that sacrifice look like? And how do we get on the same page of doing that? So let’s dig into your approach to financial independence, which we’re going to refer to here as the Coast FI journey. And we’re going to link to an article in the show notes. And we know that you’re taking a little bit different path and modifying it, but really going to compare that to a traditional kind of purist FIRE approach, and as I alluded to in the into, a typical traditional retirement savings model, which is really work for 40 years, maybe save 5%, 10%, 15% of your income and then hope, as I mentioned, that you’re happy and healthy enough to enjoy everything that life has to offer. So Cory, walk us through briefly — even though we’ve talked about it in previous episodes of the podcast — walk us through the purist FIRE approach. What is FIRE? And then what really differentiates the Coast FI path from that purist FIRE approach?

Cory Jenks: Yeah. So you’ve had a couple great guests talk about their FIRE journey. But it’s essentially Financially Independent Retire Early. So you save enough and the number that is commonly used is you save enough until you have 25 times your annual expenses and then theoretically, you can withdraw that indefinitely at a 4% rate. And to get there, basically you’re going to have to really bust it for 10-20 years, depending on what your savings rate, depending on what your own spending rate is. And as Mr. Money Mustache and hundreds of other bloggers and people have shown, it’s a very viable path. And I think that if we had found that in our mid-20s before kids, like, OK, we could have sucked it up and both worked full-time hardcore to get there. But then we had a kid and realized we want to have time with them, as much as he can be a little pain. And so I came across this idea of Coast FI. And so the FI being Financially Independent. And this says that you, if you save enough at a high rate for a short period of time early on in your life and career, you’re going to have the time and compound interest to have it grow to what you need it to be by the time you retire so that if you hit this Coast FI number, you can scale back the work you’re doing, you can take a job that has a little bit more risk, knowing that you don’t need to continue to contribute to your retirement in order to hit that number. Now I love how you like to personalize this idea of personal finance because traditional FIRE people would get angry at you for not just going all the way through and maybe Coast FI people would get angry at us because our version of it is to try to get to a number but then still work some in order to save some. I don’t think we want to hit a number and then stop. So our version is like to get to the number we want and then have the freedom to contribute a little bit less as our lifestyle changes with our family.

Tim Ulbrich: And I love, love that, the personal approach. I think for many pharmacists and maybe some heard our previous episodes about FIRE and said, ‘Hey, that’s me. I really want to be there. I want to aggressively save for 10 years, I want to get to this 25x income or the amount that I would need and do the 4% withdrawal and stop working because I either don’t like my job or want to do something else,’ whatever. But I think many others, what you’re describing here is what really would resonate as well to say, ‘Hey, I want to put myself in a position of financial independence. Maybe I even love my job, but you don’t know what life will throw at you.’ It could be that you want to have more time with family, it could be that eventually hours get cut or positions get cut or one spouse in a relationship wants to have an option to work part-time or there’s a sick family member, whatever, but you put yourself in a position because you’ve gotten to some point of financial independence that as I like to say, the exponential curve of savings takes off. And I know our listeners who are in the weeds of saving right now, especially in that first five to seven to 10 years, you know what I’m talking about where you’re saving, saving, saving, grinding it out. It feels like it’s not taking off from a compound interest standpoint. And then boom! All of a sudden that really starts growing and you see that exponential growth. So Cassie, what resonated with you about this model? And really, how did you buy into this as a vision for your family?

Cassie Jenks: So the interesting thing is way back when we thought we were making smart choices and working with a financial advisor, he presented us with three different saving strategies. One was the kind of middle-of-the-road standard, save a little every year until you’re retired, one was you wait way too long and then you have to save a bunch at the end, and then he showed us one where you save aggressive up front and then it was 0s from there down and you were done saving. And we both saw that and not even knowing anything about FIRE or Coast FI, we thought, that looks smart because we don’t know what’s going to happen in the future. So that’s almost kind of always been our mindset to begin with was always do as much as you can up front. And then as I got into my working career, like you said, it’s not about not liking your job or not wanting to work. I realized I want control. I want flexibility, and I want to be able to make decisions that are the best for my family right now. And so that’s where bringing in the concepts of FIRE and Coast really made that initial idea really turn into what it is now.

Cory Jenks: Yeah, we were like accidentally Coast FI. Like we were doing this thing that we had not labeled on the Internet yet. And so I happened to come across this article about Coast FI, and I was like, “Honey, I think this is what we’re doing and now there’s a label for it.”

Tim Ulbrich: That’s awesome. You should have branded it back then.

Cassie Jenks: Totally.

Tim Ulbrich: So you know, Cassie, one of the things that you mentioned when you met with the advisor that presented three different options, you know, the one that really resonated with you guys was aggressive upfront savings and then you can obviously continue to save, but you really could take the heat off in terms of needing to continue to save at that rate. And I think while that may resonate with many because obviously our listeners are very well educated on compound interest and time-value of money and the earlier you save, the better, the two biggest barriers I typically see to being able to do that model as it’s presented to them are student loans and that they may be in a home position that is sucking up such a big percentage of their income. So talk to us about those two areas for you guys: student loans and then ultimately the home — and I’m guessing maybe there’s some lessons here learned as well along your journey. But how have you been able to do that, despite what many pharmacists are facing, typically in high student loan debt as well as usually home expenses that certainly eat into that available income?

Cassie Jenks: So for the home expenses, I believe it was 2017, Cory did an Excel spreadsheet. And we looked at where every single penny we spent went, kind of coming back to what we were talking about earlier, where does your money go? And that was when we really started dialing down our home expenses. And we looked at all the places where we were spending money that wasn’t adding value to our life. So we stopped buying books and started going to the library. We started getting less expensive haircuts.

