Behavioral Finance / Podcast

YFP 281: The Connection Between Finances and Fitness with The Fit Pharmacist

Posted on by Caitlin Boyle

Dr. Adam Martin, The Fit Pharmacist, talks about practical strategies you can implement to help you thrive, five areas of the SMILE framework for living to your full potential, and the most effective antidote and prevention to disempowering feelings.

About Today’s Guest

Dr. Adam Martin works with people to write their scripts for success using proper nutrition, stress management, and the power of a positive attitude. He earned his doctorate of pharmacy degree from the University of Pittsburgh School of Pharmacy, and with over 7 years of experience working full-time in the community pharmacy setting, he’s passionate about empowering other pharmacists and pharmacy students to put the health back into healthcare through leading by example in their professional practice to not only live their best lives but to

inspire others along the way to do the same. He pairs his PharmD with his expertise as a certified personal trainer and nutrition consultant to guide self-care back into healthcare.

Dr. Martin is the founder of The Fit Pharmacist, LLC. As a National Speakers Association (NSA) Professional Speaker, Adam’s core passion is traveling to pharmacy schools across the world to speak to pharmacy students, sharing practical plans of action that will empower them to maximize their careers and create a competitive edge in the profession to maximize their success and degree of impact.

He has made his life’s work showing people how to take control of their overall wellness, sharing SimpleSolutions through his writing for numerous pharmacy publications including PharmacyTimes magazine, and is the author of the best-selling book “Rx: You: The Pharmacist’s Survival Guide for Managing Stress & Fitting in Fitness” as well as “Gen-Z Pharmacist: Dominate Pharmacy School & Script Your Dream Career.” He is the host of The Fit Pharmacist Healthcare Podcast, sharing successes and practical strategies from the most successful minds in the profession of pharmacy with a new episode released every week.

With a passion for learning and serving his patients, he’s an inaugural member of the Pennsylvania Pharmacists Association’s Leadership Excellence and Advocacy Development (LEAD) program, and strives to serval the global community of pharmacy as a medical missionary, having served in Honduras and Panama as a pharmacist in the field. In 2019, he was named the “Most Influential Pharmacist” by SingleCare’s Best of the Best Pharmacy Awards.

Episode Summary

In this week’s episode, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is joined by Dr. Adam Martin, The Fit Pharmacist. Dr. Adam Martin is known for working with people to write their scripts for success using proper nutrition, stress management, and the power of a positive attitude. In today’s show, Tim and Adam discuss the eBook, “5 to Thrive Healthcare Habits,” and how those mindset habits for thriving in life mirror the mindset for financial fitness. Adam shares how he came up with the SMILE framework, how to operate from a thriving versus surviving mindset, and how to form a realistic work-life balance with practical strategies that anyone can implement into their lives. Tim and Adam work through the five areas of the SMILE framework, created to help others live with intention and unlock their full potential by providing examples and demonstrating the concepts with real-life examples.

The SMILE framework consists of the following:

Shift Your Focus
Move and Groove
Identify the Best You
Let Loose and Celebrate
Electrify Your Spirit

Together they discuss what Adam calls the most effective, instant antidote and prevention to disempowering feelings. Adam shares a technique, “GRIN (Gratitude Ripple In the Now),” for celebrating and igniting joy.

Links Mentioned in Today’s Episode

Episode Transcript

[INTRO]

[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 a friend and colleague, Dr. Adam Martin, The Fit Pharmacist, to talk about Five to Thrive Health Care Habits. Highlights from the show include Adam and I talking through practical strategies you can implement to help you not just get by or survive but to thrive, the five areas of the SMILE framework to live with intention at your full potential, and the most effective instant antidote, as well as prevention, to disempowering feelings.

Now, before we 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 280 households across the country. YFP Planning offers fee-only high-touch financial planning that is customized to 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 by visiting yfpplanning.com. Whether or not YFP 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 jump into my interview with The Fit Pharmacist, Dr. Adam Martin.

[INTERVIEW]

[00:01:21] TU: Dr. Adam Martin, The Fit Pharmacist, welcome.

[00:01:24] AM: What’s up, Tim. How you doing today?

[00:01:26] TU: Man, I’m doing great. How’s your week been, and how are you doing?

[00:01:30] AM: Dude, it’s Fit Pharmacist Friday. Let’s go. Let’s go.

[00:01:35] TU: Let’s do it. So you recently published a resource, and we’ll leave a link to this as well, Five to Thrive Healthcare Habits, simple and quick ways to use what you have to live a lifestyle you dream about. It caught my attention because of how much overlap there was between those five habits and what I often think about as it relates to the financial plan. So I’m going to dig into each one of those in more detail.

This has been a long time in the making. You and I had the opportunity to present together at the OPA Annual Meeting last year in Columbus. That was on fire, right? That was an awesome session that we did together, and I’ve thought so many times, when you and I have a chance to converse and dig deep, like there is so much synergy between a lot of the work that you’re doing and the focus on the mindset in the healthcare and how we often need to, should be thinking about the financial plan as well.

So this is going to be a party of sorts. It always is when Dr. Adam Martin is on the line. So before we get into those five habits, we’ll walk through them one by one, I don’t want to just gloss over the significance of operating from a mindset of thriving, rather than just getting by and surviving. Since the focus of our time together is going to be all about thriving, tell us more about why that is center to what you’re doing and what you’re talking about and how you’ve developed that mindset and learn that through your own experiences.

[00:03:05] AM: Absolutely, Tim. Well, first off, thanks so much for the opportunity. Like you said, it’s always fire getting together, especially in person, but we’ll roll with this. But, yeah, OPA was awesome. First live event since COVID, I believe, for both of us in a long time. So that’s kind of where that idea stemmed from because there are so many overlaps with wellness and fitness and also your money because you won’t feel very well if you’re broke or in debt, so it just kind of goes with that through line.

But the reason that I made this, and just so y’all know, this is a free e-book, so I’m not selling anything, this is such a needed resource. I created it, like put a ton of time, made it simply applicable because there’s so much information out there that, yeah, it’s great. But how are you going to apply it?

[00:03:54] TU: That’s right.

[00:03:54] AM: For example, we all want to get healthier, right? So we go and hire a nutritionist, dietician, whatever. That’s outside of our normal, and they say be mindful when you eat. Chew your salad 30 times before you eat. We don’t get lunch breaks. What are you talking about?

So when you take the science, the research, and you say, “How can I practically apply this in a simple way,” because here’s the reality, you ain’t got more time. You don’t got any time. You ain’t got more things, and you’ve got no room left on your to-do list. So how are you going to make a change that you know you need to make and you want to make when you don’t have time, when you don’t have money, and you don’t know what’s going to actually work and what’s a scam?

I took all the things that I’ve learned in my journey in coaching my clients and working with some of the best in the world of mindset of fitness, of nutrition, and I condensed them down into a practical framework that is easy to understand, and more importantly, easy to implement, that actually gets results. So that’s kind of where that came from, from the need of burnout and stress and how do I manage a work-life balance. There’s such a need for it. That’s where it came from.

[00:05:12] TU: That’s why they call you The Tony Robbins of Healthcare right there, right? That is why. I think that the practical implementation is huge, and we see this every day from the financial side. I live it in my own personal financial journey. We can have these big lofty goals with big numbers. Until we break that down to something that means something to us today, that we can put our arms around, that we can grasp, that we can implement, that we can get some momentum and wins on, those are just nebulous, big, scary goals that we can have somebody coach us and say, “You know what, Adam? You need $3.5 million in your retirement account to save.”

What does that mean for today and how we can practically implement this? Again, I just love the synergy between the work that you’re doing and what we’re obviously talking about over at YFP. So let’s jump into these five habits to thrive, and the acronym here to remember is the SMILE framework, okay?

[00:06:10] AM: That’s right.

[00:06:10] TU: S is shift your focus. M is move and groove. We’ll talk about these each individually. I is identify the best you. L is let loose and celebrate, and E is electrify your spirit. So number one, shift your focus. In this habit, you talk about how we often set a goal. It could be around losing weight. It could be around healthier eating, connecting to our community, in our case, improving our financial situation. Despite knowing what to do, we don’t do it. The choices that we make that do or don’t lead us to our goals often revolve around our state of mind.

So my question for you here, Adam, is why are we drawn into these negative thought patterns and habits that can put us in ruts and prevent us from achieving our goals, even when we don’t want that to be the case?

[00:07:02] AM: Excellent questions. Why don’t we do that? We’re like – It’s like in the moment. We know we’re not supposed to do this, but we’re doing it anyway. So big picture, I just want to simplify this. The reason it’s called the SMILE framework is that regardless of your nutrition, your job, your career, your personal brand, all of it, the reason you do anything is so that you become happy. You want a happy life. What’s the most characteristic thing that would kind of show that someone’s happy? A smile. While this might seem mute, it is absolutely true. We all want to be happy. That’s why we do anything. By being happy you SMILE.

The reason I did this is to make it simple, so that you can see that you are focused on the outcome. You’re focused on what you want. A lot of times, when we get overwhelmed or we’re pulled in all these directions, for example, what do I do with my finances? The world’s going into recession? What do I do with this? What I do with that? What’s the best workout plan? What’s the best nutrition plan? How do I manage stress? The question you have to ask is what is your outcome? What do you want?

That comes right into your question, ironically, because that’s the answer. The first kind of pin of that SMILE framework is S, to shift your focus. What you need to ask yourself is what do I want? What is the outcome that you want? If you reverse engineer that, it will lead you upstream to realize that it all starts with the quality of question that you ask. To your point or question, again, the answer of why do we ask questions that get us so worked up, that get us so stressed out and focused on what’s wrong? It’s because that’s our survival brain.

Here’s something that I want you to hear and understand. Your brain does not exist to make you financially successful, to make you happy, or to make you thrive or live your best life. Your brain exists to keep you alive. That’s it. So when you’re taking a financial risk for a potential gain, that is interpreted as dangerous.

[00:09:11] TU: Scary. Yup.

[00:09:12] AM: Threats to your survival.

[00:09:14] TU: That’s right.

[00:09:15] AM: Your subconscious is going to hijack you and say, “Oh, no. That could mean death. Let’s not do that.” Going to work out, that is painful, right? I mean –

[00:09:25] TU: Literally tearing muscles. Yes.

[00:09:26] AM: After not going for a while, that is painful. That is a threat to survival. So whatever area of your life you want to improve, you inherently know that when you start that process, that it is uncomfortable. We’ve all heard that phrase, nothing grows from comfort zones. So you have to recognize that you will have resistance from the good intention that your brain is trying to protect you. So don’t be hard on yourself and say, “Why is my brain so stupid?” It’s trying to keep you alive because that’s what it’s designed to do. So you have to identify the purpose. You have to identify what you want, and then recognize there’s a gap there that is going to require your active participation.

[00:10:09] TU: Yeah. Adam, my mind is spinning with the financial connection here. So a great example, I just mentioned a big scary retirement number before, $3.5 million. That often is not the question we want to focus on. So we’ve been trained societally through a lot of financial information commercials to ask the question of how much do you need in your bank account to retire, right? It’s an important question, but it’s not the question that we need to be asking ourselves, right?

The question we need to be asking ourselves is what does it mean to live a wealthy life, not just in dollars and cents, right? How can our financial plan support and get us towards living a wealthy life? Why do we even care about this topic of money to begin with? Money is a tool that derives value, only because you and I and the rest of the world say it has value. Objectively, by itself, it doesn’t have value, right? So why does money matter to you? What does it mean to live a wealthy life? How can we support a financial plan that aligns with that?

Because to your point about some of the pain, it’s no different with our finances. If I say that, I want to be able to save money for the future because of X, Y, and Z, and that’s a compelling reason, well, guess what? That means I’m going to have to not spend it today to save it for the future. There’s pain in that, right? There’s pain. So I love how you focus. Again, we’ll link to this, so folks can download it and read it in its entirety.

But you have a whole page, maybe two pages. I remember at least one page of questions that we can be asking ourselves, right? Better questions, give us better information that we can live with more intentionality. I think that’s so important here, when we talk about shifting your focus. So that’s habit number one, shifting your focus.

Number two is we work to the SMILE framework. The M is move and groove, and you argue that this is the most effective instant antidote, as well as prevention to disempowering feelings. That’s a pretty strong statement. Tell us more. Why is that the case, and what does this practically look like?

[00:12:14] AM: Absolutely. So without a doubt, if you’re in a funk mood, if you’re scared, if you’re terrified, the fastest way to break out of that state is to move your body, the fastest way. You can do it immediately. For example, if you ever had like an argument, a confrontation, or you’ve heard the phrase, “Go walk it off,” there’s truth behind that. So this comes to go like, well, if we just move. What are you just saying? Like run away from your problems? Running away from your problems burns zero calories, okay?

But what you have to recognize is that when you move your body, you are changing your state. So I’m not saying go run a marathon. But I’m saying, for example, if you’re out in public, and I told you that I would give you 50 grand if you could tell me which of the people in public was depressed, I guarantee you could do it. You’re not a psychiatrist. You’re not a therapist. You don’t have ESP. But how can you see that? Because when they’re walking, their heads’ down. They’re walking slow. They’re chests in, right? They’re kind of like this. From someone that has overcome that, I can tell you, that’s absolutely spot on.

But if you – If I do the same to the other side, I say, “What if I gave you 50 grand to identify the most confident person that you encounter?” You can already see in your mind what that’s like. They’re walking with purpose and intention. Their shoulders are back. Their chest is out. Maybe they’ve got like a little swag in their step. It’s because that motion is inducing the emotion. If you look at emotion, I don’t want to feel bad. I don’t want to feel better. I want to be happy. I want to feel fulfilled. Emotion is energy in motion. So to snap that, it’s very simple. Change how you’re carrying yourself, moving yourself.

Now, to the practical implementation part. Well, Adam, how do I just snap out of it if I’m having such a bad day, week, month? Music. Let me ask y’all a question. Have you ever worked in a community pharmacy or just been out in public and on the PA system, on the radio in the store, a song comes on? Maybe some Gloria Estefan, if we want to throw it back. All of the sudden, you see Granny Smith in Aisle 5, tapping her foot to the point where she’s like, “[inaudible 00:14:38] pop out or what?” She can’t help it. She might not even be aware of it.

Everybody is moving, tapping their feet, bobbing their head. Music is the fastest way to change your emotion. You can do it without even being aware of it. So that’s the fastest way to snap out of your state. Play a song that makes you jive.

[00:14:59] TU: So are we talking dance party in the pharmacy? Is that what we’re doing here?

[00:15:02] AM: So true story. When I started as a pharmacist back in 2012, it was, I mean, busy store, like super busy. When I retired there in December, we were doing over 600 scripts a day on Monday with no pharmacist overlap. That’s the reality. So there’s a lot of stress as you can imagine. So in order to kind of refocus, I would actually create something free on Pandora called Happy Radio. So whenever I noticed stress coming, the levels of tension going up, I would literally play that.

That’s where – If you ever heard the term club pharmacy, I coined that term back in 2012 because it’s how you frame your environment. If you say, for example, I have to go to work today, how does that make you feel? Versus I get to go to club pharmacy today. That’s going to interrupt your state. What is he talking about? What, like Sam’s Club? Like what? Yeah. So you frame it, and then you entertain it, and you do something different. That’s how you kind of snap out of the norm so that you can rescript what you want to get.

[00:16:06] TU: I love that. I think some people, this is more natural than others. For me, it’s music. You talk about the idea of creating your playlist. Have it ready, right? Walking is a huge daily rhythm or routine. It just provides like, for me, some perspective, some space, and some peace of mind as well. So find that piece that really helps you. That’s number two, move and groove.

Number three, the I in the SMILE framework is identify the best you. What do you mean by this, identify the best you, and how can individuals work towards accomplishing this?

[00:16:42] AM: Excellent question. When it comes to psychology, the most defended aspect of the human condition is your identity. People will defend that to the death. Look at any religious war that’s ever been fought. Look at anyone that’s done anything drastic. Look at people who refuse to do anything. What do they say? I’m not that kind of person. That’s not who I am. Your identity is the strongest driving force in your psychology.

When we’re talking about goals with finances, with fitness, why are you doing that? Why do you want to save three and a half million? Yes, that is, obviously, a good goal. But what is the means behind that? What does money mean to you? What will that afford you? There’s got to be some sort of compelling future because the reality that we all know is that whatever your goal is, whether it’s small or large, think big, by the way. Whatever your goal is, you are going to have resistance. You’re going to come across adversity. You’re going to be exhausted. You’re going to start with a lot of motivation.

But if you’re not committed to exactly with a perfect picture in your mind to visualize exactly why you’re putting in the time, why you’re putting in the work, why you’re sacrificing a comfortable lifestyle, and instead going after it, facing rejection to make calls, to grow whatever you’re trying to achieve. You have to have a clear, compelling future that pulls you towards what you want. Keyword, you, what you want. Not what your friends want. Not what you think you should want or should have or should do. Quit shoulding all over yourself, please. You want something that is genuinely authentic to what makes you happy. That’s the secret.

[00:18:43] TU: That last point is huge in the financial services space, right? Because I talked to people weekly. I experienced this myself as well, where often our goals aren’t truly our goals. The reflection of what we feel like should be our goals. Or we interpret it as someone else says it should be our goals.

One thing you said there I want to dissect a little bit more, you kind of mentioned like, by the way, think big. As you said that, my mind went down this path how often the goals I hear from individuals, guilty as charged, no judgment to anyone else, we often limit those. I’m wondering why? So for example, right? If someone says, “Hey, I really have a goal to give philanthropically or to give,” like usually we’ll put a qualifier on that like 3, 5, 10 percent of my income, or I really want to save for retirement.

It’s a big number. Don’t get me wrong. But we’re kind of defaulting to like what is a limit low number that is acceptable or that we’ve heard elsewhere, and our mind doesn’t naturally go towards, well, if instead of making $120,000 a year, and I gave 10% of that or $12,000, what if I made $500,000 a year? 30% of that or – Why doesn’t our mind go in that direction? Why are we kind of defaulting to this low norm, if that makes sense?

[00:20:11] AM: Excellent question. So another thing that we all know of, and I want to kind of bring this back home, is the only thing that’s going to stop you is you. Not the economy, not your circumstances, you. When I mean you, what I mean is your fear. While there’s lots of specific fears with everyone in specific situations, all humans have two fears. There’s two fears that are the most common fears, the fear of not being enough and the fear of being unlovable.

When you’re looking at, “I want to set a goal,” if you say like, “Oh, this would be a nice increase.” Let’s say, for example, you’re making 120 grand a year, and you want to go up to 150. Just a little bit. Well, if I set 500 grand a month, that is a huge jump. That is a risk that if I don’t get it, it might mean that I’m not enough. It might mean that I can’t be loved because I didn’t get this. It’s not what’s going on. It’s not your circumstance. It’s the meaning that you give to your circumstance that is the driving force of whether you’re going to face everything and rise or fall into that fear. It’s all based on the meaning that you give something that becomes the outcome.

[00:21:29] TU: In that example, we’re essentially trying to set ourselves up to avoid failure or not even actual failure. Our perception of what that failure would be in that. So that’s interesting. Okay. That’s number three, identify the best you. Habit number four in the SMILE framework is let loose and celebrate. You say, “You need to party more, like seriously.” You will feel like you’re losing when you’re actually winning, if you do not celebrate your wins. My question here is why do we not celebrate our wins, in the same way that we dwell on our losses?

[00:22:03] AM: Let me paint a scenario that those of you watching or listening might resonate with. You work for years, for months, for, let’s say, getting a job as a pharmacist, and you get the job. You get the email. You’re on stage, getting a promotion. As they’re calling your name and reading your bio, you say, “What’s next?” You get the promotion. Then you say, “I’m going to go after this goal.” Let’s say that you launch a book. Let’s say you’re trying to get your name out there and build your personal brand. So you decide that you’re going to publish a book. So it gets released. What’s next? What’s next? What’s next? You’re so focused in the future that you’re living in a state of anxiety.

Now, here’s something that I want to just share, as far as emotion, like why do I feel this way? What’s wrong with me? Those kinds of things that get us twisted. If you’re living in the past, you’re living in depression. If you’re focused on the future, you’re living in anxiety. But when you’re focused on the present, it is a gift, which is why it’s called the present. The attitude of gratitude is honestly the antidote for fear.

Try this. If you’re angry, frustrated, or ticked off, I want you to think about and just look around and say one thing that you’re grateful for. Then say another and then another. It is literally impossible to be both grateful and angry or upset or overwhelmed at the same time. It is impossible. So the antidote to this, really, is to be grateful at your progress.

Now, there is a thin line for this, and I think the best way to do it is to live it and really go after your goals because on one hand, you don’t want to rest on your laurels and take your foot off the gas, because if you’re not growing, you’re dying. So you want to constantly be pursuing the best version of you. But if you’re living in that what’s next, what’s next, what’s next, here’s the reality. You will feel like you’re losing when you’re actually winning, if you don’t take time to note how far you’ve come.

[00:24:16] TU: 100%. Yes.

[00:24:19] AM: That’s really it. So you say like, “Oh, Adam. There’s so much going on. I don’t know. How do I be grateful? I’ve heard this before. It’s not practical,” blah, blah, blah. So we’re going to go with the grin, with the SMILE framework, and stay on theme here. I actually found this out of a necessity when I was in a really dark time in my life many years ago because I heard this over and over and over from so many successful people. Gratitude is the antidote to everything, all this sort of stuff.

I woke up in an anxiety attack, and I thought, how can I start this gratitude thing? So I was laying in bed, and I said, “What can I be grateful for right here right now?” So I just rolled my feet around like, “Wow, these sheets are really comfortable. I’m really grateful to have comfortable sheets.” “Wow, I’m on a comfortable mattress. I’m really grateful to have this mattress and not be laying on the floor.” “Wow, I have my own bedroom. I’m grateful to be in this bedroom.” Oh, my goodness. I own a house. Wow, I own a house, and it’s in a neighborhood that’s quiet. Just be quiet and listen. I can’t hear anything. It’s so quiet. I live in the city.”

It became a ripple effect from wherever you are in the moment. State and feel and focus on wherever you are in the moment so that it’s real. It’s one thing to say that you’re grateful for something that might have happened. But when you can be lying in bed and feel your soft sheets, it gives evidence and makes that real. When you’re in your room, and you like peace and quiet, and you just listen to the silence, that is evidence that, yes, this is something I can be grateful.

So the acronym I made for this is to GRIN. It’s the gratitude ripple in the now. So wherever you are, just pause and start thinking like do you have clothes on? Those probably. I mean, not everyone in the world has clothes, right? Are you standing somewhere that is safe? Is it raining outside, but you’ve got to shelter over your head? Just start where you are, and ripple from where you are outwards, and just watch what happens inside. That is truly the secret. But it’s so simple, people throw it out like, “Oh.” It’s so simple, it can’t fix my complex problem. The antidote really is that simple, and it’s so simple that it actually works.

[00:26:40] TU: Yeah. I really liked that. You and I have talked about this before. This has been transformative in my own life. So I am notorious for living in the future. Living in the present is not my jam. I will say I’m not a big dweller of the past. So that is something I’m grateful for. But what I have found is like what you describe. Publishing a book, what’s next? Giving a speaking event, what’s next? Achieving this milestone, what’s next? It’s not natural for me to really pause and be present in the moment.

But the gratitude piece, what I have found is, and you described it perfectly, an example, when you’re laying there in bed in the midst of an anxiety attack, as you’re going through a gratitude, exercise, and reflection, it forces you to be present in the moment. It shifts your perspective and focus while you’re there as well.

I think the trick for this, in my opinion, which you’ve really addressed here with the gratitude rip on the now, the GRIN acronym, is it doesn’t have to be like a one time in the morning, I’m going to do a gratitude exercise for five minutes. This could be a quick reminder as you’re going throughout the day because as you highlight, I mean, at any given moment of the day, we can all stop and find one thing that we’re thankful for in that moment. So I love that.

[00:27:57] AM: One caveat to that, I don’t want to say that thinking in the future is a bad thing. You want to always be planning. This is one of the biggest sources of anxiety that pharmacists have. When you’re in pharmacy school, your goal is to graduate and get a job. So when you graduate and get a job, if you don’t have goals, you have a problem. That’s where a lot of pharmacy students transitioning to pharmacists life are.

I don’t want to downplay how valuable forward thinking is. Just make sure that as you make those milestones, you pause, you note them, and you celebrate them however you actually can feel that celebration of your progress in the process.

[00:28:37] TU: I love that. Great input. Number five in the SMILE framework is electrify your spirit. It’s clear as we’re talking that consistency is the key here when we talk about the SMILE framework and the importance of a daily routine. You say in the e-book, “Stand guard at the doorway of your mind at the most critical time of the day, the beginning.” Tell us more about why standing guard at the beginning of the day is that important, and what are some of the habits that folks can implement to help here?

[00:29:07] AM: If you ever woke up, and you stub your toe, and then you realize that you’re late, and you get a red light, and then your tech doesn’t show up, or someone comes and yells at you, and what do you say? Wow, this day keeps going from bad to worse. It is a ripple effect from what you focus on, literally taking all that we’ve looked at through the SMILE framework, starting with shifting your focus.

When you wake up in the morning, you have a clean slate. You are starting with a brand new bank account of time for those 24 hours. If the first thing you look at or think about is your to-do list or the news or all the things that you wish you did, then that’s going to ripple and transcend the whole mood of your day. So it literally – You all know this is true, but we all do it.

Again, simple doesn’t mean easy, especially if this is a habit that you’ve had for a long time, the simplest thing, to stand guard at the door of your mind is to not touch your phone for the first half hour, hour, whatever that might be. For me, it’s two hours because it’s that sacred of time. Because think about it. People want to get your attention, news highlights. They’re not talking about new puppies that were given out for free. They’re talking about stabbings and murder and death.

[00:30:35] TU: Push notification. Push notification.

[00:30:37] AM: Yeah, yeah. All that stuff. It’s grabbing your attention. Your eyeballs are the new real estate. That’s what everyone is after. The best way to get them, again, coming back to an original point, is your brain, and your brain is wired to keep you alive. So it is going to be focused on any potential threat as a means to protect you.

So knowing that, that’s how media and everyone uses that fact of your physiology to grab your attention, to lead with danger and all these negative things. So if you can just give yourself an hour to instead of let other people direct how your day is going to go and really own your hour and decide and declare that I am going to fill the first hour, half hour, whatever you allow, that that first fruit of your day needs to be given and stewarded in a way that it sets the tone and ripples you towards the compelling future that you want. Instead of I have to avoid all this stuff that I don’t want.

Really start simple. The phone is the most effective thing, and that’s hard for a lot of people. I remember when I first did this years ago. It was like an addiction, and it’s just how we are in society. But it’s become normalized to the point where no one really questions it. But when you realize that by doing that, you’re giving control of your mind and focus to other people that just want your eyeballs, and want you to click and scroll and all this stuff, it puts you in the driver’s seat so that you can now intentionally be present on what you want to do.

You can start simple. This is my routine. This has evolved over the years. I start off by saying, “Good morning, Jesus Christ. Holy Spirit, fill me and guide me, so I can be a blessing in your way through this day. Today is going to be an amazing, outstanding day.” Then I take a five-minute freezing cold shower, I read my devotional, I jump in the Bible, and then I’m off on my 45-minute walk. That’s how I start.

Now, that might not be practical for you. You might genuinely like realistically have five minutes. In those five minutes, don’t be on your phone and start with the gratitude ripple, the GRIN. So start where you are to start listing things you’re grateful for. I promise, if you do that every day for 30 days, you’ll feel like a totally different person.

[00:33:11] TU: Yeah. It’s about winning the start of the day, whether that’s five minutes or three hours, right? Some people, maybe there’s more flexibility and time, whatever. Many folks, that’s not the case. Winning the day and the momentum and, as you mentioned, the ripple effect that can come from that. I love that.

Mine has evolved over time, and there are certain seasons where I’m humming every day. There’s other seasons where I kind of fall off track. You give yourself some grace. You get back on. But I consistently come back to a noticeable, palpable difference. I’m sure Jess and the boys would say that they can see it as well when I start and win the day. Because what I have found, and this has taken a while to really, I think, realize and work through, is that things can just begin to quickly unravel, and you throw your hands up, if things aren’t going in the steps I think they should go.

What I’ve really, especially with my four boys, is that it is rare, very rare, actually, that their behavior changes in any given day. It’s my perspective, patience, and mindset, coming into my interactions with them. When I walk out of my home office door, that first two to five minutes, which is on me and my responsibility, sets the tone for the rest of the evening, the rest of the evening. For the longest time, I’d kind of throw my hands up a little bit of a victim mentality of like, “Ah, man. They are so loud, Adam. They are so loud. Can’t they just be quiet?” It’s like I remember I had this conversation with my wife one time. It’s like, “They really don’t change a lot in any given day.”

I mean, sure, there’s a behavior thing here there, but like it really is like my mindset, my preparation, my awareness. That, obviously, is talking more about the second half of the day. But same can be said, I think, for the first part of the day as well.

[00:35:04] AM: Yes. Tim, you said something that was such a gem, I have to bring it to the forefront. You said, “I have to give myself some grace.” I really want everyone listening to this to understand, embody, and implement that. Because if you’re listening to this, chances are you’re not like – You’re going after the best version of you.

I mean, if you’re listening to a podcast, if you’re in this community, it’s because you want more. You know you’re destined to be more, to give more, to do more, to contribute. Not just to improve your life but to be an impact on those that you are blessed to influence. That’s ultimate leadership is influence. So when you’re in this journey, remember that it is not about a destination. It’s about who you become in the process. It is about progress, not perfection.

So if you’re wanting to be a good leader, if you’re wanting to be the best employee, wherever you are in your career, if you want to receive something like grace, because we all are very human, the best way to receive something is to give it. To the point of finances, so many people, one of the reasons that they want to save, and call me on this, if I’m wrong, Tim. You’re the pro of the pros. One of the reasons that people give to save money and make more is so that they can have more to give away. They can contribute to their church, whatever it might be. True or true.

[00:36:36] TU: True, true. Yep.

[00:36:38] AM: So here’s the challenge. This is very humbling, but this is literally the cheat codes for life. This is how it works. Whenever you identify whatever it is you want to receive, you must become it and go give it because, especially with finance, here’s the reality. If you won’t give a dime out of a dollar, you’ll never give a million out of a billion. So it’s not I’ll wait until. It’s how can you give from where you are right now. Because whatever you give will come back to you tenfold.

Now, that’s not the reason that you give. But the secret, the life hack, the behind the scenes truth is that the secret to living is giving. When you embody that and say, “If I want this to come in my life, how can I become it,” and then use that to give and serve others, your life will never be the same, and you will actually start to find that you are smiling more than you ever thought possible.

[00:37:39] TU: Oh, man. That is so true and so much wisdom in that that I think we can fall into that trap, and it is a trap to think that in that day in the future, a future state when I’ve got X in the bank, at that point, like I’ll be ready in a position to give. To your point about building that habit and that muscle and making that a priority, so important.

There you have it, the SMILE framework. As always, Dr. Adam Martin, it has been a pleasure. I’m so grateful for you as a friend and a colleague. For folks that don’t yet know you and follow your work, which I think are few and far between listening to this, but for folks that don’t, where’s the best place that they can go to stay in touch with you?

[00:38:22] AM: Thank you, Tim. So, so honored. So I’ve had the honor and privilege of working with and helping many pharmacists and students grow their personal brands all across the world. Your brand is my favorite because you embody the principles and values. You are the best steward of your gifts I’ve ever seen in my life. So it is such an honor.

[00:38:40] TU: Thank you.

[00:38:41] AM: I just want to give a shameless plug of real talk real real quick there. But if you want to see more smiling faces and goofy things, feel free. The best place to interact with me is on Instagram, all one word, @thefitpharmacist. I also have a podcast that I’ve been running for a little over five years now a new episode every week. It is The Fit Pharmacist Healthcare Podcast. That’s on your favorite podcast platforms, iHeart Radio, iTunes, Spotify. You name it, I’m there. So feel free to subscribe on there if you want more content, also on LinkedIn. But, yeah, feel free to interact and engage.

But definitely make sure, if you’re not for some crazy reason, following Tim and Your Financial Pharmacist because he has such a gift for connecting and nurturing people that have an incredible spirit and value within them. That he invests and nurtures so that they can then become the people that go and nurture and gift them. Just an amazing quality that you have, Tim, and I’m just really inspired by you personally. So seriously, thank you for who you are and who you continue to become.

[00:39:50] TU: Awesome, man. That means the world to me, really, guys. I really appreciate that, and I’m so grateful for you and appreciate you taking the time to come on here. Thanks, Adam.

[00:39:59] AM: An honor. Thank you.

[END OF INTERVIEW]

[00:40:01] 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 is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog posts, and podcasts 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 that 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 277: How This Pharmacist Teaches Financial Principles As a Preceptor and Parent

Posted on by Caitlin Boyle

Dr. Frank McCabe discusses his career in pharmacy and how he teaches financial principles as a preceptor and parent.

About Today’s Guest

Dr. Frank M. McCabe is currently a Pharmacist Consultant with over 37 years experience in the Healthcare industry. He received his undergraduate degrees from Orange County Community College-SUNY Orange (Business Administration) and MCPHS University-Boston (BS Pharm) and his graduate degrees, Masters in Business Administration (Management) from the West Point Military Academy Program (USMA) of Long Island University-CW Post Campus and Doctor of Pharmacy degree from MCPHS University-Boston. Dr. McCabe is a Board Certified Pharmacotherapy Specialist (BCPS). He has served as a preceptor to pharmacy students and pharmacy practice residents. Most of Dr. McCabe’s pharmacy professional experience was in Hospital Pharmacy, including leading one of Nations leading healthcare institutions (St. Joseph’s Health of NJ) acute care hospitals during the Covid-19 pandemic (St. Joseph’s Wayne Medical Center, Wayne, NJ). Dr. McCabe also has had experience in Community practice and Pharmaceutical Industry (Medication Safety and Pharmaceutical Sales Management/Data Management). Dr. McCabe is also a Certified NJ Consultant Pharmacist, which is recognized Nationally by the VA. He has extensive engagement in Professional Societies, including when practicing in New York State as Secretary for the Mid-Hudson Chapter of the NYS Council of Health System Pharmacists and over 10 years as Treasurer for the North Chapter of the New Jersey Society of Health System Pharmacists. Dr. McCabe was also a frequently requested speaker on Nutrition and Vitamins for Corporations and Community organizations in the North New Jersey area.

Episode Summary

This week, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is joined by Frank McCabe, PharmD, BCPS, MBA. Frank is a pharmacist consultant with over 37 years of experience in the pharmacy industry. This week, Dr. McCabe discusses his career in pharmacy, how he caught FIRE early in his career, strategies he employed to allow his children to attend out-of-state schools with very little debt, and how he incorporated personal finance education into his rotational experiences for student pharmacists as a preceptor.

Frank’s advice to younger pharmacists includes being active in professional societies for continuing education, networking, and helping the future generation of pharmacists. He also encourages younger pharmacists to look for opportunities and training, as he did, so that when opportunities in the pharmacy field present themselves, they may take advantage. He shares a reminder to take care of your mental and physical health while seeking opportunities to make additional income. Being conservative with spending and living frugally while paying off student loan debt can be balanced with putting money into your retirement accounts as well. For pharmacists in the latter part of their careers, Frank explains his view of the current time of financial challenges and high volatility during this period of his retirement. The episode closes with Frank’s strategies for educating student pharmacists and his children on financial principles. His methods include building an understanding of the value of hard work balanced with finding and enjoying your life’s passions.

Links Mentioned in Today’s Episode

YFP Planning: Financial Planning for Pharmacists
Schedule a free Discovery Call with YFP Planning
Seven Figure Pharmacist by Tim Church, PharmD and Tim Ulbrich, PharmD
Bankrate
Email Your Financial Pharmacist: [email protected]
Your Financial Pharmacist Disclaimer and Disclosures

Episode Transcript

[INTRODUCTION]

[00:00:01] 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 pleasure of interviewing Frank McCabe, a pharmacist consultant living in Pittsburgh, with more than 35 years of experience as a pharmacist spanning institutional practice, pharmacy administration, and pharmaceutical industry.

During the show, we discuss how he caught fire with personal finance early on in his career. Some of the strategies that he employed to allow his now adult children to attend out of state schools nearly debt-free. And why and how he incorporates personal finance education into rotation experiences for student pharmacists.

