Budgeting / Saving Podcast

YFP 383: 5 Overlooked & Undervalued Areas of the Financial Plan

Posted on November 7, 2024November 4, 2024 by YFP Media

Tim Ulbrich, YFP CEO explores five often-overlooked areas of financial planning from credit, tax planning, emergency funds, insurance, and estate planning.

Episode Summary

Tim Ulbrich, YFP CEO, dives into five critical—but often overlooked—areas of financial planning that deserve more attention. While these topics might not be as thrilling as investing, making big purchases, or debt reduction, they’re essential for a strong financial foundation. Tim covers the importance of: building and maintaining credit; proactive tax planning; establishing an emergency fund; reviewing health, life and disability insurance policies; and estate planning.

Learn how to give these areas the attention they deserve, helping you create a more resilient and well-rounded financial plan.

About Today’s Guest

Tim Ulbrich is the Co-Founder and CEO of Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 15,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements. To date, YFP has partnered with 75+ organizations to provide personal finance education.

Tim received his Doctor of Pharmacy degree from Ohio Northern University and completed postgraduate residency training at The Ohio State University. He spent 9 years on faculty at Northeast Ohio Medical University prior to joining Ohio State University College of Pharmacy in 2019 as Clinical Professor and Director of the Master’s in Health-System Pharmacy Administration Program.

Tim is the host of the Your Financial Pharmacist Podcast which has more than 1 million downloads. Tim is also the co-author of Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth. Tim has presented to over 200 pharmacy associations, colleges, and groups on various personal finance topics including debt management, investing, retirement planning, and financial well-being.

Key Points from the Episode

Importance of credit in the financial plan [0:00]
Shifting mindset from tax preparation to tax planning [3:30]
Setting up an emergency fund [9:51]
Reviewing insurance coverage [13:31]
Estate planning [19:51]
Invitation to consider YFP’s financial planning services [24:57]

Episode Highlights

“[Life insurance] is especially important for those that have a spouse, a partner, a significant other, or dependents that are reliant upon your income or partially reliant upon your income.When we think about the purpose of a life insurance policy, one of the main purposes is income protection.” – Tim Ulbrich [13:31]

“I really want you to shift your mindset to think proactively and strategically about your tax situation. And I recognize that sounds obvious, but I used to view, as perhaps some of you may, tax very much to be as something in the rear view mirror.” – Tim Ulbrich [6:30]

“According to a 2023 caring.com survey, two out of three Americans do not have any type of estate planning documents in place, and that makes sense, right? It’s not super fun to be thinking about, but the whole purpose of the estate plan is that we want to have a process to arrange the management of our assets.” – Tim Ulbrich [22:57]

“What we should also be doing practically here is making sure that we check our beneficiaries on our various accounts, and as we have talked about before on the show, updating or implementing a legacy folder, which is an important one stop shop where you have all of our financial documents and information.” – Tim Ulbrich [24:00]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

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, on flying solo, to talk about five areas of the financial plan that are often overlooked and undervalued. Now, to be fair, none of these areas are very exciting to think about, especially if you’re focused on more inspiring goals, like investing, making a large purchase, giving or paying down debt, where you can feel the progress, or in the case of something like giving, you can see the impact that that may be having in the area that you’re giving or in your community. But with these five areas, what I’m referring to here are estate planning, the emergency fund, insurance coverage, tax planning and credit that isn’t necessarily the case. And there are instances where, when we are doing well in these individual areas, we might be able to see or reap the benefits of that. But for the most part, this is some of the boring work of the financial plan that we’re really playing defense in several of these cases and making sure that we’ve got that strong base and foundation in place.

Tim Ulbrich 01:04

So let’s take a closer look at each one of these areas, starting off with number one, which is credit. Now we just talked about credit on the Yfp podcast not too long ago, episode 380 we’ll link to that episode in the show notes, understanding and improving your credit score. And as we said on that show at the time, credit is one of those threads that touches many parts of the financial plan, and having good credit puts you in a position to take calculated risks in the form of leverage that could be buying a home, that could be buying a second property, that could be starting a business and doing so at the lowest cost possible. And fair or not, our financial system rewards those who can take on and pay off credit. And I know many of us were told at one time or another, probably by a parent or a family member, to build your credit. Right? Build your credit. But how much does building your credit and improving your credit actually matter? Well, let’s take it look at one example, if we assume that we have two home buyers, let’s assume one has a credit score that is considered excellent at a 10, and another home buyer has a credit score that’s considered fair score of 640 well that might end up being the difference of a 6% interest rate on a 30 year mortgage, thinking of the excellent credit versus a 7% interest rate on a 30 year mortgage, that would be for the person with the Fair Credit Score. Now, what does that actually mean per month and over the life of the loan? Well, the individual who got the lower interest rate because the better credit would have a monthly payment of about $2,400 per month, principal and interest only, and the individual had fair credit would have a higher monthly payment of a little over 2660 per month, again, principal and interest only. Now, over the course of the life of the loan, over 30 years, that ends up being a total cost of loan of 958,000 approximately principal and interest for the individual with fair credit, versus 863,000 for the individual that had excellent credit, same house, same situation, but two people with different credit scores, which shows a difference of about $260 a month, or $94,000 over the life of the loan.

Now if you start to apply this concept is securing other debt, right? Credit card, car purchase, investment property, starting a business, taking on a loan, et cetera. That cost of credit adds up in the form of less favorable lending terms. And since your credit score is a key metric that will be used by lenders to determine how favorable or not the lending terms are, it’s really important that we understand what goes in to the credit score, because the more we understand about those factors, the more levers we can pull to improve our score. And as we talked about on Episode 380, the top factors that impact your credit include payment history, so making sure we’re making on time payments and credit utilization, so the amount of credit that we’re using each month alongside the maximum amount that we’re given. Those two alone make up about two thirds of their credit score other factors, and would be age of credit history, total number of accounts and the number of hard inquiries on your credit. So again, check out Episode 380 and this is something we encourage you to be looking at your credit score on a regular basis as well as polling your credit report, not the same thing as your credit score, to make sure that there’s no negative marks, derogatory marks on your credit report that you’re not aware of, and so that you can clean those up and evaluate those further if need be. So that’s number one on our list of five overlooked and undervalued areas of the financial plan, all right.

Number two on our list is tax planning, with the October 15 extension, filing extension deadline officially behind us. The 2023 tax season is over. I know our tax team is excited about that. There’s a couple outliers because of. Some taxpayers in disaster areas are impacted by the hurricanes that are getting additional time for good reason. Now on that note, did you know that with an extension you have until October 15, right? We typically think mid April, but with an extension you have until October 15 to file your individual taxes, and for those that do that, October 15 extension, which is actually very common for many of our clients at wifey tax, we believe in right over rushed. Extending the deadline does not mean that you are not responsible for payments on any tax due. Incredibly important, right? The IRS expects you will make payments on time, and if not, penalties and interest will be assessed. So the October 15 extension is a beautiful thing. If you’re doing good tax planning throughout the year and don’t have a big balance due, as that would occur, incur a penalty and interest if we don’t pay it on time, or the other side of the equation, if you have a big refund coming, while many of us think big refund equals good, in that case, we just delayed now the time of getting that refund and putting those dollars to work. All right, enough about that. But when we think about tax as one of the overlooked and undervalued areas of the financial plan, similar to credit, right? This is a thread that runs throughout many areas of our financial plan, and I really want you to be shifting your mindset to be thinking proactively and strategically about your tax situation. And I recognize that sounds obvious, but I used to view as perhaps some of you may as well tax very much to be as something in the rear view mirror. Right? We file each year by the mid April, or as you learn here, the mid October deadline to meet the IRS requirements and to account for what happened the previous year. And I remember early on, you know, whether you’re using TurboTax or some software to do yourself, you’re working with an accountant, you kind of hold your breath and wait for the news, right? Am I going to get a refund? Am I going to have a certain amount of due? But we probably didn’t pay too much attention throughout the year, and ultimately, what that led to was either several refunds. That was the case for us early on, that we could have been putting those dollars to use elsewhere throughout the year. So when you go to File each year and we’re finally what happened in the previous year, that’s retroactive, right? And want us to shift our thinking, to be more proactive, and so to move our mindset from tax preparation, that’s important. It’s necessary. The IRS says we have to do it. We have to file our taxes, but to think more in the mindset of tax planning, right? A very important distinction of mindset shift so that we can think proactively and how we can optimize our tax strategy. Now I want to challenge you that if you don’t already know your key numbers, things like your effective tax rate, your adjusted gross income, it’s time to get out the IRS Form 1040 we’ll link to a copy in the show notes, and take 10 or 15 minutes to make sure that you understand the terminology and the flow of dollars. Because when we start to understand how the 1040 flows, we understand these terms, we can really begin to have this concept of tax planning come to life adjusted gross income, just as one example, has very important implications on things like student loan payments for those that are doing an income driven repayment plan, as well as certain phase outs on things like child and child care credits, Ira contribution, student loan interest deduction and so much more. Now on Episode 309 of the podcast, our CPA and director of tax, Sean Richards, cover the top 10 tax blunders that pharmacists have made, as we’ve seen through the filing process. So whether someone has a negative net worth or a net worth of several million dollars, I think you’re gonna find some value in that episode if you didn’t already listen to that. These are mistakes like having a surprise bill or refund at filing. And what are the common causes pharmacists that potentially could be employing something like a bunching strategy for their giving and just not aware of that strategy, those that should be thinking about estimated taxes throughout the year and are caught by a surprise after that, not not optimizing things like the HSA or traditional retirement contributions to reduce our taxable income, and an oldie but a goodie, not factoring in public service loan forgiveness when choosing married filing separately or married filing jointly. So again, make sure to check out that episode. Episode 309. Great time of year to be thinking about that as we’re heading into the 2024, tax season. That’s number two on our list of five overlooked and undervalues areas of the financial plan, tax planning.

Number three on our list is the emergency fund. Now, if you’ve been listening to the podcast for a while, you hear me harping on the emergency fund every once in a while, and because it’s that important, right? Saving for a rainy day, saving for an emergency it’s not easy. It’s not fun. It takes discipline, it takes patience, it takes trust to save for something you can’t yet, see, feel or experience. In the moment, but we all know that it’s not a matter of if, but it’s a matter of when. And so as we’re putting in other key parts of the financial plan, we don’t want something that is likely to happen, although we don’t know exactly what it will be, right, whether it’s a cut in Job hours, whether it’s a health emergency, whatever it might be, we don’t want that to derail our progress in other parts of the financial plan, as I’ve shared before in the show in the not too distant past, Jess and I have had to dip into the emergency fund for an unexpected knee surgery that we had to pay 100% out of pocket because of our health insurance. We had a dislocated elbow for our youngest, a trip to the ER for our oldest, for the busted lip, right? The list can go on. And so life happens. That’s the point, and we want to be ready to be able to incur those expenses. And when it comes to things like health care expenses and unexpected health care expenses, everyone’s insurance is different, right? So we got to look at what is a deductible, what’s the out of pocket Max, and know that we have to have a backstop of our emergency fund at a minimum to cover those things, as well as other emergencies that will come along the way. So this area of the plan is all about peace of mind, as I mentioned, it’s about making sure we’re not derailing other parts of the financial plan. And my experience tells me that when you have an emergency come up, and you have an unexpected expense come up, and we’ve got the funds that are there to handle it, a really important mindset shift happens. It’s not fun to write those checks, but when we’re able to do that, because we plan for it, we go from playing defense to playing offense. We’ve got breathing room, we’ve got margin, and perhaps we can even take some calculated risk in other areas of our financial plan that might have been unthinkable just knowing that we’ve got this backstop, we’ve got this foundation in place. So we’ve talked about the emergency fund at length on the show before. I’m not going to bore you further on this, but we want to be making sure that we’re answering important questions like, Is it adequately funded? Generally speaking, that’s three to six months worth of essential expenses. Everyone’s situation, of course, is different. We need to be answering questions like, do we have too much saved in an emergency fund? Right? There’s value in having a cushion, but having too much of a cushion comes with an opportunity cost, and so have we grown that to a point that we might be able to use some of that for other parts of the financial plan? We need to answer questions like, Are we optimizing our emergency fund? This is not the place that we’re going to take risk necessarily. We want this money to be liquid and accessible and available when we need it, but we also don’t want this sitting in our checking account earning next to nothing, right? So this, this could be in a high yield savings account, money market account, US Treasuries, something that the money is working for us, or at least coming as close as possible to keeping up with inflation. And as I mentioned, you know, with other parts of the financial plan, we want to make sure this isn’t a set it and forget it. So life changes as we progress. Our expenses change over time. And so each year, I would challenge you to look at this once a year to see what is that amount, what’s that target goal when it comes to the emergency fund, and is there a potential boost that is needed to the emergency fund?

Number four on our list is insurance coverage. And there is lots to think about when it comes to insurance, but I want to narrow in on two policies in particular, which would be life insurance and Long Term Disability Insurance. Now life insurance, for obvious reasons, is not fun to think about. Right? Nobody wants to consider what a premature death may look like and how the impact of that would be on their family and on the financial plan.

This is especially important for those that have a spouse, a partner, a significant other, or dependents that are reliant upon your income or partially reliant upon your income. Right? When we think about the purpose of a life insurance policy, one of the main purposes is income protection. So in order to determine how much of a policy we may need, we need to ultimately determine what would be the need if you were to prematurely pass away, and what part of your income that is no longer coming in from work do we need to replace in the form of an insurance policy to be able to achieve various goals that could be paying down a mortgage, that could be investing for the future, that could be saving for kids college, right? What are the things that we would need for this policy to fund lots of work to be done there, and why generic calculations shouldn’t be applied when it comes to things like life insurance. Now there are two main buckets of life insurance. There’s a category of life insurance called permanent insurance. These would be things like whole life insurance policies, universal life insurance policies, variable life insurance policies, variable, universal life insurance policies, right? The alphabet soup of whole whole life and permanent insurance, and then the second bucket is term life insurance. And for the sake of this episode and our time together, I’m going to spend our time there, because I believe that for a majority of folks listening, a term life insurance policy is going to be the way to go. That’s not an absolute. That’s not a. Ice that’s not for everyone, but for many folks, that’s going to be the area of focus. And we’ve got a great resource on this, if you want to nerd out. It’s called the life insurance for pharmacists, our ultimate guide to free resource. We’ll link to that in the show notes. But essentially, with a term life insurance policy, what differs it from a permanent insurance policy it is, is that it is insurance alone. It is not paired with an investment product.

Another important difference is that with a term life insurance policy, as the name suggests, it lasts for a term or a period that could be 15 years, 2025, or 30 years, and you’re going to pay a monthly premium. And for that monthly premium you’re gonna have a set amount that that policy would pay out could be a half million dollars, $1,000,000.02 million dollars, whatever you decide is the need in the event of your death, and once that policy is period is complete, once that term is over, if you’re no longer needing that policy, meaning that you’ve survived or outlived that policy, which is good news, right? There’s no dollars that are coming back to you. So the premiums you’ve been paying each and every month, let’s say you pay 40 bucks a month for a million dollar term life policy over a 20 year period. At the end of 20 years, if we don’t have to enact or use the policy, that’s it. The policy is over. None of those premium dollars are coming back to you, which is the point that is typically used when folks are selling permanent insurance policies that are like, why would you want that money just to go down the drain again? Check out our article life insurance pharmacist, The Ultimate Guide for a more in depth discussion of the different aspects of these policies. This, in my opinion, for most folks listening, why term life insurance coverage is the focus is because this is really meant to be catastrophic coverage, keeping our costs low, so we can use those dollars elsewhere in the financial plan, typically permanent and child policies are much more expensive, typically carry some fees on the investments may not necessarily perform as well as we could invest the dollars on our own, or we’re in working with a professional so with term life insurance, assuming someone is healthy, very much dependent on medical conditions and age of that individual in terms of how much that policy will be, as well as the term or length, but relatively inexpensive for most folks, and is going to allow us to put our cash and dollars to use elsewhere in the financial plan. That’s just a couple key nuggets when it comes to something like life insurance. Now, with long term Disability insurance, one of the greatest assets that you have as a pharmacist is your ability to generate an income. Right?

Think about how long it took you to be able to get that point of becoming licensed, to be able to earn that six figure plus income. And so the focus of long term disability is what would happen in the event that you were unable to earn that income. Now we address the death scenario in something like a term life policy. Here we’re talking about could be a disability, like a chronic medical condition, rheumatoid arthritis, some other condition that would prevent someone from working or working in their position, or it could be something like a car accident, right? Not likely, but these are things that we need to protect if that were to happen, what is the plan to be able to replace your income that you’re earning while you’re able to work as a pharmacist? That’s the purpose of disability insurance. Again, we’ve got a great resource here, disability insurance for pharmacists, The Ultimate Guide. We’ll link to that in the show notes. Lots to think about in terms of how much coverage you might need, the different terms like elimination periods of time, what’s the length of the policy, the potential costs, these are typically more expensive than term life insurance policy.

So make sure to check out that resource from Yfp that we published disability insurance for pharmacists, The Ultimate Guide. We’ll link to both of those in the short show notes. Now, when it comes to purchasing term life insurance and disability insurance, there are a lot of factors to consider. This is one of the reasons why our planning team spends time with our clients individually, going through these policies to make sure they’re customized to the individual. Things like, what’s the goal or the purpose? What are we trying to accomplish with these policies? What employer coverage Do you already have in place, and do we need additional coverage? What are the tax differences between an employer policy that pays out versus a policy on your own? And then, of course, everyone’s situation is different, right? What’s your household income? Is there one income two incomes in the household? What are their goals? What reserves do you have? What expenses are we trying to replace? All these things are going to help us determine what policy is needed, and then from there, we can look to make a purchasing decision that aligns. So that’s number four on our list when it comes to insurance.

Number five, our final of our five overlooked and undervalued areas of the financial plan is the estate plan. Now if you’re listening and you realize that you’ve got some work to do in getting your estate planning documents in place. Know that you aren’t alone. According to a 2023 caring.com survey, we’ll link to that in the show notes, two out of three Americans do not have any type of estate planning documents in place, and that makes sense, right? Just like we’ve been talking about some of these other areas. Nine. Not super fun to be thinking about, but the whole purpose of the estate plan is that we want to have a process to arrange the management of our assets. The management of our property decisions around dependents could be decisions around child care or assets that are going to dependents or others, and in the case of our health, if we were to become, let’s say, incapacitated. Who’s making healthcare decisions? What are those decisions that we want to have made, and making those from a viewpoint in which we’re able to think about those with a clear mind? So that’s the estate planning process in a nutshell, and especially for those that have dependents and have beneficiaries, these are documents that we want to have in place, and just like we talked about with the emergency fund, this is not a set it and forget it. So yes, there’s some upfront work to be done here, from some upfront costs, typically, as well, to do these documents and do them well with a consultation from an estate planning attorney as well as hopefully working with a financial planner. But things change right? Things evolve over time, and we want to make sure that we have a process to update these documents along the way. So the objective with estate planning, yes, it’s peace of mind, right, knowing that we’ve got plans in place for our family, for our assets, for the stuff, for our health care and the decisions that are being made, but as folks accrue assets over time, there are also some tax planning considerations when we think about the transfer of assets that are really important to be considering along the way as well. So practically speaking, what do we need to do here? Well, check out Episode 310, of the podcast, if you didn’t already catch it, where Tim and I talked about dusting off your estate plan. We’ll link to that in the show notes. These are important documents, like wills and living trusts, advanced medical directives, durable powers of attorney.

And at YFP, our financial planning team is are working with clients, one on one to put a framework in place for what are the estate planning needs, and then working with a solution that relies on estate planning attorneys and legal advice to make sure that those are being executed appropriately for the state in which that individual lives. What we should also be doing practically here is making sure that we check our beneficiaries on our various accounts, and as we have talked about before on the show, updating or implementing if you don’t already have one, a legacy folder, right, which is an important one stop shop where we have all of our financial documents and information in place at our house. We call this the blue folder. Much of it is electronic now, but the original version was a hard copy blue folder. Some of it resides electronically. Some of it resides in our safe but it’s the one stop shop that we know that if Jess and I were in a situation where we weren’t able to access that information or communicate that that our family knows where that information is, like our state planning documents, important insurance policies, tax returns, our various investment accounts, all the information that would be needed to make some decisions along the way. We’ve got a checklist resource here if you want to develop your own legacy folder, you can go to your financial pharmacist.com, forward slash legacy and begin to implement that in your own financial plan. Well, there you have it. Those are five overlooked and undervalued areas of the financial plan. A lot of information and things to be thinking about. These are all areas of the financial plan that our team of certified financial planners are working one on one with our financial planning clients as well as our tax planning clients at Yfp tax and so if you’re interested in learning more about what those comprehensive financial planning and tax planning services look like, we’d love to have an opportunity to talk with you further to learn more about your situation. You can learn more about our services and determine, ultimately, whether or not there’s a good fit there, you can book a free discovery call by going to your financial pharmacist.com, you’ll see at the top of the home page an option to book that call. Thanks so much for listening. Hope you enjoyed this week’s episode. Have a great rest of your week.

