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YFP 233: Tax Moves to Consider Before 2022

Posted on December 9, 2021November 2, 2022 by yfpadmin

Tax Moves to Consider Before 2022

On this episode, sponsored by APhA, Paul Eikenberg, YFP CFO and Director of YFP Tax, discusses how pharmacists can optimize their tax strategy.

Episode Summary

As we approach the end of the year and will soon enough find ourselves amid tax filing season, it’s a great time to revisit end-of-year tax strategies and considerations to optimize your tax situation. Today on the Your Financial Pharmacist Podcast, host Tim Ulbrich sits down with IRS enrolled agent and our own Director of YFP Tax, Paul Eikenberg, to discuss how pharmacists can optimize their tax strategy. Paul has supported hundreds of pharmacists in tax filing and tax planning to maximize their deductions and avoid overpaying. Today he kicks us off with the important distinction between tax planning and preparation, as well as why it’s worthwhile to understand key numbers such as marginal tax rates and AGI. You’ll hear him describe common tax blunders he sees pharmacists making and how to avoid them, including realizing an unexpected balance due on April 15. We cover some of the factors that contribute to that making non-qualified IRA or 401(k), 403(b) contributions and missing key deductions in credits, and the listener gets a look into the two exciting tax services we have on offer to help pharmacists looking for a tax preparation and/or tax strategy and planning solution. To top it off, we’ve even got a comprehensive tax checklist for you to get the absolute maximum out of your tax benefits. This is one conversation you don’t want to miss.

Key Points From This Episode

Paul and Tim catch us up with some exciting happenings in the YFP tax team.
Understanding the important difference between tax preparation and tax planning.
Differentiating your marginal tax rate and effective tax rate as a decision-making tool.
Paul explains the implications of AGI and how to arrive at that number.
Touching on the complicated system of student loans and pursuing loan forgiveness.
Some common tax blunders that you should look out for!
Key credits and deductions that you might not be taking advantage of.
What is going to be available moving forward with child-care and dependent care.
Explaining donor-advised funds and a potential strategy around bunching.
Two exciting tax services: reporting only and year-round planning and reporting

Highlights

“Make sure your tax exposure and your tax strategy line up with your financial goals. The biggest thing that tax planning really does is provide some peace of mind that you’re not making mistakes and that you’re making good decisions.” — Paul Eikenberg [0:08:05]

“Our best practices with YFP is to advise people to, instead of putting the money in the [retirement] funds during the course of the year, put it into an investment account.” — Paul Eikenberg [0:23:26]

“The rules on business expenses are, they have to be business-related, ordinary, necessary, and not extravagant. Ordinary is, if someone else is doing the same type of business, they’re going to have the same type of expenses necessary.” — Paul Eikenberg [0:25:09]

“The donor-advised fund makes it easy to [maximize tax benefits]. Then, you can spread that money out and make the donations from the fund you control. It’s like having your own foundation.” — Paul Eikenberg [0:34:36]

Links Mentioned in Today’s Episode

End of Year Tax Checklist

Project your income, taxes, and withholding
Maximize your HSA contribution
Know your FSA carryover limits and spend accordingly
Consider 529 account contributions
Document side business expenses – Mileage Logs**
Have and execute a charitable contribution strategy
Correct any over contributions to 401K/403B/IRAs
Manage your capital gains
Look for IRS Letter 6419 Advanced Child Credit & Notice 1444-C
Have a system for organizing your tax documents
Select & engage your tax preparation method

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey, everybody. Tim Ulbrich here, and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week I had the chance to sit down with YFP Director of Tax and CFO, Paul Eikenberg to discuss how pharmacists can optimize their tax strategy. Paul’s an IRS enrolled agent and has supported hundreds of pharmacists in both tax filing and tax planning to maximize their deductions and avoid overpaying. As we approach the end of the year and will soon enough find ourselves in the midst of tax filing season, it’s a great time to revisit end-of-year strategies and considerations to optimize your tax situation.

Some of the highlights from my interview with Paul include him explaining the important distinction between tax planning and preparation, why it’s important to understand key numbers such as marginal tax rates and AGI. Hearing him describe common tax blunders he sees pharmacists making and how to avoid them. Some of these blunders include realizing an unexpected balance due on April 15, and some of the factors that contribute to that making non-qualified IRA or 401(k), 403(b) contributions, and missing key deductions in credits. Finally, hearing Paul’s end of the year to-do list, your notes already prepared and ready to go for you to take action.

Before we hear from today’s sponsor and then jump into the show, at YFP, we know that filing your taxes and figuring out how to optimize your tax strategy can be overwhelming and stressful. That’s why YFP Tax has opened up its tax filing services to 125 additional pharmacist households this year. Unlike other firms, YFP tax isn’t focused on just completing your tax return. Instead, they provide value care and attention to you and your taxes. Because they work specifically with pharmacists, they’re familiar with aspects of your financial plan to have an impact on your taxes like student loans, benefit packages, side hustles and more. You can visit yourfinancialpharmacist.com/tax to learn more and to put your name on the waitlist. Again, that’s yourfinancialpharmacist.com/tax.

Okay. Let’s hear from today’s sponsor and then we’ll jump into my interview with Paul Eikenberg.

Today’s episode of the Your Financial Pharmacist Podcast is brought to you by the American Pharmacists Association. APhA has partnered with Your Financial Pharmacist to deliver personalized financial education benefits for APhA members. Throughout the year, APhA will be hosting a number of exclusive webinars covering topics like student loan debt payoff strategies, home buying, investing, insurance needs and much more. Join APhA now to gain premier access to these educational resources and to receive discounts on YFP products and services. You can join APhA at a 25% discount by visiting pharmacist.com/join and using the coupon code, YFP. Again, that’s pharmacist.com/join using the coupon code, YFP.

[INTERVIEW]

[00:02:54] TU: Paul, glad to have you back on the show.

[00:02:57] PE: Hey, Tim. Good to be here.

[00:02:59] TU: Question, are you ready for another tax season? Feels like we – you, really, and the team just wrapped up things from last year. It’s been a busy year, right?

[00:03:07] PE: That’s how it feels too. We just finished October 15th, the last of our extensions and are trying to build the capacity this year to do all our internal returns and 125 more.

[00:03:22] TU: That’s exciting stuff. In addition to the work that you’re doing as the director of tax and leading that initiative at YFP, the team is also growing. We’ve got some folks that are coming on board. Tell us about those exciting developments.

[00:03:34] PE: Aurielle was coming on board full time this year. She worked with us last year as a contractor and I’ve worked with her in a previous business venture. Really excited to have her come on board, and help smooth out the processes and build capacity to do more returns. Then Ryan Griffin, who’s a pharmacist and loves to do taxes on the side is coming back this year and working with us again. We’ll be adding some – one or two other contractors that we’ve talked to this year are interested in joining our team. It should be a good group to increase the capacity and help us do a better job for more people.

[00:04:23] TU: I know. Tim and I are super grateful for your contributions to what has made the service that it is today for the other folks you mentioned, Arielle and Ryan. We really believe that tax for obvious reasons, we’re going to talk about much that on the show today is such an important thread of the financial plan. That tax planning and preparation is really best if we embed that into the financial plan and can consider that, both looking back in the filing as we’ll talk about, but also in more the planning, and look ahead and the strategy side of it.

That’s the theme for today’s show, how to optimize your tax situation. Great time, as I mentioned in the introduction, end of the calendar year. Some opportunities to wrap some things up, get some momentum in the new year. We’re going to talk through some of the differences of tax planning and prep, key numbers and terms to understand, some commonly made blunders. We’re certainly not going to address all of these. Some strategies and then a checklist of things to do before the end of the year.

Paul, kick us off. I think, really, with this first part which is the theme, as we think of the others, and this really highlights the intentionality of thinking about taxes. Not only looking backwards, and doing the filing, and the preparation, but also more of the proactive planning. Tell us about the difference between tax planning, tax preparation and why that difference is so important.

[00:05:44] PE: Tim, the way I like to look at it, tax preparation is just historically recording what happened last year. We as tax preparers take your information, prepare a return. There’s not much of an opportunity to have an impact on your tax liability. There may be a couple of things we can do when preparing your taxes that you can adjust before April 15th. But it’s really difficult to have much impact on the tax liability during that period of time. You have to understand that when you’re dealing with tax preparation, it’s really deadline driven. When we get into February, March, and April, we’re working every hour trying to complete returns, chase down information, review and file.

There’s not as much time to pay attention to what could have been done, look at future strategies and really think through how to improve the situation. One of the frustrating things on our end is, when you’re preparing a tax return, that’s the time a lot of problems pop up, and are discovered and it’s too late to fix a lot of times there.

You contrast that to thinking about tax planning’s forward focus. For our clients, we do a lot of tax projections in the middle of the year or towards the end of the year. That’s a great time to look for things that can have more impact on tax liability. It’s just like financial planning. If you’re making the right decisions, they compound over the course of years. Tax savings builds, it helps put more money in your investment and savings accounts. It can help you leverage the income you have if you’re making the right tax choices. The best time to do that is not during the tax filing season.

From planning, we help people avoid common mistakes. Make sure your tax exposure and your tax strategy lines up with your financial goals. The biggest thing that tax planning really does is provide some peace of mind that you’re not making mistakes and that you’re making good decisions about how you’re approaching all t he tools you have to mitigate your taxes.

[00:08:27] TU: Yeah. I think our community will appreciate working and living in the healthcare environment, where we see the importance and value of preventative health care versus that that’s more reactive. We think about tax preparation, got to do it, it’s required, right? Or else the IRS is going to come knocking on the door. The tax planning may not have that same priority in terms of that requirement, but so important in terms of that strategy and what that can mean to the rest of the financial plan. As well as Paul mentioned, the peace of mind.

Paul, as we think about key numbers that folks need to know, certainly there’s a lot that we could talk about here. But I think starting off with differentiating marginal tax rate and effective tax rate is really important because these are terms that we throw around. We’ll talk about AGI here in a moment, adjusted gross income. But I think when people are hearing about certain strategies and benefits, or maybe they’ve been told by a preparer before about what their tax rates are, may not have a full understanding of what that term means. And then what the implications are of how to use that or how helpful it is or is not as a decision-making tool. Define for us marginal tax rate versus effective tax rate, and specifically why that marginal rate is an important decision-making tool.

[00:09:40] PE: Well, let’s start with marginal rate. The marginal tax rate, think of it about as the percentage of tax you’re paying on the last dollar you earned and the next dollar you earned. There’s a lot of misconceptions on how the tax brackets work. Most pharmacists are in the 24% or 32% tax bracket. That doesn’t mean you pay 24% on all your income. You’re being taxed at 10% for some, 12% for the next layer, 22% for another layer and then you’re paying 24%. They average out to what’s commonly known as an effective tax rate. Think of effective as the average tax rate.

But the marginal rates, really the number when I talk to people, that’s the number I want them to remember. What is your marginal tax rate? Because that’s your decision-making number. If you want to make a charitable contribution, if you’re in a 24% federal tax bracket, $100, that’s deductible to a charity, you’re going to save $24 in tax. It helps make decisions on traditional versus Roth contributions. You’ll understand what the tax ramifications are.

Today, HSA contributions would save you in taxes. Just having that marginal tax rate, knowing what it is helps make a lot of decisions on earning more money, or how the deduction is going to affect you. When I talk to our clients, that’s one of the most important numbers I want them to remember is where they fall in that marginal tax rate.

[00:11:33] TU: In ballpark numbers, Paul, knowing that, of course, it’s dependent upon one situation, whether or not they live in a state where there is tax or is not. Ballpark numbers, what do you see in terms of many of the clients from a tax perspective of the marginal rate and the effective tax rate?

[00:11:52] PE: When we looked at federal alone, a high percentage of our clients are in the 24% marginal tax rate and see their effective rate in the 17%, 18% area. State taxes, you can live in Florida, Tennessee, Texas and you have zero income tax. California, you see people 9%, 10%. Maryland, when you add in the local tax, you’re up to eight. It’s everywhere between 0% and 10% for the states. You need to calculate that in with the federal for really what your marginal rates are going to be.

[00:12:40] TU: I think the other key number for folks to make sure we’re defining and thinking about the implications would be AGI. When I think of AGI, everyone has likely heard of whether it’s considerations around student loan payments, or phase-outs for certain credits or deductions. Often, those are referenced according to someone’s AGI and the phase-outs based on AGI or adjusted gross income. Paul, tell us what is the AGI. How does that connect to one’s income and what’s subtracted from the income to come up with the AGI and then some of the reasons why that AGI number is so important?

[00:13:18] PE: Let’s talk about what the income is. Gross income, you add all your wages, dividends, interest, if you have capital gains, side business income, any money you’re bringing in, typically gross income. They’re what’s known as above-the-line deductions. The most common things we see are HSA contributions, 401(k), 403(b) contributions. They reduce your AGI. Reduce that gross income, gives you the adjusted gross income. Teachers will see some educator expenses. Residents will see student loan interest that can come off of there. But those are commonly referred to as above-the-line reductions and affect the AGI. You take all that income, reduce them by the above-the-line deductions and you get your AGI.

Now, where we see that really come into effect are student loans, where payments are based on income and will also lower AGI, lowers your payments. Lower payments increase the value of the forgiveness program. They do have a big effect on a lot of pharmacists. It’s a number that we work with people to manage as best they can. Make sure they’re using all their tools to take advantage of those programs.

The other thing you’ll hear a lot are phase-outs. This year, the child credits get reduced when a married filing joint couple’s AGI is above $150,000. You start to phase out there. Child care credits, start phasing out or phasing down. They don’t phase out at $125,000 AGI.

There are a lot of things we see our clients are affected by AGI. There are cases where contributing a little bit more to an HSA or make more into a retirement program can not only affect that marginal rate you’re paying, but can substantially affect some of the credits that would be available to you. The other thing that AGI is a factor in, is your long-term capital gain rates. It’s an important number to manage and work into your tax strategy.

[00:16:03] TU: Yeah. Paul, a couple of things I want to highlight that you said that are really important. Your comment just a moment ago about depending on where you’re at with AGI and some of the phase-outs, it might be helpful to make an HSA contribution, 401(k), 403(b). Obviously, depends on someone’s personal situation. But that highlights what we just talked about a few moments ago of really the differentiation between the preparation and the planning.

If we’re simply going through that preparation and we realize what’s been – and perhaps it’s too late, maybe we make an adjustment for the future. But if we’re planning and proactively looking ahead, we have an opportunity to project where those rates are going to be. And then what are some of those levers that we could pull to really maximize that situation.

The other thing I want to mention to make sure we don’t gloss over, and I think we’ve done so much of this at clients at YFP Planning that perhaps we take it for granted, is that student loans for good reasons, they’re very complicated. Unfortunately, the system is probably more complicated than it needs to be. Tax preparers and accountants may not necessarily be really well versed in student loan repayment strategies, and the intersection of the student loan repayment strategy and tax planning and preparation. We’ve gotten that feedback so many times, of folks that may have talked with someone else and didn’t understand the student loans or got conflicting advice. I think, really making sure for folks specifically that are pursuing loan forgiveness, that you’re really considering how that tax strategy is interfacing with that student loan repayment. Because there are some situations that, filing separately versus filing jointly, that may not be intuitive from a traditional tax planning preparation standpoint, do make sense when it comes to loan forgiveness.

[00:17:41] PE: Yeah. It will almost always cost you more in taxes to file separate. But there are so many cases that we deal with the savings and the benefits on a student loan, just more than make up for it. Substantially more than make up for it in some cases.

[00:18:00] TU: Next thing. Paul. I want to pick your brain on was, some common tax blunders that you’ve seen and things that folks may be on the lookout for. We’re not going to go through an exhaustive list or we’d be here for a long time. But a few things I want to highlight, probably one of the more common things I think we see, and perhaps leads to some headaches for those that are going through the filing phase, is realizing that they were under withholding. Tell us about that, Paul, and why that may be and some of the things that folks can be thinking about to prevent that.

[00:18:33] PE: Yeah. It’s one of the more painful things for both the tax preparer, and the client is when you say, “I know you’ve got a $5,000 refund last year, but this year, you owe $5,000 in taxes.” We see big swings when maybe you got married this year, and your W-2 is now filled out, married, filing joint and it’s not filled out in a way that your employer takes into account your spouse’s income. If you switch jobs in the middle of the year, sometimes the W-4 just don’t match up and you’re under withheld. If you’re working side jobs, if you’re not completing that tax withholding form correctly, you’re employed, both your employers are not taking into account the wages you’re earning at that secondary job.

Multiple jobs, spouse’s earnings not being calculated in are common things. The other items that kind of cause and contribute to that is, maybe you have self-employment earnings and you’re not only got income tax on that, but you’ll have the self-employment tax. If you had capital gains or stock options, sometimes those are going to sneak up and cause a tax liability you weren’t thinking about. This year, you’ve really got to be prepared in thinking about, if you receive the advanced child credits since July, and your AGI is over that phase out, some of that money or all of that money is going to have to be repaid. There’s a chance you weren’t eligible for any of that. You really need to be prepared if you’re getting it and you know your income, your AGI is going to be over $150,000. You should be thinking through whether that might be causing you a problem.

[00:20:36] TU: We’re running out of time, Paul, for folks to opt-out of any of those payments, have they been receiving them.

[00:20:41] PE: December is the only one you can opt-out now, and I believe it’s November 29 that you have to do it by. Just be aware of that one hit. That could cause some unexpected problems.

[00:20:56] TU: Better to find out in November, December than March or April.

[00:20:59] PE: Yeah. That’s what we always say is, if we can identify the issue in October, November, we have six months to be ready for the tax bill. If you find out in March, we’ve got to be ready to pay it right then and there.

[00:21:16] TU: That being a common blunder, unexpected balance due on April 15 as you mentioned, less than ideal for both the preparer and the client. The other bucket here would be non-qualified IRA or 401(k), 403(b) contribution. So tell us more about how this happens and some of the headaches this can create.

[00:21:32] PE: Switching jobs or having multiple jobs is where we’ll see the 401(k), 403(b) contributions go over that 19-5 maximum. A lot of people just put the percentage in. If you work for the same employer all year, they usually stop at the maximum. But if you’ve got multiple employers, they are unaware of what amount the other one has put into it.

Usually, if you discover this before December 31, it’s not that difficult to have the funds given back. But W-2s can be adjusted properly and you avoid some of the more difficult and time-consuming ways to correct it, if you don’t discover it till the end of following season. Knowing that it’s a problem before the end of the year and getting it corrected can save penalties and save you from having to go through the amended returns.

With IRAs, with pharmacists, the phase-outs, it’s more than likely you’re phasing out on your ability to do traditional IRAs. There are limitations on SEP IRAs. There’s a misunderstanding of what the rules are on them. Especially the SEPs, you really don’t know until you do your tax return. How much you can contribute to a SEP is very common. We see people contribute to traditional IRAs. SEPs that are over what they can contribute. Roths as well, and there’s a lot of hoops to jump through to correct it after the fact, where it’s better – our best practices with YFP is to advise people to, instead of putting the money in the funds during the course of the year, put it into an investment account. When we get an exact number, which you qualify for, you’re able to put those in the IRAs up till April 15th and we can deal with actual numbers rather than guessing what you qualify for.

[00:23:53] TU: Then having to correct it later, potentially.

[00:23:55] PE: Yeah. We’ve had people that have had to file two, three years of abundant returns to correct over contributions to IRAs.

[00:24:06] TU: The third bucket of potential blunders would be missing deductions and credits, of course, that may be applicable to folks. There’s lots of deductions and credits to consider, whether that’s childcare credits, adoption credits, tuition deductions, property taxes, charitable contribution. We’re not going to go through all of those. But Paul, are there some of these that jump out of common ones that we see folks overlooking or not taking advantage of?

[00:24:31] PE: Yeah, refis in home purchases. A lot of times when you’re purchasing a home, you’re paying your property taxes in advance and that gets overlooked frequently. Are the property taxes paid at the time of settlement? If you did refi or have a home purchase, you want to have that settlement sheet available to go through and see if it helps with itemized deduction. Side business expenses, if you have a side hustle, document everything you think is a legitimate expense.

The rules on business expenses are, they have to be business-related, ordinary, necessary, and not extravagant. Ordinary is, if someone else is doing the same type of business, they’re going to have the same type of expenses necessary. If you think of it as anything you are spending to get customers or grow how much business they do with you, there’s the argument that that’s a legitimate business expense. Their cell phone, internet cost, some of your continuing education, are all things that can legitimately be switched to a schedule C business. Not all of it, but a percentage of it that you can make a case or business expenses.

Then, one of the things, if you’re not maxing out your HSA, you should be matching out your HSA. People leave dollars on the table with the HSA contributions.

[00:26:15] TU: I think it’s just a good reminder, Paul, as you mentioned, side hustle expenses and the guidelines in the IRS that they have to be business-related, ordinary, necessary, not extravagant. We’re seeing more and more clients at YFP Planning, more folks in the YFP community that are pursuing side hustles or generating additional income from the W-2 income. Certainly, something to be thinking about and planning for, again, hopefully proactively. Which is a good segue into talking about some strategies to optimize one’s tax situation. You’ve already mentioned a couple and we’ve talked about some of these at length on other episodes.

You mentioned HSAs as low-hanging fruit. We’ve talked before about HSAs in the podcast. We’ll link to that in the show notes. You mentioned the side hustle expenses, and we talked briefly about the child tax credit. A couple others that I would like to focus on, Paul, starting with the child care credit, since this was an increase that we saw in 2021 and may be applicable for many that are listening. Tell us about that child care credit and the changes that we’ve seen this year.

[00:27:15] PE: Yeah. This was part of the recovery program. Right now, it’s only been increased for 2021. But you know, we expect that the next legislation that comes through is going – this is going to be a prime factor in it. Child care costs in 2020, you were able to take a credit for up to $3,000 for one child, $6,000 for two or more children. Most pharmacists qualified for 20% credit on those. Two kids, you are qualified to get up to a $1,200 credit. 2021, the amount that the credit is based on it is now $8,000 for one child, or $16,000 for two or more. Maximum credit is $3,200 for most pharmacists this year. For the child care credit, in 2021, you’re going to be looking at probably a 20% credit on $16,000 of expenses, $3,200 hours. Most pharmacists with two children or more. That’s what’s going to be available.

It’s a substantial increase in the amount of credit that’s available and it reflects – it better reflects the actual cost of childcare that we see, then that $3,000 and $6,000 power plant. That’s going to be a good benefit to a lot of the clients we work with. The other thing to look at is the dependent care FSA. That’s a great benefit that we see available to pharmacists that a lot of them are taking advantage of. But you can shift. The limit was $5,000. It was increased to a maximum of $10,500 that can be taken out of your wages and reimburse you for the child care expenses. The advantage of doing it this way, over taking the credit is, if you’re in a higher marginal tax rate, then the 20%. It’s better to have it in the dependent care FSA.

The other big advantage there, two advantages is, it reduces your AGI. The money that is withheld from the W-2 is not subject to the FICA tax. You could save another 7.65% there. It’s a great program if your employer offers it. Not all employers have increased the limit to $10,500. You really need to check what’s available to you through your employer. But if you have it, and you’re paying child care expenses, take advantage of it.

[00:30:09] TU: I’ve heard you say before, Paul, this is one of the more underutilized benefits that we see. Obviously, for those listening that have children, between the childcare credit, the dependent care FSA changes and the child tax credit, lots to consider here. And making sure we’re taking advantage of some of those opportunities.

[00:30:24] PE: Definitely.

[00:30:25] TU: The other thing too, and we won’t go into detail on today’s show, because we’ve talked about it several different times in the podcast related to 529s. But again, on the theme here of children and the context of college savings, that’s another optimization strategy to consider. Obviously, taking advantage of some of the state tax considerations and benefits there. We’ll link to previous content and 529 in the show notes.

Paul, I do want to wrap up this section on benefits talking about a topic that we have not talked about in detail on this show. Tim Baker and I did a question on ask YFP CFP on donor-advised funds, but we didn’t get into the strategy of bunching and some of the nuances of the donor-advised fund. For those that are looking at charitable giving opportunities, tell us more about what is a donor-advised fund and what is the potential strategy around bunching versus not bunching.

[00:31:19] PE: Donor-advised fund is an account you can set up, [inaudible 0:31:26] have an account. There’s a lot of faith-based organizations that have donor-advised funds available. But basically, you make your charitable contribution to that fund. Then you’re the one that controls how it is distributed from there, and it can be distributed over a period of years. It’s tax-deductible in the year you put money in. But it’s an opportunity, it gives you some tax advantages and gives you an opportunity to be more strategic about how you give.

One of the things that it does is, it makes donating appreciated assets easy. I have a fun setup and I can donate stock that I’ve had a significant gain on. When I do that, I’m not paying capital gains tax on the stock I’m donating. Let’s say I paid $5,000 for a stock that’s now worth $10,000. I get a $10,000 charitable deduction when I switch that over. I don’t pay $5,000 capital gain tax. It is one of the best ways to maximize the power of your donations to do more with less.

Donor-advised funds makes that easy and all that money is deductible when it goes in there. Now, that becomes a big advantage when you start talking about a bunching strategy. A lot of people, when the 2018 tax change came in and the standard deduction was raised, are kind of on the edge of being able to itemize or not itemize. When we talk about a bunching strategy, it’s, let’s say bunching charitable contributions in odd years. Instead of making a $5,000 contribution in 2021 and 2022, I’ll make a $10,000 contribution to the donor-advised fund in 2021. I get all of that $10,000 deductible in that 2021 year. That may put me $5,000 over the itemized deduction limit. The next year I take a standard deduction.

It is possible, without changing the amount of money donated in those two years, that I get an additional $5,000 worth of the standard and itemized deduction added together for the two years. Could be as much as $5,000 more than if I donate the money $5,000 one year and $5,000 the next.

[00:34:28] TU: Just by grouping those together, the dollar amount didn’t change, but putting them together maximizes the tax benefits.

[00:34:35] PE: Yeah. The donor-advised fund makes it easy to do that. Then, you can spread that money out and make the donations from the fund you control. It’s like having your own foundation. There are a lot of different options out there. There’s different investment opportunities with the money in it. There can be minimums, some different costs. But you put money in there, the capital gains on money left in there grow without tax. We see people who have stock options that have gone through the roof, can really do an amount of good, and wind up 50 cents on a $1, sometimes, of being able to increase the value of their contributions by that much.

[00:35:29] TU: My hope, Paul as we’re hitting the surface on several different optimization strategies is that folks aren’t feeling overwhelmed, but hopefully an opportunity to say, “Wow! How can I better strategize my tax situation?” I think this again, comes full circle and highlights the benefit of really more of the strategy side of the tax binding in addition to making sure we get that preparation taken care of.

We’ve got a checklist of things that we think you should be thinking about before the end of the year. We’re going to link to these in the show notes. These include much of what we talked about on the show around HSAs, and thinking about FSA carryover limits, 529 contributions, side business expenses, capital gains, preparing for the tax preparation phase, organizing documents. We’re going to put that list in the show notes, which will hopefully help wrap up the year and head into the new year with some confidence. I think that’s a good segue, Paul into what we are offering at YFP tax as two different options to help pharmacists that are looking for a tax preparation, and/or tax strategy and planning solution.

Paul, tell us more about our two options, the reporting only, and the year-round planning and reporting, and what folks can expect from that service and where one or the other may be a good fit.

[00:36:47] PE: We kind of talked about in the beginning, the tax preparation reporting only is just doing your historical tax return and meeting with you and just talking about is there anything you can do that may change the tax situation for the year. The reporting only is good for, if all your income is coming from W-2, if you don’t have a business or planning on having one soon, don’t have real estate income or any substantial retirement or investment accounts, at this point, all your income comes from inside the country, that may be a good fit for you. You’re really not getting the expert advice, you’re getting preparation and kind of basic information on what happened last year and not so much of the future. That’s a fee. We’ll have a base fee, and if you require additional schedules, there may be additional cost if you move from one state to another, maybe some additional costs. It’s more flat lay transaction, we prepare your taxes.

What we’re introducing this year is a year-round planning, which, if you’re self-employed, if you’re thinking about starting a business, have that side business, if you get K-1s from partnerships or LLC, real estate holdings, if your investments have grown and your retirement accounts are nearing that $100,000 mark, maybe there’s things that you’ll have options that somebody else may not. Multiple streams of income, income from outside the US, these are all things that probably point you in the direction of needing a year-round planner.

The expert advice will have a bigger effect on your situation, and having a long-term partner to help you reach your goals. That’s kind of what we’re positioning to work with you on a continuous basis. When we do this, we’ll meet with you, do the taxes and the tax review. We’ll talk about the upcoming years as well as last year. We’ll meet with you during the course of the year to do a projection of where you are and talk about things that we can do in the third quarter, fourth quarter to prepare and make sure we’re ready for the following year. With that, we’ll have a team available when you have questions during the course of the year to answer those questions. That is where we’re geared to have the most impact for clients and pharmacists that want to work with us. I think that we’re well situated and prepared to be a long-term partner and that’s what we’re looking to do.

[00:39:54] TU: Again, two options we have, as Paul outlined, the reporting only and the year-round planning and reporting. More information about both, you can find at yourfinancilpharmacist.com/tax. We’re excited to be opening up the tax services to 125 pharmacist households. First come first serve. Many may already be aware that we do tax planning preparation for those that are clients of YFP planning. We’re going to be opening up these 125 spots to those that are not currently clients as we’ll be doing that work already for those that are clients. Process works and go to yourfinancialpharmacist.com/tax to learn more information. You can join the waitlist.

Early January, we’ll be sending out an engagement letter. You can then upload your documents, complete a questionnaire. We are a paperless tax processing and system. Then from there, there’ll be a completion of a preliminary return and then an opportunity to review that information, sign it and then e-file it.

More information in yourfinancialpharmacist.com/tax. Paul, grateful for your time, expertise contributions on the show and looking forward to the upcoming tax season.

[00:41:02] PE: Thanks, Tim.

[OUTRO]

[00:41:03] TU: Before we wrap up today’s episode of Your Financial Pharmacist Podcast, I want to again thank our sponsor, the American Pharmacists Association. APhA is every pharmacist ally advocating on your behalf to address the issues that are affecting you most, such as PBM, and payment reform, value over volume and provider status. Make sure to join a boulder APhA to gain premier access to financial educational resources and to receive discounts on YFP products and services. You can join APhA at a 25% discount by visiting pharmacist.com/join and using the coupon code, YFP. Again, that’s pharmacist.com/join, using the coupon code, YFP.

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archive, newsletters, blog post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements.

For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

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YFP 232: How Mindfulness and Money Intersect with Cynthia Knapp Dlugosz

Posted on December 2, 2021November 2, 2022 by yfpadmin

How Mindfulness and Money Intersect with Cynthia Knapp Dlugosz

On this episode, sponsored by Thoughtful Wills, Cynthia Knapp Dlugosz discusses the intersection between mindfulness and money.

About Today’s Guest

Cynthia Knapp Dlugosz is one of the first national board-certified health and wellness coaches in the United States. She received her coaching training through Duke (University) Integrative Medicine and served as an instructor in the advanced certification program. Cynthia offers training and coaching in mindfulness, health, and wellness on a private practice basis through Being in Balance Coaching.

Cynthia speaks frequently on topics related to mindfulness, resiliency and well-being, work/life integration, time management, and health behavior change. She also shares this information on her blog, Pharmacy Work/Life Matters (www.pharmacyworklifematters.com).

Cynthia has more than 20 years of experience in mindfulness-based practices. She has studied and attended trainings with a number of prominent teachers, including Jon Kabat-Zinn, Kristin Neff, Sharon Salzberg, Elisha Goldstein, Thich Nhat Hanh, and Pema Chödrön.

Cynthia received her pharmacy degree from the University of North Carolina at Chapel Hill and completed a residency in hospital pharmacy at Rhode Island Hospital in Providence, Rhode Island. Before moving to Ann Arbor, Cynthia held increasingly responsible positions at several national pharmacy associations, including the American Society of Health-System Pharmacists, National Association of Chain Drug Stores, American Society of Consultant Pharmacists, and American Pharmacists Association.

Episode Summary

In the last few years, a much-needed light has shone on the issues of resilience, burnout, and wellbeing in the pharmacy industry and we are finally seeing strategies of mindfulness and meditation entering mainstream conversations in an impactful way. But can these practices extend into the realm of financial wellbeing too? Today we are honored to sit down with the enigmatic Cynthia Knapp Dlugosz, pharmacist, coach, consultant, and mindfulness expert, to discuss the intersection between mindfulness and money. A solopreneur, Cynthia has always had a personal interest in stress management, time management, and continuing education. In this conversation, she shares how her 20 years of training in mindfulness and meditation apply to her monetary plan and behaviors. The listener hears how her financial struggles early in her career led her to implement changes and behaviors she still depends on today, as well as a simple outline of how to practice meditation to stay in the present moment. Plus, we’ll touch on evaluating the root cause of overspending and over saving and why having a healthy balance is important. This crucial episode explores the intersection of pharmacy, mindfulness, neuroscience, and balanced living – and how the financial piece fits into all of that. Tune in to begin your mindful money journey today!

Key Points From This Episode

Getting to know Cynthia, starting with the pivots and arc of her career.
Discussing how her 20 years of mindfulness training began intersecting with pharmacy.
How the topics of burnout, resilience, and wellness have only recently gained traction.
Cynthia shares her turning point from irresponsible money management to intentionality.
Using the analogy of the Weight Watchers approach to get real with your spending.
A step-by-step outline of how she first took control of her finances.
How our relationship with money has changed in the age of automation and plastic.
Defining mindfulness and how meditation trains us to live in the present moment.
The various purposes and ways meditation can be practiced.
Debunking a common misconception about meditating.
Exploring different ways to use breathing as an anchor for your attention.
How mindfulness meditation is like a bicep curl.
How being present and mindful is key to making the right decisions with your money.
Peeling back the onion of our emotional baggage and unconscious script around money.
The importance of acknowledging our underlying fears and getting curious about them.
Dealing with the changing goalposts on the question, “Do I have enough?”
The concept of hedonic adaptation; we get used to what we already have.
Setting yourself up with a solid foundation and then giving yourself permission to spend.
Cynthia shares some resources from her website, and some exciting future offerings!

Highlights

“Think about mindfulness as the ability to pay attention to what is happening in the present moment.” — Cynthia Knapp Dlugosz [0:25:12]

“About 50% of the time, we’re either thinking about things that have already happened, or we are planning or rehearsing for things that have yet to happen. Only about half of our time is focused on what’s actually happening right in front of us.” — Cynthia Knapp Dlugosz [0:25:40]

“Shift your thinking about meditation. Think that the objective is that your mind is going to wander and your goal now is to notice that it’s wandered and to bring it back.” — Cynthia Knapp Dlugosz [0:27:36]

“The idea is to train your attention. You sit in meditation, you focus on your breath, you realize that your thoughts have wandered away. That is your win. Your win is that you’ve noticed and then you return your attention, and then you wait, you notice again.” — Cynthia Knapp Dlugosz [0:28:47]

“So much of what we do with money is automatic, unconscious, or conditioned.” — Cynthia Knapp Dlugosz [0:30:44]

“You should have some amount of money that you feel comfortable setting aside, but that you are setting aside specifically for fun, for now, for doing things. Because you don’t want to get further along your life journey and regret not having done things.” — Cynthia Knapp Dlugosz [0:42:10]

“Set yourself up with a solid foundation. But once you’ve got that foundation, give yourself the permission to have some enjoyment. Otherwise, what is all this for?” — Cynthia Knapp Dlugosz [0:43:21]

Links Mentioned in Today’s Episode

Cynthia’s Recommended Books

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey, everybody. Tim Ulbrich here, and thank you for listening to the YFP podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I had a chance to sit down with pharmacist, coach, consultant and mindfulness expert, Cynthia Knapp Dlugosz to discuss the intersection between mindfulness and money. Some of my favorite moments and takeaways from this episode include Cynthia sharing how her training in mindfulness and meditation applies to her financial plan and behaviors. Hearing her share how her financial struggles early in her career led her to implementing some changes and behaviors that she still depends on today, and evaluating the root cause of overspending and over saving and why having a healthy balance is important.

Before we hear from today’s sponsor and then jump into the show, I recognize that many listeners may not be aware of what the team at YFP Planning does in working one on one with more than 240 households in 40 plus states. YFP Planning offers fee-only, high-touch financial planning that is customized for the pharmacy professional. If you’re interested in learning more about how working one on one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com. Whether or not YFP Planning’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom.

Okay, let’s hear from today’s sponsor that helps make this show possible and then we’ll jump in my interview with Cynthia.

This week’s episode of your financial pharmacist podcast is sponsored by Thoughtful Wills. Let’s take a minute to hear from co-founder, Notesong.

[00:01:40] NT: Hi, there. I’m Notesong, one of the founders of Thoughtful Wills. Our law firm specializes in creating custom estate planning documents that are understandable. We’ve leveraged technology to offer a lower price point than most law firms. Honestly, it’s refreshingly affordable. As our client, you’re in the driver’s seat. We’re here if and when you have any questions or just want our input. Our explanatory worksheet and online interview gathers your answers whenever and wherever is most convenient for you.