Before we jump into the show, I recognize that many listeners may not be aware of what the team at YFP Planning does and working one on one with more than 250 households in 40-plus states. YFP Planning offers fi only high-touch financial planning that is customized to the pharmacy professional. If you’re interested in learning more about 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 jump into my interview with Frank McCabe.

[INTERVIEW]

[00:01:27] LB: Frank, welcome to the show.

[00:01:29] FM: Thank you, Tim. Glad to be here. And hopefully we can help the next generation and admire what you’ve done with your financial pharmacist and being an entrepreneur. And it’s really much needed in our profession.

[00:01:42] TU: I really appreciate that. And I’ve been looking forward to this conversation. And just some background of how we got here, as you had reached out to me about purchasing a copy of the book Seven Figure Pharmacist because of a student that you were precepting and wanting to pay it forward. And that initiated a conversation. And we went back and forth with a few emails.

And I quickly realized that you had a passion for, as you mentioned, training up the next generation, paying it forward, teaching some of the principles that have been so important to you in your own personal journey and your own career journey as well. And so, that’s what we’re going to be talking about here today. We’ll talk a little bit about your personal career journey in pharmacy. We’ll talk a little bit about your family journey and how you taught your children about money or still teaching children about money.

[00:02:26] FM: Absolutely.

[00:02:27] TU: And the work that you’ve done precepting students and thoughts that you have on teaching personal finance as a part of some of those experiential rotations. Let’s start, Frank, with your own personal journey and pharmacy. Where did you go to school? When did you graduate? And what drew you into the profession?

[00:02:43] FM: Oh, gosh. Tim, it’s a long journey. 37 faithful years ago. And actually, over 40. I was in the top 25% of my graduating class in high school. And in New York State, in Orange County. Applied to Albany College of Pharmacy. Didn’t get in. Oh, no. But I really admired my family pharmacist, Stanley Moroknek, who own Thrift Drugs in Monroe, New York. So, okay, I did what was convenient and easy to do. But it worked out real well.

I went to SUNY Orange, the State University in New York, community college. Got a two-year degree in business. And you’ll see how that ties in later on. Completed my associate’s degree. Applied to Massachusetts College of Pharmacy, which is now MCPHS University, Northeastern College of Pharmacy.

And what was unique about going to a SUNY school, I was guaranteed a spot in a four-year school. I got accepted at SUNY Buffalo for business. But really wanted to pharmacy. So I went off to MCPHS University. And so, I did my undergrad degree there, my Bachelor of Science in Pharmacy. Graduated in December of 1983 and came out into practice. Eventually, I did go on and earn an MBA and also a my PharmD.

[00:03:53] TU: Tell us maybe the cliff note version, 1983 to 2022. Tell us about your career journey, the different areas of the profession that you’ve been in and leading up to the work that you’ve done most recently.

[00:04:07] FM: Yeah, thank you, Tim. I work for CVS when I first graduated school. It was 13-hour days. No lunch. No dinner. No break. Because you were part of management. I graduated 160 pounds. After a year, I was 130 pounds. I said, “I can’t keep this up. I’ll waste away to nothing.”

I took an opportunity to work for the New York State Office of Mental Health at a large inpatient psychiatric center. It had 1,000 patients when I started there. And that’s where I cut my hospital chops. Like, institutional pharmacy jobs.

I realized that working there was very good for the patients. Worked with a great group of people. Pharmacists are just smart people and just great people to collaborate with. But also, had a yearning and a desire to do other things in pharmacy and to be a director and assistant director in New York State OMH, often mental health, you would have to have an advanced degree.

At that time, the Continental Health Care Systems, we’re switching to pharmacy automation. Back then there was no computers, no clinical. It was all typing everything out. Going back years and years. And we visited one of the booths at the New York State Council of Health System Pharmacists. And I should weave in there, Tim. Still to this day, for most of my career, I’ve been active in professional societies. And that’s one way I do give back. And I really implore the younger generation to become involved, whether it’d be a community practice, or institutional practice society. Because you meet a lot of good people and you also have opportunities for continuing education and also to help the younger generation.

It was through that meeting that I went back and realized I really needed to get an MBA. We were very fortunate at West Point, the New York State Military Academy, Long Island University. Had a program there for 30 years. It was half civilian, half military. Did 60 credits in 18 months while working full-time.

[00:06:05] TU: Wow! Wow!

[00:06:07] FM: And that gave me the opportunity, and my X as well. And I went into pharmaceutical sales, and rose through there. Became a district sales manager. But the industry changed after 2000. The regulatory climate changed. The political climate changed.

But one thing that sales was very good for, and I think I say to the younger generation, everybody should do a stint in sales. You’re selling a product, but you’re also selling yourself, Tim. You need to articulate your ideas and things.

And I’ll tie that in for when I was at St. Joseph’s Health, St. Joseph’s Health in northern New Jersey. And I was at St. Joseph’s University Medical Center for six years. It is the fifth busiest emergency room in the entire nation with over 170,000 ER visits a year. Clinically, it was great. Interacting with residents, the pharmacy residents, the clinical pharmacist. But you really need to be able to have opportunities.

And along my career, besides continuing education, having an MBA, going back for my PharmD, you don’t know what doors are going to be open to you. And there was a management shake-up at St. Joseph’s, and I had the opportunity to become the manager, the pharmacist in charge, at our small facility, St. Joseph Wayne Medical Center. But nobody had figured this out, Tim. I have an MBA. I’m good with numbers. Most pharmacists are excellent with numbers. Nurses are not so good with numbers. But boy, they’re so good at other things and just have such admiration and appreciation for what they do.

But because of that MBA and that additional education, it paid off that many years later. I got my MBA in December of 1991. But here we are in 2018 and my career and realized that St. Joseph’s Health, between both facilities, we had $2.1 million in expired drugs. Not unusual. Probably on the higher side. But the only way you’re going to get a handle on that, Tim, is through automation.

But also, I was responsible for – neither facility had other pharmacy upgraded in 40 years. We didn’t have any clean rooms. Hey, where are we going to get the money for this? And better yet, we need clean rooms. We need carousels.

I saw Omnicell’s IVX. I don’t know if – Are you familiar with IVX at all, Tim?

[00:08:35] TU: I’m not. No.

[00:08:36] FM: In terms of sterile compounding. It’s a modular device that’ll go in the hood. It has a scale on it. It has a printer. It has a camera. And there’s a cloud library of the specific gravities of the active ingredients and the inactive ingredients. You’re checking that process. While the technicians are compounding, you’re capturing that for regulatory and legal purposes going forward.

I went out – in fact, we came out here to cranberry, Pennsylvania, to Omnicell’s headquarters for their automation, and realized, “Hey, we can do this.” I was with my boss, Mike Cairoli, who’s now a VP at St. Joseph’s Health, and got a two and a half million-dollar contract signed. They don’t guarantee it anymore. But we also had guarantees of two and a half million dollars in savings over five years.

I was able to go to the C suite at St. Joseph’s Health. And they’re second biggest provider of charity care in the state of New Jersey and very poor, but to get these contracts signed. And it’s because of my passion. And I tried to inculcate in my staff, whether it’d be the pharmacists or the technicians. And it was true, Tim. On a given day, a patient upstairs could be a colleague, could be a family member, be a friend. It’s our obligation and to practice at our highest level as pharmacist. But to do that, you need technology. I had the opportunity to do that. And also, appeared before the New Jersey Board of Pharmacy twice to educate the board on technology.

And for reasons, and we wanted to be closer to family here in the Pittsburgh area, we relocated here. But St. Joseph’s Health, last March, the New Jersey Board of Pharmacy requires that a pharmacist be in the cleanroom or the compounding area when the technicians are compounding. But because of my background in sales, my MBA, always been trying to get educated, just not in our profession, but also outside our profession, St. Joseph’s Health was the first institution in the state of New Jersey to get approval and have a pilot once they’re up and running with their cleanrooms and Omnicell’s IVX to have the pharmacists remotely located outside still having line of sight with the technicians compounding, but not having to be in there.

And the rationale for that, human beings, a simple matter of our head, Tim, you kick off 50,000 flakes of skin and bacteria. More people are introduced to that clean space, the risk of breaking that sterile compounding area. And also, if you had a pharmacist in there, as I talked to Linda Weitzel, the board president Anthony Rubinaccio, the Executive Director of Board of Pharmacy and other members of the board, that you could have 15 technicians compounding. But one pharmacist? How is that safe?

If you look at that career progression, I would implore the younger generation. It’s tiring. You’re working. You get family. You have children. But always look for those opportunities to latch on to education, whether it’d be a formal education through advanced education, or certificate programs. Because you don’t know down the road where those opportunities are going to happen. And if you have the skill set and that education and training, when that door opens, you can step through it.

[00:12:04] TU: That’s really great, Frank. And it’s really cool to see the thread. One of the things you mentioned, which resonates with me a lot, is the importance of some of the sales principles that you learned, obviously, through the work that you did in the pharmaceutical industry. But as you mentioned, it’s not just about selling the product. It’s about selling yourself and some of the confidence that comes through that process. But I can see where that sales background comes to be when you’re in front of the C suite at St. Joseph and making a pitch. When you’re in front of the board of pharmacy, the New Jersey board, those are sales principles. You’re not, per se, selling a product. But you’re really bringing yourself forward and obviously making a pitch for what you want to do. Really cool to hear and see the thread throughout the journey that you mentioned.

I want to shift a little bit and talk about some of your own personal financial journey, but also how you’ve been able to instill these principles not only within your own family, but also with students and others that you’ve precepted. And something that really stood out to me in our email exchange was how you instilled the financial knowledge in your children. And before we jump into that, I’m curious how and why did you get interested in personal finance? Was there a moment? Was it through the MBA training? Was it something that you’ve always had an interest in that you’ve always self-taught yourself? Where does your passion and interest around personal finance come from?

[00:13:21] FM: Good question, Tim. And you and I spoke about that a little bit before the recording. It really has to go back to my mom. She passed away just this past April. I miss her every day. On 93 years of age. But she was a bookkeeper, Tim. And a different generation. But her high school education at Walton High School in the Bronx really put her in good stead for lifelong earning ability.

She reveled in telling us, children and grandchildren, the story of looking for – back in the old days, there was ads in newspapers. It was an ad for a Ford dealership. And back then, they only wanted a man. But she went and said I have the skills. And she got the job.

I learned that a young age that from mom, genetically, but how to manage your checkbook. How to manage finances. But also, kind of like you, you were saying your mom and dad put up envelopes on the refrigerator. We didn’t have that sophistication.

I’m the youngest of four. I have three older sisters. The other one is deceased. But we always have the ability to earn extra money. I would clean mom and dad’s car. Hey, if I need extra cash, you can go vacuum and clean their cars, clean the windows. And then we used to – maybe about a mile away, we grew up in a mountaintop in Orange County, New York, there was a convenience store at the bottom of the hill. But we would go buy candy and then resell it at a candy stand. I learned about the multiplier effect of money.

And then I worked in food service for seven years, Tim, on the New York State Thruway while I was going to community college. And you name it, I did it. I was a cashier. And then I worked in the office on the weekends when I was doing my community college studies. You learn that early.

And then off to MCPHS University, and mom and dad was very helpful. But I kind of ran out of spending money halfway through the year. We were at Emmanuel College, which was an all-girls Catholic college at the time, MCP, leased a dorm from them. I went off down the block to McDonald’s by Fenway Park and work to get some spending money.

[00:15:36] TU: Yeah. I love it.

[00:15:38] FM: Just had that drive and that initiative. But also, making sure I kept up academically as well. I think your question, it comes from genetics. It comes from a good mentor. And then also, the rewards of working and having goals. I’ve really admired our family pharmacist, Stanley Moroknek. I was an otitis media sufferer growing up. And he was just fantastic. I had a goal. And I needed the money. It’s, “Okay, I got to do the academics.” But it needs some spending money because I want to go to Fanueil Hall, or I want to go see a concert. That’s what I did, Tim.

[00:16:16] TU: We talked a little bit about before we recorded today that there’s some challenging times for new practitioners that are out there making this transition from a student pharmacist to the first decade of their career. The student loan debt is well known. We’ve talked about it extensively on the show. The numbers are somewhat mind boggling. North of $170,000 on average of student loan debt.

[00:16:39] FM: Oh, easy.

[00:16:40] TU: Many, may be higher, private education, longer pathways of education. We’ve seen somewhat of a flattening and stagnation of wages. We’re in a high inflationary period. Pharmacists, certainly still, relatively speaking, make a good income. But many folks may have a ceiling on that income. My question for you, as we think about the next generation of pharmacists and those that are listening, is there a piece of advice or two, Frank, that you would share now looking back 37 plus years of your career? Things that you learned along the way or words of wisdom that you wish you would have had early on that could be helpful to those that are in the front half of their career?

[00:17:19] FM: You have to look at self-help, Tim, in terms of your mental health and your physical health. You’ve got to take care of yourself first. But I think what is put me in good stead over the years is taking the opportunities for overtime. And also, the skill set. Though, here I am a hospital pharmacist, and then a hospital pharmacy manager. But there’s a small chain of independent pharmacies in North New Jersey. And I would add – I get a phone call during the day, “Hey, Frank, can you work tonight.” I would ask the younger generation, besides working 40 or 45 hours a week, whatever your primary job is. And if you have that debt, is to pick up additional shifts elsewhere.

I know as a hiring manager at St. Joseph’s Health and a short stint here at Allegheny Health Networks, it’s very difficult to find qualified, competent hospital pharmacists. If somebody’s working in community practice, pick up a hospital shift or two as a per diem pharmacist. And that’s one way you can make a transition to hospital pharmacy.

But what was nice about hospital pharmacy, I work shift work. And at St. Joseph’s, they were a little unique. My shifts were 6:30 to 3:00. I always had my – 90% of my evening is free. I could pick up if somebody called me and they needed coverage on one of the stores that night.

And funny enough, at St. Joseph’s Health, Monday nights were the biggest nights for call outs. 99% of time, I’d pick up extra shifts. And also, besides earning money, Tim, I’ve always driven my vehicles in excess of 100,000 miles. Even here I am today mostly retired, I am driving a Subaru that’s got 175,000 miles. Can we afford to go buy another car? Sure. But it’s the principle that matter. I don’t need that new flashy thing.

But also, it’s also putting money into the 401k, and making sure, at a minimum, you’re getting that match. So many institutions or corporations, you don’t have a traditional pension plan. St. Joseph’s Health, they had what was called the church plan. There were lawsuits. But come next year, I’ll be getting a small pension from them. They had switched to a 403b. As soon as they switched with that, they had grandfathered the pension plan. But I started putting money into that 403b.

And even despite the downturn in 2008, Tim, I did nothing. I let it ride. Because I believe in the stock market historically. Part of the conversation you and I talked about was it’s not what you earn. It’s also what you save. Try and live frugally.

And also, another way that I do that, another passion of mine, and that may be for a little bit of another segment of our discussion today, Tim, I had the opportunity at St. Joseph’s Health to present and lecture to corporations and community groups over 30 times on supplements and nutrition. Where that ties in terms of your own personal health and well-being, I would bring my own food to work.

Not only wasn’t that frugal and savings, but it was always available to me. I didn’t have to go to the cafeteria. I made sure that what I was getting was healthy. I never understood about hospital institutional cafeterias selling deep fried chicken and French fries. But they do.

[00:20:46] TU: They do. Well, and I think the frugality message there I think is really important. Maybe a word that my generation doesn’t love necessarily. But I think, frugality, it’s important to remember. It’s not just about the dollars and what we do with those dollars. Certainly, that’s very important, whether we’re paying down debt, or investing, or saving for the future. But it’s also about the momentum and the mindset.

Here you are nearing retirement. You’ve had a successful career. And you share that, after this interview, you’re going to be working on your Subaru, which is 170,000 miles plus. So, you can keep that thing going and not have to buy another car. And could you? As you mentioned, yes, you could. But it’s that mindset and that momentum that transcends any one financial decision, right? I always say it’s not just about the used car. It’s about the mindset with a used car, which then transcends your ability to save, your momentum to save, and the ability to move towards other financial goals.

One question I’d have for you, Frank, especially for pharmacists listening that are maybe in the latter part of their career, here we are in a very challenging, volatile time period of the market. You mentioned, you’re mostly retired, how are you viewing this time period? You’ve done all this work to accrue your assets leading up to retirement. And here we are in a very challenging time period. But you’ve always had this long-term view of investing. Just take us inside Frank’s brain in the moment as someone who’s nearing retirement and how you’re viewing this high volatility period as you’re approaching a time where you may need to draw upon those funds.

[00:22:21] FM: One point that is unique in my situation, Tim, that helps me a lot, my wife, Marge, is a retired public school business administrator for the state of New Jersey. And she continues to work. In fact, she’s doing CE today. But I have her health benefits. That affords some flexibility.

Do I get worried about the market? Yes. But I lived through the downturn in 2008. I have my 401k monies, my 403 monies, in lifestyle funds. As you go through time, they’re morphing more towards bonds. I’ve seen the growth in my retirement funds from 10, 15 years ago. And also, because I was in pharmaceutical sales, and I worked for GlaxoSmithKline, when I left their employ, I left my 401k monies there, because they pay – It’s a much bigger corporation. Lot more monies.

At some point, I will have to consolidate this. But a lot of the fees they’ve paid to manage those funds. That has allowed my money to grow. I think that the days of staying with an employer for 30 or 40 years is rare. I think for the younger pharmacist is, okay, don’t panic. Leave the money. And then at some point – it’s a little bit of a hassle sometimes to tie that money together to roll it over. But you don’t want to take that out.

If you need money –I can. And I looked before I started with Allegheny General Hospital last year, within 14, 10 miles of my house, I think there’s 14 independent pharmacies, Tim? And you’re looking at, from my knowledge, the first pharmacist in the history of the state of Pennsylvania, because of my perseverance and persistence to get his immunization licensed by reciprocity. They’ve never done that before. I would say to the younger generation, believe in yourself. Follow through. But it takes a lot of work.

I sent 30 pages of documentation to the board here in a pandemic. Okay, I didn’t get my education training for immunization. It was back in 2013. No, it’s not two years ago, like the board requires. But I’ve been immunizing up until then. I think tying in financially, and that long view outlook is that persistence and perseverance. Believing yourself. Taking care of yourself. Eating right. Getting exercise.

[00:24:53] TU: Yep. And letting the time value of money do its thing, right? You live through a couple of steps. And one thing I was sharing recently with some folks is I graduated in ’08. And for folks that have graduated somewhere around that time period, or since then, this is really the first test of that long-term view and philosophy that we talk about.

And it’s one thing to say it. It’s another thing to live it, especially for folks that have maybe been saving for 12, 13 years. You look at your portfolio, it could be down 20%, 25%, 30%. But to hear from folks such as yourselves that have lived through these dips. And we know the history. If we look at the market since the Great Depression, this is not unique. It’s happened before. The reasons are different. But this is not unique. And this is why we’ve got to have that long-term view of investing and make sure that we’re keeping that long-term view in mind.

[00:25:43] FM: I agree. I agree. And one thing we left out of there, and maybe that’s another segment, is also real estate.

[00:25:49] TU: Mm-hmm. Tell me more. Is that been a part of your journey?

[00:25:52] FM: It has been. Yeah, I’ve not been a real estate investor in the sense of some people could do it if you have the stomach for it. It’s just not my personality. But some people do get investment properties and rent out. But I’ve been a homeowner since 1986. And this is probably my fifth home. I don’t own the other homes. But the market long-term has been good. Because the current structure, it’s a little bit different especially living – Well, we lived in – Pennsylvania can be higher in taxes, but New Jersey certainly was one of the highest in the nation. And that limit would solve taxes. But getting that home equity over the years, and sweat equity.

For me, Tim, growing up in high school, I took power mechanics and woodworking. And I worked with my hands. And I find that relaxing. But now, gosh, the younger generation, don’t forget YouTube. You can learn how to hang a drape. You can learn how to do a minor Plumbing Repair, do those kinds of things. I would also suggest that the younger generation, when they can afford it, is to get into their own home.

And I kind of laugh, but I don’t want to laugh. Mortgage rates are at 5%, right?

[00:27:08] TU: That’s right.

[00:27:09] FM: But historically, my first home was like 13%.

[00:27:11] TU: Yeah. Perspective, right?

[00:27:13] FM: And our current home, Tim, we have a mortgage. We don’t need it. But it’s a 2.375%. We’re using somebody else’s money. You think of that time value of money, as you talked about, and how you deploy those assets, how you deploy your savings, how you deploy your long-term goals.

[00:27:34] TU: Frank, let me put myself in the shoes of a student on rotation with you, and you’re teaching me all these things, time value of money, and home appreciation, and equity in the home, and all the things long-term. And I hear all that. And I’m like, “Frank, that’s great. But I’ve got $200,000 in student loan debt. Homes are at crazy prices right now. Pharmacist income is relatively flat.” If we get tangible for a moment, it really comes down to we need to live off of less than we make so that we can create the cash flow to be able to allocate money towards these longer-term goals.

And so, what does that look like? I’m a new graduate. I’m a transitioning graduate. What are the principles that I’m putting in place that allow me to live that discipline lifestyle so I can live off of less than I make and I can ultimately try to really save and invest the difference?

[00:28:24] FM: Tim, I don’t think it’s dissimilar to high school education today. Nevermind college graduates and pharmacist graduates. They fill our heads with so much clinical knowledge, and it’s great, and it’s a value to the patients that we serve. But I don’t think the schools are doing a good job in terms of what is this tuition mean.

And when you’re going through, try and be frugal student. But now here, you graduate, and you said the average is $170,000 in debt? Well, how the heck am I going to get out of this debt? Well, you got to have a job. You get your primary job.

Also, do a time value analysis. You can go to bankrate.com. You can use Excel. And I’ve done that with my students that, “Okay, here’s your debt. What do you think the current interest rate is going to be? What’s your minimum payment going to be?” Nevermind how do I get rid of this debt?

And the students that I talked with, the schools have not done a good job of providing them with resources and information. They’re smart enough. Heck, hell, yeah. Yeah. We’re two percenters, Tim. Do you know what I mean by two percenters?

[00:29:29] TU: In terms of the 2% that are applying? Or what are you referring to?

[00:29:33] FM: No. Only about 2% of the US population has doctoral level degrees.

[00:29:38] TU: Oh, okay.

[00:29:39] FM: It’s probably evenly split between professional degrees like MD, PharmD, and PhDs. Let’s face it. You get through pharmacy school, they’re smart people. But they’ve just not gotten a sense. It’s like, “Oh my gosh.” And I think what I’ve done, and I think any graduating pharmacist can do, once you get that job, is hopefully you’re eligible for overtime. If not, you pick up extra shifts. Find another job. Maybe it’s outside of your passion or what you’re doing. But there’s usually – because there’s no benefits involved.

I know probably – I’m 99% sure, Tim. I go and throw my CV around within 10 miles of here, and somebody’s looking [inaudible 00:30:25]. I’ll pick it up.

[00:30:28] TU: Yup, absolutely.

[00:30:28] FM: Yeah. I wouldn’t say, “Okay, I got this debt. What’s my minimum payment? What’s my maximum payment?” Because that’s going to impede their ability to get a mortgage, to buy a car. Got to pay for benefits out of your paycheck, for health insurance. But also, if there’s a retirement plan, you want to make sure you maximize that. Because the time value of money, you graduate ’24, ‘25. And you’re going to retire. Let’s say they raise social security to 68. Oh, boy! The value of compounding that. And you could do that through easily on bankrate.com. If I put 50 bucks a paycheck, times 52 weeks, and do that over 30 or 40 years. But you need to – Yeah, I can do vancomycin dosing. But nobody’s taught me how to do this.

[00:31:20] TU: Yeah. No. It’s so true. And I think there’s a gap. We’ve been fortunate to partner with over 40 colleges and to do some personal finance education. Often, those are one-off sessions. But for several of them, we’ve seen individuals at the dean level that have really bought into, “Hey, we need to be doing this and doing this longitudinally for our students.”

And what I love hearing preceptors like yourself doing this, it needs to continue from the didactic curriculum to the experiential curriculum. And obviously, my hope is even post-graduation associations and others will pick up some of the education as well. And then we need to pass it on and pass it back, so that when we’re precepting students, we’re able to help them in their own journey.

And step number one is often just that awareness. You give the example of student loan debt and the calculator. And before we can put a plan into action, we have to know what we’re working with. And so, $170,000, as I’ve said on the show before through my own journey, that feels like Monopoly money. But when you look at it as a monthly payment, and what does this actually mean? Okay, this starts to become real. Now we can put a plan in place.

And we first have to accept that, yes, pharmacists might make a good six figure income, but you’re not taking home six figures, right? And this is simple math. We all know this. But students may not be thinking about that. Or what is the actual take home amount? And coming down a little bit off of the high of that, and then looking at what’s that going to mean in terms of bills, mortgages, student loan expenses. And really starting to work that budget so we can make sure we’re achieving those longer-term goals.

[00:32:54] FM: And I think, Tim, sometimes you look at that big figure of 170,000, you throw up your arm.

[00:32:59] TU: That’s right. Yup.

[00:33:01] FM: But so often, you got to slice that pie. Here’s the pie for food. Here’s the pie for the rent. Here’s the pie from a student loan. Okay, I can do this on my salary. But I don’t want to be paying this off for – I want to get a house. I want to go on vacation. How am I going to accelerate this? And I think the way to do it is you have no choice. I think you’ve really got to pick up an additional job. And that’s okay, because it’s a sprint. You get through that. Get that loan paid off. And then you can start doing what you really want to be doing.

[00:33:37] TU: Frank, one of the things you shared with me is that your daughter became debt-free at the age of 28. Your son, very small amount of debt. He’s an engineer for Tesla. And so, for me, as a father of four young boys running YFP, teaching them about personal finance is a really important topic. And I’ve tried a few different things with my kids. And it’s been interesting to see some of the behaviors and habits that they’re picking up on. As you look at now, parenting adult children, I would guess this journey never ends, right? In terms of teaching and –

[00:34:08] FM: Tim, it never ends. Parental love. And I just talked to my children last night, and it’s just you think and worry about them, and frighten them every day.

[00:34:19] TU: Yeah. What worked for you? As you look back on that journey, and teaching your kids about money, what were some of the strategies that you employed, or even things that you’re currently employing? For folks that are listening that maybe have younger children or perhaps will have children into the future, what are some of the strategies? What are some of the tips when it comes to teaching kids about money?

[00:34:40] FM: I think it starts off with, Tim, that my ex and I are both pharmacist and believe in higher education. And also, believe that idle hands are the devil’s hands. And there’s a cost associated with that. But we always kept our kids busy, even if we’re both working parents. It might be after care, during the school year, going to parochial school, and during the summer, going to enrichment camps. But that also tied in.

My daughter, she played town rec ball, high school basketball, AAU basketball. And she went on to the University of Massachusetts at Dartmouth for sculpture and graphic design. And she played division three basketball. And that was her passion. As parents, we didn’t expect her to get a part-time job.

But my son had the good fortune, from Montclair, New Jersey to get accepted. We lived in Cedar Grove, New Jersey. But by taking the train, the path into New York City every day, he got accepted into Xavier high school in Manhattan. And that’s a Jesuit school, all boys. But also, by getting accepted, he also got the Sons of St. Patrick’s scholarship. And that required him to work.

He worked at a mom and pop local gardening store all four years. Of course, I was beneficiary, because I got the shrubs for half price. I did some of my own landscaping. You know, sweat equity. Both children, they learned to work hard and be passionate through different avenues.

I’m wrestling my daughter being academically, getting scholarships, but also working hard. She was never a star player, but she really enjoyed it. And living in New Jersey at the time, both kids went to state schools out of state. You’re paying out of state tuition. We just buckled down. I picked up extra shifts so I didn’t have to eat pork and beans. But we, me and my ex, paid a majority of their education.

But you were talking – And this is not that long ago, Tim. It was $30,000 a year tuition, room and board. They both have cars. You’re talking $50,000 a year each. Marissa graduated with, I think, about $8,000 in loans. And she has paid those. And then Matthew had about 17,000. That was it, from Purdue University. And he’s down to 5000. And he’s in no rush, because there’s been no need.

It’s teaching your children the value of money younger, of hard work. Also, following your passions. Marissa is probably lifelong – She’s had some injuries. But she goes to the gym. I was a skier. My son took to snowboarding like a fish to water. And also, mountain biking. It’s not just teaching your kids the value of money and hard work, Tim. But it’s also introducing them to sports activities they can do lifelong and be healthy. Because not only just physically healthy, but mentally healthy. Both of my children, yeah, when I talk with them, they go to the gym, they do hiking. Matthew just loves being out in Reno, Nevada, because he’s an hour and a half from the Sierra Nevadas. And buys the epic pass and whatever passes, and every time he can when he’s not at work.

[00:38:10] TU: Tough life, huh? Tough life out there. Yeah. I love, really, the message of work. I think so often, for good reasons, we talk about strategies, like, 529 accounts, and saving, and scholarships, and cash flowing it, and all of those have value. But one of my hopes with my boys is, sure, we’d love to help where we can financially, whether that’s 529 accounts, whether that’s guiding them to scholarships, whether that’s cash flowing it. The expense so they’re not burdened with the debt. But also, there’s a lifelong lesson that comes from that hard work component, right? And that is something that transcends any type of transfer of here’s $10,000, from a 529 account. That’s great. But the lifelong lesson of the hard work that can come from that is going to have a much, much bigger return on investment. I think that’s a great reminder. And I’m grateful that you shared that.

Frank, my last question for you is I suspect we have many pharmacists listening that have students on rotation with them, residence on rotation with them, and perhaps have thought before, “How can I incorporate this topic of personal finance into the rotation? Into the learning experience?”

And I’ve actually had a handful of people email me over the past couple years that are doing some cool things around this topic. And so, my question is, for you, that others might be able to adopt or build upon, what have you done, practically speaking, with students around the topic of personal finance that others might be able to apply in their own situation?

[00:39:41] FM: What I’ve done – and I just did it with Jordan. As you know, I bought a gift. And we’ve got to get together. I’ve been so busy. But I did reach out to him. I do have your book. And within the next couple of weeks, him and I will get together. But one of the first things we did, I have no – Hey, when are you going to graduate? Depends what year they’re in. How much money do you have in loans? And what does that mean? Here’s that dollar figure. What are your plans for paying that back? How are you going to pay it back?

You introduce them to tools, whether through Excel or bankrate.com. And make a realistic, concrete example of what their payment is going to be when they graduate? And what jobs are available to them? And also, suggest, and try, and push, and prod, and share with them what I’ve done and what’s been successful for me.

And my mom, at a young age, she – They said, “Well, how are you going to be successful in college?” Well, I like nice things, Tim. Nice things doesn’t necessarily mean new, shiny things. But it means the ability – my days off, I want to go skiing. I want to go mountain biking. It’s putting concrete things to that student and saying, “How are you going to get there and follow your personal passions, as well as your professional passions?” But also, because it’s become so competitive, Tim, I also encourage the students to become board certified.

[00:41:10] TU: Yeah, another credential that can help there. And I love the angle of the passions, right? Because one of things we often talk about is that a good financial plan – Yes, we need to be taking care of our future self. Yes, we need to be planning for retirement. But we also have to make sure we’re living a rich life today, right? Throughout. There has to be this balance between the two.

And I think that connects and makes the topic come alive, especially as we’re talking about working with students, that when I talk about 401k accounts, 403b accounts, Roth IRAs, HSAs, insurance policies, those are tomorrow things in their mind.

[00:41:45] TU: That’s Greek. That’s Greek.

[00:41:46] TU: Right. Exactly. Yeah, it’s overwhelming. It’s confusing. But what’s right in front of them are student loans. I’m thinking about buying a home. There’re these things that I haven’t done for the last six or eight years when I’ve been in school that I’ve enjoyed that were hobbies or passions that I haven’t done that don’t want to do again. And so, being able to really lean into those areas that they can resonate with, that they can hook on to, I think can really help make the financial plan come alive.

And then from there, take those jumping points, right? To talk about time value of money. To talk about Roth IRAs, and 401k’s and HSAs. But we’ve got to often meet the learner where they are, and then take them on the journey towards the future as well.

[00:42:24] FM: Yeah, absolutely, Tim. Yeah, because they’re going to be with you for many weeks on rotation, for 8 weeks. You don’t need to bludgeon them over the head day one. But just bring that into the conversation.

[00:42:36] TU: Yeah. Well, it’s great. And one of the ideas we’ve had for a while that has just hit the backburner, among other things, is coming up with a preceptor toolkit of sorts around this topic. I’ve taught a personal finance course at a couple universities that we can use as a jumping point. But if there’s any preceptors out there listening that would like to join me and put something together that we could perhaps share with others, I suspect that we all have different resources or tools that would be helpful, shoot us an email, [email protected]. And we’d love to get a small group together to talk about this further.

Frank, thanks so much for taking time to come on the show to share your journey, the wisdom with the next generation of pharmacists. Really appreciate it. And your mindset towards paying it forward. Thank you so much.

[00:43:18] FM: Tim, thank you so much for having me. And I’m looking so forward to some people, pharmacists, viewing this and latching on to an idea. And your good hard work that you’re doing is just much needed in the profession. Hats off to you.

[00:43:32] TU: Thank you so much. I appreciate it.

[OUTRO]

[00:43:34] 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 is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog posts and podcasts 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 pharmacists unless otherwise noted, and constitute judgments as of the date publish. Such information may contain forward-looking statements 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 yourfinancialpharmacists.com/disclaimer.

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

[END]

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YFP 269: How to be Frugal During Inflation

Posted on by yfpadmin

How to be Frugal During Inflation

On this episode, sponsored by Insuring Income, Jen Smith, a personal finance expert and co-host of the Frugal Friends Podcast, discusses strategies to practice frugality in a high inflationary period, how she was able to pay off $78k in debt while battling unemployment, and strategies for listeners to explore whether you are looking to get organized, make additional income, or grow in your investing journey.

About Today’s Guest

Jen Smith is a personal finance expert and co-host of the top-rated Frugal Friends Podcast. Since paying off $78K of debt in two years Jen has been on a mission to help people spend in alignment with their values and live for today while saving for tomorrow. She’s the author of two best-selling books on controlling your spending and paying off debt, The No-Spend Challenge Guide & Pay Off Your Debt For Good.

Episode Summary

This week, Your Financial Pharmacist Co-Founder & CEO, Tim Ulbrich, PharmD, sits down with Jen Smith, a personal finance expert and co-host of the top-rated Frugal Friends Podcast. After paying off $78K of debt in two years, Jen has been on a mission to help people spend in alignment with their values while saving for tomorrow. She is the author of two best-selling books on controlling spending and paying off debt, The No-Spend Challenge Guide & Pay Off Your Debt For Good.

Tim and Jen discuss strategies to practice frugality in a high inflationary period and how to spot and cut out unintentional spending. Jen shares her journey to paying off $78K in debt while battling unemployment and how getting on the same page with her partner, addressing her apprehension on debt repayment, and making intentional choices in her spending changed her mindset about money. Fighting lifestyle inflation with a “radical middle approach” worked for Jen, but she recommends each person find the debt repayment strategy that works for them. Jen closes with some frugality strategies for listeners to explore, including having exploratory conversations with your partner about financial goals, taking inventory of all of your accounts, planning out financial goals annually, and automating your money where possible to prevent unnecessary spending.

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:01] 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 pleasure of sitting down with Jen Smith, a personal finance expert and cohost of the top-rated Frugal Friends podcast. Since paying off $78,000 of debt in two years, Jen has been on a mission to help people spend in alignment with their values and live for today while saving for tomorrow.

She’s the author of two bestselling books on controlling your spending and paying off debt. The No Spend Challenge Guide, and Pay Off Your Debt for Good. During the show, we discuss strategies to practice frugality in a high inflationary period, how she was able to pay off $78,000 in debt while battling unemployment, and strategies for listeners to explore, whether you’re looking to get organized, make additional income, or grow in your investing journey.

Before we jump into the episode, I’m excited to share that we’re doing our first ever virtual summit, The Employee to Entrepreneur: Building Blocks for Growing Your Business. The Employee to Entrepreneur Summit is designed for pharmacists who are planning or actively working on a side hustle or business idea.