[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 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 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 analyzes expressed herein are solely those of your financial pharmacists, 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 371: 5 Wealth-Building Strategies to Become a Seven Figure Pharmacist

Posted on August 8, 2024August 7, 2024 by YFP Media

Tim Ulbrich, YFP Co-Founder and CEO shares five wealth-building strategies to include in your own financial plan.

Episode Summary

In this episode, Tim Ulbrich, YFP Co-Founder and CEO, shares five wealth-building strategies you can incorporate into your own financial plan. Drawing from his own financial journey, these strategies have been tested, refined, and used by Tim and his wife, Jess.

From setting savings goals to tracking net worth monthly to increasing your financial IQ, Tim makes setting up your financial path for success more attainable.

About Today’s Guest

Tim is the host of the Your Financial Pharmacist Podcast which has more than 1 million downloads. Tim is also the co-author of Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth. Tim has presented to over 200 pharmacy associations, colleges, and groups on various personal finance topics including debt management, investing, retirement planning, and financial well-being.

Key Points from the Episode

Wealth-building strategies for pharmacists with student loan debt. [0:00]
Financial struggles and debt repayment for pharmacists. [3:21]
Financial planning for pharmacists, focusing on strategies for success. [8:28]
Tracking net worth and setting savings buckets for financial goals. [12:33]
Financial planning, saving, and investing for pharmacists. [17:41]
Wealth-building strategies and financial planning. [22:33]

Episode Highlights

“And I had realized that despite the amazing opportunities that graduating with a pharmacy degree had offered, there was a little discussed truth among practitioners in the field. And that is that most pharmacists make a good income, but have significant student loan debt and feel like, hey, there should be more here; I shouldn’t feel as stressed and overwhelmed as I do with my financial situation.” – Tim Ulbrich [2:52]

“But it takes a lot of intention, time and effort to translate that income, to making sure that we’re actually progressing in our financial plan and finding the ever so important balance between saving for the future while also living a rich life today and investing in those things that are most meaningful to us.” – Tim Ulbrich [6:46]

“We learned a very important lesson that there is no such thing as arrived. When it comes to the financial plan, there is always an opportunity to grow and learn.” – Tim Ulbrich [7:25]

“These strategies are not overly complicated. It doesn’t have to include fancy spreadsheets and nuanced investment vehicles. It doesn’t take an exorbitant amount of time. And it doesn’t mean that you have to live on rice and beans. I did it and you can do it too.” – Tim Ulbrich [9:36]

“I want you to take a step back and ask yourself a few questions. What am I trying to accomplish? What’s the purpose? What does success look like? After all, money is a tool for living a rich life. And it’s up to you to decide what that rich life looks like.” – Tim Ulbrich [12:04]

“Resist the urge to try to do too much. And eventually getting to a place of frustration where you don’t make much progress at all. What is the one next move that you can make? This is a marathon, not a sprint, one step after another over a long period of time will yield big results.” – Tim Ulbrich [25:44]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey guys, welcome to this week’s episode of the YFP Podcast. I gotta admit, I’m pumped up for this one, I’m going to be talking through five wealth building strategies that you should employ in your own financial plan. No theory, no textbook stuff here. These are all strategies, all five of them, that Jess and I have tested, refined and used in our own financial plan. Now, before I get into these five wealth building strategies, I have two goals for this episode that I want to share with you. First, my hope and desire is to motivate and inspire you to take action. It is so easy to become overwhelmed, and fall into that paralysis analysis when it comes to the financial plan. So for those of you that are listening, that are feeling overwhelmed, or anxious, or frustrated, maybe stuck, or just this lingering, nagging feeling that there’s something more that could be done, I want to be a source of inspiration through sharing my own journey, and encouraging you on your journey as well. Now, that doesn’t mean it’s going to be easy. That doesn’t mean that you’re not going to have some mistakes and roadblocks along the way, there certainly will be. My second goal is to give you specific strategies that you can implement, starting today in your own plan; to take the motivation and to then take action that can yield results as you take steps in applying this to your own situation.

Tim Ulbrich 01:25

Okay, let’s jump in. I’m going to start with my own story that really begins back in 2009. 2009. So at this point in time, I had just finished my PGY one residency, I was making a whopping $31,000. At the time, thankfully, residents make a little bit more these days. And I finally had reached the other side, right? Ready to cash in on the mystical, six figure pharmacist income that I often thought about during pharmacy school. Now, everything was looking good. Until I realized that I overlooked one very important minor detail. And that was that I was broke. No not broke, broke, but definitely high earner high income broke. My wife Jess and I were in spectacular shape on the surface. But underneath our lifestyle and this new six figure income, really our finances underneath that had a different story, we had over $200,000 of student loan debt that was almost all my student loan debt. Actually, the vast majority of that $185,000 or so was my student loan debt. We had a house at this point with almost no equity. We had very little in savings. And we soon had a growing family to support today we’ve got four boys, our oldest was born in 2011. So there was a lot of things that were going on and happening financially, perhaps some of you can relate to that. And I had realized that despite the amazing opportunities that graduating with the pharmacy degree had offered, there was a little discussed truth among practitioners in the field. And that is that most pharmacists make a good income, but find themselves in exactly the same boat that I’m describing, right. Earning a good income, significant student loan debt and feeling like, hey, there should be more here, they shouldn’t feel as stressed and overwhelmed as I do with my financial situation. Now, as I reflect on that journey, I am certainly grateful for the experiences I’ve had, and for what I have learned along the way. I also feel though, the fear and anxiety coming up when acknowledging that my perception of the six figure income and the reality of what it could be, were two very different things. Now it took me four humbling years, hopefully it won’t take you as long but it took me four humbling years to realize that this six figure income wasn’t all that it was cracked up to be. Now one book in particular, if you’ve listened to the podcast before, you’ve heard me talk about this book, but one book at this point in time 2012, 2013 hit me at the perfect moment. It was a wake up call that I needed. And that book was The Millionaire Next Door by Dr. Tom Stanley. We’ll link to that in the show notes. And that book taught me a very important lesson. And that lesson being that net worth, not income, net worth is a much better indicator of your financial health. Now more to come on this here and a little bit but understand for the time being that net worth is your assets what you own, minus your liabilities what you owe, and it paints a nice picture of what did or didn’t happen with your income, right, that’s earned. And after reading this book, I decided that it was time to put pen to paper and do our own calculation. Now when I did this, the assets column, right, on the left hand side of the paper, I had the liabilities on the right hand side of the paper and the left side was pretty blank. Didn’t have a whole lot of assets at that point a little bit in a 401K,little bit in an IRA, we had some value in the home that that was offset by the liability. But the right side the liabilities, what we owed, there was a laundry list of things that are highlighted by none other than that couple $100,000 of student loan debt that I mentioned, most of which was at a fixed interest rate of 6.8%. A number I will never forget. I know many of you are perhaps facing a similar situation. Now this calculation, this net worth calculation at the time, showed that just four years after graduating from pharmacy school, finishing up my residency, had earned about a half a million dollars of income. But I had a net worth, again, assets minus liabilities of negative $225,000. Ouch, right? Ouch. I was overwhelmed with student loan debt. I was confused about how to best save and invest for the future, I was frustrated by the fact that, hey, we’re making a good income. But we’re not progressing financially as quickly as we should be, or at least as I thought we should be. So if you are like most pharmacists that I talked with, perhaps your journey may include something similar. You might even be there right now, some of you have gone down this journey before or perhaps for students listening. It’s something that you’re thinking about in the future. And, you know, as I think about this, it wouldn’t be so frustrating if you didn’t do everything that perhaps you were told was the right quote, “right thing to do.” Right, you got the degree, you landed the high paying job, you started making some of those smart decisions, some of you have already purchased a home, you’ve been investing, maybe you got that reliable car, and you’re finally reaping the benefits of all that hard work. But it takes a lot more intention, time and effort to translate that income, to making sure that we’re actually progressing in our financial plan and finding the ever so important balance between saving for the future, taking care of our future selves, living a rich life today and investing in those things that are most meaningful to us.

Now, thankfully, for our story, there’s a happy ending. Three years after that point where we realize, hey, we’re making a good income, but the net worth is negative, it’s not showing, we decided through that time period to really get serious, to stop messing around, to take control of our financial future. And in the fall of 2015, we hit submit on the very last payment of that $200,000 of student loan debt. I still have the screenshot saved at the time. Navient was the loan servicer, it’s an image I’ll never forget. Now to get there. We had to sever self teach ourselves personal finance. This was what led to me starting the Your Financial Pharmacist Community shortly thereafter, in 2015. And we made several mistakes along the way. And I’m going to talk about some of those here in just a little bit. Now, at the time, no one in our sphere no one in our community is really talking about this. And it was hard. It was hard, but it was worth it. Now, a little bit more on this story, when we hit submit on that last student loan payment is the fall of 2015, it sure felt like we had arrived financially finally, right? That would be the first however, of many times that we would learn a very important lesson that there is no such thing as arrived. When it comes to the financial plan, there is always an opportunity to grow and learn. Once we had crossed the line from a negative net worth to zero, and eventually working towards positive, it was go time it was time to play offense. Right. Finally, we could begin to play offense with a financial plan. And through methodical savings, investing, diligent spending, planning, and working our butt off building a business, we would eventually cross a net worth of $1 million in 2020. That’s right, negative 225,000 in 2012, to a net worth north of 1 million and approximately eight years. And I want pharmacists like yourself to be fully armed and empowered with the knowledge and tools needed, again, to find that balance between living a rich life today. And tomorrow, you can get there. But in addition to your income, it’s going to require that you have the right mindset, some strategy, and you have habits and behaviors in place that will help you to achieve success, it can be done. And that’s why I’m excited to share some of these strategies with you. It’s not complicated or overly complicated. It doesn’t have to include fancy spreadsheets and nuance investment vehicles. It doesn’t take an exorbitant amount of time. And it doesn’t mean that you have to live on rice and beans. I did it and you can do it too.

Tim Ulbrich 09:56

I recently had the chance to talk with a group of pharmacists and I asked them to reflect on a question that was intended to help them clarify what matters most to them in their lives and how their financial plan can support those different areas. And here are just a few of the responses that I received. From that group of pharmacists, quote, “I would love to travel the world give generously, and fund my kids hopes.” Another was, “to take my kids to see the world.” Another, “to have a home in space and time to host family and friends often.” Another, “to volunteer locally, spend time with family and learn new skills.” Another, “To open my new business.” “Working part time without the fear of finances would allow me to volunteer more and do something more passionate about.” Another: “To create a community center for people who use drugs to help provide basic social needs and treatment.” Yes, yes. And yes. Notice what you don’t hear here. You don’t hear people talking about having a pristine, zero based budget. Yes, I think that’s important to help us execute, but that’s not what people are talking about. You don’t hear people talking about having a certain amount of money in the bank. You don’t hear people talking about having a complicated time intensive investment strategy. You don’t hear people talking about their 4.6% high yield savings account and how advantageous that is over another one that’s only 4%. You don’t hear any comments about how to optimize public service loan forgiveness or other student loan strategies. And while there’s nothing wrong with those things, right, I myself like a good budget, like a good student loan repayment strategy, things we talked about often in the show, it’s important to remember that these things aren’t the end goals and determinants of success, but rather steps that are along the way to support again, living that rich life today and tomorrow. So before I get into these five strategies, and before you go all Type A pharmacist on me and start making moves, hitting and checking things off that list, I want you to take a step back and ask yourself a few questions. What am I trying to accomplish? What’s the purpose? What does success look like? Right? After all, money is a tool for living a rich life. And it’s up to you to decide what that rich life looks like. Okay, so let’s jump into these five wealth building strategies, it’s time to take action. Again, none of that fluffy and practical stuff. I’ve implemented all of these in my financial plan. Step number one, you probably saw it was coming based on my discussion of net worth. Step number one is you have to be tracking your net worth. As I mentioned, and that book, The Millionaire Next Door, one of the quotes from that book from the author Tom Stanley is, quote, “one of the reasons that millionaires are economically successful is that they think differently.” And what he’s referring to is that those who build wealth realize that income is not the metric of success, but rather a tool for building wealth, right, and it’s worth repeating the calculation we talked about before, net worth what you own, minus what you owe, so your assets minus your liability. Net worth not income. But net worth is the true indicator of your financial health. And if you understand and respect this calculation, it will propel your financial plan. Discovering net worth was a mindset shift and a pivot point in our own financial planning journey. Now for Jess and I, we update a net worth tracking sheet once per month, which allows us to take a step back and see the overall trajectory and bigger picture, while also focusing on the short term goals. And I have this tracking sheet along with several other resources. I’ll reference throughout the podcast available in a Google Drive, a toolbox. We’ll link to that in the show notes. You can go to that toolbox to access those for free, you can make a copy, edit, customize, make it your own, and be able to implement it in your own financial situation. It’s a very simple spreadsheet. Again, nothing fancy, right, we have a list of all of our assets, all of our liabilities. So this includes things like our emergency funds, various business accounts, kids 529 accounts, all our retirement accounts, different real estate that we own, and so forth. All assets, all liabilities, once a month. This is the big view picture of are we tracking, are we trending in the right direction. So that’s wealth building strategy number one.

Number two, you’ve heard me talk about this on the show before is setting up savings buckets. I love savings buckets. All about intentionality. Once Jess and I are on the same page with our financial goals for a given year, it’s then time to write them down and prioritize them accordingly so that we can start to implement a plan to achieve them, right? Otherwise, it’s a hope, a wish or a dream. So for each goal that we have for the year, we defined several things. First, the amount that is needed to achieve that goal. So for example, if we were to say, hey, we want to refinish the basement, it’s a goal we’re working on here in 2024, we got to put a budget to that we gotta put a number to it. And we got to put eventually a timeline to it. So first, we have to have an amount needed to achieve the goal. Second, is we have to identify the current amount we have saved towards a goal, sometimes that’s a zero. Sometimes that might be a portion of the goal. The third thing is then the gap between the amount needed and the amount saved. Right? This is common sense stuff. And the fourth thing is the monthly contribution needed to close the gap. That’s the key. So we have to know where we’re going, how much do we need? When do we need it? What do we already have saved? What’s the gap? What’s the timeline difference and a monthly contribution that’s going to help us get there because then we can implement that, right, we can do something with that, to be able to put ourselves on track to achieve it. Now, I mentioned the tool box before, there’s another resource in there. I have our savings buckets spreadsheet that you can again, nothing complicated, you can download it, you’ll see it’s just a sheet that outlines different priorities, what the status is, what the goal is, what’s the current funding? What’s the amount, what’s the gap, and what’s the contribution needed to get there with some notes for each of those items as well. So once we have this from here, once we have a prioritized list of our goals, we can then work the budget, or the spending plan, whatever you want to call it to determine how much is available each month to allocate towards the goals and make any necessary adjustments. Now just to give you some context of things that we’re thinking about here, right, this would be items like home improvements, saving and retirement accounts, putting money away into an HSA saving for vacations, saving for a future car purchase, right? These are the types of goals and things that we’re working on. And once we have this prioritized list, and we can begin to weave it into the monthly spending plan, based on hey, we know what you’re gonna make, we know the fixed expenses, the discretionary expenses, we know what’s leftover, then we can allocate whatever is projected to be left over towards the goals we’ve already defined in advance. And this is where the buckets come in. Because once we do this work, we can set up savings buckets. Now we use Ally Online Bank, this is not commercial for Ally, you can do this with many other banks, or you can track it on your own, to have a bucket for each goal. Except for those things that go directly to outside accounts. Right. So I don’t want things like IRA savings, HSAs, 529s to be sitting around in a high yield savings account. But I want those to go to work as quickly as possible for us. But for everything else, right. I mentioned several of these: vacation, home improvement projects, saving for educational expenses, not for future like 529. But for us, that would be homeschool expenses and things that we know are coming throughout the year could be gifts, insurance payments. I said vacations, vehicles, etc. emergency fund savings, right. So when I log on to our Ally online savings accounts, I see all these buckets, which are really just virtual buckets within a high yield savings account that we can then identify and earmark. It’s so important that if we think we’re saving for something, let’s actually do the accounting for it and create the bucket that allows us to see the progress made. This can sound complicated, don’t let it fool you. It’s not complicated. This system took us about 15 to 20 minutes set up. Once we had already done the work right, which is the hard work is talking about the goals and prioritizing the goals. So that’s number two, setting up the bucket system.

Tim Ulbrich 18:51

Number three in our list of five wealth building strategies, is creating a legacy folder again, something I have talked about in the podcast before. And while a legacy folder isn’t going to directly move the needle on your net worth, don’t underestimate what it can offer in terms of peace of mind. And knowing that in the event in an emergency, all your financial documents are organized and in one location. So think of the legacy folder as a one stop shop where you have all of your important financial information, records and systems such that if someone else had access, needed access in the event of emergency, something happened to you, they could quickly pick up where you left off. So our legacy folder is a combination of a shared Google Drive folder, and a fireproof safe at home. Right. So I think about things like passports, birth certificates, etc. copy of estate planning documents, those are going to be inside of a safe, and then we’ve got other things that are on a shared Google Drive. So our financial planning team at YFP has shared access to the Google Drive as well as family who would be caring for our boys in the event that something happened to us, and then we use One Password as a tool to share and store all of our passwords. You can access again in the toolbox resource I mentioned already, we’ll link to that show notes: YourFinancialPharmacist.com/toolbox, I have a legacy folder table of contents that we use that you can download, make a copy, modify and make it your own.

Tim Ulbrich 20:25

Alright, number four on our list of five, upping your financial IQ. So here are just some of the questions I’ve received recently, from pharmacists in our community: how much should I save for retirement? How can I best save and invest for the future? What should my asset allocation be? Do I need a life or disability insurance policy? How can I optimize student loan or other debt payments? Should I save and invest or pay down debt instead? If any of these sound familiar, this is real life stuff. And know that you aren’t alone if several of these questions are swirling around in your mind as well. And as I reflect on my own journey, I realized that knowledge, along with community and accountability, was a key missing ingredient early on. You know, despite being a personal finance nerd today, my financial IQ early in my pharmacy career was very limited. When I was just finishing up my pharmacy school training in 2008, residency 2009. At the time, I could not tell you the difference between a 401K and an IRA a stock versus a bond secured versus unsecured debt, unsubsidized versus subsidized loans, a tax credit versus a deduction, right, the list goes on and on. And my ignorance, my lack of financial IQ led to mistakes and really led to a delay in our progress. But that really wasn’t my fault as I reflect on the journey. Now, taking responsibility of that and learning those things. Certainly, there’s an opportunity there. But know that for many of us, we just don’t have that background. Right, that strong fine foundation and financial literacy, our K-12 system, to be frank does an atrocious job of prioritizing financial literacy. And while I’m grateful for my AP Calculus class, and how that saved me from having to take a semester of calculus in pharmacy school, I use very little calculus in my life today. But contrast that with personal finance, which I use in some form, or fashion every single day. So why do we invest so little time in financial literacy, knowing that its application will be wide for everyone? That’s a great question, right. And it’s a tragedy, but it’s one that we have to overcome, and we can take responsibility to overcome. And so the good news is that we can make progress here we can up our financial IQ if we’re willing to invest some time and energy and I’m not talking about an AP course level type of time, just a little bit of time invested is going to yield big benefits. I hope you continue to listen to podcasts, attend our webinars, read our newsletters, I think those are great ways that you can stay engaged and increase your financial IQ.

Tim Ulbrich 23:04

Alright, number five on our list of five wealth building strategies is respect the power of compound interest and time value of money. If you aren’t in awe of that time value of money, you haven’t spent enough time nerding out on a savings calculators. As Albert Einstein is credited with saying compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t pays it. This quote should pique our curiosity about the power of investing, more specifically, the power of compound interest in time value of money. It’s one of those financial jargon terms compound interest, time value, money that we throw around, that we know is important, but may not be sure what it exactly means and why it matters. And simply compound interest is the process by which an investment grows exponentially over time, because both the original investment and the interest gain earn interest over time. So we save a little bit today, it grows and then the future growth is the initial savings plus the growth plus the growth plus the growth and we continue that over and over again. And you can use a simple compound interest calculator, we have one available on our website, we’ll link to that in the show notes. Just to see that what would it mean for you when it comes to savings and where you’re at and how much you have saved? And how will that project out into the future? So what we know, which is something we’ve all heard before is that the earlier we save, the less aggressive we have to be in saving, right? And that’s where we really start to see the magic of compound interest and time value of money do its thing.