Cory Jenks: Cassie doesn’t charge me anything for my haircuts now.

Cassie Jenks: Yeah, I cut Cory’s hair now.

Cory Jenks: Huge savings.

Cassie Jenks: You know, they sound like little things. But we cut our phone bill, and we got rid of cable. And when we started adding all this up, it really changed our monthly expenses dramatically.

Cory Jenks: Yeah, there were a couple missteps when it comes to our housing and our student loans. I guess chronologically, I, again, am a proud Gamecock for life. But my dad teaches at the University of Arizona, not in the College of Pharmacy, but I could have had significantly reduced tuition. But they wanted me to go out of state, and so I did. And those were back in the good old days when it was only $100,000 of student loan debt that I had coming out.

Tim Ulbrich: So Cory, I think as I understand, working with the VA really afforded you an opportunity to have some of your student loans, even though you went to an out-of-state institution, had a cheaper option available, really afforded you the opportunity to be able to take some of the weight off your shoulders so that you could free up income to do other things. So tell us a little bit about what the VA provided for you in terms of student loan forgiveness.

Cory Jenks: Yeah, I was very fortunate at the time that they were offering student loan reduction program. It’s EDRP, Education Debt Reduction Program, that basically you give them your student loan debt, and they give you an amount that if you work for five years, you get x amount per year that you work. It’s an incentive to keep you employed at that particular institution. So I was fortunate enough to get that, and that really helped to cut down on my student loan burden, obviously, and I’m very fortunate to have gotten it. And so I was able to pay my loans off by 2017 I think they were totally gone. And so when you take that amount out every month, it really frees up what you have to work towards a goal like this. And for Cassie, her nurse prac school, we almost cash flowed that. She came out with like $7,000 or $8,000 of student loan debt. So that was another fortunate thing where we found each other and were able to help each other out in our journey. Once she was out and making full-time prac salary, we didn’t have that burden of her loans.

Tim Ulbrich: I love the ‘nurse prac’ lingo. I’ve never heard that before, but I feel like I’m in the club now. So that’s good.

Cassie Jenks: Nurse practitioner is just such a mouthful.

Tim Ulbrich: Yes, right? So we’ve established with this model what worked for you guys is really saying, OK, we’re going to aggressively save up — not to the level of a traditional FIRE purist approach but more so than a we’re going to save a small percentage over 40 years, we’re going to save more up front, we’re going to let that really accrue in a short period of time, and then of course, we’re going to allow compound interest to continue to do its thing over your career so you can achieve your goals but also have options to reduce hours, change jobs, stay the course, whatever. But you’re in a position of decision-making. And we established that what, in part, allowed you to do that was putting yourself in a position obviously from student loans, we talked about some of the home buying, so I want to get in the weeds a little bit more, Cory. Can you talk to us about some more details of what is your savings goal? How did you determine that number for our listeners that are maybe trying to figure out OK, what does this look like? Where do I begin? And where are you saving that money? Because I know that’s obviously a point of interest and hey, I’ve got lots of different options and should I do this in traditional retirement accounts or brokerage accounts? So talk to us a little bit more about the specifics.

Cory Jenks: Yeah. I think what we did when we were trying to figure out our “Coast FI number” was to look at what our current spending rate is now and adjust around within our budget — we meet every month and have a little budget party — and so look at what our expenses we will have now, what our expenses we likely won’t have at our time of retirement, and just come up with a number. And then we padded some to that just assuming there could be other things that we want to do or will come up. So that’s where we came up with our number of somewhere between $80,000-100,000 a year of income in retirement, which is more than we spend now. But no one’s going to be upset having a little bit more than they need. And so that’s where we came up with that number. And of course, we haven’t heard the YFP Crystal Ball segment yet, so we don’t know what life is going to be like in 30 years. So this is our best guess, our best idea of what we’ll need.

Tim Ulbrich: Sure.

Cory Jenks: And so what we do to save, we maximize our Thrift Savings Plans, which is the government word for 401k. And we also utilize backdoor Roth IRAs and any excess that we have, we just put into an after-tax brokerage account at Vanguard in just the total stock market fund. And that way, for us, that’s our other — when there’s nowhere else to put it in a tax-advantaged place or retirement-advantaged place, we put it into Vanguard. And then something that isn’t necessarily “saving,” but we do pay down our mortgage principal extra every month as well.

Tim Ulbrich: Awesome. Yeah, I was just trying to kind of figure out — and I think this helps our listeners, you know, if you think about a traditional 401k or here a TSP, we’re looking at $19,000 a year. You think about a backdoor Roth IRA is $6,000 per year per individual. We’re going to see those go up obviously in 2020, but here we’re talking about 2019. So you start to put the numbers together, and you guys are making big savings progress, obviously those are big numbers, it’s a big chunk of your income, but it’s not the massive percentages that you see in a traditional FIRE type of model. So I think that really highlights the differences in what we’re talking about here. So I want to dig in, Cassie, to a little bit more of the why. And we’ve dodged around it a little bit, you’ve mentioned obviously for you guys a pivotal moment was the birth of your son. But talk to us a little bit more about your why, your motivation for achieving financial independence and really trying to get to this point of what’s behind the effort and at some level, the grind of both cutting expenses as well as aggressively savings, which means that you’re of course giving up some things in the short term. So talk to us a little bit about what really resonates for you, what’s most important, and then how did you and Cory have this conversation and ultimately get on the same page?