As a busy mom of three sweet kids and two fluffy sheepdogs, I totally get it. Life is crazy busy. Who has the time? We designed our firm around that too and we poured our hearts into making our estate-planning process less of a hustle. I invite you to visit thoughtfullwills.com/yfp to learn more. Give us a jingle or drop us a note. We’d love to chat with you.

[INTERVIEW]

[00:02:39] TU: Cynthia, welcome to the show.

[00:02:40] CKD: I am so excited to be here with you today.

[00:02:44] TU: I am as well. Our paths have crossed several times over the last decade through various pharmacy circles. I’m grateful for the opportunity to talk with you about the work that you’re doing to explore the intersection of pharmacy, mindfulness, neuroscience, and balanced living and how the financial piece fits into all of that. Certainly, a very important topic. Before we jump into our discussion around mindfulness and money, tell us more about your career path in pharmacy, both the work you’ve done up until this point, and what you’re now doing with your blog, consulting, and mindfulness programs and coaching.

[00:03:18] CKD: Sure, thank you. Well, I got a pharmacy degree at the University of North Carolina and I came out of a bachelor’s degree program. Choices weren’t necessarily as clear cut back then. The residency programs were really just starting up and there was such a thing as a post-baccalaureate PharmD. A program that was an add-on after a bachelor’s in pharmacy. Not sure that I wanted to pursue the PharmD pathway at the time, I did a residency in what at the time was called Hospital Pharmacy. During the year of the residency, and then the few months that I worked as a staff pharmacist at the hospital, didn’t really think that was my calling.

Fortunately, though, while I was there, there was an ad in the newsletter for the American Society of Health System Pharmacists. They were looking for someone to join the editorial staff of AJHP. If there is one thing I am confident in, it is my editorial ability. I applied for that job, and was fortunate to get it and that moved me to the Washington DC area, to my initial job in a pharmacy, in one of the national pharmacy associations. And I spent then the next, oh gosh, 15 or so years working for various – probably closer to 20 years working for various national pharmacy associations. I worked first for AJHP, and then briefly with NACDS, and ASCP, the American Society of Consultant Pharmacist. Then finally with APHA.

It was while I was on staff with APHA that I met my husband on a parking lot shuttle bus at Dulles Airport. We got married, and he was at NIH wrapping up a fellowship and he took a position at the University of Michigan. That relocated me and him to Ann Arbor, Michigan, where I live now. At the time, this is the late ’90s, I was a telecommuter for a while to APHA. But I mentioned the year just because at that point, telecommuting wasn’t possible the way it is today. I did a lot of – it was like I had a remote office and I went to travel to headquarters maybe once every two months or so. But it was very challenging at the time being a member of a team but not being physically present with the team.

Then I took a brief detour with the University of Michigan College of Pharmacy as their director of experiential training, and decided that really wasn’t my calling. And ended up – this is, by the way, a very – I’m trying to make this as fast as possible, this summary. I ended up at that point making the decision to work on a freelance basis. At the time, I was able to work to do a lot of freelance work with APHA. When I had been a full-time staff person, I actually would manage some people who were working on a freelance basis. They would do a lot of the actual content development meant work on programs. I would manage that development. Now, I flipped to the other side. Now, I was the person developing much of the content and someone on staff was managing me.

Because of the contacts I had made along the way, and especially because I had a history, I neglected to mention that much of the work I did in various pharmacy associations was in the area of continuing education. Because of that background that I brought to freelancing, I was able to both work on, again, like this content development for programs, but also occasionally, associations would contract with me to manage some program of theirs. For example, right now, one of the things that I do is manage the student pharmacist P&T competition for the Academy of Managed Care Pharmacy.

I do a lot of different things. In my work, it’s just – I think the easiest way to describe it is that I have a freelance business, and I get contracted to do various kinds of projects, mostly in the area of continuing education. But as you see, that single sentence has a lot that goes into it. That is kind of where I am at now. I still do that kind of freelance work. Now, along the way, going back to the time that I still lived in Washington, DC, and before I started working on it as a solopreneur. I had always been very personally interested in stress management, and time management and in those areas. One of the things that I was introduced to, again, toward the late ’90s was this idea of mindfulness. At the time, kind of very closely connected with meditation. I was introduced to meditation and mindfulness. This is back at a time when many, many people, most people I encountered had no idea what I was talking about and meditation was something still a little bit off the beaten path.

[00:08:58] TU: There was no head headspace and tools, ain’t that right?

[00:09:01] CKD: There was no headspace. There’s none of that. As a matter of fact, most – when I wanted to learn more about this, when I wanted to get more training, to get more understanding, first of all, all of the training that I went through early on, really was rooted in the concepts of Buddhism. I differentiate it from not really what I think of as Buddhism as a religion, but Buddhism as a psychology. It was rooted in these Buddhist concepts, and I really had to go to retreat centers, and especially a place up in upstate New York called the Omega Institute, where I would go and study with teachers.

Over the years, I have studied with teachers like Jon Kabat-Zinn, who is very closely connected with mindfulness in our country, and who is the developer of Mindfulness-Based Stress Reduction program. I’ve done workshops with – I’m dropping these names for any of your listeners, any of the listeners who might recognize them. I’ve done workshops with Pema Chödrön and with Thich Nhat Han. I dropped those names in because, at that time, those were really kind of the leading teachers in mindfulness. I mean, they still are. Then some American-based teachers like Sharon Salzberg and Jack Kornfield, so those teachers.

It wasn’t nearly as easy, or as – I want to say plentiful, the instruction available. I started doing that and again, pursued it over all the years, really on my own. And I would tell some friends about it, and I would make some offers here and there to speak about it. Say, “Hey! I think this is really – I think pharmacists would get a lot out of the information that I’m learning here in this – as I called it my parallel life.” I would be met sometimes with a little bit of eye-rolling or a little bit of like, “Yeah, sure.” Really, not much would come of it. But then I feel like it was around 2018, 2019 and I feel like all of a sudden, in pharmacy, we exploded with the concept of burnout, and resilience, and wellbeing. Not that it wasn’t always there, not that we weren’t paying attention to it. But to me, all of a sudden, it burst forth as an issue that many, many people were engaged with and paying attention to. I remember, at the time, around one particular meeting, I think, saying to a friend who was involved with the meeting, “What do you guys think I’ve been doing for 20 years? Like all of these practices that are right, that are being discussed now and starting to be shared. This is what I’ve been training in for 20 years.”

I have this strong background in mindfulness-based practices and the psychological underpinnings that go with it. And I have increasingly been trying to bring those forth to pharmacy audiences. I do that in one way, in the blog I started, Pharmacy Work Life Matters. And because now I feel like there is some interest. I am also starting to develop some e-courses related to some of these topics, that I hope to launch early in 2022.

[00:12:45] TU: Cynthia, I think you’re spot on. My observation matches yours, that burnout, resilience, wellness have become topics that – they’ve been there in the profession, but there’s definitely been a light that has been shown on those topics, and that we’re having more discussions around. We’re obviously very much interested in the work that we’re doing at YFP, around the connection of the financial part of that. I think and believe from personal experience in talking with many, many pharmacists all across the country, that there is a financial thread that certainly transcends some of these issues of burnout, resilience.

Your career story is relevant, because you shared with me previously that you felt like early in your career, you didn’t necessarily have a good approach to your financial plan, you weren’t necessarily as intentional as you would have liked to be, or at least looking backward, have liked to be. After being in a rut for a while, with spending more than – you ultimately were hoping to achieve the other goals you had in mind, that you had to make some drastic changes for how you are going to manage your money. That you still use some of those techniques today. Tell us more about that journey for you individually and how you realized that you weren’t on the right path financially.

[00:14:02] CKD: Absolutely. Tim, you introduced that topic very kindly. I will be far more blunt in my retelling of it. I got out of pharmacy school, as I said pharmacy school, did the residency. During pharmacy school and I would even say during the residency, I feel like I was kind of on top of – essentially on top of my money stuff. With the residency, kind of getting like that, like half pay I think of it as. Our salary was about half what we’d be making if we had been on a staff pharmacist. It wasn’t like I had a lot of room for error there.

Then I took the position and move to Washington DC and I think a switch clicked in my head that “Hey! I’m earning money now. I’m going to be – it’s my time to be spending money, finally. Finally, I’m a free and easy high earning gal.” I really wasn’t internalizing the reality that how much I was making at the time, while it was a very respectable salary was not a salary that went really, really, really far in Washington DC, especially as a single person. As a single person, I mean, I was living alone. No one was sharing the cost of rent, or food, or any of the basics that we all have.

Bluntly, I overspent and I got myself into – not only do I overspend, but I also didn’t really have a good system set up for keeping track of bills and paying bills. Now, we are scrolling ourselves back to a time where this was all paper-based, right? This I think is before the internet. Bills would come in, I would sort of get busy doing fun things, I would forget about them and then, oops, my phone would get turned off. Or I would realize, “Oh! Oops! I didn’t really plan well, this month. Let’s delay writing the check for this payment for a little while.” I don’t remember what it was, what like my rock bottom was, that point I hit that just made me say, “Okay. Something’s got to change.” But it was like, really, like there was a time when I realized that my internal discomfort about how I was managing this finally got the better of me.

What I ended up doing was a technique that – I don’t think I got it from Weight Watchers, because I don’t know that I had ever been enrolled in Weight Watchers at that point. But it’s a technique that is often shared with people who are trying to get better acquainted with – get on top of a situation that they’re in. That technique being that you write everything down. Just the way in Weight Watchers for many years, I think still you are encouraged to record everything that you eat. I started recording every single thing I spent money on. It, of course, quickly became apparent that I was spending too much. This is back in the days when this was mostly cash. I shouldn’t say mostly cash, it’s probably a mixture of cash, credit card, and cheque. But it was not nearly as fast or easy to spend money as it is today.

I started writing down everything that I spent. Then as the next step, I created a budget for myself, which was just the kind of budget that is recommended to create. It was putting down all of my mandatory expenses, the fixed expenses, I suppose. How much was my rent? How much should I budget for food? How much was phone and electric, and all of those? Then, what did I have left at the end of the month? I made the decision at that point that whatever was left at the end of the month was what I had to spend. There was no more spending ahead on a credit card. I treated all of my money essentially as cash. Then, I would never carry a credit card balance again. Actually, to this day, I have never carried a credit card balance. Because a credit card balance, let’s face it, it’s a loan, you’re essentially borrowing money that you don’t have, to pay off at a future time.

I don’t mean to summarily dismiss the utility of credit cards or why you might want to carry a balance. But for my purposes, it was just irresponsible money management. It took – back when I had joined Weight Watchers at one time, this is back at the time when Weight Watchers was encouraging the – essentially what was at that time the American Diabetes Association exchange approach to meal planning, where you counted everything you ate as like a certain number of proteins, a certain number of – I think they call them starches, vegetables, fats, fruits and you had this allotment every day. What you did at the time with Weight Watchers was, this lunch was two proteins, three starches and you colored in your little blocks. At the point that you ran out of blocks, you were done for the day.

During my first few weeks at Weight Watchers, I realized that I had eaten, as I viewed it, all of the good stuff by lunchtime. And all I was left for dinner was vegetables, and it had to be steamed vegetables because I’d already eaten all of my fats. I couldn’t put butter on or anything. After a couple of weeks of this, again, you have a little meeting with yourself in the mirror and say, “Cynthia, if you’re ever going to have anything other than steamed vegetables again, for dinner, you have to figure out a way to do this differently. You have to figure out how to apportion this stuff during the day.” It was the same thing for me with money management.

I realized, “Okay. You are trying to spend far more than you actually have available as your disposable income, so you’ve got to put the brakes on this.” Also, something I would say very, very importantly, that I did at the time, and I go back and I thank my younger self constantly for making this decision. Which is when I was putting – when I was tightening up on my finances like this, when I was really ratcheting down and saying, “Here is really what I have left for my fun stuff at the end of the month.” I made the decision, in addition to retire to 401k deductions, I made the decision to start saving 10% of – I can’t remember at the time if I did it as 10% of what was essentially like my net salary but before bills, or if it was 10% of what was left. But I have a feeling it was the higher one. In effect, I decided to kind of decrease my salary, my take-home pay by 10%. I just squirreled that away, I had – I set up automatic deductions to mutual funds and just never saw that money.

You can imagine over the years, that compounded quite a bit and I’ve been able to do so many – that money made so many things possible for me, because it was money just sitting there that I treated as money I didn’t even really have to spend. I did that as well. After a couple of months of that, I figured out a way to regulate myself to understand like, really, this is what you’re dealing with every month. Let’s just say it was, you have $50 per week to spend, just free and clear on whatever your heart desires here. This is clothes, this is entertainment, this is whatever, whatever might – what I think of as the discretionary spending.

I just had to, I was going to say resign myself to that, but it’s more that I had to align myself to that. Then along the way, as I would get raises, my little pot of money would pop up as I would then run through that budget cycle again. Oh, yay! My fixed expenses haven’t gone up that much, so now I have more discretionary. At least once a year, I would revisit this budget, I would keep really careful records, or at least save the record so I now knew on an annual basis, this is how much I spent for say, the phone. Which these days, I feel like phone costs are more fixed than they were back then. Back then, my bill would vary from month to month, because long distance was unpredictable.

I would figure out how much I had spent over the year, I would divide that by 12 and that’s what I would budget for the following year, and then keep a very close track on that to see. But it was very much this paying attention. Paying attention and understanding exactly what it was that I was dealing with, rather than hoping, which is what I had been doing. Just hoping that what I had was covering what I was doing. And it wasn’t. I had misplaced hope.

[00:23:26] TU: And intentionality just screams through that story of tracking, and paying attention, and automating your long-term savings. As you alluded to, some of that is, I think, more challenging today. When I hear the concept of mindfulness and money, I really think about this idea of making intentional choices that are not just happening. Ones that we think about, we perhaps feel on some level, we can attach an emotion to it. Let’s be real, this is so hard today with everything, essentially being automated and on some level, being transactional. That automation does have value if we can take advantage of it. Some of the things that come to mind, Cynthia is, plastic instead of cash. We never see or feel our paycheck, direct deposit, that we can connect it to the work that we’re doing. We’re saving for the future without the physical act of passing over money and making that conscious decision to delay something now for longer term. Even debt repayment, it’s a number on a screen. You alluded to me before in a conversation that you have a strategy to learn to pause, and not just spend, or save or whatever we’re working on and to make financial decisions in a way that are intentional, that we’re thinking about it and we’re experiencing it.

Tell us more by what you mean by that and if there’s a strategy that you employ for how to actually do that in a day like we’re in today, where so much of this is happening automatically and so quickly.

[00:25:01] CKD: Absolutely. That is, in essence what mindfulness is. I’m not going to offer up any of the official definitions of mindfulness right now. I’d say, think about mindfulness as the ability to pay attention to what is happening in the present moment, maybe elaborating a little bit on this concept of present moment. Our minds naturally wander into the past or into the future. If you ever sit and think about or try to notice what’s happening in your head, there was one study that characterized it that probably about 50% of the time, we’re either thinking about things that have already happened, or we are planning or rehearsing for things that have yet to happen. Only about half of our time is focused on what’s actually happening right in front of us.

If you think about mindfulness then as the ability to be able to focus your attention on what is happening in the present moment, and to notice that your mind has wandered off somewhere else and to bring it back to this focus on the present moment. That is what, to me, that is what meditation trains. It’s not the only thing meditation does. Meditation can have a lot of different purposes and can be practiced in many, many different ways. I believe that for most people, especially most people who are starting out with meditation, unless they are specifically seeking, say spiritual enlightenment, or they are specifically practicing loving, kindness, meditation for various reasons – the most useful application of meditation is meditation that teaches us to notice when our thoughts have wandered, and to return our attention to a point of focus.

If there is one common misconception I encounter when I talk with people about meditation, it is the idea that the goal of meditation is to make your mind go blank or to try to keep any thoughts from coming into sit in this kind of blissful, no thoughts arriving state. And then people get very, very discouraged. They get discouraged when they realize that they’re sitting in meditation and their minds have wandered. They feel like a failure, “I can’t do this. I’m no good at this.” Well, so then what I would say to you, Tim, and what I would say to anyone listening is, shift your thinking about meditation. Think that the objective is that your mind is going to wander and your goal now is to notice that it’s wandered and to bring it back.

Typically, the traditional focus of attention is the breath. That is typically the focus of attention, because our breath is always with us. There are different places where you can experience breath. You might feel the sensation of breath entering your nose, or you might focus on the exhalation and the feel of breath, say like at the top of your lip, or you might focus on just your – as we say in yoga and in meditation, like the belly. Your belly rising and falling. You don’t just have to focus on one thing. You can even count your breaths. You can make it a more cognitive thing. If you’re having trouble with the sensations.

That’s why the breath is often offered up as the first point of focus. You focus attention on the breath and you can find these kinds of meditations in Headspace, in Calm, I’m sure, in any of the online apps. You can find, I mean, in any of the apps, you can also find them online, in many different places. The idea is to train your attention. You sit in meditation, you focus on your breath, you realize that your thoughts have wandered away. That is your win. Your win is that you’ve noticed and then you return your attention, and then you wait, you notice again. As meditation teacher Sharon Salzberg has said, “It doesn’t matter how many times your mind wanders, what matters is how many times you notice and bring it back.”

Then, what you’re doing in meditation – now meditation is more kin to a bicep curl, let’s say. You are training a particular thing. Like with a bicep curl, you’re making your bicep stronger. So that when you are not at the gym or holding a weight in your hand, you will be better equipped to lift something heavy or whatever else your bicep will do for you. The same thing now with meditation, by sitting in meditation, which can – there’s actually a study that just came out this week. Ten minutes a day is a fine amount of time for this kind of formal practice. You are now strengthening your ability during the day to realize that you’ve been carried off somewhere or to realize that your thoughts are not in the present moment.

One quote that I will share with you is from a psychologist named Miles Neil, who has said that “Mindfulness can help us naturally resist the pull of our automatic, unconscious, or conditioned patterns of thought, emotion, and action.” I’ll say that again really quickly, “Mindfulness can help us naturally resist the pull of our automatic, unconscious, or conditioned patterns of thought, emotion, and action.” That to me, is where now we have mindfulness intersecting with money management. Because so much of what we do with money is automatic, unconscious or conditioned. With automatic and unconscious, as you mentioned, there are things we do out of habit. There are things that happen that we’re not even paying attention to these days, especially as you so aptly noted.

We also bring forth with us from childhood really conditioned patterns around money. We all have grown up with money attitudes and those can’t help but affect the way we manage money as adults. Mindfulness can help us realize that we have either started to get – we have fallen into an automatic habit or that something’s happening that we’re not even paying attention to. For example, we are about to – we might notice we are about to hit, click yet again on amazon.com. Not like I’m speaking from experience here, or anything. We maybe will notice, though, that we are about to one click and we can insert a pause. We bring our attention back and we say, “Wait! Okay. Hold on. What’s about to happen? Is this really what I want to do?” If for no other reason than to potentially save yourself a trip out to Kohl’s or Whole Foods or wherever you need to dump off your return these days?

[00:32:15] TU: Yeah. I think so as you’re talking, I’m reflecting on how exhausting this internal dialogue can be. You mentioned minds naturally wandering, you mentioned a study that 50% of the time or so maybe we’re present. I was thinking about financially, that seems generous. I think that because of some of the emotional baggage, whether that’s from childhood, money scripts that we carry, whether it’s societal pressures around money. I think it’s even maybe that much more difficult. I was thinking about, what are some of the things in the last 24 hours that have been on my mind financially, and things that were coming to mind questions were – just being aware of them like, are we saving enough for retirement? Or, counterpoint, maybe are we saving too much at the expense of experiences and enjoying the present moment? Should we be paying off the mortgage fast? Are we investing in enough experiences for our family? Are we on track with our kid’s college expenses? What’s the game plan for the next car? Have we appropriately protected ourselves from an emergency?

What really is disturbing as I – even just more aware of that is like, we have a plan for all of those things. Like we’ve thought through them, we’ve planned for them. On one hand, I look at those questions and I’m like, “My gosh! That’s frustrating. I talk about this daily, like I feel like we’ve got a good plan.” But I think that acknowledgement is so important, like just being aware, aware of some of those things, and then start to peel back the onion of like, “Where does that come from? What is the root of some of those feelings and pressures?” I think for me, personally, as I start to get two or three layers deeper, I can then start to uncover where is the fear or anxiety coming from this. Often I’ve uncovered it’s not rational, and then I can see it for what it is, and really try to address it at that. But I really feel like that awareness is such an important first step.

[00:34:14] CKD: Well, Tim, you’ve just hit on a really important concept, which is that – I think you are spot on that when you start peeling back some of these things, almost always what we find at the bottom is fear, some kind of fear. The more we can be present to what is going on, we can notice what’s going on and then as you were describing, can start to investigate what’s going on. We probably will eventually get ourselves back to some kind of fear and then we can explore the fear. What is this fear? And as you said, is it irrational fear?

I still, with everything I know about both mindfulness and actually money because I’ve – after my initial, let’s call them the follies of my youth, I have done a lot of self-teaching about money management. I’ve learned a lot from financial advisors, various things over the years. I feel like I am pretty financially literate. But even now, I seem to harbor this deep-seated fear of ending up pushing a shopping cart around with my few remaining belongings, because I have no money. Now, where does this come from? It fascinates me. I didn’t grow up – I grew up in a pretty firmly middle-class family. We were not wealthy, but we never wanted for any – I don’t remember ever wanting for anything as a child. Why is this a fear? Unless this might just be like the fear of public speaking. It’s one of the fears that we’ll end up with no money, for no rational reason.

[00:35:55] TU: Yeah. That’s a really good point, Cynthia. I think something I often ask myself is, where does this come from? And again, getting more to that root cause. I think that in my experiences financially, and working with many pharmacists, and even my own journey, we often talk about overspending and we talked a little bit about some of the automation that can make that challenge. We’re not feeling those expenses, perhaps we can pause, that might help some of that. But I also see folks, myself included, that have challenges on the other side of the spectrum with which is giving themselves permission to spend. I think we’re getting some of that here, as we talk about some of the fear anxiety, is there ever enough? But here’s the thing, is there ever enough? I mean, that is a – we can crunch some numbers and do all of that. But that feeling, if you’re not really trying to uncover what is the source of that and determine, is that a rational thought or not? That can be crippling.

I think that’s another component that we need to be thinking about around this conversation of mindfulness is both, not only behaviors that allow us to become successfully long-term, making sure that we’re taking care of our future self. But as Tim Baker, our director of financial planning says so well, it can’t just be about taking care of our future selves. We also have to make sure that we’re living a rich life today. I think there’s a balance here, correct?

[00:37:14] CKD: Absolutely. The concept of whether it’s enough, “Do we have enough?” That is such a difficult, a such a difficult and fraught topic. Because first, I’m sure you’ve gathered during our conversation that I am further along in my life journey. I’m a little bit older. When I was first starting out, when I made – when I sort of got myself back on the right track, and especially was absolutely contributing to a 401k plan to the point where I would get the match. Like I maxing out what I needed to do. I think at the time, we were being advised like – let’s say it was 10%. If you’re saving 10% of your income. Then somewhere along the line, it seemed to ratchet up to 20%.

Then lately, I’ve been getting things from one of the mutual fund companies I invest with, where they have this thing like how many times your salary should have saved at various points in life. I remember looking at where I was and how much I was supposed to have saved. Let’s just say I was shocked, I won’t repeat the exact thing I said out loud. Let’s call it shock. I thought, I don’t have that. I can’t possibly have that. You can’t spring that on me now. Because I don’t – I don’t have any more time to do that. Then somebody else send out a different graph and I looked like I was fine. So then I calmed down a bit.

I share that little anecdote just as an illustration that one, it seems like the goalpost is constantly being moved on what constitutes – I’m making air quotes here – that you can’t see enough. Then another thing that we all have to contend with is this, I think it’s innate, the concept of hedonic adaptation. We get used to what we have and then it feels like it’s not enough. I grew up in a home that was not very large and now I live in a house that I think is about 3,000 square feet. When I moved into this house, I think I we’ve lived here for about 20 years now. This place seemed cavernous to me, and it’s just me and my husband. Now I walk around and think, “Oh my gosh! This place is so small. Really, I think we need like 4,500 square feet.” We don’t.

It’s like, because you get used to what you have, or you see what other people have, and you start to feel again, “enough”, that what you have is not enough. You start always looking for the next thing. It’s very, very challenging to settle yourself around this notion of enough. My feeling is, if you are, if you are following the advice of rational experts, if there is some fight – there tends to be standard financial advice out there, about things you should be doing. If you’re doing that, you are probably as well set as you can be, is my feeling.

Now, using one of my weight loss analogies, again. I had at one point enrolled in Jenny Craig, because I had gained a little weight, I wanted to lose some. And it occurred to me, you know, what, Jenny Craig just handed me the food, and all I have to do is eat it and it worked. One of the things, though, that I really appreciated about that plan was that every day, I had a treat, they just worked it in that every day you had something that was, as I see it, absolutely no nutritional value whatsoever. It was just fun. That’s something I carry forward in now my just, you know, eating regular food again. I carry that forward with me.

Every day, I allot about 10%, 15% maybe of calories to something that I just want, you know. Whether it’s my sugar cookie flavored popcorn, or a cookie, but I have to keep it in that calorie allotment. I can’t eat a pack of cookies. I can eat my 150 calories worth of cookies. What that does for me, and what I believe it does, in general, we will move this over to money in a moment. But it, first of all, means that you don’t build up this sense of deprivation. Like I can’t eat cookies, I’m not allowed to eat cookies. As a matter of fact, I eat cookies every day or whatever it is, and I give myself permission to do that and I enjoy it.

Knowing that you have that, it’s a bit of a treat, but it’s not an excessive amount. That, I believe that same concept can be carried over, should be carried over to money management. You should have some amount of money that you feel comfortable setting aside, but that you are setting aside specifically for fun, for now, for doing things. Because you don’t want to get further along your life journey and regret not having done things. I don’t mean that, again, it’s this balance between – I’m not saying overspend, because “Woohoo! We don’t know what’s going to happen tomorrow.” I mean, obviously, we don’t, but that doesn’t mean you every year go on around the world cruise, and sink yourself further and further into debt. It does mean that you have if you have allotted a pot of money to this, enjoying the present, then spend it. Because if you save it up, it’s just more money that you’re saving. Maybe you’ll spend it one day, but maybe you won’t.

As long as you’ve taken care of everything else, right? As long as, you know what I mean, Tim, as long as the things that you would be advising people to do, that I think you, and the podcast, and just everything you’re doing does so beautifully. Set yourself up with a solid foundation. But once you’ve got that foundation, give yourself the permission to have some enjoyment. Otherwise, what is all this for?

[00:43:31] TU: You said it just beautifully. I mean, that is something that our planning team, I think does such a tremendous job with the clients, which is – if we put the two spectrums, yolo on one end and squirreling money away, we’re miserable and we wake up 30 years from now, and you’ve got $4 or $5 million.

[00:43:48] CKD: It’s going to go to your children.

[00:43:50] TU: Yeah. We’ve got to find this balance between taking care of our future selves, making sure we’re living a rich life today. One step further on that, I would encourage folks, we do this a lot with the clients of YFP Planning is, actually setting up some of the buckets that name those funds accordingly, and allows for that visual permission to spend. One of the powerful things, if you’ve got all your money in one account, and we’re not separating – okay, this is earmarked for normal monthly bills. This is earmarked for emergency fund. But this small sliver, whatever that number is earmarked for those things that really derive some of the greatest joy or experiences, or give – whatever would be, those splurge type of items that folks like to do as well. Giving yourself the permission to spend is also incredibly, incredibly important.

Cynthia, this has been fantastic. It’s a conversation that I’ve been wanting to have for so long, because it’s something that I’ve been wrestling through as a topic individually for several years. I think, in this industry where we talked so much about X’s and O’s of the financial plan, I think this is such a refreshing aspect as we think about the intersection between mindfulness and money. Thank you so much for coming on the show. Where can folks go to further connect with you and learn more about the work that you’re doing?

[00:45:09] CKD: Absolutely. Sure. First, let me thank you. It has been such a pleasure to share this information. I look forward to sharing more of it. I mean, I am now getting to the point where I’m hoping to share more where people can actually access it outside of me, say speaking at a meeting. If you visit my main website, which is cynthiaknappdlugosz.com – are you going to have that written out somewhere?

[00:45:37] TU: We will. We’ll link it in the show notes.

[00:45:39] CKD: Excellent. That’s a lot of letters that I really hesitate to try to like spell out for people right now. If you visit cynthiaknappdlugosz.com, that will show you a couple of tiles that are the main things that I do. I mentioned earlier, I’m a solopreneur. I have the kind of a whole bunch of buckets really, as we were talking earlier. I have a bunch of different buckets that I do. On that page, you can click over to or you can visit directly my blog, pharmacyworklifematters.com. On there, you can sign up. I think I call it “Sign up for my newsletter” or “Sign up to be alerted to posts.”

I am working on converting that to an actual newsletter, where, originally I was just sort of letting people know, “Hey! I finally posted another blog post.” Now, I’m moving that to an actual newsletter, where I will start alerting folks to things that I am about to be doing or launching. One of the first things I am working to get up is what is going to be a free, I think I’m fashioning it as a four-week introduction to mindfulness and meditation, where I’ll try to set you up with a meditation practice. The kind specifically that I’ve been talking about that is focused on training attention. When I say four weeks, it’s just that every week, I’ll introduce something new and then you will be able to practice it during the week. Like I said, if you sign up for that newsletter, I will start announcing things through there and at least, that meditation program will be free. I look forward to seeing you.

[00:47:12] TU: Great stuff. We will link both of those in the show notes. I hope folks will check those out. I’m personally looking forward to the meditation mini-course, course, whatever you want to call it. Count me in as you launch that.

[00:47:23] CKD: Fantastic.

[00:47:23] TU: Again, appreciate your time and for sharing some of your insights and expertise on the YFP podcast. Thank you so much.

[00:47:29] CKD: Thank you. It’s been a pleasure.

[OUTRO]

[00:47:32] TU: Today’s episode of Your Financial Pharmacist podcast was sponsored by our friends at Thoughtful Wills. If you haven’t created your estate plan yet, we urge you to reach out to Notesong and Nathan. They draft custom estate planning documents like wills, trust, healthcare directives, and durable powers of attorney that fit your situation and reflect your wishes. This is key. These are custom legal documents created and reviewed by actual attorneys.

Thoughtful Wills created two cut-to-the-chase packages designed for pharmacists who are ready to get their estate planning in order. You’ll really appreciate their dedication to approachable lawyering and they charge about half of what most law firms charge for the same documents. These documents are such a gift to your loved ones. If you haven’t created them yet, please just get it done. Reach out to Notesong and Nathan by going to thoughtfulwills.com/yfp. Go ahead and book a meeting with them. They’ll take such good care of you.

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it’s not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive, newsletters, blog post, and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements.

For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

[END]

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YFP 231: From Pharmacist to Calligraphy Artist Working with A-List Celebrities

Posted on November 29, 2021November 2, 2022 by yfpadmin

From Pharmacist to Calligraphy Artist Working with A-List Celebrities

On this episode, sponsored by Thoughtful Wills, pharmacist and entrepreneur Rosie Chhun, talks about how her side hustle turned main hustle afforded her the ability to pay off $180k in student loans.

About Today’s Guest

Rosie Chhun is a pharmacist by day and calligrapher by night. She is the artist behind Wander Crafter, a calligraphy and engraving company that specializes in live events and brand activations. Her floral calligraphy engravings make her stand out amongst other artists, allowing her to work with A-list celebrities like Jay-Z, Chrissy Teagan, and Kris Jenner as well as brands such as Netflix, HBO, and Neiman Marcus!

After a major downfall of not passing the CPJE and losing her dream residency, she fell into a deep depression and used her art to create joy in her life and pay off her student loans. After 3 really long years of hustling at the pharmacy and the creative business, she paid off her $180,000 debt and is making big moves in her calligraphy career! She just launched a YouTube channel to teach engraving, a calligraphy business coaching program, and is continuing to work with luxury brands.

The secret to success is to get clear on your messaging and create what you genuinely love creating.

Episode Summary

Dealing with an overwhelming amount of student loan debt is a common story that most pharmacists can identify with, but today’s guest took control of her story by turning her creative hobby into a flourishing business that paid off her debt, all while teaching herself to be financially literate along the way! Today, we speak with the resilient and tenacious Rosie Chhun, a pharmacist, calligrapher, and business coach who grew her side hustle into a thriving one-woman business called Wander Crafter. What started as a crafty hobby to help with the slow repayment on her $180,000 student loan debt has transformed into a calligraphy and engraving business that has since caught the eye of clients such as Jay Z, Chrissy Teigan, Kris Jenner, Netflix, HBO, and numerous other luxury brands. In today’s episode, Rosie talks us through her process of experimentation and settling on her successful business model, how she cut her overhead costs to virtually nothing, and the two pillars on which her business was built. Listeners hear about her journey through pharmacy school and into the field, the burnout from the pandemic that pushed her into taking the entrepreneurial leap, and, finally, the deep sense of reward and achievement she gets from coaching and engraving at live events. If you ever wondered how to turn your passion into a reality, then tune in to get your weekly dose of inspiration today!

Key Points From This Episode

Hear about Rosie’s roots as a pharmacy technician and her journey in pharmacy school.
Having to re-evaluate how she was moving forward and paying off her $180,000 debt.
How paying the minimum hardly touched the interest accruing every month.
How Rosie’s love of calligraphy intersected with starting a business to pay off her debt.
What galvanized her to take action and become financially literate.
Reinvesting back into her business every time things were going well!
Arriving at her successful business model with virtually no overhead costs.
Just getting started, and continuing to learn and evolve as things go on.
The two different pillars that make up Rosie’s business: live events and coaching!
The gradual transition from an expensive hobby to a flourishing business.
How the stress and burnout of the pandemic was the final motivator to leave pharmacy and commit to full-time entrepreneurship.
Developing resiliency and not being afraid to take calculated risks.
Intentionally growing as the demand increases and getting a supportive team.

Highlights

“By paying the minimum [on my student debt], I was hardly even touching the interest that was accruing every month. That was really painful. I realized, even if I had refinanced and did all the things right, I would be in debt for a very, very long time.” — Rosie Chhun [0:08:35]

“Everything is online. I don’t do any additional excess costs if I don’t have to. Really, the only expense that I have right now is gas because I have to get to the location. It’s really nice.” — Rosie Chhun [0:17:36]

“If there’s anyone listening out there, I would say, don’t wait until you’re at an existential crisis to turn your hobby into a business.” — Rosie Chhun [0:25:06]

“There [are] a lot of things that I learned in pharmacy school that I would not have learned out in the real world if I had just entrepreneurship from the very beginning.” — Rosie Chhun [0:27:22]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey, everybody. Tim Ulbrich here, and thank you for listening to the YFP Podcast where, each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I had a chance to welcome Rosie Chhun onto the show, a pharmacist and entrepreneur who owns a successful calligraphy and engraving business called Wander Crafter. During the interview, Rosie and I discuss how her side hustle turned into the main hustle, afforded her the ability to pay off $180,000 in student loans. We also discussed how a couple of difficult scenarios right after the completion of her PharmD led her on the path to starting her own business. Finally, we discussed how her business went from idea to a hobby, to a successful venture that has allowed her to work with A-list celebrities like Jay Z, Chrissy Tegan, Kris Jenner, and brands such as Netflix, HBO, and Neiman Marcus.

Before we hear from today’s sponsor and then jump into the show, I recognize that many listeners may not be aware of what the team at YFP Planning does in working one on one with more than 240 households in 40 plus states. YFP Planning offers fee-only, high-touch financial planning that is customized for the pharmacy professional. If you’re interested in learning more about how working one on one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com. Whether or not YFP Pining’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom.

Okay. Let’s hear from today’s sponsor, and then we’ll jump into my interview with Rosie. This week’s episode of your financial pharmacist podcast is sponsored by Thoughtful Wills. Let’s take a minute to hear from co-founder, Nathan.

[0:01:43] NK: My name is Nathan Kavlie and I’m one of the founders of Thoughtful Wills. Our law firm spends a lot of time thinking about the process of estate planning. There’s no way we can get around the yuck of death. So instead, we focus on being lawyers that you’ll actually enjoy working with. We pride ourselves on being approachable and then we take the extra time to draft documents that are actually understandable. We pair that with technology to make the process cheaper and more convenient. Please visit our website, thoughtfulwills.com/yfp and poke around, then book a meeting with us, please. We are genuinely excited to chat with you.

[INTERVIEW]

[00:02:21] TU: Rosie, thank you so much for joining the show.

[00:02:23] RC: Hi, Tim. I’m so excited to be here. Thanks for having me.

[00:02:26] TU: Well, I am really excited to have you on the show and to talk about your pharmacy and entrepreneurial journey. We recently connected via email where you reached out and shared your story of paying off $180,000 and becoming debt-free, while also building an incredible calligraphy business. I shared this story with the YFP team. They loved hearing about your story and couldn’t wait to bring you on the show to share that story with the community. For starters, congratulations on paying off your debt. We’re going to get more into that here in a little bit. But to get us started, back us up a little bit into pharmacy. Where did you go to school? When did you graduate? What drew you into the profession?