This summit is going to be live via Zoom evenings of Tuesday, August 30th; and Wednesday, August 31st. Topics and activities include honing your mindset and uncapping your potential. How to grow a business from a position of financial strength? Retirement savings and tax optimization strategies as a small business owner, how to develop a system for achieving business financial goals, examples of pharmacists that are monetizing their clinical expertise, and much more.

And for those that register by August 23rd, we have three exciting bonuses. Those include a one-on-one implementation meeting with myself, or certified financial planner, Tim Baker. Access to a live goal-setting workshop that I’ll be hosting after the summit. And on-demand access to several bonus interviews, including evaluating health care, insurance options, marketing strategies, how to sell with confidence and more. Lots of information that we’re going to be sharing. You can learn more and register yourfinancialpharmacist.com/businesssummit. Again, yourfinancialpharmacist.com/businessssummit.

Okay, let’s hear from today’s sponsor, Insuring Income. And then we’ll jump into my interview with author, blogger, and podcaster, Jen Smith.

[00:02:19] TU: This week’s podcast episode is brought to you by Insuring Income. Insuring Income is your source for all things term life insurance and own-occupation disability insurance. Insuring Income has a relationship with America’s top-rated term life insurance and disability insurance companies so pharmacists like you can easily find the best solutions for your personal situation.

To better serve you, Insuring Income reviews all applicable carriers in the marketplace for your desired coverage, supports clients in all 50 states, and makes sure all of your questions get answered. To get quotes and apply for term life or disability insurance, see sample contracts from disability carriers, or learn more about these topics, visit insuringincome.com/yourfinancialpharmacist. Again, that’s ensuringincome.com/yourfinancialpharmacist.

[INTERVIEW]

[00:03:10] TU: Jen, welcome to the show.

[00:03:12] JS: Hey, thanks for having me.

[00:03:13] TU: I’m really excited to have you here and to hear more about your debt payoff journey. And we’ll talk about that. But first, I’d love to learn more about your career background and the work that you’ve been doing with Frugal Friends and Modern Frugality.

[00:03:27] JS: Yeah. My frugality journey started back in 2015. I was about three years out of my master’s program. My degree is in acupuncture and oriental medicine. But it was a much more expensive degree than the income provided. So, I was very much ignoring my student debt. And I thought I was frugal, or I thought I was responsible because I would buy the generic products at the grocery store. But I would also turn around and like get Chipotle on the way home from the grocery store and go out and get Starbucks without thinking about it. There was definitely a disconnect between what I thought like financially responsible was and what it really is.

So, in 2015, I got married and my husband said that he wanted to pay off his student loans, and I wasn’t as motivated, but I felt guilty because my student loans were double what he had. When we got married, we started on this journey to pay off $78,000 of debt. And I realized pretty quickly that I couldn’t side hustle my way out of it. That’s really what I tried to do at first. And I got shingles two months into trying to side hustle my way. Yeah, from all this stress, and at the ripe age of 26.

That’s when I realized I needed to be more were intentional about my spending. Not just paying attention to like what’s generic or maybe what’s like $1 cheaper than something else. Very intentional about my overall spending. And it very much freed up so much of my life. I thought it was going to be full of deprivation. I was an adult. I didn’t want anybody to tell me what I could and couldn’t do, much less me telling me what I couldn’t do.

But I found that being intentional and spending on the things that I value versus things that I didn’t think about gave the sense of freedom. And it’s really what allowed us to pay off $78,000 in two years on really average. Because we never made more than $88,000 a year combined. And so, after that, a few years later, I met my cohost, Jill, for the Frugal Friends podcast. And she and her husband were thinking about starting a podcast. And her husband wanted to produce and edit it. And I was like, “I’ll never start a podcast, because I’m a writer.” I had my Modern Frugality blog. But if I did, it’d be called Frugal Friends, because I love alliteration. And they took that as a sign to just start producing it. And four and a half years later, 227 episodes in, we have never missed a week of recording. And it’s been like one of the greatest joys of my life.

[00:06:30] TU: I love that. And we’ll link in the show notes of the Frugal Friends podcast, as well as your blog, Modern Frugality.

My question, Jen, around frugality. When I talk with those that are within the first, let’s just say, 10, 15 years of their career, I feel like the words budget and frugality feel like no-no words. Just things that we don’t love to hear. You mentioned kind of that restrictive. It can have that restrictive feeling. And so, my question is how are you making frugality exciting? Obviously, you’ve built a community, you’ve built a brand around it. Of course, that is resonating on some level with folks. Why do you think there’s a movement around this concept of frugality?

[00:07:11] JS: Yeah, because until you know what’s enough for you, nothing will ever be enough. And so, you’ll keep on this rat race, on this treadmill, looking for what is going to fulfill you. And you’ll keep buying more and looking to make more. And more time with family. More of this. More of that. And like, unless you realize what you truly value, what’s enough in these other places so you can have more in places you care more about, nothing will ever be enough. And it will be this continual unfulfilling race, which is exhausting, which is why so many of us are exhausted, like, 10, 15 years out of college. Because we thought we’d have it more figured out. But it’s so rare to do the work upfront of figuring out like, “Who am I? What do I want? What do I want that’s maybe unconventional? And how do I create boundaries to pursue that more easily?” And then just to do the hard work of retraining your brain to pursue those things, versus immediate gratification.

[00:08:26] TU: As you think about the time period that we’re in, my family is feeling this firsthand. I mentioned to you before we hit record, I’ve got four young boys that are literally eating me out of the house right now. And we’re in this time period of not only high inflation, groceries are wild as well. And I’m sure this topic of, how can I practice frugality in a day when inflation is through the roof? Things are so expensive. What advice would you have for folks that are feeling the pinch month-to-month given the price of goods, of gasoline, of food, and everything that’s going on, but want to be intentional? That concept of frugality. Of being conscious with how we spend. Of making sure we’re living that rich life today while we’re taking care of our future self. That resonates, but there’s the reality of the here and now.

[00:09:09] JS: Yeah. Well, we all want to be more responsible with our money. We want to all have more money left at the end of the month saved. And I think when we start thinking about budgets, and saving, and cutting expenses, we always jump to the things that we love most. Like, when I first started paying off debt, I was thinking, “I don’t want to get on a budget. I don’t want to do this.” Because I don’t want to cut out having dinner with friends. Like, community is one of my core values. And so, that was the first thing I jumped to.

Usually, it’s the first thing you think of is the last thing that you should cut out. When you are pursuing frugality and intentional spending, you want to look through all of your transactions in your bank account, and find the things you’re spending money on that you don’t even realize you’re spending money on. So, maybe a subscription that raised in price, or a subscription you’re not using it all, or these trips to the gas station where you’re going inside and you get a candy bar or a soda with your gas purchase. It’s stuff like that you are doing mindlessly that you don’t really care about, but you kind of probably don’t even realize you’re doing it. It’s those things that we cut out first. And it’s easier to retrain your brain to cut those things out than it is the things you care most about.

[00:10:35] TU: Yeah. I think, too, what I found in my own journey, Jen, that resonates with what you’re talking about around conscious spending. And you gave that Chipotle example earlier, right? Which I think was a really good one coming back from the grocery store. Like, guilty as charged.

And I think that, to me, it’s about the dollars, yes, because maybe we can allocate those towards another part of the plan and be more intentional with them, especially if it’s unconscious spending. But it’s also about that feeling of like, “I’m in control. Like, I’m mindfully spending my money,” right? And I connect this to a lot of eating patterns and behaviors as well. But if we’re going to make a splurge financially, let’s do it consciously, right? Let’s make sure we’ve thought about it. We’ve prioritized it. We’ve considered it among the rest of our financial goals in our plan. And then we’re not unconsciously making those decisions.

And I think what resonates with me of what you’ve shared in some of your blogging materials is that the financial plan, as we think about as a continuum over our lives, is really this balance of living for today while saving for tomorrow. Right? We talked about inside YFP, is we need to be saving and taking care of our future selves. But we also need to live a rich life today. And so, there’s nothing wrong with us spending money. But we want to do it consciously. We want to do it intentionally. And I love what you’re sharing as it relates to that and make sure we’re being intentional in how we’re spending our money.

[00:11:53] JS: Yeah, absolutely. That’s the only way to keep it sustainable, because you are – You’re not promised tomorrow. But also, you’re not promised that you’re going to die when you’re 70. You have to plan past that. But you also want to make the most of your todays. And that’s why I think it’s so important that you sit down and figure out, like, “What do I value most? What are the things that I love the most I want to pursue? And what am I going to say no to so that I can pursue the things I love more?”

[00:12:28] TU: When we think about lifestyle inflation, I think this is something that is so common in society at large, but especially as I think about our profession of pharmacy. Often, folks will spend six to eight plus years in school to get their doctor pharmacy degree. They’ll walk out with 170,000 something dollars a debt. They might go directly into a good six figure income or perhaps have a stepping stone with a residency. And I think that jump in salary can really lead to significant lifestyle inflation. And obviously, we have high costs of just what is reality today with homes and everything else.

Are there one or two things that you typically see, and whether it’s your own journey or your community that, is often contributing towards that lifestyle inflation that folks should be on the lookout for?

[00:13:14] JS: I think it’s the feeling of I’ve accomplished so much. I’ve graduated with this degree. I’ve gotten this job. I have done the hard work. And now it’s time to reap the benefits. And that’s the mindset. I had the same mindset when I graduated. And I think there’s nothing wrong with saying like, “Yes, you deserve a higher quality of living than when you were like eating ramen or whatever in college.” Yes, absolutely. But it can be really beneficial to commit to at least two years after college to say, “Hey, I’m not going to live like I lived in college. But I’m not going to live in the full potential.” Because the earlier you start paying off your debt and investing, you essentially are saving money on buying your freedom. The earlier you start, the more time you have to compound your savings in your retirement accounts. And the less money you’re going to pay in interest on your debt.

The earlier you start that, you will purchase your freedom for a lot less money than if you “enjoy your accomplishments early”. And then 5,10 years down the road, you’re like, “Oh, crap. What have I done? What have I spent all this money on?” And even if you are 5, 10 years down the road, committing for two years, give or take, whatever your situation is, to really focus on getting money into your retirement accounts, getting at least higher interest debt paid off, is really going to benefit you in the long run.

[00:15:02] TU: And so, as relates to this mindset change, you mentioned in your journey that was something that you encountered as well. As you ultimately paid off $78,000 of debt in two years, what was the turning point for you? When did you start thinking, “Okay, Jen, we really need to make a plan to tackle this?” What changed?

[00:15:21] JS: It was my fiancé at the time, now husband, saying, “I don’t care what you’re going to do. I’m going to pay off my student loan.” He wasn’t going to force me. And so, I always say, if you have a spouse that’s not onboard, you cannot force them onboard. But he was going to take it upon himself to do his thing. And then he also encouraged me to think about, what are the things you want to do long term? And how much easier could they be? How much sooner can you accomplish them if we just spent a few years upfront getting rid of this debt?

He really challenged me to think about that, because there were dreams and goals that I had. And I was like, “Yeah, it would be a lot easier if I had the option of working. If I didn’t feel forced to have a nine to five job, but I could have flexibility in that, these things would be a lot easier.” And so, that inspired me, and convicted me, and challenged me to convert.

[00:16:26] TU: I love that. Because it’s the vision, right? Start with the vision and the dream. And then you back into the details and you get excited. But, folks, if you jump in your studentaid.gov profile and you start inventorying your loans, and you look at your private and your fed, like, it’s overwhelming, right? It’s very overwhelming, especially if folks have a couple $100,000 in debt. But if you can begin with, “Okay, deep breath. I’ve got this mound of student loan debt.” The past is what it is at this point. Let’s focus on what we can control going forward. And how can we begin to think about the vision for what we want for our lives, for our financial plan that ultimately will support the debt repayment strategy?

And so, for you and, at the time, your fiancé, now husband, what was the strategy? How did you do it? There’s the snowball approach that folks talked about. There’s the avalanche method. You mentioned a side hustle. Like, what was the actual strategy for how you’re able to pay off that debt?

[00:17:19] JS: Yeah. We took a little bit of everything. And that’s why, on our show, we’re big proponents of being in the radical middle. Everybody wants to take an extreme to where, being in the middle and choosing your own path is very radical. That’s really what we support. And so, we did a little bit of – We started with the debt avalanche. And then in my student loans, there were a lot of different – They were all the same interest rate. But there were a lot of different sizes. I don’t know. Some semesters, I was poor, I guess. And so, we would do the snowball within that. All of Travis’s interest rates were different. So, then we did the avalanche there.

And so, we kind of just did what worked for us. And we just took it month by month. And we thought it was going to take us five years to pay off our student loans. Because Travis was unemployed when we started. We were not at a great financial place when we started. I got 25 hours a week at work, max. I had to find like a side job and side hustles. Travis started with side hustles while he was looking for a full-time job. We were definitely not in a place where anyone would have recommended us start paying off our debt. But we did it anyway. And we just took it month by month. And every month, built on itself. We got a little bit more every month being put towards debt, until Travis got employed. And we were putting just my entire paycheck towards debt every month and just living on his.

And so, that was kind of the strategy. We just went little by little until we were putting one whole income to debt and living off the other. I mean, even if you’re in a single-income household, I mean, we were making $88,000 max. That was like 44 plus thousand per year. And we were living – It was a lot lower cost of living at that time. Gosh! It’s crazy to think about just seven years ago. But we were able to put a significant portion down on our debt because we chose maybe not the most ideal living situation. And we’re just really intentional about every penny we spent.

And we are not as intentional as we were. We’re not as intentional now as we were then, because we really had a goal that we were focusing on. And like I said, focus on one year, two years to see how much you can get out of the way. Don’t look at all six figures of your debt and say, “I can’t do this.” Because that’s what I did at first. I looked at my debt and I was like, “This is almost double what I make in a year. There’s no way. I’m just going to ignore it.”

But if I had taken just a year, a month by month or a year by year approach, I probably would have started sooner and just said, like”, “Okay, how much can I get this year?” And just made it my goal to like go hard. And then the next year, maybe, “Okay, how much can I get here in this year? But maybe I’m going to also focus on my IRA or my 401k and see how much I can get and add in here.” And if you do that, you focus on the month to month, quarter to quarter, year to year, you’ll make a bigger snowball effect than if you’re looking at it as a whole.

[00:20:44] TU: I really liked the concept of the radical middle. I like that a lot. Because I think that we see that and conversations I have with folks who have strong opinions on debt repayment, right? Versus investing or saving for the future. There’re strong opinions on how much should I put down on a home? And you kind of put people in opposite corners.

I think, for everyone, what we realized when you get to individual conversation, like, as my partner, Tim Baker often says in the podcast, like, it depends. It depends on what your financial situation is. How do you emotionally feel? Whether it’s about debt, or saving, investing for the future. What else is going on in relation to the financial plan? And then from there, we can craft a plan that we feel comfortable with. So, I think that’s a really, really good approach.

For folks that are listening, I’m thinking of spouses, significant others, partners that maybe aren’t on the same page with a given topic. You mentioned your journey and your fiancé, now husband, at the time was like, “Hey, I’m moving forward on this, whether you are or not.” And obviously, that left you is kind of making some decisions. And ultimately, you guys getting on the same page. But I think it’s not uncommon that you may have someone that’s on fire about a financial goal, or a budget, or debt repayment, or saving for the future. And someone else may or may not be in that same boat that that other person is. From your experience in your community, what advice would you have for folks that are really trying to, “Let’s get on the same page and make sure that we share in the vision going forward?”

[00:22:13] JS: Yeah. There’s a number of reasons why a partner might not want to get on board. I think the first thing to do is instead of trying to convince them in the way you were convinced, figure out why they’re apprehensive. Some people, it’s like, they don’t like being told what to do. Some people love spending money in the here and now. Tomorrow’s not promised. They want to spend it now. Some people just get anxiety about money. They don’t want to think about it at all. There are so many reasons. And I think your partner may not even know what the reason is.

And so, just sitting down and figuring out like what are our collective goals individually and together? What do you want? And how can we get there. And I think as you start to have more of these explorative conversations, the reasons for the disconnect will start to come up. Whether you’re talking about like their childhood, or they didn’t have a lot growing up, and they want to enjoy what they have now, because they worked really hard for it. All this stuff like that. It starts with exploratory conversations about the future. Trying to figure out what from their past is making them apprehensive to adopt frugality. Because nobody wants to feel deprived. Everybody wants to feel good and confident about the way they manage money even your partner who may not be on board with paying off debt. There’s just some kind of disconnect, where maybe what you’re saying or what you’re thinking is different from the reality that you want to put forward. But you can’t force them in typically with numbers, or force like a lot of the force thing that sometimes I hear about. It is really more of like a pull and a push.

[00:24:06] TU: Yeah, I think that’s great advice. And especially for folks that might be listening to the podcasts or more of that financial nerd camp, like, if you got energized by the calculator, like that doesn’t necessarily mean that your significant other is, right?

[00:24:22] JS: Yeah. They probably are not.

[00:24:23] TU: Probably are not. Yes, exactly. On the blog, Modern Frugality, I think you do a really nice job of identifying folks that may be in a few different areas based on their goals. So, folks that are feeling like, “Hey, I need to get organized.” Folks that are wanting to make some extra money, could be side hustles, businesses. And then folks that are wanting to get started with investing. And so, I want to focus on two of those here for a few moments.

And that first one of I need to get organized, is there a tip or two that you could share for individuals that are just feeling overwhelmed, and maybe that organization step would be really helpful for them to be able to clear some of the fog to then move forward with their financial goals? Where do you start with organization?

[00:25:05] JS: Yeah. The first step is to figure out all of your accounts, your debts, everything. And you can do that by getting your free credit report either at freecreditreport.com or something like Credit Karma. And this is the report. Not the score. We’re not as concerned with the score right now. But your credit report will have a list of all of your debts, all the accounts you have open, and the amounts, like balances for each. If you look at that, and it’s not there, then it’s not there. It’s not associated with your social security number.

And so, when you look at that, it really gives you a whole picture of, “Okay, I am this much in debt. I have this much in my savings. This is where I’m at.” And so, it’s nine times out of 10 not as scary as you think. And some people just don’t want to gather everything because they don’t know where to find it. It’s like, “Where can I find everything?” It’s in your credit report.

And then next is just to look at your transactions. So then go to those checking and savings accounts and look at your transactions from probably the last three months. Which ones did you love and you feel good about? Which ones do you not remember making? The ones that you did not remember making or did not feel good about, those are the ones we cut out first. And you write down on a piece of paper, “I will no longer spend money here or on this for this reason.” And then we don’t spend money on those things anymore. And the things that aren’t on that list, you can spend money on without guilt.

And then as you go and you start to think, “Okay, well, this wasn’t on the list before. But I think I might be able to add it. Or maybe this was on the list.” And actually, do enjoy this for reasons I wasn’t thinking about earlier, we take it off the list.

But as you go, and you make baby steps towards intentional spending, we don’t start with those things that we love the most. We start with the things we don’t care about. And that’s how we make these steps towards financial freedom and intentionality.

[00:27:13] TU: As I’m going through this exercise, if I identify there’s maybe more unconscious spending that I would like there to be, what are some strategies that might help me bring some more awareness and consciousness to that spend? You’ve identified one. I think, if I’m hearing correctly, I’m writing these down, journaling them. Other people talk about using cash for a small period of time, which is not super convenient in 2022. Are there other strategies that you have found personally or you see in your community that helps increase the awareness and the conscious level to spending?

[00:27:47] JS: Yeah. I talked about baby steps. But actually, my favorite way to like shortcut this is to do a no spend challenge, which is the opposite of baby step. But it’s like short term. I would take a month. And challenge yourself to not spend any money on discretionary purchases. We’re still paying bills. We’re still paying mortgage. We’re still putting gas in the car to get to work. But it’s the discretionary things. It’s everything else.

In the grocery store, if it’s not in the list, we don’t buy it. It’s meal planning for everything. And you can even schedule like one or two meals out during the month. But if they’re not scheduled, they don’t happen. It’s saying no to – For like an actual no spend challenge, I would say no. When I was doing them, like no eating out, no coffee. Just anything discretionary. Because it helps when you are at the end of the day, and you’ve made good decisions all day. And you get to five o’clock and your brain is tired. It is done making good decisions. It’s done making the right decision. And that’s when you start you get decision fatigue, and you start to make the wrong decision when you have the option. When you’re on a no spend challenge the answer is always no. And so, that’s one – It’s decisions you don’t have to make, because you’re challenging yourself to say no to everything.

And I know some people will try and do pantry challenges while they’re on a no spend challenge. Only eating from their pantry and fridge and freezer during that month.

[00:29:20] TU: Ah! Get creative. Yeah. Yeah.

[00:29:22] JS: Right? I never carried enough in my fridge and freezer, nor have I ever had a full pantry to do that. But if you feel like you’re a little overstocked in your kitchen, another great way to not spend money. But once you do this for a month, you will get a really eye-opening view of what you care most about. What things you don’t even realize that you are giving up? Things you didn’t care about.

And so, you can go forward after the challenge to say, “Okay, these are the things I’m going to spend on without guilt. These are the things I’m giving up. Saying no to.” And it really just fast track that process.

[00:30:02] TU: One of the things that you’ve written about that we talk a lot about on our show is the concept of automation. And I’ll link in the show notes. We talked about this on episode 57, way back when, in the power of automating your financial plan. And you had a blog post that we’ll link to as well in the show notes on automate your money. Can you tell us about, from your perspective, what does automation mean when it comes to the financial plan? And why is it so valuable to help someone in achieving their financial goals?

[00:30:29] JS: Yeah. Well, it kind of comes back to the decision fatigue. Again, when you have to make the decision to pay a bill, you may forget, because you may have made too many decisions, and it just slipped your mind. Or the decision to put money into your 401 (k) or IRA, you may not put as much in when you’re in the moment when something just put you over budget or you had like a surprise expense from your kid, then you tend to invest less or put less towards debt.

We want to take that decision off the table. Make your spending plan for the year. Figure out how much you can feasibly afford to invest or pay off debt every month, and just automate it. It’s one less thing that you have to worry about. You can automate it for soon after you get paid. It’s very easy if it’s like first 15th on Fridays. I mean, you can sometimes change when your bills are paid so they line up better with your payday. But sometimes it’s just easier to get that money out of sight out of mind. For someone like me, I used to spend every penny that was in my account if I saw it. Now, everything leaves the account and goes to savings, investing or mortgage before I have the opportunity to spend it. So, then I look at my account and I’m like, “Oh, cool. I can spend all this money if I want. Or I don’t have to. Whatever.” But yeah, automating just takes that decision off the table. And it just – I mean, aside from allowing us to be lazy, who doesn’t want to be lazy when it comes to money? It’s so much easier to not have to think about it. But even when it comes down to the decisions of how much we put towards debt and how much we invest, much easier to make a neutral decision via a plan than an emotional decision in the moment.

[00:32:26] TU: Absolutely. One of things I love about automation is it forces you to be intentional, right? We talked about that earlier. But if you’re going to be proactively planning and setting up some of these systems around automation, we’ve got to define the goals. We’re already looking at the budget and expenses. We’re those funds towards different buckets and the goals that we’ve identified. It really forces our hand to make sure that we’re being intentional, and obviously increasing the amount of conscious spending that we’re doing.

Jen, this has been great. I really appreciate you taking the time to come on the show. Where is the best place that our listeners can go to find you and to connect with you further?

[00:33:00] JS: Well, wherever you’re listening to this podcast, you can find Frugal Friends podcast. We release a new episode every Tuesday and Friday. And we also have an ebook with over 200 ways to save money. And that’s at frugalfriendspodcast.com/ebook. Yeah. And then we talk more about intentional spending on the show. So, it’s a full circle.

[00:33:22] TU: Thank you so much, and I appreciate it.

[00:33:24] JS: Yeah, thanks for having me.

[00:33:26] TU: Before we wrap up today’s show, let’s hear an important message from our sponsor, Insuring Income. If you are in the market to add own-occupation disability insurance, term life insurance, or both, Insuring Income would love to be a resource. Insuring Income has relationships with all of the high-quality disability insurance and life insurance carriers you should be considering and can help you design coverage to best protect you and your family.

Head over to insuringincome.com/yourfinancialpharmacist. Or click on the link in the show notes to request quotes, ask a question, or start down your own path of learning more about this necessary protection.

[OUTRO]

[00:34:02] 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 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 posts and podcasts 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 Pharmacists, 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 info information, please visit yourfinancialpharmacists.com/disclaimer.

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

[END]

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Second Half of 2022…Are You on Track?

Tim Ulbrich, PharmD, flies solo to talk through a five-step system you can implement to set and achieve your goals to finish 2022 strong.

Episode Summary

In this week’s episode of the Your Financial Pharmacist podcast, YFP Co-founder & CEO, Tim Ulbrich, PharmD, takes a moment to reflect on the first half of 2022, revisit goals from the start of the year, and prepare for the second half of 2022. He talks through a five-step system you can implement to set and achieve your goals and finish the year strong. As Tim works through this goal-setting exercise, listeners can follow along with a template provided in the show notes, completing it while listening to the episode. Tim reminds listeners to build S.M.A.R.T. goals during this exercise for health and physical fitness, social and community, spiritual and mental health, financial, intellectual, business or career, and relationships and family aspects of their lives.

Tim’s five-step system includes the following key components to successfully setting and reaching your goals for 2022 and years to come:

Step 1: The 10-Year Heck Yeah
Step 2: The ‘So What?!’ Check
Step 3: The 1- Year Mile Markers
Step 4: Accountability
Step 5: Implementation

Tim dives into each step, explaining the value each provides in meeting your goals and how to move through them with intention. In the implementation step, Tim shares a powerful visualization practice for motivation.

Links Mentioned in Today’s Episode

Episode Transcript

[INTRO]

On this week’s episode, I’m flying solo to talk through a system, five steps that you can implement to set and achieve your goals and finish 2022 strong. Before we 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 260 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. All right, let’s jump into this week’s show.

[EPISODE]

[00:01:04] TU: So we’re officially past the halfway point of the year. We’re in the month of August. We’ve got five months left in 2022. By now, any goals that we’ve set at the start of the year may be a distant memory. I suspect we can all relate to times when we fell victim to the cycle where we set big goals. It’s the New Year. We’re excited. We have that initial momentum. We then fall into old habits. And soon enough, we give up on those goals, and perhaps we picked that cycle up again the next year.

The mid-year point or just past that is a great opportunity to dust off the goals, to do some self-reflection and determine the path forward to finish 2022 strong. Well, it’s valuable to reflect and identify opportunities for improvement. It’s not valuable to dwell in shame and judgment of yourself. Rather, it’s a chance that we can pivot. We can take responsibility for the actions that we’re going to take going forward.

So if you’re looking for a jolt of motivation for the second half of 2022, let me encourage you to set aside a few hours to work through an activity that I’m going to talk through on this show. I promise, the return on investment of your time will be worth it. I’m going to walk through a five-step process to set and achieve your goals, and this is going to correspond with a template that you can use to follow along and to fill in for your own goals. You can download that template by going to yourfinancialpharmacist.com/goals. Again, yourfinancialpharmacist.com/goals.

We’re going to talk about several different areas of our personal and professional lives. Yes, this is a financial podcast. Of course, we’ll include financial goals in there. But we’re also going to talk about other domains that I suspect are very important to all of us, whether it be health and physical fitness, social and community, spiritual and mental health, intellectual, and so on. So let’s walk through these five steps. Again, you can download that template, yourfinancialpharmacist.com/goals, and you can follow along and fill in the information yourself.

All right, step number one is the 10-year heck yeah, the 10-year heck yeah. So we need to start with this 10-year vision, and we need to dream a bit because short term goals without an inspiring vision will quickly fall off as a casualty of the busyness of life and our tendency to be led by our motivations, right? I mentioned the cycle before, where we set big goals, we get some initial momentum, we fall into old habits, and then we give up on those goals. So we need a bold vision that’s going to transcend us to be able to continue on, even when our motivations may not be where you want them.

I love this passage written by James Allen from the book As a Man Thinketh when he says, “Dream lofty dreams. And as you dream, so shall you become. Your vision is the promise of what you shall one day be. Your ideal is the prophecy of what you shall at last unveil.” Now, I’ve done this activity enough times with former students, residents, and colleagues to know that some prompts here are helpful. I get it, right? 10 years down the road is hard to imagine when the here and now can be overwhelming enough.

So use the following statement to get you started with crafting this 10-year vision for each of the domains that you’re going to see listed in that table, right? So financial, social and community, health and physical fitness. We’re going to set a 10-year heck yeah for each one of those domains. So here is the prompt. If I fast forward to August 2032, 10 years from now, what things need to happen with my – Insert the domain, right? So it could be with my health and physical fitness, with my financial situation. What things need to happen that would leave me feeling heck yeah?

So if I fast forward 10 years to August 2032, what things need to happen that will leave me feeling heck yeah? We want to think about that in each of those domains; health and physical fitness, social and community, spiritual and mental health, financial, intellectual, business, career, and relationships and family. For example, when I think about 10 years from now in the health and physical fitness category, one that’s really important to me, I close my eyes, and I visualize myself being 10 years older. That puts me at 48. It sounds really old, saying that out loud, 10 years older.

At the age of 48, I’ve got my four boys who are now 21, 19, 17, and 14. Now, when I think about what would make up a 10-year heck yeah in this domain of health and physical fitness, I envision that I’m in better shape than I am now, and I’m competing in various events that validate I can get stronger and healthier as I get older. More specifically, I’m screaming heck yeah, if the following are true 10 years from today, August 2032. I’ve completed an Ironman triathlon. It’s one of my big goals. I’ve hired a personal trainer and nutrition coach, and I’ve created a schedule that allows me to spend a couple of hours most days of the week shopping for and cooking fresh meals, something I love to do and would like to do more often if time weren’t a thing.

Those three things, if I visualize 10 years from now, August 2032, I’ve completed an Ironman race. I’ve hired a personal trainer and nutrition coach. I’ve created a schedule that has a couple hours a week that allows me to be able to shop and cook for meals each day. If those things are happening, that’s a heck yeah. That gets me excited.

Okay, it’s your turn. So visualize 10 years from now in each of the domains that I mentioned. Again, you can download the worksheet to continue to follow along. As you begin to visualize, I want you to take a walk. Reflect on these. Dream a little bit. Don’t hold back and do not rush this step because this is going to serve as the motivation and energy that’s going to drive your one-year goals that we’ll talk about here in a moment, and it’s also going to drive the daily actions that we take. So that’s step number one, is we’re looking at the 10-year heck yeah. That’s our motivation. That’s our compass.

Step number two is the so what check, the so what check. Now that we’ve defined our 10-year heck yeah, it’s time to check to see if that 10-year vision is inspiring enough. So for each of the domains, I want you to fill in what is the next column of the worksheet, which is your so what. So this should answer the question why is achieving this 10-year vision so important. Why is achieving this 10-year vision so important, right? This is the so what.

Let your responses to this so what sink in for a while. Because if you revisit them, and they don’t make you feel like you could run through a brick wall, it’s time to challenge whether or not you’re thinking big enough for 10 years into the future. Now, if I go back to my previous example related to my health and physical fitness, when I say out loud and visualize that I’ve completed an Ironman, I have a personal trainer and a nutrition coach, and I have a schedule that allows me to spend time each week preparing meals, it brings a smile to my face.

When I think about my so what, my so what is that I’m able to keep up with my four boys. My so what is it I’m in better shape heading into my 50s than I was heading into my 30s. My so what is that I’m more productive than ever in my work, in the business with YFP, in expanding our mission to help pharmacists achieve financial freedom because I know how connected my physical health and fitness is to my ability and capacity to work and to work well.

Now, one last thing here is don’t hold the 10-year vision and the so what responses to yourself. Talking these out loud with a significant other, a friend, or colleague helps bring a different perspective. There’s something valuable that happens when we articulate our dreams. It either further confirms our energy and enthusiasm, or it exposes some BS or some clarification needed, such that we have to go back to the drawing board and refine them further. So that’s step number two, the so what check on our 10-year vision.

Step number three is the one-year mile markers, the one-year mile markers. So once we set that 10-year vision and confirm that we’re thinking big enough with the so what, it’s time to get some traction with specific mile markers that we can measure and that we’re confident, if achieved, will put us a step closer to achieving our 10-ear goal. Now, here we are, a little bit less than six months out from the start of 2023. So if you’d like to operate on a clean calendar year, think of these as the five-month mile markers or the half-year mile markers. You can then redo this activity heading into 2023.

Now, if you’re feeling overwhelmed at this point, keep it simple with one goal, one mile marker in each domain. But if you’re feeling inspired, consider adding a couple of extra but be careful. I would recommend no more than three in each area. Let’s not forget to write these goals in a smart format, right? This has been drilled into all of us at one or more times throughout our training in our career.

A quick refresher on smart goals, they should be specific, they should be measurable, they should be achievable, they should be relevant, and they should be time-bound. So let me give you a nerdy financial example of a smart goal because that’s what we do best at YFP. So instead of saying something like, “I want to have more saved for unexpected health care expenses,” I could instead reframe this as, “By December 31st, 2022, Jess and I will max out our HSA by contributing $7,300.”

Or better yet, we can add a why to this goal. So it may say, “By December 31st, 2022, Jess and I will max out our HSA by contributing $7,300 so that we can have peace of mind that unexpected health care expenses will not cause unnecessary stress and eat into our emergency fund or other savings.” Now, this goal was top of mind because of our four boys, their physical nature, energy and love for wrestling one another. That’s a recipe for visits to the ER. Thankfully, knock on wood, we haven’t had many yet. But we’re expecting those expenses will come at some point.

Now, going back to my previous example on health and physical fitness, the following are the one-year mile markers, the one-year targets that will put me on the path towards the 10-year vision. By July 31st, 2022, I’m going to complete an Olympic triathlon, which is about a quarter of an Ironman. By December 31st, I’m going to complete 260 cardio sessions that are divided between biking, swimming, and running. So it’s an average of five per week. And by December 31st, I’m going to evaluate three nutritionist options for consideration in 2023. This would include price offering, scope of work, and so on. That’s step number three. We have to be able to bring that 10-year vision and the so what into a one-year vision. So we need one-year mile markers, and that’s what we’re doing in step number three.

Step number four is accountability. So we’ve inspired a 10-year vision, we’ve challenged that vision with the so what in step number two, and we now have one-year mile markers to ensure that we stay on track. So let’s keep rolling. We all know from personal experience that goals plus accountability equals an increased likelihood of success. Goals plus accountability equals an increased likelihood of success. We see this every day at YFP, specifically with one-on-one planning that’s offered by the incredible team at YFP Planning. So folks come to us with big visions, big personal financial goals, and we’re able to provide some of the guidance, some of the expertise, and the accountability to help individuals achieve those goals through one-on-one comprehensive financial planning.

As we talk about accountability here in step number four, we need to ensure that we don’t internalize our goals, and that we have a system and a plan for accountability. Now, this is not simply a person or a group of people. It needs to be more intentional than that. For example, my wife, Jess, is a huge accountability partner for me. But if I simply list here in step number four that Jess is my accountability plan, that ain’t going to cut it, right? I need to get more specific.

For example, once a month, I’m going to review my goals and progress for Jess. This keeps me accountable, knowing that I’m going to update her each month. It also challenges her in her own journey and ensures we can get on the same page with knocking down any barriers to success, whether that be scheduling conflicts, watching the boys, and so on. Now, I would challenge you to find an accountability partner that is at least, if not more, on fire than you are about living an intentional life, someone that will challenge and push you along their own journey. So that’s step number four is accountability.

Then step number five, it’s time to implement. It’s time to make these one-year mile markers a reality. Remember, that’s our focus because we’ve written them in a way that if achieved will put us on the path towards our 10-year heck yeah. So after you populate that table, and again as a reminder, you can do that by going to yourfinancialpharmacist.com/goals to get a copy of that table. After you populate the table, print it off and put it somewhere visible. Build this into a daily or weekly rhythm that allows you to see these on a regular basis and be reminded of why you are trying to strive towards these goals. We need to ensure that the hard work that we just did doesn’t end up on a piece of paper that gets put away somewhere in a drawer.

If we can develop a system to remind ourselves regularly of our goals, they start to become ever present in our thoughts. When this happens, this is your signal that you’re on the right path. Because we want these to become so second nature that we begin to visualize and see them as a reality, not as a hope, a wish, or a dream. Now, there are many ways to remind yourself of these goals, but let me suggest one that I have found to be most impactful, and that is to incorporate the review of these goals into a morning routine in a way that they can be visualized.