Tim Ulbrich 24:44

Alright, so those are five wealth building strategies that I think you can implement in your own financial plan. And it’s it’s your turn now, right and as you start to implement your plan, let me give you two words of encouragement First, avoid analysis paralysis by identifying what the next move the one next move you can make. Remember, this is a marathon, not a sprint, and I just talked about a whole lot of things. And some of you are probably gonna want to this long checklist and start moving things forward. Resist the urge to try to do too much. And eventually getting to a place of frustration where you don’t make much progress at all. What is the one next move that you can make? This is a marathon, not a sprint, one step after another over a long period of time will yield big results. That’s what Darren Hardy is talking about, in his book, The Compound Effect when he says that small, smart choices, plus consistency plus time equals radical difference, small smart choices, plus consistency, plus time equals a radical difference. So that’s the first note of encouragement. The second one is your journey will inevitably include mistakes, trust me, I’ve made my fair share. Here are just a few I’ve paid too much student loan debt, because I didn’t understand the different options that were available such as loan forgiveness and refinancing. Second, I bought a home to be frank by just a little bit too early, without having enough equity in that home and a renting situation would have been fine for a little bit longer. Third, delaying the purchase of term life insurance with young children. Fourth, delaying the establishment of estate planning documents. Fifth, cashing out a small but still a pre tax retirement fund. And finally buying a car that at the time, we really had no interest in buying. So since mistakes will happen, right? It’s part of the journey, we must learn to give ourselves some grace. You’ve got this, I’m cheering you on. And I hope that you will continue to engage with our community as you go through your own journey. If you have a question that you have, in the moment, a roadblock that you’re facing, a win that you want to share, just an ear to listen of something that’s frustrating you in the moment, send us an email. I would love to hear from you [email protected]. And for those of you that are listening, saying hey, I really could use some help one on one, and really moving the financial plan forward to take all these different priorities no matter where you are in your journey, whether that’s a mid career pharmacist like myself, someone who’s approaching retirement, someone who’s a little bit early in their career, we’d love to have the opportunity to talk with you further. To learn more about our fee only financial planning and tax planning services and to determine whether or not they’re a good fit. You can book a free discovery call by going to yourfinancialpharmacist.com you’ll see a link to do so there to learn more about the services and to again, see whether or not that’s a good fit for your own financial plan. Thanks so much for listening. As always, I hope you found this episode helpful. And we’ll catch you again next week. Take care.

Tim Ulbrich 27:51

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, 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 365: Millionaire Theme Hour: From $0 to 7 Figure Pharmacist with Mike Byers

Posted on June 27, 2024June 27, 2024 by YFP Media

Mike Byers, PharmD shares how he was able to achieve financial freedom and replace his retail pharmacist income through savings and real estate investments.

Episode Summary

In this episode, Michael Byers, PharmD shares how he was able to achieve financial freedom and step away from his job as a retail pharmacist at age 42. Mike outlines how he went from a position of financial weakness to a position of financial strength through frugality and real estate investing. A father of two young boys, Mike talks about the importance of having options and flexibility in this season as he and his wife raise their family.

About Today’s Guest

Mike Byers is a 2008 graduate of the University of Pittsburgh School of Pharmacy. He spent 16 years as a retail pharmacist for Giant Eagle where he worked as a staff pharmacist, a pharmacy team leader and a floater. After successfully investing in real estate for over 10 years, Mike decided to take a break from pharmacy in 2023 to spend time with his wife and two young boys. He loves his family, houses, outdoor adventure, and trying to find the right balance between YOLO and delayed gratification. He can be found on Instagram @DIYrentalGuy.

Key Points from the Episode

Pharmacist’s financial journey to seven figures, early retirement, and mindset shifts. [0:00]
Financial journey after graduation, including materialism, divorce, and saving for retirement. [5:59]
Saving money, investing, and finding balance in life. [13:58]
Real estate investing, personal growth, and overcoming setbacks. [23:17]
Building wealth through real estate investing and managing cash flow. [28:54]
Financial independence, real estate investing, and career development. [33:12]

Episode Highlights

“You have to be honest with yourself and say, what am I doing now? What is the result going to be? If I’m saving so much that it’s driving me crazy, the result is you’re going to go crazy. But for me, the end result was adventure.” – Mike Byers [20:51]

“I mean, just because you go down a path of a certain savings rate doesn’t mean you have to stay there, you can make adjustments.” – Mike Byers [21:41]

“What I’m looking at is that I have this money saved because I was diligent in being able to save, what does the next 10 years look like? Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars?” – Mike Byers [32:07]

“And that’s something that you think about when you turn a certain age and you start wondering how much more do I really need to be comfortable after 65. I don’t want to be self-insuring myself if there’s an insurance product or an annuity that you can buy that would serve that same purpose.” – Mike Byers [32:52]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

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 episode we have a millionaire theme hour featuring Mike a 42 year old retired work optional pharmacist living in Pittsburgh, Pennsylvania. We discuss the highs and lows of his journey as he looks back, including how he felt trapped by big fixed expenses as a new graduate, why his early savings paid off big 20 years later, how his mindset shifted over time, why his real estate investing played an important role in his journey, ultimately replacing his pharmacist income, and why patience and short term frugality and sacrifice were key ingredients to his success.

Tim Ulbrich 00:41

Now, before we jump into today’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. And we’ll hear that on today’s episode. Yes, you’ve worked hard to get where you are, yes, you’re earning to get income. But if you ever wondered, Am I on track to retire? How do I prioritize and fund all of these competing financial goals that I have? How do I plan financially for big upcoming life events and changes like moving, having a child, changing jobs, getting married, or retiring? And perhaps why am I not as far along financially at this point in my career, as I thought I would be? The answer may be that your six figure income is not a financial plan. Yes, as a pharmacist, you have an incredible tool in your toolbox and that’s your salary. But without a vision and an intentional plan that good income will only go so far. That’s in part why we started your financial pharmacists back in 2015. At YFP we support pharmacists at every stage of their career to take control their finances, reach their financial goals and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners and tax professionals work with pharmacists all across the United States and helps our clients set their future selves up for success. While living a rich life today. You can learn more and book a free discovery call by visiting yourfinancialpharmacist.com/learn. Again, that’s yourfinancialpharmacist.com/learn. Alright, let’s jump into my interview with Mike.

Tim Ulbrich 02:11

Mike, welcome to the show.

Mike Byers 02:13

Hey, I’m happy to be here.

Tim Ulbrich 02:14

Before we jump into your financial journey and the path of becoming a seven figure pharmacist, tell us more about your career in pharmacy. What led you into the profession? Where do you go to school? When did you graduate and the type that you have work you’ve been doing since?

Mike Byers 02:28

I think I started off like most folks going from high school to college, I went to the University of Pittsburgh. I started there. And of course, I was thinking about medicine, dentistry, pharmacy as my options and I was thinking about the path to get there. I don’t quite know what I wanted to do. My life kind of hit a roadblock sophomore year, I have a condition called ulcerative colitis. And I had to drop out of school at that time. And for a semester I was in the hospital for 16 days. And after the end of it and being in the hospital and experiencing things firsthand, I said, I think being a doctor is too hard for me. I think it’s it’s just not in the cards for what I have going on. And I didn’t know at the time that this disease wouldn’t be a huge part of my life. I found medicines over the years to control things. But I was also still dating my high school sweetheart at the time. And oddly enough, her father was a pharmacist. He owned an independent pharmacy. And I thought why not. So I finished my undergrad, I got a degree in economics and also a minor in engineering. And I went to pharmacy school from there.

Tim Ulbrich 03:54

And after graduation, those that are native to your area or where I lived for 10 plus years in Northeast Ohio, they’ll recognize the name Giant Eagle, but others will not. So tell us more about the work that you’ve been doing with Giant Eagle after graduation.

Mike Byers 04:09

Sure. So that was an exciting time to be in pharmacy school. I mean, you were going to school, you were learning things that were helping people and developing these skills and it was very fulfilling and the whole time, salaries were going up and you hear you would hear interesting things like the Alaska deal and all the things you’ve probably heard about it that time. But I did graduate and I worked for Giant Eagle. I was an intern there and stayed on as a staff pharmacist. I had some experience leading three different stores, which I learned a ton from and I was also floater and then staff again. So it was about 20 years from the time that I signed on as an intern to last year when I did resign.

Tim Ulbrich 04:59

Mike is a fellow 2008 grad. I graduated from Ohio Northern, I remember those times, right? It was the sign-on bonuses with the cars and classmates showing up with new cars in the parking lot and the Alaska deal, which I never saw on paper, but I heard of it as well. So we’ll share with our listeners, what is that all about? What I remember if it was, it was a big retail pharmacy chain that was offering a three year deal in Alaska for a million dollars. That’s what I remember the deal.

Mike Byers 05:28

The only thing I remember is sitting in class and hearing somebody turn around in their seat and say, I heard this. I heard a million dollars, three years. I’m gonna do it. And then I’m going to retire. Yeah, so maybe that planted the seed for some kind of early retirement financial independence at that point.

Tim Ulbrich 05:46

Nonetheless, it’s a very different time right here in 2024. So we’re going to dig into your current state of being a seven figure pharmacist achievement, financial independence, getting to this point of being work optional. We’ll talk about how you did that, and how real estate and traditional investments played into that. But I want to go all the way back to 2008 when you graduated with a net worth of zero, clean slate, no mounds of student loan debt, right, our listeners today are graduating $150k, $200k, you know, smaller debt loads, some might look at that and say, Hey, net worth, is your graduation, smooth sailing, but not so fast. Right? Tell us more.

Mike Byers 06:23

Yeah, before you throw tomatoes at the podcast, I did have a little bit of student debt. Which it was I mean, the difference between what I was making what I was spending, I can’t even remember how I paid it off. It was about $20,000. But I did go through a divorce, which cost some money, and I did have a real estate deal go south where I lost a lot of money. So I have had to dig myself out several times since 2008. But yes, I did. I did graduate with roughly a clean slate. And worked my way up to now where my passive income through real estate pretty much replaces my salary at 30 hours a week as a pharmacist.

Tim Ulbrich 07:13

What were some of the decisions, and we’ll dig deeper as we go throughout. But what were some of the decisions that you made early on as a new practitioner, you know, as it relates to car purchases and other things. You know, one of the things you shared with me prior to recording was that quote, “I became obnoxiously materialistic, which I partly blame for my marriage falling apart.” What do you mean by that? And how did this ultimately, you know, play into not only the financial plan, obviously the relationship but what would be the beginning of of, you know, that trench that you would eventually dig yourself out of.

Mike Byers 07:44

So like, like we mentioned, it was exciting times to graduate with bonuses. And we I graduated and I was married, we got married the last year of school during rotations. And we were living in her parent’s basement, not because we needed to financially, but because we weren’t sure where we were going to end up for her job. But I bought an Audi. A luxurious Audi. While it wasn’t even three months after I graduated, still living in my in-laws basement, bought this fancy new car. And it just seemed like the thing I was supposed to do. Long story short, I mean, we eventually moved. She got a job north of the city, we moved into a nice townhome rental. Not much longer after that, I’m on Zillow shopping for a nice, big, fancy house. So the fancy house came not much long after that. And I did become obnoxiously materialistic. And it wasn’t long after I moved into that house where I saw the house on the next street. He said, Gee, I wonder when or what it would take to get that bigger house. And that was just the way I was operating and had we not gotten divorced, I could still be operating that way. But it was just a mindset where I blame being really materialistic 10%. 90% we were young and ultimately not right for each other. But it wasn’t much longer after living in that house a couple of years where the bomb went off and divorced, trying to pick up the pieces again.

Tim Ulbrich 09:34

So you don’t go from that point to becoming a seven figure pharmacist by continuing that mindset and continuing those behaviors. So something shifted, something happened from a mindset and a behavior perspective. It sounds like that was the divorce. Tell us more about that.

Mike Byers 09:50

It absolutely was. I realized that I didn’t need a big house and a fancy car to be happy. I said the exact opposite – how little can I survive on? Or how little can I have material wise in order to live a happy life and I somehow found a studio apartment in the city, it was 350ish square feet. When my mom first saw it the first time, took her breath away, because it was just that small – the bedroom was in the kitchen. Yeah. And those were those were happy times. I lived that way for a couple years. And it felt really comfortable. But I still wasn’t saving. A couple years goes by and I’m like, well, kind of on this path where my rent is relatively cheap, my salary is relatively high. Why don’t I have a savings goal? Because I didn’t feel like I was doing the right thing at the time. So my goal that year, I think this was about 2012. So a couple years after divorce four years after graduating, I decided I wanted to save in addition to 401k, I wanted to save $2,000 a month. And each month I would play the game, if I wanted to buy something I worked extra. If it looked like I wasn’t going to hit my goal I cut back. And that’s what I did for that year to in addition to maxing out 401k to build up some cash savings.

Tim Ulbrich 10:11

So if I’m following correctly from jump street, you’re maxing out your 401k. So you’re leveraging the tax advantage account. And then you hit this point, shortly after the divorce four years into your pharmacy career. You’re in this studio apartment 350 square feet, and you realize, Hey, I’ve got an opportunity to more aggressively save. And so you set this target, which you know, to be on, I mean, $2,000 as a percentage of one’s take home pay, that’s a big chunk of money. And you see this a lot in the financial independence, retire early the FIRE community where there’s very aggressive savings rates, right, you’re in your early 40s. So to get to a net worth of seven figure plus, it’s going to take a substantial amount of savings to do that at an early age. So did your savings rate stay there? What did the trajectory look like as you were building that over time?

Mike Byers 12:21

So I hit that number, okay. And I was able to save about $25,000 that year. So I built up my cash savings. When I after going through the divorce, I didn’t have that cash savings. And I built that up and again, I kind of felt comfortable like, Hey, I hit that goal for that year, and I got a new apartment, that apartment had one bedroom. Not necessarily more happy in that apartment, but it was more expensive. And it seemed nicer. So at that point, it was a little more rent, and I wasn’t saving money and about a year had gone by and I said to myself, What am I what am I doing now? I mean, I had this surplus, and I was on a good path. So I for whatever reason started Googling. I figured it was taxes. I said I typed into Google, “single high earner how to save on taxes.” Okay, so real estate comes up. And I’d always been interested in homes. I love home remodeling and you know, watching a little bit too much HGTV at the time. But the next day, my friend came over to watch a football game. Oddly enough, he says my mom was thinking about selling the duplex. I had known him in college. And my ears perked up because why not? So, long story short, I fell ass backwards into owning a duplex.

Tim Ulbrich 13:58

Little house hack.

Mike Byers 13:59

Yeah. House hack. Yeah.

Tim Ulbrich 14:01

How did that one work out? Tell us about that is an investment property?

Mike Byers 14:06

I mean, it was it was a huge learning curve. So I said yes. I said I contacted his mom. We did the whole thing without an agent. It needed a lot of repairs and the whole thing flooded while we were in escrow. The pipes burst it was during winter the heat wasn’t on. So I had to jump into renovating and immediately kind of learning how to increase the value of the property. So I did that. And you know, I went from a studio apartment to half of a duplex even though it didn’t have air conditioning. It felt I mean, I felt amazing. I renovated it. It was nice. And I was just living in the duplex I was charging downstairs rent that mostly covered my mortgage. And it was shortly after that time when I discovered Mister Money Mustache. I’m sure a lot of people that you’ve talked to have started that or had that at some point in their journey. But that’s when things really started to go pretty quickly and I’d love to talk about that experience.

Tim Ulbrich 15:25

Yeah, and we’ll dive into that deeper and we’ll link in the show notes and Mister Money Mustache. For those that aren’t already familiar, I suspect many people are, great resource great blog will also link to other episodes, we talked about house hacking for those that that’s a new term. The idea is that you typically lots of different ways to house hack but you know, the most common we live in a duplex triplex or quad, you live in one unit, and you rent out the remaining units, obviously trying to generate income streams and hopefully cover a portion or majority of your mortgage payment in turn your what you think of often separately, your primary residence and then investment properties, bundle those together. And there’s some creative financing strategies of ways that you can, you can do that. And I want to come back in a little bit to talk more about real estate because I know it’s been such a big part of your plan. I do want to go back to the savings rate piece because I know you started with that $2,000 month goal. You shared with me in advance that eventually you’re pushing that up closer to $4000 to $5,000 a month. A lot of pharmacists hear these aggressive savings rates. And they’re like, how? Right, how? You know, you think of a typical pharmacists income, take home pay $7000 to $7500, maybe $8,000 a month, depending on what they do. You look at large fixed costs, like house, cars, student loan payments, daycare, childcare, other expenses. And we work with many pharmacists where there’s just not a whole lot of margin, at least in current expenses. So give us a little bit more of the behind the scenes of how you were able to actually allocate a large percentage of your income? What sacrifices did that require? And then where were you putting that money? I heard early on it was cash savings beyond the 401k. But was that in IRAs? Was that brokerage accounts? Where were you putting that money?

Mike Byers 17:13

As far as stocks and retirement accounts, it’s just 401k. The Roth and the traditional just, I was saving so much at the time, the income limits, and then the limit that you could put in just seem too small for me. So how do you save? I mean, you mentioned that the three biggest things housing, transportation, and whether or not you have kids, I guess your third one would be food? If you don’t have kids, that third one, if you do is day care. Yeah. So house hacking. That’s the big way to save on your housing costs. So at one point, my housing costs were zero, because the rent went up. And I was saving at that time, I had paid off the loan on my car, and I kept it. So a lot of folks will pay off one vehicle and buy in the next or keep buying new vehicles that are pretty, pretty frequent pace, but if you keep your vehicle eight, nine, ten years, when you get to that point, it’s paid off. You can save a lot of money. So I was saving probably in the realm of $5,000 a month. So that included a paid off vehicle. It included rent from downstairs, a little bit of overtime manager salary. And saving on food. I mean, just not going out to eat a lot. That was a big thing for me. I mean, you can play the game where you get pretty extreme. And it was too much for me. I mean, there was one point where I was calculating the cost of the extra food I would have to consume to walk to work versus the cost per mile of gas if I had driven so what I was doing with that $5,000 a month, I was putting it all in my checking account. Okay, fine. It was just building out pretty quickly. I called the mortgage company and I said, hey, this PMI insurance. I have, you know, a certain amount of equity at this point. Can we make that go away? And they said no. I said why? And they said, Well, this is an FHA loan.

Tim Ulbrich 19:26

Yeah, right. Did it. On my first home. Didn’t know that.

Mike Byers 19:30

Yeah, blame myself. I blame the mortgage seller, whatever. I was so angry by that. And I was saving so much money that I paid off. I think it was $100,000 loan balance relatively quickly, like within a year and a half. Just because I was mad about that. And I wanted to make $120 a month go away. So I was putting it back into the real estate.

Tim Ulbrich 19:55

Got it. Okay. You mentioned something really interesting. You talked about of extremes, right? And you see this sometimes in the FIRE community and and let’s, let’s say out there and everyone’s on their own journey, everyone’s situation is different. You know, everyone’s cost a living expenses are different family situation is different. So everyone has to figure out what is the journey and pathway that allows them to achieve the goals that they want to achieve. But those that are on this financial independence, retire early or retire optional journey, you know, there is what you call the potential for this frugal fatigue. Right. And I love that term, because it’s real. And there’s a time and season for it, for that grind. And there’s a fatigue that comes with that as well. And so, my question for you is, how did you combat this? When you recognize that? What did you do to say, Hey, this is real, and I’m achieving all these great goals, and I’m saving a lot per month. But this fatigue is real. How did you combat that fatigue?

Mike Byers 20:51

I mean, you have to be honest with yourself and say, What am I doing now? What is the result gonna be? I mean, if I’m saving so much that it’s driving me crazy. The result is you’re gonna go crazy. But for me, I would. For me, it was adventure. So when I got pretty fatigued with the daily saving, and it wasn’t like I was living this life where I was, you know, things were relatively scarce and I wasn’t having fun. But at time, like I bought an Airstream when you’re holding back so much, and you’re just kind of yearning for adventure, you see a commercial for the new Airstream. You just buy it. And you can adjust. I mean, just because you go down a path of a certain savings rate doesn’t mean you have to stay there, you can make adjustments. I ended up selling it a few years, a few years later. And the money that I lost, I guess you could say last was a great experience. So you just keep adjusting yourself and you have honest conversations with you or with your spouse if you’re married on okay. What are we saving? What experiences aren’t we having? Right? What is that going to result in in the future? Because you could have two different ends of the spectrum. You could have YOLO. And I know people like this and they’re happy. You only live once, they’re spending their whole paycheck. They’re not thinking too much about the future and holding back on some things. They’re just living life now. But there’s the other end of the spectrum, which is deferred gratification. Yep, either one of those two, seems a little extreme. And you could get screwed either way. So if you’re YOLO, and not saving anything, and leveraging all your salary and income to have fun today and you live to 100. I mean, you could be screwed. Sixty-five When you start to not have energy and ability to work, I mean, yep. But if you defer everything and you die at 50, you’re screwed as well. So you have to find your balance in the middle and continually be honest with yourself and have the conversations with your spouse on what the right balance is.