[00:03:04] RC: Yeah. I actually started off as a pharmacy technician back in 2009. I worked in a hospital for about four and a half years while during undergrad and just getting experience. I took a couple of years off and applied to pharmacy school and wound up going to University of Washington and Seattle in 2013. Graduated in 2017 and then started the business around 2018 when I realized I needed something else to really pay off the amount of loans that I had incurred, along with some hiccups along the way, which we can talk about in the future or in a couple of seconds, I guess.

[00:03:41] TU: Absolutely. I want to talk about the debt accrual phase for a moment while you’re in school. I’ve shared on this show before that, in my own journey, paid off a couple $100,000 of debt. The debt was racking up, but I really didn’t think that much about it. It felt a little bit like monopoly money, to be honest and it didn’t get real for me until that first payment came due after the grace period was up, six months after graduation. Talk to us about how you viewed your loans when you’re in school. Was it something that you thought, “You know what, I’m going to be able to pay that off later, not really worried about it”? Or was it in the back of your mind throughout school?

[00:04:16] RC: There was a lot of different phases, I feel like. When I was in school, I definitely had it in the back of my mind and that was one of the reasons why I decided to go out of state. I’m originally from California. I live in Long Beach. I did get into USC at the time, but decided to kind of spread my wings a little bit and try to save up some of that monopoly money, if you will. When I was there, the first year, we paid out-of-state tuition, which was around $55,000, I believe for the first year. UDUB had a program at the time if you wanted to claim in-state tuition, you would have had to work 30 hours per week during school. That’s what my roommate and I ended up doing just to prove that we weren’t there just for school. We ended up working and busting our butts for the whole first year, ended up getting in-state tuition for the last three years.

I think at the time of graduation, I had only incurred about 120k, which doesn’t even sound like that much, right? That’s kind of the average these days. Throughout the whole pharmacy school, I was kept thinking to myself, like, “Okay. I’m going to work in a hospital. I’m going to work for a nonprofit. I’m going to get loan forgiveness.” I put in all of the things in place for me to try to get that loan forgiveness over the 10 years of working at a nonprofit hospital. When I graduated, things didn’t work out. I ended up matching to a residency, which was the residency of my dreams. I was so hopeful for the future and ended up moving back to California for. Didn’t pass the licensing exam and so ended up getting kicked out of the program.

At that point, I was hit with a very harsh reality, because the six months are up. Didn’t have a pharmacy job, didn’t have a pharmacy license and I didn’t really know what I was doing at the time. I had no plan and it was a really harsh slap in the face by reality. I ended up getting a grad intern position at Walgreens, which is very fortunate because there’s not a lot of people who get hired into the company as an intern if you weren’t an intern during pharmacy school. I was very lucky there, the store manager who hired me was very generous, very gracious and I’m really thankful for the opportunity for him to give me the job. After I got hired on as a grad intern, I trained for about two or three weeks, ended up getting licensed very shortly after that, and then have been working as a pharmacist since then.

[00:06:55] TU: So you had the residency of your dreams lined up, which many of our listeners know just based on match, rates and how competitive it is, that is difficult in and of itself. So you’ve got that residency of your dreams lined up and things don’t go as planned. You graduate, don’t pass the licensure exam. Obviously, with that comes the inability to complete on with the residency position. You’re able to get on as a grad intern with Walgreens even though you didn’t work with them previously, which is great. Here you are in a very different position than you thought you would be. I think that’s a great intersection then into the business. You’re working with Walgreens as a pharmacist, you have got $180,000 of debt. And to your comment earlier, when it was at $120,000, you said only $120,000. I think that’s where we’re at as a profession. I mean, the median debt loads are now, for today’s graduate, about $170,000, so it’s become normalized, I think unfortunately.

[00:07:49] RC: That’s incredible.

[00:07:50] TU: Yeah. Where did you start to see the intersection between your debt and the opportunity you had with the business and some of the passion you had around the calligraphy work?

[00:08:01] RC: Yeah. When I started working as a pharmacist, finally started doing the 401k stuff, started to get financially literate. Then it was time to pay off some of that loan. I hadn’t consolidated any of my loans yet. I hadn’t refinanced or anything. At the time, my average interest rate for the $120,000 was between 5.6% and 6.5%. I was accruing a lot of interest every single month. By paying the minimum, I was hardly even touching the interest that was accruing every month. That was really painful. I realized, like even if I had – if I refinanced and did all the things right, I would be in debt for a very, very long time.

There was no way that I could pay off that debt without a supplemental income or a side hustle, so I started doing a lot of research. People started saying “You can make an income with this calligraphy stuff.” I started doing calligraphy while I was in pharmacy school in 2013. That was just as a hobby. I would be jotting little things in the corner of my notes during class, I would be like sketching something instead of studying, like I was in calligraphy all the time.

When I finally realized that I could turn that into a business, that was when I started to do more research about entrepreneurship, what kind of calligraphy field I could get into. I would say, probably around the same time that I started working as a pharmacist, I also started this side gig. I played on pretty much every single niche of calligraphy you could even imagine. I did the cards, I did cake toppers, I did banners, welcome signs, wedding signs. All things calligraphy, I have tried and touched on. It wasn’t until, I want to say January 2020, where I actually found my niche of hand engraving. I combined, basically, illustration skills with calligraphy skills and created these beautiful perfume bottles that create amazing keepsakes that people can take home and keep for generations.

[00:10:25] TU: We’re going to link to that in the show notes. Wander Crafter is the business. I hope folks will check it out. It really is, Rosie, beautiful work and it’s incredible.

[00:10:32] RC: Thank you.

[00:10:34] TU: How you’ve been able to apply that gift that you’ve been given. Now, I have to ask, as a father of four boys, and my wife who home-schools our boys is incredibly passionate that they need to learn how to write cursive. So, as someone who does calligraphy and I suspect loves the art of writing, and I suspect learning cursive is probably really fun for you. What do you make of nowadays when sometimes, we’re taking cursive out of curriculums, right? It’s not something that every kid is being taught nowadays.

[00:11:03] RC: I know, yeah. I like tricking my little five-year-old niece into learning cursive.

[00:11:10] TU: That’s great. That’s great. You refinance your loans, you’re pursuing this side hustle, which is allowing you to make some more aggressive payments. Ultimately, we’re going to get these loans paid off. You mentioned just a few moments ago that you weren’t at a point of being financially literate. It strikes me because as I hear you talk, you’re talking about things like loan forgiveness, and interest accrual, and refinancing. Clearly, you’ve invested a decent amount of time and understanding, more information that has helped you on that journey. Tell me more about what you meant by not getting to a point of financial literacy and ultimately, getting to that point. What was the spark for you that really pursued your own learning on that journey to be able to implement those things in your financial plan?

[00:11:53] RC: Yeah. In pharmacy school, they didn’t really talk about financial literacy. Maybe I chose not to pay attention, because in my mind, it was always, loan forgiveness was the solution. When I kept thinking to myself like, “Oh! There’s no way I’m going to be able to get into inpatient if I don’t have a residency.” I think having been in the hospital for nine years, four years of technician and four years of pharmacy school interning, and along with the six months of the residency, I think it kind of just left a bad taste in my mouth too. I just didn’t really want to strive for that anymore, and so I figured, retail is probably the easier way to go, so let’s just do that.

I never really tried super hard to understand, or even learn how to do investing or any 401k stuff, or real estate. Anything like that, I just kept thinking like, I’m not there in my life yet. Because as a student, there’s no way I can make any kind of investment. I just kept thinking like, “I’ll learn it later. I’ll learn it later.” It wasn’t until like, I started working as a pharmacist, got my first figural check, and then had to throw all of it to the loans that I had ignored for six to eight months. Then I saw the big number and was like, “Okay. If I can put $3,000 into this per month, how long is it going to take me to pay it off.” It wasn’t touching it. It wasn’t doing anything. I was like, “Okay. I got to do something about this.”

I started listening to you. I started listening to Dave Ramsey. I started reading a lot, and just having the conversations with friends, and family and asking other mentors and colleagues how they were doing it. That really helped me to kind of build that knowledge base so that I could drop it down faster.

[00:13:49] TU: Yeah, education plus action is power, right? As I hear, you really taking that priority to learn more and then to implement that. And obviously, that ultimately pays off as you’re able to knock out that $180,000 of debt when it’s all said and done because of interest and so forth that accrues when you’re talking about interest rates between 5.6% and 6.5%. Yeah, I mean, it’s crazy. I think that’s the piece. I was speaking with a group, actually, this weekend, and really just highlighting to them that it’s not just that debt that’s occurring from semester to semester, year to year, but you got to factor in also the interest that’s going to accrue over the life of the repayment.

Perhaps it gets decreased through something like a refinance, but it’s a great example where having a plan A, B and C is probably a good idea. Because if folks are thinking loan forgiveness or a certain path, and for whatever reason, that doesn’t work out. What’s the game plan, right? What’s the plan to be able to ultimately knock out that debt?

Tell us, I’m curious as a business owner, often when you’re trying to get a business off the ground, there’s this decision to be made of as you start to see some success. Do I take this money and continue to invest back in and grow the business or do I take this money out as an owner and perhaps apply it towards a goal, such as you are here paying off your debt? As you’re growing your business, as you’re making progress in your debt, tell me more about that decision where you said, “You know what, perhaps I could put this money back in the business and continue to grow. But I’ve really got to focus on the loans.”

[00:15:17] RC: Yeah. I started the business in 2018, tried and failed a bunch of things. We bought the Cricut, which is vinyl. Basically, it’s a little computer that can cut vinyl for you, or fun little paper shapes and stuff. That’s how we kind of started. Then we upped our game and bought a Glowforge, which is a laser cutter. That one’s really cool, because you can cut out shapes with wood or acrylic and little things like that. That was really fun, but that was also a really big investment, especially from – I definitely pulled from my pharmacist salary for that. And just continue to reinvest into the business until I started to really run the numbers and figured out what was truly profitable.

It wasn’t until January of 2020, where I took a hand engraving class from one of my calligraphy mentors and we just hit it off. I loved doing all the hand engraving stuff. Eventually, I figured out a business model where I don’t actually have to supply any of the overhead. With the Glowforge, you have to buy wood, acrylic, and you know all the different colors, and you have to do listings and shipping. It just ended up getting up into all of our profits, and we were making very little for a lot of work. Eventually, with the hand engraving stuff, I created a business model where my clients would actually buy this physical item and send it to me. I would engrave it so I would provide the service, and I would mail it back to them or meet up with them to do a local pickup.

I cut out all the overhead cost and I cut all the shipping. Well, most of it. I still ship every so often. But for the most part, my clients are local, and they can drop by my studio and pick up the engraved item. I ended up cutting out so much of my overhead costs. Now, all I have to do is, I have my supplies already all in one kit. I spend maybe like $10 on nib, like my kit. I’ve already invested maybe like $600 or $700 worth for the machine, and the lights and everything that I need to go on site and engrave for clients in person at events and stuff. Really, I just have a room in my apartment, which I call my studio now, and everything is online. I don’t do any additional excess costs if I don’t have to. Really, the only expense that I have right now is gas because I have to get to the location. It’s really nice.

[00:17:48] TU: That’s a great example, Rosie of often, when I talk with folks that have an idea, there can be some paralysis of trying to think about exactly what is the next step or what might this look like in three or five years. One of things I like that you shared is it took some time, right? You had several different products that you worked through, I suspect in three years, you’ll look back today and say, “Oh, I’ve learned this and this and this now that I’ve had a few more years of experience.”

You’re talking about things like some of the operations, and the equipment, and the overhead. Those things can be so overwhelming at the beginning of an entrepreneur’s journey. But what you did was you got started, right? You had an interest, you had a talent, you had a passion, you had a motivation, which obviously here was paying off that debt. You took that first, sometimes very overwhelming but very important first step, which is, get started and then continue to learn and evolve as things go on.

[00:18:39] RC: Right. Yeah, you just figure it out.

[00:18:41] TU: Figure it out. Right. Exactly. Tell us more about the products specifically or a couple of your main products that you offer at Wander Crafter, and who are the customers. You mentioned some local things and so forth. As you think about your business, the products that you have to offer, the folks that you’re focused on marketing those products towards. Tell us a little bit more about those two things in the business.

[00:19:04] RC: Sure. I have two different pillars that make up my business these days. The first one is live events and that includes luxury brands like Neiman Marcus or Netflix. I’ve also worked for HBO Max a couple of weeks ago for their succession launch. Those luxury companies end up bringing me into the store. Going on-site, and I bring my kit and get dressed up and I create a luxury service for these brands to create a better client experience, and that helps them to sell their products a little bit better, because everyone wants something personalized. There’s nothing more special than seeing your name on a perfume bottle.

Most of the things that I do these days are personalization on mostly perfumes. I’ve done it on like whiskey bottles, water bottles and a couple other stones and things like that. But it is mostly perfumes, just because I think that’s where they have the most profitability.

The other pillar of my business is coaching. After figuring it out for a couple of years on my own, I decided to create a coaching program for calligraphers who want to break into the luxury brand industry. I help them start a business, get over the money mindset. How do you charge for something like this, working on a website, or SEO, photography, videography, and leveraging your social media to create a business model that works for you and helps to bring in multiple clients. Not just luxury brands, but also your local clients as well.

Nowadays, I don’t really do the local clients as much. I tried to focus more my attention on the luxury brands just because that has a bigger return for the time that I put into it.

[00:20:58] TU: Very cool. I hope folks will check it out, wandercrafter.com. We’ll link to that in the show notes. You can see more of the work that Rosie’s done, the engraving, the calligraphy as well as the training program. She’s mentioned the Craft Academy and some items to shop there as well. It is really, really beautiful stuff.

One of the things, Rosie, I like to prod a little bit is, you mentioned before we had hit record that, your pharmacy job was funding a very expensive hobby or business. I think for many folks that are getting started with something, especially something they’re very passionate about, which I think links well to the work that you’re doing here, is that, there’s a mindset shift that happens from, “Okay. I’m going to do this thing that is interesting, it’s a hobby to actually running this like a business.”

What was the transition or the pivot point? Was it the specific markets when you mentioned kind of working with some of the higher end items or the training course? Was it figuring out the messaging or the SEO? What was it that really allowed you to make that transition from a hobby to actually running this as a business?

[00:21:59] RC: Oh my gosh! That’s a really good question. I think the transition, business-wise, I don’t know if there was like an actual, pivotal moment. It was more of a gradual, uphill climb. Until, I mean, to be honest, I think it was just a burnout. I don’t know if I ever mentioned this in any of the emails and stuff that we’ve had back and forth. But during the pandemic, I’m sure you’ve heard a jillion times, it was really hard. The initial panic was really difficult. Because we had to tell doctors like, “No, we can’t give you this Z pack” or tell this family, “I can’t give you 20 Z packs. One, I don’t have any, and two, that’s illegal.” It was a lot of moral decisions that I didn’t have to make before. And then, we kind of got used to that with the mail orders and things like that.

Then the vaccines launched to the public in March of 2021. Honestly, that to me, that was the turning point where pharmacy went from a passion to just painful really. At that point in the business, I was already making probably the same amount as my pharmacist salary. For whatever reason, whether it was feeling guilty for giving up on pharmacy or a duty to help the public or family expectations, I just didn’t have the bravery to really just trust myself with the calligraphy business.

It got to a point where we were doing 30 to 60 vaccines per day, and most of the time, we were by ourselves. It was just one pharmacist for the whole day. It just got to a point where I was completely burnt out. I hated my life. I hated work. The only thing that provided a little bit of light was my business. I just remember like one Friday, I was short on technician and we did 30 vaccines that day. Then Saturday, we did the same thing. At the end of Saturday night, I told my tech, “I can’t do this anymore. I don’t think you’re going to see me Monday.”

Monday came around, I woke up and there’s just this existential dread in my day and I just could not physically get out of bed or go to work. So I ended up calling my scheduler and was like, “Hey! I just don’t feel good today.” I called my doctor and I was like, “I think I need therapy.” Like I’m at a point where I could hurt myself. I could hurt my patients because of not being in it. I wasn’t passionate about it anymore. I went to therapy for a couple of weeks and ended up just double downing on my business, my coaching program, my calligraphy business. From there, it blossomed, it grew beyond what I could even imagine. I mean, if there’s anyone listening out there, I would say, don’t wait until you’re at an existential crisis to turn your hobby into a business.

[00:25:15] TU: Yeah. I hear a big mindset shift that happened. I certainly don’t want to say that there have been positive things related to the pandemic. It’s been a very difficult time for obvious reasons. But here, as you share that story again, for you in that journey and some of that pain that you experienced, personally led to further pursuit of the passion that you’ve had around this work. I hope folks would even go back and listen the last three minutes because, Rosie, like your tone in your voice and your enthusiasm around talking about the business relative to sharing, and I could tell, even self-reflecting on some of my own journey for you. Just a very different vibe, and your voice and your tone.

I think, for folks that are listening that have an idea, whether it’s within pharmacy or something else, whether it’s within the job they’re in or pursuing something as a side hustle, or another opportunity, taking some type of a risk or opportunity that they can pursue. Like having folks around you, whether that’s family, friends, accountability partners, you mentioned providers that were involved that hopefully can pick up on some of those passions, and some of the enthusiasm, some of the things that they’re observing and keep you accountable in that journey as well. Resilience, Rosie is something that really stands out to me as I think back to your sharing of some of the difficulties after graduating from pharmacy school and not passing the licensure exam right away, delay, unable to do that residency. How did that journey and developing resilience through that experience in pharmacy, how has that helped you in the business?

[00:26:44] RC: I think it’s just not being afraid to take risks, calculated risks. Being a pharmacist, I think you do have a little bit of type A, doesn’t matter what kind of personality, but there’s a little bit of OCD in there, and just doing whatever it takes to survive and succeed. I think just being able to – even in pharmacy school, I feel like I learned a lot of skills, whether it was learning how to study, and multitask and manage your time. I think there’s a lot of things that I learned in pharmacy school that I would not have learned out in the real world, if I had just entrepreneurship from the very beginning.

Then even working at a retail pharmacy, I think part of that even comes – that taught me a lot too. Working in retail is really hard. You have to be able to multitask, and manage people and teach people in a way that they will understand, whether it’s different teaching, or learning skills and stuff like that. There’s a lot of things that I still learned working out in the real world and going to pharmacy school that I do apply to the business itself as well.

[00:28:01] TU: One of the things you mentioned, Rosie, before we hit record. We’re recording on the first of a month, and you mentioned you had a really big order come in over the weekend, which is leading to a busy Monday and start to the week for you, which is good problems. But problems nonetheless, when you’re growing, and running a business and you have growing demand and more people want your service. We’ve all heard many stories where sometimes businesses may not keep up with some of that growing demand. Talk to us about, as we look ahead at Wander Crafter, as your products, your services, your time is becoming of greater demand. How are you growing the business intentionally? What steps are you taking knowing that there’s going to be demand that continues to increase? At the end of the day, there’s only one Rosie.

[00:28:49] RC: Yeah, that’s a really good question. I was really literally just thinking about that this morning. How am I going to continue scaling this if I’m the only person who can do the engraving, and the writing, and all that good stuff. Right now, I’m just a one-woman business. I did have an assistant who ended up getting her dream job a couple of weeks ago, so I lost her and I’m really sad about it. I haven’t quite recovered from her leaving me just yet, so I am very hesitant to bring on anyone into the business, whether it’s for social media management or even just assistants, or photography, or anything like that. I am very scared to bring someone on in case someone leaves me again. Maybe you can give me some advice on how to grow your team.

[00:29:39] TU: It’s a work in progress. I feel like it’s one of those things that as you are so passionate about the vision, that you obviously are, and as people really treasure the products that you’re putting out, sometimes you as the business owner, me as the business owner can become the bottleneck of the growth. It’s a hard thing. It’s a hard thing to figure out of making sure that you’re comfortable in that next step, making sure that the quality of the product is to the standard that you want it to be.

But also recognizing that the addition of a team and folks that you trust can ultimately mean a bigger reach and the impact that your work can have. I look forward to watching some of the growth and what happens over the next year or two as you continue to grow in that area.

[00:30:23] RC: Yeah, I’m really excited for where Wander Crafter is going too, the coaching program is taking off, the calligraphy portion of it is taking off too. There’s definitely a high need to hire somebody to take some of that load off so that I can have some kind of a balance in life. But right now, I feel like it’s okay. I’m only working like maybe 20 up to 30 hours a week, which is still less than what I was doing with the pharmacy job, so it’s not too bad.

[00:30:54] TU: And pursuing something that you’re really passionate about, which is awesome. Where can folks go, Rosie to follow your work to learn more about what you’re working on?

[00:31:04] RC: Yeah. I am always on Instagram, so head on over to instagram.com/wandercrafter. I’m also getting really big on TikTok these days, so find me there as well. Also just go to my website, wandercrafter.com. You can find out about the Craft Academy, which is the calligraphy coaching business or program rather. And yeah, just hit me up on Instagram. I’d love to chat with you and maybe give you some inspiration for your own business as well.

[00:31:31] TU: Great stuff. We will link to those in the show notes, the Instagram, the TikTok, the website, the YouTube channel. Really appreciate, Rosie taking time to come on the show to share your journey, and hopefully it’s going to inspire many other pharmacists on their own journey. Thank you so much.

[00:31:43] RC: Of course, Tim. This is a dream. I’ve been listening to you for so long. This is really an honor to be on here.

[00:31:49] TU: So fun. Thank you so much.

[OUTRO]

[00:31:51] TU: Today’s episode of Your Financial Pharmacist podcast was sponsored by our friends at Thoughtful Wills. If you haven’t created your estate plan yet, we urge you to reach out to Notesong and Nathan. They draft custom estate-planning documents like wills, trust, healthcare directives, and durable powers of attorney that fit your situation and reflect your wishes. This is key. These are custom legal documents created and reviewed by actual attorneys.

Thoughtful Wills created two cut-to-the-case packages designed for pharmacists who are ready to get their estate planning in order. You’ll really appreciate their dedication to approachable lawyering and they charge about half of what most law firms charge for the same documents. These documents are such a gift to your loved ones. If you haven’t created them yet, please just get it done. Reach out to Notesong and Nathan by going to thoughtfulwills.com/yfp. Go ahead and book a meeting with them. They’ll take such good care of you.

Furthermore, the information contained in our archive, newsletters, blog post, and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of your financial pharmacist, unless otherwise noted and constitute judgments as of the dates publish. Such information may contain forward-looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements.

For more information, please visit yourfinancialpharmacist.com/disclamer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

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YFP 230: 5 Steps to Get Ready for a Home Purchase

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

5 Steps to Get Ready for a Home Purchase

On this episode, sponsored by IBERIABANK/First Horizon, Tony Umholtz talks through five steps for getting ready for a home purchase.

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.

Episode Summary

If you are considering purchasing a home in the next six to twelve months, today’s episode with mortgage manager Tony Umholtz will equip you with the information you need to prepare for this exciting journey. Tony shares his knowledge about the importance of understanding interest rates, where to find the most up-to-date information on those rates, how to determine your home-buying budget without the lender setting it for you, and criteria used by the lender to calculate your maximum loan amount. Tony also shares the best time to get pre-approved and things to look for in a lender when going through the home-buying process. The discussion covers the five key steps to follow to ensure that you are ready to purchase a home including, understanding the landscape, knowing your budget, getting pre-approval, choosing a lender, and knowing which documents you need to provide once the property is under contract. If you have questions about interest rates, the difference between pre-approval and pre-qualification, the various types of lenders that you can work with, the pros and cons of putting a 20% down payment on a home, the 28/36 rule, or anything to do with credit scores, you’ve come to the right place!

Key Points From This Episode

Why now is a good time to buy a home.
Where you can find out the average interest rates in the home loan industry.
Tony explains what discount points are and why you need to understand them.
The importance of reading the fine print.
Know your budget!
How lenders determine how much they are going to lend.
What the 28/36 rule is.
Tony runs through the pros and cons of a 20% down payment.
How savvy investors look at returns.
Comparing pre-approval and pre-qualification.
The value of a credit report.
How lenders work out your credit score, and why this differs from what you will see if you use a monitoring service.
Examples of the different types of lenders that exist.
Information that you will need to provide to the lender you choose once you have a property under contract.

Highlights

“Lenders look at your gross income. We don’t factor in your after-tax income.” — Tony Umholtz [0:09:23]

“I’m a big believer in being diversified.” — Tony Umholtz [0:10:51]

“The higher your credit score, the better your rates tend to be.” — Tony Umholtz [0:23:12]

“There are advantages and disadvantages for every type of lender that’s out there. So, it’s good to know, get some recommendations, and also to compare the products and make sure it’s a fit for you and that you feel comfortable with the group that you’re working with.” — Tony Umholtz [0:27:20]

Links Mentioned in Today’s Episode

Episode Transcript

[00:00:00] TU: Hey everybody, Tim Ulbrick here and thank you for listening to The YFP Podcast where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I had a chance to welcome back onto the show Tony Umholtz, a mortgage manager for IBERIABANK/First Horizon. During the interview, Tony and I talked through five steps to getting ready for a home purchase. So, for those that are listening and thinking about a home purchase in the next 6 to 12 months, this episode is certainly for you.

On the show, we discuss the importance of understanding interest rates and how you can find the most up-to-date rate information. We also discuss how to determine your home-buying budget and the criteria used by the lender to determine your maximum loan amount. When is the best time to get pre-approved and what is the difference between pre-approval and pre-qualification? And finally, what to look for when shopping around lenders and going through the application process.

Now, before we hear from today’s sponsor, and then jump into the show, I recognize that many listeners may not be aware of what the team at YFP Planning does in working one on one with more than 240 households in 40 Plus states. YFP planning offers fee only, high touch financial planning that is customized for the pharmacy professional. If you’re interested in learning more about how working one on one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com.

Whether or not YFP Planning’s Financial Planning Services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom.

Okay, let’s hear from today’s sponsor, IBERIABANK/First Horizon and then we’ll jump into my interview with Tony.

[SPONSOR MESSAGE]

[00:01:42] SPEAKER: Does saving 20 percent for a down payment on a home feels like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities including high student loan debt, meaning that saving 20 percent for a down payment may take years. We’ve been on the hunt for a solution for pharmacists that are ready to purchase a home with a lower down payment and are happy to have found that option with IBERIABANK/First Horizon. IBERIABANK/First Horizon offers a professional home loan option AKA a doctor or pharmacist home loan that requires a 3 percent down payment for a single family or townhome has no PMI and offers a 30-year fixed rate mortgage on home loans up to $540,250. The pharmacist home loan is available in all states except Alaska and Hawaii. To check out the requirements for IBERIABANK/First Horizon’s pharmacist home loan, and to start the preapproval process, visit yourfinancialpharmacist.com/homeloan. Again, that’s yourfinancialpharmacist.com/homeloan.

[INTRODUCTION]

[00:02:46] TU: Tony, welcome back to the show.

[00:02:48] TU: Tim, thanks for having me. Always good to be here.

[00:02:51] TU: Excited to jump into this episode, you’ve been a frequent guest on the show. Last episode we had you on was episode 216, where we talked about common credit blunders to avoid when buying a home. We’re going to link to that in the show notes and dig in some more detail on that topic as well during this episode. So Tony, give us the update. What are you seeing out there in the housing market? It’s been a wild year, right?

[00:03:14] TU: It has been a crazy year. It really has been. A lot of the same things we’ve seen before in the past, the inventory levels are still fairly tight and rates are still low. The one thing I will mention is you know is more of a timing thing for the time of year in the season we’re in, is the autumn in the fall is typically – there’s a little bit less buyers out there. We have Thanksgiving and the holidays around Christmas. Typically, there are less buyers, a little bit less competition. So, it’s often a better time to buy because there are less buyers you’re competing with.

[00:03:51] TU: I think that may be true for many folks in our community that perhaps we’re shooting for a spring or summer home purchase. Maybe they got delayed because of the inventory issue that is well known that’s out there. So today, we’re going to be digging into five steps that folks can take to get ready for a home purchase. We’re going to be talking through evaluating loan options, finding a lender, saving for a down payment, and running the numbers for your budget. So, if you’re thinking about buying a home in the next 6 to 12 months, this episode is really designed for you. If you think combined is in your future, whether that’s now or down the road, my hope is you’ll be able to pull some tips and lessons away from this episode to help you prepare for that journey.

No need to take notes. You can head on over to yourfinancialpharmacist.com/home-loan. We’ve got an extensive resource at that site. You’ll be able to check out a lot of what we’ve referenced today. So Tony, five steps to get ready for home purchase. Number one, know the landscape. So, before you’ve been shopping around for lenders, it’s helpful to have a general idea of what’s going on in terms of mortgage, interest rates, what the market is. So, what do we generally seeing right now Tony, and knowing these, of course are subject to change, and where can someone go to research those rates?

[00:05:05] TU: Well, it’s a good question here, Tim. The first step, just to kind of get a very broad view of the landscape would be, you can actually go to Freddie Mac, freddiemac.com, and Fannie Mae, they actually post rates, but it’s an average rate. So, it’s an average industry rate. You can also find it like in The Wall Street Journal. Clearly online, you can find it but you would look for the weekly average rate, and by Fannie or Freddie Mac. Freddie Mac quotes typically have points in them. So, you do have to look at the fine print with that, that it’s an average rate, kind of a consensus of the industry to tell you where rates are, like a rough idea of where they are, but they’re often quoted with points. So, keep that in mind, because your lender may quote you something the same or a little higher, but it does not have points. That’s just kind of a good place to start, Tim.

[00:05:58] TU: Tony, I’m looking at those rates right now. So, at the freddiemac.com/pmms, we’ll link that in the show notes. So, showing 30-year 3.14 percent, 15-year 2.37 percent, a five-one-year arm, 2.56. And then what’s neat about this is you can look at the trends over the year, 3 years, 5 years, 10 years. And then also let you know what has changed within the last week or the last year. I didn’t know that about points in terms of how these are reported. Some folks may be looking at these and not thinking about the points or what that means in terms of expenses for them. So, just give us a quick definition of points and why it’s important that folks understand that as they’re trying to compare rates, and perhaps get to that apples to apples comparison.

[00:06:41] TU: Sure. Points are actually called discount points. They’re an upfront fee that the lender will charge and it is often a charge in the form of prepaid interest. And that helps you get a little bit better interest rate. But that is a percentage of the loan amount. So, it can be costly. Let’s say, it’s 0.3 percent of a loan amount, if you’re borrowing $400,000, well, that’s $1,200 in additional fees, you’re going to pay if you were to obtain that loan. So, you do have to be aware of points in fees as that is a big component. And then lenders all have different origination fees. That’s another segment of the costs and those are things that you want to look at too, because not all rates are equal, right? There are a lot of pieces of mail people will get. I’ll just leave it at that. There’s a lot of mailers you get with that will quote these really low rates, but then if you read in the fine print, you’ll see how much fees are charged. So, you really want to be aware of that because your payback period could be so long, and it makes no sense to pay points, and often it doesn’t.

[00:07:49] TU: So that’s number one, know the landscape. Number two, a topic we’ve talked about before when we’ve had you on the show, know your budget, and before thinking about pre-approval, it’s important to know your budget, as well as knowing how a lender is going to determine what they’re going to borrow to you in terms of that home-buying purchase. And those things can be an often perhaps should be different as you evaluate what fits in your budget and the lenders looking at what they’re comfortable in terms of you borrowing. So, down payment isn’t certainly is not the only cost. But Tony, talk to us about lenders, in terms of how they determine how much they can lend to individuals or to couples. And I think here, it’s worth talking about the 28:36 rule.

[00:08:37] TU: Sure. I mean, this step is is critical, right? You clearly want to review your own budget and know what you can and can’t afford, because even if a lender can qualify you for a certain payment, that may not be something you’re comfortable with, so it’s very important to evaluate your own budget. Lenders do look. There is, obviously, the 28:36 rule, and this ties back to what lenders can qualify you for, but often we can qualify people up to a back-end ratio, which is a total debt ratio of 45 percent, sometimes even 50 percent with enough down payment. So clearly, we can often maybe qualify you for more than you want to borrow.

The other component to this too, that’s very important to know is that lenders look at your gross income. We don’t factor in your after-tax income. So, that’s another method that we all look at in our industry. We use your your gross income that you report on your W-2, or the gross income before taxation. Same thing if you’re self-employed, we look at your gross income prior to to income tax. So, that helps people buy homes and afford homes, but it is a factor to consider when you’re running your budget. But historically, those numbers, we do go a little higher. Nowadays, instead of 36 which is – I think, let me just dive into what that means.

So, the 28 percent is called the housing ratio. That’s the total amount of your monthly income that is allocated to a home payment, like a mortgage payment on a home. And that mortgage payment includes your principal and interest, and your taxes and insurance, and any other HOA expenses you might have. So, when you buy a home, you had your principal and interest payment on the mortgage, you have property taxes, that you typically pay 1/12, so a monthly amount of the total amount of property taxes on a monthly basis, and then your insurance. So your homeowners insurance.

And then some communities have what are called homeowner’s association fees, that might be $100 a month or $100 a quarter, just depends on where you live. And those are all part of the housing expense. So, when Tim referenced the 28 percent, what that means is your total income, so let’s say you made it just for round numbers, let’s say you made 10,000 gross income as a household per month, we would use 2,800 as your housing expense. I’m not saying that that’s what you need to do. You can actually go a little higher, and of course, you can go lower. But that’s kind of the metric that historically lenders have looked at.

And then the back-end ratio means your total debt. So, that’s going to be the aggregate of all your other debts. So, your car payments, if you have auto payments, on auto loans, student loan payments, we take your student loan payment, any credit card payments you might have, and any other installment loans you may have. It does not include car insurance. Auto insurance, or cell phone bills, things like that, utilities, it does not include those at this juncture. So, we don’t look at those expenses. But that is going to be the aggregate of all of your debts and you cannot exceed that. We call it the debt to income ratio. So, that’s a very critical metric that lenders look at when they’re evaluating you for your pre-approval. That’s kind of a high level of what we would look at.

[00:12:10] TU: Tony relevant to our audience, if I zoom out for a moment, we’ve seen somewhat of a stagnation of pharmacist’s salaries, obviously, that’s very dependent upon the field and someone’s career trajectory. While we’ve seen a significant bump up in home prices, as well, as you know, I just read an article the other day in the journal about home insurance, homeowners insurance costs going up. So, if we think about what’s involved in that 28 to 36, rule 28 percent, again, being maximum monthly housing expenses, 36 percent would be maximum monthly gross income going to all debts, as you alluded to, and of course, student loan debt, has been going up, as our listeners know, too well.

So, these do have implications for our audience, in terms of understanding these rules, what’s involved and to your comment, just to reinforce it, the number that gets spit out by the lender, may or may not be in line with the budget and the rest of the goals. So, we’ve got to take a step back and determine what makes sense in the bigger picture.

Tony, one of the most common questions we get is 20 percent down, yay or nay? What are the pros and cons of putting 20 percent down? I think the reason it’s top of mind for many is just the amount of time and savings it can take to put 20 percent down. So, if I’m buying a $400,000 home, I stay true to that rule of thumb of 20 percent, looking at $80,000, I’ve got $200,000 of student loan debt, I’ve got other competing priorities. That takes time, to be able to do that. From your perspective, what are some of the things that you think about in terms of the pros and cons of that 20 percent down payment?

[00:13:46] TU: Well, you’re exactly right. It can take a long time to save 20 percent. This is a question that comes up a lot. Let’s start with the pro. Let’s look at the pros first. I mean, clearly, you’re going to owe less on your mortgage if you put 20 percent down. So, your payment would be slightly lower. But it’s not that much lower because interest rates are so low. So, that additional 20 percent is really not buying you much of a lower payment. It might be, maybe $100 a month, or something to that effect, maybe $200 depending on the price of the home, but it’s not going to be a substantial amount for the amount you’re putting down. So, that’s one pro clear, I’m going back to the pros, is you owe less.

The other thing is if you’re not a, for example, pharmacists, we have some programs that you can avoid PMI, which we can address later. But if you’re not, let’s say you’re in my role, you I don’t have a PMI option for my career path. So, 20 percent down would help a lot of people avoid PMI. So, clearly that’s a pro. And then, the other thing you owe less on your mortgage so you have a little bit more margin there. Those would be some of the pros. You can also maybe afford more home, because your payments lower, or you’re allowed a higher debt to income ratio, because I did reference earlier, we can often even get approvals up to 50 percent. Well, if you put 20 percent down, there’s going to be no constraints from the MI company or the lender’s underwriting, for example, they may allow you to go to a higher level, because 20 percent down frees you up. If you have great credit, and you’re putting a nice down payment, you can actually get a higher debt to income ratio, often, approved.

So, those would be some of the pros, Tim, of putting 20 percent down. Some of the cons, clearly, one is just how long it takes to save the funds, and that plays into a whole bunch of other things, too, that I see quite often. Number one, you could use that, those proceeds to pay off higher interest rate debt, because mortgage rates are low plus, the mortgage interest is often tax deductible as well. So, you’re really not even paying the actual note rate you’re paying in many cases, so you could use that extra money to pay off other higher interest rate debt, whether it’s auto loans, student loans or credit cards.