Not too long ago, I established this a part of my morning routine where I record and listen to these words each morning, along with some other affirmations and truths that I have to be reminded of every day because there’s something powerful about hearing your own voice, encouraging yourself to strive towards the things that you’ve determined to be most important. It provides incredible energy and fuel to the day.

For example, back to the example around health and physical fitness, I would say something along the lines of, “Tim, visualize the following. At the end of July of 2020, you’re in the best shape of your life because you’ve just crossed the finish line of an Olympic triathlon, arms high in the air. The boys are beaming with joy seeing their dad complete this race and want to do one themselves.”

Now, just hearing those words make me smile, and I can’t wait to cross that finish line two weeks coming up this Sunday at the time of recording this, when I complete my first triathlon because it started as a dream in the fall 2022 and is nearing reality, all from setting a vision with a strong so what that led to the daily habits over the past six months that have prepared me for this race.

My challenge for you is it’s time to make the most of tomorrow. Start by designing what you want tomorrow to look like, rather than reacting to what the day brings. I hope you found this episode helpful. I’m looking forward to a great second half of 2022. Again, I would encourage you to download that template, yourfinancialpharmacist.com/goals. As always, thank you so much for listening and have a great rest of your week.

[OUTRO]

[00:18:01] 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 is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

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 263: The Intersection of Financial Literacy and The Energy Burden

Posted on by yfpadmin

The Intersection of Financial Literacy and The Energy Burden

On this episode, sponsored by Insuring Income, Diamond Spratling, an impact-driven environmental health professional and non-profit leader, discusses her TEDx talk, The Secret to Clean Energy: Addressing The Root Causes of Energy Burden.

About Today’s Guest

Diamond Spratling is an impact-driven environmental health professional and non-profit leader motivated to mitigate health, racial, and environmental inequities in Black and Brown communities. She is the founder of Girl Plus Environment, a national non-profit organization designed to educate, engage, and empower Black and Brown girls, women, and non-binary individuals to stand up for environmental justice in their own neighborhoods.

The Detroit native and 2021 & 2022 TEDx speaker has spent more than six years at the forefront of environmental justice. Ms. Spratling has led many environmental and health initiatives for cities and organizations such as the Centers for Disease Control and Prevention, Bloomberg Associates, WaterAid International, and Greenlink Analytics.

Episode Summary

America is in an energy burden crisis. In today’s show, we will unpack what energy burden means, the root causes of energy and utility burden, and how financial literacy and education play a role in combating energy burden. Joining YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is environmental health professional and nonprofit leader, Diamond Spratling. We discuss Diamond’s TED X Talk, “The Secret to Clean Energy: Addressing Root Causes of Energy Burden,” where she addresses this crisis. In that talk, Diamond shares the disparities of energy burden for low-income communities in the United States typically made up of people of color. After Diamond shares her professional background and how she ended up in environmental health, the conversation moves to the three aspects of environmental justice and her definition of energy burden. Listeners will learn about the correlation between income and energy burden, how and why America is failing in financial literacy education, some ideas on how to implement financial literacy education in America, and why all people should learn about financial literacy from an early age. Diamond provides background and insight into the why and how of her non-profit organization, Girl Plus Environment. Through Girl Plus Environment, Diamond engages black and brown girls, women, and nonbinary individuals in all forms of environmental justice.

Key Points From This Episode

A warm introduction to today’s guest, Diamond Spratling
Diamond’s educational and professional background.
How she got into doing the work that she’s involved in today.
Her definition of environmental justice.
Breaking down the three aspects of environmental justice: Earth, built, and social.
What energy burden is and why our guest decided to speak about it.
Why income is a big factor of energy burden.
What an acceptable energy burden percentage looks like.
Energy burden versus utility burden.
Taking a look at some of the root causes of energy burden.
Why America is failing in financial literacy education.
How to implement financial literacy education in America.
The importance of educating the youth as early as possible.
Diamond provides a link between improved financial literacy and the energy burden crisis.
What Girl + Environment is and why she brought it to fruition.

Highlights

“I can work at the intersection of both environments with justice and health equity. Understanding that both are very important and both highly impact each other.” – Diamond Spratling, MPH [0:05:21]

“In the clean energy sector, we often focus so much on the environmental side of things but neglect this whole other side of energy burden, which is income.” — Diamond Spratling, MPH [0:09:48]

“There’s a lot of disparities in income and race as well that we have to be able to first, understand and identify, but also try to mitigate and eliminate.” — Diamond Spratling, MPH [0:14:19]

“We need to think hard about why are we not putting financial literacy in the classrooms, especially in communities that have generational poverty.” — Diamond Spratling, MPH [0:17:15]

“I saw a gap in who understood what environmental justice was in comparison to who was at the forefront of the justice movement.” — Diamond Spratling, MPH [0:24:24]

“How do we know how to protect ourselves if we don’t even know that environmental racism exists?” — Diamond Spratling, MPH [0:25:20]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] 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 pleasure of sitting down with Diamond Spratling, an impact-driven, environmental health professional and nonprofit leader, to talk about her TED X talk: “The Secret to Clean Energy: Addressing the Root Causes of Energy Burden.” During the show, we discuss what environmental justice is, the root causes of energy burden, how financial literacy and education can play a role in combatting energy burden, and why Diamond started a 501(c)(3) nonprofit organization that shares educational resources tools and information to get black and brown girls, women and nonbinary individuals excited and engaged in all forms of environmental justice.

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 jump into my interview with Diamond Spratling.

[SPONSOR MESSAGE]

This week’s podcast episode is brought to you by Insuring Income. Insuring Income is your source for all things term life insurance and own occupation disability insurance. Insuring Income has a relationship with America’s top-rated term life insurance and disability insurance companies, so pharmacists like you can easily find the best solutions for your personal situation. To better serve you, Insuring Income reviews all applicable carriers in the marketplace for your desired coverage, supports clients in all 50 states, and makes sure all of your questions get answered.

To get quotes and apply for term life or disability insurance, see sample contract from disability carriers or learn more about these topics, visit insuringincome.com/yourfinancialpharmacist. Again, that’s insuringincome.com/yourfinancialpharmacist.

[INTERVIEW]

[0:02:23.9] TU: Well, I’m excited to welcome Diamond Spratling to the YFP Podcast. Diamond is an impact-driven environmental health professional and nonprofit leader, motivated to mitigate health, racial and environmental inequities in black and brown communities. She’s the founder of Girl + Environment, a national nonprofit organization, designed to educate, engage and empower black and brown girls, women, and nonbinary individuals to stand up for environmental justice in their own neighborhoods.

Diamond is a Detroit native and 2021 and 2022 TED X speaker that has spent more than six years at the forefront of environmental justice. Diamond has had many environmental and health initiatives for cities and organizations such as the CDC, Bloomberg Associates, Water Aid International and Green Link Analytics. Diamond, welcome to the show.

[0:03:09.9] DS: Hi, thank you so much for having me.

[0:03:12.4] TU: Well, this is a rare opportunity and we crossed paths somewhat unexpectedly at the TED X Bowling Green State University event. I had the opportunity to get to know you a little bit as a co-speaker but also to watch your talk on energy burden, with the focus on financial literacy as an opportunity, financial educational literacy as an opportunity to really get out some of the root causes around energy burden.

Which I thought would make for a great interview on the show, so I really appreciate you taking time to come on. We’re going to talk about, and I’ll link in the show notes to your TED X talk, “The Secret to Clean Energy: Addressing the Root Causes of Energy Burden,” for folks that want to go and watch that. Before we get into the topic, love to hear more about your background, where you went to school, what you studied and what drew you into the work that you’re doing today.

[0:03:57.9] DS: Yes, absolutely. So, I started my undergraduate career at Bowling Green. I started in 2014 and I studied environmental policy and analysis, with a specialization in international perspectives. So for me, I guess, growing up, I was always more that typical environmentalist and save the polar bears, save the trees type of work.

It wasn’t until I had an internship, my second year at Bowling Green, where I was working at the intersection of energy policy in health equity. I learned about all of the different disparities between different communities that we saw in our environment, how it impacted our health, and, for me, that was very triggering, especially being a black woman. I felt like, “Wow, all of these disparities and health implications that we’re seeing are in communities where I essentially grew up.”

So I was like, okay, all the more earth side of things and the trees and things like that, those are important but I need to center, recenter my work and what I want to do in the next couple of years. So basically, I decided that I would shift gears a little bit and get into the public health side of things when it came to the environment.

After I graduated from Bowling Green in 2018, I went directly to Emory University to get a master at public health at the Rowland School of Public Health, so that I can work at the intersection of both environments with justice and health equity. Understanding that both are very important and both highly impact each other. So that’s basically how I got into the sector and I’ve been in the sector for about six years since then.

[0:05:37.0] TU: So, you already mentioned one term that I think we’re going to visit often throughout the show, which is environmental justice. Another is energy burden. I want to take a moment to define these terms. Let’s start with environmental justice. How do you define environmental justice?

[0:05:49.8] DS: Yeah, absolutely. So often, we go back to this definition that I’ve seen on the department of energy and I think that they do a really good job in making sure that when we talk about environmental justice, we’re talking more so about the human impact and human implications from our environment.

So when we talk about safe drinking water, air pollution, how does that impact our environment, specifically people who are disproportionately impacted by our environment? So, a lot of times, those are low-income communities and those are also communities of color.

So, environmental justice, since there’s this aspect of making sure that those who are disproportionately impacted by our environment are at the forefront of those decisions, and being able to have access to environmental resources that helps improve their overall mental health, physical health, and just like wellbeing as a human rights.

[0:06:38.8] TU: You talk on your website, which we’ll link in the show notes, Girls + Environment, you talk about three different aspects of environmental justice around the earth environment, the built environment, and the social environment. Can you break those down a little bit further?

[0:06:51.1] DS: Yes, absolutely. And I’ll just flag, we’re very intentional in making sure that we are interdisciplinary with how we consider environmental justice. So, traditionally, in the past, people in this sector have usually looked at this earth environment side of things, and so do we have access to safe drinking water, clean air, landfills, waste, pollution, different things like that. So that’s more so our earth environment, but I think that those have huge implications on other parts of our environments too.

We also look at our built environment. Our built environment can be, for example, do I have access to a safe park near me? What is the walkability in my neighborhood, are there sidewalks for me to even run or ride my bike, are there bike lanes? So many things, all the way down to having access to a grocery store, can be considered a part of our built environment.

The last concept that we look at is our social environment. That gives it more the feeling of feeling welcomed in your environment, feeling like you have a place. So, is there a YMCA place in my neighborhood or boys and girls club or some type of community group of people who either have shared experiences as me, look like me, or somewhere that I have a support system that can help me through everyday life situations and things like that?

We look very interdisciplinary in our environments but also, understanding that all three of these pillars have everything to do with racial justice and health equity and even just thinking about our life expectancy and quality of life.

[0:08:20.3] TU: In your TED X talk at BG, the title again, “Secret to Clean Energy: Addressing the Root Causes of Energy Burden.” Define for us, what is energy burden? And, why did you decide that this was the topic that you wanted to share about?

[0:08:34.7] DS: Yeah, absolutely. So energy burden is basically this concept of, how much are you paying for your energy or utility bills every month and in comparison to how much money you are actually bringing in each month. So, it looks at two different things, the amount of your bills that you’re having to pay but also, your income. Your annual household income.

So basically, if you just do, I like a sample of formula, you basically just divide both of those numbers. You’re able to get what your percent of energy burden is and, for a lot of households, if you have an energy burden of over 10 percent, then you are considered severely energy burdened.

As back to the TED talk, what I would say is, my primary reason for censoring it around this concept of energy burden is that a lot of times, especially in the clean energy space, we focus so much on, “Let’s get this renewable energy out there. We need to invest in solar power. Why don’t you have solar panels on your roof or wind energy?”, and things like that.

It’s like wow, all of those things are great but look at the affordability. If I can barely pay my energy bills, how do you expect me to invest in all this really cool technology, as far as renewable energy? I felt like, in the clean energy sector, we often focus so much on the environmental side of things but neglect this whole other side of energy burden, which is income.

A lot of families are not making enough income to even pay their bills. So, having to pay an energy bill or utility bill, that’s a significant burden for people, even more than we think about, from the environmental side of things.

[0:10:10.8] TU: That was really what caught my attention actually, in the practice session we did the day before. When you talked about this heightened focus on some of the clean energy things, whether it’s windmills or solar panels or other things, which obviously have value and purpose, and the technology is being advanced but if we’re not addressing some of the core infrastructure and the core issues, are we out of order, right?

I often think about investing, when we talk about it on this show, there are steps to investing, like hey, if your employer offers a match with your retirement accounts that’s low hanging fruit, you take it, and then we progress that investing plan to more brokerage accounts and other things and often, we may do those things out of order, and that really struck me of, you know, great conversations.

I think often, those gather headlines and perhaps have some political motivations that are behind them, but are we really getting to the root cause of what is necessary around energy burden? Just put numbers to your definitions. So, if energy burden as percent of annual household income spent on energy bill.

So round numbers, if someone makes $100,000 a year and they’re spending $3,000 on energy bills, they would be looking at 3 percent and you mentioned greater than 10 percent is considered a substantial burden. Is there a normal or an average or an acceptable that we would look at as a percentage?

[0:11:21.8] DS: Yeah, so around 3 percent is around like the average energy burden across the US, three, 3.5 percent. If you are above five or 6 percent, then that means that you are highly energy burdened and then if you are above 10 percent, that means you are severely energy burdened.

[0:11:39.9] TU: Okay, that makes sense and it’s just like electricity in terms of gas and electric, is this also inclusive of water? How do you typically define this when we look at the utilities?

[0:11:50.5] DS: Yeah, so when we say energy burden, we are mostly looking at gas and electric but you can also say utility burden and that will then include your water bills as well.

[0:12:02.2] TU: So, as we just alluded to, some of these other solutions around clean energy may not be addressing the root cause. So, the natural question that is, what are the root causes as it relates to the energy burden? I really found this part of your TED X talk fascinating. So talk to us about some of the root causes related to the energy burden and then we’ll talk about the financial literacy piece as a potential solution.

[0:12:20.9] DS: Yeah, absolutely. One of the things that I talk about in my TED talk is this concept of housing and also, even just redlining, which I know we think like redlining happened tons of years ago but unfortunately, lots of communities in neighborhoods are still bearing that burden.

So, when we talk about housing, like for example, I can run my air-conditioning unit all day or even just an hour, but if I don’t have proper housing conditions, if the structure of my home is horribly put together or very old, if I don’t have tons of insulation in my home, then it’s really doing nothing.

I’m just running the air conditioning or the heat all day for it to not even cool down or heat up my home. That’s a huge issue right there thinking about housing, especially when we think about section eight housing. I mean, those homes are poorly structured, rarely ever updated or invested in and therefore, a lot of those homes have to constantly run electricity.

I mean, if you think about what happened in the Bronx about a couple of months ago, there was that huge section eight housing fire, which resulted in the fact that people were freezing cold in their homes because they couldn’t afford to pay for the electric, or they’re running the gas from their stove which we know is very unsafe, or just using space heaters which also can be unsafe as well.

So, housing is definitely an issue here, but the other thing that I often like to bring up is just this concept of income disparities and thinking about communities of color, especially black communities, how much we are getting paid in relation to our white counterparts. So, again, when you go back to this concept of energy burden, it’s not just how much you have to pay for utility bills, it’s how much annual income you’re bringing in, in the first place.

We’re already set back by whatever the difference is between white counterparts and black communities and how much we’re bringing in financially every year, that’s a huge impact in itself as well. I think there’s a lot of disparities in income and race as well that we have to be able to first, understand and identify, but also try to mitigate and eliminate these issues as well.

[0:14:30.7] TU: Yeah, and I think it’s so important to go back to the definition, two parts of the equation, right? The utilization and then the utilization relative to the income, and I think you just articulated so well some income gap and challenges, and I think on the utilization, we’re not talking here about, “Oh, I’d like to keep my home at 75 degrees when it could be 72. We’re talking about infrastructure problems that lead to unnecessary high burdens on energy use, and I think that concept, to me, was really something you articulated so well.

Let’s talk about some financial literacy piece as a potential solution. Obviously, this is a multipronged issue as well as an approach that’s needed to address it, and I just wanted for a moment talk about some statistics that were reported by the University of Chicago around financial education and literacy, and we’ll link to these in the show notes, and then I’ll get your thoughts, Diamond, a little bit on why is the financial literacy so inadequate in this country and what are some of the potential solution.

So, I’ll read a couple of these, nearly 50 percent of high school seniors say they wish they learned personal finance in school. That is according to discovery education in 2018. A recent study finds that differences in financial knowledge account for 30 to 40 percent of retirement wealth inequality and that’s from a 2017 study by Lucardi et al. A 2016 survey indicated at 31 percent of young Americans agreed that their high school education did a good job teaching them healthy financial habits. Bank of America, 2016, meaning that the majority did not think that.

A study from FINRA in 2015, students exposed to various financial educations at high school saw their credit scores increased by an average of 20 points and their probability of delinquency reduced. I mean, these go on and on but it impacts retirement savings, it impacts the ability to deal with energy bills in the moment, it deals with access to housing through credit and other issues.

As you hear those statistics, why has this been an area that we just have not done a good job, around financial education and literacy?

[0:16:26.2] DS: Yeah, that’s a big question. I mean, it’s hard to even find the why. A lot of those statistics were from students or from professionals who thought back to their education in high school and I mean, even thinking about my personal experiences, I’ve never taken a financial literacy class and I think that that’s true for a lot of us. As to why they don’t teach it to us, I have absolutely no idea.

I mean, a part of me is thinking, on the back of my head like of course, they don’t want all of us to know how to protect ourselves financially, you know? They want the rich to get richer and you know, whatever the case may be, but I think that it has had a continuous toll on us because I mean, it is not just the financial issue, it is a public health issue, a mental health and everything else.

I think that we need to think hard about why are we not putting financial literacy in the classrooms, especially in communities that have generational poverty, especially because how else do we get rid of that cycle if there isn’t really a generation that is being taught what to do as far as our finances.

[0:17:35.4] TU: Yeah and I couldn’t agree more. I mean, I think we’re finally starting to see a little bit of traction on recognition to your comment about it’s not just about the dollars. It is a public health, it’s a mental health issue. We’re finally starting to see financial wellness as a key component of wellness and that is certainly a new development I think in the last several years, but it’s long overdue.

We’re starting to see more states, Ohio, finally coming onboard with requiring some personal finance education literacy through the K12 program. That really is baseline and we certainly know from our experiences in undergraduate and professional programs in pharmacy education, despite the awareness that we continue to bring to the topic, it’s slowly developing, but it’s slow, right?

I think there may be some baggage of, “Well, this is a pharmacy degree. We’re not here to talk about personal finance.” But to be an effective clinician, be an overall wellbeing, this is an important part of it, just like we address mental health with our students, right? Just like we talk about other public health issues. So, let me ask you in terms of where we go, sure, we could dwell on why this hasn’t been the case or where we go.

Are there programs or initiatives that you’ve seen to be successful in this area around financial literacy and education? If so, what do they look like? Who is offering? When are they starting them or if not, what do you perceive to be the ideal place of how we implement financial literacy and education?

[0:18:57.4] DS: Yeah, that’s a great question and I’ll probably have to get back to you on this, specific resources. What I would say as far as what I think is most ideal and most critical here, is definitely centering financial literacy in education as young as possible. It is never too young to learn about financial literacy, and I think also, when we use students to learn about financial literacy, then a lot of that gets reflected onto the parents because many other times it’s a generational cycle to instill.

The kids may even know how to protect themselves financially but parents may not. So I think that parenting programs are just as critical as well because you don’t know what you don’t know and so you lean on, “Oh, well my parents did this” or “My parents told me not to get a credit card” or anything like that. So we go based off of what people who we know have done or have not done.

I would say definitely centering conversations in literacy that are directly within the community, that are targeting both students and parents and even grandparents, and being able to provide those resources on a generational side of things, as opposed to just like, “Here is some resources. Good luck” those are, you know, it’s a small piece but I think also just drilling things into people like many, many times.

I think that that’s very, very critical. My boyfriend actually teaches a generational wealth class on Sundays to my family and he’s like, “Well, I thought I already covered this?” I was like, “Cover it again.” Cover it a million times because people need, you know, we want things to be drilled into us as many times as possible. I think doing that and making sure that it is very community centered and family centered is all the better, especially when building that trust with people.

Because traditionally, we’ve been told not to do this and not to do that but really, it’s not always the case, especially when it comes to different financial advice as well.

[0:20:49.3] TU: I love that. I love the focus on community-specific, community-centered. I love the aspect of the family-centered, you know, bringing in the education that includes the families at large. I think the other thing, I am linking those two, research has been done on drug abuse education and really the importance of starting that as early as the pre-k level and it’s longitudinal throughout.

I think something similar in the personal finance space, that it’s got to be early. As life goes on, we carry more baggage with us about finances. We start to hear more stories and scripts and it impacts us, and the longer we go, the harder it is to change. So I think the earlier we can start the conversation, the more longitudinal it can be in the repetition and, to your point, that can happen overtime is so important.

So what do you see, I mean perhaps obvious, perhaps not so obvious, but what do you see is the direct link between improved financial literacy and education and the energy burden crisis?

[0:21:43.5] DS: Definitely. So I think that there are a lot of components here, especially when it comes to education. I mean, a lot of the advocacy or the work that I talk about often goes back to education, because we know that education is linked to how much you know about a specific topic, down to how much you’re potentially going to get paid or your percentage of going to college and things like that.

I think that being able to one, educated ourselves or to be able to have access to education is a concept within itself because a lot of us don’t have access and don’t have good quality educational systems that can help us to earn higher amounts of income every year. A lot of that goes into what’s your education, what did you learn, are you going to go to college for example, which I know college has implications on the financial side of things.

But being able to understand whether or not we have access to an educational system that advocates for us to be able to earn more income, but I think also when we think about this education system, the side of education within the housing and knowing what to look for when buying homes or being able to be in a position where you can own a home, because the impacts that renters, people who rent a home versus people who own a home, there are tons of energy burden disparities with between that too.

So, if you are renting a home, you have less autonomy on even being able to make updates or changes to your home that helps to lower your energy bill, as opposed to someone who, “Oh, I own this home so I may be able to make updates to my house” because a lot of times landlords are like, “Oh, well I don’t care. You need to pay the bill on the first regardless.” So that’s a huge concept too when it comes down to being in a position where you can own a home or purchase a home as well.

[0:23:31.0] TU: Yeah and I think, you know, as I think about the financial literacy, I could see the connection, as you mentioned, to some of the education and the awareness around owning versus renting and updates that you can make to your home or what to look more in buying a home, but it still feels like there is a core issue. You know, I’m thinking about folks that had been in homes for 10, 20, 30 years.

Income gaps have already been established, not to say there can’t be movement or change, but there has to be some changes in advocacy for housing changes and infrastructure and things that may be dependent of the individual and their own financial education literacy and their own financial position as well. Talk to us Diamond about Girls + Environment, what is it? Why did you start it and what are you hoping to accomplish?

[0:24:12.0] DS: Yeah, of course. So Girls + Environment, we are a national organization, we’re a 501 (c) (3). I actually started it my first year at Emory, so back in 2019, and I created it because I essentially saw a gap in who understood what environmental justice was in comparison to who was at the forefront of the justice movement.

So for me, back in 2016 when I was doing my internship first learning about environmental justice, I remember being so fueled up because I learned there were asthma rates in Black and Latino communities that were skyrocketed, and I was just so mad about the air pollution and the asthma rates comparison, and so this was back when Facebook was really popping.

I would go on Facebook and type these long statuses about how mad I was and try to educate my family and friends and no one was really interacting with the posts. They’re like, “What are you talking about?” I realized that, okay, we are experiencing the greatest amount of environmental burdens but none of us even know what’s going on in our own backyards, that’s a huge issue.

How do we know how to protect ourselves if we don’t even know that environmental racism exists? So for me, that was a huge problem and I wanted to get more people who look like me at the forefront of the sector, so Girl + Environment was created specifically so that we can educate black and brown communities on what environmental justice is, engage them in the sector and empower them to be leaders in the sector.

So that they can stand up for themselves and their neighborhoods, but in a very fun and creative way too because I also acknowledge that there is tons of papers out there, literature, but no one wants to read that. Give it to me straight, give it to me in a fine creative way, that is why you’ll see on our page it’s very fun. It’s supposed to be very engaging so that people don’t even realize, “Oh, I’m learning about environmental justice right now.”

Yeah, you sure are, and you’re learning about how it impacts you, your health, your mental health and everything else. So, that is basically why Girl + Environment was created and in the pipeline, we have tons of just different programs that we are putting together. We actually just got funded by Al Gore’s organization for protecting our energy project, which helps to educate black and brown women in Atlanta about energy burden and to put them at the forefront at Georgia’s energy policy process that’s going on this summer.

[0:26:33.9] TU: Wow, congratulations. That’s awesome.

[0:26:35.8] DS: Thank you.

[0:26:37.3] TU: Yeah, no offense to the Department of Energy or research papers but they’re boring, right? I think the platform you’ve created, I love the vision, I love the platform. It’s girl+environment.org. From there you could join the community, you can look at projects that are ongoing, you can read the blog, you can donate, and get involved. So I love the vision of what you’ve created and we’ll link to that in the show notes as well.

So for folks that Diamond want to follow the work that you’re doing and the journey that you’re on, where is the best place that they can go to do that?

[0:27:04.0] DS: Yeah, absolutely. So you can go on our website, girl+environment.org. We’re also on Twitter @girlenvironment and on Instagram @girl+environment and then you can also follow us on Facebook, Girl + Environment and my personal LinkedIn is just my name, Diamond Spratling and I am also on Twitter as @diamondsprat but I’ll be sure to send you all of those links and things like that in case it’s helpful.

[0:27:28.2] TU: Awesome. We’ll include those in the show notes to go along with the TED X talk again, The Secret to Clean Energy: Addressing the Root Causes of Energy Burden. Diamond, thank you so much for taking time to come on the show. I appreciate it.

[0:27:38.0] DS: Yeah, absolutely. Thank you so much for having me. I had a great time.

[END OF INTERVIEW]

[0:27:42.1] TU: Before we wrap up today’s show, let’s hear an important message from our sponsor, Insuring Income. If you are in the market to add own occupation disability insurance, term life insurance or both, Insuring Income would love to be your resource. Insuring Income has relationships with all of the high quality disability insurance and life insurance carriers you should be considering and can help you design coverage to best protect you and your family.

Head over to insuringincome.com/yourfinancialpharmacist or click on their link in the show notes to request quotes, ask a question or start down your own path of learning more about this necessary protection

[DISCLAIMER]

[0:28:18.9] 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 261: YFP Planning Case Study #2: Planning for Retirement, Saving for Kids’ College, and Paying Off Debt

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YFP Planning Case Study #2: Planning for Retirement, Saving for Kids’ College, and Paying Off Debt

On this episode, sponsored by Insuring Income, YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP® is joined by YFP Planning Lead Planners, Kelly Reddy-Heffner, CFP®, CSLP®, CDFA®, and Robert Lopez, CFP® to walk you through a financial planning case study on planning for retirement, saving for kids’ college, and paying off debt.

About Today’s Guests

Kelly Reddy-Heffner, CFP®, CSLP®, CDFA®

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

Robert Lopez, CFP®

Robert Lopez, CFP®, is a Lead Planner at YFP Planning. Along with his team members, Kimberly Bolton, CFP®, and Savannah Nichols, he helps YFP Planning clients on their financial journey to live their best lives. To go along with his CFP® designation, Robert has a B.S. in Finance and an M.S. in Family Financial Planning. Prior to his career in financial planning, Robert worked as an Explosive Ordnance Disposal Technician in the United States Air Force. Although no longer on active duty, he still participates as a member of the Air Force Reserves. When not working, Robert enjoys being outdoors, playing co-ed volleyball and kickball, catching a game of ultimate frisbee, or hiking with his wife Shirley, young son Spencer, and their dogs, Meeko and Willow.

Episode Summary

What are your retirement goals, and do your investments align with your vision of the future? Welcome to another episode of Your Financial Pharmacist Podcast. YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP® is joined by YFP Planning Lead Planners, Kelly Reddy-Heffner, CFP®, CSLP®, CDFA®, and Robert Lopez, CFP®, to walk you through a financial planning case study on planning for retirement, saving for kids’ college, and paying off debt. This is our second case study, and this time we hone in on the lives of a fictitious couple, Fiona and Rob Anderson. We examine their financial portfolios, from salaries and debt to their investment accounts and insurance policies. Listeners will learn about Rob and Fiona’s retirement goals and whether they have invested in the right ways to achieve them. The problem of conflicting goals rises to the surface, and Kelly and Robert share how you can manage to prioritize your children’s college education with your own retirement plan. Kelly and Robert touch on innovative ways to spend less on college while giving us invaluable advice on making your investments work for you. Delaying your retirement and waiting to claim your Social Security are helpful methods in ensuring cash flow during retirement. Finally, we get a glimpse at what paying a mortgage during retirement is like, and whether there is reason to panic.

Key Points From This Episode

Getting to know Fiona and Rob Anderson.
The home, work, and financial portfolios of our case study couple.
Fiona and Rob’s investment accounts and insurance policies.
Diving into tax concerns.
Your children’s education versus building your retirement fund – conflicting goals.
How to prioritize conflicting goals.
Some innovative ways to lower the costs of college/university.
How to use 401Ks, RSUs, and other investment accounts wisely, for investing in your goals.
Delaying retirement and waiting to claim Social Security.
A closer look at whether their particular investment accounts work for their specific goals.
Unpacking the target date fund and traditional IRA.
What to consider when paying a mortgage in retirement.
Your age concerning your debt, and if there is reason to panic.

Highlights

“You can take out loans for school, but you can’t take out loans for your own retirement. So make sure you take care of yourself first.” —Robert Lopez, CFP® [0:08:20]

“It’s really like golden handcuffs. It’s a way for a company to make sure that you’re not going to want to leave, ‘Hey, here’s this money, but you have to stay here to get it.’” — Robert Lopez, CFP® [0:18:25]

“Taking those dollars that you feel are being wasted and putting them towards something that you actually feel pain over, is huge.” — Robert Lopez, CFP® [0:21:00]

“Things happen unexpectedly. So, having your documents in place is important, and it makes it a lot simpler and less chaotic.” — Kelly Reddy-Heffner, CFP®, CSLP®, CDFA® [0:24:20]

“The emotional variable, I can’t calculate for.” —Robert Lopez, CFP® [0:32:12]

“‘Money is power.’ But money is not power. Options are power. Having the option to do different things, and having the ability to make different plans is powerful.” — Robert Lopez, CFP® [0:35:02]

“The best plan is one that works. As long as it works for them, then they made the right choice.” — Robert Lopez, CFP® [0:35:16]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TB: You’re listening to the Your Financial Pharmacist podcast, a show all about inspiring you, the pharmacy professional, on your path towards achieving financial freedom. Hi, I’m Tim Baker, and we’re back with the Case Studies, this time with the Andersons. I sit down with YFP Planning’s Lead Planners, Kelly Reddy-Heffner and Robert Lopez, to walk through this fictitious family and their financial plan.

Although the Anderson’s are not an actual couple we work with, they are really a composite of clients that we do work with in reality. The first part of the discussion, we lay the groundwork of the Anderson’s jobs and salary situations, where they live. We walk through their net worth and point out important elements of their financial situation. We also talk about their goals and what they’re trying to achieve.

We then talk back and forth about their financial situation. One of the big focuses being on education versus retirement planning and how to best use their investments going forward. This is a bit of the behind the scenes look at what goes on at YFP Planning. I hope you enjoy this episode, but first, let’s hear from our sponsor and we’ll jump into the show.

[SPONSOR MESSAGE]

[00:00:58] ANNOUNCER: This week’s podcast episode is brought to you by Insuring Income. Insuring Income is your source for all things term-life insurance and own-occupation disability Insurance. Insuring Income has a relationship with America’s top rated term Life Insurance and Disability Insurance Company. So pharmacists like you can easily find the best solutions for your personal situation. To better serve you, Insuring Income reviews all applicable carriers in the marketplace for your desired coverage, supports clients in all 50 states and makes sure all of your questions get answered.

To get quotes and apply for term life or disability insurance, see sample contracts from disability carriers or learn more about these topics. Visit insuringincome.com/yourfinancialpharmacist. Again that’s insuringincome.com/yourfinancialpharmacist.

[EPISODE]

[00:01:50] TB: What’s up, everybody? Welcome back to YFP Planning, case study number two. The last time, if we remember our first case study, which I thought was smooth, looked at the Joneses. This time, we’re looking at YFP Planning case study number two, the Anderson’s. The Anderson’s that are a little bit different stage of life, but I’m excited to jump in with my colleagues Robert Lopez and Kelly Reddy-Heffner. Guys ,what’s going on? How are things going where you’re at?

[00:02:15] KRH: Good.

[00:02:16] RL: Yeah. It’s 105 today, so—

[00:02:19] TB: 105 in Phoenix. Kelly, you are, I’m sure, all in on this case study, not imagining sitting on the beach next week.

[00:02:26] KRH: That’s right. I am totally all in. Not distracted at all, but excited to talk through people in mid-stage.

[00:02:34] TB: Awesome. All good. So, Robert, same as last time. Why don’t you set up and, for those listening on the podcast, we are releasing these on video, so you should be able to see us talk through our one page overview of the Anderson’s. Robert is going to set us up in terms of salaries and things like that. Kelly is going to get into goals and debt, and then I’ll take us home, and then we’ll open it up for discussion and go from there. So, Robert, why don’t you take us away?

[00:02:58] RL: Yeah. So, today we’re working with Fiona and Roy Anderson. Fiona is Field Medical Director. She’s 46 years old, making $155,000 a year. Roy is a Pharmacy Manager, 48 years old, making 135. They’re married, filing jointly. They have two sons, Michael and Paul, aged 16 and 14 respectively. They live in Jersey City, New Jersey. Their gross income works out to about $290,000 a year, which breaks down to around $24,000 monthly. Their net, or what they actually receive in their bank accounts, is about $12,000 a month. Their fixed expenses are $6,300, variable expenses of $2,200, and then about $3,300 of monthly savings. They live and own a three bedroom, a single family house. They purchased in 2008, which they got for $420,000 using a conventional 20 percent down at a 6 percent interest rate. Then, in 2015, they’re able to refinance to a 4 percent, 30 year fixed mortgage.

[00:03:56] KRH: Then they have a few goals that they want to accomplish while we’re working together, hypothetically. They want to pay for the four years of undergrad for Michael and Paul. They are making 529 contributions, which they recently increased. They have a pretty robust amount in the account baseline. They want to know if they’ll have enough to accomplish that. Concurrently, they want to try to retire in the next ten to 15 years. One thing to consider is, with the home that they currently own, they want to downsize and move to Florida. Then they are concerned about some of the debt that they still have, as well. So, that debt is listed out as a home equity line of credit that has a 5 percent interest rate.

They remodeled their kitchen and are paying $1,000 a month on that. They still have car loans. They pay a total of 750 interest rates between 3.5 and 4.25 when the two car notes. They still have their own student loans, which is always an interesting intersection with paying your own children’s college tuition as well. They refinance to a ten year private loan, 4.25 percent five years ago. Then, of course, they have the mortgage. So it’s a 30 year fixed 4 percent interest rate after that refi. They’re seven years in and they’re paying 2,500 a month.

[00:05:21] TB: Then, from the wealth building side, they have some cash in the bank, $20 grand in checking, $50 grand in savings, but in terms of their investments they’re looking at 401K, so they both currently have 401K that they’re contributing 4 percent each, plus a 4 percent employer match, so basically 8 percent in total. They’re both invested in the 2035 target date funds. Fiona has an old 401K, a small one at $15,000 that she hasn’t really looked at. They do have a 529 account that they’re increased their contributions lately to $1,0LL, so $500 for each son, so $12,000 a year to get to that goal. Unfortunately, they don’t get an income tax deduction, because in New Jersey if you make more than $200,000 it’s off the table.

They do have a taxable account which is basically Fiona’s RSU, so stock units as part of her compensation, which we see in a lot of Industry Pharmacists. We’ll get that as part of their comp. She has $125,000 that it’s currently sitting in there, all in the company stock, and then they have a joint savings account that they’re putting a hundred bucks a month in, to consider the rainy day.