Cassie Jenks: Probably the word that would sum it up the best is control, getting to have control over how you spend your day, how you spend your time. I’ve always just not understood this idea that we’re all supposed to work 40 hours a week. It just didn’t ever make sense to me. And being able to pursue other passions, there’s things we both — we don’t dislike our jobs, but there’s things we really want to do that we can’t fit into the weekends and hobbies we want to pursue. Having time for family I think most people probably resonate with that.

Tim Ulbrich: Totally.

Cassie Jenks: Getting a balance of feeling like we are raising our child but also getting to be productive employees at the same time.

Tim Ulbrich: And Cory, what about for you?

Cory Jenks: Yeah, I think that the ultimate commodity we’re saving is not money. It’s time. And when you kind of lay out, we’re weirdos. We do a budget, but we also do a time budget every month, and so we sit down on our calendar and we have our friends that we want to see every month, we have family, we have — like Cassie said — our different hobbies and pursuits. There’s not a whole lot of other time left over after five days a week of work. And so to us, we use the term sacrificing. I think Cassie and I, we talk a lot about the gratitude is a word we throw around a lot, the idea of wanting to work less is not that we’re not grateful for all that we have, but we are very fortunate in the jobs that we pursued. My parents were both teachers, her father was in the military, so we grew up quite middle class. And so we’re very fortunate to what we have. So it’s to have that time, but it really doesn’t for us feel like it’s a sacrifice. I think we’re fortunate we found each other and that we have very similar values, dreams, ideas about money. And we frame it, we take care of veterans every day. They’ve had much rougher days at work than we’ve had. Our grandparents grew up in the depression, and they had to be frugal out of necessity, and we’re fortunate to be frugal out of kind of the privileged world that we live in now. And so when we frame it like that, it doesn’t feel like a sacrifice. And then the ultimate goal or endpoint of that is to have more time with the people we care about and to do the other pursuits aside from our 9-5 day jobs that we care about.

Tim Ulbrich: Yeah, I really admire, Cory and Cassie, just — I respect and understand that you guys are on the same page with this, which is awesome. When two people really come together and they have a vision and you start to execute it but also don’t want our listeners to take for granted that this is hard. Two people, even when you’re often on the same page, you know, we know the friction money can cause. And I sense very much for the two of you an openness of conversation, a willingness to work to get there. And I think it’s such a reminder for me and Jess and for our listeners that it’s so fruitful when you can have those really big conversations. And then the budget, the month-to-month, really becomes an execution of the vision. And I think that’s when things start to get I guess “fun.” I don’t know if we ever use fun and budget in the same sentence. But budgeting can be such a grind. But when we’re talking about things like gratitude and really being able to capture more time and really establishing more of that family atmosphere and thinking about the next generation, and that’s what gets me excited is your 18-month-old, the position that you’re going to put your family in going forward because of all the things that you’re setting up but also everything that he’s going to observe throughout this journey, said and unsaid, is really incredible and inspiring to hear. Now, I do have to ask, Cassie, I have heard Cory say “budget party,” and I’ve heard him talk about spreadsheets. So complete nerd, obviously, of course. You know, does that resonate with you? Or for maybe some of our listeners where maybe they’re married to a financial nerd, but that’s not them. What advice would you have in terms of how someone who maybe isn’t that budget part of your spreadsheet person can really come into the fold and make sure this is a priority to the couple?

Cassie Jenks: I think talking about the why is really what gets us on the same page. I have to admit, I do kind of love spreadsheets myself.

Tim Ulbrich: OK, OK.

Cassie Jenks: But —

Cory Jenks: She also loves dark chocolate, so I get a bar of that out and it’s not hard to get her in front of that computer.

Cassie Jenks: Make your budget party fun. Like we sit down on the couch together, we have a little treat. And like Cory said, it’s our financial budget, but it’s our time budget. So we get excited making up our plans. But for us, I think what works is just that openness that everybody has to navigate finances in the relationship in a way that works for you. I totally respect that. But what’s worked for us is we know every dollar each other spends. Every account is shared, there’s really nothing hidden between us. So we have a lot of accountability. There have definitely been times where I have — I’m a little bit more of a spender than Cory. I’m not a heavy spender, but there’s times when I have an impulse to buy something. And I think, he’s going to see that, can I really justify needing this purchase right now? And that’s worked for us because we’re comfortable with that accountability together.

Tim Ulbrich: And I think it’s important for our listeners to hear in your story that it’s not just all a grind, but I sense that the two of you are having fun along the way. And it’s not just all delayed gratification. I mean, that’s a big part of it, but it’s not no fun today and all fun later. So I think one great example of that is, you know, especially the year the two of you had in 2016, which was a 30-for-30 year. Can you talk to us a little bit about that? I think that’s such a great example of having fun along the way.

Cory Jenks: Yeah. So in 2016, if anyone wants to guess our age, we turned 30 in 2016. And we were kid-free, dual income, feeling pretty good. And we wanted to do something special for turning 30 to commemorate it. And my dad — I have to give him credit — came up with this idea probably after watching ESPN of like 30-for-30. Do 30 fun, interesting things over your 30th year. Now, for us, there was some really nice trips. There was also some trips to museums, some hikes around Tucson. But it really was a special year, and as a lifelong Cubs fan and somehow who she married into it, we ended up going to a World Series game because — and we didn’t go into debt for it. We were financially prepared for it. So it was a year that allowed us a lot of fun, but it wasn’t something we look back on with regret financially. We loved every minute of it.