The other thing is home repairs, upgrades, if you’re looking to remodel, it’s very common right now. People will say, “Hey, I want to redo the flooring in the kitchen.” And that gives them greater margin to do that. They’ll have their own money, they can actually get into the home, acquire it with less money down. And then of course, they can do all those things they want to do the house which creates value. One thing just to address with like investment, a home is more of a lifestyle to place to live. It’s an alternative to renting, but if we do work with some savvy investors, too. I have referenced before on this climb. I’m doing this for 20 years. I’m getting kind of old. I have quite a few investor clients. And I’ve noticed over the years that some of the savvier investors look at their returns differently than a lot of us would, right?

For example, just think about this. I mean, the average appreciation, let’s take out the last few years it’s been way above this. But normally it’s like 3.5 percent to 5 percent a year, is kind of historical, average appreciation for homes over time. If you were to find a home, let’s say you bought a 400,000 home, and you put 5 percent down such that’s going to be a $20,000 down payment. Okay. Well, let’s say that house, the following year is worth 420. Well, you just made 100 percent return on your investment. You only put 20,000 down to secure the home. And now your home’s worth 420, you just made 100 percent return in one year. I mean, it’s an incredible return, right?

Where if you put 20 percent down, you would have made roughly a 25 percent return, right? So, it’s still a good return, but not the same return. That’s how a lot of the investors that are out there, look at their returns on real estate. So, institutional investors look at it that way. But even us we can look at that way, you know, because that’s what we invested truly, and we put down $20,000 to buy that 400,000 home. And now we’ve made 20,000 in equity. So, we’ve doubled our investment in that case. Versus if we put 80,000 down, which would be 20 percent down, and we made 20,000 and we got a 25 percent return.

So clearly, the con is you don’t get the same returns, right? Your return is not as high. I think I’ll add one more thing to that with returns is, you could also use it for other investments. For example, the team at YFP, IRAs, Roth IRAs, there’s a lot of other alternatives out there to diversify, instead of putting all your money into real estate. I’m a big believer in being diversified. So, I think, clearly a con, if that’s a lot of your net worth that 20 percent, you’re putting it all into one asset may not be the wisest thing. So, those are just some cons there, Tim, to consider. And I guess, as we compare those options.

[00:19:09] TU: Tony, you’re alluding to two really important concepts that tie into the financial plan, which is leverage and opportunity costs, right? Any purchase and financial decision we make, there’s an opportunity costs or an evaluation of an opportunity cost. Here we’re talking about putting more money into a home that might be used elsewhere. I think that for many of our folks, this is a time to do some self-reflection evaluation as you look at risk tolerance, as you look at other goals that you have, looking at student loan debt, looking at your long-term investment retirement picture. That’s one of the things I think the team at YFP Planning does so well with the financial planning clients is help them look at a decision like a home purchase decision, have these conversations about appropriate amounts of leverage and the other goals that they’re trying to achieve, and then help coach through that decision making while looking at home buying in the context of the rest of the financial plan.

I think this is a good place, Tony, that we just remind folks, that down payment, of course, is not the only expense we need to be thinking about, right? We’ve talked about this on the show before, you know, earnest money, closing costs. So, what you’re going to need in some to come at the table to close, but then also, beyond just the ongoing monthly payment, which you mentioned, the PITI concept. So, principal, interest, taxes and insurance, what about everything else associated with that home purchase? So, whether that’s maintenance, and upkeep, and things that you expect, remodeling, finishes, landscaping, equipment that you need for the home, now that you have that home purchase. Really taking a step back, especially for those that might be currently in a renting situation to say, “What’s the total cost? And are we ready financially to make this decision?”

So, that’s number two, is knowing the budget. Number three is getting prepared -approved. So, once you’ve done some research to understand rates, created a budget, safer down payment and some of the other costs I just mentioned, next up is getting pre-approved. Tony, why is the pre-approval process so important? What is it? And how is that different from pre-qualification?

[00:21:09] TU: Well, the pre-qualification is typically a very easy thing that can be done. But unfortunately, this doesn’t carry a lot of weight. So, the key differences are, an actual pre-approval is going to be when a lender looks at your credit report, and then also looks at your income. So, it’s not just looking at credit, it’s actually asking for a pay stub, for example, and we verified your pay stub. Where pre-qualification, you don’t even run credit, you just put in what your expenses are, and tell the lender what your income is, and say, “Okay, great, you’re pre-qualified”, that doesn’t carry a lot of weight in the real estate community.

We talked to a lot of realtors, they call us a lot of times on offers, the listing agents do when they receive an offer and the buyer will include our letter, our pre-approval letter and ask some – they want to know that the client is qualified because it’s a competitive marketplace, and they don’t want their properties being tied up. So, the key difference is the lender has run credit, has reviewed your income. Those are the key differences there between the two.

The other thing that the pre-approval, I mean, that really brings value that I’ve seen over the years is the credit report. I want to bring this up, because a lot of us follow our credit scores, whether it’s Credit Karma, or a lot of these other monitoring services that are out there. But they don’t truly give an accurate reading of what a creditor sees. They’ll give you a kind of a good idea of what your scores are doing, and like if they’re moving higher, then the trend is probably good for you. But they can often be 20 to 30 points, 40 points even lower than what a lender sees. Because we run all three bureaus, we don’t follow one.

So, the mortgage community runs a report that has all three bureaus, TransUnion, Equifax, and Experian and we use the median score. So, we use the median score of the three to determine your credit score. And the value that I think can come here is, clearly, you know your score, which can determine if you qualify, but also your interest rate, right? So, the higher your credit score, the better your rates tend to be. And some lenders, and not all lenders can do this, but some lenders have the ability to help you with rescoring.

Basically, they have a program where they can tell you what you can do to improve your score. And that’s been invaluable for many people that are home shopping right now that we’ve been able to get them either qualified or into a better program by telling them, “Hey, by the way, if you pay down this credit card, for example, your score will go up 20 points.” Or “If you consolidate this loan or whatever it might be, you can improve your credit by this much.” So, that’s been something that’s been helpful during the pre-approval process, Tim, that I’ve seen lately.

[00:23:56] TU: And that’s a good connection back to Episode 216, Tony, when you and I talked about common credit blunders to avoid when buying a home. Again, we’ll link to that in the show notes, but credit is such an important part of the home buying process for the reasons that you mentioned. So, really looking at any due to shore up credit and making sure that you’re understanding your credit scores and using the right tools, so that you’re not surprised when you get into that pre-approval process.

So, that’s number three, get pre-approved. Number four is comparing lenders. Tony, we know that not all lenders are created equal. Ultimately, we’ve got to make this decision of what lender am I going to work with? What type of loan am I going to pursue? I think sometimes these are recommendations that might come from an agent, might be recommendations that come from a family or a friend or coworker, might be a random internet search. So, I think it’s worth talking about what are some of the things that folks should look for in a lender?

Now, of course here, Tony, you’re representing IBERIABANK/First Horizon, and we’re talking about the pharmacist home loan products. So of course, there’s a vested interest in folks evaluating that option. But from your viewpoint, what are some of the things that folks should be looking for when choosing that lender?

[00:25:06] TU: Well, there’s quite a few different types of lenders out there, and all of them have varying pros and cons to working with. So, I could kind give you guys an idea of some of the lenders that are out there, you have what are called mortgage brokers who are true, almost like a middleman between lenders, and there’s pros and cons with working with those types of lenders, because they do have a lot of options where like a larger bank may not have as many options as a mortgage broker. But mortgage brokers tend to be more expensive. I find that they’re typically better when you have a really more tough case, whether it’s a credit score issue or some other issue, they can be more valuable than a bank in a lot of ways. Because they have some more greater flexibility.

Then you have the correspondent lenders, which are mortgage lenders that may have small branches in a city or a town. They’re not a bank, but they are able to lend directly to Fannie and Freddie. They use, not to get too complicated here, but they actually use bank warehouse lines to fund the loans, and then they’ll sell the loans, but they are true correspondent lender. And then of course, there’s banks. But there’s different types of banks, there’s large banks like the Citi groups and the Bank of America’s and Wells Fargo. And then there’s more of a medium sized bank, like the bank that I work for, and then there’s small community banks, too.

So, there’s lots of different sizes, and all have pros and cons. When you’re looking at mortgage lenders, programs are very important. The program that you can get is important. Rates are important as well. The other thing that’s very critical, is being able to fulfill the timelines, because there’s some challenges out there with certain types of lenders where they can’t meet the commitment letter deadline in the purchase contract, or they have a struggle with their appraisal process, or they have a struggle closing a loan in 30 days. Those are questions you need to ask the lender upfront, because different lenders had different operations. Some will actually use outsourced processing, which might be in another state, whether it’s not all under one roof, or the loan originator that you talk to may not have control over that process.

So, those are just some things to think through. But clearly, there are advantages and disadvantages for every type of lender that’s out there. So, it’s good to know, get some recommendations, and also to kind of compare the products and make sure it’s a fit for you and that you feel comfortable with the group that you’re working with. I think ultimately, that’s the most important thing, that you feel confident that they can help you and fulfill the closing date for you. That’s a key element.

[00:27:52] TU: Yeah, that’s a good reminder, Tony. Interest rates, of course, are very important for the reason we mentioned in terms of the length of the loan, and what that’s going to mean in terms of dollars out of pocket. But don’t overlook some of those things about abilities around appraisal and underwriting and closing on time and communication, and making sure that you feel comfortable. There’s, of course, going to be some open communication. There’s a lot of things that need to get done in a short amount of time.

So, I think it’s a good place to highlight the pharmacist home loan product that is offered, Tony, through your organization at IBERIABANK/First Horizon. We’re seeing a lot of interest in the pharmacist community about this product, which many listening might have heard of doctor type of loans and think, “Hey, I’m a pharmacist. I’m not eligible for that.” And here with IBERIABANK/First Horizon, we have an opportunity that is available to pharmacists. So, talk to us more about that program in terms of down payment, what’s involved or not with PMI, maximum loan amounts and where this option is available in terms of where folks may live?

[00:28:58] TU: Sure, sure. Well, this product is often a great solution, and it’s been really fun to be able to help so many people with this program. It is somewhat unique in that you can put very little down payment and not have PMI and still have very aggressive interest rates too. So, to kind of just highlight the program overall is, if you’re a first-time homebuyer, first time buying, you can put as little as 3 percent down. And of course, there’s no PMI. If you’ve owned a home before, it’s 5 percent down. You’d have to put a 5 percent down payment and the no mortgage insurance clearly is an advantage. But the other thing too is oftentimes the rates on this program, the 30-year rate that we offer on it is often better than my 20 percent down rate. So, you’re still getting a really competitive rate and priced very, very well. As far as the minimum credit score is 700. So, there is a minimum credit score you have to be above 700. There’s no like clear reserve requirement. What that means is having extra money reserves of payments in your bank account or investments, which is nice too, for a lot of first-time homebuyers and those that are buying their first home.

But the other piece about the loan limits that Tim referenced, currently, our loan limit on this product is 548,250. But that’s about to change. I think we’re probably looking at at least 625,000 starting January 1, 2022. So, we’re going to see a nice bump up. It may even be higher than that, and that’ll be across the country. So, this program is available in basically the 48 lower states. Alaska and Hawaii are the only two states that we’re not licensed in, but we can offer it in 48 states. So, it’s a nice footprint that we can help and we’ve helped individuals in pretty much every state, I think, that I referenced.

But the loan limit thing is exciting, because I think that’s going to enable a lot more people to buy in higher priced areas. And we may even see that go higher than that in certain areas that are even higher priced. And there are certain parts of the country that priced markets, housing prices are much higher, clearly in California, in and around DC, Northern Virginia. So, those are some places where this could be even higher than 625. So yeah, it’s exciting to see a little bit of a move higher there.

[00:31:19] TU: So sorry to our friends of YFP in Alaska or Hawaii, as Tony mentioned, this is available in the lower 48. We’ve got more information that goes into more detail on what Tony just shared there. You can find that at yourfinancialpharmacist.com/home-loan. And again, that’s a summary of much of what we’re talking about here on this episode as well.

So Tony, we’ve talked so far about knowing the landscape of interest rates. We referenced the Freddie Mac resource, folks can go to find that information, making sure that they’re considering that points may be including those rates, as they’re looking at various options. So that was, number one, know the landscape. Number two, we talked about knowing your budget, the importance of not only the down payment, but also other costs that are involved in the transaction, as well as ongoing costs with the home purchase. Number three, we talked about pre-approval, why that’s so important, how it’s different than pre-qualification, and how the credit score has implications there. Number four, we just talked about comparing some of the lenders and the options that are out there and we talked about the pharmacist home loan product.

So here we are, finally, we put in an offer on that home, we’ve got our lender obviously lined up, we’re working with that agent, hopefully that offer is accepted. And now we’ve got this process that happens from offer accepted to ultimately closing on the home where those keys are handed over. So, what should folks expect in this application underwriting process in terms of forms that they’re going to need to prepare, documents that they’re going to have to show, and any work that they might be able to do in advance to get some of that ready?

[00:32:55] TU: Yeah, so the exciting part happens, right? We’ve got the property under contract, but there is quite a bit of of items that lenders will need. Once you feel comfortable and you found the lender, that’s a good fit for you, lenders, we’re all really going to need the same things, and it’s going to be income information. So, if you’re self-employed, we’ll need typically two years of your tax returns, both your corporate returns and your personal returns. And then for income for those that are employed, it’s a little easier, just need two years of your W-2s, and your most recent pay stubs for the past 30 days. Those are what lenders will need to verify income.

Then we’re going to have to verify your down payment. And typically, that’s going to be bank statements and lenders have different types of ways to do this. We actually have a technology that we’ve – no, it’s not our proprietary technology, we have a FinTech company out of California, that has been doing very well in the mortgage space. They built a platform where when clients enter their information, we can actually do a read only format for your bank statements. So, you don’t even have to supply them. It’ll tell us what’s in the account, and the average two months and we verified it that way. So that’s been really helpful and a lot of clients have liked that.

But outside of that alternative, traditionally, it’s two months of statements. So, two months of your most recent bank account statements to verify the down payment. If they need additional reserves, if the lender needs additional reserves in, if you have an IRA or 401(k), or any investment account, brokerage account, those assets would be verified with a two months of statements or a quarterly statement as well. And then of course, we’ll need a copy of the purchase contract. So typically, once you have a purchase contract available, you’re able to lock a rate in and that’s important because rates can be volatile. They can move in, especially with economic reports, that can cause rates to move up and down and lenders typically cannot lock rates until they have a purchase contract so they know how long to lock it and they have an actual property address for the bond that they’re locking, basically. So, that’s another step that we’ll need.

The other items that you need to work on too, is homeowner’s insurance. I always encourage people that to get started with that as soon as possible, especially if you’re in the southern states, southeastern states during early July, through the end of October. We have some tropical storms down in this area and hurricanes, even if they’re not any threat to you, if they are in, what’s called the box, insurance companies have limits on when they can write insurance. So, we’re always very encouraging to get that process started soon. So, homeowners’ insurance is an important component. And typically, driver’s license, things like that.

The application will go through all the questions about your employment, where you’ve worked the last couple of years, a lot of your vitals, date of birth, social security number, those types of things, and you’re on your way. So, it’s an exciting – that’s when the process officially begins. Typically, the appraisals ordered shortly after that mortgage application is put in. So, we also need to know who your realtors are, if there are realtors involved, so they can open the home – they can be the point of contact for the appraiser. That’s another item that we need to know. We need to know the parties who are involved. And often we do, but I just included that because that’s something else the lender will need to know. You may need to supply that to your lender, make sure that you do. That information, the key contacts in the transaction. But from that point on, that the journey is on, and you’re moving through the loan process after you make that formal loan application.

[00:36:33] TU: Yeah, and I mentioned a few moments ago, Tony, the importance of open communication. This is an exciting time, this can feel overwhelming, there’s a lot of moving pieces and parts. I think much of what you just shared to me is a good reminder of folks of like this is the time to over communicate on both sides, for both the lender, as well as the home buyer, and making sure that you’re being responsive, things need to move quick, there’s a lot of ducks that need to get in a row. The other reason, I think, this section here on our final one on completing the application and bringing this whole process to ultimately a close is folks should be thinking about some of the information that’s been requested and what implications things like job transitions may have, big financial purchases people are making, right?

Ideally, we’re trying to have as little disruption as possible in this time period, because of the information that the bank is requesting from you and wanting to have the stability of both that funds to close as well as looking at your income. So, for folks that are in transition, for folks that have pending large purchases, I’m thinking of the residents or the fellows and those that are moving from a first to a second job. Just be thinking about some of the timeline and the implications that has on finishing up this process and ultimately the overall home buying process.

Tony, great stuff as always. It’s been a great year of having you on the show, and always appreciate your input and your expertise. And folks, again, more information, yourfinancialpharmacist.com/home-loan. You can learn more about all of what we talked about here on this episode, as well as the pharmacist home loan product and get in touch with Tony and the team at IBERIABANK/First Horizon from there. Tony, thanks so much.

[00:38:10] TU: Thanks for having me, Tim. Always good to be here. Thank you again.

[SPONSOR MESSAGE]

[00:38:13] TU: Before we wrap up the show, I want to again, thank this week’s sponsor of Your Financial Pharmacist podcast, IBERIABANK/First Horizon.

We’re glad to have found a solution for pharmacists that are unable to save 20 percent for a down payment on a home. A lot of pharmacists in the YFP community have taken advantage of IBERIABANK/First Horizon’s pharmacist home loan, which requires a 3 percent down payment for a single-family home or townhome, and has no PMI on a 30-year fixed rate mortgage. To learn more about the requirements for IBERIABANK/First Horizon’s pharmacist home loan and to get started with the preapproval process, visit yourfinancialpharmacist.com/home-loan.

[OUTRO]

[00:38:55] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analysis expressed herein are solely those of your financial pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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YFP 229: How This Pharmacy Professor’s Debt Free Journey Ignited His Passion to Teach Others

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

How This Pharmacy Professor’s Debt Free Journey Ignited His Passion to Teach Others

On this episode, sponsored by GoodRx, Bhavik Shah talks about his debt-free journey, his early missteps, and how he used his experience to further the financial literacy education of other pharmacists.

About Today’s Guest

Bhavik Shah earned his doctorate of pharmacy from Rutgers University and completed post-graduate training in pharmacy practice and infectious diseases at Thomas Jefferson University Hospital in Philadelphia, PA. He is an associate professor at the Jefferson College of Pharmacy and co-director of the Pharmacology thread in the JeffMD curriculum at Sidney Kimmel Medical College at Thomas Jefferson University. He is an active member of ASHP and ACCP. Within ASHP, he has served as vice-chair and chair of the Year-Round Educational Steering Committee for 2019-2021, where he was able to promote including personal finance education through podcasts with the New Practitioners Forum and Clinical Leadership section advisory groups.

Bhavik is passionate about teaching personal finance to students and colleagues. He has created a personal finance elective at JCP.

Episode Summary

Today, we host pharmacist and educator Bhavik Shah for a candid conversation about his journey of becoming debt-free and the financial missteps he took early in his journey that you can avoid. Fresh out of pharmacy school, Bhavik knew he wanted to pay off his student debt, but he did not have a plan. Bhavik shares the story of how he paid off a hefty student loan of over $80,000 in just six years and shares his advice to develop a plan for student loan debt payment along with a plan for making the most of your income. Bhavik also shares why he believes it is critical to take advantage of Roth payments and how he was motivated by the idea of being his own financial steward. Listeners will learn why Bhavik believes it is essential to get a grasp on the basics of financial literacy before hiring a professional (tax, insurance, or otherwise), and what drove him to create his course on financial literacy, including the reality that student debt creates a barrier to entry for many pharmacists to pursue post-graduate education. He believes that this problem could be solved by including a financial literacy piece in the PharmD program. Listeners will be introduced to several great resources that have enriched Bhavik’s financial understanding and more!

Key Points From This Episode

An introduction to today’s guest, Bhavik Shah.
Bhavik’s academic background and why he chose a career in pharmacy and teaching.
The money scripts Bhavik was raised with and how they impacted his mindset.
How he graduated with $80,000 of student debt and paid it off in just six years.
Why he considers it a mistake not to have taken advantage of Roth contributions to get tax-free growth.
What Bhavik means by emphasizing being your own steward, and what motivated this.
How he learned the importance of understanding the basics before hiring a professional.
Financial education and literacy and why it is important.
What motivated Bhavik to create his course on financial literacy.
Bhavik’s thoughts on whether a personal finance piece should be included in the PharmD program.
Resources he has found helpful, including the White Coat Investor and the Money Guy.
How student debt deters people from pursuing postgraduate education.
The role of financial education in preventing this barrier.

Highlights

“The core, the concepts of living below your means, saving, understanding the value of money, those experiences stuck with me. It made it a lot easier as an adult to approach my own finances with that mindset.” — Bhavik Shah [0:05:02]

“Another mistake I made was not taking advantage of Roth contributions, especially as a student or as a resident, being in that lower-income bracket and having not much time on your side to get that tax-free growth. That is something I wish I had done more of or at all.” — Bhavik Shah [0:14:02]

“There is a taboo centered around talking about money and so I realized people are making the same mistakes and so we need to learn from one another so that is really what drove me to create this course.” — Bhavik Shah [0:23:24]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] TU: Hey everybody, Tim Ulbrick here and thank you for listening to The YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week I had a chance to sit down with Bhavik Shah, an associate professor of pharmacy practice at Jefferson College of Pharmacy. I had an opportunity to meet Bhavik a few weeks prior to recording and really appreciated his passion and his enthusiasm for personal finance. On this week’s show, we talk about Bhavik’s journey to becoming debt-free from student loans and why he felt like that was just the beginning of his overall financial journey. We also talk about some of his early missteps and how that helped shape his current mindset and approach.

We talk about why and how he has taken the experience from his own journey to further the education of other pharmacists through podcasts that he’s done with ASHP new practitioner’s forum, as well as by creating and offering a personal finance elective at Jefferson College of Pharmacy.

Before we hear from today’s sponsor, and then jump into the show, I recognize that many listeners may not be aware of what the team at YFP Planning does in working one-on-one with more than 240 households in 40 plus states. YFP Planning offers fee only, high-touch financial planning that is customized for the pharmacy professional. If you’re interested in learning more about how working one-on-one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com.

Whether or not YFP Planning’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom. Okay, let’s hear from today’s sponsor, GoodRx, and then we’ll jump into my interview with Bhavik.

[SPONSOR MESSAGE]

[0:01:44.7] TU: It’s American pharmacist month and to honor the occasion, GoodRx has created the Above and Beyond Pharmacy Awards. These awards recognize pharmacy professionals that go the extra mile, every single day to improve the health of their patients and communities and we need you, the pharmacy community, to nominate your incredible colleagues.

Pharmacists, technicians, residents, and interns that show true leadership, compassion, pride and dedication. Pharmacy professionals are on the frontlines, working every day to transform their communities. The time has come to show them some appreciation. Nominations are open now through November 19, 2021, and recipients will receive education credits and more.

Go to GoodRx.com/pharmacy-awards to nominate someone today. Now, again, that’s GoodRx.com/pharmacy-awards.

[INTERVIEW]

[0:02:36.5] TU: Bhavik, welcome to the show.

[0:02:37.5] BS: Thanks for having me, Tim.

[0:02:39.8] TU: Looking forward to this interview. You and I had a chance to connect a few weeks ago, and we’re going to get to where that connection came from and some of the work that you’re doing in personal finance education and your passion for this topic. I really left that conversation feeling inspired and empowered in my own journey, based on the intentionality, I really heard of how you have approached your financial position and I think that information is going to be really helpful for our community.

Let’s start with your background and work in pharmacy, what drew you to the profession, where did you go to school and then what type of work are you doing now?

[0:03:14.0] BS: Absolutely. I went to pharmacy school at Rutgers University, I did the zero to six program and what drew me to pharmacy is because I knew I wanted to do something in healthcare. And I was sort of deciding between medicine and pharmacy, and I had family pursuit pharmacy and you know, the more I learned about it, it seemed it fit my strengths and my personality. So that’s what drew me to Rutgers and I did my residency training at Thomas Jefferson University and pharmacy practice as well as in infectious disease and I’ve been a faculty member here since 2010.

I have a student of four, hospital medicine rotation, and teach in a number of courses as well as in the medical school too.

[0:04:02.7] TU: Very good, we’re going to come back later about some of the work that you’re doing at Jefferson around personal finance education but I first want to talk about your own journey and your own story. And Bhavik, one theme I’ve noticed on this show, through interviewing other pharmacists, that I have also seen in my own journey, is their relevance of the money scripts that we carry with us.

What I mean by that is the said and unsaid things from our upbringing that impact the way we view money today. Tell us about your money scripts and how they impacted your own journey when it comes to your financial plan?

[0:04:40.4] BS: That’s a great question. My relationship with money started with my parents. They immigrated from India with nothing and they sort of built a life here. They had the means to provide for my brother and I, but it was never to the point where it was abundant, where we could talk about investing or anything but the basics, the core, the concepts of living below your means, saving, understanding the value of money, those experiences stuck with me. It made it a lot easier as an adult to approach my own finances with that mindset.

I really am appreciative of that upbringing, even though I didn’t necessarily have the rarer thoughts and know all the finer things about investing or anything like that. I think that came later but that relationship with money, I think was really key in understanding what it brings and what it doesn’t bring.

[0:05:36.7] TU: I like Bhavik that you used the word relationship with money because I think that is something that is healthy for us to think about is, what is the relationship we have with money? Whether that’s a healthy or an unhealthy relationship, where might that come from? Where do the perceptions and values and beliefs that we have come from in money, and obviously knowing that that very well and likely, is connected to the behavior and how we’re approaching our financial plan today.

Bhavik, as you know today’s graduate is facing on average, about $170,000 in student loan debt. Now, that is much different than what our peers were facing back in 2008 when both you and I completed our PharmD training. Tell us about your debt position after graduating and through residency and not only the position that you’re in debt-wise but also tell me about your mindset at the time around paying off that debt.

[0:06:29.4] BS: When I graduated, my expenses for college were all financed by student loans. My parents, coming from a working-class background, they didn’t have the means to provide for us and that was fine so I knew that sort of going in.

I graduated with about $80,000 of debt back in 2008. I was fortunate enough to go to a state school, I was fortunate enough to be in a zero to six program so that definitely helped mitigate some of the amount of debt that I graduated with.

When I graduated, I didn’t know, you and I know repaying debt, especially student loans, there’s so many different options and terms and it’s very dizzying and I made mistakes along the way. And when I went to residency, I put my loans into forbearance, which looking back that was not the right thing because I was confusing the terms forbearance and deferment.

As I sort of started learning more about things, my relationship with my loans was I wanted to pay them off as quickly as possible so I was – I was a resident for two years, I was moonlighting, picking up extra shifts. And once I became a faculty member, I was working, you know, having them sort of being accustomed to working every other weekend as a resident, I carried that forward so I was picking up shifts at the hospital.

I was able to pay off my student loans in six years instead of a standard 10-year plan. A part of that way that we were able to do that, it was dad’s idea actually. He suggested that we payoff, at the time interest rates on student loans was more high, they’re still high. At the time, he had access to a home equity line of credit. That was very low, that was right after the economy crashed in ‘08.

He had access to cheaper money and so he said, “How about we take a home equity line of credit” we pay off the loans and then I paid my parents back. I looked into that and I didn’t know what a home equity line of credit was back then, I didn’t understand these things but my dad was looking out for me and I really appreciated that because he was able to get a 2% home equity line of credit at the time or two out of 3%.

I was sitting at six and a half percent so I was saving money, he said, “You know, why pay the interest to the government when you could just pay it, keep it within the house?” I was just paying him interest to – he didn’t make any money off of me but he did get a tax deduction out of it so I guess he came out ahead a little bit but it really set me up for success and so I really appreciated that offer. Obviously, they trusted me to pay them back.

[0:09:19.9] TU: Yeah, there’s got to be obviously, trust in that relationship. That strategy, if I heard you correctly was, you’ve got federal loans and I remember, Bhavik, I had fixed interest rate loans 6.8% is the number I remember in my mind in 2008. Some are a little bit lower but many of them were at about that rate and so obviously, home equity line of credit that your father is able to help with lower. You mentioned two to 3% so obviously that difference between six, six and a half two and three percent is significant intra savings, even when you’re talking about a relatively short period of time, which that being six years.

Did you, Bhavik – when I graduated in ‘08 and I think there’s a lot more information that’s out there today. I’m finding that I’m having conversations with graduates today that already have an understanding of unsubsidized versus subsidized and public service loan forgiveness, and refinancing and income-driven repayment. I didn’t know what any of that was.

Did you feel like, at the time, you had an understanding of the nuances and options, and would you agree that it seems like a lot of that information has come a long way here in the last decade since we graduated or I guess, a little more than a decade.

[0:10:28.3] BS: Yeah, absolutely. I think back at the time, I didn’t know anything. I just knew I had to pay it back, I know that the standard 10 year plan was a default and that was, it’s sort of the mindset that I went in. I didn’t know there were other options at the time. I think student public service loan forgiveness was new and so in looking back, I certainly didn’t qualify for it because I was a previous borrower predating 2007.

I won’t have qualified but I didn’t know that at the time. I just knew I had to pay this off and so that’s why I was just motivated to pay it off as quickly as possible. So I was paying extra principle payments to my dad, turns out but I was able to pay everything off in six years. That was like a huge sense of relief.

[0:11:18.2] TU: Yeah, that’s great. One of the things you shared with me when we talked a couple of weeks back is, this resonates with me as I think back to our own journey. Once the loans are paid off, you kind of wondered, “Well, now what?” right? Had you thought much about that post debt payment journey and tell us a little hit about that transition from making big, aggressive, large on monthly payments to no longer, they’re gone, right?

[0:11:43.8] BS: Yeah, actually and that’s where my sort of personal finance journey started was after paying off my student loans, I was like, “Now, what?” and so at the time, I was dating my now wife, girlfriend at the time, I just transitioned my monthly student loan payment and I was just saving cash because I knew, engagement ring, and I’m Indian and when we do weddings, it’s sort of a big affair.

I knew that I want to pay for that and I didn’t want my parents to go into any debt for that. I transitioned towards those expenses, saving for those expenses and so that sort of – once those were done, then it was like, “Okay, now what? Where do I go?” I started learning more about where else to save and invest our funds.

[0:12:34.6] TU: We graduated in 2008, I guess we could call ourselves kind of that maybe second part of the career, right? That mid-career, we’re no longer new practitioners, we’re beyond that or there’s perhaps some evolution of the financial plan, the debt’s paid off, other goals that you’re working on and towards.

And so my question here is, Bhavik, you now sit in this vantage point of, “Okay, I’ve been through this journey, I paid off the debt, I’m now in more of that wealth building, next phase of the financial plan.” What advice would you give to the students that are listening to the new practitioners who are listening or even think about your former self as they are on the front end of this journey, and perhaps feeling overwhelmed by the magnitude of not only the debt but also other priorities of which you’re trying to work on?

[0:13:19.8] BS: Absolutely. I think for me, the challenge that I had was I didn’t have a plan. I had a general sort of vague approach to things but it wasn’t necessary purposeful. And so having a dedicated plan for your student loans is something that I would tell myself. I, looking back, I did what I wanted to do but then, was I optimizing every single dollar. I left money on the table because I wasn’t taking advantage of 403(b) matching at my employer.

I mean, I wasn’t spending the money, which is I guess good, I was still building net worth by putting it towards student loans, but finding ways to get the most utility out of your money was a real mistake I made. Another mistake I made was you know, not taking advantage of Roth contributions especially as a student or as a resident, being in that lower-income bracket, and having not much time on your side to get that tax-free growth. That is something I wish I had done more of or at all.

That’s what I tell students is just there’s a lot of information out there and so going back to your question earlier, which I realized I didn’t answer, because back then, there was not enough information out there, the new programs are really new. Now, there’s a lot of resources out there, just a matter of finding it. You have that, other websites have it blogged. Knowing that and I encourage my students, third year, fourth year, to start thinking about this and that way, in my elective, that when you graduate, you know what you’re going to do. Whether you’re going to pursue this line, what IDR is best for you or not, or if you’re going to refinance, which lenders you’re going to look into, that sort of thing so having a plan.

[0:15:02.7] TU: Absolutely, we talk about it all the time, right? The intentionality of the plan and even if that debt number doesn’t change tomorrow or next month or next year in a very significant way, the power of knowing you’ve evaluated your options and you have a plan, going forward that considers, not only student loans but also other parts of the financial plan, knowing that student loan debt is certainly going to be a big part of the puzzle for many folks that are out there.

When you and I talked several weeks ago, one thing that you said that really stood out to me was your desire to be your own steward, and how much of a motivation that was for you on your quest towards learning more about personal finance, and then applying the things that you’re learning in your own plan and on your journey. What did you mean by that in terms of the importance of being your own steward and what led to that motivation?

[0:15:52.9] BS: I think the biggest experience that I had was, after I had paid off my student loans, you know, we paid for the engagement ring and wedding, I mean those life events that are happening in your 20s and 30s you know, it was sort of like, “Now, what?” My wife and I, when we got married, we had an accountant.

I asked for advice and how to minimize taxes and what more we could do. They offered it and so that sort of got me into thinking, “Okay, they encouraged, a backdoor Roth.” That’s not what they called it at the time but it’s called a none – it was more confusing. I wish they called it backdoor Roth because I Googled it that way. Then, that got me sort of thinking. At the same time, when I graduated as a resident, I was approached by what I thought was a financial advisor but it was really an insurance agent.

He was recommending term insurance, term life insurance and disability insurance which I know I wanted to get, but they were pushing whole life insurance, which at the time for me didn’t make sense. And I pushed back but they have a really good sales pitch and it’s very tempting, but I did not go down that road. But he did end up selling me a term life insurance, which was not what I wanted, but I didn’t know how to communicate that because I didn’t know what specific terms to look for or ask for.

What I was sold was a term 80 policy by one of the big companies in the business. The premium increases as you get older, what I really wanted was a level premium where it’s just a fixed amount per month, doesn’t increase with the face value for a certain period of time. That’s what I wanted but I didn’t use that jargon.

Similarly, he also sold me a disability insurance and he was saying it was like an own-occupation et cetera. Similarly, it didn’t have – it was not a level premium so the premium was escalating and in your 20s and 30s, it looked pretty cheap and I didn’t really look at it how much of a cost in my 40s, 50s, 60s. The own-occupation ended up not being really own-occupation.

[0:18:08.2] TU: Yeah, it’s confusing, yup.

[0:18:09.9] BS: It was only for the first year or two of a claim and then it goes back to any occupation. Again, at the time, I didn’t know what to ask for or what to watch out for. Between that experience and going back to the accountant, I started looking more into the backdoor Roth, and doing it in one of the resources that I stumbled across was White Coat Investor. I learned about what that was and how doing it – and once I executed it and I – the next tax year, I went to my accountant. I said, “This is what I did, my wife and I. Can you help us file 8606?”

He did it correctly for me but he did it incorrectly for my wife. Now had I not known what to look for I wouldn’t have credit and so the basis would have been off of my wife. So that’s why I was saying, you know, I was trusting a professional and the accountant and this insurance agent, with a lot letters behind his name that seemed like he knew what he was talking about, but it was still not what I wanted or wasn’t in my best interest. So that really solidified for me and my wife that we have to sort of take the time to at least understand the basics.

That way if we engage with professionals then we know we are getting what we want to get and if it is appropriate for us.

[0:19:35.5] TU: I think what you just shared there, Bhavik, is a lot of things that are so valuable. Because I would advocate, as you just mentioned whether folks engage with professionals, you talk about accountants, you talk about insurance sales, you talk about financial planners and certainly as you’ve highlighted, not all professionals are created equal. There is some homework that folks have to do to understand the different professionals or credentials, how folks are getting paid, what standards are held under.

Does it makes sense or they act in their best interest or not, and we’ve talked about several of those things on the show but regardless if you are working with a professional or not, I think this concept of being your own steward is so important. One of the philosophies that we have at YFP planning is very much that folks feel that they have the education of the information whether that’s debt repayment, whether that’s investing, whether that’s insurance, whether that is tax as well as they feel empowered in that be in a shared decision that is being made between them and the professional in this case, who would be a financial planner.

Again, even if you are entrusting a professional, to your comment that you just made, really having that understanding, that baseline knowledge to make sure that you feel comfortable and confident in the advice that is given and that also you feel good that it affirms what you’ve been learning on your own. Or that you are able to then engage in that conversation, hopefully have some good and at times perhaps some hard questions and we’ve got more information.

There is a couple of things that you mentioned there, Bhavik, that I sense folks probably might want to dig into a little bit deeper. You mentioned both life, term life and long-term disability insurance. We talked about those on episode 44 and 45 of the show respectively, we’ll link that at the show notes and then back to our Roth IRA, probably one of the most common questions we get, I’ve got a blog post, why most pharmacists should consider it.

Episode 96 on the podcast talks a little bit about what is it, what’s the process, executing back to Roth, some of that, we’ll link to both of those in the show notes. A great example that I think you gave in terms of the importance of being your own steward. I want to shift gears and talk for a bit about financial education, financial literacy is I know that this was in part how we crossed paths and something that we both very much show and have a passion for.

This is evident, Bhavik, in the work that you’re doing and teaching personal finance elective at Jefferson, also within ASHP, you’ve been able to promote personal finance education through podcast with a new practitioner’s form and the clinical leadership section advisory groups. And so one of the questions I want to start with here is, as it relates to the course that you are teaching at Jefferson, tell us more about that course.