Michael graduation trip, when you graduate high school, and then a traditional IRA that they’re funding for Fiona in a balanced fund. That is basically their investment accounts. Roy also has a Roth IRA that has about $36,000 in it that he’s not contributing to. It’s sitting there presently.

From a wealth protection, so this is typically where we talk about insurance, in a state, they each have a 20 year term, $1 million policy that they purchased five years ago, plus a little bit of group life insurance that basically matches their salaries, $150,000, $135,000 respectively. They both have short term and long term disability which has a benefit of 60 percent. That’s going occupation for two years, then any act after that. Roy carries his own professional liability policy. Then, they have a will that was done when Michael was born, so basically 15, 16 years ago. A living will or trust, power of attorney that needs to be updated.

From a tax perspective, they currently use an accountant, but they’re not sure they’re maximizing their deductions. They recognize that New Jersey state income tax and property taxes are killing them, which is why a lot of people from New Jersey moved to Florida. It’s not as bad. They typically owe taxes every year, so they’re basically reached in their pocket for that. One of the big tax concerns they have is that with Fiona’s RSUs, they’re worried about capital gains on that and not really sure what to use that for.

Some other things are conflicted about how much to put towards college versus their own retirement. Can they retire in 15 years? In retirement, they’re really looking to up their travel game a little bit more. So I guess, I’ll pose the question to the group here when you guys look at the Anderson’s, Fiona and Roy, what are some major things that stick out to you when you’re approaching them in terms of their financial plan?

[00:08:08] RL: Yeah. The first two goals that they have are conflicting here. So they want to pay for education for the boys, but they also want to make sure they’re setting themselves up for retirement. One of the phrases that you’ll hear a lot through financial conversations is, “You can take out loans for school, but you can’t take out loans for your own retirement. So make sure you take care of yourself first.” I think they’ve done a really good job with that so far. They’ve saved a lot in their 401K. They’ve set aside money for the boys at the same time, but now it’s really deciding on how to be important about that and how to be decisive.

The 4 percent that they’re doing into their retirement accounts, plus 4 percent of a match is good, but not where we’d like to be. Ideally, we want to meet at least 10 percent, and I think there are going to be some ways that we can get them to that point. I think that their savings in their 529, right now, is aggressive at $1,000 a month. That’s a pretty big chunk of their cash flow. I think that that’s actually going to be enough, depending on some scenarios we may discuss. But really deciding is the order that they gave it to us, to correct order that they have. Is the boy’s education more important than their own retirement? Are they willing to accept the opportunity cost or the change that would require? They may need to work longer to send the boys to college, and really flushing that out.

[00:09:14] TB: I think one of the things that is interesting about this case, because we hear it for a lot of new practitioners, is the age old question of, should I pay down my debt, i.e., my student loans or should I get going on my retirement, my investments? There’s that push and pull that I don’t think really ever goes away, because there’s just different things that are always competing against that berm investment game. So when you look at this, how would you walk them through or walk them down the path of getting down to the granular bits and pieces of the retirement versus the education? Is that something that you would look to model out? Is it really asking more clarifying questions with regard to their goals? Walk me through your thought process there.

[00:10:03] KRH: Sure. I agree with Robert that those are conflicting. So, talking through what’s important when individuals have their own student loan debt, they really do tend to lean towards creating scenarios where that doesn’t exist for their own children. We do a high level nest egg that popping some numbers in, based on this case study, they probably wouldn’t be able to retire in ten years, based on these numbers. So, Robert is correct about that, too. More contribution would be better. As far as the education, we can model out and take a look. Certain schools are going to be more cost effective. There are other things that students can do. Good grades. Robert gives a great talk on collect exams, which I love. My own children have listened to some of the conversation.

There are ways to make college funding more affordable and have those conversations. The kids are at an age at, especially at 16, really to start the conversation about what’s affordable, what makes the most sense, and the parents, setting some boundaries on what they’re comfortable with to not sacrifice their own retirement goals. Yeah, a combination of modeling would definitely answer some of the questions about that expected cost in the future, how much they’re going to be able to cover. What the shortfall is. Then I think Robert’s right too, about finding a better balance with the goals and how to prioritize them.

[00:11:40] TB: Robert, can you give us the cliff notes on the CLEP thing? Because I think that’s actually pretty powerful, if you’re a pharmacist that’s listening and then you have kids that are high school age looking at colleges. This is something that I think [inaudible 00:11:50].

[00:11:54] RL: Yeah, Tim. One of the big things that we like to talk about with clients is not necessarily just saving for college, but also ways to save on college and education expenses. There are a ton of ways to do that, whether it’s planning to go to a community college for the first couple of years or it’s maybe just ignoring traditional education and going to our trade schools. But one of the ways I like to do it is just getting credits out of the way, and everyone understands dual enrollment credits and everyone talks about AP courses, where they can test out of college classes, but a CLEP, a C-L-E-P is run by the College Board. It’s the same people that create the SAT.

What it is? Is it’s a test where you can sit down. Take a one-time test where it costs about 90 bucks on a bunch of general education classes. If they pass that course, then they get to skip it in college, they get automatic credits that will be accepted at the majority of universities. Now, every university in college has their own rubric that they request, and they say, “Hey, you have to get at least 65 on this class for it to count. They only accept these five classes. 65 different CLEPs, that different college will accept.

If you’re a math major and you don’t want to take English classes, take these two tests while you’re in high school, when you just learn English and never have to take it in college. Or if you’re an English major who doesn’t want to take mathematics, when you take a mathematics and high school that’s practicing for the test, you take a CLEP, you pass it, you never have to take it in college again. It’s a great way to either get a head start on college or get through the classes that are going to slow you down, and allow you due to the coursework that actually excites you and makes you want to go to college, rather than slogging through the first two years of Gen Ed before you can get to the stuff that you care about.

[00:13:20] TB: Yeah, I think it’s now really important to highlight all the tools that are available for students and parents to make a good decision. I feel like, if I get in the time machine and go back to when I was looking at schools, I didn’t have any. And I think because—I would have done very foolish things back in the day. I think that if there are things that we can do, whether scholarships or things like Test NL, going to put the price tag a little bit more affordable. I think probably one of the things that I would want to model out and what’s interesting about the Anderson’s is that they have a goal in place.

A lot of people, especially, I think if they have young kids, will ask, “What’s the goal for sending your kids to college?” It’s like, “I don’t know.” That’s what we talk about the one third rule, which we’ve talked about at length, where you can pay—basically the idea is that what you’re putting in 529 is one source of the tuition, and then another source would be when your child is 17 or 18 going into college, you’re basically paying that out of your paychecks, you’re sending a check to the college. Then the last third would be the scholarships and the student loans. Last but not least. We use that as a default, that there’s no idea what they want to do. With Fiona and Roy, the idea is put them through four years of undergrad.

Kelly, we know that not all schools are created equal, right? Whether they go to somewhere like Rutgers, which is in the state in New Jersey or somewhere like The University of Miami, which is a private school out of state in Florida, how do you advise parents to talk to their kids or just approach this with their kids, in terms of sensible decisions with regard—I know it’s hard at 17, 18 year old to go about approaching that question.

[00:15:07] KRH: Well, definitely when we started that conversation, it was talking about what our budget was, what we were going to be able to contribute. Then, looking when we would look up schools, understanding what the tuition is. There’s a number that pops up a lot on schools or websites. That’s an average cost, unfortunately, depending on your income and for many of our clients. That income is not going to reflect what that average cost is. So the average cost assumes 100 percent paid for, in some scenarios, all the way up to paying the full price tag. It’s really good to understand what your cost is likely to be, and at this income level for Fiona and Roy, it’s probably not a whole lot of financial aid.

I would assume no financial aid based on need. I do recommend having an understanding of what your cost might be. What schools are going to give those scholarships? There are certain schools that only give financial based need aid. There are schools that give grants for being a tuba player, the football player, great academics. So knowing your skills, what your talents are in a range. I would agree, we mentioned, Rutgers, a state school is going to be different than Princeton. What does that look like between the two? But I think people also discount private schools, and just seeing some of those schools have pretty nice endowment and a little better package. I would say I’d look at a nice handful.

We sometimes see kids are applying to 30 schools. You’re busting your budget, just on application fees. So, pick a few that makes sense. Have a few you can compare apples to apples, oranges to oranges and be like—you’re really looking for the best package and the best fit that’s financially viable for you and the student borrower, who’s going to take on any debt that you all can’t pay for if the savings is at capacity.

[00:17:14] TB: Yeah, I agree. I think one of the wildcards in this whole situation is we look at the taxable account. So, I don’t think I broke down what they have in their 401K. But Fiona has a 425 plus another 15 in an old 401K, Roy has 459. Then they have 365 and a Roth IRA and 195 – Ira. I think the wild card Robert, in this whole scenario in terms of the planning is what to do with the RSUs. These are a weird, because it’s compensation that comes in the form of stock that can grow over time. I’m a big proponent of like, “Okay, let’s tie this to something.” So, is this something that is for retirement? Is this something that they could apply towards the debt, towards the education? What’s your thought with regard to—how would you approach it? How to utilize that for the goals that the Andersons have?

[00:18:08] RL: Yeah. So restricted stock units, for those who aren’t aware, are a form of compensation when a company gives you stock, but you have to invest into it, right? Generally it comes in with the grant where it says, “Hey, you’re going to get this many shares.” Then, you’ll get a portion of it every year or quarter or month depending on the policy. It’s really like golden handcuffs. It’s a way for a company to make sure that you’re not going to want to leave. “Hey, here’s this money, but you have to stay here to get it.” Yeah, you may want to leave, but you have some invested RSU grants that you’re not going to be able to get if you leave right now. So you should probably just stay with us.

One of the things that I like to make sure clients understand is that these RSUs are just income, right? It’s taxed as income when you get it and you need to treat it as such. Although it looks like this big shiny object that we have to save and grow forever, it is just income and we can use it as such. So when we look at them, their big goals are, “Hey, I want to pay for college. Hey, I want to make sure we retire. Hey, I want to have less debt.” We want to help them, again, rack and stack those goals where sure, if we need that money for college, then it’s there, right? But if we can find out a plan for college, “Okay, cool. Let’s check that off, the boys understand what we have for them. The boys are going to come up with their own plan and it’s going to be financially settled.”

Okay, retirement. How can we use this money toward retirement? We could reorganize our cash flow, when we’re actually cashing out. Some of these are issues which would allow us to put more away in our retirement buckets. That’s a great way to use it. Another way is to solve that fourth goal. These are issues again. It’s just a taxable investment account. We have an unknown what the capital gains are, so we’re not sure, in this scenario, exactly how much of that is the grant itself and how much that is gained.

There will be some tax complications of this plan, but the $125,000 could, in reality, pay off all of their debt other than the mortgage. We can pay off the HELOC, which is $43,000 at 5 percent. We could pay off the cars at 3.5 and 4.5 percent. We could pay off the student loans at 4.5 percent. Then all they would have left is the mortgage that would free up $2,300 in cash flow on a monthly basis—

[00:20:04] TB: It is huge.

[00:20:05] RL: That’s huge, that’s a huge amount of money, okay. That could then turn around and immediately go towards extra savings, extra travel budget for that graduation trip they want to take in two years, extra 401K contributions. Right now, they’re doing 4 percent plus a 4 percent match. We could easily get that to ten or 12 percent without changing their life at all, only by reallocating those RSU dollars that are just sitting in a holding to this thing. We also know that she’s getting more RSUs, so this isn’t the end of her getting company stock. She’s going to get those refreshed, which is what happens when you get a new grant all the time. So as long as she’s still working, those grants are going to keep coming. We just want to make sure we’re using them appropriately.

They’re just sitting there, maybe they’re growing, they’re doing phenomenally, maybe they’re going down. We got to check the company trajectory, but using that to solve an immediate goal, like get out of debt and save for retirement would be a huge lift on somebody’s spirit. Having done that with clients in the past, taking those dollars that you feel are being wasted and putting them to something that you actually feel pain over, is huge.

[00:21:05] TB: Yeah. I think one of the things that I would want to unpack. I love all of the different avenues to go, potential pot of money, the RSUs, which is, like you said, another form of compensation. I think the other thing that I would really want to impact with the two of them is to retire in the next ten, 15 years. Is it closer to ten? Is it closer to 15? One of the things that’s going through my RICP coursework that I just thought was astounding was delaying retirement by three to six months is the equivalent of saving 1 percent more for the course of your 30 year career.

Another way to look at is delaying retirement by one month is the equivalent of saving 1 percent more for the final ten years before retirement. One of the big things that I think people get wrong in retirement is when to claim Social Security. Obviously, if you can delay that, you have an income stream for life that follows inflation that’s super valuable. So, are there ways to potentially increase that retirement paycheck? Now, they could look us and we know that this is true, guys. In pharmacies, I only got ten more years left. I’m burning out, I’m not good. Maybe there is the ability to work part time or things like that.

I think to Robert, to your point, being able to model out and move those pieces around to say, “We could use this pot of money and clear all that debt that frees up that cash” is a beautiful thing. But they could also say, “We feel bullish on the company that we want to let it ride and we won’t have the certainty there of cashing out and retiring those debts. Maybe we’ll let it ride for greater upside, but we know that there’s risk there as well.” Super fascinating. The nice thing about this is there are pieces to move here and there’s different scenarios to run. I guess, one question I would have with regard to the protection of the plan. Kelly, what are some things where their insurance related or a state plan and related that you see has some areas of exposure for them?

[00:22:59] KRH: I mean, in general, the insurance looks pretty good. The term 20 years, they just purchased it five years ago. So they’re going to get the kids through college. I know we had talked about this the last time. What amounts make sense of the disability policies? The amount looks reasonable with the 60 percent of income replaced. I would say the own-occupation for two years is a little bit of a question mark or sometimes we see the policies follow an income amount. So is it the income amount? Or is it that owning your own or any occupation? That’s probably something, I’d look at a little further, because we know just with the actuarial data that that can be a bigger problem than [inaudible 00:23:42]. But things look reasonable.

I would say, I would get the estate planning documents updated. So I would get the will double checked and updated, some other things probably have changed, as well over the last six years. I am a fan of having advanced medical directives in place, in terms of retirement. I think one of the statistics in our slide deck is that things happen sooner than we think they might happen at times. On the positive side, if you have an opportunity to retire, great. But sometimes health events, issues, things happen unexpectedly. So having your documents in place is important, and it makes it a lot simpler and less chaotic, especially at this phase. The kids aren’t really old enough to be making decisions, so you do still need to have things in place for sure.

[00:24:38] TB: Yeah. I think obviously that’s one of the often overlooked parts of the financial plan. Unless you’re military, where they force you to do wills and things like that, that’s where you typically see it more frequently. But just making sure that that’s buttoned up and there’s a plan in place for that. I think the other thing that I would probably circle back on. Robert, I would love to hear your thoughts on, is just the overall allocation. Do you think l balance funds—I see that we’re funding the traditional IRA, which see— were in 2035 target date funds, which are in that time frame. Ten to 15 years is still a pretty long time to go, so I’d want to dig deeper into that in terms of what they’re actually invested in.

We know, as we talked over at length in the past, that the allocation console of a lot of things, because if you’re looking at ten years, 20 years-time, typically the stock market, will take care of you. So, how would you look at their investments, particularly with the traditional IRA and maybe some of the allocations that you’re seeing?

[00:25:35] KRH: Yeah. One of the things on the traditional IRA that we need to double check on is, how are these dollars even going in there? Based on the fact that she has a 401K and they make so much money, shouldn’t be qualified for deductible contributions. So we want to make sure that these contributions have been going in undeductable, that they’re not trying to take a deduction on it. Beyond that, having them in a balanced fund doesn’t sound bad.

Most people in the world will believe that balanced means 50/50, but in the finance world it means 60/40, because why would we make sense? So a 60/40 fund on that account isn’t terrible for their age range, but it’s probably a little conservative. To go along with that, the target date 2035 funds, which are just mutual funds aged for a use at 2035, so they decrease in risk over time. Those are probably about the same right now, so about 60/40 at this point in time. I think that that should be probably extended. If they’re going to stay at a target date fund which is not necessarily a bad thing, I’d probably want to extend it closer to that 2045 timeframe to line up more with a normalized retirement.

You don’t actually aim for the year you’re planning to retire. It’s more so you aim for 65 and then that stretches out over your lifetime. It’ll never go to 0 percent investments. It’ll always have something in the market, because if we’re going to live to 100, we can’t just put it all into cash the day we retire. We need to have some risk in there. I think they still need to have a little bit more risk going on. So we want to look at what options they have, what the fees are, what the expenses are, how complex we can make it, but at the very minimum, I’d to maybe take that up to about 80/20 from a risk perspective. We obviously talk to them and make sure that they’re comfortable with that amount, but with their current time horizon, I think that that would still work.

[00:27:10] TB: Yeah, I think it’s asking a clarifying question and maybe digging into – because I think, even all target date funds in this, they aren’t created the same. There’s different allocations that are associated, depending on the year. I think the other thing that I would probably want to look at, just to make sure, is that you could have a balanced fund for the 529, which might be good for Michael’s accounts, but maybe not for Paul’s. Maybe it is Paul’s 14, so he has a couple more years, maybe just looking at that.

As Michael is going to college, we’re not overexposed in equities and we see a crash and then not as much dollars are there. One question, and then we wrap this up, guys. I think one question that I would ask related to the mortgage. They’re 46 and 48, respectively. Based on their refi that happened after what was that? That was in 2015, so we’ll say seven years ago, they had 23 years left on the mortgage.

Kelly, you recently relocated, so maybe get your take on this. Your thoughts on you—whenever says like, we have too much debt. I think Robert did an excellent job of outlining the path, or basically, we can redeploy some of the assets to basically wipe all the debt out, except for the mortgage. My question is this. If I’m mid to late 40s, or 50s, and I have a mortgage that’s going to take me well beyond retirement age, should I be freaking out about that, or what’s your thought? How do you talk clients off the bar to that part?

Because of debt, obviously, this is something that can be a detriment to your retirement paycheck in the future. Walk me through what you guys think in terms of that. It’s like, now I’m 46, I’m 48, we have 23 years left in the mortgage, or that [inaudible 00:28:54].

[00:28:56] KRH: Oh, my gosh. I love this question, because I think it really could be all over the place. I think, well, I feel like, there could be a point-counterpoint, point-counterpoint about this. It is interesting. Off the top of my head, when we do the nest egg, we’re like, okay, the wage replacement ratio, 70 percent of what you’re living on now, because you’re debt-free, you’re not paying into retirement. They’ve said that they want to move. It will be interesting to see if you are downsizing and you’re going to sell the house. Anyhow, that current mortgage debt is not going to be as big of an issue.

I would say, if they’re not moving, ideally, you’d probably like to see it paid off, but it really does come down to cash flow. When we run modeling and looking at retirement and potential for success to reach a very pleasant age of 95, or a 100 and still have resources, it really always comes down to cash flow and budget. What you’re living on per year has a big impact on that. Is the mortgage affordable to make the plan work? It really does depend. It would go in the modeling and scenarios and again, comfort.

I guess, I would lean towards wanting the debt paid off if I wasn’t moving before retirement. Then, we just have that conversation in my house and my spouse is like, “I could live with pain for a couple years, and then we sell it, and we become expats on a Caribbean island.”

It depends, but I do think it does a little bit. Wherever they go with it, Robert, I will love to hear what you add in, too. Before I turn it over to Robert, I would say, too, the other thing about wealth protection, at this stage, this is often when our parents are having stuff going on, too, if their parents are still alive and they have a relationship with some understanding about that. That relationship, hope and expectation is definitely a key part of protection. I’m often surprised at what an overwhelming time that can be. The kids are in college, but the parents have some type of health issue, and that can be stressful as well.

[00:31:20] TB: Which is important to bring up, because it’s not necessarily that Fiona or Roy’s parents would be our clients, but their parents situation can affect the financial plan of our clients. It’s good to get in front of that before—have those hard conversations about who is doing what or providing care, or if they have policies that not left the—cover down on that. Yeah, that’s a huge important point. How about you, Robert, in terms of the debt? 23 years left. I’m in my mid to late 40s. Should I be freaking out about that, or is it depends?

[00:31:51] RL: Specifically for the mortgage, I think, to Kelly’s point there, that two of them in our own household have different vibes on that. That’s one of the key things when we’re talking about this with clients is, mathematically, I can tell you the right answer. Mathematically, it’s interest rate arbitrage. We’re paying 4 percent of the mortgage. We can get 8.50 percent, 80-20 portfolio. We should just put it in the retirement accounts. The emotional variable, I can’t calculate for.

If someone has a money script that tells them that they have to have no mortgage when they retire, because they saw their parents or their grandparents have issues in their life because they had a mortgage tying them down, then that’s something we have to attack. If they’re going to downsize, doesn’t necessarily mean that their mortgage is going to go down. In Florida, are they going to leave a single-family home in New Jersey and move to a very swanky condo, 50s plus condo in Florida where they’re playing shuffleboard with movie stars? Maybe they’re going to be paying more even with less space. Those are some things to work out.

Having that conversation of 4 percent interest rate, although it may have sounded extremely large a year and a half ago, or even six months ago, is really a good rate historically. It’s not going to be the end of the world. It’s a securitized debt, so it’s tied to their house. I would be more worried about the other loans.

[00:33:05] TB: I was going to say the same thing. Probably, even the student loans that have probably just been kicked down the road a bit, I would almost—and this is probably an emotional thing, because I’m sure the—well, we said that the student loans are four and a quarter. Then not much more. I think, and this is more an emotional thing, this is a bias of mine, I’m like, “Let’s retire those loans before we start sending Michael to school,” would be my thought.

It’s a great point is, what is the plan in the future? It’s that arbitrage. Do we emotionally make that extra payment on a 4 percent mortgage, which historically over a 30-year mortgage reduces that by seven years, if you pay that extra payment, or do you put that extra payment more towards the retirement, get a better rate of return over the long-term and secure that?

I don’t know. That’s also another thing that, as Kelly mentioned, in her household, it’s different. It’s different in our household, too. I don’t think it really even registers with, where I’m I in my mind want to have the mortgage paid off as I retire, which in my mind is 70, but I could lose my marbles before that and have to retire sooner. That could be a thing. That’s another thing that people sometimes discount, is that you’re not always in control of when you actually retire, either because of career stuff, or health stuff.

Yeah. I think these are fascinating questions that we’re talking about this on a vacuum, but really go back and ask Fiona, ask Roy, the fake clients that we’re talking about, some clarifying questions about the debt, about the investments, the education and with the retirement picture, I think would be really important to then proceed with the plan.

Again, as we always say, it’s not about necessarily the plan. It’s about planning, because we know the next time we talk, there’s going to be a wrench in the system that’s going to potentially have a zig and zag as we get further along the plan. Guys, anything else to add?

[00:34:52] KRH: No.

[00:34:51] RL: No. I think they’re in a great spot. I think that Fiona and Roy have done a really good job of setting themselves up for success. People always like to say, and I use this phrase all the time, “Money is power.” But money is not power. Options are power. Having the option to do different things, and having the ability to make different plans is powerful. They have put themselves in a place where they have a lot of options going forward, and they can choose what they believe is the best path. The best plan is one that works. As long as it works for them, then they made the right choice.

[00:35:19] TB: Totally agree.

[00:35:20] KRH: If they use the RSUs to buy an RV, we’ll see.

[00:35:24] TB: Don’t do it. Don’t do it. I was talking to the team last night, on our happy hour, that I said $800 RV. It’s actually $1,100. Yeah, they’re a money pit All right. Robert, Kelly, thanks again for talking about the Andersons on our case study here. Looking forward to doing the next one here, in the next couple of months. Yeah, we’ll do it again soon.

[00:35:45] RL: Toodles.

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YFP 260: Why It’s Critical for Women to Take Control of Their Personal Finances

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Why It’s Critical for Women to Take Control of Their Personal Finances

On this episode, sponsored by APhA, Robin Hauser, an award-winning director and producer, talks about her most recent documentary, $avvy, which explores why it’s critical for women to understand and take control of their personal finances.

About Today’s Guest

Robin Hauser is the award-winning director and producer of documentaries (CODE: Debugging the Gender Gap, Bias, $avvy, Running for Jim) made to illuminate causes about which she is passionate. Those include the gender gap in tech, unconscious bias, equality, and financial savviness. Robin’s work has carried her around the world, from the TED and TEDx stage to the White House, NASA’s Kennedy Space Center, and conferences worldwide, speaking about mitigating bias in artificial intelligence, the likability dilemma, diversity, inclusion, financial wellness, and gender equality. A self-described “disruptor,” Robin is committed to provoking thought to address the most important socio-economic issues we face today.

Episode Summary

There is an antiquated stereotype that women are ill-equipped to deal with the complexities of finance, but did you know that women outperform men when it comes to investing? In today’s episode of the Your Financial Pharmacist podcast, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is joined by award-winning director and producer, Robin Hauser. In connection with her most recent documentary, $avvy, Robin walks us through the gender-based stereotypes surrounding finances while giving us her lived experiences of unconscious bias. Robin shares her motivation and inspiration $avvy and why it is an important work for people to view. The $avvy documentary addresses why women often take a passive role or give up their role in managing their finances, particularly millennial women. We dive into the different responsibilities men and women have concerning the financial planning of their households. Robin then highlights some of the obstacles facing women who want to take control of their finances—surprisingly, age is a noticeable factor. The conversation takes us through the confidence gap, and Robin states the importance of financial literacy education and instruction from an early age. Listeners will learn all about the pain of paying and the reasons behind financial education being a male-dominated space.

Key Points From This Episode

Robin’s real-world example of unconscious bias.
The gender-based stereotypes surrounding finances.
How day-to-day and long-term financial planning responsibilities differ in a household.
Why a woman’s lifespan is an important consideration.
The biggest obstacles facing women who want to take control of their finances.
How women outperform men when it comes to investing.
The psychology of confidence.
Negotiation and gender perception.
When financial literacy should be taught to women, men, and teenagers.
The pain of paying.
Why it’s mostly men who are the educators of financial literacy.

Highlights

“‘You do know that women have pocketbooks too, right? Women can buy condos or can join a timeshare.’ It was as though it never occurred to him. Poor guy.” — Robin Hauser [0:04:31]

“It just really struck me that they were missing this entire demographic by not actually approaching women.” — Robin Hauser [0:05:00]

“The reality is that we all take on a lot. So we need to divide and conquer at times, to be most efficient.” — Robin Hauser [0:08:05]

“We live longer than men. Even if you live a full life, chances are that a woman’s going to live eight years at the end of her life on her own.” — Robin Hauser [0:08:33]

“90% of women who are widowed or divorced changed financial planners or advisors within the first year.” — Robin Hauser [0:11:09]

“Because of women’s patience and their sensibilities to risk, they tend to make better investment decisions.” — Robin Hauser [0:13:13]

“We violate societal norms of what it is to be a likable woman when we are negotiating hard for ourselves.” — Robin Hauser [0:16:54]

“There’s no reason that you can’t learn in high school the positive and negative impacts of compounding interest.” — Robin Hauser [0:20:00]

“When you take two things that tend to have the stereotype to be very male-centric, I think it stands to reason that there are less women there.” — Robin Hauser [0:26:40]

“I do think that it’s hard to be what you can’t see.” — Robin Hauser [0:27:18]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey, everybody, Tim Ulbrich here. 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 pleasure of sitting down with award-winning director and producer, Robin Hauser, to talk about her most recent documentary, Savvy, which explores why it’s critical for women to understand and take control of their personal finances. During the show, we discuss the main obstacles for women to take control of their finances, why women typically outperform men with investing, and why negotiation skills are essential for women to embrace as it relates to the financial plan.

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 250 households in 50 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 financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacies achieve financial freedom. Okay, let’s jump into my interview with Robin Hauser.

[INTERVIEW]

[00:01:17] TU: Today’s episode of the Your Financial Pharmacist podcast is brought to you by the American Pharmacists Association. APHA has partnered with your financial pharmacies 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 the APHA at a 25 percent discount by visiting pharmacies.com/join and using the coupon code YFP. Again that’s pharmacist.com/join and using the coupon code YFP.

Well, I’m really excited to welcome on this week’s podcast, Robin Hauser, who’s the award-winning director and producer of documentaries CODE: Debugging the Gender Gap, Bias, Savvy, Running for Jim, made to illuminate causes about which she is passionate. Those include the gender gap in tech, unconscious bias, equality and financial savviness. Robin’s work has carried her around the world, from the TED and TEDx stage to the White House, NASA’s Kennedy Space Center, and conferences worldwide, speaking about mitigating bias in artificial intelligence, The Likability Dilemma, Diversity Inclusion, Financial Wellness and Gender Equality. A self-described disruptor, Robin is committed to provoking thought to address the most important socio-economic issues that we face today. Robin, welcome to the YFP podcast.

[00:02:50] RH: Thanks, Tim. I’m happy to be here.

[00:02:52] TU: I’m really excited to have you on the show and to dig into the documentary that you helped produce, Savvy. This came from a friend of mine who let me know about the documentary. I’m so glad that she did, because I think it’s going to be an incredible resource for the YFP community and, of course, for pharmacists and others even beyond. I want to start with a story, Robin, that you shared in your 2019 TED talk (that we’ll link to in the show notes). That TED talk was called, “The Likability Dilemma for Women Leaders.”

You share a story when you’re on the ski resort and a man approached you and asked you if you’re with a husband or a fiancée. You said, “No” and started to head back toward the lift, and your curiosity got the better part of you and you decided that you were going to follow up and have a conversation. Take us there and tell us what happened at that moment.

[00:03:43] RH: Right. This is such a good example to me of unconscious bias, right? I’m walking through the ski resort. I’ve got a pair of skis on my shoulder. This man, he was young, probably late twenties/early thirties, just came up to me and said, “Hey, excuse me, are you with a fiancée or a husband?” I said, “No.” He said, “Oh, okay.” Sort of like, okay, never mind. So I kept walking and I thought, this is—wait. I’ve got to find out why he asked me that. I turned around and walked back to him and I said, “Hey, I’m just curious. Just wondering why you asked me if I was with a man?” He said, “Oh, because we’re selling timeshares.” That gave me pause. Then I looked at him and I said, “So you don’t sell to women?” He said, “Oh, yeah, oh, yeah. Well, we could. Yeah. Are you interested?” I said, “Well, no, not really.” I said, “You do know that women have pocketbooks too, right? Women can buy condos or can join a timeshare.”

It was as though it never occurred to him. Poor guy, he’s just trying to do his job. But I think that it’s the way they trained him. to go for probably the average (which is fine) couples that are together, heterosexual couples, and ask the guy, because, usually, it’s the man handling the purse strings and making long term or investment decisions. It just really struck me that they were missing this entire demographic by not actually approaching women.

[00:05:09] TU: You shared another story in that same TEDx talk where you had a cocktail party and you asked the man about his line of business, and he said he was in the fintech business. You said, “What type?” He said, “Well, it’s complicated.” I think it’s just another example of what you just mentioned there. My question for you is, why do women often carry this implicit bias that women don’t understand finance or they’re not involved in the finances? Where does that come from?

[00:05:33] RH: Well, and I just want to point out that these are, likely, very well-intended men. When this man said to me, “Oh, it’s complicated,” he did definitely say it in a dismissive way. What I was curious about is, had I been a man, how he said that to me. Would he still have said, “Oh, it’s complicated?” Or would he have said, “Well, actually, we’re a white bank and we’re raising 10 million for a first fund” or whatever, and gone into details about it. But he just assumed—and maybe it’s because I’m a woman, maybe because I’m blond. I don’t know—but he just made this assumption that it would be probably too complicated. Then, my response to him was, “Try me. You might be surprised. I actually might be able to understand you and the concept of whatever your fintech deal is.”

A lot of it is stereotypes. I mean, it’s really interesting that in our society—our society dictates that finance is male territory. If you look back over the years, that’s how it’s been. So, even if a woman handles the lunch money or the day-to-day grocery money, it doesn’t mean that she’s involved in long term financial planning. It doesn’t mean that she’s necessarily involved in, how much are you saving? Who’s your mortgage with? What debt do you even have? I mean, these are questions you might not be able to answer.

[00:06:49] TU: Yeah. Just the point of vulnerability here for a moment. My wife and I had this conversation not too long ago, where just what you said there—my wife stays home. We’ve got four boys, just phase of life we’re in. She, day-to-day, is spending money on the groceries, activities, home schooling things. She has a much closer look on the financials day-to-day than I do. But long-term planning, I was really taking a lot of that under my wing. We really identified this disconnect between the long-term planning and what was happening day-to-day. We said, “Really, if anything you should be in charge and empowered in the financial plan. Obviously, we both need to be involved.”

I think that’s a very common thing that can happen. We really felt like it was a great moment to take a step back and say, “Sure, there’s the issues where if something were to happen to one of us, do we both make sure we have a good understanding of the whole plan?” But just objectively, day-to-day, week-to-week, month-to-month, year-to-year, especially in the phase that were life that we’re in, it just makes sense that she would really be taking the lead in what we’re working on financially.

[00:07:49] RH: Well, that’s right. When you think about, look, we’re all really busy, right? Division of labor in a partnership, in a marriage, is important. You don’t both need to always take the kids to school. You don’t both need to walk the dog together. I mean, if you can, that’s wonderful, that’s fabulous. But the reality is that, we all take on a lot. So, we need to divide and conquer at times, to be most efficient.

My point is, that’s not what we need to do with money. With money—when it comes to money, and planning money and understanding personal finance, it’s something that we need to at least collaborate on once a month, so that we know. That’s exactly right, as you said. Here are the reasons that women are so vulnerable. Number one, we live longer than men. Even if you live a full life, chances are that a woman’s going to live eight years at the end of her life on her own. We earn less money because we spend more time out of the workforce; therefore, we have less Social Security. And we earn less. We earn $0.80 to the dollar that a man makes.

This is why 80 percent of women, 65 and older, live in poverty (80 percent more than men). That’s astounding. I mean, that’s a problem. Women need to get involved with personal finance, take the reins of their money, and really understand how to grow their wealth. So that if they did or when they do end up on their own, they’ll be able to handle it.

[00:09:13] TU: Which is a great call to action. Our communities, I mentioned before, we hit record, the pharmacy profession is predominantly more women than men, especially as of late with graduates over the last 20 years or so. Such a good call to action and reinforcement for our community. So, the Savvy Documentary addresses why women across the board often take a passive role or give up their role in managing their finances. You say, particularly in millennial. Obviously, there’s many factors as to why, but what do you feel like is the greatest obstacle or two for women being able to take control of their finances?

[00:09:46] RH: Probably intimidation. I think what happens is that—I mean, the financial industry was built by men for men, not on purpose to exclude women. It’s just that’s the way it was when Wall Street was being created. It was men that was handling that, that organized that, right? So, along with that comes this sense of ambient belonging. We’re using a lot of acronyms, ETFs, SEP, your IRA, what do these things mean? Even very well-educated, very intelligent women can feel marginalized and can feel intimidated if they haven’t kept up and if they don’t understand.

Especially now with technology and the way fintech is working. There’s all sorts. I mean, cryptocurrency, there’s all sorts of new terminologies. It takes you no effort to keep up with what does this all mean, right? So, I think that that’s probably the biggest hurdle is this intimidation factor, thinking, “Oh, boy, I really should have kept up with this all these years and I haven’t. So now I’m behind and I don’t even know. It’s overwhelming. I don’t know how to catch up. I don’t even know how to start.”

Often the woman who is busy with kids and probably her own job and volunteer hours and everything else, doesn’t make the time to go to the financial planner with her spouse. Therefore, she doesn’t really have a great relationship with that person. 90 percent of women who are widowed or divorced changed financial planners or advisors within the first year. What does that tell you? That tells you that women are not relating to the financial advisor or the financial advisor doesn’t really understand the plights or the issues that women face when it comes to money, and they’re not really working to maintain their female clients.

[00:11:35] TU: Yeah. Perhaps weren’t invested in that relationship together or a part of the decision making for that relationship to begin with. It’s one of the reasons, when we’re talking with individuals that are looking for planning services, if it’s a situation where it’s a spouse or a significant other, but folks are doing that together, both parties need to be present from jump street.