Tim Ulbrich 23:17

Ton of wisdom there, Mike. And there are several resources that are coming to mind that I feel like of what you shared. You’re kind of pulling from, you know, some different philosophies and putting it together. What we often say is, hey, we’ve got to figure out how we can save and invest for the future to take care of our future selves, but also live a rich life today. Both of those things can happen and be true. While that looks different for everyone. And, you know, I’m thinking of some of the resources that have influenced my journey. Rich Dad, Poor Dad, The Millionaire Next Door or Die with Zero by Bill Perkins.

Mike Byers 23:45

I just read that.

Tim Ulbrich 23:47

Bigger Pockets. Like, I kind of hear a little bit of pieces of these. And what I love is you’ve taken these teachings, and probably many others, and said, Hey, this is what is ideal for me and my journey. And I think the way you articulated that is beautiful, and I want to talk more about the real estate. So 2012 You buy the duplex sounds like that was a good move in the house hack. You weren’t a one and done real estate investor. 2019, you decide to do a deep dive deeper dive into real estate beyond that initial house hack, which ultimately, when we talk about current state would allow you to cut cut back your work altogether to replace that income, but initially go from that full time to less or full time 30 hours a week. Where did that motivation and drive come from? Do that deeper dive in real estate and tell us more about that second investment, the one that you you kicked off in 2019.

Mike Byers 24:41

So I had lived in the duplex for about five years 2013 to 2018. I had gotten out of a four year relationship at the time and I’m driving to visit my brother in Sioux Falls, South Dakota. It’s pretty long drive so I’m doing a lot of podcasts listening and I discover some things was about real estate. So again, I was kind of on the path. But I listened to some information on podcasts that said, well, you have another opportunity to continue down this path. I mean, I was sit still saving a bunch of money living there and earning a good salary. By the end of that trip, I decided that I wanted to buy another property. I wanted to continue, there was no, there was no reason not to grow this. And at that time, I felt like I had a little more tools and resources and experience to go down that road. So I bought another house, I was able to pay cash without a loan because of my savings rate over those last five years. And I lived in it, renovated it. I rented it out for a decent price. And I hit a certain number that I wanted to hit. And I thought I was the King of Real Estate in Pittsburgh. I bought another one. And before I was finished with that one, and ultimately ended up in another low point in my life where I just had too much going on. And I ended up selling that for a loss because it was just too overwhelming. But I, you know, these are the things you think about long car rides and long bike rides. It’s like what is the purpose of what I’m doing? And I had said to myself, I have this duplex, it has the opportunity to give me two rents. And I have the opportunity, because nothing’s really tying me down, to buy more real estate. And I think in order to do that, I need to cut back hours. So eventually, I asked to be cut down to 30. I got a really great store where I work three days a week, every fifth weekend. So that gave me the time and the freedom to eventually build more real estate. And the salary that I’ve lost over that amount of time, it’s, it’s really not a big deal. Because what you’re able to build with your time, or the freedom that you’re able to have is worth the cost.

Tim Ulbrich 27:17

In terms of your portfolio, you started with the duplex, you buy another one in 2019. Sounds like that goes well. The one after that not so much. You mentioned a low point, what what did you do to kind of pick yourself back up and say, Hey, maybe I’m not the king of real estate in Pittsburgh, but I also have something here to offer. And I think I’m on to something in terms of building some real assets here. How did you get out of that trough and really get yourself back in the game?

Tim Ulbrich 27:46

And then that portfolio, the current day portfolio you just mentioned, has gotten to the point where work is optional. So you went from 40 hours a week to 30 hours a week. And now that portfolio is generating income such that if you need to, want to work in the future great, you can or if you want to pick up extra hours, but you’re not in a position of needing that income.

Mike Byers 27:46

I mean, thank God, I met my wife at that time. Because she gave me the confidence and believed in me. And I’m the type of person that if someone believes I can do something I could, I could climb a mountain pretty easily. Amazing, amazing luck that I found such an amazing person. And she believed. She knew what I had done in the past with the single family home and the duplex and the skills that I have built and the knowledge that I had built during this time. And sometimes all you need is a partner that can believe in you and do it with you. So we basically went on a buying spree and use the equity in those two homes to buy four more homes and rent those out. And that’s what our portfolio looks like today. Four single families and a duplex plus our primary house.

Mike Byers 29:14

Exactly.

Tim Ulbrich 29:15

Okay. Yeah, man. That’s awesome. Congratulations on the journey all the work.

Mike Byers 29:20

Yeah. So that was a goal. And things change when you have kids. And we had two children born pretty close together. And we were coming towards the end of my wife’s maternity leave for our second child and we were deciding what to do and it was a decision for me to stay home and not work. And the investing in assets and growing those assets and having those assets give you a return to buy more is what allowed us to have a one income family.

Tim Ulbrich 29:58

And your boys are how old now?

Mike Byers 30:00

They’re one and two.

Tim Ulbrich 30:01

All right. All right. So you’ve got options for time and flexibility schedule with them. That’s cool. If we zoom out for a moment, and look at your pathway to becoming a seven figure pharmacist, and now looking at your asset base as a whole, not specific numbers, but just general percentages, if you were to break that down between, you know, more traditional, right 401k types of dollars versus the assets that you have in real estate, or potentially others that I’m not yet aware of, like, how is that net worth broken down?

Mike Byers 30:36

I would say 60 to 70% real estate. Probably 60% of real estate. And then the rest is in 401k.

Tim Ulbrich 30:46

Okay. Okay. And we haven’t even touched on obviously, a whole nother aspect of the real estate, you know, you’ve got your cash flow you’re generating now there’s future appreciation, there’s tax advantages, if anyone wants to dive into that deeper, Tax Free Wealth by Tom Wheelwright, great resource to kind of just open your eyes a little bit if, if that’s not something you’ve you’ve considered before.

Mike Byers 31:08

I mean, for our real estate specifically, I mean, if you think about it, there’s three, three or four different ways where you make money. So there’s cash flow, there’s appreciation, and there’s loan pay down. So what we shoot for with our properties is $1,500 a month. $500 is $400 or $500 is cash flow. $500 is being paid down by the tenant and then above $500, is appreciating, and when you multiply that by several properties, you get that automatic savings in those two parts, you get the automatic savings where the tenant is paying it down, and it’s appreciating in value. And then you can use the cash flow to reinvest or if it’s a different season of your life where you need to live on cash flow, you can do that you can take a break from work, you can take a sabbatical. And it’s it just provides you options. Right now, what I’m looking at is, what kind of options has what I’ve built in the past, giving me to live a great life with like I, like you mentioned the book Die with Zero, you get to 40 years old, and you start thinking, Okay, I have this money saved because I was diligent and being able to save, what does the next 10 years look like? Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars? You know, maybe your kids and your spouse they want you home? So that you know you can you can live a different life with experiences. And that’s something that you think about when you turn a certain age and you start wondering how much more do I really need to be comfortable after 65. I don’t want to be self insuring myself if there’s a maybe there’s an insurance product or an annuity that you can buy, that would serve that same purpose.

Tim Ulbrich 33:11

And options is the word I hear. Flexibility is the word I hear. And it’s interesting when I polled our community about the idea of financial independence, whether or not they want to retire early. You know, some people love what they’re doing. Some people don’t like what they’re doing. Some people might want part time or to pivot. But the goal of financial independence, I think, is one that resonates with people as a whole. And when I asked that question, you know, what excites you? What motivates you around that concept of financial independence? It’s options. It’s flexibility. It’s being able to choose and to have choice in those things along the way, which I think your story is such a good example of that as well. Mike, when you look back on this journey, and one of the things I appreciate is in the transparency and the vulnerability. You know, we could look at the current state and say Mike is crushing it, and you’ve done incredibly well. But there’s been highs and there’s been lows along the way. And there’s been a lot of learning that’s happened. As you look back on that journey from net worth of zero to becoming, you know, well into a seven figure pharmacist, what lessons do you take away as you reflect back on that, that you can share with our listeners?

Mike Byers 34:20

I think a good lesson to learn is have honest conversations with yourself about the alternatives. So if you’re on the path, and you’re making and not saving, if you’re making a certain amount and you’re not saving a whole lot and you get to the point where maybe you’re thinking there’s something more I can do. Maybe I can save a little bit more or maybe I can make investments outside of my 401k, they’re gonna be a good return and give me cash. flow like real estate. Just have honest conversation about what the alternative is. Because sometimes the alternative is you get stuck for a long period of time in what you’re doing because you didn’t take those five years to save diligently, or to pursue something that you’re interested in as far as a side hustle or take that job. So I sit down, evaluate what you’re doing and what path you’re on. And where that’s gonna lead to 10, 20, 30 years down the road. Five or 10? Whatever.

Tim Ulbrich 35:44

Yeah, and I hear a lot of patience in your story. I hear a lot of, you know, seasons of sacrifice, but also seasons of perspective, and kind of reevaluating where am I going? What are we trying to do? I’m curious, as you look out, you mentioned this time window into the future, as you look out, where do you see your real estate portfolio going? You know, now that it’s gotten to a point of replacing your income, do you see yourself kind of staying put in this model where you’ve got a duplex and several single family homes? Do you see an expansion within that same investment category? Are you interested in, you know, commercial or short term rentals? Like, what? Where are you envisioning the future of the real estate portfolio?

Mike Byers 36:23

So I’m envisioning, I mean, my, my vision is to work on it three to four hours a day, from a coffee shop and manage the investments. So I wish I could give you a better answer. And part of stepping back from the pharmacy job and trying new things is this level of uncertainty and really uncomfortability like, things aren’t amazingly comfortable right now. I mean, I’ve really had to unwind some of the programming that 20 years of retail pharmacy put in me, so it’s tough, and I can’t tell you exactly where I want to be in this is a period where I am. But I mentioned the word sabbatical. So it’s, it’s a period of time where you’re not forced to work, where, you know, thank God, my wife is just so amazing and understanding. You can take the time to figure out your next path. And instead of working nights and weekends for the next 10 years to figure out how to have your kids experience and watch you live an amazing life. So that’s an evolving thing. And maybe we’ll catch up in five years, and I can tell you what it evolved to. I you really have to think about what your passion and purpose is. And sometimes you look at 100 jobs on on LinkedIn or Indeed, pharmacy/medical related and you just can’t see yourself doing that. So I’m trying to find my passion and purpose right now. And I really think it is in real estate, whether it’s rental real estate, commercial, vacation rental or flipping. I’m trying to figure that out.

Tim Ulbrich 38:19

And what excites me about that is I sense this is a season of, you know, some of that deep reflection and figuring out the next steps. You use the word sabbatical as well. But you know, another tip of the cap to the work that you’ve done, you’ve put yourself in a financial position, with the support of your family to be able to take the space to think and think strategically, right? And that’s an amazing opportunity, but it didn’t fall in your lap. You worked incredibly hard for that to happen. So congratulations, Mike on on the journey. I do look forward to following up and following your journey. Along the way. I know it’s been an inspiration to me, I’m sure it will to our listeners as well. So thank you so much for taking time to come on the show.

Tim Ulbrich 39:01

As we conclude this week’s podcast, an mportant 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, 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 Is yourfinancialpharmacist.com/ disclaimer Thank you again for your support of the Your Financial Pharmacist Podcast Have a great rest of your week.

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YFP 358: Top 6 Financial Moves to Make as a Mid-Career Pharmacist

Posted on May 9, 2024May 9, 2024 by YFP Media

YFP Co-Founder and Director of Financial Planning Tim Baker discusses six financial moves for mid-career pharmacists, including re-evaluating the vision for the financial plan.

Episode Summary

Tim Ulbrich is joined by YFP Co-Founder and Director of Financial Planning at YFP, Tim Baker to discuss various financial planning strategies for mid-career pharmacists, including resetting the vision for the financial plan, prioritizing retirement planning and emergency funds, and reevaluating, reviewing and updating insurance policies.

Regularly reviewing and adjusting these funds to account for the various life changes ensures that policies align with current financial goals and circumstances. Tim and Tim also address the importance of having those uncomfortable conversations, such as end-of-life care and inheritance to avoid potential legal and financial issues in the future.

About Today’s Guest

Tim Baker is the Co-Founder and Director of Financial Planning at Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 12,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements.

Tim attended the United States Military Academy majoring in International Relations and branching Armor. After his military career, he worked as a logistician with a major retailer and a construction company. After much deliberation, Tim decided to make a pivot in his career and joined a small independent financial planning firm in 2012. In 2016, he launched his own financial planning firm Script Financial and in 2019 merged with Your Financial Pharmacist. Tim now lives in Columbus, Ohio with his wife (Shay), three kids (Olivia, Liam and Zoe), and dog (Benji).

Key Points from the Episode

Financial moves for mid-career pharmacists, including resetting financial goals. [0:00]
Financial planning, goal setting, and prioritizing life ambitions. [3:54]
Emergency funds and savings goals, including rechecking amounts and locations. [9:17]
Emergency funds and retirement planning for mid-career pharmacists. [14:34]
Retirement planning and nest egg calculation. [16:46]
Social Security benefits and retirement planning for pharmacists. [22:43]
Updating estate plans for mid-career individuals. [29:13]
Financial planning for aging parents. [33:39]
Financial planning for mid-career pharmacists, including insurance checkups and estate planning. [37:48]
Insurance planning for pharmacists, including long-term care and property casualty assessments. [41:17]

Episode Highlights

“And I think the other thing is that things change. I think checking up on your financial plan is really, really important.” -Tim Baker [5:08]

“I think it’s really important to kind of recast the vision, recast the organization of your financial plan and go from there.” – Tim Baker [5:52]

“I think one of the things that I would challenge people who are mid-career, from a goal setting perspective is, are you doing the things that make you whole or that you’re passionate about?” – Tim Baker [6:28]

“So, you know, I think being critical and actually like slowing down and saying, is this what I want to do. And then using the resources, the time that you have, the dollars that you have, to kind of right that ship, and because again, we’re here for a very finite amount of time. And it goes by quickly, and it sounds very cliche, but it’s true.” – Tim Baker [8:08]

“I typically say that the estate plan is really important, really, for anybody, But particularly for people that have a spouse, a house, or mouths to feed. So if you have those things, and you don’t have documents in place, I think that that’s probably the biggest thing that we need to look at.” – Tim Baker [32:58]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

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, Tim Baker joins us back on the mic to talk through six financial moves to make as a mid career pharmacist, we discussed the importance of resetting the vision for the financial plan, how to determine whether or not you’re on track for retirement, gaps to look for in your estate planning and insurance coverage, and much more. For more information and details on each one of these areas, go to yourfinancialpharmacist.com/midcareer. That’s one word again yourfinancialpharmacist.com/midcareer.

Tim Ulbrich 00:37

Before we jump into this week’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. Yes, you’ve worked hard to get where you are today. Yes, you’re earning a good income. But have you ever wondered, am I on track to retire? How do I prioritize and fund all of these competing financial goals that I have? How do I plan financially for big upcoming life events and changes such as moving, having a child, changing jobs, getting married or retiring? Or perhaps why am I not as far along financially at this point in my career as I thought I would be? The answer may be that your six figure income is not a financial plan. As a pharmacist, you have an incredible tool in your toolbox: your salary. But without a vision and a plan that good income will only go so far. That’s in part why we started Your Financial Pharmacist. At YFP, we support pharmacists at every stage of their careers to take control of their finances, reach their financial goals, and build wealth through comprehensive fee-only financial planning and tax planning. Our team of certified financial planners and our CPA works with pharmacists all across the country to help our clients set their future selves up for success while living their rich lives today. If you’re ready to learn more about how Your Financial Pharmacist can support you on your financial journey, visit your financialpharmacist.com/learn. Again, that’s your financial pharmacists.com/learn. Alright, let’s jump into today’s show.

Tim Ulbrich 02:05

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

Tim Baker 02:07

Good to be back. Tim. How’s it going?

Tim Ulbrich 02:09

Good. It’s been a while official congrats on the baby. I know you’re off for a little while. But we’re glad to have you back on the mic.

Tim Baker 02:17

Yeah, thanks for thanks for hosting, it’s trying to get back in the swing of things with baby here. Sleep’s at a premium. So, it’s all good.

Tim Ulbrich 02:28

Well, this week, we’re talking about moves that mid-career pharmacists should be making things that they should be thinking about. And really whether someone is early in their journey, you know, these are things to be thinking ahead of or those that are actually in this season. Hopefully, this is more of a checklist type of episode where you can go through different parts of the financial plan, or perhaps tune up or look back at some of these items. Tim, it dawned on me though, as we’re preparing for this episode of like, that’s us mid-career, you know, it’s really that that phase where you start to feel like, Hey, we’ve kind of checked off some of those basic foundational items. But there’s this whole other set of issues and things that we need to be thinking about going into the future. So for better or for worse, here we are in the middle of our career, as well. And we’re excited to talk through these six moves that mid-career pharmacists should be making in each one of these we have covered at length, if not once, maybe twice, or three times on the episode before. So we’ll make sure to mention that when we get to these individual items and link to those things in the show notes as well. Tim, I think it makes sense that we start number one, really with the goals. You know, this is an opportunity, I think to reset the vision for the financial plan, there often is a lot of transition that can be happening at this phase, you know, this might be the time where people have kids are getting a little bit older, maybe beginning to think about them moving out of the house, we obviously have to be thinking about taking care of ourselves. Maybe we have elderly parents that we’re trying to prioritize as well. So just a lot of transition, I think an opportunity to take a step back and really look at the vision and the goals for the financial plan and how those have changed over time.

Tim Baker 04:05

Yeah, I would package these, I would actually package this together with like, what is the balance sheet look like? And then what is the vision going forward? So you know, we kind of look at this, you know, when we work with clients as a get organized and kind of a goal setting, you know, as a one two punch, and this is typically where, Tim, when a pharmacist asked me a question of Hey, should I do X or Y? I say it depends. A lot of it depends on what is what is the financial picture look like for you? And then what does a wealthy life look like for you both today and in the future. And for everyone that’s going to be different. So, that to me is where that answer comes from. So yeah, like I think in prepping for this episode, Tim, I kind of learned you know, two things or realized two things that I think is really important to say out loud. One is just like a lot of stuff when I was looking at my you know, I was looking at my insurance stuff in my in my nest egg calculation, some of the things that we’ll talk about in this episode. It’s just a lot of moving pieces. And it’s a, and it’s changed a lot over the years. So that’s, that’s the first thing. And I think the other thing is, like, you know, this thing, things change, I think having, you know, checking up on this is really, really important. So, when we look at, like, the, when we look at the balance sheet, again, if you haven’t looked at your balance sheet in a long time, I think it’s really important, it’s not necessarily necessarily something that we feel in our day to day, yeah. But if you, you know, if you if you put your head down, and you’re working, and you’re raising a family or doing whatever you’re doing, and, you know, two or three years later go by, you can actually see the progress that, you know, has been made, right, so you can see, you know, how your assets, you know, been built up, how have you How have your liabilities been paid down? Or not, you know, do you have a different set of, you know, versus if it’s was it student loans in the past the past and now its a HELOC, or something like that. So I think it’s really important to kind of recast the vision recast the, you know, the organization of your financial plan and go from going from there. From the vision perspective, it’s, it’s laughable when you think about, you know, like, when I, you know, had these conversations with myself and my wife, you know, even three or four years ago, and then what that looks like today, like, like, and you don’t sense that, but like, when you when you actually look back, and you kind of memorialize, hey, in 2019 pre-pandemic, this is kind of our viewpoint, this is what we wanted to do. And then we look at that today, it’s vastly different. So I think, like, you know, one of the things that, that I would, you know, challenge people that are mid career, you know, from a goal setting perspective is, are you doing the things that, like, make you whole, or that you’re passionate about? You know, like, I was joking around with my team over the weekend that I kind of felt like an Uber driver, because I was driving to soccer practice and swim practice, soccer practice again, and swim practice again. Which is great, like, I love that I love you know, you know, you know, seeing my kids, you know, do well on their sports and their activities. But, you know, though conversation that I had with my wife over the weekend was like, are like, Are we are we good? Are we on like the track that we want to be on and kind of checking in with and sometimes that’s a check in with yourself, some that’s a check in with a spouse, sometimes it’s a check in with like, a close advisor, like a financial planner. And I think it’s really important to do that, because again, you can put your head down, and you know, live, you know, be living your life, but then, you know, you’re doing that vicariously through your kids or, or whatever, and not actually take the time to do the things that you’re passionate about. And sometimes, you know, again, your own goals. And ambitions are kind of taking a backseat to your kids, which is a it’s a natural thing. But at the end of the day, like there typically is enough to go around, like we can carve out time, we can carve out resources to do the things that you want to do whatever that is. So I think it’s really important, you know, as you are mid-career, and I think this is where, you know, people like to talk about, like a midlife crisis, because they kind of get caught in the rat race, and they’re like, this is not really the life that I want to live. So, you know, I think it’s that, you know, that self, you know, being being critical and actually like slowing down and saying, is this what I want to do. And then using the resources, you know, the time that you have, the dollars that you have, to kind of right that ship, and because, again, we’re here for a very finite amount of time. And it goes by quick, and it sounds very cliche, but it’s, it’s true. And I think you can I always talk about this, like, you know, that whole that sense of being on autopilot. I’ve worked at jobs where, you know, like, my commute to the office in the morning was in darkness, I would you know, I would drive there 30 minutes, I wouldn’t remember that drive, and then you back was in darkness, I would get in my car, and 30 minutes would go by and I’m home. And I don’t remember any of that. And that’s, that’s like an analogy for life is that if you’re not actually slowing down and think about is this what I want to do that’s important. So that’s just my life planning hat. You know, are we are we putting the first things first are we doing, you know, the things that we want to do and making sure that we’re, we have a plan and we’re being intentional for that.