How did it get started? What type of support have you had? Some of the general concepts and information that you are trying to teach within that course, is that something that we certainly don’t see at all colleges but I suspect many listening whether it’s a student or alumni, perhaps a faculty member might have an interest in seeing this being offered or something similar through own institution?

[0:22:33.0] BS: The course was a – it sort of was a multi-year process of how I sort of got there. As I spent a couple of years teaching myself about personal finance and then becoming comfortable educating others or pointing to others the right resources, so I first started off with doing a faculty development program or a session on it, and then I start incorporating it with my API students.

I would do topical, topic clinical topic discussions but I would devote Mondays for personal finance topics and I made it optional because I didn’t want anyone to feel uncomfortable. But you know, I was saving on this is Money Monday, we’re going to talk about anything that you want to talk about and so students took me up on that. That sort of showed me that there was a need for it, especially since we don’t really get taught in any and I didn’t have any sort of formal education on it.

There is a taboo centered around talking about money and so I realized people are making the same mistakes. And so we need to learn from one another, so that is really drove me to create this course. I looked at the literature to see what was done at pharmacy schools and there wasn’t a lot published. There were a few papers published, there is really one paper that’s published by Michelle Qui out of the University of Wisconsin.

[0:23:52.7] TU: Yeah, I think that was back in ‘13 or ‘14. It’s been a while too, right?

[0:23:57.0] BS: It’s been a while, yeah and so there wasn’t out there, and I looked at different colleges to see what they had on their websites, how many schools had it and so this was like an untapped – this was a need but it had an untapped potential. In creating this course, I really didn’t have too much direction of what was done. I just sort of created something about starting from the basics like banking, credit scores, debt, what does the interest mean and what does inflation mean.

Then we talked about like module on tax rates, and then we get into the weeds of the different retirement vehicles, student loans. And so you know, it is pretty comprehensive, estate planning and so it’s a one-credit course over 14 hours. Now, it is going to be a two-credit course because there was just so much volume there that the students wanted, and so I expanded it to two-credit hours and so the type of assignments that I give are, I hope, that was sort of practical.

There is a long internal assignment in the course where I want them to finish the course with their own financial plan and so we build that out throughout the course. Existing debt, so what is your repayment plan, what’s your plan for getting life insurance, disability insurance? What’s your plan for your student loans, saving for retirement? Every week we go through that, each of those topics.

For life insurance and disability insurance, I go through policy genius or whatever resource just getting an idea of this is a resource you could use to look at when you graduate and how much it might cost. We go through student loans and we go through the different tech leaders online, and the studenta.gov and we go through PSLF. And so then that way they can put it to paper of what they are thinking about now. And obviously they could change their plan when they graduate, but having that something to refer to it will I think hopefully give them a starting point.

Something that I know I certainly don’t have but having that sort of framework hopefully sets them up for success.

[0:26:08.8] TU: I love you started one credit, you’ve gotten to two credits. I suspect there is a lot of interest from the students as well and I felt that similar but we started with one-credit hour personal finance like in the northeast to have Murdoch University about six or seven years ago, one to two-credit hours and then at Ohio State, we built the three-credit hour online asynchronous course and you know there is a lot to cover.

I think that the students, certainly there is a desire for that information and just some really cool things that you can do obviously in early management systems and other things to customize that learning experience for the students. I love the work that you are doing at Jefferson at that, and I hope for other colleges that we’ll see more of that. Bhavik, I’m going to put you on the spot and I didn’t tell you I was going to ask you this question in advance.

I am honestly curious to hear your input on this and of course, noting that you might have a bias, you probably do have a bias because you are teaching a personal finance elective. I think we have an interesting opportunity in front of us with the ACPE accreditation standards that are set to come out the next version in 2025 I believe and there is currently a comment period through the end of 2021 for folks to give feedback on those standards.

I have often thought and again, biased of course that you know, personal finance education should be considered as a part of the PharmD required curriculum and I think for good reasons, there is perhaps some split opinion on this ranging from is something like personal finance really part of a PharmD large at a clinical pharmacy training program. And I think there is other professions we could point to, whether it’s veterinary medicine and their associations or even medicine in AAMC who have done some more work in this topic than perhaps we have done in pharmacy.

I sense there’s two camps or two thoughts out there of, like absolutely consider what’s going on with the debt loads and the trends like it is a part, or our obligation to make sure students have a baseline understanding of personal finance education. Then others that are perhaps of the mindset of like, great philosophically, great in theory, great idea. I buy into the importance of the topic but is this something that really should be a part of the required PharmD program. What are your thoughts on that?

[0:28:27.8] BS: I think that is a fascinating question and honest, you know, you mentioned the comment period. I already added my comment to that asking that this be considered being incorporated in the document. I didn’t direct them to make it required or elective but I think it should be considered and I think there is an opportunity for it now especially I think there is a well for it and I think it relates to the current standard for where they talk about personal and professional development.

I think there is definitely a fit into that, because a part of personal finance is you need to have that self-awareness that what your own goals are and what you want out of your own career and your own personal life. And money is a tool that helps you achieve that or not, depending on how you use money. And so that’s one of the things I have in my elective is a reflection paper and for students to sort of put down why are they doing what they’re doing with their financial plan.

They just start thinking about it. I think there is a goal for it and I think there is certainly a need for it, and I saw that in the APHA House of Delegates. There was a motion too for every school of pharmacy or college of pharmacy to have such a course either be offered, whether it be required or elective, but at least be offered and so I think the momentum is there. I can comment out on the medical students because I also have a role at the medical college at Jefferson.

[0:29:50.0] TU: Yeah.

[0:29:50.5] BS: Currently, there isn’t a course. There is some content that they are exposed to but it is not as structured or in a course format, so they, the students themselves, they did a curricular gap analysis last year and there’s a strong desire from the medical students to have this kind of content. And so I am hoping that with my hand in two pots, you know, I can sort of bridge that in and open it up the elective to both students. I think that would be great in professional opportunities.

[0:30:23.6] TU: Yeah and I think we have some examples, you know the course you are doing at Jefferson others that are teaching courses, I probably know of 10 or 12 colleges that have some really good momentum in this and similar to other areas. I think in professional education being one, where really pharmacy took a jump out of the gates even ahead of other professions, and you get started, and then it continues to evolve, right?

It continues to evolve over time and so I agree, I think there is momentum. I think the house of delegates you mentioned at APHA SP, the students really being behind this, and credit to what I’ve seen AVMA and AAMC do for their members in both veterinary medicine and medicine respectively in terms of resources they provide with their membership. I think we’ve got a real opportunity in pharmacy especially considering what we have seen in the trends in debt load as well as some of the other pressures that we have on our profession.

That I think the timing is right to be able to see some of these forward. Bhavik, in your journey, again as you are in kind of this next phase in your career, what resources have you found to be really helpful as you’ve navigated this topic of personal finance in the first 13 or 14 years of your career?

[0:31:35.0] BS: Yes, so there is a number of resources that I’ve sort of used and they all have a different role and what is good. But the ones that I sort of go through, and sort of subscribed to on a, I guess daily basis, so The White Coat Investor, I mentioned. He has a blog, a couple of really good books. His bootcamp, financial bootcamp book was really helpful because it sort of laid it out in a very algorithmic manner of like what you ought to do.

That helped me sort of make sure my disability insurance, life insurance was up to date and of adequate coverage. I like White Coat, after White Coat, I was looking at other resources that’s when I stumbled upon YFP and so that was really good. It was good to see there is something in the pharmacy space as well, and it was very helpful to see that it was the same message and so that sort of solidified what I was doing. I also like, I don’t know if you have ever heard of The Money Guy, it’s a YouTube channel.

[0:32:35.5] TU: No, I have not.

[0:32:36.5] BS: No? I really like them. It’s a podcast that’s done by, and they have a YouTube channel of two CPAs/CFPs. And the way they present content is very approachable, very digestible. It’s very beginner-friendly. The one thing that I like most that they have that’s for free is what they call the financial order of operations, and for me, that was something I wish I had ten years ago because I was just trying to think about paying off debt but I didn’t know what to do next with my next dollar.

The way they laid it out it optimizes every single dollar to meet your goals. And so from the tax standpoint, from a matching standpoint, paying off debt, all of those considerations. And so it’s very easy and approachable to do an action plan, so I found that to be helpful.

Another thing to consider about the need for personal finance education in pharmacy curriculum is that there is data out there that shows that students, their career choices after graduation are impacted by their perception and stress related to their student debt and not knowing how to handle it. There is data that shows that folks are less likely to pursue post-graduate training and enter the workforce directly because they want to pay off their loans.

I think the profession will be served best by having this so that students when they graduate, they know what to do and have a plan and that way, they’re making their career choices because that is what they want to do not because they feel like they have to and so I think that will probably help our graduates the most in our profession by incorporating it.

[0:35:05.5] TU: Bhavik, I appreciate the resources and the recommendations. We’re going to link to those in the show notes, you mentioned The White Coat Investor, The Money Guy, YFP, I appreciate the shout out and I suspect our community will find those resources helpful. Bhavik, thank you so much for taking time to come on the show, for reaching out and I really appreciate your willingness to share your story with the YFP community and also very much appreciate your passion for teaching personal finance to others, so thank you again.

[END OF INTERVIEW]

[0:35:33.6] TU: It’s American Pharmacist Month and to honor the occasion, GoodRx created the Above and Beyond Pharmacy Awards. These awards recognize pharmacy professionals that go the extra mile every single day to improve the health of their patients and communities and we need you, the pharmacy community to nominate your incredible colleagues, pharmacists, technicians, residents and interns that show true leadership, compassion, pride and dedication.

Pharmacy professionals are on the frontlines working every day to transform their communities. The time has come to show them some appreciation. Nominations are open now through November 19th, 2021 and recipients will receive education credits and more. Go to goodrx.com/pharmacy-awards to nominate someone today. Again, that is goodrx.com/pharmacy-awards.

[DISCLAIMER]

[0:36:24.2] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blogpost and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analysis expressed herein are solely those of your financial pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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YFP 228: Why This New Practitioner Decided to Start His Own Business

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

Why This New Practitioner Decided to Start His Own Business

On this episode, sponsored by Thoughtful Wills, entrepreneur and pharmacist, Chris Cozzolino, talks about his journey building several businesses as a recent graduate.

About Today’s Guest

Chris Cozzolino is a recent pharmacy graduate (Class of 2020) from the University of Iowa and the Co-Founder of Uptown Creation, a B2B Business Development and Consulting Firm. Prior to pharmacy school, Chris founded an Amazon Dropshipping store, which he still has to this day. During his time in pharmacy school, he Co-Founded Uptown Creation. Uptown Creation began as an Instagram Growth and Consulting company but has evolved into a more full-service Business Development Firm. Chris has a passion for business and hopes to merge this with his love for the pharmacy community.

Episode Summary

Content creation for social media and personal branding has grown exponentially over the last couple of years but is still fairly new to the healthcare sector. Today on the Your Financial Pharmacist Podcast, host Tim Ulbrich speaks to pharmacist and co-founder of Uptown Creation, Chris Cozzolino, about his journey into the social selling space and how it aligns with his pharmacy education. Chris shares his non-traditional career arc, from making money using video games as a teenager to starting his own dropshipping business in college and now to running a hugely successful business development company focused on direct outreach campaigns. In this episode, Chris shares his passionate mindset about impactful contributions and innovatively using all the resources available to create something bigger than himself. Chris touches on strategies in the growth hacking space to build authentic relationships and a trustworthy reputation, as well as always keeping your endpoint in mind. Listeners will learn about the importance of knowing when to pivot your business, focusing on the end goal rather than attaching to a product or idea, plus you’ll hear some insightful perspectives about the benefits and challenges of diversifying across available platforms. Tune in today to hear all this and more!

Key Points From This Episode

Chris shares what drew him into the profession, and the freedom of remote working.
Reflecting on Chris’s non-traditional career path, and building something impactful.
How social media is a fascinating concept of reaching so many people at once.
How making money in a video game as a teenager galvanized his entrepreneurial spirit.
Discussing the big barriers to starting a business, like upfront capital and inventory holding times.
Optimization through combining drop shipping and retail arbitrage.
Chris outlines the challenges and opportunities of not working on your platform.
Having the best of both worlds by making the brand bigger than the platform.
Diversifying across platforms to build community and then converting that traffic.
How Uptown Creation was founded, and key pivots in their journey.
Learning the Instagram algorithm and their specific social media marketing tactics.
Chris shares about his pivot to LinkedIn and what the clients and services entail.
Building authentic relationships and a trustworthy reputation.
Why creating content is still really new for the healthcare sector.
Where Chris sees Uptown Creation heading in the next few years.
The concept of developing your craft, and always being able to be close to the ground.
Always keeping your endpoint in mind.

Highlights

“What I’m trying to create is being able to build something that’s bigger than myself.” — Chris Cozzolino [0:05:53]

“I don’t want to sell anything in a salesy way. I just want to make something that’s really good and then people can decide if they want it or don’t want it.” — Chris Cozzolino [0:22:57]

“That became the ethos of what we are today, is getting rid of bots and automation, putting a human in all the seats that a bot would be taking, and being able to have genuine interactions with people using the internet as a means to contact the right audience.” — Chris Cozzolino [0:25:11]

“I think a big thing that people do wrong in entrepreneurship is they fall too in love with the product or the service or that identity of what they’re doing, rather than the end impact that they’re trying to have.” — Chris Cozzolino [0:33:47]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey, everybody. Tim Ulbrich here and thank you for listening to the YFP podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I had a chance to sit down with entrepreneur and pharmacist, Chris Cozzolino to talk about his journey with several businesses that he’s been involved with as a recent 2020 graduate of the University of Iowa. Some of my favorite moments and takeaways from this interview include, hearing from Chris about his decision as a new practitioner to not pursue a traditional career path, but rather start his own business. Also talking about why he is prioritizing LinkedIn as the platform to generate authentic conversations that promote personal and professional success. We dig into the work that he is doing as the co-founder of Uptown Creation, a B2B business development and consulting firm. Really cool story, one of my favorite episodes of this year of a pharmacy entrepreneur who is using his PharmD in a non-traditional way.

Before we jump into the episode, I want to invite you to a free webinar that’s happening on November 10th at 8:30 PM Eastern. Dr. Jeff Keimer, our good friend and author of Fire RX: The Pharmacist’s Guide to Financial Independence will be joining me to talk about the FIRE movement aka Financial Independence, Retire Early. How pharmacists can overcome common barriers to achieving financial independence, how to calculate your retire and need and some investment considerations for those that are on the FIRE path. Plus, if you attend the webinar live, you will be entered for a chance to win a copy of Jeff Keimer’s book, Fire RX.

You can register by going to yourfinancialpharmacist.com/webinar. Again, that’s yourfinancialpharmacist.com/webinar.

All right. Let’s hear from today’s sponsor, Thoughtful Wills and I will jump into my interview with Chris. This week’s episode of Your Financial Pharmacist podcast is sponsored by Thoughtful Wills. Let’s take a minute to hear from co-founder, Notesong.

[00:01:57] N: Hi, there. I’m Notesong, one of the founders of Thoughtful Wills. Our law firm specializes in creating custom estate-planning documents that are understandable. We’ve leveraged technology to offer a lower price point than most law firms. Honestly, it’s refreshingly affordable. As our client, you’re in the driver seat. We’re here if and when you have any questions or just want our input. Our explanatory worksheet and online interview gathers your answers whenever and wherever is most convenient for you.

As a busy mom of three sweet kids and two fluffy sheepdogs, I totally get it. Life is crazy busy. Who has the time? We designed our firm around that too and we poured our hearts into making our estate-planning process less of a hustle. I invite you to visit thoughtfullwills.com/fyp to learn more. Give us a jingle or drop us a note. We’d love to chat with you.

[INTERVIEW]

[00:02:51] TU: Chris, welcome to the show.

[00:02:53] CC: Yeah, thanks for having me, Tim.

[00:02:54] TU: Really excited to have you on and feature your entrepreneurial story and how that’s connected in with your pharmacy journey. One thing I’ve mentioned on the show over the last several months is a goal, I have to feature more pharmacy entrepreneurial stories with the hopes that more folks will see the PharmD as a potential pathway, they can go many different directions. My thought is not that, folks hear Chris’s story and say, “I’m going to go do exactly that.” But rather it inspires and motivates folks to think differently about how they might leverage and utilize PharmD. Chris and I actually share a mutual friend, Ashley Klevens Hayes that connected the two of us. We had Ashley on this show, Episode 95 when we talked about how to level up your career.

Just a couple weeks ago, Chris and I did a LinkedIn live and I left that conversation, really feeling energized and motivated to take some of the expertise and information I learned from Chris to accelerate our own business at YFP, and to be able to serve and fulfill the mission that we have to help pharmacists achieve financial freedom. So excited to introduce Chris to the YFP community if you don’t already know him.

Chris, before we get into your entrepreneurial journey, share a bit about your background, where you went to pharmacy school. when you graduated, and what drew you into the profession.

[00:04:12] CC: Originally, I am from the southwest suburbs of Chicago. When I was looking at universities and everything, University of Iowa was close enough to be close to family, but far enough away to still get away, like you’re trying to do early in college. I was lucky that they have a great health care program going into it, I knew that I wanted to do something in healthcare. I grew up in a family, my dad was in the state police, my mom was a dietician, and my brother has cystic fibrosis and is doing really well with it. But I kind of saw medications my whole life. That was a big part of being interested in medicine.

Then going in early to college, really fallen in love with chemistry. I just really enjoyed those classes and also the – just the philosophical concept of being able to take a substance in medication that can then solve a problem, and providing control to otherwise uncontrollable situations. That’s kind of how I’ve always thought about medicine as it puts control back into people’s hands, which was a nice thought and I liked that component of everything.

Then the other big aspect of going to – I went to pharmacy school at University of Iowa. The big thing that drew me to pharmacy, outside of all those other things, was the ability to work remotely, and to be able to work in different places. A lot of times if you’re a physician or a dentist even, you kind of set up practice, and there’s a lot of opportunity to be entrepreneurial. But once you set up that practice, you’re building your book of business, and you’re kind of set there. Obviously, you can build it bigger, you can move yourself out of the role. But I liked the idea of being a pharmacist, there’s CVS, Walgreens pharmacies all across the country. So if I wanted to travel or live in different locales, it was very doable.

Then also, after that realization that I wanted the freedom to be able to move around, I also realized that there was a remote component with medication therapy management and those roles that were popping up. The concept of working remotely, before it was so common practice, was another thing that kind of drew me into the space.

[00:06:28] TU: Chris, you mentioned some things that I would think of as more traditional that drew you into the profession, in terms of some of the science chemistry, obviously the ability, the impact on patient care. But you’re taking a very non-traditional career path. I don’t know if I love that term, because I’m hoping we’ll get to a point where, you know, we recognize to my comment earlier that the PharmD is really just the beginning of one’s career path and their opportunities.

But when folks hear me say non-traditional, they know what I mean. So you’re relatively young in your career, you haven’t taken that traditional clinical pharmacy job where you’re utilizing your PharmD as much on a direct patient care. We’re going to talk about the work that you’ve done in various entrepreneurial efforts, whether it be the dropshipping business, other summer accelerator programs, the work that you’re doing uptown creation. But nonetheless, it’s been in a different direction.

My question here for you is, like what’s the why behind that as you reflect back on this first part of your career, like, why not a traditional career path? Why do you think you’ve gone in this other direction?

[00:07:30] CC: Yeah, that’s a good question. I think the biggest thing for me is, I’ve always enjoyed creating things and being able to play around. There’s a lot of opportunity to do that within healthcare and within pharmacy. Even though the projects that I’m working on right now, I have an inkling that it will come back to healthcare and come back to pharmacy in one way or another, where I’m able to tie entrepreneurship, growing companies, and doing that within a healthcare model. But the other thing that has always been kind of an ethos of what I’m trying to create is being able to build something that’s bigger than myself. If I’m trying to have as large of an impact on the world, as I want to have, knowing that, I’m going to have to take a lot of things out of my hands, and be able to build a machine or a processor system that is able to put other people into seats that can extend that reach.

That’s kind of one of the concepts of why social media, the internet, and being able to reach a lot of people at once has always been a fascinating concept to me. Because the impact that you’re able to have, as an everyday human is pretty robust with everything that we kind of have at our fingertips.

[00:08:50] TU: A really unique opportunity, right, in the time that we live in. Your desire for contribution, Chris really stands out to me. I just finished reading The War of Art by Steven Pressfield, which is just an awesome, awesome book. He’s got a follow-up called Turning Pro. One of my favorite passages from that book, as he says, “Creative work is not a selfish act, or a bid for attention on the part of the actor. It’s a gift to the world and every being. Don’t cheat us of your contribution, give us what you’ve got.”

I sense that desire in the conversations you and I have had, and we’re going to talk about how that’s threaded throughout your journey. But I often wonder, and obviously, I’m looking at it through the lens of the financial plan, sometimes being a barrier to folks being able to achieve some of the potential that they have, and the ideas that they want to contribute. We’re passionate about that part of it.

But I often wonder as a profession, what could we fully contribute, if everyone’s giving everything they’ve got, and they have that mindset and we remove some of the barriers. I think sharing your story and others is hopefully a source of motivation and inspiration for folks that consider that question.

Chris, your entrepreneurial journey, we’re going to talk in a little bit about the business that is today, in terms of what you’re doing with Uptown Creation. But you know, I think with most entrepreneurs, they can point back to a younger version of themselves, where maybe it wasn’t a formalized LLC or business structure, and you didn’t have a team and employees, but you’re hustling in some entrepreneurial way. Take us back to when you can remember that entrepreneurial journey beginning for you.

[00:10:24] CC: Yeah. I think the start was really, when I was like 12 or 13 and playing World of Warcraft, a video game, and seeing digital currencies that people wanted, and digital assets that people wanted, which is a whole another conversation that has started up again with NFTs and everything. But being able to sell like gold in World of Warcraft was the first way that I made money before even having a job. And then I started to referee as a soccer referee and then had a variety of jobs from there.

But really, that first playground that I had was being in a video game and kind of trying to learn supply and demand, but actually make money as a 13-year-old by selling a thousand gold coins through PayPal to random people on the internet was that original bug, I guess, where I was able to scratch that itch of fulfilling something.

Then, outside of that, I didn’t really do a whole lot other than having minimum wage jobs throughout my high school career and then early college. Then I always thought there was something that I was missing with, seeing stores buy something cheaper, and then sell it for more expensive and make money on that. It just seemed like such a simple concept that there had to be something that I was missing to – otherwise, everybody would be doing that.

It kind of coincided with Amazon Seller marketplace rising a lot and eCommerce rising a lot more. This was back when I was a junior in college. Probably 2015 was – yeah, a junior at Iowa. Yeah. I did my undergrad in biochemistry at Iowa.

When I was a junior, I was working as a pharmacy technician, I was working in a cystic fibrosis research lab. I was just looking for other ways to supplement income and the term dropshipping came up. And that’s something that I just became fascinated with because it was a way that you could sell physical products and not hold an inventory. That’s usually the biggest barrier I found with buying something cheaper, selling it for higher, is you have to put that upfront cost and to get that thing for cheaper, and then sit on that inventory to then be able to sell it. But drop shipping took away like that variability.

So the initial business that really got me involved in the entrepreneurship community at University of Iowa, which I’m lucky that they have such a good program and had so many connections, and ways to foster an environment. I know not every school has that. But that was the original business model.

To break it down even more simplistically, I was following somebody on Instagram, who was talking about finding products on eBay, and then selling those products on amazon.com and never having to purchase the product until it was already sold. Somebody would buy it from you on Amazon, you would get their shipping information, their name, and then you could take that information and go back to eBay, and put that into the shipment address, and then put your credit card information in and it would just ship the product directly to that Amazon customer and you collect the profit in between.

That was the first low barrier to entry that I had to be able to experiment again, and the risk was pretty low. I was able to do it with a credit line of like $1,000, because I was a college student with nothing but debt, and nobody wants to give you money or credit card, so I was able to do that with limited startup costs. That was a big factor of that being kind of the first step into, but I learned a lot about customer service, about human nature, and about expectations that people have when they’re purchasing something.

[00:14:10] TU: Yeah, and I love that as an example. As you mentioned, you know, some of the big barriers to starting a business can be upfront capital, can be inventory holding times, right? Especially when talking about product-oriented businesses. Being able to learn some of those lessons, which I would argue you probably already see a direct connection to the benefit that’s been and furthermore will into the future. But to be able to learn those lessons without having to go through that pain of going further into debt and so forth, extremely important to you. Did you continue that through pharmacy school then?

[00:14:42] CC: Yes, I continued that through pharmacy school and I continue that to this day, and it’s evolved a little bit more from an Amazon to eBay dropshipping model, so we have other suppliers. But the big versions of selling are selling products on Amazon and sourcing those from walmart.com and then vice versa. Selling things on walmart.com as a Walmart seller and sourcing those from amazon.com.

So really, the terminology for it, if people want to look it up, is a combination between dropshipping and retail arbitrage is really what it is. Retail arbitrage usually is done by people going into Walmart, finding a sale, checking it on other websites online. If they’re able to make money, then they’ll go check out at Walmart and then ship that product out. This is kind of the way to do it at scale without having to physically go into a store but just doing it online.

[00:15:34] TU: Chris, my naive – and I’m following the methodology, and I suspect we have many that are listening, maybe interested in a side hustle that are going to go down this rabbit hole, which is cool. My naive understanding of this type of opportunity brings up a question. I often think of businesses that might be built on the back of something else versus businesses that you have full control over.

We’re going to talk in a moment about what you do at Uptown Creation and in that environment. Chris and co-founder and partners can make decisions tomorrow, today and do what you want in terms of the business in the direction. When I think about a business model or a side hustle, whatever you want to call it, with something that we’ve been discussing that might be built on the back of like an eBay, or a Walmart, or an Amazon. What challenges does that present, as well as perhaps opportunities, how do you as an individual that is trying to grow something strategically, whether you look at that as a business or not? How do you plan for some of those unknowns that are out of your control when it’s not on your own platform?

[00:16:36] CC: Yeah. I think that is a great thing to bring up, and that that is one of the – I wouldn’t say risks, but one of the pitfalls is that, Amazon can stop people from selling at any point on their platform, and then you’re reliant on that as your sole business. You’re kind of at the mercy of whatever platform you’re using. By the benefit that you get is, you get all the attention that Amazon has and all the web traffic that Amazon has. That’s the benefit of using another platform that isn’t your own, but then you’re at the mercy of that platform at the end of the day.

That kind of goes into the whole social media part of things. Anybody who has tried to build a brand or build something on social media, probably understands that they’re at the mercy of that platform, whether it’s Instagram, Facebook, LinkedIn.

To be able to mitigate your risk, I think first, being able to identify like that is a risk that needs to be overcome. I know with, let’s say, Instagram influencers, for example. If Instagram was to go away, so many of those influencers would be wiped off the face of the planet and nobody would know who they were. So being able to make the brand bigger than the platform is kind of the best of both worlds, in my opinion, whether it’s selling physical products, building your personal brand, or anything else where you’re leveraging something on the internet.

It’s a matter of being able to use that platform, that traffic, because it’s convenient and it drives a lot of traffic and attention. But then being able to do something with that, that you’re able to take people someplace else.

For example, if I wanted to make my Amazon business bigger than just my place on Amazon, I would include packing slips, for example, that would direct people to my personal website where they could check out the other products. Maybe there’s a little bit of a discount if they go there. But then now I’m taking the traffic from Amazon and directing it someplace that I have a little bit more control over.

[00:18:38] TU: And you see so many companies doing this, right, that are trying to get to that direct-to-consumer relationship and I think for the reasons that you’ve mentioned. That was a lesson, Chris, I learned early on in YFP. I think I might have picked up on that from some of Pat Flynn’s work with Smart Passive Income. The concept of being at the mercy of an algorithm, and that could change and has changed in different platforms. How do you diversify across platforms and then how do you utilize them not as the end game, but as a source to further promote, and build that relationship with the community, the audience that you have, and then convert that traffic?

Like for us, a big part of that is getting folks over to our platform, and thinking about a way we can then engage with them via email or other types of educational offerings that we want to do. But you know, if I’ve fully built the YFP community on the back of Facebook, or Instagram, or whatever, and something changed drastically tomorrow and I wanted to promote a webinar. All of a sudden, I don’t have an audience to promote to, right? I think there’s a lot of wisdom in what you said.

You started the dropshipping business while you’re in college, found some success in it. I’ve continued to grow it, but that didn’t stop you from starting another business. Talk to us about Uptown Creation, what it is, and what’s the story behind why you launched the business, and ultimately the problem that you’re trying to solve?

[00:20:01] CC: Yeah, that’s a great question. Uptown Creation was founded in early 2016, and with my current business partner, who also went to the University of Iowa, his name is Conor Paulsen, and we both had companies beforehand. He made a men’s leather good company, where it was very personalized leather good products that he was creating; bags, duffel bags, everything like that, belts. But you were able to have – his customer was able to have a part in the creation of it from meeting the leatherworker that’s going to be creating stuff, having things very, very customized. He was in a business where the customer relationship and their customer experience was really at the center of it, and that’s why they were able to do what they did because they provided a great customer experience.

Where what my business was, was more trying to scale things and do things at as large of a level as possible. Then kind of use the attention that was from another platform and drive it to myself. We became friends through the entrepreneurship communities at the University of Iowa, so the Founders Club was a club where you can kind of had to have a business, and then there were different tiers of it based on the income you were generating from your business. That allowed you to do pitch competitions, startup accelerators and everything.

Uptown Creation started in a startup accelerator at the University of Iowa. Conor, my business partner came to me and asked if I wanted to do this thing for the summer. We had some other people that were in it just for the summer. It started off as a YouTube company, essentially, which is nothing what it is today, but the goal of it originally was to be an educational company, and create YouTube videos to kind of teach people the things that college didn’t teach you. They went through that startup accelerator over the summer. I had already done one in the past, so I can be directly involved and compensated that way. But I kind of had a backburner role in it, and that was as I was entering pharmacy school in 2016.

At the end of that summer, Conor and I looked at each other and the other people that were involved, it turned out that we were the only ones that wanted to continue doing anything with the business. Now, it was Conor and myself, and we had to figure out kind of what to do.

That was the first big pivot is, we knew that we wanted to create some sort of education that we were able to provide other people, the format we weren’t married to. But we knew that YouTube was a way to make money from ads. But we knew that we also both had a background in selling physical products. This was at the same time that Instagram was initially talking about something called shopping on Instagram. This was back in 2016, they started to talk about it. It didn’t get launched until earlier this year, which is funny, but that drove us to learn Instagram.

One of the problems going back to Amazon, that Amazon selling brings up is that Amazon takes a 15% cut of everything that you’re selling. We were naturally looking for other ways to sell physical goods then and have a little bit less of a cut be taken. We saw Instagram as the potential for that if we were early on enough. We spent the next couple of months growing some Instagram accounts.

And long story short, we realized that we were really good at growing communities on Instagram and growing Instagram accounts that people started to come to us and want to pay us for that. When you are making no money as a business, and you have people that want to pay you for something that you’re doing, you usually take that opportunity, so you can keep the business going.

So that was kind of the next big pivot. Maybe we’re not going to sell our own educational resources or our own physical products on Instagram. Maybe we’re just going to help people do Instagram better than what they’re doing currently and then let them get more attention for whatever they’re working on whatever products they’re working on.

That kind of put me down the rabbit hole of learning the Instagram algorithm really, really well. Learning social media marketing tactics specific to Instagram, better than most people I can think of, and doing that through online forums, and the underground communities that exist in the growth hacking space. I was in pharmacy school, and also simultaneously doing that. I like to learn things, so that was a good hobby to have outside. But then we started bringing clients and people started to want to pay us for these Instagram services. Unfortunate that – so this is I guess a good touchpoint to have.

Another reason why my business partner and I decided to go into business together was, we complemented each other very well. He is very front-end sales, talking to people, networking, probably the best networker I’ve ever met in my life. And I was very – I don’t want to sell anything in a salesy way. I just want to make something that’s really, really good and then people can decide if they want it or don’t want it. I’ve always been more of the service fulfillment and service creation component of the business. Whereas, I had a partner early on that did the things that I didn’t want to do. I think that’s imperative because that set us up for success.

[00:25:28] TU: I think you’ve done that really well, Chris. Like when I look at – if folks haven’t looked – we’ll link in the show notes to some of the educational content that you’ve done on LinkedIn, which we’ll talk about here in a moment on YouTube. I think you have very much that persona of a desire to provide good value and good education. From there, I suspect the business development opportunities come to be so that complementary approach between you and your partner, I can see why that was so important and the value that you bring to the team.

Pivot is a word you mentioned a couple of times. You mentioned the beginnings with YouTube, the pivot to Instagram. And now I understand much of the work that you’re doing focuses on LinkedIn. Talk to us about that pivot to LinkedIn, and some of the services that you offer now and the types of clients that you serve.

[00:26:16] CC: Definitely. As a commonality that – about all the businesses that I’ve started have been kind of built on the backbone of something that already has a lot of attention, whether it’s Amazon selling, whether it’s Instagram, whether it’s LinkedIn, business development. It’s always been being able to drive attention from something else. As I mentioned, you’re also at the mercy of that platform. We were using a lot of bots and automation on Instagram, found out Instagram doesn’t really like that too much. They do their best to keep that stuff off of the platform.

We realized that if we wanted to scale the business, we needed to not have those variables, because it was easy to have 50 clients, 100 clients. But if we wanted to ever grow bigger than that, we wouldn’t be able to wake up one day and Instagram changes their algorithm and now we have to rethink our whole process and deal with customer service of 100 people.

That led us down, “Okay. What if we just played within what the social media platforms want us to do anyways? That’s creating real conversations, having a very human component to things.” That became the ethos of what we are today, is getting rid of bots and automation, putting a human in all the seats that a bot would be taking, and being able to have genuine interactions with people using the internet as a means to contact the right audience. As Uptown Creation sits today, it’s a business development company really focused on direct outreach campaigns.

What that looks like in practice is, targeting people on LinkedIn, and then starting conversations in their inbox, but not the spammy messages that everybody receives. More of a message, you know, I think given that example. If I was going to reach out to you, Tim, I would go to the YFP website, I would look at a podcast, I would try to find an episode where I’m able to bring up a guest name, listen to the first 10 minutes. And now, when I message you, I’m going to bring those things up. That’s how I’m going to inevitably start that conversation and hopefully get you to respond. Because while you have 20 other messages that are clearly spammed out to everybody, this is the message that you know is sent to you directly.

[00:28:26] TU: That’s how genuine conversations, and rich relationships, and meaningful long-term relationships start, right? Is having a true vested interest in someone else and identifying where that collaboration can happen. I love that approach and as I mentioned, we’ll link in the show notes. You did a great series on YouTube going step by step through the LinkedIn process, and what you guys have done with clients in terms of looking at that as a business development opportunity.

When I look at Chris, your LinkedIn presence, and again, we’re talking here from the mindset of, it’s not just about the number of followers and how many people do message, but authentic relationships. And the fact that you’ve been able to build those authentic relationships also build a large profile, a large following of what you do, I think over 20,000 something, folks that are following the work that you’ve done. Talk to us about the positive impact that has had on you professionally, personally, as well as for the business and what you’re doing at Uptown Creation?

[00:29:24] CC: Yeah. So personal branding has been kind of a buzzword that I’m sure everybody’s heard. That was a big component of the work I was doing on Instagram, a big component of what people talk to you about as you’re going through pharmacy school. The way that I like to talk about personal branding is really, it being your reputation, and nothing more, nothing less than that. But personal branding, kind of being the online word for it.

But in the real world, you have a reputation, people think of you or hear your name, and they think certain thoughts or remember certain things that they’ve seen. Really, since I’ve done so much consulting work with clients of trying to get them to create content, trying to get them to spread their message, use the free traffic that the internet provides. I realized I needed to also do that myself and be a practitioner of that, which was uncomfortable for me at first, because that’s not my natural way of being.

I think a lot of people think that, “Oh! If somebody is creating content or creating videos, like they’re seeking attention, they’re more outgoing than I am. They’re –”, all these other preconceived notions that people may have. When in reality, it’s really just being an effective communicator, and also building your reputation online.

With the community that builds up through my own LinkedIn outreach and content creation, there’s been a lot of great relationships that I’ve made. I mean, this is one of them, because I don’t think I would have ever met you, Tim, if I didn’t have those other interactions with other pharmacists that say, “You really need to talk to this guy.”

Just from a sheer meeting people in the industry component, I don’t think that that can be understated, how much that has helped. I mean, even with jobs that I’ve been offered in pharmacy, specifically, and just the conversations I’ve been able to have with people greatly exceeded my expectations. The cool thing about it, especially in health care, and pharmacy is that, in the entrepreneurship communities and business, this is nothing new. Everybody’s been creating content for a decade or more since YouTube came out as a platform. It’s still really new for healthcare. There’s not a lot of people that are known for things online, or have a brand. I think, ZDoggMD is probably one of the biggest brands that exists that a lot of healthcare people know. It can set you up for speaking engagements, for having those side hustles, those side gigs, but also creating something that you’re known for that then you can progress your career with.