Now, as time goes on and maybe that schedules get busy, maybe it’s not realistic that, for every single meeting, two people are always there. Upfront decision making, understanding the goals, the priorities, the issues, it’s so important to have both individuals that are involved. One of the things that you highlight in the documentary, that I thought was fascinating, is the statistic that when women invest, whether that’s hedge fund managers, mutual fund managers, or individually, they outperform men by about 1 percent annually.

When I saw that, we preach and teach on this podcast, that 1% really matters. Our listeners know that in terms of a compound effective 1 percent over time, whether that’s in returns or perhaps fees or a combination of both, so when I see 1 percent, that matters, that’s significant. Why is this? What’s behind this? Tell us more.

[00:12:42] RH: Yeah. I think it’s one basis point a year, which corresponds to about 1 percent. I think what that is, is women are more risk aware. They’re not more risk averse. They’re more risk aware. So, women understand the risks involved in investing. They might pay a little bit more attention into being well diversified, to not jump into something that sounds like it’s a really good investment but could have a huge negative impact on a portfolio if it were to go wrong. So, because of that, because of women’s patience and their sensibilities to risk, they tend to make better investment decisions.

[00:13:22] TU: Yeah. That, of course, compounds over time. We know when you look at simulations of portfolios, if you’re able to mitigate the volatility of a portfolio, but take on appropriate risks of the long term, you’re going to see really good returns, so that makes sense. The other aspect that I’ve seen, in my own situation, and a pharmacist I talk with (all across the country, the men that are pharmacist that listen may not like me calling them out), but there tends to be a little bit more overconfidence that I see in terms of— certainly there’s varying levels of education—but is there an openness and a receptiveness to learn and to have someone come alongside of you to be able to advise, but also to keep your accountability? I know that’s a big generalization, of course, but I think there’s a different level of receptiveness that may come to that as well.

[00:14:09] RH: Well, there’s no doubt that there’s a confidence gap when it comes to women and to girls. This is just something that we tend to suffer from, right? There have been some really interesting studies, and in catalyst of the study several years ago that showed ten different qualifications that you would need, whether you’re a woman or a man, to apply for a job. Men tended to apply with confidence if they had even just 60 percent of the qualifications, right? Women even who had 100 percent of the qualifications still were not 100 percent confident that they would get the job or that they qualified for the job. So, there’s a big difference in physiologically. Is that because of testosterone? Maybe.

What it says is that we need to push ourselves as women. We need to push ourselves to become more confident, to take on investing, to decide that we’re going to take that promotion in order to stay on a good career trajectory, because otherwise, I don’t know that we’ll ever feel 100 percent confident that we’re ready for that next step. But when we do take it, we perform well, right? So, it’s just a matter of feeling confident and understanding that we can take that risk.

[00:15:24] TU: Yeah. As you challenge the women to lean into that confidence and be comfortable taking some of that risk, I would challenge the men listening to really ask themselves, “Am I perhaps overconfident in the financial plan? What are the opportunities for learning and improvement and perhaps a different perspective as well?” Robin, you also touched on in the film Negotiation Skills, a topic we’ve talked about in this podcast before, specifically around credit card negotiation, salary negotiation. Why is this so important for women to develop and refine, and why do you think it’s something that many women may shy away from?

[00:15:55] RH: Well, I think we shy away from it, because the confidence gap, what we just talked about. But negotiating is a really interesting thing, because what happens is that women and men, when we negotiate, women tend to outperform men in negotiations, but only when women are negotiating on behalf of somebody else. When we negotiate for ourselves, we are not as successful. Why is that? Well, it’s because in our society, women are supposed to be especially, a good woman, right, is supposed to be supportive, deferential. We are not necessarily rewarded when we come across as overly confident, overly assertive, decisive, right? But those are things that men actually are rewarded for, because they are seen as leadership skills in men more than they are in women.

This comes into this likability dilemma. But when it comes to negotiating, it’s fascinating, because women, we violate societal norms of what it is to be a likable woman when we are negotiating hard for ourselves. We come across as being selfish and self-centered and maybe even greedy, right? Which is ridiculous, but those qualities, we tend to tolerate more in men and expect more of in men than in women. So, what does that mean? Women have to often come to the table, negotiate and give examples of why they need money, which is interesting. Why they would need a higher salary? Those are things that men aren’t burdened with as much. I think that if you’re an employer, I think we need to pay attention to this. We need to understand.

If you want to retain women, if you want women to rise in your company, we need one: to push them to take promotions. Two, understand that it’s going to be harder for her to ask for a salary raise, even though she has earned it and deserves it. So, we need to be aware of that. We need to also be aware of the fact that women know how we’re perceived when we negotiate. So, we are careful about how we negotiate in what we do. The reason we need to continue to negotiate successfully regardless is because otherwise the pay gap widens.

[00:18:09] TU: Yep. That’s where my mind is just going around with the pay gap and I appreciate the call to action to the employers that are listening. So important to be aware of it and to be taken action appropriately, especially in a field like pharmacy where we have great flexibility, where pharmacists may through different seasons of life, cutback hours or increase and then take back hours or overtime, depending on family needs and other needs, which is a great benefit, but also can be a challenge if you’re stepping out and into the workforce to make sure that that pay differential is not widening over time.

I think the responsibility certainly lies in part on the employer, also in the individual, to be able to effectively negotiate for themselves and to be confident in doing that. It’s a great, great piece. We often, on this show, talk about the lack of financial literacy available to pharmacists while they’re in pharmacy school. I know financial literacy education is a big topic, one I’m passionate about, that really should start as early as possible and be as longitudinal as possible. This is really striking for our profession, where we have new graduates coming out on average with about $170,000 in student loan debt. Because of the lack of financial literacy of education, I think it’s easy to make missteps along the way.

My question here is, were there any key lessons that you took away from the documentary, in the preparation of the documentary, that really focuses on helping to improve financial literacy among women? Even if it’s access or interest, how do we overall raise the level of financial literacy in education and make it one that is accessible of interest and also is able to be action oriented?

[00:19:46] RH: Well, and this is for men and women, we need to have relatable financial education courses in school and in high school even. I mean, I’m even a proponent for starting them age appropriately in grade school. But there’s no reason that you can’t learn in high school the positive and negative impacts of compounding interest for example. You need to understand that you can’t just— that you need a credit card. First of all, you need a credit card in order to establish good credit.

In fact, when you get to college and you’re going to rent an apartment, they’re going to check your credit score. S,o you need to establish a credit score by having a credit card and yet paying off the minimum. Nobody teaches us how to use credit cards, right? Unless we’re having to have parents that teaches these things. Otherwise, you, probably everybody, that comes out of school comes out of the pharmacist training and school gets, what, maybe three different credit card invitations a month?

[00:20:40] TU: At least.

[00:20:41] RH: Yeah. At least, if not a week, right? I mean, it’s ridiculous. Yet in any of those, unless you’re going to— even if you read the fine print, does anybody stop and say, “ut here, let me actually teach you how to use this.” Because paying the minimum is not enough. Paying the minimum means you’re actually going to be paying interest, right?

[00:20:58] TU: Yeah. Lot of interest.

[00:20:58] RH: Interest is accruing, a lot of interest. Some of those credit cards, those initial credit cards, are over 25 percent, so that’s huge. I think that’s essential for men and for women. We need to know what our credit score is. We need to pay off the total balance on a credit card every single month. We need to use less than 10 percent usage of it in order to have the highest credit score rating. But these are things that nobody teaches us, right? I think that’s important. Then I also think that, yes, whether you’re in business school, whether you’re coming out of pharmaceutical school. There’s no reason that there can’t be an education or finance course that’s specific to your industry, right? I think that that’s something that we’re owed, especially if you’re going to end up with $170,000 in student loans debt.

[00:21:43] TU: Yeah. I think we’re starting to see momentum among this. I think there’s other health professions I would give kudos to. I think medicine has done this well, from an association colleges standpoint. Veterinary medicine has done this well, from an association colleges standpoint. I think what we need immediate past is the stigma and the idea that this is a doctorate level education and personal finance doesn’t belong. It does belong, right. Because we know the connection between financial wellness and one’s ability to be a clinician and to work effectively in their role. Those things are very well connected. So, I think we’re starting to see momentum in our profession around this topic, which is very exciting.

Of course, for folks that are listening and have kids at home, what a great opportunity to just begin conversations as early as you possibly can. These come up all the time if you watch and listen for them. I remember being with my oldest son, who’s now about to be 11, probably when he was five, maybe six, and we’re at the grocery store and he just asked me a question once at checkout. He was like, “Oh, so dad, you just swipe the card and then you get the groceries. Is that how it works? You just swipe the card and you get what you need?” I was like, oh, my gosh, what a great teaching moment, about how does money go from work into a bank account. There’s not physical cash, right?

This is such an incredible learning moment, but that is a foreign concept. If a child gets money from a gift or from work and it ends up online, but I don’t see it in front of me, but it’s in an account. What? What is that? What does that mean? So, I think just such a great opportunity to be having these conversations, if we’re in a position to do that.

[00:23:18] RH: Yeah. It’s so interesting. The psychology behind all that too, right? We are just swiping. I mean, it’d be interesting to see how your son would react if you pulled out your wallet and paid in cash, which none of us do anymore for the groceries, as opposed to swiping that card, right? There’s something that they talk about called a pain of paying. I think that’s really interesting, because it is much less painful to pay with a credit card. It’s more painful when we see our balance at the end of the month than we have to say, “Okay, pay that off.” But in terms of swiping versus taking out a few twenties or fifties from our wallet, that hits us a little bit more in terms of the pain.

Let me tell you, I mean, with Venmo. What’s Venmo? I mean, that it’s crazy, right? There’s just this fictitious balance. I mean, it is a balance, actually, but you almost forget that it’s tied to your checking account and there seems to be no pain in that at all, which is why it’s so easy to spend.

[00:24:15] TU: Yeah. One of things my boys will often ask me now, I guess I’m glad that they’re comfortable asking the question, but they often ask, “How much does that cost you, Dad? How much is that cost you?” Sometimes your reaction is like, “Oh, my gosh, I had no idea.” Or “Oh, that’s not bad.” I’m like, “Well, it’s still a lot of money and let’s have a conversation about work.” But you also want to create a scarcity mindset. So, there’s a delicate balance as you’re having these conversations with kids about money, but there’s things they can relate to, right?

If they get a dollar or $3, or whatever the tooth fairy pays now nowadays for a tooth, they understand what that is. If they can understand something cost $20 or $50 that might really resonate with them and be able to put their arms around exactly what is the amount of something. And, to your comment about the pain of paying, it becomes real when they can really see the tangible dollars that are at play. One of the other things I wanted to ask you about is it feels like, to me, there’s a significant inequality of who is leading the financial education out there. One of the reasons I was so glad to see this documentary specifically geared towards empowering women around money, and obviously the work that you’ve done here is— it feels like if you look at the traditional education around financial topics, it is largely led by men.

Now I think that’s shifting what’s happening, but let me give one example. I’m going down the rabbit hole right now. I’m learning about cryptocurrency. One, because it’s a topic I feel like I’ve got a baseline knowledge in, but as we get more questions, I want to, myself, become more knowledgeable. I’m digesting YouTube videos and blogs and books, and I’m pretty far into the journey. I can maybe think of on one hand (if even that many) women that are leading the conversation and the education around cryptocurrency. Well, that’s one example. I think it sheds light into other areas of the finances, whether we’re talking about the alphabet soup of retirement planning, or estate planning, or tax planning. It feels so heavy on the male side of the equation as it relates to financial education literacy. Am I reading that correctly?

[00:26:17] RH: Well, yeah. I think so, because I mean, there are many more male financial advisors than there are women. This is something that there’s a big effort to change in trying to get more women into financial advising, but I think especially when it comes to crypto, and why? Well, because crypto’s a merge of finance (which we know is male oriented) and computer science, which is male oriented. When you take two things that tend to have the stereotype to be very male-centric, I think it stands to reason that there are less women there. Again, back to that idea of ambient belonging. I mean, if you just don’t feel you belong there, if it doesn’t feel like home when you’re—so if a woman goes to a cryptocurrency conference and she’s one of the only or the few women there, she’s going to feel like she doesn’t belong, right?

It’s really hard to pioneer and to push through being the minority, and many women have. Same goes for people of color, right? I do think that it’s hard to be what you can’t see. So, we need to get more women into finance and into crypto, into computer science and sciences in general. I love hearing that pharmaceuticals has a stronghold of women, that is fabulous. But this is what we need to do in order to change the stereotype.

[00:27:39] TU: Well, this is great, Robin. I really appreciate the conversation. I would encourage folks to make sure that they check out the Documentary Savvy. We’ll link to it in the show notes. Where is the best place that folks can go to learn more about you and to follow the journey and the work that you’re doing?

[00:27:53] RH: Well, finishlinefeaturefilms.com is our website. We will list different screenings of Savvy, whether it’s film festivals or whether we’re doing public screenings, you’ll find them listed there. So, keep an eye on that website.

[00:28:06] TU: Awesome. We’ll link to that in the show notes. Thank you so much, Robin, for your time. I appreciate it.

[00:28:10] RH: Thank you, Tim.

[OUTRO]

[00:28:11] TU: Before we wrap up today’s episode of the Your Financial Pharmacist podcast, I want to again thank our sponsor, the American Pharmacists Association. APhA is every pharmacist’s ally, advocating on your behalf for better working conditions per PBM practices, and more opportunities for pharmacists to provide care. Make sure to join a bolder 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 percent discount by visiting pharmacies.com/join and using the coupon code YFP. Again that pharmacies.com/join, using the coupon code YFP.

[DISCLAIMER]

[00:28:50] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for your informational purposes only and is not intended to provide and should not be relied on for investment, or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation, or offer to buy or sell any investment, or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on this 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 for your support to the Your Financial Pharmacist Podcast. Have a great rest your week.

[END]

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YFP 253: YFP Planning Case Study #1: Growing a Family, Paying Off Student Loans, and Buying a House

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YFP Planning Case Study #1: Growing a Family, Paying Off Student Loans, and Buying a House

On this episode, sponsored by Insuring Income, YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP® is joined by YFP Planning Lead Planners, Kelly Reddy-Heffner, CFP®, CSLP®, CDFA® and Robert Lopez, CFP® to walk you through a financial planning case study on growing a family, paying off student loans, and buying a house.

About Today’s Guests

Kelly Reddy-Heffner, CFP®, CSLP®, CDFA®

Robert Lopez, CFP®

Episode Summary

Welcome to our very first YFP Planning case study. In this episode, YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP® is joined by YFP Planning Lead Planners, YFP Planning Lead Financial Planner, Kelly Reddy-Heffner, CFP®, CSLP®, CDFA® and Robert Lopez, CFP® to walk through a case study featuring fictitious clients facing real-life scenarios like growing their family, paying off student loans, and buying a home. While the Jones family may be made-up clients, their financial scenarios, facts, and goals resemble common areas of focus and concern for many long-term YFP Planning clients. Kelly and Robert detail the various options and information pertaining to the financial plan of our fictitious clients, the Jones family, laying out all of the case study client earnings, expenses, debt, and goals. The team discusses potential client considerations for the financial plan regarding student loan repayment and their growing family. Kelly and Robert touch on everything from PSLF to wealth protection, speculating the necessity of a whole life policy, and the advantages of a joint credit card. This behind-the-scenes look at YFP Planning will provide insight and understanding of what goes on at YFP Planning, plus a comprehensive analysis and education on the financial picture for the Jones family.

Key Points From This Episode

Introducing YFP Lead Planners, Kelly Reddy-Heffner and Robert Lopez.
Describing the fictitious family of today’s case study: Jason and Lauren Jones.
The Joneses’ earnings, expenses, and debt.
Their goals and concerns.
How their cash position fits in the context of their goals and debt.
The question of whether or not to go the PSLF route.
The tendency to get caught up emotionally without considering the mathematics.
How the Joneses should tackle the wealth-protection aspect of their financial planning.
Speculation of whether a whole life policy is necessary.
The benefits of having one joint credit card per family.
What the Joneses should consider with regards to the mortgage conversation.
The power of financial planning.
The wealth-building opportunities for the Joneses’ emergency fund.
The ideal amount to put aside as an emergency fund.
Investment options and recommendations.
How to approach college education funds.
The future prospects of a supplemental income for the Joneses.

Highlights

“[PSLF] is a huge conversation both emotionally and mathematically to work through.” — Robert Lopez, CFP® [0:13:39]

“There are very rare circumstances where a whole life policy is cost-effective and really necessary in the planning process.” — Kelly Reddy-Heffner, CFP®, CSLP®, CDFA® [0:19:32]

“The power of financial planning is that process of planning.” — Robert Lopez, CFP® [0:23:44]

“Tying in a specific amount to a specific goal is very important.” — Kelly Reddy-Heffner, CFP®, CSLP®, CDFA® [0:26:47]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TB: You’re listening to your Financial Pharmacist podcast, a show all about inspiring you, the pharmacy professional, on your path towards achieving financial freedom. Hi, I’m Tim Baker. Today we’re changing things up with a new type of episode. I sit down with YFP Lead Planners, Kelly Reddy-Heffner and Robert Lopez, to walk through a case study of a fictitious family, the Joneses.

Although the Joneses are not an actual couple we work with, they’re really a composite of clients we do work within reality. The first part of the discussion we lay the groundwork of the Jones’ jobs, salary situation, and where they live. We walk through their net worth and point out important elements of their financial situation. We also talk about their goals and what they’re trying to achieve.

We then talk through, how we would approach the Jones’ financial plan as if they were real clients. This is a bit of a behind-the-scenes look at what goes on at YFP planning. I hope you enjoy this episode, but first, let’s hear from our sponsor, and then we’ll jump in at the show.

[00:00:57] ANNOUNCER: This week’s podcast episode is brought to you by Insuring Income. Insuring Income is your source for all things term life insurance and own occupation-disability insurance. Insuring Income has a relationship with America’s top-rated term life insurance and disability insurance companies so that pharmacists like you can easily find the best solutions for your personal situation. To better serve you, Insuring Income reviews all applicable carriers in the marketplace for your desired coverage, supports clients in all 50 states, and makes sure all of your questions get answered. To get quotes and apply for term life or disability insurance, see sample contracts from disability carriers or learn more about these topics, visit insuringincome.com/yourfinancialpharmacist. Again, that’s insuringincome.com/yourfinancialpharmacist.

[INTERVIEW]

[00:01:48] TB: What’s up, everybody? Welcome to our first YFP planning case study. This is a new concept that the team at YFP planning is going to test out. We want to launch these, I think at least once per quarter and the idea behind this concept for both the podcast and video that will be shown on YouTube is to give you a look behind the scenes of a fictitious client that we are going to work through and look at, various information regarding to their financial plan, their goals.

The idea is to give you a behind the scenes of how we would handle these fictitious clients in terms of giving them some thoughts and ideas behind their financial plan. Today I am joined by our two lead planners, Kelly Reddy-Heffner and Robert Lopez and in a second here, we’re going to go through the fact pattern on our first case, the Joneses. It’ll take us a little bit of time to go through all the different facts of the case and then we’re basically going to have an open table discussion of how we would approach this particular client. We’ll do — this client is fictitious, but it’s based on a group of clients that we worked with over the years in terms of some of the planning challenges that they face. We’re going to have a variety of type of clients that we’ll talk with as we roll out this series. Hey, guys, welcome to our first case study. How is things going in your neck of the woods, Kelly?

[00:03:12] KRH: It’s going well. It’s good to be back to doing some planning after the tax season. So happy to be talking about a case study.

[00:03:20] TB: Yes. Yes. Tax season is behind us. I guess we can say that at least the deadline is. It was an eventful tax season, no doubt. How about you, Robert? How have things going on, your end of things?

[00:03:31] RL: Well, we’re already in the nineties out here in Arizona, so we’re doing our best to make sure the AC doesn’t die on us.

[00:03:37] TB: Yeah, please. Especially with Spencer, make sure he’s nice and cool. It’s funny, we were just talking about this yesterday, 45 degrees in Columbus, Ohio, yesterday. I think this weekend is going to be 85, so that is the weather of the season. All right, so I’m going to share my screen here and for those of you on the podcast, you won’t be able to actually see us. We’re going to talk through this. If you’re watching the video, obviously, you’ll be able to follow along. Robert is going to kick us off on the high-level facts. Then I will get into the network statement and then Kelly is going to finish us off and talk about goals and some of the other miscellaneous. Robert, the screen is shared, why don’t you kick us off here?

[00:04:15] RL: Yeah. Just waiting for that screen to load up on my page. Today we’re going to be talking about the Joneses, and so to try to keep up here is Lauren and Jason Jones. They’re both 33 years old. Lauren is a clinical pharmacist working at a public hospital. Jason is an Electrical Engineer. Then six months ago, they welcomed their daughter Lucy into the world.

Lauren earns $118,000 at her main job and then has a side hustle with supplements where she does $10,000 regularly. Jason is getting 112,000 from the Electrical Engineering Firm. He filed the taxes, married filing jointly. They are living in wonderful Dallas, Texas. Their gross income combined is $240,000. That breaks down to about $20,000 a month. Then after their taxes and contributions to the cafeteria plan or retirement savings and insurance, now they bring home about $14,200 a month and then they get chopped up in their expenses.

They have fixed expenses of roughly $7500, variable expenses that can change from month to month or above $3600. Then their savings target right now is about $2700 a month. They’re living in a three-bedroom single-family house that they bought a few years ago in 2018. They used an FHA loan to put 3.5% down on $295,000 home. They have a 4.25% interest rate.

[00:05:36] TB: Awesome. If you look at their net worth statement, we’re going to start on the asset side. Between checking and savings, they have about 35,000 in a joint account, 85,000 in a savings account. Then Lauren also has a CD of $10,000 that will mature in a year. When we take a look at their investments in their Roth IRA, both Lauren and Jason have Roth IRAs. She has 25,000, Jason has 15. They’re not currently contributing to this. This is an IRA, a Roth IRA that was set up with a financial advisor when Lauren was in Pharmacy School, definitely hanging out there.

403(b) Lauren has one 85,000 that she’s contributing 5% with a 3% employer match. She thinks it’s primarily in target-date funds that has about 85,000. Jason has a 401K with 55. He’s contributing 7% with a 3% match. He also has a Roth 401K or basically, he contributes into the Roth side of things and he’s in an A 20 allocation. Then he also has an old 401K from a previous employer with about 15,000. He doesn’t really know what to do with. Then Lauren has $5,000 in an HSA that she’s contributing 36.50 which is the max for a single person for the year and just sitting in cash, right now. They have the primary home that Robert talked about and they think it’s worth about 355,000 now that they own jointly.

Then if you look at the liability side of things, they do have a credit card balance of 2000 that they pay off every month. They basically use it for points for travel. They have a personal loan of 6000. It’s Lauren’s debt that’s to the bank of mom and dad, that they basically pay 0% interest and I think they put about $1,000 towards that, if I have the note right. Then in terms of long-term debt, they both have car note. Lauren has a car that has a 15,000 balance dated as 23,000. The total payment per month between the two of them was about 825. Jason’s interest rate is five and a quarter, Lauren’s is 4%. The mortgage was 272,000 left on that.

Then Lauren, like a lot of pharmacies out there, has a good amount of student loans. She has a total 170, 145 of that is in the public program and then about 25,000 in private student loans with an interest rate of 7%. You put the total assets of 695 minus their total liabilities of 480,000. That equals their net worth, which is 207,000. Positive net worth, not too shabby, net 33. Some other things that they talked about is they’re filing jointly like Robert said, but they’re doing it themselves but feel like their situation is becoming more complex, potentially converting their house to a rental. Kelly will talk about that here in a second terms of goals.

The baby, Lucy being born six months ago and then potentially looking at PSLF, they think they’re missing out on some deductions and they typically owe money, two or $3,000 each year that they don’t necessarily have a plan to save for. Kelly, walk us through the Joneses, their goals, and any other miscellaneous things that they have going on.

[00:08:40] KRH: Yeah. After we get a good idea of net worth, which, Tim, you shared with us and some of those retirement contributions and other things that they’re doing. It’s really important to understand the goals, because that frames, what we’re doing the planning for. In this case, Lauren wants to aggressively pay off the student loans but has some concerns about PSLF. Jason is in disagreement. It’s something that’s on the list to talk about. They are thinking through adding an addition to their family over the next two years. They’d like to start saving for their daughter, Lucy’s college education, but unsure where to start. Thinking through housing and if they’re going to grow their family. What does that next house look like?

They’ve added an opportunity to maybe turn their current home into a rental property and yield some recurring revenue from that. Then Jason is thinking about some career exploration, not uncommon. Of course, we’ve seen a lot of that over the past year with job changes, transitions. So thinking that through and seeing what that will do to salary. Some of the other things to think about, which also contribute to the conversation and the one that we’ll have here today is Lauren believes that she could increase her supplemental income. She’s bringing in that 10,000 now, but believes she can grow that in the future.

Lauren is also thinking through the care of her mom with the children. Sometimes we’re also worrying about her parents. So she has that on her list to consider in the planning as well. They both like to travel, so having a budget for that is important. Although not a top priority, retirement age of 65 is on the list, as a consideration as well.

[00:10:29] TB: Awesome stuff, guys. Appreciate us setting that up. I guess what would be from a job when you guys look at this fact pattern, with this particular client, the Joneses. What are some things that jump out to you that you would want to focus on and dig in and see what we could do in terms of some help with their financial situation?

[00:10:47] RL: Kelly, why would you go first?

[00:10:48] KRH: Well, I certainly would think through the cash position and how that fits in the context of the goals and some of the debt that they currently have as well. That’s a common question is, we’ve accumulated quite a bit of cash, what do we do with it? I would say that would probably be a good starting point is where does it fit with their goals versus other things that they need to accomplish on this list here.

[00:11:18] TB: Yeah. I think for me, one of the areas and this is often true with a lot of our clients, especially in around this age is, what the heck are we doing with the student loans? Right? I think as the financial planning goes, as the student loan plan goes to the rest of the financial plan. So to me, I think having that discussion with Lauren and Jason about, to PSLF or not to PSLF, right? We recently, Robert, I listened to your episode here recently about PSLF and updates, and some of the success stories around PSLF. But I think probably having a conversation about this and then supporting in this with the math to determine, does it make sense to go this route or not. What’s your thought on that, Robert, as you would walk them through this particular part of their plan?

[00:12:09] RL: Yeah. I think, it will be really important to figure out what Lauren and Jason are disagreeing about when it comes to PSLF, though she not believe that the program is going to be valid or does she not believe that her ability to earn this, basically, is she going to work in the public sector for the remainder of those ten years.

[00:12:23] TB: Yeah.

[00:12:24] RL: She’s already got 30 payments as a part of that 20. If we’re saying that this is happening currently, all 30 of those payments are happening under no dollar payments and no interest, thanks to the COVID changes. We’re already a quarter of the way there. That gives us 75% more the way I think it’s going to be too hard to pass up on the value of that. So really just reiterating that this plan works, hey, I can point to specific YFP clients. I can point to specific numbers on how many people have earned this forgiveness. I can show how you are or are not on track for your own personal forgiveness to make sure that this is a valuable thing.

That really ties into a lot of the other goals here, right. As we decide to grow the family that can decrease our payments, as we decide to maybe take a step back from a career that Jason’s getting some burnout from, that can free up some cash flow for us to live month to month. I have to worry about making really aggressive student loan payments. That does allow us to be more aggressive towards the private side. If she wants to be aggressive towards new loans, let’s pay off that 7% aggressively as opposed to something that’s at 0% right now, and could be at 0% for still a little while.

Then show what the value of that forgiveness could look like, when we’re talking [inaudible 00:13:32] the way there, $80,000 of forgiveness easily depending on what their income is going to look like going forward. I think that’s a huge conversation both emotionally and mathematically to work through.

[00:13:43] TB: Yeah. I think sometimes, we get caught up in the emotion without actually taking a look at the math. I don’t think it’s out of the realm of possibility, especially in this day and age with the pandemic and some of the forbearance and the relief there that if you have three years, four years, five years of $0 payments, and then if you also have one or two years that is being calculated on a residency salary that you could pay, I don’t have the numbers in front me as supportive, but you could pay $60,000 in total and that could be on 170,000, 250,000, $300,000 of debt.

When you look at that total amount of forgiveness, the amount of being forgiven is not necessarily as important in PSLF, it’s more of the amount that you paid, but if you can then minimize that by looking at more of the pretax accounts, like the 403(b) the 401K. In this case with Jason, if we’re going that route, maybe, maybe he doesn’t do the Roth, but if they file separately, which they’re not doing right now, it doesn’t necessarily really matter. But then –

[00:14:49] RL: It would, it’s a community property state for Texas –

[00:14:51] TB: Oh, Texas, yeah. You’re right, could call out. So those are the things that as when I say as the student loan goes, the rest of the plan goes, because you would argue that, you would be able to save more for the long term, but then maybe even more for the short term, whether that’s a job transitions fund, a vacation fine or something like that, because right now, she’s paying, they’re paying $2100 in student loan payments which is probably on the high side, again, probably some meat on the bone with regard to how much they’re paying in interest.

Maybe the compromise is that they just pay off the private loans more aggressively or with the cash that they have on hand, maybe they just write a check, and the private loans are gone and then they pay the minimum on the public loans. I think to me one of the things that jumps out when the fact pattern is that the two of them disagree on that, I think is probably having them both come to the table and talk through some of the maybe the angst around that. To your point, Robert, it could be I don’t think I’m going to stay at this job very long and I want to move to the private sector. That’s a completely different conversation.

I think having more of those clarifying questions to determine, hey, is this a good mathematically it absolutely makes sense in most cases, but from a career perspective, from an emotional perspective, maybe not. One of the things that we didn’t, actually we skipped over when we were talking about, that I’ll go through quickly here, when we talk about the wealth protection, we typically talk about things like insurance estate planning. One of the things to mention is that they probably were okay insurance-wise before their daughter came. I typically say, especially with life insurance, that the two thing, or two of the things that you look at is, if you have a spouse, so check in this case, if you have a house, check. Then you have mouths to feed, typically want to make sure that you have enough insurance.

Right now, Lauren has $500,000 a term policy, a 30-year term policy that she bought through the financial advisor when she was in pharmacy school, along with one times group benefit that’s 118,000, so 600 plus thousand dollars in life insurance. Jason that’s 500,000 that he also bought and then a 50,000 flat amount through his employer. They also have a small life policy that is worth the death benefit, it’s 50,000 with a negligible cash value that paying about 70 bucks a month. Then from a short-term and long-term disability, pretty common. Lauren has a 60% benefit for short-term and long-term disability it isn’t an occupation. Jason does not have any short-term disability, but he does have a long-term disability that’s an occupation for two years and then switches to any occ, until Medicare age.

We’ve talked about this on the podcast in terms of how that works and maybe something to talk about a little bit more today. Lauren doesn’t have any professional liability outside of what her employer offers. Then from a wealth protection perspective, we typically look at the estate plan and right now they don’t have any documents in place, but they’re looking at Lauren’s employer. They have a legal benefit that they would work through. If I’m asking the question of what jumps out, this is probably one of the — outside of the student loan. This would probably be the one of the next things that I would look at in terms of the wealth protection, particularly with Lucy being born six months ago.

Kelly, what’s your thoughts as you look at more of the protection stuff, which is often not necessarily at the top of everyone’s mind, especially as they’re going through a lot of these life changes. Kelly, what’s your take in terms of how they should attack this part of their financial planning?

[00:18:28] KRH: Yeah. I would agree that this is often an area that is neglected. Even at annual reviews, we sometimes see estate planning documents still on the list. I think with Lucy for sure, getting a will in place, guardianship, very important, and having that taken care of would give them a lot of peace of mind, as well. As far as insurance coverage too, once you’re a parent, it would be highly unusual to probably be under $1,000,000. If you look at the goals that you have and some of the high-level calculations like, ten times income that would certainly put both of them well over $1,000,000 in terms of need.

I do like that it is purchased outside of their workplace that it is their own policy, but I guess it would be good to take a look at the details of the policies as well. As far as whole life, we have this conversation all the time. There is very rare circumstances where a whole life policy is cost-effective and really necessary in the planning process, so that would be one of the top priorities to look at that to see about surrender charges and use that money towards something better in the plan, perhaps the difference in increasing that term policy up to the amount that would be more adequate and of course, the disability as well.

Speaking of purchasing from outside, we recommend is the gold standard having your own disability policies, the 60% is reasonable, but Jason doesn’t have that short-term disability policy at all, so then you are looking at the emergency fund. Does that cover that or does he need his own policy as well? Just really looking at the fine print in the details and seeing, should they purchase that on their own as well.

[00:20:33] TB: Yeah. You can go out and purchase a short-term disability plan, but it probably it’s typically cost-prohibitive. I would probably just had the emergency fund. He’s covered from a long term disability, but he does have that wonky definition of two years on occupation and then any occ, after that, which is a little bit [inaudible 00:20:53] you should do there if you should go out and price a different policy and carry your own or just use what the employer has.

When you look at the debt, the outside of the of the student loans Robert, what are you seeing in terms of the personal loan, the credit card, the car note, the mortgage in general? Obviously, the conversation has changed a little bit in the last couple weeks and months with interest rates and where they’re going, but if you even assessment of where they’re [inaudible 00:21:19] debt perspective, what’s that look like to you?

[00:21:23] RL: Yeah. One credit card for a family these days is a little odd. I think it’s really awesome. We did just have a client come on board that they do just have the one joint card, using that for their monthly expenses to gain those points for travel. I love it. Having those points set aside for future travel points is really going to help them. The car notes 5.25% and 4% on those loans. Those would seem a little bit high in previous years, but it’s not too far out of bounds, right now. So I’m not sure they could refinance too much out of that.

Obviously, paying those off with the delta between what they’re getting on their savings accounts is a different conversation on, and it doesn’t make sense to carry those loans, yay or nay, but those are understandable loan amounts. Student loans at 7% interest, I think we can still maybe refinance those private loans down and probably get a better rate. There’s a bunch of tools that you can use online to find better rates between all the servicers and then the mortgage at 4.25%, yeah, for having this conversation six months ago we’re like let’s refinance, let’s get out of the FHA and do a conventional. We have at least 26% or 28% of equity in the home, so that wouldn’t have PMI on another loan. With the FHA, that PMI stays on for the life of the loan and if we were to refinance right now we’d end up with a worse rate.

The conversation with the mortgage would be how serious are we about getting another house? Are we going to be able to keep it as a rental? I think, the math doesn’t really work out too well for that, because there’s only about $200 of gap between what they’re paying on their mortgage right now. If we were to refinance that gap would even shrink. But how much is it going to cost to refinance from a funding fee or any points we have to pay? How much are we going to save on a monthly rate? Are we going to reset our amortization? We are going to start back at 30 or are we going to stay basically the 26 or 25 years that we have remaining on our loan since about 2018?

We can run those numbers and say, “If we keep this house for another five years, then it doesn’t make sense. Let’s just keep our 4.5 to 5%.” But if we know we’re going to leave within the next three years, because we’re going to grow our family farther and maybe we want to get into a better school district before we start getting Lucy towards that school age, which is a really common conversation, then maybe the math does start to work out well. We could still refi now get away from that PMI and then the math is going to flush out better. That’s really just a conversation that involves a bunch of steps of what are we really think we want to do with our life, what do we really think the math says, and what decisions does that lead us to. That’s really the power of financial planning is that process of planning.

[00:23:47] TB: Yeah, yeah. So much it’s not say about the plan, it’s about the act of planning. I think, it’s an interesting conversation to have, because in this particular case they think they can get $2800 a month as a rental, right now their mortgage is 2600, they’re paying that on a 30-year, four and a quarter. Probably when we wrote this out, four and a quarter was actually a higher rate, but if you can get that down and get rid of the PMI maybe you’re delta between what you can rent and what your mortgage would be, there’s a lot more. The other argument is because inventories are so low in a lot of different parts of the country, probably Dallas included, maybe the rent you can get is not 2800, maybe it’s 3032, I don’t know, but those would be some of the things that I want to dive a little bit deeper.

For some people, too, it’s like, “What’s the catalyst behind renting it out?” If it is from a wealth building perspective, maybe your point the math says, maybe sell it and roll it into your new home and minimize expenses on that. Maybe with Jason, maybe part of his idea in terms of shifting careers is more along the lines of supplement in his new career with real estate or something like that, and maybe an effort to diversify income. But to your point, I think it’s just like the PSLF discussion. I think it’s having a conversation that is supported with the emotional, but also the math in terms of what it looks like, and because things change, it seems like all the time with markets and interest rates and home values and rental, all that stuff, it constantly changes. I think having a little bit more of a clarifying discussion.