Tim Ulbrich 09:16

I love the example you gave of you know how for you and Shay, your family, right short period of time, the goals can look very different, and why it’s so important to be looking at these regularly and talking about them together to have a third party, you know, kind of help, whether that’d be a plan or someone else. I was even thinking as you shared that, you know, for Jess and I, when you did the planning with the two of us how helpful it was when we would get together to flash up the goals to say, hey, yeah, a year, a year ago, you guys said this is important. Like, is it still important? If so, like, what what are we doing? What are we doing to kind of move this forward? And ultimately, like, where are the funds, right? If it requires funds to do that, and that’s so important. You know, you and I had a very similar season of life where, you know, to the point you gave of the weekend and being the Uber driver We’re like, the days and the months are flying by to really have that mechanism to stop, pause, slow down and remind ourselves of like, are we running the path? Are we running the race that we want to be running? And we’re not gonna get it right all the time, right balance in every season of life, but to have some built in mechanism to not just set those goals, but also to refresh and to look at those periodically.

Tim Baker 10:23

Yeah, absolutely.

Tim Ulbrich 10:24

All right, number two on our list is savings. And we’re gonna talk about a few different areas. Here. We’ll talk briefly about the emergency fund, and an opportunity to recheck where we’re at with that, we’ll briefly talk about retirement. Again, we’ve talked about all these at length, we’ll reference other episodes, and then we’ll touch on some kids college stuff as well. Tim, let’s start with the emergency fund and a recheck. I just talked on Episode 357, last week about five questions that we need to be asking ourselves related to the emergency fund. So make sure you go back and check out that episode. But I think this is one of those areas that where we set the emergency fund maybe early on in our career, and then we don’t think about, wow, a lot has changed, we really got to relook at is the amount that we have there sufficient? And how does this fit in with the rest of the plan?

Tim Baker 11:09

It’s one of those things where yeah, it’s kind of a forgotten, forgotten thing. And, you know, you know, what we really want to do is check in and make sure that you know, what’s in there is appropriate, and, you know, are there things that we can do to, you know, to, to improve it. So, you know, for for a emergency fund, what we’re looking for is three to six months of non discretionary monthly expenses. So these are expenses that are gonna go out the door, regardless of if we work or not. So things like, you know, a mortgage and insurance premiums and utilities and a food bill. So, unfortunately, we tend to get to that number, we have to actually look at spending data and understand like, what that looks like, and then, you know, we kind of look at, you know, what is what is discretionary? What are things that are non discretionary, and we add up all the non discretionary if we have, you know, two incomes, we multiply that by three, if we have one income, we multiply that by six for six months, and then and then that’s our number. For a lot of our clients. You know, it typically can be I think, in a, I would say, anywhere between 15 and $50,000 is what is what the number is, um, so I think like, you know, and this is something that that Shay, I looked at recently, and I think, for us, because of three kids and you know, daycare and all that kind of stuff, it’s, it’s crept up, and I’ve kind of tried to, you know, the interest that I that I accumulate in my high yield, or I do, I do a combination of a high yield savings account. And then like, a laddered CD that I do every quarter, like a year CD for every quarter. So I have a q1, q2, q3, q4 that I just renew, and I kind of let those ride and I’m actually adding more money, both to the high yield, and the, and the CDs as we go here. But I, the only reason I knew to do that was to actually look at the spending, and it’s kind of crept up, you know, just because of family of, you know, probably the last time I did it, we were a family of three, now we’re a family of five. So I think that’s important to do. And again, like, there are so many people that I talked to that they’re like, Okay, this brokerage account, this, this taxable investment account, that is my emergency fund, that is not an emergency fund, it’s, it’s, you know, if you’re investing in it, and you can see volatility, that’s not what we’re trying to do. So I think having you know, the right amount, and then the location is going to be really important. And to get the right amounts, typically, looking at the budget where you’re at today, and again, like I don’t look at the kids swim or, or soccer or other activities as a discretionary as a, that’s, that’s a discretionary thing. So if times get tough, we, you know, try to try to cut that. So I think even, you know, examining what is, you know, what should be in there and what shouldn’t, is important, but, you know, to me, it’s, it’s a little bit of nails on chalkboard, right Tim, because I don’t want to keep cash, I want to get that into the market and get work. And so I need enough to get us through a tough spot. But then also know that, you know, for me, I want to get money into mortgage and a lot of people typically, you know, later in mid career and beyond, they’ll they’ll start because they have an asset like the house, they’ll even use something like a HELOC as like an even deeper reserve. Yeah. So to have access to a HELOC, or something like that is going to be important that I’ve seen people use as a mechanism to, you know, to safely and I wouldn’t say cheaply because of where rates are, but somewhat cheaply access cash if needed, and not necessarily tie up a ton of money in a checking error, high yield savings account, I should say.

Tim Ulbrich 14:33

I like the hack that you mentioned. And yes, I do the same thing where you know, any any earnings on a high yield savings, we just kind of dumped back in the emergency letter, I let it ride right. And the idea being that’s going to help kind of keep pace at some level with inflation, maybe not fully, but to your point, it doesn’t cover those big jumps, right. So like now we’re a family of five instead of a family of three or, you know, we bought an investment property and we’ve got to be thinking about that or we moved homes and you know, mortgage payments went up and so those kind of big moves, where all of a sudden, you know, that emergency fund might go from that 15 to that 30, 35. Are we looking at that periodically.

Tim Baker 15:09

And for you, Tim is probably like your food bill, right? Oh, pre preteens? Like, like, that’s gonna that’s that’s like No, that’s no joke, you know like when you, even Olivia. Olivia is going to be 10 this year and she’s a swimmer. I mean, she eats I feel like as much as I do. And you know, when you when you think about that, that’s, that’s gonna move down quite a bit. So you know, it’s it definitely adds up. And at the end of the day, the emergency fund is there for that rainy day when, when when you need it and just making sure that’s properly funded is going to be important to kind of give you that peace of mind.

Tim Ulbrich 15:42

The second part of savings Tim, I want to touch on as we work through these six different moves for mid-career pharmacists is, you know, I think this is a natural time where we ask ourselves, Am I on track with retirement? Right? And, and this is a season where when we talk with pharmacists mid-career, you know, the visual I have is you’re getting hit in every direction, right? You maybe kids expenses, kids college has grown, we’ll talk about that a little bit. You’ve got this pressure facing you on retirement, you might be caring for elderly parents, you know, perhaps there’s debt still hanging around, we’re working through student loans or other things. There’s, there’s all these different pressures and headwinds, and naturally, that retirement piece made maybe wasn’t a top priority for a while. And all of a sudden, we get to this point where previously we couldn’t visualize retirement now we can start to and it’s like, Am I on track? And I know, we covered this in Episode 272. How much is enough? We’ll link to that in the show notes. So people can dig deeper, but just at a high level, you know, some some tips or some thoughts for folks that are asking this question of, Hey, am I on track? How much is enough? When it comes to retirement?

Tim Baker 16:45

This is such a, this is such a hard one. Because like, I’ll ask like prospective clients, like, Hey, do you feel like you’re on track to meet like your goal for retirement? And if you’re talking to someone in their 30s 40s 50s? I would say even in your 50s, it can be somewhat nebulous anytime it’s like a decade or more out. And typically, that the answer I get is like, you know, Tim, I really have no idea. Which is, I think, problematic, especially if we’re trying to, like, you know, build out a plan. So that’s obviously something that we can fix. But also, it’s kind of that default of like, well, like the 401k, you know, company or the 401k that I have, they have a calculator that says I’m on track. And I’m like, I just don’t know how they calculate that. And I almost feel like, all the compliance things that, Tim, that we have. So it’s almost like irresponsible, yeah, to, again, they’re looking at it very much from it, but people don’t necessarily know that, you know, it’s very much a vacuum. I think that like, the problem with like, Am I on track for retirement is that there’s so many variables that go into it, there’s so much time that goes into it, you know, and I always talked about this, like, when we, when I first started working as a financial planner, I remember working with my previous firm, and it’s like, you know, we would do financial planning by hand, and we would do a time value money calculation. And we would say, Hey, Tim, hey client, you know, your, your, your, what you need for retirement is $3.1 million. And we’d be like this exact number. And then we’ll kind of go on to like, the next thing, I’ll make sure you’re doing this. And it’s like, it just never connected. It was almost like this disassociated moving, because you’d like to look at like what the client had, which might be three or $400,000. And you’re like, I need to, like 10x this in 20 years, or 15 years. And there’s so many people that come back to me that when they start and then they’re like four or five years, they’re like, like, damn, Tim, like, actually, my assets I’ve actually grown like, I almost didn’t believe you. And it’s still hard to even to see that, you know, the progress to get to that, that millionaire level. But I think it’s really important. And so like, I took that, as a financial planner, I would look at the clients, like their eyes would kind of like gloss over because they’re like, that doesn’t mean anything to me. And I can’t we build up this nest egg calculator that basically goes through. And I did it recently for Shay and I, you know, what’s your current age? What’s your target? You know, so how many more years do you have left in the workforce? How long do you expect to live? Which is again, that’s one of the hardest, you know, that’s one of the risks in retirement is like longevity risk, like, are you gonna live really long or not? So again, that’s a little bit of a crapshoot. So we kind of make make some assumptions there. Social Security kind of has an idea of when they think that you’re gonna pass away, what your current retirement savings is with kind of think of it as your present value and your time value money. And then what your current calculate your current income is and then what that kind of projects into what you need for retirement. So we make some assumptions on how is your current assets actually invested? So for a lot of people that I see at least it’s in my opinion, too conservative, especially mid you know, if you follow the rules of thumb of, hey, if you’re, you know, if you’re 40 years old, you take 110 minus 40, your equity, equity amount should be 70%. And then the other 30 should be in bonds, I think that is wrong. But then we do some, you know, asset assumptions when you’re actually in retirement, so might be more conservative. And that kind of gets down to the total need. And then you have to factor in things like social security. So I pulled my Social Security, I think we’ll talk about that in a second. And then like, what does that mean, in terms of what do I need to actually save today? So it’s, it’s the idea here is to take this big number, whether it’s 3.1, 3.6, 2 million, 4 million, and actually break it down to a number that I can digest. So like, if you say, if I’m, if I’m the client, and I say, hey, you know, if I’m talking to a client, I’m like, Hey, you’re putting in 10%, for you to actually get on track to retire by 65. To live to 95, whatever that is, you need to go from 10% to 15%. Like, I can track to that. And also, you know, so that actually is a tangible thing, that’s a, that’s a digestible thing that I can do versus just saying, we need $3.1 and we kind of just are like, it’s a hope and a prayer, right. So it’s not, it’s not a perfect system. Because like, when I look at my own nest egg calculation, you know, I’m maxing out my 401. K. And let’s assume that I’m going to be doing that for the next 29 years, if I retire at 70, which, that’s a, I don’t know, I don’t know if that’s going to be the case. I’m hoping that’s the case. But so there’s, there’s, there’s some assumptions that we have to make to make, to make it kind of come to life. And I think the next level of this, Tim, was kind of going through some simulations. So if I were to, you know, if I were to, you know, take part of my portfolio and purchase x, or if I were to, you know, go and go down to part time, or, you know, do something else, you could actually run scenarios, if I, if I buy my Mountain House 10 years earlier, there’s some Monte Carlo analysis that will actually affect, you know, show you how it affects your success rate with your with your retirement. And I think that’s kind of the next level stuff. But for a lot of people, it’s where am I at? What are the things that I’m that I’m doing today? How can I tweak those things to get a better outcome, and that could be contribution rate, that could be my allocation, that can be a variety of things. So I think that’s important to kind of break down and really see, you know, because the more the longer that we wait to kind of effect change here, especially if it’s negative, the steeper that gets, right. So when you’re, when you’re early in your career, you know, a tweak here there can really have monumental changes, the closer you get to that retirement, just the the steeper that climb is and the harder it is to kind of meet goals. And that’s where you have to start, then potentially taking a haircut on lifestyle and retirement, or you know, the amount of time that you have to work etc.

Tim Ulbrich 22:43

What I love about the nest egg exercise is, you know, going through it for Jess and I, again, just a reminder, with all these things, we’re told it’s not a one and done, right. So if you do a nest egg when you’re, you know, 45, there’s assumptions, we’re building into all of these types of calculations, both in terms of the mathematical assumptions, but also what you want. And you know, you mentioned the different scenarios, and that can change and probably will change over time. So revisiting this periodically is so important, but it really moves I often hear people talking about retirement as like a hope, wish or dream, meaning like, I hope I can retire by 58, or 67, or whatever, or, you know, I would love if I could potentially work part time at some point in the future. And it’s like, hey, yes, those assumptions can change, many of them will change over time. But we can put a number to these into your point, let’s get it down to what do we need to be doing on a monthly basis, because these numbers do seem scary. And you can see, kind of the peace of mind that comes when you walk through these calculations with people when you start with those big numbers, three, four or 5 million. And then you get down to that monthly even if we don’t love the monthly number, when we factor in employer matches, other things, savings we already have. We’ll talk about social security here in a moment. It’s like, oh, okay, like, we can work with that, because we can put our arms around it and start to figure out, can we build that into the rest of the planet, a monthly basis. So, so important, especially for those who are mid-career listening. If you’ve done this before, you know, revisit this, you know, we’d love to have opportunity to work with you on the financial planning side, if you haven’t done it before need to revisit this as well. But something we definitely need to be updating. And looking at periodically. Let’s move to number three, which is really looking at our Social Security benefits and the projected benefits, which I think fits so well into the how much is enough calculation. And, you know, this is an opportunity to really look at our [email protected] to look at our statement, our projected benefits. I think a lot of people probably aren’t necessarily familiar with these tools that are out there. And to begin to figure out and build some assumptions of, hey, if I have social security benefits, what might those be? And then certainly we can project down if people are worried about the future of the benefit. I’m sure you’ll talk about that as well. But thoughts here on on kind of revisiting or looking at the social security piece?

Tim Baker 24:57

So if you go to ssa.gov Like if you have haven’t done this, I would encourage you, especially if you’re mid-career just to kind of see what your social security statement looks like. So to me, that’s really important to kind of get a sense of, and again, like, I think a lot of people, when they, when they think about security, it’s kind of an eyeroll of like, uh, that won’t be there, when I’m when I’m ready to retire, or it’s going to be greatly diminished. You know, I would, what I believe is that, you know, Social Security is one of those things where so many people rely on it to actually survive in, you know, it’s kind of a hand, um, you know, unfortunately, we’re kind of like a hand to mouth in terms of like, a lot of people don’t do a great job of saving themselves, especially, you know, no offense to Baby Boomers, where there was pensions and things like that pensions, and Social Security could go a long way, in terms of retirement, that day is done, you know, so when we moved away from pensions, and more to 401k, the onus has really shifted from the employer to the employee, to make sure that we’re doing what we need to do. And again, social security still there. But there’s lots of, you know, press about, you know, will be viable, and, you know, will it go bankrupt? My sense is that, you know, it will be there, Tim, when we retire it at 70. But it’s kind of one of those things where it’s, it’s unknown what that benefit would be, and again, maybe when we retire, you know, it’s not 70, it’s 75, or something like that, because of a variety of reasons. But the I think the big thing here is to pull your statement. And then when I look at mine, it actually shows me, you know, what my personalized monthly retirement benefits would be, if I started from age 62. So right now, my my benefits $2,076 or if I wait until age 70 and actually get the, you know, credits $3,777. The big thing with Social Security that doesn’t get enough play is that it’s inflation protected. So when we had that big jump into inflation the year before last, yeah, everyone’s payment went up, I think 8.9% or whatever it was your over a year, that’s huge. Because if you’re thinking about, you know, building a retirement paycheck, most of the things that you have, most of the income streams are not inflation protected. So every time, you know, we go through bouts of inflation, you’re you know, you know, the checks, the checks that you have running it coming in, are not going to account for the fact that, you know, your your grocery bill went from 100 bucks per month to $140, just because of where that’s at. So Social Security, you know, plays a part in that. So I think the big thing here is to try to check, you know, when you pull your statement, you can actually see your work year, and what your earnings tax for security were from, you know, I’m looking back from, like, 1991 to present day. So I think to make sure that that’s accurate, that’s, that’s going to be a big thing. And again, like, I think the sooner that you can kind of look at this and kind of get a sense of where you’re at. And then and then look at the you know, look at the the the retirement calculator that’s there, you know, if you if you retire early, versus if your full retirement age, you know, for us, it’s going to be 67. Or if you delay it out to age 70, which to me, I think a lot of people should really look at doing and if you have a plan, you know, before the kind of the knee jerk was like, get the money when you can get it, but that’s a that’s a mistake. And a lot of people are understanding now that it is a mistake. So doing a proper analysis. Again, it’s kind of a microcosm of your of your financial plan is, you know, inventory. So get organized in terms of what does the statement look like? What are the goals in retirement, and then how to properly deploy this, this inflation protected income stream, I think is going to be a big part. Now, for pharmacists, you know, your it might be 25%, 20% of your retirement paycheck, whereas, you know, the typical American it’s, it’s north of 50%. So but I think making sure that we’re positioning ourselves from, you know, to ensure that the income is correct. And then the basically the way that we collect the benefit is going to be in line with your overall retirement picture and financial plan.

Tim Ulbrich 29:13

And I think once we have that number, and again, we can adjust up or down, as you mentioned before as we’re running assumptions, but we can then build that into the nest egg calculation as well and see how that impacts where we’re at on a on a need for a monthly savings. Number four, Tim, on our list of six mid-career pharmacist moves to be considering would be the estate plan. We’ve talked about the estate plan in detail on the on the podcast episode 310. dusting off the estate plan. We’ll link to that in the show notes. But this time well, you and I were just talking about this last week. You know with your new baby in the house right there’s an opportunity to update documents we haven’t yet done our updates with with our youngest who soon to be five, so we’ve got to make sure his name is present, although he’s covered in language, but his actual name isn’t present in the documents. So I think again, and talk to us through why there’s an opportunity mid-career to really be updating these documents or perhaps for some even even establishing these for the first time.