[00:32:01] TU: I would add too, Chris. I think the benefits professionally to many folks, I think may seem fairly obvious in terms of opportunities, and the network, and the relationships that come from that or in your case, what that means for the business. I also just get a ton of fulfillment, and joy in really connecting with other pharmacists, learning about what people are working on, what problems they’re trying to solve, opportunities that have frustration challenges.

That’s one of the things I love most about the work I do at YFP, is I get to have conversations like this, or talk with prospective clients and pharmacists all across the country in all different phases of their career. The point I’m making is, don’t underestimate folks listening of, yeah, I mean, it’s going to have professional benefits for sure. But also, just some of that personal satisfaction and joy that can have from developing those meaningful relationships.

Chris, I know at the time of recording, you’re doing some strategic planning for the business right now. I’m curious, as you think about the evolution of the business thus far, you’ve talked about a couple of pivots that you’ve made, you put your hand on the crystal ball, like what does Uptown Creation look like in three or five years? Where do you guys see yourself going?

[00:33:09] CC: Yeah, that’s a great question. I want to make it like explicitly clear that Uptown Creation started as making YouTube videos on the Internet, went to Instagram, and is now at a completely different spot with direct outreach marketing. I think that’s a good learning lesson for a lot of people in that, especially pharmacists that are looking to do anything outside of pharmacy, or even just start a side hustle. It’s good to get out of your own way sometimes, and just start and know that it’s going to evolve into something else and that’s okay, as long as whatever that end mission or that end goal is being accomplished.

I think a big thing that people do wrong in entrepreneurship is they fall too in love with the product or the service or that identity of what they’re doing, rather than the end impact that they’re trying to have. If you know that the journey to getting to that end can change and it’s okay. I think that makes it a lot more freeing, that it doesn’t have to be what you’re doing right now, but you have to start to be able to get to that endpoint.

Going back to your question of kind of what the outlook for Uptown Creation is. We are very clear now kind of what we’re good at what we do, and that is direct outreach marketing. Meaning, you can use paid ads, Facebook ads, and other paid forms of traffic online to bring people in and that’s what’s called a one-to-many approach. You’re showing an ad to thousands of people. Well, we are the experts at, and growing our services in, is the one-to-one approach, and being able to have very specific targeted conversations.

So as the mediums change that are effective right now, LinkedIn, email marketing, even cold calling, and cold texting are still really effective ways if your targeting is right, but that’s going to change over the next five to 10 years, which is okay. LinkedIn might not be the best platform to do outreach on and that’s not where people are hanging out online. That’s when we’ll make more pivots, but really being on the bleeding edge of direct outreach, marketing, conversational marketing. Social selling is the term, that’s another buzzword, is where we’re headed over the next five years.

[00:35:24] TU: I love that. It’s so in line with what you just shared, which is great advice for folks that are growing something or thinking about something is, keeping that goal and vision you have in mind, understanding the methodology of getting there might change, likely will change, just given how quick things are evolving today.

[00:35:42] CC: The one thing that I want to plug as well, because I think that this is like interesting insight for people. The reason why marketing and direct outreach is interesting to me as – I’m 27 right now. I plan to have other businesses. I want to do things in healthcare. But if I’m able to build this engine of direct outreach, bringing in traffic, starting conversations, this is something that I can apply to future businesses that I create regardless of the industry. Building this engine early on in my career, that can then be applied to other companies in the future.

[00:36:17] TU: Great stuff. Chris, I want to talk about the concept of developing your craft. I’m a follower of the Uptown newsletter. This morning came out and you said the following, “What I love most about Uptown Creation is that what we do just makes sense. It makes sense that reaching out to someone on the Internet is an extremely personalized way, it would elicit a response. This is what sets the framework for us as an organization. As the marketplace continues to evolve, we will evolve faster because we are practitioners of our craft, and practitioners always win.” What does it look like to be a practitioner of your craft? What do you mean by that?

[00:36:55] CC: Yeah, and that’s a little Gary Vaynerchuk insight there. It was somebody that I follow and admire. But really, being the person that’s doing the thing that you’re selling, or the thing that you want to be known for can’t be overstated. That’s why there’s so many pharmacists out there that are experts in oncology, experts in nutrition, experts in all these different fields that are practitioners every single day, and have things that are worth sharing to people that aren’t doing that every single day, even if you don’t really see that yourself.

If you’re doing something every single day, you are an expert, whether you like it or not in that thing, and you know, more than 99.9% of the population that’s not in that thing. Really making sure that you always have your finger on the pulse so to speak, and by doing whatever you’re known for, or whatever you’re in business for, you can never be blindsided.

I think a lot of business owners start to grow as a company, and you have to put other people into a lot of the seats that you were doing before. But always being able to be close to the ground and be doing things yourself that are directly related can’t be overstated, because that’s the way that you stay up to date.

[00:38:17] TU: Great stuff, Chris. Really enjoyed the conversation. Appreciate you taking time to come on and share your story. Look forward to having you back on the show in the future as you further develop some other projects that are coming. What’s the best way that folks can connect with you and reach out to you if they have a question or want to learn more about the work that you’re doing?

[00:38:35] CC: Yeah, connecting with me on LinkedIn is probably the best. So Chris Cozzolino. Then my email address if anybody wants to email me is [email protected] and checking out uptowncreation.com is probably the next best way to learn more about what we’re doing.

[00:38:52] TU: Awesome. We will link those in the show notes so folks can reach out to Chris. Chris, thanks again for your time.

[00:38:58] CC: Yeah, I’m excited for future conversations.

[OUTRO]

[00:38:59] TU: Today’s episode of Your Financial Pharmacist podcast was sponsored by our friends at Thoughtful Wills. If you haven’t created your estate plan yet, we urge you to reach out to Notesong and Nathan. They draft custom estate-planning documents like wills, trust, healthcare directives and durable powers of attorney that fit your situation and reflect your wishes. This is key. These are custom legal documents created and reviewed by actual attorneys.

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it’s not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive, newsletters, blog post and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of your financial pharmacist, unless otherwise noted and constitute judgments as of the dates publish. Such information may contain forward-looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements.

For more information, please visit yourfinancialpharmacist.com/disclamer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

[END]

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YFP 227: Why Tim Baker, CFP® Bought a Depreciating Asset

Posted on October 28, 2021November 2, 2022 by yfpadmin

Why Tim Baker, CFP® Bought a Depreciating Asset

On this episode, sponsored by GoodRx, Tim Baker talks about his recent decision to buy a depreciating asset, how his journey becoming a Registered Life Planner® (RLP®) impacted his decision, and how he coaches clients considering big financial purchases.

Summary

Your Financial Pharmacist co-owner & YFP Planning Director of Financial Planning, Tim Baker, talks about his recent decision to buy a depreciating asset. He explains why he would purchase an asset that he knows will go down in value and how it became part of his financial plan.

Tim shares what the depreciating asset purchase is and how he and his wife arrived at their decision. After learning a bit about life planning and its incorporation with the financial plan, Tim realized that one of his goals was to make lifelong memories with his family. Tim and his wife decided that purchasing a motorhome was part of their life plan, allowing them to take adventures across the country, creating those lifelong memories, as Tim did with his own family growing up.

He explains how his journey to becoming a Registered Life Planner® (RLP®) surfaced this experience-based purchase and how the financial plan can and should support the life plan. Tim further details his coaching philosophy when working with clients weighing whether or not to make a large purchase. He considers the entire picture, not just the ones and zeros, creating a plan that benefits the client financially, balancing financial wealth with the client’s idea of a wealthy life. Investing in yourself in ways that align with what a wealthy life means to you ultimately makes for a healthy financial plan by taking care of the whole person.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim, welcome back to the show.

Tim Baker: Yeah, good to be back, Tim. Thanks for having me on.

Tim Ulbrich: Before we jump into your story of purchasing a depreciating asset, you and I were talking this past week about how grateful we are for the journey that has been this podcast over the past several years. We started Episode 01 back in July 2017, didn’t know exactly where we were going to go, how long we were going to do it, but are grateful to be here today, over 225 episodes in, three different shows on the channel each week, recently surpassing an important milestone: 750,000 downloads of the show, so pretty awesome, right, to reflect on that journey?

Tim Baker: Yeah, it’s incredible, really. You know, we talk with a lot of prospective clients that we work with one-on-one with YFP Planning. You know, when you get those comments of like, ‘I’ve been listening to you for so long,’ and you kind of build a relationship with your listeners and you know, after the red drains from my face experience in that, it’s also very something that I’m proud of and I think we should be. And it’s been a good forum to really showcase, you know, like what we believe and our approach to money, and I think this is — and wealth building — and I think this particular episode is another step in that. And you know, it’s just been a great forum for us I think to take something that maybe is a little bit — can be a little bit dry and boring for people and get them excited about it. And I think the podcast has been one of the most monumental things that we’ve done. And that was really kind of the first big thing that we’ve done together, Tim.

Tim Ulbrich: Yep.

Tim Baker: And I think it’s been just a great launchpad for our partnership.

Tim Ulbrich: Absolutely. And one of the great joys we have is, you know, we get periodic emails from those that are listening to say, “Hey, Tim, I was listening to this podcast and I did this or it inspired me to take some action or to work toward this goal,” and you know, those mean so much to us. I think the goal with this podcast is to hopefully inspire, to motivate, to educate, and we believe this topic is a lifelong journey. It’s something that we’ve practiced in our own lives and I’m hopeful that folks find it as a source of inspiration. So all this to say thank you, thank you to the community for listening, for staying with us, for sharing the good news with others as well, and we appreciate those that have been listening to the podcast and many who have even contributed with being a guest on the show. Alright, Tim, it’s confession time. So I’m putting you on the hot seat in front of the 35,000 or so folks that listen to the show each month to really, you know, ask you why as a financial planner did you decide to make a purchase of a depreciating asset. And so let’s just start with the purchase. What was it? When did you make it? And give us a little bit of the why behind that.

Tim Baker: Yeah, so my wife and I, we purchased a Class C Thor motorhome over the summer. It’s about 30-31 feet. It sleeps 10, so it has a bunkhouse, you know, bunker with a cab, kitchen, bathroom, you know, the whole — dinette — the whole 9. And yeah, we purchased it over the summer from a guy here in Ohio. And it was a long time coming — well, I wouldn’t say a long time coming. It was and it wasn’t. But that was the purchase that we made, and for someone who is very much thinking about finances and things like this and growing wealth, this was not necessarily a move that helps in that department. You know, lots of storage costs and repairs and it’s a 20 — I think it’s a 2014 with about 40,000 miles on it, storage, insurance, the tax that we paid on all that stuff adds up. But probably one of the better decisions I think I’ve made, even in — it’s early, so check in with me later — but I think just great in terms of what I think this can do for our family and the experiences that we can have. And that’s really the crux of why we decided to kind of pull the trigger on this.

Tim Ulbrich: So it’s been over a month, right, now, maybe even two?

Tim Baker: Yeah. I think we bought it in August.

Tim Ulbrich: OK.

Tim Baker: So we’re recording here in October. I think August is when we purchased it. Yeah. So — and back up, like this was something — and I give my parents a lot of credit growing up. When I was preteen, my parents bought — we first had a travel trailer growing up, so like we had one of those old conversion minivans and a travel trailer. And we took a trip when the three of us were I think preteens. I have an older brother and a younger sister. And we did four weeks, and I grew up in south Jersey, kind of outside of Philadelphia. And we did a four-week trip to as far west as the Grand Canyon, Mount Rushmore, the Alamo, Yellowstone. And for me, that was transformational. And I think that’s one of the words that I would use for this episode is really that. And you know, it kind of really changed my perspective, oh wow, when you drive west, there’s just — just the topography and there’s just so much to see and people are just different and they speak different. And it really broadened my — I don’t know if I would say worldview, but at least my domestic view of the United States and really kind of lit a fire for me to want to travel and see other things. You know, we did other trips outside of that and my parents would take it up to West Point for football weekends, and it was always like a great reprieve, like being able to go inside and like kind of hang — like chill and not always be buttoned up in uniform and things like that. So I kind of just equated that to freedom. And for awhile, you know, I was like, man, I would love to do this with — I was first thinking like when I retire, so like when I’m in my 60s, 70s, and you know, get a big old rig and drive around. But I just started thinking more and more, and as I went through my experience with life planning, really kind of changed my perception or at least my timeline, so to speak.

Tim Ulbrich: So Tim, I want to talk for a moment, you know, we talk on this show before we — I know the planning team does as well. Anytime you’re making a significant purchase or any purchase, for that matter, it means you’re not doing something else with that money, right? So the economic term here being opportunity cost. So you know, as you’re looking at making this large purchase, I know I’ve heard you talk about real estate as a goal, obviously something that you and I are both bullish on and see a growing interest in our community and in large part why we’ve got the podcast that David Bright and Nate Hedrick are doing a bang-up job leading each and every Saturday. So whether you look at say, hey, could this money go to real estate? Could this money go into long-term investing or a brokerage account? You know, could this money go into the 529 account? I think this concept of opportunity cost is — we often talk about it in terms of the dollars and making a decision, but I think there’s also an opportunity cost to not making decisions as we make the connections of how our life plan is supported by the financial plan. So just to nerd out here for a moment, if you were to put $40,000 or let’s say $50,000 and save that for 40 years at 8%, you know, that’s $1 million. So there’s the $50,000 purchase, and then there’s that hidden cost of what that could be if that money were to grow over 40 years. So just talk us through that process as you evaluated this purchase. I suspect others might be thinking the same as they’re weighing big purchases. Like, how did you both consider the opportunity cost and then eventually get to the point where you overcame just the mathematical aspects of it to determine that this was the right decision for you, for the family, and the goals that you guys have?

Tim Baker: Yeah, it’s a great question. And you know, I think for all the way up until almost like go time, you know, it was real estate investment. You know, we — my Ally account that this money was being, like where this money was, was called “Real Estate Investment Account.” It might still be called that. I don’t know if I ever changed it to like “Motor Home Account.” I mean, it’s fairly empty now. We paid cash for this, and I didn’t want to put a note on it, so I wanted to kind of keep in the budget that we were — that we had. But you know, I think it comes down to like windows, right? So I’m really bullish on real estate, and we have one property that we completely gutted and redid our home in Baltimore and are renting that out now since we’ve now moved out to Columbus, Ohio. And that’s been great. And I wanted, I definitely want to do more of this. But when I say “windows,” it’s kind of windows of time. And that’s what life planning is really about. And you know, specifically about the length of your life, but in this case, when we sat down and we were looking at our plan, I asked my wife Shea, I was like, “Is this really what you want to do?” And she’s like, “Yeah, of course it is. This has been — this is the plan.” And we kind of had this role reversal because I’m more of the — and I see this a lot in couples. I’m more of the person that is thinking like long-term and making sure that we’re doing what we need to do to have a wealthy life in the future. And my wife is typically like, hey, we’ve got to make sure that we’re doing — we’re living our life today.

Tim Ulbrich: Yep.

Tim Baker: But in this case, it was kind of a little bit of a role reversal. And I asked like, you know, I asked the question, is this really what you want to do? And she’s like, well yeah, that’s the plan. But then once I said kind of a combination of these words, she’s like, you’re right. So I basically — what I said to her was, Olivia, our oldest — we have Olivia who turns 7 this Halloween, so in about a week or so. She’ll tell everyone about it. She turns 7 this year. And we have Liam, who turned 2 this year. What I was examining, like I was kind of thinking about this as like, we only really have with her, I don’t know, six, seven years maybe until, you know, we’re no longer cool, like she doesn’t want to hang out with us. You know, you get to the teen years —

Tim Ulbrich: And we’re running out of time.

Tim Baker: Yeah, we’re running out of time.

Tim Ulbrich: Sure.

Tim Baker: And you know, I thought about that even with like the trip that I took that, you know, my brother two years older than me, he was kind of right on that preteen. And we had a good time, but I don’t know — like a summer or two after that, I don’t know if that trip would have worked. So when I put that in context in that kind of emotional tug that that gives you and specifically my wife, she’s like, where do we buy a motorhome? Like where do we do this? And that was really it. You know, that was really what brought us is that, you know, I view this purchase as an investment. You know, so many people view this as an expense. And if you do that, it doesn’t really work. And believe me, there are lots of expenses that are tied to this. But if you view this as an investment, you know, a memory-maker investment, that’s where it works. And I’ve had conversations, you know, we kind of bought the motorhome with my sister and her family in mind. They have twins that are a little bit older than Olivia and our boys are about 10 days apart, so they’re like best bros. So we kind of bought it with them in mind, hoping to share this with their family as well. But they’ve actually been thinking about buying their own and kind of doing big trips and like taking a year of that and all this kind of stuff. And for them, it’s hard to get — like they’re doing it down to the penny in terms of expenses. I’m just thinking — like it’s just tough, that’s a tough sell. It is a tough sell. And I get it. Like as a financial planner, it’s good to do that. But for me, this was really about letting go a little bit. And again, I know in the back of my mind that we’re going to be OK for the future and we’re doing a lot of things in that regard and we have a fully-funded emergency fund and all of those things. But to me, like the emotion, which is what drives our choices of I want my kids to experience similar things that I was fortunate enough to experience as I was growing up, and I think we only have a window of time — and not to say that when she’s a teen and things like that, but when you’re camping, like to me, it’s close quarters. Like you’ve really got to love your kids and your family and I think it gets harder as you get to be a little bit older. But that was the impetus, really. And a lot of that really is rooted in my own life planning journey of how we got to even make this transaction.

Tim Ulbrich: Such a good, reminder, Tim, about, you know, if we only look at the numbers — and here, you’re talking about one thing. I would argue that applies to other things as well where if you’re looking at this only as an expense, we would never make these life planning decisions.

Tim Baker: Right.

Tim Ulbrich: Or these decisions that spark the life, right? I mean, I get the numbers. If instead of buying a motorhome, whether that’s $40,000, $50,000, $60,000, whatever — let’s call it $50,000, if instead of buying the motorhome, you saved $50,000 and you put it into a long-term savings account and it grows for 40 years and you have $1 million. In one, we’re looking at $50,000 of a purchase that’s going to go down in value and has other expenses. And in the other, we’re looking at an investment that’s appreciating and is going to be worth $1 million or more. Like but what we’re really trying to highlight through this journey and through the discussion around the planning process and the importance of bringing out these goals and visions that you have for your plan and for the family and for you individually is that it can’t just be about the numbers and the expense. And Tim, you’ve mentioned a couple times now life planning. Tell us more about what is life planning and how did your journey in going through not only your own life planning but ultimately being registered as a life planner and being able to use that skill set for clients of YFP Planning and training the rest of the team? Like what is that life planning process? And how did going through that journey ultimately lead you down this decision here?

Tim Baker: Yeah, so I found out about life planning kind of George Kinder, who’s kind of the founding father of life planning, and his three questions. And it’s something that once I went through the three questions myself years ago, I immediately incorporated that into kind of our goal setting. We call it Script Your Plan at YFP Planning. And we’re — that’s what we’re doing is we’re kind of saying, OK, now that we know kind of where we’re at, we’ve gone through a get organized, where is all the — what do the finances look like, let’s talk about where we want to go. So we do the three questions with clients now, but I think for me, what I — it was powerful to go through that myself when I was answering those questions, and I found out that there’s a registered life planning designation, RLP, that I just finished this year. And really, it’s been a couple years in the process that I have been going through that. What life planning is, to back up, they say it’s kind of financial planning done right. It’s really about putting first things first. You know, we often live our lives by like a paradigm that is not ours. It’s been kind of something that’s been dictated to us over the course of our lives, you know, get good grades, get a good job, earn a lot of money, that type of thing. But for a lot of us, we kind of get stuck on that, stuck in that, and we can sometimes fall into this state of not really examining our lives and not really saying like, is this really what I want? Is this what I’m doing right now, is this what a wealthy life is? And again, it’s not just about the 1s and 0s, it’s about what are you passionate about? What enriches your life? So years ago, I went out to Arizona and I did the first step, which was the seven stages of money maturity, which kind of focuses on listening, believe it or not. So as planners, we need to shut up. And so much of us, we see like student loans, OK, this is what you do, dah, dah, dah, dah, dah. And there’s a plan. But it’s really about focusing on your client and being there with them, being present with them, and not trying to overpower or not listen. And it’s about communication, kind of the client-planner attitudes, the biases and behaviors that we grow up with, so understanding that. You know, one being money is the root of all evil. Like where does that come from? Or you know, don’t trust — like some of those things were built into me I think. You know, my mom came from a very — her upbringing was tough. And I think some of those were kind of implanted on me. And you go, I have to understand that. And we see a lot of clients with that type of thing. So that was eye-opening. And really the next stage, which I think was truly transformational, was a five-day in-person training called The Evoke Life Planning Training. And this is where you actually go through the different stages of life planning. So I was life planned myself. And I life planned my partner Dan, so shout out to Dan. And I think this for me was very transformational. I kind of went into that training not knowing what to really expect but came out saying like, I am burnt out. My schedule is not mine. You know, kind of what I’m doing right now is not healthy. And from there, you know, I changed a lot of things. But the big thing that I took away from that was my vision meeting, which is the second — you know, it’s all about uncovering your kind of most exciting, meaningful, and fulfilling aspirations. And when Dan went through that with me and lit my torch, it was about really the motorhome and doing that with my family. And I still remember that meeting like it was yesterday. And you know, you go through that and you know, you create so much energy that that’s all I think about. Like that’s all I thought about for a while. And it took me longer than I thought to get it done, but you know, you could run through walls. And then finally, the life plan that you go through like a mentorship, which is like a six-month thing where you go through case studies and one-on-one guidance and group conferences and things like that. So that finished this year. And to me, the challenge that I have now is how do I best inculcate and integrate, I should say, the life planning methodologies into what we’re doing with clients. Right now, we do portions of it, and I tested out kind of the full Evoke method on clients and trying to figure out how to best balance getting to the core of what a client is passionate about but also making sure that we’re soothing the pain that are student loans, investments, tax questions, insurance, home buying, all that stuff. So that’s my challenge going forward. But I think to me, it’s where you really create and have meaningful relationships, meaningful conversations. And that’s what the RLP is about. And I think without me going through it personally, I don’t think that we would be at this step. And like I said, to go back to the whole if you invest this money, what would it be in 30 years? $1 million. I’m like, that’s great. But I would suspect that if you asked a 30-year-older version of myself, I would trade that $1 million for I think the experiences that we’re going to have with this investment, the RV, and with my family. And that’s I think what this is really about.

Tim Ulbrich: And I think that’s what a good coach does, right, what you just mentioned there is ask that question or ask the right set of questions that get somebody thinking about what might 30-year-into-the-future self think of this looking back? And you know, I think there’s some good accountability in that process. I think as you’ve gone through the RLP and just briefly scratched the surface here, I think that has really enriched the planning process and obviously you seeing the value of that being able to bring that effort to clients of YFP Planning, so I’m grateful for that. Tim, I’m looking at your credentials now on LinkedIn. You’re starting to look like a pharmacist with all these letters after your name.

Tim Baker: Alphabet soup. Yeah, I know. I’m working on a few others.

Tim Ulbrich: I was going to say, you’ve got one coming down the pipe, right, the RICP is coming. So.

Tim Baker: Yeah, if I can study, if I can get studying for it, yeah. I mean — and again, I think, you know, one of the things that one of our core values at YPF is optimize you and you know, I’ve been in organizations where it’s stagnant because hey, we’ve figured everything out and we’ve seen everything. And I think that’s just poison to an organization. So you know, I’m not necessarily one for designations just to get them, but I look at it in terms of what can this provide to our practice? How can this further benefit the clients that we serve? And you know, I think that is important. And you know, having that. And it’s funny. I always kind of go back to this story. When I graduated from West Point, I’m like, ‘Well, that’s it. I’m done with school. I never have to pick up a book or do anything.’ And you know, really that changed more when I became an entrepreneur and now I’m a — I read all the time and listen to podcasts and I’m always trying to figure out ways to do things. And I think, you know, that’s the message really even to our clients is keep evolving and keep sharpening the salt, so to speak. You know, I think that it just, it leads to more of an enriched life but also I think it just can continually improve your skill set. And again, like the RLP, the Registered Life Planning, there are advisors, financial advisors, that have taken this training and have stopped being financial advisors. Like all they do is the front end life planning and then they hand it off to advisors. And I actually thought of like even doing that internally is you know, having just life planners that are doing this front-end work that it’s a form of planning, it’s a form of coaching, and then hand it off to our CFPs to kind of, you know, put a lot of that into practice. So it’s an option that I’ve been playing around with. And I think the cool thing about this is you don’t have to have all of the other financial designations to do this, but to me, it’s how do we further enrich ourselves, enrich the lives of our clients?

Tim Ulbrich: Yeah, and you mentioned Kinder and the three questions. We’re going to link to those in the show notes for those that want to dig a little bit deeper. And for those that are hearing this in real time saying, “Hey, I’m really interested in having a financial plan that also considers some of what we’re talking about here around the life plan,” we would love to have an opportunity to talk with you to see if the services offered at YFP Planning are a good fit for you and the financial goals that you have. We do a free discovery call, you can learn more, schedule that at YFPPlanning.com. Tim, talk me through the process not only that you use but in coaching clients of YFPP that are making a big financial purchase, right? It could be a home, whether that’s a first home, an investment property, a vacation home, could be a car, could be a motorhome. What questions are you prodding to help them reflect upon that purchase that hopefully leads to a situation where there’s a purchase that has confidence behind it and not one that leads to buyer’s remorse?

Tim Baker: I think that you know, this is a process, right? So it’s not — you can’t look at it in a silo. I probably wouldn’t have made this type of purchase without a good, solid foundation. So like you know, cash emergency fund, a good savings plan beyond that, I think doing well in the investments, stable job, all those things. But beyond that, you know, like what we often ask clients is if we get into the Delorean, the imaginary Delorean, and we go ahead five years, like what does success look like? You know? If we look back at those five years. And I like to kind of equate age with that because I’m turning 40 next year, Tim, so like in 30 years, I’ll be 70, which is kind of like where my parents are. My dad’s a little bit older than that. So like trying to put myself in their shoes and like what do I want to accomplish because the further away it gets, the harder it is for us to kind of like feel that time. So I think framing it — and just for a lot of us, it’s actually just sitting down and actually asking some of these questions of ourselves. Like I said, I always tell the story when I was — my first job out of the Army was Sears/Kmart. So I would drive to work in the dark at 5 in the morning, and I would drive home in the dark at probably 6 at night or 7 at night or something like that. And those drives I would never remember. Like I would get in my car, and I was on autopilot. And so many of us, like that’s our life is like we’re not really thinking. It’s kind of an automatic thing, so like even asking ourselves these questions, so I think it’s — that’s part of it. It’s just going through that process and examining is this what we want to do? And if it’s not, what the heck are we doing about it? So like one of the things I say to prospective clients, you know, we might go through the wealth-building stage of the financial plan and we’ll do a nest egg calculation that says, ‘Hey, Tim, you need $5 million to retire.’ And that’s typically where they look at us like we have 5 million heads, right, because it’s a big number that’s in the future that doesn’t really mean anything to me. So you know, we go through the process of kind of discounting that back to a number that says, OK, if you’re putting this into your TSP or this into your IRA or this into your 401k a month, you’re on track or you’re off track, right? So we can kind of break that down into more of a digestible number to see if we’re trending to that goal given, you know, a handful of assumptions. But the point of this story is if we do work together for the next 30 years, and you don’t have $5 million, you have $7 million, $8 million, $10 million, whatever that is, that’s great. Like those numbers are bigger than $5 million. But if you’re miserable because you look back at that list of all the things that you wanted to do over 30 years, 20 years, 10 years, whatever that is, and you haven’t done anything and you’re miserable because of it or you’re disappointed, the question I would ask you is what’s the freaking point?

Tim Ulbrich: That’s right.

Tim Baker: Why get this education, why earn this money, why pay down this debt, why invest, whatever, if we’re not going to intentionally direct it to the things that matter to you most? And I don’t think that I’m going to be on my death bed and I’m going to say, “I wish I would not have bought that RV.” I just don’t think that in my heart of hearts because of just — I just think about the reaction that my daughter and my nieces had, just when we pulled that up. And even the two camping trips that I had, I think I snapped a few pictures and texted them to you, Tim, even in our first camping trips, it’s going to be an adventure. And to extrapolate that out, like that’s our lives. Our lives are adventures. But we have to be willing to take it, you know, and seize it. And I think that’s what life planning really tries to get to the surface is what is that adventure? And taking that road and not necessarily adapt to a paradigm that’s not yours.

Tim Ulbrich: Yeah, and you talked about this, I think there’s some really practical things, right, making sure do I have a good foundation in place? We talked about that on Episode 212, you know, what does it look like to have a good, strong financial foundation in place. You know, looking at the value that this purchase is going to add, what are the alternatives, right? We talked a little bit about opportunity cost. You know, waiting a little bit before making that purchase and feeling that peace and the thought that went behind making the decision. But you know, as you highlighted, I think the example of fast forward looking back and really asking some good questions to reflect on that, so, so important. So and you mentioned that — if I heard you correctly — it’s the Thor, right? Which is great. I just see like Tim Baker behind the wheel of the Thor and think of the Thor films, which is fantastic.

Tim Baker: Yeah.

Tim Ulbrich: Where has it gone so far? Where is the Thor going in the future?

Tim Baker: Yeah, so we’ve just done basically weekend trips in Ohio. We’ve just done camping sites that are within a few hours’ drive. So we went up to Cedar Villa one — that was our most recent one. I think next year it’s really looking at some of the national parks. And it’s a lot — it actually is different than growing up. Like you have to book these pretty well in advance, so if we want to go to Yosemite or things like that. And you know, I kind of look at this as like, you know, some summers of adventure is really to get the kids, especially when Olivia is not in school, and go out and do it, you know? And you know, a lot of it is, you know, just being outside of your comfort zone. I don’t think I’ve ever driven something this big, but it’s fun. And you know, it can be a little stressful, and that can be true for whatever your life plan is is that it can be outside of your comfort zone. But it’s one of those things that, again, I’m tooling down the road and I look back and the two boys are in their car seat just gabbing on and the girls are doing their thing. And it’s brought me a lot of fulfillment already, and I think one of the things Shea and I have a long drive here this afternoon heading back to Maryland for a wedding. That’s one of the things we’re going to talk about too is what is the slate of trips? And start scheduling them. And I’m really excited for that. So it’s a journey. And I’m excited, I’m excited for what’s in front of us and again, to me, I look at this as a window of time with our kids. But just to extrapolate that out further, like we have a window of time, which is our life. And again, to kind of bring it back to life planning, it’s really important that we’re taking full advantage of that and not necessarily leaving anything on the table.

Tim Ulbrich: Yeah, one of the things we’re blessed with here in Ohio, Tim, shout out to the Buckeye State, is just some awesome state parks. So you know, trips locally and I know you’ve got a sabbatical coming up here. So one of the benefits we offer for the team at YFP is when you get to the five-year mark, we’ve got a month off and some funds to take a trip with the idea that we’re supporting the things that are central to the life plan. So pressure’s on, Tim, to be planning that, that sabbatical when it comes to the motorhome. Great stuff, Tim. Appreciate your willingness to share the story. And again, for those that are hearing this and interested in taking that next step with the financial plan, especially considering some of the dreams and goals that you have for you individually or for you and your family, love the opportunity to talk about the services at YFP Planning. You can learn more and schedule a free discovery call at YFPPlanning.com.

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6 Boring Financial Moves Worth Making

Posted on October 22, 2021June 30, 2023 by yfpadmin

6 Boring Financial Moves Worth Making

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

Today’s the day.

You’ve spent the better part of a decade getting your PharmD, passed your boards, and got the job. But today’s the day it’s supposed to all pay off; for today, you finally get that sweet first paycheck as a pharmacist.

Welcome to the club!

But now what?

Well…whatever you want, right? After all, the world’s your oyster now that you’re making good money. Live it up! And even if you don’t have the money on hand to do what you want right now, you’ve got a big income to support a big credit limit. Charge it!

Unfortunately, a lot of us (myself included) buy into this mindset and fall into a financial quagmire because of it. What starts as something innocuous like “I’ve worked hard for a long time and now I’m going to treat myself” has a funny way of becoming “Wow, I make six figures and live paycheck to paycheck!” And if you don’t believe that’s a thing, tell that to the majority of high-earning Millennials who report living that life.

It doesn’t have to be that way though. There are moves you can make to protect yourself from such first-world problems. But here’s the rub, most pharmacists (and people in general) don’t like making some of these financial moves because they can be boring, tedious, and might be outside your comfort zone. If you can get past that though, these moves could pay off in the long run.

So with that, let’s dive in!

1. Make and Keep a Budget

This one’s probably the most essential thing you can do to keep your finances on track. Knowing how much money’s coming in, how much is going out, and what can be saved is elemental to the financial plan. If you aren’t budgeting, I’d dare say that you’re going to find it very difficult, if not impossible, to meet most of your bigger financial goals.

So why does this one top our list?

In truth, budgeting can be one of the most boring activities that fall under the broad umbrella of things considered “adulting.” It requires you to take an accurate accounting of not just the money you have coming in, but the money that’s going out and where it’s going. Poring over pay stubs, bank statements, and credit card bills to get all this data isn’t just recommended, it’s required. Oh, and you’ll probably need to make a spreadsheet or two.

Sounds like fun, doesn’t it?

And that’s just what goes into making an initial budget. To make budgeting work for you, you need to get in the habit of sitting down with all these numbers regularly (usually once a month, if not more often). Like a diet, success with budgeting is only going to occur when you practice it consistently for the long run. Fortunately, budgeting isn’t that hard to do and there’s even more than one way to do it.

For most of us, the thought of budgeting invokes a picture of sitting down with your finances once a month, going over your income and expenses, and seeing if there’s money left over to put toward goals. This kind of process, known as “zero-based budgeting,” is the most basic form of budgeting you can do and will likely be the first budgeting style you try. It can also be a pretty tedious process as you need to dissect each month’s spending and see how it compares to the goals you set for yourself ahead of time. For instance, say you want to set a budget of $150 a month for clothes, and this month you only spent $135. Great! The extra $15 can be added to the amount you can save this month. Conversely, if you went over budget in that category by $15, hopefully, you underspent in another category. If not, you’ll need to dip into existing savings to cover the shortfall.

Given the fact you need to repeat this process for every spending category, month after month, it’s not hard to see why many people don’t care for it. Still, it must be done. Don’t fret though, there are plenty of tools available to help you out along the way. For starters, you can avoid having to make a budget spreadsheet yourself and get one for free right here at YFP. This template will walk you through the steps required to make your first budget. Beyond that, there are some excellent platforms available to keep you on track. I was a big fan of the app Mint when I was getting started as it automatically drew all the data I needed from my accounts, aggregated it, and presented it to me on a clean interface.

Using that app, I was also able to get a handle on my spending trends over time and better predict my spending in the more variable categories (ie. food, clothes, entertainment, etc.) which allowed me to pursue a more convenient budgeting style. By knowing what I usually spent in those variable categories and seeing a consistency over time, I could also (in theory) treat the whole lot of them as a single line item. This led me to create a budget for myself which is sometimes referred to as a “reverse budget” in which money for savings is taken out first (in my case every pay period), and then you live off what’s leftover. It’s kind of like living paycheck to paycheck, but without worrying about how you’re going to pay the rent. For me, this style has worked very well as it involves little work beyond the initial setup. I get paid, my spreadsheet tells me how much extra I should have, and I send that money toward goals. The only time I revisit the numbers on the spreadsheet is when they change. That’s it! If you’ve been using a zero-based budget for a while or happen to have a few years of data showing relatively consistent spending, migrating over to a reverse budget might help you keep things going long term.

However you decide to do it, the bottom line here is you need to budget. Full stop. All of the other things we’re going to talk about in this post can be crucial to the financial plan, but they pale in comparison to the importance of budgeting. If you’re not already doing it, get started today!

2. Protect Thyself!

Ok, I tried to give this one a more exciting title, but this section encompasses the most boring things you can do as part of the financial plan. In this bucket, you’ll find riveting topics such as insurance policies, designating a power of attorney, and even writing a will! Hoo boy!

Pumped? Yeah, I didn’t think so.

But the truth is, taking steps to secure yourself against life’s uncertainties is never a fun exercise, and sometimes the process can even be a little uncomfortable. It’s worth it though, and you really should consider taking action here. After all, stuff happens in life and even the best-laid plans can get torn to shreds by the unforeseen.

When it comes to insurance, most of us are pretty familiar with health, home, and auto policies, and these are all essential and may even be legally required to have in some cases. But what about insurance that protects your income and those who depend on that income? Life and disability insurance policies typically aren’t given the kind of attention and essential label that the above do, but for many of us, they probably should. After all, your income is the lifeblood of you and your family’s financial plan, and securing it is important! It’s tough to think about dying prematurely or losing the ability to work, but preparing for the worst is always a good move.

Life insurance can be a pretty complicated topic, especially when you consider the fact that many policies out there combine insurance with investing. Rather than getting into the weeds on the pros and cons of different types of policies (for that, check out my other post Life Insurance for Pharmacists: The Ultimate Guide), I’ll just say that the most important thing to consider here is getting a death benefit sized to your situation for the lowest amount of premium from a reputable insurance company. And given the importance of getting that sizing right, it’s probably not a bad idea to work with an advisor or agent when getting a policy.