Kelly, if we assume that we’re going to go down the PSLF route and we’re really trying to make sure that the investments are buttoned up and really the cash is deployed in the most optimized sense, we’re looking at with this particular client would we say about $130,000 in cash between check in savings and the CD they have. So if we look at – we think would be in an emergency fund and how we would set up their investments. What are some opportunities for this excess of cash and what they can potentially do with that? What’s your take on that, if they’re asking, hey, because one of the things that we’re hearing from real clients is like, “Hey, with the forbearance we haven’t been paying towards our loans and we know that that’s good, but it’s also a bad thing because that cash is just sitting there not really doing anything.” If you’re looking at things travel or transition, or a mom fund, how would you approach the client in terms of trying to deconstruct what to do with this cash?

[00:26:23] KRH: I do think and I’m not sure if I’ll answer the question specifically, but I think it is indirectly related. It does really help to earmark those large portions of cash. So what is the emergency fund like we say six months, those necessary expenses, mortgage, student loan payment, car payments, from there, the travel budget really tying in a specific amount to a specific goal is very important. Then once you see what that looks like that is a much better view of what’s left. I guess in terms of debt, I would take a look at, is it paying off the private loan? We get asked that a lot. Invest versus private loan, I would see about a refi rate versus just paying it off directly.

In terms of the wealth-building, there are certainly a lot of opportunities if you’re pursuing a PSLF option to really look at how much is being contributed into the 403 B, it’s well under the limit of 20,500 for 2022. Jason’s going into the Roth side, he’s not at the maximum either, so looking at that contribution rate. Now with Lucy, I guess asking the question, is Lucy on Lauren’s health insurance or Jason’s? If she can be on Lauren’s, that HSA amount increases substantially as well to over $7,000.

Those would be the places where that’s always a great conversation with PSLF is, what else can you be doing? So not only are you not paying the student loan, you’re not having to put that money towards a payment amount, but then you’re also building wealth on the back end towards your savings capacity.

[00:28:14] TB: What do you guys typically see or what do you typically recommend in for an average client like this in terms of our emergency fund, are we saying emergency fund is 80,000 10,000? If you had to do a roundabout guess in terms of what you’re seeing in terms of an average emergency fund, what would you say you’re seeing?

[00:28:32] RL: Yeah. I like to break cash down to pure ratios. My checking accounts, I like to have a floor. Everybody resets their zero when they’re making it in life, right? When you’re in high school and college, maybe it’s zero, dollars is to zero. When you make a little bit of money, it’s a thousand bucks and it’s 10,000 bucks you want to have that feels like your real “Oh, no” moment. There we go. So I like to see 1.5 X, so one and a half times your monthly expenses in your checking account, that’s just to make sure you never overdraft, you never do anything crazy, from a savings account perspective, we always hear that 36 months for two people, if they’re both in very secure jobs, I think three months is going to be good enough. That’s generally going to be long enough for long-term disability to kick in depending on the plan, if it’s got a 90-day or 180-day exclusion period.

If we’re thinking that maybe there’s going to be some career change opportunity happening, then I’d like to be closer to six months of net expenses, I definitely want to be closer to that and you can decide if that’s just fixed expenses or if it’s all expenses. People are generally really bad at judging out what their expenses are for monthly basis, so I just take all expenses and make that our emergency savings. So for a client this, I think that we’re just going to need to have 60 grand kinda set aside. They’re spending about 10K a month between fixed and variable expenses. If we want six months, so that’s in 60K in an emergency savings wouldn’t be about right for them.

[00:29:50] TB: Yeah. That’s about half of what the cash that they have on hand, thereabouts. I think typically and it would probably be in a traditional case if Lauren and Jason were saying like, “Hey, we’re good with these jobs, more than likely they’re probably pretty secure. It might be half of that, but I think to account for some of the transition and give them some runway, if he does take a step back in salary, it makes a lot of sense.

I’m with you, Kelly. I personally like the idea of setting up a high-yield savings account that is called an emergency fund. Set in a high yield savings account or sub-accounts, that’s called travel. Our travel fund at Ally has sub-accounts that is like RV camping trips, Paris, which we just got back from our big trip this year, is Disney World, right? The idea is that we have goals for each of them, we turn that off and then we go on to the next thing. So we nerd out a little bit and get very granular with that and I think it does help, because it pushes the goals. Sometimes I think, if you have a big pot of money, you’re doing some of the earmarking already, but it’s a little bit more nebulous. Where it’s like, “Oh, okay. I think some of this is for X, some of this is for Y.

If you’re going to do that anyway, just actually do the accounting. That’s not everyone’s cup of tea, I get it. Sometimes it’s more percentages or things like that, but I think sometimes that’s one of the beauty of like a 401K or an IRA is that when you save money, do your 401K and all make that comes out of your paycheck, but for you to reach into that cookie jar and get that money out, there’s a lot of penalties, 10%, you pay taxes and things like that. At least from a savings perspective, we’re labeling it, and we have a goal set up that if I rob the Disney World account to go buy a Tesla, I’m going through that, at least mental barrier to do that.

I’m a proponent of building a savings plan and drawing those lines. Let’s talk about one thing that we haven’t talked about too much in depth is just the investments. When you look at are they saving enough right now, 5%, 7% for Lauren, and Jason respectively, they do get a match, target date funds 80-20 allocation for Lauren and Jason respectively. They have a taxable account, it’s a Robinhood account that he’s doing, individual stocks, ETFs. What’s your overall impression, Kelly, of the investment account? Then let’s talk about the retirement stuff and then we’ll pivot and we’ll talk about the education stuff. Kelly, what’s your take when you look at their investments?

[00:32:14] KRH: Right, I mean, sometimes target date funds are the best option in an employer-sponsored plan, but that would be the first place I would look to see what are the fees for the target date funds? Does it match Lauren’s risk tolerance and appropriate asset allocation and see if there’s a portfolio that can be developed that would be better? Again, sometimes that’s not the case.

As far as Jason, I guess I would be wondering if the 80-20 asset allocation was appropriate for his age and if maybe he should be taking on a little bit more risk now, of course, we’d be looking at his score and having that conversation from the risk tolerance as far as just in general with the taxable accounts too. I think one of the lessons from the tax season is just that these do have an impact on our tax liability, which can sometimes be a surprise at the end of the year. I think it’s always good to check in on just having that conversation, how does this fit with overall goals and what you want to accomplish and making sure just some high level facts.

The IRS is now having the conversation about cryptocurrencies, like, know what to expect, wash sales. All those pieces that individual investors really do need to take into account as they’re thinking through how they manage those. Would it be better somewhere else too.

[00:33:48] TB: Yeah. I mean, one of the things that I would call out here is in the fact, pattern. Jason’s doing $200 into his Robinhood account, so $2400. I would just ask a question like what’s it for? Sometimes the answer is like, “I don’t know, just to mess around.” Which is fine, but is that worth maybe deferring, should we earmark this for the transaction fund or for X, Y, or Z? The other thing that they’re probably doing that they don’t necessarily need to do, because they have the cash is they’re putting $500 into a joint account. They’re probably set there. Maybe we redeploy that into a travel fund or a mom fund or something like that, but I would agree with you, target date funds might be okay, might not be the most cost effective or align best with the risk tolerance.

You could argue with Jason being 33 in 80-20 allocation, 20% in bonds, might not be the best. Is there an opportunity to invest the HSA, right now it’s sitting on cash. She has 5,000, she’s contributing another 3,650, might be up to be to get that rolling and then maybe cash flow some health expenses. With a baby coming up maybe they don’t stay in a high-deductible health plan and maybe they switch over for that year, which turns off the HSA. All of these things I think are on the table. Robert, as you look at the education, so we see this a lot. Lauren and Jason are basically saying like, “We want to save for Lucy’s education, she’s six months old.” Sometimes people go behind even at six months old, but don’t know where to start. They’re in Dallas Texas. How would you start that conversation of how to approach the college savings conversation?

[00:35:23] RL: Yeah. Anybody who’s got student loans, wants to make sure that their children don’t have the same problems and issues that they have. So it’s a really common thing of, “What can we be doing and when should we be doing it.” With 529’s college savings accounts, those are probably going to be your best bet in most places, unless they’re both alumni of a particular school and that school has some prepaid credit options where you can actually pay for college credits now and they’ll be matched whatever they are in the future. That would be an option. But for the most part, 529 savings plans is where is at.

Now in other states you get a discount on your state taxes for that. Texas does not have any state taxes or income, so they can choose any 529. There’s some great ones out there. Some of my favorite ones actually have a feature that allows you to send a link to family, so then family can send money to the 529 as well. So that’s a great way to go about as well. Even if you just set that account up. I guarantee, I have a nine month old here in the house and they have way too many toys and people are going to start sending them more toys for the next six months, so instead of just sending out a 529 plan link to somebody that they can give $50 to the education savings account instead, which is better than having a little plastic drum in behind you in a video, so you can make noises or memes. That’s a great way to go about it, but really anything they do now is going to be beneficial.

We’re never sure what the college landscape’s going to look like in the future. Highly unlikely that it’s going to stay on the same trajectory that it’s at now, that would be completely untenable. But just getting something going and then allowing other family members to contribute so then, they can also feel like they’re involved in Lucy’s life. This maybe the first grandchild, this could be the first nephew, the first cousins to be the first of many or the first of only. We really want to make sure that everyone can be included.

[00:37:01] TB: Yeah, it’s so true. It’s like the war on plastic. I feel like Liam had so many cars and things like that. He doesn’t need any more of that stuff, so here’s a link and contribute to a gift that way. I think one of the places I would start even before get into that vehicle and to your point with them being in Texas where there is no state income tax, and you can do this in any state, but a lot of the time, if you’re a resident of Ohio, you’re going to contribute to Ohio’s. If you’re resident of Maryland, you’re going to contribute to Maryland’s, because they give tax benefit for that, but not all 529s are created equal. So you have different expenses and things like that. So you definitely want to make sure that you’re finding a plan that all things being equal has good investments, low cost, that type of thing.

I think probably one of the things that I would least start the conversation and sometimes it’s like, I don’t know, it’s like, what’s the goal? I’ve seen the spectrum, Robert, where it’s like, well, I’ve had to deal with my student loan, so my kid has to figure that out as well to like, what you said is I never want my kid to have to go through this. To me, it’s deconstructing, what is the goal? Most of the time when I feel when I ask that question of, what’s the goal with the planning for your kid’s education, it’s a shrug emoji, not really sure. But then sometimes we paint a little a picture of, so we talked about the one third rule in prior podcasts.

One third could be, you say even something like a 529, one third of tuition of this could be from when Lucy is 18 and you’re basically paying tuition out of your present paycheck. Then one third could be from things like grants, scholarships. Then last but not least, student loans. So you attack it that way. So if you’re trying to achieve a funding goal, 33% in your 529, you can work with an advisor and try to figure out what that is. But I think it’s having that conversation and get, I know some clients are like, I want to put my kid through four years of college, master’s, doctorate. Then that’s obviously a much bigger monthly amount that they have to save for, but. the earlier you do, the better because if not, if you’re still trying to achieve that, you’re paying that much, much more in future dollars without the benefit of it being able to invest in compound. I think it’s a worthy conversation is build out that part of the plan.

Any other call outs that you would say as you’re looking at this particular couple, the Joneses, is that either from a tax perspective, a cash, a debt, a wealth protection with insurance that you would say, “Hey, this is probably something that we really need to talk about.” I mean, I think probably the one that we didn’t dive too deep in is, what is the future prospects of a supplemental income?

She makes it seem here that she can increase it fairly substantially, but then also probably the other thing that I would want to talk more about is just what’s the situation with mom? What’s that timeline? What’s that look like? How are we going to prepare for that? Is that something that we’re looking at in terms of the next home purchase, which again is probably another point of conversation is, what’s the timeline for that? What’s your guys take on that?

[00:40:08] KRH: I mean, I think right, the housing we just had a recent conversation with a client about their next house. They were thinking through about having room for a parent or both sets of parents. I think when we do the estate planning conversation, it is always interesting how a lot of times it does come up about parents and their needs too, so making sure they have documents in place that are here and that you have a good understanding of expectations is really important, because it is a lot of work to take care of a child and a parent at the same time. The more clarity you can have, the better for sure. I would say that’s pretty important. Do they need long-term care insurance? Do they have it? What resources do they have available to help you help them in the process?

[00:41:01] TB: Yeah, absolutely. How about you, Robert, any other closing thoughts?

[00:41:04] RL: Yeah. I don’t know if we touched on the professional liability. I think that’s a big one. We’re getting that policy in place, the hospitals protecting her when she’s at work, but definitely not when she’s doing her supplemental income job. Even if the hospitals protecting her, they’re really protecting themselves, so it’s really important to have a policy of your own. These policies are very inexpensive relative to some other stuff for paying, so I think that that going out and getting professional liability policy would be easy and quick and a good solution.

[00:41:31] TB: Yeah. I mean, I think there’s some more to be done on the wealth protection stuff with the estate documents, probably be looking at some of the life insurance, maybe disability. Yeah, professional liability, low hanging fruit. I definitely probably in down the road if they are looking at a rental property and probably and one of the things that we haven’t called out here that we typically see with a lot of our clients, they have kids, they don’t take advantage of all the things available to them at IE like FSA for dependent care. If that’s something that we’re spending money on with Lucy, so probably some help with taxes in the future, perhaps, especially if they’re looking at a PSLF now you could argue with Texas, there’s no state income tax you really just need help with the federal.

As you’re looking at maybe a rental property and another baby PSLF and you feel you’re missing out on deductions and you’re owing that money, maybe some proactive planning around that as the financial situation becomes more complex is something that you might want to get a helping hand with. But yeah, good stuff, guys. We’ll leave it there. We really appreciate the conversation, looking forward to doing many more of these in the future. Yeah, thanks for doing this today.

[00:42:37] RL: Yeah, enjoy it Tim.

[00:42:38] KRH: All right, thanks, Tim.

[END OF EPISODE]

[00:42:41] ANNOUNCER: Before we wrap up today’s show, let’s hear an important message from our sponsor Insuring Income. If you are in the market to add own occupation disability insurance, term life insurance or both, Insuring Income would love to be your resource. Insuring Income has relationships with all of the high-quality disability insurance and life insurance carriers you should be considering and can help you design coverage to best protect you and your family. Head on over to insuranceincome.com/yourfinancialpharmacist or click on their link in the show notes to request quotes, ask a question, or start down your own path of learning more about this necessary protection.

As we conclude this week’s podcast and important reminder that the content on this show is provided to you for informational purposes only and is not intended provide and should not be relied on for investment or any other advice. Information to the podcasts 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 archived newsletters, blog posts, and podcasts 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 date publish. Such information may contain forward looking statements that 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 yourfinancialpharmacists.com/disclaimer. Thank you again for your support of the Your Financial Pharmacists Podcast. Have a great rest of your week.

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YFP 250: 10 Takeaways from 50 Financial Conversations with Pharmacists

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10 Takeaways from 50 Financial Conversations with Pharmacists

On today’s episode, sponsored by Splash Financial, YFP Director of Business Development, Justin Woods, PharmD talks about 10 takeaways from more than 50 discovery calls he’s conducted, where he has had a close look at the financial goals and concerns of pharmacists across the country.

About Today’s Guest

Justin Woods, PharmD received his Doctor of Pharmacy degree from Albany College of Pharmacy and Health Sciences, completed two years of postgraduate residency training at The Ohio State University College of Pharmacy, and is currently in his final semester at the University of Nebraska at Omaha pursuing a Masters in Business Administration degree.

Justin has spent nearly 10 years as a practicing pharmacist in community and specialty pharmacy settings. Originally from Upstate New York, Justin met his wife, Sara, also a pharmacist, during residency in Columbus, OH. They lived in Omaha, NE for four years and currently reside in Richmond, VA.

Justin is looking forward to connecting with our community and communicating the value of YFP to help pharmacists on a similar path as himself toward achieving financial freedom.

Episode Summary

Knowing the steps to reach your financial goals can be overwhelming and confusing, particularly at the start. YFP Co-Founder & CEO, Tim Ulbrich, PharmD, sits down with Justin Woods, PharmD, a fellow pharmacist and YFP Director of Business Development. Currently, Justin leads the discovery call process designed to help individuals determine whether or not the comprehensive financial planning services at YFP Planning comprehensive are a good fit for them. Since joining the YFP team in November 2021, Justin has conducted more than 50 of these discovery calls. Justin talks about ten takeaways he has had from these conversations. Justin shares his unique experience working at YFP and how he has gone from a fan of the podcast to the Director of Business Development. Justin explains how his prior experience as a YFP Planning client helps him conduct discovery calls, the benefits of discovery calls, what makes the YFP approach to financial planning different, and the best time to start your financial planning journey. Finally, Justin details why financial planning requires a substantial investment of time and money, why the transparency of the fees involved is so important, and addresses the most common question he hears, “What’s the return on investment?”

Key Points From This Episode

What YFP Planning has to offer clients and what discovery calls are.
Why people feel guilty about their financial situation when seeking advice.
The concerns clients have regarding saving up for retirement.
The prevalence of questions and interest that Justin experiences regarding real estate.
A brief outline of the concerns around repayment of student debt and the PSLF program.
Why YFP Planning services are suited for non-pharmacists as well.
The importance of involving both partners in the planning process.
When is the best time to begin the financial planning process.
Justin outlines some of the fees associated with the planning process.
An explanation of the “fee-only” model that YFP Planning uses.
Challenges around estimating the return on investment for clients.
The benefits of coupling your financial plan with a tax plan.

Highlights

“Generally speaking, if you have the motivation to book a discovery call, to find time in your busy schedule to prioritize your financial wellness, you’re making a big step and that should be acknowledged.” — Justin Woods, PharmD [0:11:24]

“In most models of financial planning, the more that you put money into an IRA, brokerage accounts, the more the advisor gets paid.” — Justin Woods, PharmD [0:16:34]

“We’re called Your Financial Pharmacist, but our planning services are technically for people of all income levels, all career backgrounds.” — Justin Woods, PharmD [0:21:47]

“Over time, investments are a tool to actually combat inflation and, with proper allocation, keeping expenses in your investment accounts low, your investments will grow with the market.” — Justin Woods, PharmD [0:30:13]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] 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 fellow pharmacist and YFP director of business development, Justin Woods on to the show. Justin leads our discovery call process designed to help individuals determine whether or not YFP Planning and its comprehensive financial planning services are a good fit for them. Since joining the YFP team in November 2021, Justin has conducted more than 50 of this discovery calls.

And on today’s show, we talk about 10 takeaways he has had from these conversations where he’s had a close look at the financial goals and concerns of pharmacists across the country. Some of my favorite moments from the show include hearing Justin talk about the various guilt individuals have when reaching out to a financial planner, whether that be about a previous mistake, join the club, feeling like they could be doing more or even as you’ll hear Justin say, having too much cash on hand.

Also, hearing Justin talk about determining when the timing is right to work with a planner and why there is a cost to not starting with the financial planner. Why planning requires a substantial investment of time and money and why the transparency of the fees involved is so important and how he answers the most common questions he gets, which is, “What’s the return on investment of the planning services?” Okay, let’s hear from today’s sponsor and then jump into my interview with Justin.

This episode of Your Financial Pharmacist Podcast is sponsored by Splash Financial. With interest rates on the rise, it’s a good time to evaluate the refinancing of your student loans. If you’ve ever considered refinancing your loans, check your rate now through Splash Financial.

Refinancing could help you get a lower monthly payment on your student loans or get a lower interest rate. Splash helps you shop and compare loan refinancing offers across lenders nationwide. Browsing rates through Splash Financial is fast, free and won’t impact your credit and now, when you successfully refinanced $50,000 or more, Splash Financial will give you an extra $500 in cash bonus, using our link at splashfinancial.com/yfp. Check your rate today and see what you might be able to save at splashfinancial.com/yfp.

[INTERVIEW]

[0:02:16.8] TU: Justin, welcome to the show.

[0:02:18.4] JW: Hey, Tim. Pleasure to join you. A bit surreal, actually, since I’ve been a long-time listener of the podcast since 2017 now, and now feature as a guest in addition to being part of the YFP team.

[0:02:29.0] TU: We are so glad, Justin, to have you as a part of the team. You and I have known each other for sometime on the pharmacy world, we completed residencies a few years apart of your house at University College of Pharmacy, had some great shared mentors there and are really excited to have you as a part of the YFP team.

[0:02:45.2] JW: Definitely. One quick point before we get started, I don’t want our listeners to think this podcast is having an issue buffering when I’m speaking. I do have a stutter or as I like to say, I speak with a remix. That is my one disclaimer for folks who might not know me since I’m human and you may hear a stutter periodically throughout this episode.

[0:03:06.1] TU: Appreciate that, Justin. So, here we are, episode 250, we just crossed a million downloads. Thank you so much to the YFP community, the support that you’ve provided us since launching the podcast in July of 2017. Really, a surreal moment for us and for folks that had been listening for a while, if you haven’t yet done so, if you could please do us a favor and leave us a rating and review on Apple Podcast, wherever you’re listening to the show, we’d really appreciate that and be a great way to help others find the show as well. Thank you so much for the ongoing support that everyone has provided.

Today, we’re going to be talking, Justin and I, about 10 takeaways that he has had in 50 plus conversations with pharmacist about t heir financial goals, about their financial plan, since he joined the YFP team in mid-November of 2021. These conversations come through the discovery call that we offer folks and Justin leads these efforts, these discovery calls are an opportunity to learn more about YFP Planning and comprehensive planning services and folks can learn more at yfpplanning.com.

Justin, before we jump into your story, before we talk more about the takeaways that you have had through these 50 plus conversations, give our listeners who may not be familiar with the planning services offered by YFP Planning, more insights into what the discovery call is, why it’s important and what they could expect?

[0:04:31.5] JW: To be honest, hiring a financial planner, it’s a big investment in time and dollars. With that said, our model is worth it for the right people and it’s wrong for some and that’s certainly okay. And through a discovery call, I seek to understand your specific financial needs and concerns. I meet with people who vary, in terms of their season of life.

Some folks are new practitioners building their careers while simultaneously tackling student loan debt, learning how to be efficient with their income, others are growing personally by starting a family or purchasing a home, some are mid-career, seeking to optimize their income, given more cashflow through being debt free here just no longer paying for daycare.

Then we have pharmacists who are near retirement and want to protect the assets that they worked so hard for. Typically, people share, they feel overwhelmed or concerned about their debt. Maybe even frustrated that they’re making a good income but are not progressing financially. I also hear some folks are unsure if they’re optimizing the income they’re making or even afraid that they won’t be financially secure in retirement.

And it is only through a discovery call process that we can uncover your financial why and understand if YFP has solutions that fit your needs. In terms of what to expect when you take that initial step to book a discovery call, you first book the call through our scheduling application that shows you my availability to help find the best time that works with your schedule, we conduct these calls via zoom conference and in fact, when you become a YFP Planning client, you work in a virtual space with your lead planner as well.

The meeting will last 30 to 60 minutes, depending on where their conversation goes. I do take notes throughout the process to capture information in the moment and also because, if you take the next step to become a client of YFP Planning, anything we discuss goes directly to your lead planner to review before your first meeting with them.

[0:06:48.9] TU: Great stuff, Justin, and for folks that are listening, maybe had been following the community for some time and they’re ready to take that step, they can do so. By going to yfpplanning.com, they’ll see that option to schedule a discovery call, they’ll see your face and they can pick a date and time that works for your calendar and works for their schedule as well.

Let’s jump into 10 takeaways that you’ve had. Now that we framed what the discovery call is, we’re going to talk about 10 takeaways you’ve had through over 50 of these discovery call, financial conversations with pharmacists over the last few months.

I think the first one is a good segue from what you just shared that this is really about discovering more about an individual’s financial plan and their goals, it’s hence called the discovery call and number one, I think the thing that we first see is that individuals might be seeking financial advice in these calls and my question is, what’s the problem here, isn’t that the team at YFP Planning has expertise in? Tell us more about this one.

[0:07:44.7] JW: Yes, right, exactly. Trust me, I’m not an expert in personal finance. You can certainly ask my own YFP financial planner, Kelly Reddy-Heffner. In fact, I’ve made many mistakes that you, Tim, outlined in episode 247 of 10 common financial mistakes pharmacists make.

Realistically, five months ago, I was a practicing pharmacist. I’ve spent 10 years in community and especially pharmacy settings including two years of residency at Ohio State, go Buckeyes. If you’re listening right now and afraid I’m going to test your financial literacy on a discovery call, I promise, you have nothing to worry about when I’m on that other side of the screen but even though, I’m not a financial planner, I do understand our comprehensive financial planning service better than most folks since I see it from the inside as part of the YFP team.

But my wife, Sara, also a pharmacist and I are YFP Planning clients as well. For a bit of background about the industry, a survey of financial advisors show that advisors spend 15 to 20% of their time on business development activities as in meeting with perspective clients and in our model, our financial planners focus solely on financial planning and I lead those discovery calls.

[0:09:10.1] TU: That’s a great call, Justin. I don’t think that’s something we’ve talked about before on the show that the model we’ve chosen is to really let the planners be really good lead planners so they can focus on the needs and the issues that the client is bringing forth and then obviously, your role, and Tim and I have shared some of this as well, to really focus on some more of those business development activities and I would even further contend, Justin, that I often said this.

Hey, I’m not a financial planner as well, I love the topic, I love to learn but I think there’s often value and not getting in the tactical weeds, right? In that first call, when you’re really just trying to understand, what are the goals, what are the hopes, what are the dreams, what are the pain points, what are the problems so that we don’t get sucked into very detailed student loan repayment or investing strategy but rather, we can just really learn about what is of greatest need and significance to the client. It’s so important early on in that relationship.

Number two, Justin, I often felt like you know, I still joke with folks as that I feel like sometimes when I do a talk or people come and talk to me, it’s almost like financial confession, you know, sometimes. Number two is I think that folks may feel like, “Hey, I’m coming with some guilt about the financial situation.” This one resonates with me, I felt a lot of financial guilt and pressure early on in my journey. Tell us more about what you’re seeing here?

[0:10:25.2] JW: Yeah, this was an element I honestly did not anticipate early on when I started taking discovery calls, particularly knowing my own financial mistakes. It has been fairly common for people to acknowledge they feel guilty or feel ashamed of how sharing or admitting a piece of their financial lifestyle that they’re not proud of, it could be related to a number of things, like their lack of a budget or consistently sticking to a budget, maybe the amount of student loan debt they have, not being able to clearly define their financial goals and more recently, many people have shared, they feel guilty about having a large amount of money sitting in their checking or savings account since their expenses were minimized during the pandemic and they just don’t know what the best strategy is but also know, it’s losing value sitting in a checking or savings account.

Generally speaking, if you have the motivation to book a discovery call to find time in your busy schedule to prioritize your financial wellness, you’re making a big step and that should be acknowledged. That should be celebrated. It’s okay to be human, you’re obviously aware that a change needs to happen on your financial path and whether financial planning can achieve what you need, it’s something we’ll talk thorough together. It’s similar to working with patients, right? When you have an engaged patient, ready to make a change, there are certainly a greater likelihood for success.

[0:12:00.8] TU: Absolutely, and then, number three on our list here of common things you’re hearing through these 50 plus conversations is, you know, folks coming in with questions, perhaps some concern about saving for retirement, why is this such a common concern?

[0:12:16.0] JW: Yeah, this is the second biggest concern from potential clients is saving for retirement. They share that they feel behind for retirement but they’re not sure why they feel that way. They say, “I just know I don’t want to work forever” or “I’m not confident, I’m on the right track for retirement because I don’t know what the finish line is or how to track my progress.”

The typical question is, “Is retirement and age, is retirement a dollar amount?” People often admit that because it is a goal that’s decades away, it’s hard to relate to and objectify. Honestly, that’s just human psychology. The further away something is, the harder it is to relate to. Typically, when people bring up retirement, I ask them, “You know, of the steps you’ve taken so far, do you think you’re on the right track?” and inevitably, the answer is a clear “No” or they refer to the chart on the dashboard of your 401(k) account, right?

Through the planning process, our planners help clients conduct what’s called a “nest egg calculation” or the amount of money that you would need to retire comfortably. The last time I did this calculation for my wife and I, it was about 3.3 million dollars and this is generally where people, look at me, I haver three million heads, right? Since it’s a big number, way in the future.

Whether retirement’s 20 years away, 10 years away, 40 years away, the big question is, what does that actually mean in today’s dollars and what do I do with that number? I think a good financial plan will really take that information, distill it down to, “Okay, let’s discount that information back to today’s numbers, what does that mean for how much we need to be saving each and every month?” and then, let’s begin to put a plan in place based on the tools we have.

Like a 401(k), a 403(b), and IRA. Automate that plan so we’re contributing in a tax efficient manner or keeping the fees low and we’re allowing compound interest to do its magic and time, value, money to kind of take its course.

[0:14:34.8] TU: Great stuff, Justin. I think we often think about retirement as a hope, a wish, a dream or a big scary data off in the future or we do get a little bit more granular, maybe punch some numbers in a calculator and then the number that’s spit out were like, that feels impossible, right?

[0:14:49.5] JW: Right.

[0:14:50.5] TU: I feel behind or I’m worried about that becoming a reality and I think, what I really hear there is that value in coaching of bringing that to life and then, let’s make sure we put that into numbers that mean something today and let’s also make sure we’re prioritizing that along with other goals that we’re working on with the financial planning, that’s great stuff.

Number four, the prevalence of questions and interest that you’re seeing in real estate. Both purchase of a primary home as well as in investment properties. I think this – I will say, this doesn’t surprise me, right? We’ve seen a lot of growing interest in real estate investing.

Part of the reason we launched the Real Estate Investing Podcast, we certainly have felt the interesting home buying, could be a first home, second home, obviously we know that that market is pretty wild right now. Tell us more about what you’re seeing here?

[0:15:35.2] JW: Yeah, I mentioned a bit ago that retirement was the second top concern of people I meet with, another top five concern is home purchase. What I found is that this is not limited to people who are buying their first home. I also hear this concern from people who have outgrown their current home or maybe looking for a second home, a vacation home.

Followed closely behind that topic of home purchase is interest in real estate investing. The prevalence of this topic as you said could be due to the nature of our podcast content, particular when they and David on the Real Estate Investing Podcast.

But for most people, it seems like real estate is an outlet for their entrepreneurial spirit and helps also create passive income but I also think it’s due to the nature of our fee only financial planning model. As Tim Baker shared in episode one of the Real Estate Investing Podcast, in most models of financial planning, the more that you put money into an IRA, brokerage accounts, the more the advisor gets paid.

They’re not incentivized to say, “Hey, maybe you should dump $50,000 into this property?” Because again, it takes away from that traditional investment vehicle. But our team does view real estate investing as a method to build wealth and we have the resources to help people through that process if that is the path you want to take.

[0:17:10.4] TU: Great stuff, this is another example, just like we often talked about with, “Hey, when you work with a planner, if you’ve got student loans and they don’t understand student loans, that’s a problem” right? If you’re working with a planner that maybe doesn’t prioritize or value real estate investing as an option, right?

We’re not saying this for everyone but it’s an option to consider, has experienced either themselves or advising other folks. Such an important distinction in that relationship. Number five, to no surprise, we’ve just talked about this in episode 248 of the podcast as I mentioned is, folks coming with questions, confusion, angst, excitement, any other emotion I think, surrounding PSLF. Tell us more ab out what you’re seeing here?

[0:17:49.6] JW: Yeah, as you said, if you’re listening and new to the term PSLF, definitely queue up episode 248 to learn more about the program and hear some of the pharmacist success stories there.

Since I did not practice as a pharmacist for a nonprofit or a 503(c) organization, I wasn’t eligible for PSLF but through my role here at YFP, I quickly learned how overwhelming and confusing the process can be for some people and personally, I would want an expert to help me through that process, to help me get thousands of dollars wiped away after a hundred twenty payments. That is what I hear on discovery calls as well.

People are confused about the nuances of the program, confused about how to optimize the repayment strategy in a tax efficient way and need a partner to help get them across the finish line. Obviously, I have a biased opinion but I’ve heard the success stories and I see the joy our team shares on Slack when they help a particular planning client get those loans forgiven. If you’re a pharmacist listening and need the support of a team to give you that peace of mind that we can get you to the finish line, YFP Planning is your best option.

[0:19:13.7] TU: Awesome stuff. Number six, Justin, is spouses or significant others where maybe one is a pharmacist and one is not and you know, maybe wondering, “Is YFP Planning even for us? Do we both have to be pharmacists or do you guys work with non-pharmacist?” Tell us more about what you’re seeing here.

[0:19:29.7] JW: Yeah, I wanted to include this observation since it was brought up during one discovery meeting and generally, if one person has a question many other folks do too. In this example, we were nearing the end of this particular discovery call and the pharmacist shared, “Even though I’m a pharmacist, my husband is not and I want to make sure that he’s represented throughout the planning process” and I could have not been more thrilled that she brought that up.

Because one, it taught me that I need to acknowledge upfront at our planning process is not just suited for pharmacists. Obviously, we’re called Your Financial Pharmacist but technically only 80 to 85% of our clients are pharmacists and the majority of those households we work with, only one person is a pharmacist. The active involvement of both partners regardless of their background we feel is critical to the planning process.

In fact, when you book a discovery call, we ask you to find a time that both you and your partner are available. If you’re married, engaged, maybe not married but living with your partner for many years, you generally have shared assets, maybe not combined finances, which is a step we walk clients through during the planning process if that makes sense but you generally own things together like a home.

In these cases, it is impossible to optimize the financial planning process if we don’t have all the decision makers at the table and I’ve learned this the hard way that generally speaking, if we conduct a discovery call with only one partner, we get to the end and they say, “Oh this sounds great but let me check with my spouse” and then what we end up doing is going through the discovery call process all over again because that partner may have a different perception of money, its impact and also their own financial goals.

It is critically important that both partners are involved in the discovery call and in that initial planning phase should you become a client of YFP Planning. So long story longer, yes, we’re called Your Financial Pharmacist but our planning services are technically for people of all income levels, all career backgrounds. It just has to fit what you’re looking for.

[0:21:57.2] TU: Yeah, so important, Justin. I’m a firm believer – I wrote an article way back when about 10 financial discussion every couple should have whether they decide to merge accounts or not and how assets are joined or not, whether they’re married or they’re not married, just healthy discussion for folks to have about getting on the same page financially even having an understanding where they agree to disagree in certain areas just to have those conversations.

We believe as you mentioned that outcome of the planning process is so much stronger, so much richer when both folks have a voice because what we often see and I’ve experienced this first hand with my wife, Jess, and I and Tim Baker, being our planner, is that you have that hour with Tim is great but the two hours afterwards and the conversation later that night and that weekend throughout that week where we are then discussing among ourselves, it’s so helpful to have that third party and to make sure both folks are present, to start that all the way at the beginning as they are evaluation that service to begin with.

Number seven, Justin, you shared with me kind of this chicken and the egg of timing of when to work with a planner, meaning that, “Hey, Justin, I’ve got a lot going on and the need is there for help but also just wondering of like maybe I should just wait to a certain point” right? Maybe I am in a busy phase of life and I should just wait until we get through things in the next six or 12 years but the other side of that coin is, right now I am looking ahead. I am in the middle of a lot of things where I could use the value, the help and a planner. So, talk to us through this one.

[0:23:18.0] JW: Yeah, so I heard Tim Baker share a phrase during a discovery call when I first started and it’s that, “Transition points bring lots of financial decisions.” The emphasis is that there is a cost to not starting with a financial planner. If you see the value that it can bring to you or your family, it will continue to cost you to not get started. It could be a tangible thing like paying more in interest on student loans, right?

Or money sitting in your savings account that’s being eroded by inflation or possibly more time lost toward your short-term goals like a home, vacation, car purchase, starting a family or even just stress around balancing multiple priorities. I hear people say, “Let me get rid of credit card debt and let me streamline my budget before I hire a financial planner” and I try to challenge those people that, “Isn’t that the reason you book this call because you need help with some of these aspects of your financial life?”