Tim Baker 30:10

It’s probably, you know, I can say this being a ginger, but it’s probably the redheaded stepchild of like the financial plan. It’s, it’s ignored. And unless you’re military, a lot of the clients that are coming through the door really don’t have an estate plan in place. And one of the things that we implemented to kind of really combat this and really supercharge our ability to support clients is we have a an estate planning solution now that we, when we work with clients, if you don’t have a will, a living will, and well trust, if that’s needed, we can actually get those documents in place for whatever state that you live in country, which I think is awesome. So you know, it’s one thing to kind of, you know, say, Hey, Tim, this is what you need something to actually like, walk side by side with you and get the documents in place to make sure you’re covered. So I look at this really from a from from to, you know, to? Well, I would say it’s one big perspective, just change, right. So like, you know, if you think about, you know, maybe when you were, you know, early career to where you’re at now, for some people like could be different relationships, like there’s horror stories about people that are leaving money to like an ex. So I think it’s really important to kind of do a beneficiary check to make sure that the money is going to the right people, you know, Shay is going to be my primary beneficiary for like, a lot of the things that I have. But then right now, it’s like, Liam, my, my, my, or Olivia, my daughter, and Liam my son who are the contingent beneficiary, so if something were to happen to both, it likely would go to the kids, so like Zoe, or our newest baby has to kind of be in on that. Or it could be to like a trust, you know, a trust that is for the benefit of the kids, which is probably the better way to go with minor children. So to me, it’s more of again, looking at the the relationships, whether they’re, you know, out with the old in with the new, or, you know, brand new in terms of kids to make sure that the documents that you had in place clearly reflect your wishes today could even be things about, you know, bequesting, or, yeah, hey, I want to leave, you know, money to my alma mater, or to my cousin Fred, or things like that, that that’s a really reflects the things that you want to do. But also, you know, to, to ensure that from a protection perspective, you know, if you have dependents, they’re there, they’re taken care of, in a sense that, you know, if you were gone, or you can speak for yourself, the documents are that are in place, do that justice. So, for a lot of people mid career, it is adjusting what they have, or it could be it says that, that thing that’s been neglected that you’re like, I’m gonna get to it, I’m gonna get to, I’m gonna get to it, and you have it. You know, what, when I’m talking when I’m talking to prospective clients, and I bring up the fact that we can do this, that like, perks them up, because I know, it’s important. They know, it’s like, uh, I gotta find an attorney, or I gotta find some sort of solution. We got that covered. And to me that alone, I think, especially if you’re, you’re, if you’re a family, or if you you know, I typically say that the estate plan is really important, really, for anybody, particularly, particularly for people that have a spouse, a house, or mouths to feed, right. So if you have those things, and you don’t have documents in place, I think that that’s probably the biggest thing that we need to look at. You know, it’s important to get, you know, a plan for debt, it’s important to get your your nest egg and a plan for your assets and retirement planning. But this is really going to be important to shore up and make sure you’re good to go in the event that something were to happen to you. And again, it’s one of those things like, oh, that won’t happen to me, it will happen to somebody else. And then eventually, you’re going to be that that’s someone else. So not to be morbid, but you know, I think it’s important to cross those t’s and dot the i’s with regard to the state plan.

Tim Ulbrich 33:39

I mean, the reality is just like we’ll talk about in the final item number six on the insurance side, like it’s not fun to think about, right? So it’s easy, but been there myself, it’s easy to kind of drag your feet and let this be the call to action to either update, take a fresh look at those or get those documents created. Number five on our list of six mid-career pharmacists moves to make tip is probably one that a lot of people maybe aren’t thinking about, again, not necessary, the most comfortable thing to be doing would be some of the financial conversations with aging parents, you know, I think it’s common that we see mid-career pharmacists that are entering into a new stage of caring for elderly parents sometimes that, you know, could be a time investment that they need to factor in, that could be a financial investment. And for some, you know, that might be Hey, this is an expense that we need to be thinking about caring for our elderly parents or others. It might be, Hey, do they have the documents, the right documents in place that we just talked about? And do we have an awareness, understanding and transparency into that information? Which admittedly, is a very hard and awkward conversation to have no matter which way we’re looking at it. So thoughts here on some of the financial conversations with aging parents?

Tim Baker 34:44

So I think this can be both from an estate planning perspective, but also like a retirement perspective. So it’s very common for you know, our clients, you know, maybe who are you know, first generation immigrant that you know, they basically Say, Tim I am the retirement plan for my my parents. Right. So I think like building that into their into the our clients plan is gonna be really important because that’s, that’s part of their culture. That’s part of the goal. That’s I think that’s important. I think beyond that, you know, is more of the estate planning stuff. So I look at this as we have to, we have to secure our own estate plan. So our clients estate plan, but then what are the what are some of the things that can negatively affect, you know, and I’m talking negatively in terms of like financial, and maybe some of the legal and logistics, it could be the your parent, like elderly parents that don’t necessarily have a sound estate plan. So whether that’s, you know, we’ve talked about this, what’s the book “Mom and Dad, We Need to Talk” about some of those some of those conversations or some of those instances where, because of a lack of estate planning and foresight foresight, it’s negatively affecting the child’s plan or finances or time because they’re, they’re suing for conservativeship or you know, there, there’s just things that you’re don’t expect. So this is a tricky thing, because again, like I grew up in a household where we really talk about money that much, so it’s kind of a touchy subject. So how do you how do you go about having those conversations, and have, you know, have access to the detail that you need, but not being respectful, and not necessarily prying where you know, that it were, your parents made me feel uncomfortable, but they’re adult conversations that need to be had, because if you wait too long, then again, you’re you’re putting yourself in a position where you either can’t care or provide, you know, the support that you need to a parent, and it can ultimately, you know, negatively affect your own plan in terms of your, you know, financial resources, but also time. So, I think this is one of these things where, again, whether this is a family conversation around the holidays, or it’s a, an email or a letter, or it’s, Hey, this is a shared document, even give me passwords, and you know, I’m not going to access it until the time is needed to be able to do the things. But, you know, if something were to happen to your parents today, like, Do you know how to log into their different accounts? And what is the what’s the plan, and that can be a very uncomfortable conversation for some people, and for some people it’s not, like this, what it is, so I think, just to have that conversation, and understand where to go, what are the proper documents? What are the accounts? I think if you can do that before, you know, there’s capacity issues, or whatever, I think that’s gonna be really important. So that’s, that’s the big thing here.

Tim Ulbrich 37:47

And that’s one of things I appreciate so much, Tim, about Cameron Huddleston book, you mentioned, “Mom and Dad, We Need to Talk” is, it does provide a nice kind of third party and she’s got some great suggestions in that book of specific questions to ask, how to ask them how to ignite the conversations. And, you know, I think having that third party resource, even if you’re referencing that of, hey, I read this book, and you know, got me thinking that we should have a conversation and, you know, likely it’s not gonna be everything addressed in one conversation, but it opens up the door. Sure, it’s gonna be uncomfortable, but for, as you mentioned, for some people, maybe not depending on how they grew up around money, but so important that we understand, you know, what, what is the potential financial impact, as you mentioned earlier, for some if that means caring financially for the parents. And even if that’s not the case, there’s just a lot to consider in the estate planning process that we want to make sure that we’re honoring the wishes and aware of what’s going on as well. So number six, our final item on the six moves to consider for financial moves for mid-career pharmacists, Tim, is an insurance checkup. Again, not the most exciting part of the plan to be thinking about here, I’m talking about term life insurance, long term disability, perhaps beginning to think about long term care insurance as well. I know we’ve talked about term life, long term disability, even long term care extensively on the show before. Is this an opportunity to reevaluate those policies, you know, I’m thinking of this situation just as one, where let’s say somebody in their early 30s, bought a 20 year term. Now they’re at the end of their late 40s. And they’re looking at that saying, hey, the terms coming up here in the next, you know, five, six years. So talk to us about how we might look at the insurance part of the plan here as a mid-career pharmacist.

Tim Baker 39:25

I think like, in the absence of like, a, like an actual insurance calculation, you know, a lot of people will use a rule of thumb for term insurance of like, 10 to 15 times income, which again, that could have changed over the years. If, you know, if you have a 20 year policy, and you bought it in early 20s or 30s and now you’re you know, 40s 50s, like, what does that look like, you know, going forward? So I think like, I think, you know, and I think the other thing, too, is are there other wrinkles in your financial plan, i.e., hey, if I were to pass away, one of the questions I would ask myself is like, do I want to be able to send like, do I want to do I want Shay to have to worry about the mortgage or paying for the kids education? Right. So maybe that’s something that, like, I built into my, my plan going forward, and I didn’t have that, you know, 10 years ago. But now I do. So like, the other thing, too, is like, you know, again, mid-career, if you’re, if you maybe bought a house and moved out of the house, and now rented it, like, what, what happens from an insurance perspective? Like, do you want that property to be paid off? So I think like, I think, yeah, there’s there’s this renewal period, potentially, like, what do you need? And again, maybe it’s not, you know, maybe maybe you buy a 10 year term policy to kind of bridge it maybe don’t need another 20? Year? Maybe you do. But I think there’s also things that you can, in a proper calculation, say, Okay, this is important to me, this is not important to me, and then reflect that in insurance. So, obviously, I think the the life insurance is going to be really important. For some people, even getting it in place, which people just like the estate plan will drag their feet on that long term disability again, that’s one of the things I’m not really worried about short term disability, I think without it, I would just plus up the emergency fund, but from a long term disability, you know, again, how is your income changed over the over the course of the years, you know, if you’re, if you get it through a group policy, that’s going to typically be a function of what you earn. But, you know, if you have your own policy, should you supplement that policy? Because your earnings have continued to climb? You know, does that make sense long term care, we typically, you know, the our thought here is that we want to, we want to support the client as much to age in place. So so much of the science or so much of the studies show that the longer that you can be in your own surroundings and age in your own home, whatever that looks like. So that typically means bringing in some help as you age, you know, that’s going to be important. So what can we do to buy a long term care policy to meet that minimum, and then again, different parts of the country, that’s going to be a different, different amount per month. But we typically want to look at this, believe it or not, in our late 40s, early 50s, because there’s a sweet spot of, you know, if you’re too early, it doesn’t make sense. If you’re too late, it doesn’t make sense in terms of the availability of the of the policies. So what does that look like? So, typically, late 40s, early 50s, is when we want to have that conversation. And again, a lot of people, they kind of just like security, they kind of blow this off, like this is not for me, but you know, I think more and more of of, you know, the the industry is trying to support clients as best they can, to, you know, age in their home residence, and you know, and do it versus going into a facility or something like that. So long term care is going to be really important. And then the last one, I would mention, Tim is property and casualty. So doing an assessment here, holistic plan, which is our tax tool, has this deliverable that we’re testing out now that looks at homeowner’s auto and an umbrella policy. And what it does is try to find gaps in coverage. And if you think about homeowners, if you haven’t dusted that off in a while, like what your home was, you know, if you bought a home at 35, and now you’re 40, over the last five years, your home has appreciated a lot. So are you underinsured in that regard? You know, do you have enough assets? Or is there is there a risk there that you should have an overarching umbrella insurance to cover risk if something were to happen, or if you were to get sued? So these are kind of, again, next level things to kind of consider and just doing a checkup from an insurance perspective, do you have the proper life, long term disability? Is Long Term Care something on the horizon? And then from a property and casualty perspective, are there risks there that we don’t know about that we should have kind of, you know, a circling back to make sure that the coverages that we that are currently in place are, you know, suitable for what you’re currently at in terms of, of risk?

Tim Ulbrich 43:53

Yeah, that’s a good call on on the property casualty just for the appreciation you know, is a good good reminder for me as you mentioned, I was thinking about we had a fire of a house in our neighborhood it’s probably been sitting now for over a year and a half note no movement on the home and all I can think of is it’s probably some type of insurance issue going on trying to work through the process but you know that that’s exactly the question that came to mind right of hey, you know, what, what is the replacement coverage that you have? What’s the timeline of that replacement and given the appreciation and the cost to rebuild a fresh look at those policies, you know, is certainly warranted.

Tim Baker 44:27

I mean, I just I just got a picture here from Shay- fire in the next neighborhood. Fire started in the garage with a lithium battery charger catching on fire. So this is like as as we’re recording here, this is the picture from Shay so like, this stuff is important. Again, if we haven’t dusted that off in a while you’re leaving yourself open, you know, to risk that we don’t and I think it’s a somewhat of an easy fix to mitigate that.

Tim Ulbrich 44:53

Well I hope all was good there. Thanks again for great, great stuff, Tim, as we look through these six mid-career for pharmacist moves. For more information and details on each of these as a reminder, go to yourfinancialpharmacist.com/midcareer. Again, midcareer is one word. And for those that are looking to work with one of our certified financial planners at YFP on your individual financial plan, which would certainly touch these six areas as well as many more, make sure to head on over to YFPplanning.com. Again, that’s yfpplanning.com. You can book a discovery call. We’d love to have the opportunity to talk with you to see whether or not our services are the right fit. Tim, thanks so much and we’ll catch up again here in the future.

Tim Baker 45:32

Thanks, Tim.

Tim Ulbrich 45:34

DISCLAIMER: 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 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 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 Pharmacist unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

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YFP 357: Emergency Fund Check-Up: Five Questions You Must Answer

Posted on May 2, 2024 by Tim U

Tim Ulbrich, PharmD (YFP Co-Founder & CEO) covers five questions that you should ask related to your emergency fund to determine whether or not it is adequately funded and optimized.

This episode is brought to you by First Horizon.

Episode Summary

This week we’re diving deep into a financial fundamental that often flies under the radar: the emergency fund, also known as the rainy day fund.

Saving for unexpected expenses isn’t easy. It requires discipline, patience, and a leap of faith to stash away money for something you can’t predict. Especially when other financial goals, like paying off debt or investing, are competing for your attention.

In this week’s episode, we explore why having an emergency fund is crucial. From unexpected medical bills to home repairs or sudden job loss, life throws curveballs when we least expect it. But having a well-stocked emergency fund isn’t just about having the dollars to cover these surprises; it’s about gaining peace of mind and confidence.

Join host, Tim Ulbrich, PharmD, as he covers 5 questions you should ask related to emergency fund to determine whether or not it is adequately funded and optimized. Remember, when life throws you a curveball, your emergency fund will be there to catch you.

About Today’s Guest

Key Points from the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

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Advertising Disclosure

Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
	$750* Loans â‰¥150K = $750* â‰¥50K-150k = $300	Fixed: 4.89%+ APR (with autopay)	A marketplace that compares multiple lenders that are credit unions and local banks	Check Rate
	$500* Loans â‰¥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

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YFP 356: Love and Money: How to Successfully Navigate your Finances with a Partner

Posted on April 25, 2024April 25, 2024 by YFP Media

Tim Ulbrich, PharmD (YFP Co-Founder & CEO) digs into how to successfully navigate finances with your partner and shares 25 questions you can use to frame conversations around money.

This episode is brought to you by First Horizon.

Episode Summary

On this episode, we’re talking about love and money! Discussing finances with your spouse, partner or significant other can be tricky sometimes. Tim Ulbrich shares 25 financial discussion questions to help you navigate these important conversations along with a free resource you can download to help get you started. From reflecting on your “money classroom” and the way you were raised to understand money to how you feel about debt, savings, and other important goals, Tim guides you through these important conversations. There is no one-size-fits all to managing finances in a relationship – but sharing the same vision and goals with your partner can set you up for success. This episode is brought to you by First Horizon.

About Today’s Guest

Key Points from the Episode

Navigating finances with a partner, identifying money personalities, and setting goals. [0:00]
Financial planning for pharmacists, merging money personalities in relationships. [1:49]
Money personalities and setting financial goals. [5:50]
Financial goals, budgeting, and spending plan for couples. [10:39]
Financial goals, debt management, housing, transportation, and children’s education. [14:57]
Financial planning with a partner, including goals, investing, and retirement planning. [20:04]
Financial planning and management strategies for couples. [24:32]

Episode Highlights

“I think it’s really important that we spend time to reflect on and identify our money personality and how this does or does not match with our partner. For some of you that have been at this topic for a while, you know how emotional and how behavioral this whole topic of managing money can be. And so it’s important we spend time to reflect on and to get curious about what our money approach is.” – Tim Ulbrich [4:13]

“It’s really helpful that we reflect upon what is the approach that we have surrounding money? How might that have been influenced by the money classroom that we grew up in? The more we can understand that about ourselves, as well as our partner, and how we bring those characteristics into the relationship can be really helpful as we set a plan going forward.” – Tim Ulbrich [8:03]

“Is everything merged when it comes to the finances? Might we have some things separate? Some things merged? Of course, that’s an individual decision for everyone. But ultimately, on some level, we want to have a shared vision, even if some of those items might be separate.” – Tim Ulbrich [8:38]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody Tim Ulbrich 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 we’re talking love and money how to successfully navigate your finances with a significant other spouse or partner. Easier said than done right? During the show, I discuss how to identify with your money personality and how this does or does not match with your partner strategies for setting and achieving goals together 25 financial questions and discussions that every couple should have? Hang with me. I’ll give you a resource and a link to download those questions and advice from the YFP community on what has and has not worked for them in their own journey, navigating this important topic with their partner.

Tim Ulbrich 00:45

Now before we jump into this week’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. Yes, you’ve worked hard to get where you are today. Yes, you’re earning a good income. But have you ever wondered, Am I on track to retire? How do I prioritize and fund all these competing financial goals that I have? How do I plan financially for big upcoming life events and changes such as moving, having a baby, changing jobs, getting married or retiring? And perhaps why am I not as far along financially at this point in my career as I thought I would be? Well, maybe the answer is that your six figure income is not a financial plan. As a pharmacist, you have an incredible tool in your toolbox: that’s your salary. But without a vision and a plan that it good income will only go so far. That’s why we started Your Financial Pharmacist where YFP we support pharmacists at every stage of their careers to take control their finances, reach their financial goals, and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners works with pharmacists all across the United States and helps our clients set their future selves up for success while living a rich life today. If you’re ready to see how YFP can support you on your financial journey, you can learn more by visiting your financial pharmacist.com/learn again, that’s your financial pharmacist.com/learn. Alright, let’s hear from today’s sponsor First Horizon and then we’ll jump into the show.

Tim Ulbrich 02:16

Does saving 20% for a down payment on a home feel like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for a down payment on a home may take years. For several years now we’ve been partnering First Horizon who offers a professional home loan option AKA a doctor or pharmacist loan that requires a 3% downpayment for a single family home or townhome for first time homebuyers, has no PMI and offers a 30-year fixed rate mortgage on home loans up to $766,550 in most areas. The pharmacists home loan is available in all states except Alaska and Hawaii, and can be used to purchase condos as well. However, rates may be higher and a condo review has to be completed. To check out the requirements for First Horizon’s pharmacist home loan and to start the pre-approval process, visit yourfinancialpharmacist.com /home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

Tim Ulbrich 03:20

Hi there, Tim Ulbrich here flying solo this week as we talk about love and money: how to successfully navigate your finances with a partner. Now first things first, this is a heavy topic right? And I do not have all the answers. When it comes to our financial plan for Jess and I we have found the system- keyword system -that works best for us. But we are far from perfect. We’ve made our fair share of mistakes. We haven’t always been on the same page. And it certainly has required compromise and grace on both sides. So this is not a preach and teach episode. That would be very helpful. Rather, the intent is to give you some things to think about and conversation starters, to find the system that works best for you. Because at the end of the day, that’s going to be what matters most.

Now, before we jump into some of the tactical strategies, and some of the questions and conversation starters, I think it’s really important that we spend time to reflect on and identify our money personality and how this does or perhaps does not match with our partner. Right for some of you that have been at this topic for a while, you know how emotional and how behavioral this whole topic of managing money can be. And so it’s important we spend time to reflect on and to get curious about what is our money approach? What is our money, personality? What is our money classroom that we grew up in the household that we grow up in financially? And how does that perhaps shape how we manage our money today and ultimately how we merge two of those money personalities together as we try to work and get on the same page. So some questions to think about here as it relates to the money personality. Do you approach money in the same manner that you were raised? Have you reflected upon the money classroom that you grew up in? And maybe what worked and didn’t work? Was money in your household an open conversation? Was it a closed conversation? Was it stressful? Was it calm? What was the emotional tone surrounding money? Was there transparency around money? Or was it a taboo topic? What were the spending habits, what was said? And what were some of the unsaid lessons that you learned along the way? And how did all of this potentially contribute to the money personality and the habits that you employ today that you ultimately bring into your relationship? Right, good and bad. Probably true for all of us.

If you want some guidance on this, there’s a great resource, we’ll link to it in the show notes. The Money Couple has five different money personalities, they have a book and an assessment if you want to really dig in and go further on this topic. And they in that resource they referenced five money personalities, those five personalities are number one, the Security Seeker. Number two, is the Saver; number three is the Spender; number four is the Risk Taker; and number five is the Flyer. Now, anytime we do these assessments, right, we’re running a risk a little bit in terms of bucketing ourselves into one of these approaches, when often we may have a little bit of more than one of these. And that’s one of the things I like about this tool is they combine two of these, what they call a primary and a secondary to come up with your money profile. So for example, let’s say that you identify as a saver/security seeker. Okay, so just some quick definitions here a saver, pretty much their outlook is that as they share in their own resources, A penny saved is a penny earned. You make things happen by getting the best deal, right, you can often be someone that’s very thrifty. Characteristics of a saver would be someone who’s trustworthy organized with money, they also would have some real challenges potentially, including maybe obsessing over money, having a hard time letting go. And they would rarely spend compulsively, they really liked the plan. And they really liked that good deal. Now a Security Seeker, which here was the secondary personality, they have an outlook that better safe than sorry, right protection and security is the definition here. So these individuals make things happen by planning for the future. And they’re often very well prepared. So some defining characteristics here would be they can investigate things thoroughly do a lot of research challenges, of course, could be, you know, some of the potential and again, letting, letting go. And maybe finding that balance that we often talk about in the show of living the rich life along the way. Certainly also trustworthy with their finances, they want to make decisions by confirming that there’s a plan, right? So they’re not, they’re not gonna be very spontaneous, and they’re spending money like to have multiple options. This is just one example, one assessment. But it’s really helpful, again, that we get curious that we reflect upon what is the approach that we have surrounding money, how might that have been influenced by the money classroom that we grew up in, and the more we can understand that about ourselves, as well as our partner, and how we bring those characteristics into the relationship can be really helpful, as we then set a plan going forward.