Tim Ulbrich: And I think for — as I heard of that and I’m guessing our listeners think the same thing, you know, that concept can be done in a very inexpensive or a very, very, very expensive way, right? I think it’s to be just as much about the memories and the planning and the fun and could be day trips, it could be something more extravagant. But I love the creativity and really making that a priority for your family. And I’m guessing you guys have a vision to do something similar as your family continues to grow. Cory, I want to ask you about your side hustle because we talk about side hustles a lot on this show, and I think you have a really unique side hustle doing improv comedy. Talk to us a little bit about that, where the motivation, where the inspiration comes from, and where you’re currently doing this work?

Cory Jenks: Yeah, so I’ve always enjoyed comedy. I watched a lot of Saturday Night Live and Simpsons as a kid. And in pharmacy school, there was an improv group at the University of South Carolina, but I was just very focused on school at the time. And so once I finished my residency, was dating Cassie, she got me an improv class through a local theater here in Tucson back in 2013. And I just did it and loved it and kept doing it. And have taught, performed, coached it. But something that really sticks out for me is that the tools of improvisation: listening, communication, teamwork, are all things that as pharmacists, healthcare providers — Cassie’s done the classes too — they’re useful and really help you connect with your patients, help you get the most out of what can be really frustrating work environments. And so doing this now for seven years, I was like, pharmacists should do this. And I’m fortunate enough to help teach a section of it here at the University of Arizona. But my side hustle now, ImprovRx, is taking this to other healthcare organizations, other colleges, other businesses, trying to teach people these tools because love it or hate it — I think we have great intergenerational workforces, but I think millennials, which Cassie and I are a part of, the generation below us and every generation can use an improvement on these skills. And not to stereotype pharmacists or pharmacy students, but we’re generally kind of Type A people.

Tim Ulbrich: Just a little bit.

Cory Jenks: Just a little bit. We were talking about how much fun spreadsheets were just a couple of minutes ago. So I’m going and I’m doing this and I’m teaching this to other organizations and in students. And I’m getting a lot of really interesting and fun feedback from people who are like, oh my gosh, yeah, you could use this to be a better listener for a patient because, you know, when it comes down to it, we can’t control a lot of our work environments. But if you can be a better listener for a patient one day, if you could be a great team member on your healthcare team, be an ear, be a better empathizer, it’s a really great tool. So that’s kind of what I’m working on right now. And it’s really exciting to get to share that.

Tim Ulbrich: I love that. And I think that’s such a great example we talk about with side hustles — and shoutout to Tim Church, he does a great job with this on our side hustle series. But I think the best side hustles are those that certainly there’s a financial piece, it helps you accelerate your goals, but it’s those things that really hit into a spot that gives you that fulfillment and allows you to serve and meet others and really identify an area that you’re passionate about but also you can essentially generate some income and make a business opportunity out of that. So I think that’s just a great example of that. Great work on what you’ve done. And I’m guessing we may have some people listening, whether it’s from colleges of pharmacy, state organizations, companies, that say, “Hey, I want to work with Cory. I want to learn more about what he’s doing with ImprovRx,” or maybe just has a question about something we’ve talked about here tonight on the show with Coast FI or what does your budgeting process look like. So where can our listeners get in touch with you if they have additional questions?

Cory Jenks: Well, I am on LinkedIn, so my name will be spelled in the show notes there. I’m also on Twitter, @CoryJenksPharmD, and then my Instagram’s more of a fun place, so it’s @pharmacomedian.

Tim Ulbrich: Love that.

Cory Jenks: And then Cassie, you’re on Twitter as well.

Cassie Jenks: I’m on, yeah, Twitter and Facebook and Instagram as —

Cory Jenks: @NPCassieJenks.

Cassie Jenks: @NPCassieJenks, yeah.

Cory Jenks: But we love talking about this stuff, whether it’s improvisation, finance, working in healthcare, it’s a really cool world we live in where I can send YFP an email saying, “Here’s a cool article about what I think my wife and I are doing.”

Tim Ulbrich: I know, right?

Cory Jenks: And we get to share that. And I think that’s really special. We really appreciate this opportunity to share our little slice of financial life with folks.

Tim Ulbrich: And I appreciate that. I’m not going to let you off the hook, though. You’re both readers, and I’m a big reader, and I’m building my 2020 reading list. So I need a book recommendation from each of you. What have you read recently that, you know, you just said, “Hey, this is a home run,” or maybe something you’re currently reading that you’re drawing inspiration from?

Cory Jenks: Alright, well, one of the books that I read at the beginning of 2020 was called “Atomic Habits.” And it’s a great book about how to break down habits — it’s not even about setting goals, it’s just kind of tricking yourself into having a better process with going about achieving your different goals. From that, I’ve developed a system for like a To-Do list that he mentions. It’s called an Eisenhower Box. People can Google it on their own time. But it’s really helped me organize all the different facets of my life, and I kind of get hung up in all of the different minutiae that can slow you down and send you into wormholes.

Tim Ulbrich: Love it. Cassie, what about you?

Cassie Jenks: Well, I have to say that Cory gave me this suggestion, so I have to give him a little credit here. But “Your Money or Your Life,” fantastic book that really dives into how much time you have to spend to make all the purchases you make in your life and to really reframe how we think about money and thinking of it more as currency of time than anything else. And that probably really drove home for me our why and what we’re trying to do with our financial journey.

Tim Ulbrich: Awesome. Great recommendations. We’ll link to both of those in the show notes. Cory and Cassie, thank you so much for taking time to come on the show to share your journey, share your why for what you’re doing here with the Coast FI, and I think just a different perspective for our audience to consider. I know you have inspired me, and I’m confident you’re going to do the same for our community. So thank you so much for coming on the show.