Be forewarned though, policies that have investing components such as whole life or universal life tend to have MAJOR financial incentives for the agents selling them. As such, those agents (who may also call themselves financial advisors) may not be acting in your best interest when pitching them to you. For most new pharmacists, these types of policies are rarely the best option. In general, term life policies that meet your basic need for insurance are what to look for.

If life insurance is a good fit for your financial plan, then you’ll want to consider getting disability insurance as well. Thankfully, disability insurance is a little more straightforward. At a basic level, you need to choose how long you want to receive benefits, the amount you’d receive, and how long it will take before benefits kick in (also known as the elimination period). In addition, you may want to get a policy that’s specified as “own occupation” disability insurance because receipt of disability insurance otherwise is predicated on the idea that you can’t work, period. Unless you have an own-occupation policy, disability payments can be denied if you could reasonably work in a different capacity, even at a much lower rate of pay. For more on disability insurance, be sure to check out this must-read on the YFP blog, Disability Insurance for Pharmacists: The Ultimate Guide.

Finally, when it comes to protecting you and your family in the event of the unthinkable, having other plans in place such as a durable power of attorney, will, and/or estate plan can go a long way. These things can make your wishes known in the event you’re unable to say them yourself. For more on this, be sure to listen to YFP Podcast Episode 222: Why Estate Planning is Such an Important Part of the Financial Plan.

3. Tackle Debt

Once you’ve started to budget, getting out of debt tends to be one of the first financial goals people set for themselves. After all, being debt-free is pretty awesome.

So why does this one make the list? Because while being debt-free can be exciting, getting there can be a pretty boring process. On top of that, if you have student loans you are trying to pay off, an optimal strategy may involve a suboptimal amount of paperwork to boot.

For most of us, eliminating a substantial amount of debt boils down to following a budget and applying the savings from that budget consistently. Put in the work, grind it out, and the debt will eventually be gone. That said, there are ways to optimize the process.

There are two main strategies for straight debt pay off: the avalanche and the snowball. The avalanche strategy involves you paying off debts in order of smallest to largest. With the snowball method, you’ll pay off the debt that has the highest interest rate first, eventually working your way down to the lowest interest rate. There probably won’t be much of a difference between the two in terms of how quickly you’ll pay off the debt, but these strategies do provide a roadmap to get you from start to finish.

But while the path to get rid of most types of debt can be straightforward, the best path to get rid of your student loans can be a little less clear. Depending on the type of loans you have, your employment status, and your level of discretionary income, you may find that the optimal strategy for addressing your loans is a lot different than simply grinding them away. For more on that, be sure to check out Tim Church’s comprehensive book, The Pharmacist’s Guide to Conquering Student Loans as well as the excellent post The Ultimate Guide to Pay Back Pharmacy School Loans.

If, after carefully considering all of the payoff strategies available to you, you decide that simply paying them off is the best course of action, visit the refinancing hub at YFP so you don’t pay a dime of interest more than you need to. You might be able to get some extra cash too!

4. Avoid More Debt

Once you get out of debt, it’s only natural to feel that your financial picture has relaxed a bit. After all, these are bills you’ve likely eliminated from your life forever. But now that they’re gone, it’s incredibly important that you don’t replace them with new ones. Believe me, keeping up with the boring grind that got you out of debt after paying everything off is easier said than done.

There’s a theory in economics known as the “wealth effect” which shares that as the value of people’s assets rise, they tend to spend more. I would argue that the same can be said when you get rid of debt. Your net worth rises and the cash flow available from your biggest asset (your income) increases. Taken together, the pressure to upgrade your lifestyle goes up as well. After all, you can afford nicer things now, denying yourself these pleasures would be on you alone, not the fact you have a loan payment due.

This is something I started to struggle with once the only debt I had in my life became my mortgage. With all the other big monthly bills gone, the amount of extra cash available every paycheck seemed to give me license to spend a lot more than I had previously. While my experience in personal finance taught me to avoid credit card debt like the plague (and I do), it’s a lot harder to keep thoughts of buying a nicer car or considering a home upgrade at bay; both of which have a nasty habit of getting you back into debt. Add temptingly low-interest rates into the mix and, well, you get the picture.

5. Force Yourself to Save More

Going hand in hand with keeping yourself out of debt is then using that money to save more. This can be tough because unlike getting out of debt, saving money doesn’t have a well-defined endpoint and the goal you set for yourself can shift over time. In addition, unless you’re in a group that likes to share financial successes, getting external validation (and motivation) about your savings habits is unlikely. After all, people see nice stuff, not nice balance sheets.

Thankfully, there’s a concept I’m going to borrow from the Financial Independence, Retire Early (FIRE) movement that we can use here to make savings a little less boring and give you a better-defined goal to work with. It’s called the “four percent rule.” In a nutshell, the four percent rule sets the amount you need to save to be considered financially independent as 25 times your annual expenses.

How does that make saving less boring? Easy. With a defined goal in mind, you can give your savings journey milestones to get excited about! For example, getting to a point where you have $100,000 in your investment accounts can sound pretty good on its own, but it can be much more meaningful in the context of where you are in your journey to financial independence; arguably the end goal for everyone taking charge of their financial futures.

6. Be Honest With Yourself as an Investor

Finally, I wanted to touch on this one not just because it fits the theme of boring things to do, but because I think as pharmacists (like other highly compensated professionals), we can easily fall into the trap of thinking we’re smarter than we are when it comes to investing. I’ve been guilty of this. But despite what you may hear in the news about small “investors” making scads of money on the latest meme stocks or cryptos, the truth is that day trading the market is a great way to lose money over the long run, or worse. For most investors, following a boring, buy-and-hold style of investing using a diversified mix of quality assets that aligns with your risk tolerance is typically a much better play.

Conclusion

The bottom line is that the path to long-term wealth and financial prosperity isn’t always sexy. Along the way, there are things you’ll need to do that are, frankly, quite boring. But if you can get past that and put in the work to make and keep a financial plan that allows you to build wealth in a secure, consistent way, you’ll be well on your way to reaching financial independence.

Need help figuring out which financial move to make next?

If you’re interested in having support on your financial journey, I encourage you to book a free discovery call with the team at YFP Planning. YFP Planning is a fee-only, comprehensive, high-touch financial planning firm that’s dedicated to serving pharmacy professionals like you.

You can book a free call to see if YFP Planning is the right fit for you.

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YFP 226: How and Why this Entrepreneur Left a Successful Pharmacy Career to Start a Business

Posted on October 21, 2021November 2, 2022 by yfpadmin

How and Why this Entrepreneur Left a Successful Pharmacy Career to Start a Business

On this episode, sponsored by Thoughtful Wills, Tim Ulbrich sits down with pharmacy entrepreneur, Dr. Christine Manukyan to discuss her why for leaving her career in hospital pharmacy administration, her passion for building a business around functional medicine, growing pains she has experienced in her first year of business, and setting a bold goal of growing her business to $1M in revenue per year by age 42.

About Today’s Guest

Dr. Christine Manukyan is the founder of the Functional Medicine Business Academy™, best-selling author, STORRIE™ podcast host, and an international speaker. Prior to becoming an entrepreneur, she spent 13 years in corporate America. In the midst of a global pandemic, she made the wild decision to leave her reputable job as a Clinical Pharmacist to start her virtual practice. She is now disrupting the way clinicians are able to make an impact by coaching and mentoring them through the foundational steps of holistic practices and entrepreneurship. Dr. Christine created the world’s first Functional Medicine Certification Program which is a business incubator for clinicians to launch and scale their Functional Medicine Practice as they become Certified Functional Medicine Specialist™. Her mission is to pave the way for other burned-out medical professionals struggling to balance family, career, and their health to take control of their freedom and create their Functional Medicine Legacy.

Summary

This week, Tim Ulbrich takes some time to sit down with fellow pharmacy entrepreneur and all-around rockstar Dr. Christine Manukyan. Christine is the founder of Functional Medicine Business Academy™, best-selling author, STORRIE™ podcast host, and an international speaker.

Christine talks about her reasoning and motivation for leaving her successful career in hospital pharmacy administration. She shares her passion for building a business around functional medicine and how it aligns with her personal and progressional goals. As we know, when a business experiences rapid growth, there can be growing pains. Christine details some of her challenges during her first year of business and how coaching and professional guidance helped her overcome those difficulties.

There are no signs of her slowing down either! Christine talks about setting a bold goal of growing her business to $1 million in revenue per year by age 45 and why she recently decided to go bigger, moving that goal up by three years to the age of 42.

For Christine, mindset is critical for success! She encourages pharmacists and entrepreneurs alike to visualize what success and an ideal life look like and act upon that visualization by becoming all of the things you set your mind to become.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Christine, welcome to the show.

Christine Manukyan: Thank you for having me. I’m so excited. Thank you.

Tim Ulbrich: Absolutely. I’ve been looking forward to this interview. We crossed paths after I heard the tail end of your session at the Pharmfluencer Summit that was hosted by Dr. Kimber Booth, and I heard a little bit of your story and said, “Hey, I need to learn more, and we have to share more with our YFP community.” And our listeners know that I have a passion for featuring various pharmacy entrepreneurs with the hopes of highlighting the many different paths that one may take with a PharmD. You know, I believe that the PharmD is a ticket, it’s a starting point, it’s certainly not the end. And I think your story, Christine, highlights just that. We also share a Buckeye connection, and we’ll get to that here in a moment, but before we jump into the entrepreneurial journey, dig into the business, the work that you’re doing now, Christine, give our listeners some background on your pharmacy journey, how you got into the path of pharmacy, where you went to school, some of your post-graduate training, and the work that you did prior to the business.

Christine Manukyan: Absolutely. Well again, thank you for having me on your podcast. This has been such a fun connection, as you were sharing like with the Buckeye connection too. Years later, who knew we are doing a podcast exchange here. This is called coming full circle, right? Well, thanks for giving me the opportunity to share my story. Well, Tim, my story kind of goes back a little bit behind my life, what happened before coming to here in the United States because I was actually brought up in Armenia, and I came to the United States when I was 16 years old. And back home, we go to school for 10 years. So after 10th grade, and you graduate school at age 16, you are actually prepping for college. So for me to graduate, my last year of school to step into like I was going to go to medical school because I wanted to do something with medicine. And coming to the States, realizing that hmm, I’ve got two more years to figure out exactly what I want to do and really kind of gave me the opportunity to understand what I really want as somebody who just came to the States, is not speaking the language, just reinventing herself as a teenager. And what I realized at that time was medicine was not a good fit for me. And I wanted to be a mom, I wanted to be a full-time mom. I was still wanting to do something with medical field and healthcare, but I decided not to go into medicine. I wanted to be a plastic surgeon back home. And here, I’m like, no, that’s not a lifestyle I would be going into. So I literally just started doing what everyone else does, just asking people what they love about their job in the healthcare space and just kind of to narrow down my choices. And I was stuck between optometrist and pharmacist. And I realized I’m a talker. I like to talk to people. And those few minute conversation in the optometry space was not going to give me a whole lot of that connection, so I decided to go into pharmacy space. And started my undergrad — and so back then, we didn’t really have to have bachelor’s to get into pharmacy schools. And I remember, you know, applying to pharmacy schools. And I was actually put on hold on a wait list here in California at USC and also at Western, which is here in Pomona. And literally, deciding to — like maybe this is not my time. And they’re not calling me, it’s already end of July, schools are already starting. And my family decided to move to Florida, a better life and housing prices at that time. And my brother being in real estate, we decided to actually move across from California to Florida. And I remember like over the weekend, making that decision to move my entire family. On Monday morning, I get a phone call from here, from Western, saying, “Congratulations. You’ve been accepted to pharmacy school.”

Tim Ulbrich: Oh, gees.

Christine: Manukyan: And this is like what? I literally yesterday moved across from California to Florida. And I’m going to apply to become a resident here in Florida so I can go to school here. But you know, everything happens for a reason. And so the experiences that I gained becoming a graduate from the (inaudible) gave me a whole new opportunities of taking this profession to a whole new level because I was surrounded by people who did not have my background. And the reason I’m sharing this because here in California, there’s a lot of Armenians. And people know each other’s cultures, and a lot of us don’t have that voice to educate the rest of us what we do and what we’re passionate about because there’s just so many of us, right? This is not the first time they’re going to hear your story. But being in Florida and being actually class president too, it gave me the opportunity to share my story of who I am and the struggles I went through because I was the only person in my class, in the whole school, to come from where I came from. And the reason I’m sharing this is because there was a lot of learning and unlearning that happened during that process, and I had to let go of the mindset of like, everybody knows who I am to a mindset of like, nobody knows who I am and really using your voice and your experience to become that hope and inspiration for other people who may be similar like you are, but you’ve never met them before. And long story short, I had a great experience in Florida, and so I decided to continue my education in hospital setting working in undergrad and pharmacy school and retail pharmacies. I decided this is not the career path for me. I decided to run away from retail pharmacy, and I committed to a two-year residency at Ohio State at the health system pharmacy administration. And it was such an incredible experience being in Midwest, which was my first time, and experiencing that cultural shock. I’m like, whoa, this is whole new world that I stepped into. And literally being there for two years and learning so much. And I just remember like graduating, saying like, “I have so many opportunities to go anywhere I want and do so many different things,” but I really have to find something that was aligned with my passion and my soul, which was not only leadership but also making an impact that hasn’t been tapped into in the past. And I was looking for creative positions. I was looking for — the titles didn’t really matter to me. It was more about what I will get to do in the position that I’m hired to do, you know? And that questioning kind of brought me back to California again at that time. And I was hired as a regulatory compliance officer at Cedar Sinai, which was a brand new position that was created literally during my interview, I’m not kidding. It was created literally during my interview because they saw the passion that I have like creating new projects, and I was given this opportunity to do that. So — and that’s how my journey came from becoming, you know, here an immigrant starting to learn the language going to pharmacy school and residencies and landing to my one and only job that I had for 12 years at Cedar Sinai in different leadership roles, working as a clinical pharmacist and also different roles in the hospital before I left.

Tim Ulbrich: Such a cool story. And we’re going to talk about that journey out and why you made that shift, but you know, just to reflect for a moment, you mentioned being waitlisted at a couple pharmacy programs to then entering, of course I have a bias being connected to that program as well, but then entering into one of the top health system administration programs, highly selective programs, and then a job being created for you during your interview. So talk about making things happen, right? I mean, just an awesome example of that. So 2009 to 2020-ish or so, you’re in that position at Cedar Sinai, very stable career. You know, I think it’s a position many would look at in the profession and say, “Hey, I want a job like that. I want to do what Christine is doing.” You certainly invested a lot of time and money to be in a position like that, but as you noted in an article that was recently published on Yahoo — and we’ll link to that in the show notes — you noted in August, on August 13, 2019, you said, “I wrote a letter to myself manifesting how I will retire at 40. I had no plan how it will happen. I had no clue what would I do if and when I retire from corporate. I just had a huge why.” So what was that why, Christine? Why make that transition out and ultimately become what you’ve mentioned before of really being a corporate dropout?

Christine Manukyan: Oh my gosh, thank you, Tim. You’re bringing me back incredible moments of creating and manifesting. But when I wrote that letter, Tim, I was stuck. And I know a lot of us go through school, we land in this fancy jobs, our dream job, it’s happening, we’re making the income that we want, but I just knew deep inside I was not happy. You know, from outside, I had everything figured out. I was making the money, I was healthy at that time, and it was just — I was broke inside. And I just did not feel like — like why did I work so hard? Like is this it? Is this what I signed up for? I was just really like finding ways to get out of where I was stuck in. And I just didn’t know what it was going to look like or what it was going to be, as you’re mentioning. But my why was I was just so tired of choosing between family and career. Having two kids and back-to-back, and my husband also being in a hospital setting in the pharmacy administration, like we literally spent less than an hour or two at home together as a family. And I keep asking myself, why are we making all this money? Like for who? For whose dreams we are creating and building? And when I say I was broke inside, I was like, I was not happy. I would come home, I remember, and I would be so tired and so stressed out and you know, just physically exhausting as well as driving two hours every single day, sitting in my car. So I would come home and the kids like, of course they’re excited to see us, but I was not a happy person, you know? Because I was bringing that frustration, that stress from work, to home. And here I am, looking at myself saying like, I’m not a good parent. Like I’m providing the physical stuff, you know, we have a house, we’re so blessed to have a car and all these things that a lot of people would love to have, but I was not the parent who was fully present. I was not the parent who had the energy to like hey, let’s go out for a bike ride like at 7 p.m., you know, before it gets too dark, right? I was just not there, and my why was like, I need to become a full-time mom. I need to become a mom who is present and is no longer choosing between family and career. And I want to create a lifestyle that I get to choose how I spend my day, I get to choose who I spend the day with. And yes, I did not have anything figured out, but I just manifested and I wrote that letter to myself on Aug. 13, and just saying like, it will happen. It will happen. And I’ve been manifesting to kind of having an exit strategy for my 40th birthday, which was like literally a year later, and just focusing on who I want to become. And this kind of ties into like one of my favorite quotes, and I write about this quote in my book as well too. It’s by Paul Coelho. And it says, “Maybe the journey is not so much about becoming anything. Maybe it’s about unbecoming everything that isn’t really you so you can be who you were meant to be in the first place.” And I remember reading that quote, and I said, you know what, I’ve been working so hard to become this person, to have this title, to have this impact in this pharma space. But I’m like, I’m not happy. My passion is in holistic health, which is like a couple — technically opposite of what I’m even doing as my job — and just really giving myself permission to say, it is OK to unbecome who I was thinking I was going to become so I can actually step into this space and create this identity, this new identity of who I am supposed to be becoming in the first place. So that was my why, like literally figuring it out, how I’m going to have an exit strategy, creating my own legacy, creating my own lifestyle so I can live my day the way I want to and I no longer have to come home and bring the frustration and stress to my house, to my kids. They didn’t deserve to have a mom like that. They did not deserve to be, you know, having somebody in the house who was like always like impatient and you know, not really having this deep down conversations, like taking the time and really enjoying parenthood because time was going by fast. And I did not realize how my son was going to be — my oldest was going to be 10 years old. And I’m like, oh my gosh, I’ve been a part-time parent for a decade. Like what the heck? What the heck? This is enough.

Tim Ulbrich: And I think in the experience I’ve had just getting to know you and I’ve read this in the Yahoo article as well, you talked about the importance of manifesting and visualizing the next big goal. What I love about what you did on Aug. 13, 2019, is you didn’t have the path figured out, right? But you knew there was a strong why. And you know, we talk about that often on the show about how the why becomes the compass of where you’re going. And that why and I’m guessing that step of writing that letter and the visualization that came from that really probably helped inspire so much that would come over the next year. So one year later, Aug. 13, 2020, you turned in your two-week notice. So tell us about what the plan was. You had a whole year to kind of reflect on, OK, I know the why of where I’m going but how I’m going to get there, you know, somewhat TBD. You turn in that two-week notice a year later, what is the path and the work that you’re going to be doing? And tell us more specifically about some of the passion behind holistic medicine and functional medicine.

Christine Manukyan: Oh my gosh, yes. So you know, when you put your ideas and your energy out to the universe, the right people will show up. And I remember as soon as I wrote that letter and started manifesting that, the first thing I did, Tim, I don’t think I’ve shared this a lot of places, but I changed all my passwords and everything around me to say that I retired at my 40th birthday. Like I was claiming that.

Tim Ulbrich: Oh, that’s cool.

Christine Manukyan: I retired at 40. I am retired. I am 40 and free. Like anything that was around the mindset of like my 40th birthday, which you know, was like a year later, like I am free. Like I’m finally free. And I’m creating this lifestyle. And as more I was saying that, typing those passwords every single day, and the right people came into my life. And that’s when like a complete stranger became my first business coach that I ended up hiring January of 2020 to learn all about functional medicine entrepreneurship in general. How do I take my knowledge that I’ve already created all these years into getting monetized for what I want to do? And this is where my passion is aligned. And around the same time too, January of 2020, I committed to becoming the biggest fan of Tony Robbins and really invested in his coaching, in his training with one of his mentor — one of his coaches, Chris Akutchez, KK, and really being in this mindset of like, I am going to create something that has never been created in the past because I’m going to stick through this process, I’m going to focus on my why, and the how will come. It was just the process. It was a process. And I remember, you know, getting ready to go to Tony Robbins’ event in March, and the event was canceled. And I was so looking forward for that event because I needed that breakthrough. I needed to be walking on the fire and just having the guts to like just go all in. And of course with the pandemic, everything got canceled, and I was like, maybe this is not my time. And again, we kind of hold back again because you’re looking forward for an event for this breakthrough and it’s being taken away from you. But I love Tony Robbins and what he’s done, and he’s such a visionary. And what he ended up doing was he actually created his event virtually, which he’s never done before. And between March and July, he created this online space. He built his own platform to deliver Zoom to 25,000 people. And I was one of those 25,000 people for the first time ever be on his virtual event, “Unleash the Power Within,” which was end of July of 2020. And coming out of that event, I did not walk on fire, but I did break a wood. I became a wood breaker and like really breaking through the fear of failure because, again, I was mentally stepping into the space of like, I’m going to retire. I’m going to get out. My birthday is coming up. It’s going to happen. It’s going to happen. And physically breaking that wood and really passing through that fear of like what can go wrong and focusing on what can go right and really coming out of that event, I said, “This is it. I’m going to be looking at my calendar. Sometime in July or August to pick a date that I’m going to tell my boss when my last day is going to be.” And as I’m like literally like, I swear to God, like literally staring in my calendar, right, and I’m like, which day will make more sense? Do I give a three- week notice? Do I give a four-week notice? Do I give a two-week notice? Because I’ve been there for so long, and I don’t want to just like leave people hanging. And I was highly trained. People didn’t have the job that I had. And I had to train people to come into this role. And as I’m like literally staring at my schedule, staring at my boss’ schedule, and literally at the same time, I get a pop-up message saying like, “You’re scheduled for your annual performance review on Aug. 13 of 2020.”

Tim Ulbrich: Oh my goodness.

Christina Manukyan: Tim, I saw that come through my inbox and I like literally like froze. And I was like, oh my gosh, what? Here it is, universe deliver — like helped me to make that choice of not overthinking what’s the right way to do it. And I was like, this is it. This is the date. And I keep asking myself, why is this date so familiar? Like what happened? And found my notebook and I saw the letter that I wrote. I was like, oh my gosh, it has to be on this date. And I remember just sitting going into the review — of course I didn’t say anything, and we start having conversations. And like a few minutes into the conversation, I said, “This is not going to be a performance review meeting as we thought. This is actually my two-week notice to turn in,” and because this is the legacy that I’m creating, this is where my heart and passion is aligned. And again, my why was like, I want to be home with my kids. I want to be home as a parent who is still making an impact and the income that she loves and deserves, but I’m also a full-time mom. I’m also present. And it was one of the hardest decisions to do. It was one of the scariest decisions to make. But I just knew that I knew that I knew I will figure it out. I will figure it out. And I said, “This is the time. This is the time for me to create. This is the time for me to step into this new identity that I always talk about,” reinventing yourself and aligning your passion to your purpose and bringing greatness to the world. So that was my story of how I turned in my two-week notice during my performance review. And that became my exit strategy because I had a plan, but again, I did not have everything figured out. I couldn’t wait any longer, and I’m going to say this too because there’s so many people who are probably listening to this and saying like, “Well, that was easy, like you just left your job.” So I wonder if she really made enough income on the side doing her side gig. And the answer is no, Tim. I did not have everything figured out because it was really hard to create this legacy on a full-time basis if I was still working full-time, miserable, in a job that I had. I could not physically and mentally create the legacy that I could have created if I did not have the job. You know? So no, I did not match my income. When I left, I left my job making less than $1,000 on the side. But I just knew I can make things happen because now I’m like 100% in, I’m all in, and my energy is flowing in the direction of creating and nothing can stop me. I am unstoppable. That’s my thing.

Tim Ulbrich: I think it’s a great reminder, Christine, too — I was actually listening to something this morning reminding me of Tim Ferriss’ work when he talks about really leaning into the fear, right? So you’re talking about giving a two-week notice and what does that mean, you know, in terms of not only next steps for the business, but you know, as you mentioned, it’s not like you had everything fully fleshed out, what does this mean for the family. But you know, folks might be listening that whether it’s a jump to another job, whether it’s making a decision to go part-time, whether it’s another fear that they may have, is that the thoughts that we have around that fear can quickly seem as if they’re reality. And we need to just sometimes lean into that a little bit. And I encourage like as you’re weighing a big decision like this and you feel like that fear is taking over, like literally think of the worst case scenario and start writing it down. Right? Because I think once we start to make it a little bit more objective and get it out of our head a little bit, I think we can start to at least begin to wrap our arms around it and process it and not be paralyzed by that fear. So it’s just such a great example of that. So tell us more about the work that you’re doing right now. We’re going to link to the website, of course, DrChristineManukyan.com, we’ll link to that in the show notes. Tell us more about the work that you’re doing with the business, the why behind that work, the problems that you’re trying to solve, and ultimately the products and services that do that.

Christina Manukyan: Absolutely. So I am a huge believer in giving people opportunities and choices. OK? And going into pharmacy space, like we were not really being given choices. It was just like, this is the protocol, this is how you treat stuff, and this is what we do, right? There’s no like, let’s try this, let’s try that. No. We were just given a recipe, we just go with that. Right? And when I was going through my own health transformation too, I realized like I was craving having choices in life. I wanted to have other options so I can weigh in and make that decision of like, how do I want to lead and treat my health? Right? And so that choice was given to me, which was functional medicine, which was holistic health, and really understanding like, let’s dig in deeper and get to the root cause of what’s making you sick. Again, part of my health transformation was at age 35, I was told by my primary care physician I was going to have a heart attack and I was going to die by my 40th birthday in the next five years because I was morbidly obese, I had extremely cholesterol, I was extremely burnt out. The stress was killing me. And I was told I need to take a pill. I was given a prescription for Lipitor, saying, “Go take this pill, try to lose some weight,” some weight — nothing about nutrition, right — and if you don’t do all these things, you are going to die. You are going to die. And this was not something that I wanted to receive. And I said, “Lord, there has to be a better way. There has to be something else that I can do that is going to save my life.” Not change my life but save my life. And that was holistic health and functional medicine. And when I incorporated that and started doing the cleanses, started bringing adaptogen into my life and really feeling like a new person and as a result, I lost over 100 pounds. As a result, I became a bodybuilding fitness athlete. And as a result, I ran the LA Marathon March 8 of 2020.

Tim Ulbrich: Awesome.

Christine Manukyan: I mean, this was how I was stepping into my 40th birthday of being like healthy and fit and physically and mentally and emotionally and I was not broke anymore. You know what I mean? And when I saw this is a missing tool that a lot of us clinicians feel like there is a huge maybe stigma associated to like why would you recommend an herb versus a proven medication that has all these studies to that? Right? And I became the voice for other clinicians who are literally struggling themselves too to take care of their own health because burnout is legit. It’s happening to all of us. And they want to get healthy, but again, they just don’t know what else is out there. They may have heard about holistic health and functional medicine, but they have themselves not tried it because their mind has not been opened to learning what else is out there because we have not been given this education training. We can’t blame anybody else other than our education. Like that’s happening right now. And creating that space to train other clinicians, No. 1, taking care of your own health, utilizing functional medicine, but also as a result, as you’re working on your own health transformation, I’m going to show you how you can turn this into a business model that you can get paid for the same services that you’re applying for yourself for other people because there is always somebody out there that is praying for someone just like you with your own zone of genius to come into their life to save their life. So it becomes this process of like take care of your own health first, understand functional medicine is a tool for you, become your own transformation story, so now you can become a mentor for someone else. And that’s how the academy, the Functional Medicine Business Academy was born. It’s more than business coaching. It’s also reinventing yourself, who you are as a human being. And all of my clients and our clinicians and we are not only creating business models but we’re also transforming our own health because if we’re not healthy, we cannot serve everyone else, especially nowadays when there’s just so many moving parts and so much stress associated with life in general, so much uncertainty. And what we’re trying to create is like focusing on our own health. You’re not being selfish. You’re learning as you’re going, and you’re also creating your own functional medicine legacy so you can one day have an exit strategy if you choose to do that. And that’s how the academy has been growing and constantly adding new things into that. Collectively, we are all going to be writing a book that’s going to be published very soon, “Unleash the Story Within,” scheduled to be released on Nov. 9. And these are all clinicians who are telling their own transformation journeys, how they went from traditional medicine to functional medicine, and what their own health transformation with functional medicine and holistic health looks like. I’m a storyteller, so it’s all about getting your voice out there because there’s always somebody out there that is literally praying for someone just like you to come into their life to save their life. And really creating this tribe and starting the functional medicine revolution and giving our profession an upgrade, I’m going to say. Maybe not the right word to use, but really telling the world like, we are clinicians. Yes, we are pharmacists, we didn’t learn this in school, but we have tools to become certified functional medicine specialists through my program and really use our knowledge and experiences but not become a specialist in functional medicine space. So upgrading your PharmD to a specialist of functional medicine because this is an opportunity that was not given to us from any ways and now I’m becoming the voice for our profession to say, “You can do this too.” And the Board of Pharmacy will not show you how to do that because it’s not written there yet.

Tim Ulbrich: That’s right.

Christine Manukyan: Yet. It will one day. Yes. It’s all about starting the revolution and really giving us that platform to practice what we’ve already learned but also blend in and integrate functional medicine into our practice so we can give people options and give them choices, you know?

Tim Ulbrich: And we will link to the website, again, DrChristineManukyan.com, you can learn more about the academy, the Functional Medicine Business Academy, as well as an upcoming free master class on Oct. 25-29. And we’ll talk more about that here at the end. Christine, you know, I was thinking recently that I have lots of conversations with folks where they may have an idea and I think some of those ideas stay just as that, as an idea, a small percentage of those end up with some action of those that people take action, sometimes folks see results and then a lower percentage of those you actually see results where folks can replicate that, scale that, grow that to where they’ve got an actual thriving business. So as you reflect back on your journey from ‘I have an idea,’ and you mentioned leaving your position where you hadn’t yet fully fleshed that idea out to where you are today now and the business really growing and scaling. Was there a specific moment in that journey where you realized that this idea that you had was really an idea that had legs and one that could be sustainable as a business?

Christina Manukyan: Ooo. This is such a huge question, Tim. I’m going to say yes. And this all also is connected with who I am as an individual when I make decisions. And those of you who have not done human design, I would highly recommend all of you to do that because it also dictates how you make decisions and how you see yourself in this world. And I make my decisions, Tim, based on my gut. And that’s how I am the visionary who executes it, even though if I’m 80% sure, I will execute it to the finish. And that’s how I was humanly designed to make decisions. This is not for everyone because a lot of people don’t make decisions with their gut. They are actually thinking it, right? I have to feel it. So we’re all designed differently, and if you’re listening to me and you’re like, wow, I would never do that because that’s fine. Find the way that you can actually execute it based on your own human design. So do that thing, and there’s a website you can actually go and it’s completely free, will tell you who you are. But for me, it was knowing like I don’t have another choice. Because I can continue doing this, I can continue living my life, or I can take this other path of creating something that has never been done before. And this may be part of my process of coming to the United States and being an immigrant. I was not given a lot of choices when I was here as an immigrant. And I had to figure things out. I had to learn things that I have never seen or heard in the past. I gave myself permission to not be scared because your body cannot tell if you’re scared or excited. It’s the same neurotransmitter that you’re experiencing that. So instead of saying like, “I’m afraid to make this decision and execute,” I’m going to say, “I’m excited about the opportunities that are to come.” So really put that into excitement versus fear. But most people are stuck in the fear and not executing. And again, I wanted to have — I’m one of those people who likes to try new things and not being afraid of failure because that is just not an example of how you can learn and grow but also want to become a voice for my kids, Tim, because being an immigrant coming here, I watched my mom work like three jobs to provide for us. And I said, “This was hard.” And her sacrificing her own health to provide for our family is actually causing her have three autoimmune diseases, like here like 20 years later. You know? And I don’t want anybody to sacrifice their health because they’re trying to create the wealth that they need. I want everyone to have choices, and I want my kids to grow up saying like, “Mommy and Daddy made this decision,” and we are creating generational wealth. We’re not just taking care of ourselves now. I’m creating a generational wealth so my kids are growing up and they’re saying, “Mommy made this decision, you know, like when she was 40. And she created this legacy because now I get to do this.” So and it all starts with, again, going back to the simple things of understanding your why and why you want to do that, and everything else will fall into place. And just follow what makes you happy. And go back to asking yourself, what do you desire? Like I was desiring to be a full-time mom first. I wanted to be — I was desiring to be a somebody who was happy not for the world to see but I was happy inside. And I was not broke anymore. And I was living a fulfilled life, not for social media to see the highlights, but I was really, really like living that happy lifestyle that I know I can inspire someone else saying like, “You know what? Enough is enough. This is my time to rewrite my story,” and they can connect and make that transformation journey themselves and really step into the new identity that they should deserve and they’re part of it. So.

Tim Ulbrich: Christine, I am. I am. You said that if you’re inspired in any way — and I’m taking, again, this from the Yahoo article — if you’re inspired in any way, write a vision-casting letter to yourself and use the “I am” statement when you’re describing your life a year from now. And you say, “I challenge you to have this everywhere. I had it on my screensaver. I had it as my passwords that I was typing every day. I mean, it was everywhere. I was saying it until it became real.” Tell us more about that “I am” statement.

Christine Manukyan: There’s something about this like psychology and that again, I didn’t learn about this, but again, hiring a lot of mentors and business coaches and mindset coaching like and understanding your mind is capable of doing so much, and I decided to claim I am corporate dropout. Also I am Wonderwoman. And those of you who haven’t seen my Wonderwoman transformation as a fitness athlete on stage and really owning like having that mindset that goes with the image that I’m creating. Like who am I? Right? And Wonderwoman was actually my nickname in my fraternity, Phi Delta Chi, and I was like, who is Wonderwoman? I’ve never heard of her name, right? And when I was given that name back in pharmacy school, I literally had to Google like Wonderwoman because again, I have never seen her or heard of her, right? And I was like, this is somebody I want to be. And I think just even having that name that was given to me back then, like I was — I am Wonderwoman in my fraternity Phi Delta Chi. And what that allowed me to do is to become like a Ro Chi. It allowed me to become the class president and FSHP president and Phi Lambda Sigma president, right? Because I was stepping into this like who I am. My name might be Christine Manukyan, but I am Wonderwoman. I am unstoppable. And really claiming that and more excited — I’m not going to say scared — more excited you are when you’re saying those words and you’re owning it, psychologically and physically, you are going to become. OK? You’re going to become. And I have been, the last couple of months, I have been claiming of really having a million-dollar business in my business by age 45. But I’m actually, after attending this event the last couple of days, I am going to challenge it and change it to by 42nd birthday, so by next year, because I’m really pushing myself to the next statement of like who I am and also honoring the transformation that I’m going through myself. It’s not just like saying it, like “I am Wonderwoman.” Well, what does that mean to you? What does that mean to feel things and how do you show up? How do you talk? How do you dress? Who are you surrounded with? How do you spend your time? How do you spend your money? What relationships do you have? Right? Like who is that person that you’re stepping into? And when it actually happens, you’re like, ‘Of course it was going to happen.’ It’s like you’ve already done the rehearsal. You’ve already created that space. And you know, I talk a lot about this during my master class too, Tim — and thanks for mentioning that — understanding like the ideal life you want to create for yourself and why you want to create that. It sounds so simple, it sounds so cliche, but I want you all to actually physically experience like what would it mean if you say like, ‘I want to let’s say retire in xyz years,’ or ‘I want to actually wake up one day and not have migraine headaches anymore,’ right? Whatever it is that you’re desiring, whatever your ideal life looks like, I want you all to actually experience that right now. It’s like running a drill. It’s like running a drill, right? Like you practice it now so when the day comes when it’s the right time to show up in your life, you are able to receive that information, you are able to see the transformation that the universe will deliver to you because you’re focusing your energy and your mind in that direction.

Tim Ulbrich: Yeah, no, that’s great stuff. And I want to share, you know, as we feature more pharmacy entrepreneurs on this show, you know, I think that for folks that have an idea in mind and they hear someone who is taking some calculated risks, has taken that step, has had some success in that, they can get excited, right, about that and start to hopefully visualize and dream that if that’s something that they’re passionate about as well. But it’s also important that we talk about the growing pains, we talk about what we do when we feel overwhelmed or unfocused. You know, it’s not always rainbow and butterflies. You and I know this from firsthand. And so when we share these stories and we talk about some of the positive outcomes of these dreams and visions that we’re also talking about the reality of what it means to be running a business. So Christine, as you reflect on what has been a very short period of time and the success you’ve had thus far, as you’ve gone from idea to validation of that idea and now the business really growing, you mentioned $1 million business goal that you have by your 42nd birthday, I suspect there has been some growing pains as you’ve had some success, right? I know you and I talked a little bit about things like corporation structures, right, and tax situations, and other things that can feel overwhelming at times as a solopreneur. So tell me about some of the growing pains that you’ve experienced thus far.

Christine Manukyan: Oh my gosh, yes, Tim, we were talking a lot about that. And again, sometimes you just don’t know what you don’t know.

Tim Ulbrich: That’s right.