Tim Ulbrich 08:27

So once we really think about some of those money, personalities, you know, I think it’s then that we want to really figure out how can we set and achieve goals together? Now we’re gonna get into a little bit about, you know, perhaps is it everything is merged when it comes to the finances? Might we have something separate? Some things merged, completely separate. Of course, that’s an individual decision for everyone. But ultimately, on some level, we want to have a shared vision, even if some of those items might be separate. And I think it’s so important, I’ve talked about this on the show before, that we start with the vision, and not necessarily start with the budget or the spending plan, right? Not start in the weeds, but really start on what is the dream that we have financially? What does success look like for us collectively as a unit? And can we agree upon that vision, that direction, that dream that we have for us financially, right? That’s a much, I say, easy but easier conversation than getting into the individual decisions. This is also the place where we really want to get all of those goals, all of those ideas out of our heads onto paper, we want to see what overlaps what doesn’t overlap. Obviously, there’s gonna be some compromise here along the way, but once we get them to be shifting from unsaid to said, right, so Jess can share her goals, I can share my goals, we can see what what is similar, what’s different, and then we can begin to start to compromise and prioritize those. That’s really where we can start to then begin to implement and execute on that vision. So for us, I’ve shared this before on the show, typically what we do is want once a year we’re looking at, hey, what does success look like for us over the next 12 months? Right? Keeping the bigger vision in mind? What does success look like for the next 12 months? And what are those things that we want to focus on spending? You know, so we’re looking at, hey, are we on track with savings goals for the future? And retirement planning? If not, what are some things that we want to surplus in the following year? What do some of the experiences look like for us in terms of vacations, home projects, things like that? What are the giving goals for the year right? These are the things that we need to begin to, again, get out of our heads onto paper so we can start to set a plan. Now, I think it’s really helpful here, especially if you have two individuals that are on completely different pages that this is really really where a third party can be very helpful. I know for Jess and I, our financial planner at YFP has been really helpful in getting us to have conversations not only together when we’re in the room with a financial planner, but also in between those meetings to make sure that this is an open conversation as we can possibly have. Now, I have some questions here that I think are good conversation starters. Right? I started the episode by saying this is not about telling you what you should do. This is really about helping to start conversations, stimulate some discussion so that you can figure out what the system is that works best for you. So I’ve organized these questions into different areas. And I have 25 of them, I’m just going to mention them briefly. And we have a one page resource that you can download for free that will have a list of these questions. You can go to yourfinancialpharmacist.com/25 – two five again, yourfinancialpharmacist.com/25.

Tim Ulbrich 11:43

Okay, so in the spirit of starting conversations, here are 25 financial discussions that I think are worth having. And let’s start with the first bucket, which is setting goals, budgeting and just the overall approach to managing the finances. So the first question is, have we discussed and agreed upon our short term, midterm and long term financial goals? Now you can define these differently, I think of short term goals is within the next 12 months, next year, mid-term, one to three years in long-term greater than three years. Obviously, you can determine the timeline that makes the most sense of you. And then furthermore, how can we best set, review and update these on a regular basis? So there’s that initial exercise, and then how often are we going to be reviewing these so that we can make sure we are able to implement those in the plan? Sounds simple, right. But everything starts with the vision and getting to some level of an agreement on the shared goals.

Second question here is have we developed and agreed upon monthly spending plan, budget, whatever you want to call it, that accounts for all of the income and all the expenses? And does this spending plan, budget, again, whatever you want to call it, does it represent and include the goals that we just worked through in the first question? Now, again, for some individuals, and I’ll share some data here in a little bit from our community, for some individuals, everything is merged. Some they have some separate, some is completely separate. So obviously, you have to work through this as it relates to how you treat the merging or lack thereof of the accounts. But do we have representation within our spending plan, approach, whatever that looks like lots of different ways to do that. So that the goals, there’s an actual plan to implement and achieve those goals.

Question number three, does one of us take more of the lead than the other when it comes to managing the finances? And if so, are both of us aware of our overall situation? How do we ultimately make sure that both parties are aware of the progress if one person is taking the lead. I have seen that that often, not always, often is the case where one person may take the lead. So if that’s the case, what’s the plan? What’s the strategy? What’s the structure so that both parties are aware of what’s going on? And the overall progress? Right, the overall situation?

Number four, I’ve alluded to this a couple times is the desire to merge all of our finances; to keep some separate, some merged; or to have everything completely separate. Now for Jess and I, we’ve made the decision that everything’s merged, I’m not here to tell you that you should do that, or that’s the only way. But really having that conversation of what’s best for us, is it all merge is a little bit of both, or is it everything that would be completely separate. Number five, do we need to check with one another before spending any money? If so, is it a certain amount? What’s the criteria for this? How do we determine this. Some, you know, couples might have a large purchase or something that would trigger hey, we need to have a discussion about this. So what are those criteria, if any exist when it comes to making some of those bigger purchases? So that’s the first group of questions around setting goals. budgeting and your overall approach.

Tim Ulbrich 15:01

The second group of questions is around debt management. Debt Management. So question number six here on our list of 25. is how much debt have we acquired thus far? Right? Do we know? Do we know the numbers? Is everyone aware of the debt that’s that’s accrued? And what will be our plan to pay off the debt? Do we both understand each other’s debt position and the feelings perhaps just as important, the feelings towards the debt? Right, for some people, I’ve talked about this on the show before for some people, there can be a significant aversion to debt? Others maybe that’s not the case. So if you have two individuals where you have opposite feelings on debt, that’s an important conversation to have. Are we treating this as our debt? Or is this separate debt? Right? When you think about things like credit card debt, student loans, car payments, or other things that especially may have been existing coming into the relationship. Number seven, again, on debt management, how comfortable are we with having debt? And I would encourage you to break this down further to different types of debt, right, including student loans, credit card, mortgages, car loans, etc. So not just a blanket debt good or bad, but how do we feel about different types of debt? And then final question on debt? Number eight on our list is do we view each other’s debt as our debt? Or is this your debt? Right? And how does that potentially approach how we pay that off? All right, third group of questions is around housing and transportation. So question nine on our list is how do we feel about renting property versus owning a home hot topic right now, given where the housing market is at, given where home prices are and where interest rates are at? And if we already own a home, are we okay with the current situation? Or is there potentially a desire to move? Right? Again, we want to get a lot of these questions and maybe things that we’re thinking about making sure we have an opportunity to discuss with one another. So if we don’t own a home already, how do we feel about renting versus owning a home? What’s that timeline? Like if we already own a home? Are we thinking we’re set? Or is there a potential or desire to move? Next question around housing transportation, number 10 on our list, if currently renting, and there’s a goal to own a home, do we agree on the location, on the purchase price, and the amount of downpayment that would be needed, right? That’s gonna have a big impact on the budget. And again, if things are separate, and not merge, how are we both contributing to that downpayment? And getting ready for that purchase? Number 11, as relates to transportation? Do we view our cars as a necessity? Is it a luxury where we lease? Are we gonna buy our cars? If we buy our cars? Are we paying them outright? Are we going to finance part of it? How do we view the transportation part of the plan? And again, let me pause here and reinforce what I was saying towards the beginning. I don’t really think there’s a right or wrong answer here. The goal is to really get you thinking about, hey, how do we feel individually? How do we feel collectively as a unit? You know, as I think about this question here on transportation, it reminds me of Ramit Sethi’s book, I Will Teach You To Be Rich. I’ve referenced that many times on the show before and one of the things he talks about he starts the book is this concept called Money Dials. And what he’s referring to there is identifying those things that derive the most significance and meaning for you as a part of the financial plan and have a plan to spend money, what he’s referring to is the dial, dial that up. And alternately for the things that you maybe don’t care as much about financially, dial that down, right. For some people, you know, transportation cars may be something that’s has significant value, and for other people, not so much.

Tim Ulbrich 18:35

Alright, next group of questions relates to kids, children. So number 12 on our list is how do we feel about one of the biggest expenses we often see in the financial plan – daycare? What’s our budget for this? And how does it fit in with other financial goals? Number 13, how do we feel about public versus private K through 12? education? You know, again, this might certainly link back to the home purchase and the location and and where you’re looking for home based on schools. And if it is private education is the goal, how will we plan for this and prioritize it with other financial goals? Number 14, again, in this area of children, how do we feel about paying for our kids college? This is a hot topic, right? You often see maybe people that are split on this. And how do we plan for this? Are we hoping to pay for it in its entirety? A partial amount? Are we banking on you know, scholarships or other funding other family to help taking on debt? What’s the plan for that? And then last question, as it relates to children, what ideas and strategies do we want to employ to teach our kids about managing money? Right? We started this episode talking about the money classroom we grew up in. And for those that have children in the home that you’re raising now, they’re obviously growing up in their own money classroom in your house. And so what strategies are we employing and how are we approaching teaching kids about money? What’s our philosophy about behind that, right. So this this gets to things like, you know, our philosophy around alarm allowances, and giving, and how we’re going to teach some of those lessons to our kids. And at what ages are they ready for those lessons?

All right, next group relates to saving, investing, and retirement planning. So question number 16, when it comes to the emergency fund, are we comfortable with three months? Right, your general rule of thumb recommendation three to six months of essential expenses? Are we comfortable with that? Three months, six months, something in between, something different? Have we discussed that? Again, are we on the same page with that?

Number 17, what financial goals are we trying to achieve by saving or investing? What does success look like, right? So we often talk about the importance of saving and investing for the future. But for what? What are we trying to achieve? And what does success look like? Number 18? What does retirement look like for both of us? Are there similarities? Are there differences? What’s the desired age? Right? What are the activities? What what are we working on? Which is the next question: what activities are we engaged in during retirement? What are we doing together? What are we doing separately? Right, beginning to envision so that we’re approaching that retirement phase with intentionality.

Next question, how much should we be saving and investing for retirement each month? And how do we balance and prioritizes with other goals? And then final question here on saving investing in retirement planning? What is our risk tolerance for investing? And again, if we have two different risk profiles? How are we approaching that as we’re saving, investing and planning for the future?

Final set of questions as a group, I’m just calling miscellaneous questions. Got four left on the list here. Number 22. How does each of us feel about giving? How much? How often?Where? How will we plan for this? And what priority? Are there certain things that we have to have achieved before we do this or not? Number 23: Do we plan to do the financial plan ourselves? Or are we looking to hire a professional to assist? Are we on the same page about this? If the goal is to hire someone, what are the criteria we’re going to use that will help us find the right fit? Who’s taking the lead in this conversation? What does that look like for us as a unit? When it comes to assisting family financially, whether that be caring for elderly parents, maybe that’s supporting a family member need or some other situation, how do we feel about this? Right? How do we feel about this financially, and the impact that it can have in other parts of our financial plan? And then finally, question number 25? How will we strike that balance between saving for the future and living a rich life today? What does it mean to us to be living that rich life today? And how are we prioritizing that in the financial plan?

So again, that’s 25 conversation starters, there’s a lot there, right, the different categories we talked about, you can download that list again, yourfinancialpharmacist.com/25. I hope you’ll reference that maybe print it off, and have some of those discussions with your partner. Next, I want to give some input not just from me, but from the YFP community on what has and has not worked for them in their own journey of navigate navigating this topic with their partner.

So I recently posted a poll on LinkedIn asking the following question, that for those that are working with a significant other spouse or partner on their finances, which of the following best describes your situation: is everything merged or all the finances merged? Are some things merged something separate? Or is nothing merged? In essence, everything is separate. And what we saw from that data was just shy of 50%- 49% responded that all of the finances were merged. 42% responded that some were merged and some are separate. And 10% responded that nothing was merged, and that everything was separate in their accounts. Now, some of the comments and advice that I thought were helpful to pass on and again, some some different perspectives here. Kelly had this to say lots of systems can work. But it all starts with transparency. It’s not uncommon for one person in the household to do the bill pay, and thus see more of the transactions. Periodic money dates can help facilitate conversation. A favorite topic in our house is identifying mutual goals and where we want to prioritize funding for the year, sometimes their goals are not aligned. And that is important conversation, as well. So Kelly, comes transparency. Having that open conversation having those periodic money does it dates and sometimes those goals aren’t aligned, and important conversation to get on the same page. Tracy said that we have a joint household account, where we contribute an equal amount each month to cover our household expenses, and some minor rainy day savings. We tossed around percentage based on income but landed on equal flat dollar amount. We also have separate personal spending accounts for ourselves, so we don’t feel like we have to justify personal spending to one another. We’ve divvied up who contributes and covers what to each savings bucket and who does the insurance via their paycheck all this to say after typing this that our marriage is basically a business. I thought that was some humor to add in there as well. Cassidy said my husband, I follow the 50-30-20 budgeting process right now. We have a joint account where 50% of our income goes towards household expenses and joint purchases, a joint high yield savings where we both contribute 20% of our paycheck for larger goals. And then 30% goes in our fun money personal checking accounts. So far it’s working great ensures that we’re both contributing an equitable portion of our income.

Final one that came in is someone shared just got married in summer of 2023. My husband wanted to keep our finances separate, except for one joint checking to pay utilities out of. This came from seeing his parents get divorced about six years ago and had always fought about money. He did not want that to be us. So going into the marriage, we plan to keep our own savings. I that’s a great example before I go further with this one of how that upbringing, right, how that money classroom can impact how we approach our money today. She goes on to say that we’re now nine months married, and we’re getting ready to buy a house with the need to pay the mortgage, we’re rethinking finances and will likely be combining more of our money. He prefers a separate checking account for each item, such as utilities and mortgage, we still plan to keep the money we had pre-marriage as our own stock savings, mutual funds, etc. We have a joint credit card for joint expenses and groceries that’s worked well. We still have separate credit cards. Being upfront about money has been so important to us. We’ve had several long conversations about money, pre-marriage, and within the last few months to get us set up for success. So it sounds like here, there’s even some transition, as they’re getting ready to purchase a home. They’ve been married now just shy of a year, maybe perhaps more that’s moving into the joint accounts, but a system that they’re still working through.

So I appreciate all of those that contributed providing different ideas. So again, the spirit of this right is to identify that system that works best for you. Right works best for you and your partner, really accounting where we started with reflecting on and getting curious about what is the money mindset? What’s the money personality approach that I have? And do I have a good understanding of that for me, as well as my partner? Really coming up then with those shared goals? That vision we talked about? What does success look like in the short, mid and long term, and then beginning to work through those individual areas of the financial plan.

Tim Ulbrich 27:19

Well, certainly last but not least, as many of you know, we have a team of Certified Financial Planners at Your Financial Pharmacist that we offer fee-only financial planning and tax planning, we work with pharmacists all across the country. And certainly we’d love to have the opportunity to work with you. And we’d love to have an opportunity to talk more to see whether or not the services are a good fit. You can learn more about our fee-only financial planning services again at yourfinancialpharmacist.com/learn. Again, that’s your financial pharmacist.com/learn. I think, as I mentioned a couple times that third party, right, that third party can be so helpful to facilitate some of these conversations and to begin to execute on the different aspects of the financial plan. Well, thanks so much for listening, and have a great rest of your week.

Tim Ulbrich 28:05

Before we wrap up today’s show, I want to again, thank this week’s sponsor of the Your Financial Pharmacist Podcast, First Horizon. We’re glad to have found a solution for pharmacists that are unable to save 20% for a down payment on a home. A lot of pharmacists and the YFP community have taken advantage of First Horizon’s pharmacist home loan, which requires a 3% downpayment for a single family home or townhome for first time homebuyers and has no PMI on a 30 year fixed rate mortgage. To learn more about the requirements for First Horizon’s pharmacist home loan, and to get started with the pre approval process, you can visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

Tim Ulbrich 28:51

As we conclude this week’s podcast and important reminder that the content on this show is provided you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information to 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 Pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

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YFP 355: 5 Financial Moves to Make After Graduation

Posted on April 18, 2024April 17, 2024 by YFP Media

Sponsored by YFP+, YFP Co-Founder Tim Ulbrich shares five key elements for building a strong financial foundation after graduation.

Episode Summary

On this episode sponsored by YFP+, host Tim Ulbrich outlines five key elements for building a strong financial foundation. Whether you are a pharmacy student looking ahead, a soon to be 2024 graduate, or a resident, fellow, or new practitioner trying to find solid financial footing, Tim shares what it means to build a strong financial foundation, no matter where you are in your career.

With the average pharmacist facing staggering student loan debt and often lacking financial knowledge, Tim shares practical strategies to help pharmacists to begin to navigate debt management, investing, insurance coverage and retirement planning.

About Today’s Guest

Key Points from the Episode

Financial moves after graduation, including debt management and investing. [0:00]
Financial planning for pharmacists, including student loan debt and income management. [3:52]
Financial planning for pharmacists, including assessing current financial state and setting long-term goals. [8:28]
Proactive budgeting to prioritize financial goals. [13:50]
Investing early and often for financial success. [18:24]
Investing for pharmacists, including retirement accounts and tax-advantaged savings. [23:39]

Episode Highlights

“Without a plan, pharmacists certainly may be income rich, but net-worth poor.” – Tim Ulbrich [6:48]

“I saw firsthand how good decisions early in the career could certainly accelerate the financial plan, as I now look back nearly 18 years as well as how some of those bad decisions had a lingering effect in our financial plan. That’s part of the reason why I’m so passionate about teaching this topic to pharmacists at all stages of their career.” – Tim Ulbrich [8:08]

“At the end of the day, money is a tool. And we’ve really got to strike this balance between making sure that we’re taking care of our future selves, making sure that we’re putting this foundation in place today, and also living a rich life along the way.” – Tim Ulbrich [12:21]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast for each week we strive to inspire and encourage you on your path towards achieving financial freedom. On today’s episode, I’ll be covering five financial moves to make after graduation. Whether you’re a student looking ahead, a soon to be 2024, grad, or resident fellow or new practitioner trying to find solid financial footing, this episode is for you. We’ll be talking all about what it means to build a strong financial foundation, including practical strategies that you can implement in your own plan.

Before we jump into today’s show, I have two exciting announcements. First up, make sure to sign up for our next YFP webinar on Thursday, April 25 at 8:30pm Eastern, where pharmacist and real estate agent, Nate Hedrick, The Real Estate RPh, co-host of the YFP Real Estate Investing Podcast, will be presenting on your checklist for buying a home in 2024. During this free webinar, Nate will walk you through how to know if you’re ready to buy a home. We’ll discuss the current state of the housing market and give valuable insights into the home buying process. You learn more and register at yourfinancialpharmacist.com/webinar again, yourfinancialpharmacist.com/webinar.

Second announcement last year we launched a nonprofit YFP Gives that aims to empower a community pharmacist to give to alleviate the indebtedness of the PharmD students and graduates, to help enhance the financial literacy within our profession, and to support other pharmacist-led philanthropic organizations and efforts. We’re thrilled to announce that our first round of the YFP Gives scholarships is now live! We’ll be giving out three $1,000 scholarships and applications are due on April, 30 2024. For those eligible for the scholarship include PharmD students and new practitioners within five years of graduation. You can learn more and apply at yfpgives.org/cholarship. Again, yfpgives.org/scholarship.

Alright, let’s hear more about our new online community YFP Plus, and then we’ll jump into today’s episode.