Cory Jenks: Certainly.

Cassie Jenks: Yeah, thank you.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 133: Your Financial Toolkit for a Successful 2020

Posted on by yfpadmin


Your Financial Toolkit for a Successful 2020

On the first episode of the New Year, Tim Ulbrich talks about 5 ways you can accelerate your financial plan in 2020. This episode is full of resources you can use to put these ideas into action.

Summary

Tim Ulbrich shares five tangible ways you can crush 2020 in this week’s episode.

1. Get Clearer on the So What

Getting clearer on the “so what” pushes you to dig deeper into finding your why. Why are you focusing on your financial plan or financial goals for 2020? Is it because you are wanting to create flexibility in your job or time? Are you wanting to radically give? Are you hoping to have more control or choice in your life?

2. Build or Modify the Road Map to Achieve Your Goals

When you are clear on your purpose, it’s time to put your plan in place. Without a monthly plan, it’s easy to find yourself in a position where your financial plan is happening to you rather than the other way around. Creating a plan and executing your budget are key.

3. Get a Side Hustle off the Ground

Having a side hustle isn’t only a way to bring in additional income to accelerate your financial goals, but it also allows you to fill the creative expression you might be craving. Plus, it can also satisfy that entrepreneurial itch you may have! If you have an idea in place, what barriers are you facing on taking it to the next level? If you don’t have any ideas on what your side hustle could be, what’s one next step you can take to figure it out?

4. Set One Stretch Goal for 2020

A stretch goal is one that seems out of reach, but you’d absolutely love it if you could achieve it. These types of goals allow you to think beyond what’s possible. Set one big, audacious stretch goal for 2020 and focus on visualizing it into action.

5. Get a Coach

The value of a financial planner isn’t in choosing the right investments or allowing you to have the best return as you can ultimately learn anything online now. Instead, a financial planner carries the most value as being your accountability partner and coach. They help to see the bigger picture of what you’re wanting to achieve and help get you there.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Tim Ulbrich here, and excited to turn the page on the new year and a new decade. Wow, hard to believe here we are at the start of 2020. Now, I don’t know about you, but I’m over the whole 20/20 vision thing. That seems to be trending over the past several years leading up to this year. So I’m going to spare you any of the cheesy references to having 20/20 vision or having a clear vision for the future. But we are going to talk about five tangible ways that you can crush 2020 and accelerate your financial plan. Now, many of these things we have talked about before on the show. However, I don’t know about you, but I know for me, sometimes it’s helpful to hear things more than once or presented in a different way. As I mentioned in the introduction, we have an awesome giveaway to go along with this episode to kick off the new year the right way. And for me and my financial plan, finding great resources and tools has been a big part of the success and of the learning along the way. So again, this giveaway includes five winners. We’re giving away for each of those winners a one-year YNAB subscription, a copy of “Your Best Year Ever” by Michael Hyatt, and a copy of “100 Side Hustles” by Chris Guillebeau. So if you’re interested in that awesome giveaway, head on over to YourFinancialPharmacist.com/giveaway, and you can enter to have a chance to win.

OK, in somewhat of a rapid-fire format, I’m going to walk through these five things, five steps that I think you can take sooner rather than later to make 2020 an awesome year and accelerate your financial plan. So let’s jump right in.

No. 1, get clear on the so what. No. 1 here, get clear on the so what. So you’ve likely heard us talk about before several times on the show about finding your financial why. And that is exactly what we are talking about here in point No. 1. Why does this topic of money even matter to you? It sounds like such a simple question. But if you have thought about this in depth before, you know it is not that simple. This is really the “So what?” question. So before we get too deep into the x’s and o’s of whether it’s budgeting or paying off debt, loan repayment strategies, how to save for the future and think about asset allocation, nerding out about compound growth and real estate investing, all of these different things, this question is “So what?” Why does this even matter? When we talk about financial freedom, why does financial freedom matter? What does this mean to you? What is the ultimate goal of achieving this path?

So to give you an idea of a few things that you may have heard myself, Tim Baker, Tim Church or other guests on the show talk about when it comes to finding your financial why or really answering this question of “So what?,” it’s things that we have heard before like to have flexibility over how you’re spending time or even how you’re spending your money, to be in a position of control, to be in a position of choice, to be able to achieve goals around giving, or to be able to radically give, to put yourself in a position to leave a legacy, to travel and see the world without worry or stress or regret. Maybe it’s to start a business or a movement or a foundation or a charity. So these are some ideas of the bigger the vision in terms of the “So what?” question that we talk so often about on the show. So yeah, we can do a nest egg calculation and figure out how much you need to get to the point of retirement or we can talk about how to aggressively pay off $150,000 or $200,000 of student loan debt. We can talk about how to set up a budget and exactly what a zero-based budget looks like. But what is the ultimate goal of doing this? And that is exactly what we’re talking about here in point No. 1 of getting clear on the “So what?”

So my question here for you today as we roll the calendar into 2020 is what is your financial why? What is your “So what?” And how do you get to the point of defining this if you haven’t yet done this? And so to help you get to that point, I’d recommend if you haven’t already listened to episodes 032 and 033, Tim Baker talks with Jess and I about this concept of finding your financial why. So again, that’s episodes 032 and 033 of which we’ll link to in the show notes. I would also recommend — again, we’ll link in the show notes — there are three life planning questions that we’ve referenced before on this show. These are really big questions, big philosophical questions that are designed to help you answer this question of this “So what?,” finding your financial why. So we’ll link to those questions, the article about those questions, that you can spend some time answering those.