I also hear other people say, “Let’s wait until student loan repayments start” or “Maybe after our wedding” or “After I started my new job” and I totally understand that these transition points are stressful and that it’s difficult to think about adding one more task to your plate but that’s the beauty of financial planning. It is more about the process than the plan itself and through that process, these points of transition become easier to manage personally and maybe even enjoyable with less financial stress.

[0:25:00.4] TU: Great stuff. Number eight has to do with the fees and I think the unawareness of the fees and this is really insightful for you to come into the YFP Planning our fee-only, our pricing model, which I think is a little bit non-traditional to the industry and to get some experience but generally here, what you are seeing is an unawareness of the fees associated with the planning. Folks realizing maybe there is a lot of variation in the industry but not knowing really what to expect here in terms of that investment of money. Tell us more.

[0:25:27.7] JW: Yeah, as I mentioned before, hiring a financial planner is an investment of both time and dollars so we obviously talk about pricing during the discovery call but what I’ve noticed is that generally people have no idea how much a financial planner costs or even how a financial planner gets paid. Tim Baker tells the story of when he decided to become a financial planner.

He went to his mother and said, “I am changing career paths to become a financial planner” and his mother told him it was the stupidest idea he’s ever had since she doesn’t pay her financial planner anything and that lack of awareness around fees is not unique in the financial service industry. I actually started working with an advisor back in 2014 with another company and when I went through the discovery call process myself out of curiosity if YFP Planning was a good fit for me and my family, Tim Baker really educated me on all the hidden fees.

Since that point, I’ve learned that payment models for financial planning come in more varieties than Skittles and Jolly Ranchers combined. The most common fee though is called “assets under management” where your planner will charge you a percentage of the money you invest with them. This percentage can range based on the services they provide but it is generally at least one percent.

What I didn’t know is that there are also expense ratios assigned to those investments or funds based on where they are invested and since you need to pay a small fee for the company of the fund to handle those day-to-day operations but if you are not careful, those expense ratios can really impact the overall performance of your portfolio in the long run and that is where our model is different, right?

We’re fee only, we’re fully transparent about the fees that we charge. We believe that fee only is the best way to operate as a financial planner because it reduces conflict of interest. Similar to the real estate example that I just shared, in reality most folks don’t wake up one day and decide to hire a financial planner. You typically hire a financial planner to solve a problem and generally it’s not a math problem.

It’s because you want to live a richer life than you currently have and achieve your version of financial freedom and we believe a fee only model is the best way to keep your financial goals a top priority.

[0:28:12.8] TU: Justin, you’ve mentioned now twice that it’s a significant investment of time and money and you and I are both analytical pharmacists and I suspect you talk with many folks that are like, “Okay, it’s an investment of money, I get that” maybe they have even talked with someone before where it’s quote “free financial planning” and then they realize otherwise that there is either hidden fees or perhaps sale of products in their best interest.

That is really where the revenue might be coming from and truly not providing confidence of planning, so I value the transparency. I understand there is a fee involved with that but naturally the next question here is, what’s the ROI, right? What is the ROI? Tell me more about what you’re hearing from folks as they’re trying to make this decision of, “This is an investment of time and money, then what’s the potential return?”

[0:28:58.4] JW: Yeah, this has to be the number one question and I’m mastering a discovery call and it is very difficult to answer since as a comprehensive financial planning firm, we prioritize your complete financial life. When some people think of a pharmacist, they think of counting pills and I say some people because I like to think and believe that that narrative is changing.

The point I’m trying to make is that when most people think of financial advisers, they think of investments and in our model, investments is only a small piece of the financial plan. A few people have recently asked me, “What is your investment philosophy for combating inflation?” and one, I’m not a financial planner so I probably don’t have the best technical answer and two, if that’s your primary concern that’s fine but we’re probably not your people and that’s okay because in general, the market is efficient, right?

93% of active management advisors, so those who attempt to beat the market, 93% of them fail, right? There are pockets of inefficiencies like we’ve noticed recently but overtime, investments are a tool to actually combat inflation and with proper allocation, keeping expenses in your investment accounts low, your investments will grow with the market.

[0:30:24.9] TU: Yeah, great stuff. Definitely as Tim always say, which I wholeheartedly agree with his investments as you mentioned it is one part of the plan among many others, an important part but it is one part of the plan and in traditional planning and part because of how the industry was born and how fees are assessed, often you know that maybe with some insurance might be the bulk of the plan and there might be things like, “Hey, those student loans will just take care of themselves” or “That home buying like nah, not so much us” or “Investing in real estate, not so much.”

I think when you look at really good comprehensive planning, which I am bias of the work that Robert and Kelly’s team does and under Tim’s leadership with YFP Planning, a really good comprehensive planning will again, get us out of the silo and be really looking at how do we make sure we’re taking care of our future self. We need to be thinking about that – how do we also make sure we’re living a rich life along the way, right?

Yeah, we need to be saving and investing and in doing so efficiently and saving on fees and taking advantage of the tax benefits but we also need to be thinking about many, many other parts of the financial plan including the protection parts as we think about things on the insurance side, on the estate planning side, obviously the debt management piece and then all the other things that come throughout life and throughout the financial plan.

That takes time, an investment of time, an investment of money and obviously there’s benefit in that being transparent as you mentioned. Number ten is what you’ve I think seen often, which I will hear often as well is, “You do taxes?” and I think a lot of individuals may not be thinking about the synergies between the tax and the financial plan or the power of the synergies between the tax and the financial plan.

What are you hearing here and what perceived value are you getting that folks see of, “Okay, well, what could be possible if we really have the tax plan rowing in the same direction as the financial plan?”

[0:32:10.9] JW: Yeah, as you said, the synergies between taxes and the financial plan, that’s something that I’m still personally learning about since I too did not understand that for a long time how interconnected they are and in this time of year, a lot of people share with me how their tax returns went. I hear from people who own quite a bit of money and then excitement from other people expecting a big refund.

Previous Justin would have also been excited about a big refund but my perception is changing through my own comprehensive financial planning process. If you’re listening right now and are expecting a big refund, let me ask you how would you have spent those dollars better throughout the year? Could you have put up a bigger down payment on your home? Could you have added more to your 401(k) or investment contributions?

Could you finally leave your state and go on vacation, right? When you get a tax refund, you’ve basically given the government money interest free and through our planning process in quarter one, we file your taxes for you but the real magic happens during the year through our tax planning service where we ask you for a couple of documents and by understanding your situation, we can estimate either how much money you will owe or how much money you will get back and neither of those are great options.

We want to get as close to zero as possible, so we outline strategies that we can proactively put in place during the remainder of that year to again, get that number as close to zero as possible because that shows us that we’re being as efficient with our income as we possibly can.

[0:34:05.7] TU: Well, there you have it, 10 takeaways from 50 plus financial conversations that Justin Woods has had with pharmacists over the last few months and Justin, I can tell you firsthand when you came up with this list of ten, I’ve done a handful of discovery calls prior to your arrival. Tim Baker has done ten times as much as I have but these are themes that we’ve seen for years.

I think some of the takeaways that you brought here I suspect will resonate with many folks that are listening to this episode. As I listen or hear to this, I’m a pharmacist thinking, “Hey, maybe I am interested in taking this next step to get on a discovery call with Justin and learn more about the planning services” you know, see whether or not it’s a good fit, tell us more about what next step they can take and where can they go to schedule that.

[0:34:46.8] JW: Yeah, thanks for having me, Tim, and I hope that by sharing these observations of mine, it will encourage or maybe even motivate more people listening to consider a discovery call and we can work together to really understand if it’s a good fit for you specifically.

[0:35:03.9] TU: Great stuff and, again, folks can go to yfpplanning.com. You can see an option there to schedule a call and that will allow you to get some time on Justin’s calendar. Justin, thank you so much. I really appreciate it.

[0:35:13.8] JW: Thanks, Tim.

[END OF INTERVIEW]

[0:35:14.9] TU: Before we wrap up today’s episode of Your Financial Pharmacist Podcast, I want to again thank our sponsor, Splash Financial. If you’ve ever considered refinancing your loans, check your rate now through Splash Financial. Refinancing could help you get a lower monthly payment on your student loans or get a lower interest rate.

Splash helps you shop and compare loan refinancing offers across lenders nationwide. Browsing rates through Splash Financial is fast, free and won’t impact your credit and now, when you successfully refinanced $50,000 or more, Splash Financial will give you an extra $500 in cash bonus, using our link at splashfinancial.com/yfp. So, check your rate today and see what you might be able to save at splashfinancial.com/yfp.

[DISCLAIMER]

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 242: Social Security 101: History, How it Works, and Why it Matters for Your Financial Plan

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Social Security 101: History, How it Works, and Why it Matters for Your Financial Plan

YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP® talks about social security retirement benefits, how they are funded, how to determine eligibility and considerations for receiving benefits.

Episode Summary

It’s time to talk about the elephant in the room that most people ignore for as long as possible: social security retirement benefits. Whether retirement is decades or just years away, it is something you should be talking about sooner rather than later. This week Tim Ulbrich sits down with YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP® to do a deep dive into the history of social security, how it came to be, and what it was and was not intended to do. Tim Baker covers how social security benefits are funded, the credit concept, what number of credits are needed to be eligible for benefits, and how those credits are determined. You’ll also hear some golden nuggets from Tim on the power of being protected against inflation, as well as reminders on striking a balance in the financial plan around happiness and physical and mental health. Finally, Tim and Tim touch on how the amount of benefit paid out is determined and considerations for when someone elects to receive their benefits in early, full, or delayed retirement. This episode helps establish a great foundational understanding of social security benefits and how they fit into a broader financial plan.

Key Points From This Episode

An introduction to today’s topic and a reminder that we can help you with your tax.
Addressing why people aren’t having enough conversations about social security retirement benefits.
Hear some intense statistics about retirement and working longer that will blow your mind.
Talking about the history of social security and the difference between that and a 401(k).
Being protected against inflation by being inflation-adjusted.
Tim talks us through some annuities and numbers in a basic scenario.
Discussing our huge year next year from an inflation perspective.
How retirement is not just a money decision, it’s an emotional decision.
Tim digs a little into the different ways scarcity fear can arise during retirement.
Looking at your pay stub: explaining credit and payroll taxes.
The outcomes of the three ages of retirement: early, full, and delayed.
Touching on some of the nuances around health and spousal benefits.

Highlights

“How you approach social security is one of the most important retirement income decisions you’ll make.” — Tim Baker, CFP®, RLP® [0:05:33]

“We’re just not great savers, we don’t think that far ahead. Social security forces that issue and, by law, makes you kind of set that money aside for that future benefit.” — Tim Baker, CFP®, RLP® [0:10:00]

“This is not just a ones and zeroes decision. It’s not just a money decision, it’s very much emotional.” — Tim Baker, CFP®, RLP® [0:15:44]

“At the end of the day, you’re really trying to manage and plan for the unknown and that makes it really difficult. I think it goes back to, you just want to be intentional.” — Tim Baker, CFP®, RLP® [0:31:44]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

This week, I had a chance to sit down with YFP co-founder, co-owner and Director of Financial Planning, Tim Baker, to talk through social security retirement benefits. During the interview, Tim and I discuss the history of social security, how it came to be and what it was and was not intended to do, how the benefits are funded. We also discuss what number of credit is needed to be eligible for benefits and how those credits are determined and finally, how the amount of benefit paid out is determined and considerations for when one elects to receive their benefits.

Now, before we jump in to today’s show, let’s pause to acknowledge that we are in the midst of tax season. Those tax forms are piling up and it’s time to have your tax filing and planning top of mind. Now, tax strategy and planning is an undervalued but very important part of the financial plan and YFP Tax is working hard to help pharmacy professionals optimize their tax situation. YFP tax is opening up its services to file 2021 taxes for 125 pharmacist households this year.

The team at YFP tax isn’t focused on just completing your tax return, instead, they provide value, care and attention to you and your taxes. Because YFP tax works specifically with pharmacists, they’re familiar with aspects of your financial plan to have an impact on your taxes. The 125 slots are filling up quickly so don’t wait too long. I5f you’re interested in working with a team of highly trained tax professionals, head on over to yourfinancialpharmacist.com/tax to sign up. Again, that’s yourfinancialpharmacist.com/tax.

[INTERVIEW]

[0:01:47.9] TU: Tim, welcome back to the show.

[0:01:49.1] TB: Yeah, good to be back, love these deep dives, these full episodes.

[0:01:52.9] TU: Good stuff, looking forward to doing more of that in 2022. And we’re now 240 plus episodes into the podcast, I think we’ve laid a really good foundation on so many topics that are front of mind for pharmacists and those in the YFP community. I think we’re itching to really take it to the next level and today, we’re going to do that by providing a primer on social security benefits and what pharmacists should be thinking about in terms of how social security benefits fit into the broader financial plan. And on future episodes, we’re going to discuss some common social security mistakes and strategies. So today, we’ll make sure to establish a good foundation that we can build upon going forward.

Whether you’re listening and you’re approaching retirement in the middle of your career, just getting started, you know our hope is that you’ll walk away with a social security nugget or two that you can consider and evaluate as a part of your own plan. Today, as we talk about social security benefits, we’re going to use that term interchangeably with social security retirement benefits. We’re not going to be including and discussing this social security disability benefits.

Tim, I was looking at a recent Wall Street Journal article and I know you’ve got some other stats as well that we’ll draw out throughout the episode but that article, which we’ll link to in the show notes references some work that was done by Boston Colleges Center for Retirement Research. They say that for the typical American household aged 55 to 64, the present value of social security’s represent about 60% of their retirement assets. And with that in mind, even if that number is half, let’s say, 30% for those that are listening to the podcast because they’ve been diligent in setting up their own savings plan, why aren’t we talking more about such a big part of one’s retirement assets?

[0:03:39.4] TB: Yeah and it is crazy Tim, because there is the tenure out there that, “Social security won’t be there for me in the future, I can’t trust it. I have to go do this all myself.” I don’t think that’s necessarily true. I think that social security will be a program that will endure and it might take tweaks and pushing for retirement age out and payroll taxes and things like that. I think there could be things that happen along the way that make it more enduring.

I think that for that sense of the fold, it would be catastrophic because, to your point and your stat, so many people rely on this for their ability to survive in later stages of life. I read a stat that a third of retirees, 90% of their income comes from social security, think about that. I think it goes to show, it’s like, we’re not great at kind of transporting ourselves into the future and saying like, “Hey, I really could use this nest egg of dollars” because we just disassociate ourselves from things that are 20, 30, 40 years out and it’s such an important thing to kind of breakdown and look at because it’s one of those things that you wake up and you’re like, “All right, I’m 50, I’m 60, I’m looking at retirement and what do I have?” And it’s not enough.

Social security, we’re going to go into the some of the background and everything but it is a major piece of this Rubik’s Cube that is, “Okay, once I stop working, how can I convert or how can I build this retirement paycheck that I’ve been really working my whole life for?” Social security is going to be a big part of that, with the stats support that. How you approach social security is one of the most important retirement income decisions you’ll make. I would say, most of the retirement, one of your most important retirement decisions, not even income decisions.

To me, yeah, we haven’t talked about this enough. I think it’s really important because it is going to be a major piece of the pie when we’re breaking down, “Okay, we need X amount of dollars per year, this percent is going to come from social security, this percent’s going to come from your 401(k) IRA, this percent is going to come from here.” That’s really important to break it down and I read a stat Tim, this will blow your mind, we’re talking about – with some clients, the power of working longer.

[0:06:14.5] TU: Yeah.

[0:06:14.8] TB: The stat is that, delay in retirement by three to six months is equivalent to saving 1% more for 30 years.

[0:06:22.2] TU: Wow.

[0:06:23.2] TB: That’s insane. Then, to break it down a little bit more, defer retirement by one month is equivalent to 1% more savings for the 10 final years before retirement. What’s going on here, there’s lots of different variables. When you work longer, you are earning and typically, you earn at the top end and we’ll talk about that with social security, you’re making the most in your career towards the latter part of your career.

You’re also not – that’s one last month or year that you’re digging into your 401(k), 403(b). It’s one less year that if you live to age 90 that you’re drawing on that. Social security is a big part of that in terms of delay and deference, so there’s just a lot going on that really is important to understand. And again, social security is going to be a big part of that and that’s why I’m eager to kind of dive in with you and kind of crack the nut, so to speak, in a very important topic.

[0:07:19.9] TU: Well, thanks Tim, for dashing my hopes of early retirement. No, I’m just kidding. Let’s start with the history of social security. I think it’s important, your comment earlier was a good one, right? I think for many of us, myself included that it’s easy to disassociate with something that’s 20 to 30 years out. I think even more so, there’s been such negative talking points around social security that I think especially for us that maybe are on the early or mid-part of our careers where it’s kind of been not a big thing that we’re thinking about. Which on one hand, you could argue as a blessing because that means hopefully we’re building our own retirement paycheck and social security might be a bonus. But on the other hand, I think as we’re going to expose today, that probably means we’re not thinking enough about it.

[0:08:03.1] TB: Right.

[0:08:04.1] TU: You mentioned, it’s an important part of the Rubik’s Cube. Understanding the history and what it was intended to do and not intended to not do, I think, is a good segue into understanding some of the benefits and credits in how we determine how we’re going to approach the strategies for withdrawal. Talk to us about the history of social security starting with the social security act of 1935?

[0:08:24.0] TB: Yeah, this was an act that was signed in the law by FDR, President Franklin Delano Roosevelt in August of 1935 and really, what it was the main effort here was, it created a social security administration and thus, the social insurance program designed to pay retired workers at retirement, age 65 or older and to continue throughout retirement until death.

It was really meant to kind of look at the problem of economic security for those in old age by setting up this system, which you contribute as a worker throughout the course of your career into this huge fund and it’s not – it’s different. We just had a question about, “I’m maxing out my 401(k), what should I do from here?”

In that case, when you put money into a 401(k), that is your own individual account. Every dollar that you put in, again, dependent on your investment selections like you’re going to get that back. Social security is not the same, it’s a big pool that then pays benefits as you kind of hit those retirement ages.

You’re funded. And when you look at your pay stub, Tim, you’re going to see a big line for social security and you’re going to see that money’s coming out each paycheck and how much you contributed for the year, but it’s really meant to kind of be based on the fund and based on the payroll tax contributions that you make during the course of your working life.

I think around this time, you got to think. I think there are lots of measures that kind of protect the worker, not just in this in terms of economic security but I think even safety and things like that and I think the data shows that even today. And maybe it’s because of this, but we’re just not great savers. We don’t think that far ahead and social security kind of forces that issue and, by law, makes you kind of set that money aside for that future benefit.

But social security, from the outset Tim, was never ever meant to be, to meet 100% of the needs of retirees. Although, like we said in some of these stats, for some people, it comes pretty darn close. Again, to me, depending on where you’re at in the income scale, if you’re lower income, it could be 100%.

If you’re a higher income, it could be a very much smaller percentage of the overall need but it is one of those incomes for life that is inflation protected which you just can’t find anywhere. Even if you were to say, “Hey, I have a three million dollar portfolio and I’m going to drop $500,000 or a million dollars into an annuity that I’m going to buy,” it’s not going to be as good or as beneficial to you as what social security is going to provide.

Like you said Tim, the history – I think this just comes with different amendments but it was really also meant to protect disabled workers and also, families where the working spouse or parent died. It is a monumental piece of legislation and I think really paved the way for people to have a benefit that they can lean on in older age and not really work for the entirety of their life.

[0:11:26.5] TU: Tim, when you say it’s inflation protected, just to clarify there for folks that are diving into some of this, perhaps the first or second time, that’s because the benefit itself is inflation adjusted, right? I remember talking with folks this year that our drawing social security benefits because we’re inflation and they saw a significant bump in that benefit heading into 2022 and to your point, that’s just really hard to find that type of benefit and we think about traditional kind of retirement planning, 401(k), Roth IRAs and other types of things, you’re having to account for that yourself, right? As you’re building that portfolio.

[0:12:01.4] TB: Yeah, exactly. That’s why when we talk about, “Hey, you can’t just stuff the mattress full of dollar bills and hope that in 30 years, your purchasing power is going to be there.” In social security, that’s built in for you. I think it’s by law so every year, they set the COL, the cost of living and then they adjust the benefit accordingly. I think recently, it’s been lower, I think I saw a number, it was like 1.7 but next year, it will be a lot higher because we’re seeing rates start to tick up. But that benefit alone, Tim, is not to be underestimated.

Because again, if you go on to the marketplace, either an annuity – when I say annuity, essentially, what I’m saying here is – that’s all really social security is, in the sense that – an annuity is, you put money in either in like a lump sum over time and then sometime in the future, you annuitize it so you basically start to draw on that benefit and they say, “Okay, based on the amount of money that you put in and our ability to invest on your behalf, we think that we can pay you a benefit of $2,000 per month.”

What a lot of people do is, they’ll take some of that nest egg, some of that defined contribution like a 401(k) and they’ll peel that off so they’ll say, “Okay, if I need a paycheck…” Kind of tangent here but I think worth going down.

[0:13:21.9] TU: Yup.

[0:13:22.5] TB: “If I need a paycheck of $5,000 per month and $2,000 is going to come from social security and I know that for me to keep the lights on, housing, food, kind of the basic necessities, I need $3,000.” Basically, what I would do is, I have $2,000 from social security, I’m going to purchase an annuity that’s going to give me an additional thousand dollars per month so I’m going to take, I’m going to make up a number, I’m going to take from my portfolio of half a million dollars and basically buy that annuity that it will give me a thousand dollars per month.

There’s lots of different ways to go, you can have a joint rider where you can have a term certain, there’s lots of different ways to do this on how it’s invested and things like that. Essentially, what you’re doing is you’re creating a floor. You’re saying, for me to keep the lights on, it’s $3,000 per month, social security is going to cover two, I’m going to purchase the one.

[0:14:15.4] TU: The one, yup.

[0:14:16.9] TB: Then the other two is more like discretionary where I might be traveling and spoiling grandkids or that type of thing. That’s all this is and again, that’s one of the beautiful things about – to go back to the annuity thing, for you to find that same type of inflation protection, it either doesn’t exist or it’s capped.

If we have a huge year next year from inflation perspective and it’s 4%, 5%, 6%, 7%, the annuity might say, “You’re capped at whatever, 3%, three and a half percent.” Then, what happens and really in that year is that your purchasing power is diminished. That’s one of the things is like, the social security – and it’s backed by the full faith and credit of the US government, the tax payer, which you can argue, “Okay, that’s good.” But from an investment perspective, it’s about as safe as you can get in the world.

Yeah, that’s important. It is really important to understand that, in terms of the context of where those dollars – we can get into this a little bit more but just like everything we talk about this with different parts of the financial plan, Tim, this is such an emotional thing. And you see, we’ll get into the decision to claim, to claim or not to claim when you do that and what age.

It’s really important and people stress out about, “Oh if I wait the claim and then I die and I don’t get all those dollars, what a waste.” The other thing Tim, to really consider in this whole conversation is, it’s really so true for the rest of the financial planning is that, this is not just a ones and zeroes decision. It’s not just a money decision, it’s very much emotional.

This decision on social security and when to claim, when not to claim, and there’s lots of different approaches out there in terms of total benefit of social security versus the break even analysis. And the idea is like, “If I wait to claim,” there’s so many retirees that say, “If I wait to claim at 70 and then I die at 75, I left a lot of money on the table.”

[0:16:12.9] TU: Yup.

[0:16:12.6] TB: There’s a lot of different pieces of that to consider but I think the other – so there’s lots of stress and uncertainty there but I think the other thing to kind of mention in this discussion is that if I kind of invoked the example that I’ve said, “Okay, if we’re looking at $5,000 paycheck, two is going to come from social security, we bought another one.” In that $3,000 total, out of the five is just what we need to keep the lights on. It’s for living, food and all that kind of stuff.

The emotional part of that is palpable, it’s really important to understand that because, you know, just like there’s stress and emotion around when to claim, there’s also this feeling of, you know, if you don’t create that floor and you’re dipping into your three million dollar portfolio as an example and your every month or every quarter or whatever it is, you’re deducting from that, there’s this feeling of scarcity too.

Sometimes, you know, you want a little bit of column A and a little bit of column B. Sometimes, people don’t create that floor because they want that investment to really thrive and the idea of taking a big chunk out of that to create income is scary. But from a scarcity abundance mindset, a lot more people either by delaying social security or creating that floor through social security and annuity, really allow that abundance to thrive.

I always joke, like I joked when we bought the motorhome. I look at their red shade and I was like, “Well, you know we can completely crash and burn, lose our jobs, lose our house and we can always rely on the motorhome to have a place to live.” I think that’s just a micro-chasm of what we’re talking about here, because a lot of people – the questions for retirement is, “Am I going to have enough? Will the money run out?”

That is really important when we’re talking about things like social security and where that plays in the grand scheme of things.

[0:18:11.5] TU: Tim, I want to come back to this decision on when somebody takes money out and what it means to defer, we’ll come back to that later episodes and more on the strategy side. But taking a step back into the how it works, thinking about the funding of it and the credits, you mentioned before, this is something that folks likely have already noticed on their pay stub. Tell us more about how this comes out to payroll taxes and what they can be expecting there?

[0:18:35.3] TB: Yeah, so the two main payroll taxes out there is Medicare and Social Security. Social Security is basically tax at a rate of 6.2% and sometimes you see it together at 7.65%, which is Delta, it’s the Medicare tax rate. Every year this changes, so the maximum social security contribution in 2022 is $9,114 and that’s based on what’s called the wage base or the taxable wage base.

For 2022, the taxable social security wage base is $147,000. If you multiply that by 6.2% that’s where you get the $9,114. What essentially that means in layman’s terms is, if I am a pharmacist out there and I am making $147,000 or I am Elon Musk and I am making billions, from Social Security you’re still treated as the same. Any dollar above that is not necessarily taxed from a social security perspective.

The wage basis and the maximum amount of earned income that employees must pay social security taxes on. Now, I think Medicare is uncapped, so you’ll pay a percent throughout the higher earnings so to speak. With the funding in mind and again, you’re setting aside that – those dollars, not necessarily directly for you but for the pool that you will one day dip into. Basically you are trade in those dollars for credits.

As you work, you build credits and for you to become eligible for Social Security, you need 10 years or 40 quarters, 40 credits that makes you eligible for retirement benefits. In 2022, you earn one Social Security or Medicare credit for every $1,510 in covered earnings each year and you must earn just over $6,000, $6,040 to get the maximum four credits for the year. The idea is that you’re building credits, building credits and then depending on when you actually start to draw on your benefit, you kind of convert those credits to what that benefit is and then there is also some things called like delayed credit.

For me and you Tim, and it is different depending on when you’re born but for anyone born after 1960, full retirement age for you and I, anybody born after 1960 is going to be 67 years old. For my dad who was born in the 1940s, he’s the old man in the group here so his for-retirement age is 66. But if you or I or really anybody decide to delay your retirement, so delayed retirement, the maximum you can delay it to would be 70 years old, you would receive delayed retirement credits, which are used to increase the amount of your kind of older age benefit credit.

You would earn additional dollars and it’s about 8% per year that you delay. If my for-retirement age is 67 and I decide to retire at 68, my benefit would increase by 8%, which if you think about that is very powerful. Not everybody gets 8% raises every year and then the other thing that’s important to just remind everyone out there is that it’s inflation protected. Again, this goes back, we’re going to talk about this more on a strategy perspective but it’s just very powerful in terms of how you approach this decision.

[0:21:53.4] TU: Tim, you mentioned that the delayed component, so you know, you mentioned 67 and essentially up to 70 depending on when somebody is born, but there is also the other side of it, right? If somebody decided to take it sooner than that, talk to us about that.

[0:22:06.7] TB: Yeah, great question or great point. Yeah, you’re looking at, you’re really looking at and what we’re really kind of breaking down here is how you determine your benefit. To back up on the credits, which we should have mentioned is that the credits are based on your highest 35 years of earning. You know, it looks at the top 35 and it goes back to that question of if you delay you’re later years, you’re probably going to be substituting like a year.

A year where you are making six figures from where you made tens of thousands because you’re a resident or something like that so yeah, that’s huge. Really, the three I guess phases or ages are going to be kind of the early retirement for everyone at 62. But what happens is that your benefit is based on for-retirement age. You have your early retirement, you have full retirement age, FRA, and then you have delayed retirement and that’s to 70.

For you and I Tim, our early retirement is 62 years old, our full retirement is 67 and then our delayed retirement is 70. Now, depending on where you’re at from a birthdate perspective, if you were born between 1934 or 1943 and 1954, then 66 is your for-retirement age not 67. If you are born in 1955, it’s 66 and two months, 1956, 56 and four months, I don’t know why they complicate these things like this but yeah, so that’s the big change.

Again, there could be legislation in the future that they’re going to say, “Hey Tim, just kidding. People are living longer, your full retirement age is not 67. It’s 68” that could happen or the earliest that you could retire from an early retirement is 63 not 62. It’s you’re early for us, it’s 62. It’s for your full retirement for us is 67 and for delayed retirement it’s 70 and again, those could change in the future but dependent on how you choose to then claim, so the example is if you begin taking your social security at 62 you reduce your benefit by essentially half a percent each month to your full retirement age.

If you take it 24 months, two years, every month you’re reducing it by half a percent, which can definitely add up. A lot of people they’ll say, “Hey, my job is not great.” Or sometimes I’m forced out of retirement, for a lot of people there’s just this misnomer that, “I am going to control when I retire.” That’s not necessarily the case. It’s something like 40% of people are either forced out of their job or because of a health issue of themselves or a loved one.

That’s also something to kind of take into consideration but it’s all based on this credit. And again, when I was prepping for this podcast, I went to my socialsecurity.gov and I put out my own social security statement and it outlines eligibility and earnings. It says, “You have the 40 work credits” so to receive benefits, it kind of told me what I earned last year but then you can click in and review your full earnings record now.

It goes back really from 2021 back to, I think for me, 1998 I earned in social security’s eyes like $351 but eventually that number will fall off in the calculation because I’m going to have, you know, I have 24 or 25 years of work and those lower numbers will knock off and then I’ll get a bit of benefit but the cool thing to see is, you know I can see the dollar amount of my benefit for early, full and delayed.

Right now and I can share it, so this is at for me it’s saying if I retire at 62, I wouldn’t be on track to earn a benefit of $1,603 per month. If I wait for 67, which is my full retirement age it’s $2,341 per month and then if I delay it to 70, it jumps to $2,902. And again, these are inflation protected, that’s really important to understand. That is basically the way that the credits work and how that kind of translates to a benefit.

Again, it’s something that I think and we could probably have a full episode of like how people kind of mismanage these decision of it’s, “Hey, my brother did it at this age” or my spouse or these are what people are doing in the workplace and X, Y and Z. And it’s really just like different parts of the financial plan, it’s really important that you take a look at this very intentionally because it can have major consequences in terms of your overall outlook for your retirement picture.

[0:26:39.6] TU: Yeah and I like what you said earlier is that, how you approach social security is the most important retirement income decision you’re going to make, right? Again, one of the reasons we want to do this episode followed up with other content, if folks haven’t yet checked out their social security account, I would encourage you to do so. It is really neat to kind of see and log in and start to dig into this deeper, you can go to ssa.gov/myaccount.

Tim, I was looking back too at my earnings record, it was fun going back like starting when I used to work for the family business, Ulbrich’s Tree Farm, back in my cashier days working at a top grocery store in Western New York, so fun just to see some of those earnings history and see where things are at in terms of that really full and delayed phases. Tim, the other thought that comes to mind and we’re not going to go down the Medicare pathway right now but if you think about that early benefit and you mentioned someone begins taking it at the age of 62, they reduce their benefit by 0.5% each month.

They’re also then is that potential gap of age eligibility for Medicare benefits, so you’ve got some other considerations also with just the intersection of this and the healthcare cost as well.

[0:27:45.5] TB: Yeah, I mean it’s so much. It’s so true like when we’re talking about the financial plan, it’s kind of like you can’t just treat one system of the body like you’re looking at the entire picture and it is so true in this kind of question as well as that there is so many – I mean, just even the overlay of the taxes and like, “Okay, what’s the best way to build that retirement paycheck from a tax perspective?” And then also you invoke things like Medicare and even like gifting strategies, if you are trying to minimize tax there.

There is just an array of questions that you have to answer and a lot of them are really less about the numbers and more about, “Okay, what does this look like for you?” And so many retirees go into retirement thinking like, “Hey, I’m just so done with work and I just want you to know” but then they all often return to work sometimes because of the money but sometimes because of like the – they don’t have the social infrastructure to kind of carry on in terms of like having a passion or a meaningful life.

It’s so funny because some of the similarities with the different phases of life in terms of like, “Okay, what’s a wealthy life for you?” And answering that question in your 30s and 40s and saying, “Okay, we can’t just stock away money and not live today.” But there is a balance to that but also when you reach the end of your work in life, what’s a wealthy life to you? That question still stands and a lot of people either don’t ask themselves that question or they struggle to answer it because for a lot of us unfortunately, a lot of us we really define ourselves by our career, our role, our professional roles.

It’s important to slow down and ask the question of, “Okay, what do I actually want to do? What do I want to get out of my 60, 70, 80s and beyond?” And then execute to that. It’s a common thread no matter where you’re at in the financial journey.

[0:29:51.1] TU: Yeah, I think this too is another good reminder as you are talking about this range from, I’ll just use 62 to 70, right? The early to then the full to the delayed benefits, obviously we can see the negative impact of financially just numerically speaking, if we pull the benefit early whereas if we’re able to delay that, that number goes up. And just another reminder that for folks that are able, to build up those savings outside of social security throughout their career, you take some of that pressure off, of getting into those early retirement years.

Tim, I know we’re going to come and do a lot more detail on some of the breakeven analysis and factors that go into, that but I know that a lot of pharmacists are listening to this and I know there’s a lot of math nerds that are just looking at some of the numbers of like, “Man, it seems so obvious that if you wait, you’re going to have more.” If you defer, you’re going to see that benefit go up but there’s really more behind that.

You know, you start to think about what is someone’s health situation look like, what are other savings that they have in place and I think that that is one of those areas. And you gave and commented on this just a moment ago, this is not one of those areas you say like, “My friend Gerald John is doing this and so therefore I’m going to do that as well” right?

[0:31:02.9] TB: Yeah, no and even with the health stuff there are again, we’ll get into this later but when you look at that and you’re like, all right, there is a history in your family where people will pass away in their 70s or 80s or whatever, so that might press the decision. But also sometimes depending on what the spousal benefit is, you might even decide to delay that because if that person has a greater benefit, the spouse takes over that benefit in the surviving, you know, the surviving spouse takes it.

There’s just a lot of nuance there that you know again, there’s breakeven, there’s the total benefit, all that analysis that goes into play here but you know at the end of the day, you’re really trying to manage and plan for the unknown and that makes it really difficult. I think it goes back to, you just want to be intentional. Like you said, it’s like don’t necessarily go with the herd mentality and have this question answered way in advance.

Sometimes there are pressures like the employment and like your outlook on employment, your overall happiness factor that really presses the issue. But at the end of the day, what we’re really trying to do is come up with a plan where again, you’re living a wealthy life and the money doesn’t run out. That’s paramount.

[0:32:25.3] TU: Great stuff Tim. Again, the hope for this episode is we’re going to lay a foundation around social security to talk about some of the history of social security, the funding of the benefits, the credit concept, how the benefit is determined, what are the different points of beginning to draw on that benefit. We’re going to come back in later episodes talk in more depth on the strategy side as well as common mistakes that folks might make in social security.

As we wrap up, I want to remind folks that we’re now approaching mid-February, which means we’re in the midst of tax season. Those tax forms are likely piling up on your desk, it’s time to have that tax filing and planning for the year top of mind and we’re excited at YFP tax that we’re opening up our tax planning services to an additional 125 pharmacists households. We do taxes as a part of the comprehensive financial planning for those that our clients of YFP Planning.

We are opening the doors to an additional 125 pharmacists households. Really proud of the team at YFP tax and what they have been building. I really believe that that team is not just focused on getting the return done, rather providing value care and attention that you and your taxes currently deserve. Those 125 spots are filling up quickly so don’t wait too long. If you’re interested in working with YFP Tax, head on over to yourfinancialpharmacist.com/tax to sign up. Again, that’s yourfinancialpharmacist.com/tax.

[END OF INTERVIEW]

[0:33:48.1] 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.

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

[END]

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