Christine Manukyan: And for me, I have made a lot of bad decisions hiring people. OK? And this is huge because we always say, you know, when you have business growing, you need to hire help. Well, that’s great. But who do I hire? How do I know they’re the right fit? How much do I pay them? Are they a contractor or are they — just so many things. And I have made really bad decisions the last few months because I was desperately looking for someone that my unicorn, and I was like, OK, I will train them. I’ll give them this opportunity, but they were not the right fit for my company. They were not seeing the vision that I want to go. Like I’m creating, I’m revolutionizing how our system and how people are going to learn about holistic and functional medicine and creating legacies. Like there’s nothing has been done the way — the scale that I’m going. And the people I was bringing on board, they didn’t see the long vision. And they were just focusing on the tasks that I was giving them at this moment, so I’ve spent a lot of money, close to like $20,000, let’s just put it out there. It’s a lot of money because I just didn’t know, and I was go-go-go mode. I was like really working off of my masculine energy and just go-go-get things done and not slowing down and saying like, let me reflect who I want to bring into my company. Anybody wants to take a job right now. Like right? And they want to work with you, but did I really give myself permission to really ask like who I want to work with? I know they want to work with me, but do I really want to work with them?

Tim Ulbrich: Right.

Christine Manukyan: But it was coming from the mindset of desperation because I was like, I’m growing so fast. I need help. And I was like literally hiring people left and right. Like literally had no structure in place, I had no SOPs in place.

Tim Ulbrich: And you have an administrative management background, right?

Christine Manukyan: Yes. But again, that was structured for Corporate America, Tim.

Tim Ulbrich: That’s different. Yeah.

Christine Manukyan: It was structured for Corporate America. I cannot go get an MBA to have an online practice running. An MBA is not teaching you what to do. It’s not. And the minute I started asking myself like, why is it that I’m bringing more help but I’m even more stressed out right now? Here I am working like 12-hour days. I went from like 8 to 10 12 now. And what is going on? And I asked this to my business coach, Kelly Roach and her program “Unstoppable Entrepreneur,” and she was like, “Christine, have you put systems in place when you’re onboarding? What does your onboarding process look like?” I’m like, “Kelly, I don’t have an onboarding process. What do you mean? You don’t just hop on on Zoom and tell them what to do and where to look for information when they need your help?” They’re like, no. I’m like, oh my gosh. So I’ve spent a lot of time, which is, again, my most valuable asset that we have, bringing people on board who are not a right fit for my company. But I was doing what people told me to do, go hire some help. So I did. I went and hired some help versus asking, education — like smarter questions like what does the process look like? Explain it. Because I’ve never hired someone before. So understand that just because somebody’s telling you to go do something, like stop and say like, can you explain what that looks like? Can you tell me what would be a better fit for me and for my company? Ask those questions, and it’s OK to ask questions. You may sound like, oh my gosh, that’s such a dumb question to ask, but let me tell you, those dumb questions you feel like there’s — No. 1, there’s no dumb questions to ask. Those questions can not only save you time but money and education because you’re learning. And running a business, especially if you’re scaling and you’re creating something that hasn’t been done before, like there’s not a lot of people to like go study for you to create. You just have to go with it and put it in place and pivot when needed. And I know a lot of people say like, ‘I have the best product I’m bringing to market. And this is it. It’s going to be a game-changer.’ Well, honey, I’m sorry to tell you that, but you might have to learn how to pivot and how to make changes.

Tim Ulbrich: That’s right.

Christine Manukyan: If you feel like your ego is getting into your way to really create the product, the services that everyone needs and loves and become your biggest fans, like you have to grow and you have to pivot when it’s the right time. But a lot of people say, ‘No, I can’t do that. Like I already spent so much time and money on this.’ Well, if it’s not working, please change. It is working, keep going.

Tim Ulbrich: Yeah, and I think that’s a great example — and I have one in our business where, you know, and I think ego can be such a barrier. But we had a service that we launched that we thought was going to be a home run, and the key as I reflected on that is, you know, that was very much framed by what we thought was going to be needed by our audience and by the community not necessarily by exactly what that group was telling us what they needed. And once we could get over the ego, we’re able to move forward and cut those losses. But it’s easy to hang onto those losses, say, ‘Hey, I spent a lot of time, I spent a lot of money developing this,’ but at the end of the day, you’ve got to pivot. I think that’s a good lesson. Last question I have for you, Christine, you mentioned in this time where you’ve hired folks and sometimes that hasn’t necessarily been the right fit, probably you spent more time than it would have been without having some of those people on board, I suspect times, you’ve felt maybe overwhelmed or unfocused. What do you do in those moments? You know, as an entrepreneur, you find yourself in a period of time where it’s stressful, you’re overwhelmed, you feel like you’re unfocused, perhaps a little bit separated from the core mission of what you want to be doing in terms of spending your time and working on, what do you practically do in those moments where you’re feeling that?

Christine Manukyan: First, take a deep breath and remind myself that I am fortunate to have this type of stress in my life because sometimes, we forget this was a choice and this is an opportunity for me to overcome those barriers and recreate what I want to do, right? So first, celebrating that this was a choice. I am alive. And I get to stress about things like this, OK? But just kind of going back to like really go back to the basics. OK? And I’m such a huge like a checklist person. If you see my to-do list, you probably would have a heart attack. But it’s long. It’s very like detailed, right? But that’s also psychologically, it’s overwhelming. And what I learned was I need to break it down to like literally like maximum three decisions I have to make today. What’s the next right thing for me to do today? Maximum three things to get me closer to the next place. It may be going down the checklist, maybe re-evaluating my checklist, maybe learning how to delegate some of this to-do list to other people on my team and elevating them and training them. OK? But really asking yourself like, going back to the basics and really asking myself like what are the top three choices, decisions I need to make today, to get me a step closer? What’s the next right thing for me to do? The next one. And then like one at a time. One at a time. And that’s it. Versus getting overwhelmed with a large to-do list and it’s just too much and just you will — like you will have those days when you’re going to ask yourself like, what the heck did I get myself into? And I want you all to celebrate that feeling because again, you’re feeling stuck, but I want you to celebrate that feeling because you’re going through a transformation. And instead of getting stuck in that like oh my gosh, like what the heck did I just get myself into, just saying like, ‘Who can I call to help me just to talk?’ and maybe the one decision you need to make that day is for you to get rest, for you to have the time out, for you to create time on your schedule to create content, to create lifestyle, whatever you want to do. Like give yourself permission to block off time on your calendar to create. And you have to create that time in your schedule because we all have the same 24 hours, OK? You don’t have to do anything. Everything you do in life is based on your choices you make and decisions you make. So you don’t have to do anything. So create that time for you to like slow down and really ask yourself, what is it the maximum three decisions I need to make today that’s going to make me closer, get closer? And that decision, one of them can be like, you know what? Today, I’m taking a day off. I am just not even going to do anything because physically, my body needs to rest. And that’s OK. And that’s perfectly fine.

Tim Ulbrich: Absolutely. This has been fantastic, Christine. I really appreciate you joining and sharing your story with the YFP community. We’ve only scratched the surface. We didn’t talk about the book that you’ve co-authored along with 17 other female entrepreneurs and business owners, “Pivot with Purpose.” We’re going to link to that in the show notes. I hope folks will check that out. And as I mentioned earlier, Christine has an upcoming free master class Oct. 25-29. You can learn more at DrChristineManukyan.com. We’re going to link to that in the show notes. And this master class is really meant to help folks learn how to blend the years of education, the professional experience you have, folks that are passionate about holistic health and ultimately how to create your own functional medicine practice. And it’s going to be on Zoom Oct. 25-29. Five days learning how to identify your why, handpicking your dream clients, taking the center stage as personal branding, looking at your definition of wealth and success, and then finally redefining your scope and practice. And so much of, Christine, what I’ve heard in this interview is a lot about mindset and really thinking about how your personal mindset is going to have a positive impact on the future growth and hopefully realizing what’s possible within yourself. So Christine, thank you so much for joining us and looking forward to watching what you do in your business over the coming year.

Christine Manukyan: Thank you so much for having me, and I’m so grateful for your time as well too because you added so much value in my community a couple weeks ago, and I’m just so grateful for our relationship, our friendship and collaboration. It is definitely making this world a better place when you have amazing partners next to you. And we all share so much and I just cannot wait to see what’s next and yes, we can always, always connect with me and share your biggest takeaways because like you said, Tim, life is all about making connections and really getting to knowing people who are going to change your life. And this conversation that we had can probably change someone’s life. And I want to hear from you.

Tim Ulbrich: Awesome. Thanks again, DrChristineManukyan.com, you can also connect with her on LinkedIn and as always, we thank you for joining for this week’s episode and look forward to having you again back here next week. Have a great rest of your week.

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YFP 225: How to Navigate Open Enrollment and Employer Benefits

Posted on October 14, 2021November 2, 2022 by yfpadmin

How to Navigate Open Enrollment and Employer Benefits

On this episode, sponsored by GoodRx, Tim Baker, YFP Co-founder and YFP Planning Director of Financial Planning, joins Tim Ulbrich to talk about open enrollment and evaluating employer benefits. Tim and Tim dig into:

Considerations for choosing a health insurance plan
How to determine whether or not your employer-provided life and disability insurance is sufficient (one of the most common questions we get)
Understanding the differences between an FSA, Dependent Care FSA, and HSA
What to be looking for when putting money into your employer-sponsored retirement plan.

Summary

This week on the Your Financial Pharmacist Podcast, Tim Ulbrich sits down with YFP co-owner and Director of Financial Planning, Tim Baker, to discuss open enrollment and the process of evaluating employer benefits. As you go into making your benefit selections for 2022, Tim and Tim share some considerations for choosing a health insurance plan and how to determine whether or not your employer-provided life and disability insurance are sufficient. Tim and Tim provide a general overview into understanding the differences between an FSA, Dependent Care FSA, and HSA and what to be looking for when putting money into your employer-sponsored retirement plan.

Whether you are reviewing your benefits for the first time or are a seasoned professional with open enrollment, there are many factors to consider. Pharmacists may not think to consult with their financial planners when it comes to open enrollment or the process of evaluating employer benefits, but these decisions affect the financial plan. When choosing a plan for the coming year, pharmacists should consider future life events or changes impacting money spent on medical expenses such as a child being born, marriage or divorce, coverage for a significant other, or a child aging out of medical coverage. The open enrollment period is a time to review history in medical spending, how much is spent out of pocket, and how to optimize benefits and cost savings based on those findings.

Tim Baker touches on life insurance and disability insurance, how to calculate your total need, transferability issues to consider when deciding whether or not to purchase a policy outside of your employer policy, and tax considerations.

Tim Ulbrich closes out by breaking down the differences between an FSA, DCFSA, and HSA. He also touches on retirement savings accounts in conjunction with open enrollment and the opportunity to re-evaluate investing and savings goals and how each fits in with the financial plan.

Mentioned on the Show

Episode Transcript

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

Tim Baker: Yeah, good to be here, Tim. Looking forward to getting into open enrollment discussion. ‘Tis the season. So yeah, I’m ready for it.

Tim Ulbrich: ‘Tis the season indeed. Fall is in the air officially here in Ohio, which does mean it’s almost time for open enrollment and ensuring that we’re taking the time to understand and maximize employer benefits. And I think whether someone is reviewing their benefits for the first time, whether that’s accepting a new position, going through another round of open enrollment, a lot to consider here, including insurance, retirement accounts and HSAs, FSAs, to name a few. So Tim, our team at YFP Planning includes employer benefits as a part of the planning process, perhaps an area that folks don’t necessarily associate working with their financial planner on. So how does this part, employer benefits, factor into the financial plan? And why is it so important that we’re looking at it in the planning process?

Tim Baker: Yeah, I think this is another area, Tim, where like when we say, “comprehensive,” we mean comprehensive. And it’s just like kind of the same conversation with things like home purchase. Most financial advisors are not going to kind of walk you through kind of the A-Z of buying a home because most of the time, a financial advisor is working with people in their 50s, 60s, 70s, right? And the reason for that is because those are the people that have assets, and that’s how they charge their fee. We have many, many, many clients that are in their 20s and 30s. And things like home purchase is really important and is often a big step in their financial journey and their financial plan. So we kind of take the time to go through that based on, I know you’ve said it, I’ve said it, we’ve messed those transactions up in the past, and we just don’t want to see our clients do the same thing. So open enrollment is kind of the same thing. A lot of financial advisors don’t really talk about this stuff because if you’re working with people in their 50s, 60s, like they’ve done it dozens of times, right? So they’ve gone through this. And a lot of our clients haven’t. You know, it’s not something that is kind of what we understand. And so to define open enrollment, open enrollment is the period of time where you can purchase or apply for health insurance for the upcoming year without a qualifying event. And usually a qualifying event is something like a marriage or a divorce or a birth of a child. So it’s typically very centered on the health insurance plan because that’s the big piece of the benefits. But then what the employer does is kind of have you opt out of other benefits that they might offer, which might be life insurance, disability, I’ve even seen things like pet insurance and things like that. You know, some things that are not insurance-related could be like a legal benefit. So that’s what this is is open enrollment. And it’s important because your employer benefits are a major component of your compensation package. And you know, this is kind of the conversation that goes back to things like salary negotiation is I’ve seen clients, they’ll say, “Hey, I’m making $110,000,” and they get an offer for $120,000 but they take a major step back with regard to their total compensation because of the benefits that are associated with that. I think it’s really important to understand what the employer benefits are and how to assess that. So that’s really what’s at stake here is really understanding that piece. And we know this, Tim, because when we plan to hire someone, we know that it’s not just about the salary pay. We apply a multiple on top of that because we know that the benefits that we’re going to provide for the employee are going to be above and beyond that. So that total cost or what I would say is an investment in that person is really beyond the salary. So this is what is really that bell to that. We’re trying to assess an an employee to say, OK, how can I best optimize this part of my compensation. And I would say that there is a lot, you know, a lot of people that don’t necessarily fully optimize this part of their financial plan or give it the attention that it needs because it sneaks up on us or bad information or what have you. So that’s really kind of the overall picture here of what it is and why it’s important.

Tim Ulbrich: Yeah, and Tim, I think when you say sneaks up on us, bad information, it’s important I think for folks, basic stuff before we jump into individual benefits, you know, know your dates, obviously what’s the time span. You know, a lot of employers, depending on how they organize this, will do informational sessions, open Q&As, one-on-ones, group, and some of that might be automated, depending on the system and the platform they’re using. But making sure, understanding the dates, you know, simple things, how much time do you have if you’re going to be on vacation, things like that, making sure you can coordinate with HR. And then also, you know, just taking a look at your pay stub and your benefits. What do you currently have? And really taking a pulse on — and I think just a chance to go back and what’s gross pay, what’s net pay, what’s coming out in benefits, and taking this time that comes around every year as a chance to revisit some of these things that we want to be looking at often. And then of course, just thinking about upcoming changes, right, that might be happening. You know, I think of things like children that might be beneficiaries on the healthcare side, aging out if you think about 26 or folks that might be expecting or perhaps getting married, things that might have an impact on their benefits, considering those things as you’re in the benefits selection. And then of course just refreshing and updating the evaluation of who are the beneficiaries that are listed on certain policies. Tim, I want to start with health insurance. You know, I think it’s the one that typically carries the biggest price tag as we think about it relative to the other insurance and typically carries more options than things like dental and vision and life and disability, which I think for many employers it’s more of a one-way type of option. So the big question here is how do I determine which one to get? And of course, all plans are created differently but when folks are looking at these and you’re evaluating the deductibles and maximum out-of-pockets and premiums and copays and coinsurance, unfortunately, it’s a system that even though our audience is comfortable with all of those numbers because they live in it in the job that they’ve done or have been trained in it previously, there’s just a lot to consider. And if you look at plans, let’s consider a three-tiered plan where you’ve got like a bronze, silver, gold option, you know, you’re looking at OK, less out of pocket, more out of pocket, better coverage, but perhaps I could have lower out of pocket and I could use that money elsewhere. Like general framework, how do you begin to help clients think through this decision and not just look at it in a silo but also consider it in the context of the rest of the plan?

Tim Baker: Yeah, so I think it’s — you know, everyone can say it with me — it depends, right? So you know, I think a lot of it depends on past history or — you know, you mentioned a few things like what’s kind of on the horizon? Is it getting married or having kids? And some of those will allow you to kind of elect insurance outside of the open enrollment period. But those are typically qualifying events. But you know, an example is when we had Liam, when Shea was pregnant with Liam, we opted out of the bronze package, you know, the HSA plan to more of a gold package because we knew that the doctor bills and the hospital bills were going to be there. Our thought process was, you know, although in most cases we’re not going to the doctor a lot, you know, during a normal year, well, electing to a higher deductible plan, which means less coming out of our paycheck but then when we do go to the doctor, there’s going to be potentially more coming out of our pocket. So we did that to get in front of it a little bit. And you know, that’s really important from a planning perspective and kind of mitigating as much of the costs — and we probably saved ourselves if we did the math $1,000 by doing that. So that’s an important part of the plan. Now, sometimes things are going to come up and you’re just not going to — you know, it’s kind of like that emergency fund. You’re just not going to know for the future. But I would say is it’s a little bit of an exercise in looking at your past history, so looking at how often you’re going to the doctor and how often you’re reaching into your pocket to pay for things like copays and things like that. But then also projecting it forward, so that’s kind of where the conversation starts is that, you know, if you’re a younger, healthy professional and you’re not really going to the doctor, then you probably should really consider kind of a bronze, high-deductible, HDHP plan and couple that with the HSA, which we’ve said is a great forum to stash dollars. If you’re looking at regular doctor visits because of a chronic issue or something like that, that’s not going to be for you, regardless of your age. You just know that you’re going to be in and out of the doctor’s office. So I think it’s really looking at, again, kind of the budget and seeing what money has been spent on healthcare costs in the past and then what you think, project those going forward. And like I said, like this is not — it’s important, but these are taking it like snapshots one year at a time. So you can — like after Liam was born and the medical expenses were gone, then we went back to the high-deductible plan with the HSA. So I think it’s really important to kind of take stock of kind of your history, your medical history, your spending on healthcare, to form the baseline of your decision in that realm. The other comment I would make, Tim, is not all 401k’s are created equal. And as many of us know, not all health plans are created equal. So some are really, really great, and some are really, really terrible. And sometimes, that has to do with the size of the organization, sometimes the economies to scale, the bigger that you are, the less that each participant pays, whether that’s the 401k or the health insurance plan. So you kind of have to work with the sandbox, you know, that you’re playing in, so to speak, and something that can be very much out of your control.

Tim Ulbrich: Yeah, and I think, Tim, your example of Liam is a great reminder of not putting open enrollment on auto pilot.

Tim Baker: Yeah.

Tim Ulbrich: And I think that’s what we’re trying to stress here is like, using this as a chance to re-evaluate each year, you know, what happened last year? What worked last year may or may not be what makes sense for this year for a variety of reasons. And I think this is certainly a place where we want to be evaluating what does the cash position look like? What does the reserves look like? And how do we feel about that? Especially if we’re going to be opting into a high-deductible health plan, you know, thinking worst case scenario — hopefully never happens — looking at those out-of-pocket maxes and really asking yourself, how comfortable are we with that happening? How does that make us feel? And could we weather that storm if it were to come?

Tim Baker: Yeah, and you know, and we’ve had some tough conversations with clients that are deep in credit card debt and they really need as much of their income to kind of like right the ship and get going, so sometimes it means sacrificing or being uncomfortable here. You know, one of the things I look at is like if we look at all the debts that are out there, medical debt is not necessarily a bad debt in terms of like they reformed a lot of things with it hurting your credit because it’s kind of been a nightmare, you’re typically not gouged with higher interest rates and things like that. So typically more forgiven. I would even say push back on a lot of medical debt because it’s wrong. I think Tim, you had a story about that when one of your sons was born. So there’s a little bit more give I would say than some of these other ones that goes like right to collections and you’re in a lot of trouble. So it’s kind of — this is all about like mitigating the risk and trying to understand where can we give a little bit so we’re OK.

Tim Ulbrich: I want to shift gears, Tim, to life and disability. Probably one of the most common questions that we get is, do I need to purchase additional life and disability insurance beyond what my employer covers? And of course the answer is it depends on a large part of the individual’s situation and what they have going on and what they’re trying to do with those policies and so forth. But you know, general thoughts and discussion on how one goes about making this decision in terms of understanding what coverage is there from an employer standpoint, determining what total coverage may be needed, and some of the gap and differences between an employer plan and if they purchased a policy out on the open market.

Tim Baker: I think if we look at most pharmacists out there, you know, professionals that are making a six-figure salary, I think there’s going to come a time when there probably is a need to purchase policies outside of what the employer provides. Now, the problem with the financial services industry is that a lot of “financial advisors” are trying to push those policies on a young professional when they probably don’t need them. That’s when you’re a pharmacist that has maybe six figures of debt that’s going to be forgiven if you die or are disabled with no dependents and really, you know, not much on your balance sheet. So there’s kind of like this gap of do I really need this? Or can I just make do with what my employer provides? I’ll say this about the employer-provided policies: Outside of health insurance, which is a health plan, I would say that things like life and disability insurance are not plans. They’re really perks. So they’re meant to supplement or meant to provide some type of benefit that will help the employee but also it’s a way to kind of retain you and things like that. So I really view these as perks and not necessarily plans. I would say, to your point, Tim, I think it’s really looking at the individual and say OK, does it make sense to buy a policy outside of that? Most employers will provide some type of life insurance benefit, whether it’s something like $50,000 or one or two times income, which you can then elect to either increase your coverage or not. I think the downside of that is, you know, if you’re working for an employer as a 30-year-old and you have all of your eggs in that basket and you’re saying, “Hey, I have $1 million” or a lot of times, they’re capped. Most times, pharmacists need a lot more than what their employer can provide. So that’s one of the drawbacks. But if you’re working with that company for 40 years and then you leave to go to another organization, which maybe that isn’t provided or it’s a lot less of a benefit, you have a gap, then you’re going out in the market 10 years older where you’re paying a lot more for that particular policy. So that’s one of the things that — sometimes they’re portable, meaning that you can take them with you, and sometimes they’re not. So for both the life and disability, you know, it’s really looking at your own situation. Just like open enrollment itself, this is one of the things that often overlooked, just insurance. And I know we’ve probably done a podcast in the past about what’s proper life and disability and things like that.

Tim Ulbrich: Yep.

Tim Baker: For the disability, the coverage is typically going to be a percentage of your income. And again, it could be capped, and some employers will offer both long-term and short-term disability. You know, both are great. But you know, oftentimes, because of one reason or another, there’s going to be a gap in the coverage either because of taxes or just that a pharmacist, what they make and what most professionals will say that you need to kind of cover down and typically, that can be anywhere from 50-80% of what your income is, that there is a need to go out onto the open market and buy individual policies. But from an open enrollment perspective, I think if you don’t have those policies, it’s really important to understand, you know, what is there for you? And what can at least tide you over until you get those policies in place? And again, it’s one of those things where it’s like, it’s not important to you until it’s important to you. And it’s really hard to kind of, to show that to clients unless they’ve experienced that pain themselves or a close family member.

Tim Ulbrich: Yeah.

Tim Baker: But it’s going to be a really important piece of protecting the overall financial plan, which is — this is really what this is all about is, you know, insurance is really protecting the financial plan from a catastrophic event and ensuring that you can continue to build wealth and survive into the future.

Tim Ulbrich: Episode 044, Tim, How to Determine Life Insurance Needs, 045, How to Determine Disability Insurance Needs, two that we’ll link to in the show notes. We’ve got more information on the website as well, YourFinancialPharmacist.com. Tim, I think one of the common mistakes I see made here just relating to that discussion on gap in coverage is not digging into the policies to really understand, you know, life insurance is maybe the most obvious example where if you have a policy — if you have a need for life insurance and you have a term policy that’s offered for $50,000 or $100,000 or one times salary or two times salary, typically, those have a cap on them. For many folks, there’s going to be a gap and a shortage. And I think this is where, you know, sitting down one-on-one with someone to really calculate the total need, think about the transferability issues that you mentioned and what does it mean if you pick up employment, tax considerations, and really getting into the weeds of some of the nuances of the policies and things like own occupation, we’ve talked about that before and its importance. And again, thinking about how this fits in with the rest of the plan. And just a shoutout here to our fee-only financial planning team at YFP Planning, this is really where I think the value of fee-only comes in in that really sitting down with someone to determine what is their true need in their best interests. Not too much coverage that there’s dollars being spent that could be put elsewhere in the financial plan, but making sure we’re also not exposing the plan to unnecessary risk.

Tim Baker: Yeah, I mean, you know, this — what we’re talking about here are products. Like insurance is a product. So any time that you talk about dispensing a device, “Hey, Tim, you need life insurance,” and you say, “OK, great. Like where do I get it?” Like we can sell you this product. There’s going to be a conflict of interest. So having someone that is a fee-only fiduciary that is not further enriched by the advice that they’re giving, you know, strips away a lot of that, well, am I being advised in my best interests or in the advisor’s best interests, the one that’s advising me. So that’s I think the beauty of fee-only.

Tim Ulbrich: One example I just want to give here, I just pulled up, Tim, our long-term disability coverage that we added recently for the YFP team.

Tim Baker: Yeah.

Tim Ulbrich: And you know, if you look at it on kind of the main benefits platform, it says, “60% monthly income up to $6,000.” But this is an example where digging deeper is so valuable. You know, you get into things like what is the definition of earnings? So our policy, it’s base wage. So how you’re compensated could have an impact here.

Tim Baker: Yep.

Tim Ulbrich: What’s the elimination period or the timeframe from when the disability happens to when the benefit starts to pay out? Here, it’s 90 days. But if it’s shorter than that, perhaps longer than that, what’s the game plan to fund. Does it have own occupation coverage? We’ve talked about the importance of that before. What’s the maximum benefit? Our policy goes up to age 65. And then things like coverage restrictions, other incentives. So really, just a reminder of this time period and using this point here to really dig into this information and read the policies.

Tim Baker: Yeah, you know, and again, going back to those episodes you mentioned there, that’s where we kind of talk about the nitty-gritty, but I think the beautiful thing about this is like when we’re reviewing this and we kind of look at the — kind of go through the open enrollment optimization stuff is like as a planner, I’m looking at your balance sheet. So I’m like, alright, does it make sense to bolster — you know, because a lot of these, you can opt in. So like our policy doesn’t do this, but a lot of policies, they’ll say, “The employer pays for a 60% benefit of your earnings.” But then you can opt in to get that up to 80%. So you pay an additional — you pay out of pocket out of your paycheck for that additional 20%. If I’m looking at your balance sheet, Tim, and I’m saying, “Man, you have plenty of cash,” I would say, “Let’s not opt into that.” Or we might say, “Let’s do it,” because we know because the employer is going to pay for it, that that benefit’s going to be taxed.

Tim Ulbrich: Yep.

Tim Baker: If the employer pays for the benefit, it’s going to be taxed. That’s the gap. You know, so the idea is looking at your situation and overlaying what’s out there. I think the open enrollment, what I say is we want to look at the things that you’re paying for and say, does it make sense for you to be paying for it? I see a lot of AD&D insurance, and I kind of look at this as like — and again, this is not advice — but I kind of look at those as like when you buy something at Best Buy and they ask you about the warranty. You know, most of the time, you say no because it’s just not worth the money. Some of these things in open enrollment, it’s the same thing. It’s like AD&D, for those to pay out is very rare. So even if it’s $2 per pay period, I’m like, I just don’t think it’s worth it. So we’re trying to make sure that you’re not paying for things that don’t necessarily provide you much benefit, much utility. But then you are paying for things that do. And you know, kind of finding that Venn diagram of sorts to make sure that, again, we’re fully optimized with regard to this part of your compensation package.

Tim Ulbrich: AD&D, for folks that are wondering, Accidental Death & Dismemberment insurance.

Tim Baker: Oh yeah. Yep.

Tim Ulbrich: Tim Baker dropping some financial lingo here.

Tim Baker: Sorry about that. Yeah.

Tim Ulbrich: Tim, next I want to talk about FSAs, dependent care FSAs, especially since we’ve had some changes that have happened there as well as HSAs. And we’ve talked probably among these to the greatest extent, we’ve talked about HSAs because of the value of what that can provide as well as these other options. And we’ve talked about it on the podcast, we’ve got some blog posts, Episode 165, The Power of a Health Savings Account, also have an article on the blog, which we’ll link to, about really more of the strategic investing side of an HSA if you’re able to do that. So Tim, high level overview, FSA, dependent care FSA, HSA, and some of the differences and considerations for these accounts.

Tim Baker: The very crude way that I remember the difference between FSA and HSA is FSAs are really use-or-lose. So when you fund these with pre-tax dollars, if you don’t use those monies for the purposes of healthcare for an FSA for healthcare or dependent care for a dependent care FSA, you lose it. So it’s F-udge. Like I don’t get — you don’t get to use that money. Whereas the HSA, this is — can potentially be an accrual account, meaning that year over year, you can stack Benjamins and hopefully one day becomes that kind of stealth IRA that we talk about that has that triple tax benefit. So like I said, we’ve talked about the HSA ad nauseum. It has to be paired with a high-deductible health plan. You know, you can put the money in. It has a triple tax benefit, which means it goes in pre-tax, it grows tax-free so you can invest it like an IRA, and then you can distribute it in the near term for approved medical costs or when you reach a certain age, you can use it basically for whatever. So that’s the beauty of the HSA. But you know, again, it only works or you only have access to it when it’s paired with a high-deductible health plan. The FSA for healthcare is similar, but very different. So you’re allowed to use — you’re allowed to fund it with pre-tax dollars, meaning if you make $100,000 and you put $1,000 in there, you’re taxed on as if $99,000. So I think the limits for FSA for 2021, I think it’s like $2,750.

Tim Ulbrich: That’s right. Yep.

Tim Baker: Yeah. So the idea is that what you’re trying to do here — it’s a little bit of a game of chicken. So what you’re trying to do is really, again, see into the future and say, “OK, what do I know is a baseline that I’m going to use on my out-of-pocket healthcare expenses?” And if you know for sure that you’re going to spending $2,000 on that, then you should fund it with $2,000. And typically, there is a little bit of give at the end of the year where you can either carry some over or you have some time into the New Year to use it on.

Tim Ulbrich: Two months or —

Tim Baker: Yeah. And every plan is going to be different in its design. So you might be loading up on kind of some of the over-the-counter stuff. I’ve had a client buy a bunch of stuff for like contacts and things like that. So it’s going to be really important to kind of — again, this goes back to the spending plan, the budget, to understand what have you been spending in the past? Is that going to be indicative of what you will spend in the future? And then fund that with at least that baseline amount so you don’t lose it. The same thing can be said for the dependent care FSA. So this is a pre-tax account that you can fund that is used for care for your child who is age 13, for before- and after-school care, babysitting, nanny expenses, daycare, nursery school, preschool, summer day camp, and then also care for a spouse or a relative who is physically or mentally unable to care for themselves and lives in your home. So this money — this has actually been amended under the American Rescue Plan Act. So I think for single and married filing jointly couples, the pre-tax contribution limit went from where you could $5,000 a year, now it’s I think $10,500.

Tim Ulbrich: Significant jump. Yep.

Tim Baker: Yeah, very significant. So the higher limits apply to the plan year beginning Dec. 31, 2020 and before Jan. 1, 2022. So it is a temporary thing, but it allows you to park some dollars that you would otherwise — so if you’re in a 25% tax bracket, it’s as if you’re saving 25%, kind of thinking about it that way. So that’s what really — and for the FSAs, unlike the HSA, the FSA is — it has to be provided by the employer. I think we had a question on the Ask a YFP CFP about the HSA. And you don’t have to necessarily go through your employer. Sometimes, the employer doesn’t offer it. So you can go out and set up your own HSA. The FSA has to be provided by the employer for you to have access to it. So that’s really important. Again, these are all going to be — when you elect it, it’s going to take money out of your paycheck and basically fund these accounts for the appropriate purpose.

Tim Ulbrich: Yeah, and this to me is where when we’ve talked with Paul Eikenberg, our director of tax, and working with our clients, one of the things he talks about here is these being untapped areas of potential.

Tim Baker: Totally.

Tim Ulbrich: And so I think there’s a lot of low-hanging fruit in the financial plan. And I think really evaluating these and perhaps the dollars of any one don’t jump out as being super significant, but I think as we start to add these up with other strategies, there certainly is value. And Tim, you had mentioned we did tackle a question recently on Ask a YFP CFP 084. The question was about fees on an HSA account, but we did talk about the opportunity to access an HSA account independent of the employer. So we’ve talked about health insurance, we’ve talked about life and disability, we’ve talked about FSAs and HSAs and dependent care FSAs. I want to wrap up our discussion by retirement saving options. And I think, again, this is an opportunity to take a step back, look at the overall progress on the investing part of the plan, overall goals, perhaps gap between the goals and where you’re currently at, and then to evaluate where does investing fit in with the rest of the financial plan. And so when we think about, Tim, employer-sponsored retirement accounts, two main buckets we have, which are those that are Roth contributions and those that are traditional. So define for us the difference between those two for folks that are — maybe have some outstanding questions about those or unsure as well as the limits of what we’re able to do in 2021.

Tim Baker: Yeah, so — and I’ll preface this by saying that most of — you know, open enrollment is a good time to check in on your retirement savings options. You’re not necessarily bound to that because you can go in —

Tim Ulbrich: Correct.

Tim Baker: — really at any time and say, “Hey, I was putting in 5%. I talked to a YFP planner, and they said I should put in 8%. That’ll put me on track to get my $5 million nest egg, so that’s what I want to do.” I can really do that at any time. Or I can say, “I want less Roth and more traditional,” or whatever the case is. So it’s just a good opportunity, it’s a good checkpoint to say, OK, where am I at and should I make any tweaks? So — and one of the things that they often do here is they allow you to put in an escalator. So you know — and you can do this any time too, but it’s a good thing to do in open enrollment so every year, you can increase that by 1% or 2% or whatever that looks like. So to answer your question, Tim, the Roth v. traditional, so most employers will offer a 401k or a 403b or if you work for the government, a TSP. So when you elect your retirement options here, a lot of them will now — you’ll have a traditional — so think of two buckets. You’ll have a traditional 401k and a Roth 401k.

Tim Ulbrich: Yep.

Tim Baker: And they’re all under the same plan, but they segregate the monies because for a traditional, these are pre-tax dollars. So that example I gave you is if you put in $1,000 into your 401k and you make $100,00 — your traditional 401k — and you make $100,000, you’re taxed as if you made $99,000. For a Roth, it’s after-tax. So same example, if you put $1,000 into your Roth 401k and you make $100,000, you are taxed as if you made $100,000 because you’re not getting that pre-tax deduction. So for these dollars, the money is either taxed going in or coming out. So for a traditional, you’re not taxed going in, but then it grows tax-free inside of that account, and then you’re taxed when it is distributed, hopefully in retirement. For the Roth 401k, you’re taxed going in, so you don’t get that deduction, but then it grows tax-free and when it comes out, it’s not taxed because it’s already been taxed going in. So a lot of people will say Roth, Roth, Roth. And again, it’s going to depend on your plan. It’s going to depend on what you’re trying to achieve. And a lot of people get this wrong as well. So this is another good check on it to make sure that you’re putting the dollars in the right spot. Your match that your employer provides, if there is a match, is always going to go into a traditional account.

Tim Ulbrich: Yep.

Tim Baker: So if there is a match, you’re going to have — some people get it twisted like, I’m 100% in my Roth 401k, but I see money in my traditional, like what gives? And I’m like, well, this is the money that your employer is matching. It’s going to go there, you know, regardless. So it’s really important, you know — so to kind of give you some numbers with 2021, to max out a 401k, a 403b, it’s $19,500. So you can put that in regardless of how much money you make. So that’s really going to be the limit for the 401k. IRAs are a completely different animal. They’re $6,000, this completely separate accounting mechanism. And that’s going to be dependent on your income whether you can put it in directly into a Roth or a traditional IRA and if you get the deduction. And I know we’ve had podcasts on that as well. But the point of this, Tim, is that the open enrollment exercise is a great opportunity to kind of just do a once-over for your retirement savings options and just make sure that one, you’re in the proper allocation but then it’s also in the Roth v. traditional, and then just making sure that you don’t get stuck in that hey, my employer matches 3%, so for 10 years, I’ve just been putting in 3%. You don’t want to do that because more often than not, it’s not going to be enough for you to retire comfortably. So this is another way to kind of check those things and push the envelope a little bit.

Tim Ulbrich: Yeah, and I point folks back to Episode 074, when we talked about evaluating your 401k plan, also more recently, Episode 208, when we talked about why minimizing fees on your investments is so important. Certainly relevant here as we talk about employer-sponsored retirement plans where we can see a lot of variabilities in those investment options and in the fees. As we’ve said a couple times now throughout the show, open enrollment is such a great time to take a step back and evaluate the financial plan. And for folks that are going through this process and think, you know, I really see the value in working with someone one-on-one to look at the financial plan holistically, to determine how to prioritize the goals, make some of these decisions around open enrollment, could be debt repayment, investing, tax evaluation, and so forth. We’d love to have a chance to talk with you about the YFP Planning comprehensive financial planning services that we conduct on a one-on-one basis. And you can learn more about those services as well as schedule a free discovery call by going to YFPPlanning.com. As always, thank you so much for listening. We hope you have a great rest of your week and look forward to having you join us again next week.

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