And so my request for you here today, as we enter this new year, which is an opportunity to really set a new path forward, is to put your “So what?” or put your why on paper, say it out loud, and share it with those closest to you. And then revisit this often. So again, I know it’s so easy to want to jump into the specifics of what’s in front of you right now, whether that’s the budget, whether that’s making that next payment, whatever it would be. But really taking a few moments to take a step back if you have not done this before, and to put down on paper your “So what?,” your why, say it out loud, share it with those closest to you, and revisit that often. So that’s No. 1 here, getting clear on the “So what?”

No. 2, build or modify the road map to achieve your goals. Build or modify the road map to achieve your goals. So once you get clear on the purpose, the “So what?” or the why, it’s time to put a monthly plan in place that will simply be the execution plan to see that your goals and vision become a reality. And that’s essentially the budget, the spending plan, and that’s how I like to think of the budget. It’s not necessarily overly complicated, overwhelming, restrictive, do I have to? type of activity, but rather it’s the execution plan of your goals. And we all know how months and at times, years, can fly by. I’m certainly feeling that lately with four young children. And without a monthly road map, without a monthly plan, without a monthly budget, it’s easy to find yourself in a position where your financial plan is happening to you rather than you dictating and directing what your plan is. You know, and credit here to Tim Baker. He does such a great job of this when he’s doing financial planning with clients — and I know I can speak to this firsthand with the planning he has done with Jess and I — one of the very first activities we did is that “So what?,” that why activity and really identifying what’s most important to us. And if we fast forward five or 10 years, you know, what should be happening that we would say, “You know what, things are going well, things are a success when it comes to making sure that we’re spending our money in the places that matter the most to us.” And then we really get into the spending plan and the budget. But he often then comes back to say, “OK, here’s where you’re spending the money. Here’s the budget. But here was the ‘So what?,’ the why we talked about. And does this picture, does this vision, align?” And often what we see is that again, it’s easy that time goes by quickly, it’s easy to get caught up in the month-to-month and sure enough, soon we find ourself in a different direction where the spending plan isn’t necessarily aligned with the vision and the goals. And I think that’s really one of the many values of having a coach in your corner to keep you on track.

So for those of you looking to either start, restart, reinvigorate, refresh your budget, I would encourage you to check out a few different resources: Episode 028 of this podcast, we talked about a budget, just actually I think two years ago. It was called “New Year, New Budget.” We also have a great article that walks you step-by-step, including a budget template that you can download. And that article is “Five Steps to Creating Your Best Budget.” We’ll link to that in the show notes. And then as a next step, as a follow-up once you get that budget template in place, in Episode 057, we talked extensively about how you automate your financial plan. So once you have that plan set, then how do you make sure that is happening each and every month and ultimately getting your own self out of the way so you can ensure success with that plan you set.

So you know, some resources here, obviously we’re highlighting one in our giveaway, and that’s the You Need a Budget software, relatively inexpensive. So whether it’s You Need a Budget, whether it’s another paid budgeting service like Envelopes, there’s certainly several others that are out there or maybe it’s a free tool like Mint.com, maybe it’s an old school spreadsheet that you do this manually, whatever the resource would be, it’s about finding a system that works for you. And so I would encourage you to check out our budget template, YourFinancialPharmacist.com/budget, you can download for free a zero-based budgeting template. And then that will help you get started. And then you can automate that into whatever tool works best for you. I would also point out — and credit here goes to Tim Church — we recently released a great tool that is essentially a financial checkup, financial assessment to see how you’re doing overall with your personal financial plan. So if you go to YourFinancialPharmacist.com, you’ll see that there on the main page. You can go through a series of some quick questions. Tim Church has done a great job of making that easy, quick, he’s put some humor in there. And then essentially, that will help you identify what are the areas that need the most attention when it comes to your financial plan. So if you’re trying to think about does my budget really reflect the areas that I need to be thinking about that may need the most attention, that tool will really help get you there. So again, if you go to YourFinancialPharmacist.com, you’ll see there that we have a tool — and we’ll link to it in the show notes as well — that will help you essentially do your financial fitness test is what we’re referring to.

OK, so that’s No. 2. And that is No. 2, build or modify the road map to achieve your goals.

No. 3 is get a side hustle off the ground. And again, that’s a book here that we’re highlighting as a resource and a giveaway. So yes, yes, the side hustle is by far one of the trendiest movements of the last decade or so and certainly something that we’ve been talking about extensively over the past couple years. So if you’ve been a part of our community for awhile, whether it’s on the podcast, in the blogs, in the Facebook group, you’ve probably heard us talk about side hustles and you know that we have a love for side hustles. And we think that for many, side hustles are a way to not only bring in additional income so that you can accelerate your financial goals and achieving those goals but also allows you to have a creative expression and allows you to work on something that is a passion of yours beyond the traditional 9-5 type of work. And so I think for many, I know this is true for myself, this can really satisfy the entrepreneurial itch that you might have but also can help you achieve your financial goals even faster. And we’ve got some great stories, people in this community that we’ve featured on the podcast, that people have started part-time side hustles and ultimately have turned those into full-time gigs, people that are continuing to do part-time gigs while they’re working full-time and is just something that they really love, but they’ve used it as a way to generate additional income. So I’d love to see when pharmacists are able to leverage the expertise and passion they have in their field and fill the needs that they’re seeing and their patience with the creation of a side hustle as well.

So a couple resources I would mention here. Episode 063 of the podcast — again, we’ll link to these in the show notes — we did an introduction to the side hustle series. Again, Tim Church did this, has done a great job with this. Episode 126, recently published, Brittany Hoffman-Eubanks is a great example. That episode is called “Going Beyond Six Figures Through Medical Writing,” has done a great job of really starting and scaling a side hustle business. And then recently, Eric Christianson came on the show, creator of Med Ed 101, in Episode 131 to talk about the secrets to building a successful side hustle. I would also obviously point you to the resource we have highlighted in our giveaway, “100 Side Hustles: Unexpected Ideas for Making Extra Money Without Quitting Your Day Job,” and that’s by Chris Guillebeau.

So my call to action here for you, my hopefully motivation to get you going in this area if this is something that you’ve thought about. For those that have already have a side hustle in place, you know, have you validated the idea and the business need? And if so, what’s the game plan to grow it? So maybe some of you have started something and for whatever reason, it stayed status quo and you feel like it’s been a good idea but you’re in somewhat of an autopilot mode. Have you validated the idea and the need for that business or that side hustle? If not, what’s the game plan to validate that? How could you do that? And if you have done that, what’s keeping you back from growing that? And what’s the game plan to really grow and scale that? Now, for those that have an idea but have not started the side hustle, what is holding you back? That’s really the question I want you to reflect upon. Have you identified whatever that barrier may be? And what will it take to knock down that barrier? Maybe it’s even multiple barriers that are in place. And who is going to keep you accountable to moving forward? So I think I felt this when I started Your Financial Pharmacist back in 2015. I know at first when you have an idea, you tend to want to keep it quiet and you’re not sure if it’s going to work and you’re not sure what other people will think. But I think there’s real value in talking it out loud with people that you trust and respect their perspective that not only can help you think through the idea but also can help you keep you accountable moving forward to get that off the ground, encourage you, and even to challenge you in a positive way. And I think that ultimately will make your idea and your side hustle or business even better.

Now, for those that maybe don’t even have an idea or maybe are thinking through this at a very early state, you know, my challenge to you would be is what’s the game plan to learn more? What’s the next step you can take to be able to be one step closer in this first part of 2020 to getting something off the ground. So you know, what are you listening to and reading to that can help stimulate more ideas? Who will you reach out to this year that has done this well to pick their brain and learn more? And so I think with side hustles, again, we featured several stories already on the show and we have more planned for 2020. I think it’s helpful to hear others’ stories, even it’s not directly related to whatever idea or interest you may have yourself. So if you’re just in the early stages of this, the challenge really is what are you listening to, what are you reading, what can you be reading or listening to? And who will you reach out to that you can pick their brain and get some additional insights and information? So that’s No. 3, hopefully get a side hustle off the ground or take some steps to be in that direction.

No. 4 is set one stretch goal for 2020. Now, you’ve likely heard of this concept of a stretch goal before. But if not, the idea is setting a goal that seems perhaps out of reach, maybe too audacious, too unrealistic, despite it being something that if you were to achieve, you would say, “Heck yes, that was awesome.” So the idea is that setting a stretch goal allows you to begin to think beyond what you believe is possible and really starts to help you visualize what it would take to knock down those self-limiting beliefs that often hold us back from our true potential. And of course, the power of setting a goal and visualizing a goal then becomes the increased likelihood of achieving that goal. And for those of you that have set goals and visualized goals, you know exactly what I’m talking about. You might them on paper, and you look at them at first, and you say, “That’s bold. I’m not sure how I’m going to get there. And then you start thinking about them, more and more you visualize them, you relook at them, maybe it’s daily or weekly. And all of a sudden, you’re beginning to just train your mind to say, this went from a “I hope” to “How will I get this goal achieved?”

So now, we obviously know that there’s a time and place for setting realistic goals. After all, if we set a bunch of goals that we didn’t achieve, we would likely get pretty frustrated pretty fast. We’d get defeated, and we might move on from this whole goal-setting thing. So here we are talking about one additional bold, audacious goal in addition to the other goals that you have planned for 2020. So of course we want those realistic goals, you know, those goals that we look at our budget, we look at our numbers, we look at our direction of our net worth and our plan and say, “OK. We think we’re going to be able to achieve those.” But here, we’re talking about one additional bold, audacious goal. So maybe it’s something like paying off an extra $10,000 on your debt this year beyond what you think is possible when you look at the numbers. Maybe it’s buying your first real estate investment property, despite not knowing a whole lot about what’s involved and where the cash will come from. Perhaps it’s maxing out your 401k or 403b contributions in 2020, $19,500, although you thought you’d be only able to contribute up to whatever your employer match provides. Maybe it’s giving 10% or 20% or 30% of your income to something that you care about, despite looking at the current numbers and saying, “How am I going to do that?” Or perhaps it’s taking a bold step to start your own business, despite your fears of, you know, what if this fails? Or what will others think? Or I don’t consider myself to be a business-savvy person, so why even bother?

So again, I think there’s lots of resources out there that can help in this direction. And one that I would point to that really has had a profound impact in my life is the book “Miracle Morning” by Hal Alrod. And whether you’re a morning person or not, this idea of establishing a daily routine that includes things like setting goals and visualizing those goals, that includes things like reflecting on your day and gratitude and having a place for silence or meditation or prayer, having a routine and a plan in place, especially at a time when you have potentially a busy professional and personal life is incredibly important when it comes to this topic of setting big goals and achieving those goals. And I would recommend that resource, it’s a quick read, it’s a great system you can implement, “Miracle Morning” by Hal Alrod.

So my challenge to you here is to set one big, audacious goal for 2020. So for Jess and I, our big goal for 2020 is to buy four more rental properties this year. Now, I don’t know exactly how we’re going to get there. We were able to achieve our initial goal in 2019 of getting one property, thanks to the help of many others that were able to wrap around their expertise and really provide us with their time and their wisdom and help us get there. We wouldn’t have gotten there alone. So four is a big stretch goal. I really don’t know exactly how we’re going to get there, but we need to be thinking about it. We know this is a goal for our family for a variety of reasons. And so we initially talked about two, and we decided the stretch goal for 2020 is going to be four. So we’ll see where it goes, and that’s the big goal that we have for 2020. So No. 4 again here, we’re talking about setting one big stretch goal for 2020.

Now No. 5 is get a coach. And I think it’s fitting here that we have this as No. 5 because in order to do all the things that we’ve talked about, these are big things we’re talking about for 2020 when we talk about Nos. 1-5, getting clear on your “So what?” or your why; building or modifying your monthly plan to get there, obviously that’s the budget piece we talked about; getting a side hustle off the ground; and setting a big, audacious goal for 2020. We can see here in No. 5 why a coach could be so valuable. And what we really see when it comes to coaching as it relates to personal finance is that the evidence is getting more and more clear that a financial planner, a financial advisor, a financial coach, their value really is not to help you choose the right investments or to get the best returns because ultimately, we live in a world here in 2020 where you can pretty much learn anything that you want. And what the evidence is really showing, specific even to investing, is that the more passive you are in that process, typically the better the returns that you will have. So a financial planner, in my opinion — and we offer financial planning, so this obviously is front and center for us — it’s not about hiring a financial planner like us to be able to say, “OK, we’re going to outperform the market,” or “We’re going to help you choose the best investments that are going to beat another financial planner.” Now, we obviously want to have success in that area, and we’re going to help you fine-tune your investments, but that’s just one part of the financial plan. And when you think about this bigger picture, the why, the “So what?,” the budget, all the goals that are swirling around, a financial planner and the value of a financial planner is really having an accountability partner and a coach in the process that can help you prioritize and achieve all of these different goals that are out there.

And I can speak firsthand that the power of this and working with Tim, as Jess and I have worked with him over the past couple years. Now, this also reminds me of Episode 124, where we talked with Dr. Daniel Crosby, the author of “The Behavioral Investor,” somebody who studies behavioral psychology for a living. And really what I took away from his book and his interview is that at the end of the day, the two most important things that you can do when it comes to your financial plan is to automate your financial plan, which we talk about extensively on Episode 057, and to hire a coach to help ensure that No. 1 barrier, which is often yourself, isn’t getting in the way of having success with your financial plan. Automation and a coach. And that has exactly been my experience as I reflect back on the past several years. Automating our financial plan and having a coach has helped us to achieve our financial goals.

Other episodes that I would highlight here that you could get additional information, episodes 015, 016, and 017, Tim Baker and I did an entire series on financial planning and the different types of planners that are out there, questions to ask financial planners, how they get paid. In Episode 054, we talked about the importance of fee-only and fiduciary and why that matters. And in Episode 055, we talked about why you should care how a financial plan charges. We also have a great resource if this is something you’ve been thinking about, here we are at the turn of the new year, not a better time to make this decision, to make this a priority in 2020. We have a guide we have created, which is nuts and bolts to hiring a financial planner. And you can get more information and download that guide for free at YourFinancialPharmacist.com/nutsandbolts. And if you are somebody listening today that is ready to take this step or ready to learn more to say, is this the right fit for me? Please head on over to YFPPlanning.com, again, that’s YFPPlanning.com, and you can schedule a free discovery call with Tim Baker where you can talk out loud what our services look like, talk more about your specific financial plan, and determine whether or not it’s a good fit for you going forward. And again, that’s a free discovery call. And you can get that going at YFPPlanning.com.

So before we wrap up today’s episode, I want to remind you again about the giveaway that we’re doing for this month. We’re giving away five winners each a one-year YNAB subscription, a copy of “Your Best Year Ever” by Michael Hyatt, and a copy of “100 Side Hustles” by Chris Guillebeau. You can go to YourFinancialPharmacist.com/giveaway to enter that today.

So here we are in 2020. We’ve got a fresh start ahead for this new year. And I hope you will consider these five things that we talked about as a way to have a successful 2020. And of course here, with these five or others that you think about, it’s all about being intentional with your financial plan, all about dictating your financial plan rather than letting that financial situation happen to you. And so I think it’s important to look back on 2019, to look at the trends, to look at the successes, maybe look at the challenges or failures as well. But looking back, while that is important, I don’t think we want to dwell too much on 2019. We need to look ahead to 2020 and say, “What did we learn? What went well? What can we replicate? What can we do a little bit differently? And what’s the game plan going forward for this year so that at the end of 2020, we will look back and be able to say, ‘Job well done?’”

So I hope you have a great rest of your week. Thank you so much for joining me on this week’s episode of the Your Financial Pharmacist podcast. And as always, if you like what you heard on this week’s episode and you have not done so already, please take some time to leave us a rating and review in iTunes. We’d greatly appreciate that as that will help others find our show. Have a great rest of your week.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

Facebook Linkedin Envelope

Compliance/Legal

Disclaimer/Privacy Policy

Firm Brochure (ADV Part 2)

Brochure Supplement (ADV Part 2B)

YFP Planning CRS

Subscribe to YFP Money Matters and get financial tips, money resources, and the latest podcast episode sent straight to your inbox every Friday morning!

© Your Financial Pharmacist Planning LLC, 2024 All Rights Reserved

Careers
Privacy Policy
Disclaimer / Advertising Disclosure