Do you ever feel like you’re trying to figure out this money stuff all on your own and aren’t sure where to turn? Maybe you’re overwhelmed with determining how to tackle your student loan repayment. Or perhaps you’re living paycheck to paycheck despite making a six figure income. Maybe you have a negative net worth and aren’t sure how to climb out of debt or make progress on your financial goals. Trust me, I’ve been there. When I finished my residency, I was starting at $200,000 of student loan debt and confused about how to best navigate the transition to new practitioner. I had a great income, but was living paycheck to paycheck and felt trapped. The good news is that you don’t have to continue feeling that way. At Your Financial Pharmacist, we want pharmacists to have the education, resources, and support they need to get a plan in place so they can stop feeling overwhelmed and they can use their six-figure income in the best way possible. That’s why we created YFP Plus an online membership community that empowers pharmacists to gain the knowledge and skills necessary to take control of their financial well being. Inside YFP Plus you have access to exclusive on demand courses. Like the prescription for student loan success, you have access to the right capital financial planning tool so you can track your debt assets and net worth to view your financial progress. You’ll have access to exclusive live events, monthly themes and challenges, a space to ask questions to YFP financial planning and tax professionals, and a community of like minded pharmacists on a similar financial journey as you. If you’re ready to get started inside YFP Plus to take control of your finances, visit yourfinancialpharmacists.com/membership. And if you sign up today, you’ll get a 30 day free trial. Again, that’s yourfinancialpharmacist.com/membership.

Hi there, Tim Ulbrich here welcome to this week’s episode of the YFP podcast. Excited to be talking about this very important financial transition, whether it’s going from student to new practitioner or resident or fellow to new practitioner, critical five year window, where we need to really be thinking about how we can best optimize the financial plan and get on some solid financial footing. So in the next several weeks, we’re about 12,000 pharmacy students that are going to be awarded the doctor of pharmacy degree joining them of course in the workforce will be those completing postgraduate training, whether that be residents, fellows, graduate students, and these graduates on average are gonna make about $120-$130,000 a year of course, depending on where they live in the area of employment they choose. And if we assume that they work a 40-year period with an average raise cost of living about one to 3% they’re going to earn approximately six to $9 million throughout their careers. Let me say that again: about six to $9 million of gross income throughout their careers.

Now if we assumed that about 30% of that income would be eaten up by federal income tax, FICA tax, which is Medicare and Social Security, state income tax, health insurance premiums, and a small contribution to an employer sponsored retirement plan, that leaves about four to $6 million of take home pay. So again, we start with about six to $9 million of gross income, we’re left with about four to $6 million of take home pay. Now I know that’s imperfect math, right? There’s a lot of assumptions that are in there, but just Just stay with me for a moment. We can debate how far a six figure income does or doesn’t go. But let’s agree that a pharmacist income on average, is about $50,000 above the average household income in the United States.

So if we look at the average household income in the United States, it’s about $75,000 per year, it was the average pharmacist’s income according to the Bureau of Labor Statistics, that’s about $130,000 per year, right. So by all intensive purposes, pharmacists make a good income. And if it’s managed wisely, it should be more than enough. So what’s the problem? Well, I’ve talked with hundreds of pharmacists who make a great income but feel like they aren’t progressing financially. They feel stuck. And yes, student loan debt is a big contributor, but it’s certainly not the sole culprit. And I know that because we recently had three-plus years worth of a pause on federal loan payments starting back at the beginning of the pandemic, and those feelings of making a high income, but not progressing financially didn’t go away during that time period. The main reason I see pharmacists experiencing financial stress is the omission of having an intentional plan in place that includes clear goals, and a system that prioritize and funds those goals on a monthly basis. It’s proactive, intentional planning. Without a plan, pharmacists certainly may be income rich, but net-worth poor.

That’s really what today’s episode is all about. It’s about having an intentional plan, and building a strong financial foundation early in one’s career. Now, I know the importance of this because I lived it.

So as many of you know, I graduated from pharmacy school in 2008. I did a year residency, in 2009. Came out of residency entered an academic position. And I remember vividly having that feeling of, wait a minute, I make a good income, but I don’t feel like I’m progressing financially. And the main reason for my journey for our journey as a family is that early on, we were navigating through a sizable amount of student loan debt, a little over $200,000 of student loan debt. And we would eventually get that paid off in the fall of 2015. That was a big milestone for our journey, certainly one that I’m excited about and excited and teaching others about as well.

However, we made that journey more difficult than it needed to be. I didn’t understand terms like Public Service Loan Forgiveness, there wasn’t great information out there. We paid more interest than we had to in the journey. We perhaps, weren’t looking at how other parts of the financial plan fit together while we are also pursuing that debt repayment. And because of that, I saw firsthand how good decisions early in the career could certainly accelerate the financial plan, as I now look back nearly 18 years as well as how some of those bad decisions had a lingering effect in our financial plan. That’s part of the reason why I’m so passionate about teaching this topic to pharmacists at all stages of their career. Here, we’re of course talking about those that are making that transition. Now let’s talk about what I mean by having a strong financial foundation.

So through my own experience, and in teaching 1000s of other pharmacists on this topic, I’ve come to appreciate really five key elements that are critical to building a strong financial foundation. Now let’s be clear, this is not five things that once we check the list, this is the finish line, right? Think of this as literally the first couple blocks that we’re putting in place on the foundation of our financial plan so that we can grow and thrive in the long term and do so with confidence. So let’s talk through what these five areas are.

Number one is completing a financial vitals check. So I believe the starting point is to complete an honest self assessment of where you are today with your personal finances as a pharmacist, right. no need for judgment, no need for shame. Where are we today? Because before we can implement a plan, right, we have to have a good idea of our progress made thus far and what are some of those opportunities that we could potentially improve upon.

So here are just a handful of questions to really help you consider areas of the financial plan that might require your attention. Number one, do I have an emergency fund in place, approximately three to six months worth of essential expenses? Number two, do I have any revolving high interest rate credit card debt, right? I’m not talking about the credit card charges that you pay off each month but that revolving debt that’s accruing. Perhaps 20-25% interest. Number three, do I have an optimize student loan repayment strategy? Critical as we look at many new practitioners and the average debt load that folks are carrying, this is often a key piece of the financial puzzle that we have to put in place, and then build around it. Do I have sufficient own occupation, long-term disability insurance that covers about 60% of my income in the event that I’m unable to work as a pharmacist? A few more questions. Do I have sufficient term life insurance to care for loved ones who depend on my income? If that’s applicable. Do I have adequate professional liability insurance? And do I know my retirement number? Have I thought about, certainly far away, but what is that number that we’re shooting for in the future? Am I on track? If not, how much should I be saving each month to ultimately achieve that goal? We have a lot of information, and resources in each one of these areas available at yourfinancialpharmacist.com.

We certainly have talked through many of these topics at length on the podcasts and the blog, so make sure to check out those resources. Furthermore, if you if you want to go through some of this in more detail yourself, we have a really neat tool available called the YFP Financial Fitness Test. We’ll link to that in the show notes. It’s a really fun interactive quiz that will take you through essentially conducting a vital check in and help identify some areas that you perhaps can improve upon, and that you might want to implement as you look at setting goals for the future. So that’s step number one, completing a vitals check

Number two. Step number two is setting the vision setting the vision. So after we reflect on the current state, right, the current situation, the Financial Vitals Check. It’s time to really establish a vision for the future. Now, this is the area where I think it’s really helpful that we let ourselves dream a little bit right, we just perhaps bogged ourselves down and kind of looking at the current state and the reality, maybe that didn’t bring the greatest feelings of joy. And so this is our opportunity to really let ourselves dream a little bit. Spending time reflecting on questions like what does it mean to be living your rich life? What brings you the most joy? As it relates to the financial plan? Are there experiences such as traveling, giving spending time with family and friends or something else? Right, at the end of the day, money is a tool. And we’ve really got to strike this balance between making sure that we’re taking care of our future selves, making sure that we’re putting this foundation in place today, and also living a rich life along the way.

One more final question to reflect upon, if you were to find yourself in a position where you were financially independent, the find that you are no longer required to work. How would you be spending your time perhaps for some of you? The answer is, hey, exactly like I am is great. Right? This is meant to help us identify what are those things that derive and give us the greatest significance, and meaning in our lives. And for every person, this certainly can look different. So that’s number two. Step number two, letting ourselves dream setting the vision, before we start to chart the path forward. Alright, step number three, is to develop the spending plan to develop the budget to develop the system that’s going to help us bring this vision to reality. Right. So in step number one, we identified what are some of the opportunities, what are some of areas that we might want to focus on. Step number two is really about the vision of where we want to go.

Step number three, is now about making that come to life. Now, while one spending plan method, budgeting method, whatever you want to call, it will never be right for everyone, I really believe that the zero-based budget is a great place to start, especially for those early in their career, those that are looking to get back on track. Reason being is that with a zero-based budget, you give every dollar you earn a job before the month begins. This is a proactive planning process. Now, I’m not suggesting this as a method that you stay with forever. This certainly can feel onerous at times. But as we’re looking at defining how we’re spending our income, making sure that we’re allocating income towards our goals, and that we have a good track on what that income is and how it’s being spent. This system is really going to help us shine a light on that. So the goal is again, we’re doing this proactively is to spend your paycheck essentially down on paper to zero, and to ensure that your financial goals can be funded rather than hoping you have money leftover at the end of the month.

Okay, so for example, let’s say that after step one, which again, step number one was completing the vitals check, and step number two is really setting that vision. Let’s say you identify three goals that you want to focus on over the next year, just as one example. Let’s say goal number one is to save $500 per month for an emergency fund, and up until it’s fully funded at $25,000. Let’s say that you want to save $300 per month in a Roth IRA to supplement your retirement savings. And finally, is the third goal. Let’s say that you want to save $300 a month and a travel account to fund one trip per year. Okay, so in that vision setting, you determine that travel was a was an item that was really important. So in this case, with these three goals, right, we have some money set aside in earmark for the emergency fund some for retirement savings in a Roth IRA, some in a travel account, when you go to work the budget through the budgeting process, you want to have those three areas represented just like any other expense, so that you prioritize these before the month begins.

Again, we’re working proactively really important, rather than hoping we’ve got something leftover at the end of the month. So just like we account for a mortgage, or rent payment, or utility payment, or a car payment, right, we want to think about our goals in the same sense, and making sure that we’re building our plan accordingly to prioritize and fund those goals. In my experience, and in talking with others, so much of the stress, so much of the feelings of overwhelmed and confused around the financial plan comes from having all of these competing priorities swirling in our minds, without necessarily a plan for how we’re actually going to achieve them. Right. And so what we need to do, and what we’re trying to do here in step number three is get those ideas out of our head onto paper. So we can list them down, we can prioritize them, and we can start to put a plan in place to actually achieve those goals and to see the progress.

Now, sometimes we realize that, hey, in this season, or in this moment, we’re not necessarily going to get to all of those goals. That’s certainly normal. But at least we have an expectation of what’s happening. And we’ve been intentional with proactively planning how we’re going to work through those different goals. Now, if you’re ready to try this out yourself, we’ve got a free budgeting template you can download, we’ll take you through this process that I’m referring to here. You can download that at yourfinancialpharmacist.com/budget, we’ll link to that in the show notes as well. Again, your financialpharmacist.com/budget. Alright, that’s step number three, developing the spending plan.

Step number four, is automating your plan. Now I’ve talked about this several times on the podcast, and I’ve referenced that this has really been one of the most transformational things that Jess and I, over the last 15-16 years since I graduated, have really evolved into that has had a significant impact on our own plan. So once we do the work in steps one through three, right. Once we’re able to complete that vitals check to identify what are some of those gaps, what their progress once we’re able to set the vision once we implement the spending plan. Now it’s time that we make sure we execute, right we actually achieve these goals. And that’s really what automation is all about. I

n his book I Will Teach You To Be Rich , Ramit Sethi says that automating your money will be the single most profitable system that you ever built. And I agree automation is so apparent, so effective, so easy to implement, yet vastly under utilized. It involves essentially scheduling the transfer of funds to the predefined goals, right? We just talked about that in the previous steps and doing so confidently knowing that we’ve already accounted for these in the budget, right, because we were proactively planning during that process. Sure, it takes a bit of time to set up. But once it’s set up, it provides a long term return on your time benefit. And perhaps equally, if not more important peace of mind knowing that you’ve thought about prioritize and have a plan working for you to fund your goals. Right. I just mentioned a couple moments ago that so much of the feelings of stress and confusion, overwhelmed come from that uncertainty come from the unknown. So this step is all about bringing it into the known and executing on the plan that we set.

Tim Ulbrich 18:54

So in terms of operationalizing this, one example certainly not the only way, my wife Jess and I, we have a high yield savings account. We use Ally Online Bank for all of our accounts. And inside of that high yield savings account, we essentially have several different buckets. And those buckets are named according to the goals that we’re working on. Right. So one bucket, for example, is an emergency fund. Another bucket might be for a vacation that we have earmarked, you know this summer or next year, one bucket is for the next car purchase one bucket might be for something related to the boys’ education or to the activities that they’re involved in. So all of that rolls up into one high yield savings account. So it’s liquid, it’s accessible, we can get it we can move it to our checking account if we need it. However, the key there is it’s earmarked and defined for the goals that we’re trying to achieve. Now. Just like I said, a little bit of a go, you know, this may not be a forever system that you have to develop. We have found it to be something that’s beneficial ongoing because it’s a visual reminder. It’s the visual aspect of hey, we set those goals, here are the actual buckets, right named for the goal that we worked on. And it allows Jess and I, I’d have some really good conversations. And of course, transparency into the system that we’re working on. This system it took us about 15 minutes to get set up. And again, you could just as easily achieve it through perhaps your own bank that you already have, or through tracking these in a simple spreadsheet. So, as I mentioned, the buckets are simply a visual representation, it really is just sitting in one high yield savings accounts. And it’s then earmarked to these different buckets. So that’s step number four is automating the plan.

Step number five, again, as we’re on this journey, towards building a strong financial foundation, is investing early and often. Investing early and often. Now, Albert Einstein is credited with saying whether he said it or not, compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t, pays it. Right, regardless of whether he actually said it’s really good advice, the time value of money is real. And the earlier you save, the less aggressive you’re going to have to be. Now easier said than done, right? Considering many competing priorities that new practitioners are facing. And I remember well, in my journey after graduating 2008, not only was it the student loans that were staring us in the face, right, it was a potential home purchase, it was the emergency fund, it was building up some additional reserves, and of course wanting to enjoy some things as well during that transition. So there’s a lot of things that are coming at you in this season of life. And shortly thereafter, we would start our family and certainly new expenses that would be there as well.

Now let’s take a look at an example of how powerful early investing can be. Okay, early investing. So if we assume and you can run your own numbers using a number of calculators, we have several on the YFP site as well. But if we assume a pharmacist is making, let’s say, $126,000 per year, if we assume that their incomes gonna go up on average, about 2% per year could be a cost of living adjustment could be a performance adjustment, a combination of both, we’re gonna assume that they’re going to put away 15% of their income. And we’ll assume that there’s an average annual rate of return on that investment of 6%. Now, we know the markets don’t work like that in terms of a clean 6% every year. But for the sake of the calculation, we’ll go with that we’ll assume no match from the employer, and that they have a planned retirement age of 60. Okay, so pretty normal situation. So I’m gonna make an average pharmacists salary that’s putting away about 15% of the year and they want to retire at the age of 60. Now, what we see is that if they start at the age of 25, saving 15% of their income with these assumptions, when they get to the age of 60, the math tells us they’re gonna have about $2.6 million. Now, is that enough is a whole another question, right, we’ve talked about that. On the show before we’ve done an episode on how much is enough, we’ll link to that in the show notes as well. So 25, if they start, we’ve got $2.6 million at the age of 60, a coordinator these assumptions now if we wait to the age of 30, right, because of student loans, because life’s expensive, there’s a lot of things going on that 2.6 turns in $1.8 million. An $800,000 difference already. If we wait to 35, we’re down to $1.2 million. If we wait to 40, we’re down to $800,000. Right. So that’s the power of time value of money. That’s what Albert Einstein was talking about with compound interest in really the value of investing as early as we can, knowing that the earlier we invest, perhaps the less aggressive we’ll have to be the later we invest, the more that we’re going to have to do to catch up.

So naturally, then the question is, well, where do I save? Right? And that depends, of course, there’s lots of different options. Everyone’s investing journey is going to look a little bit different. We have to really assess what’s the risk tolerance, what’s the risk capacity, what are the goals, but many pharmacists are going to be focused early on, especially in their career on tax advantage, retirement accounts, tax advantaged savings accounts. So these would be employer sponsored accounts like a 401k or a 403B offered through your employer. Of course, as the name suggests, there’s both Roth and traditional versions of those anytime you hear traditional thing pre tax, anytime you hear Roth and post taxt. There would also be opportunities to save and something like an IRA stands for individual. So these are not through your employer. Again, there’s a Traditional and Roth version of those. Lower contribution limit in 2024 $7,000 versus in the employer sponsored accounts $23,000. And then the other one I typically think of in this bucket would be an HSA or health savings accounts, which again, we’ve talked about on the show at length before we’ll link to those episodes in the show notes as well. So those are the five foundation and steps and I would encourage you with each one of those to learn a little bit more. Right and as I think about and zoom out here for a moment we think about being on this financial journey throughout your career. Right. So important. Remember, here we’re talking about laying the early bricks of the foundation. Again, this is not the finish line where we start to check these boxes off, but rather, it’s that strong foundation upon which we can then build and hopefully build wealth throughout our career and live confidently knowing that we’ve done some of the hard work early on. So just a quick recap, step number one, we talked about completing that vitals, check the self assessment. Step number two, we talked about setting that vision step number three, developing the spending plan. Step number four, automating that plan, right, that was all about the execution. And then step number five is investing early and often.

So let me wrap up by sharing some advice that I got from the YFP community. I recently reached out to the YFP community to say hey, what are some of the things what are some of the things that you think would be helpful as you reflect back on your journey, going from student to new practitioner student to resident to fellow to a new practitioner that you wish you would have either learned or you wish you would have followed that advice and let me just share you a handful of those response.

One person in the life he can be said it’s worth it to learn how to budget early even on a resident salary you can save.

Another person said there’s one financial hack I wish someone had whispered in my ear my own graduation, house hacking with a high value short term, or midterm rental model. We’ve talked about house hacking on the show before referring there to essentially living in a unit can be a single unit duplex, triplex quad and then renting out a portion of a single family house or if you have multiple units renting out other units.

Another person in the YFP community said I wish I would have learned about the different student loan payment options and how to lower my taxes as a W2 employee.

Another person share this advice don’t put off paying your loans if you’re not going down to forgiveness pathway, tackle them head on, and get them done with. Financial life only gets crazier down the road with the addition of a spouse and kids. Looking back, I wish I would have lived as a student resident lifestyle for two years or more and paid extra to knock out those loans early. And then finally, someone else said if you do income based repayment for your student loans, don’t do forbearance during residency, your payments will be low, and you’ll be finished a year earlier.

So just a few pieces of advice from those in the YFP community that I’ve made that transition. I hope you enjoyed this episode. Thank you so much for listening on a regular basis. Again, we have several of these topics we talked about before we’ll link those into the show notes. And I hope you have a great rest of your week. Take care.

[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 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 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 guaranteed 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 orphanage pharmacists podcast. Have a great rest of your week.

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YFP 346: Developing a Budget That Works…And You Don’t Hate with Tim Ulbrich

Posted on February 15, 2024February 14, 2024 by YFP Media

Tim Ulbrich shares the importance of setting a budget for achieving your financial goals and five steps to help you get started.

Episode Summary

In this week’s episode, we learn all about one of the key first steps to mastering your money: creating a budget. You’ll learn how to implement a budgeting system that not only works, but is also enjoyable. Tim Ulbrich, YFP Founder and CEO shares a practical five-step process to help you get started. A budget isn’t a restrictive tool, but an important instrument that can empower you on your journey toward financial well-being and help align your money with your vision for a rich and fulfilling life.

About Today’s Guest

Tim received his Doctor of Pharmacy degree from Ohio Northern University and completed postgraduate residency training at The Ohio State University. He spent 9 years on faculty at Northeast Ohio Medical University prior to joining Ohio StateUniversity College of Pharmacy in 2019 as Clinical Professor and Director of the Master’s in Health-System Pharmacy Administration Program.

Key Points from the Episode

Budgeting for financial freedom. [0:00]
Pharmacist financial success and budgeting. [3:51]
Financial health check and budgeting. [7:32]
Setting a financial vision and budget. [11:40]
Budgeting methods for personal finance. [16:04]
Budgeting and financial planning. [20:54]
Budgeting and financial planning for pharmacists. [26:06]

Episode Highlights

“So I think it’s safe to say that most pharmacists didn’t spend six to eight plus years training to get into this profession, to work hard to find themselves living paycheck to paycheck.” – Tim Ulbrich

“So, if we can identify in advance what our goals are, and we can identify how much we have to allocate towards those goals, then the next step we’ll talk about is how to actually make sure we distribute them accordingly. All the sudden, we’re thinking in a way that we are pre funding our goals, right really important, rather than waiting to see what’s left over at the end of the month.” -Tim Ulbrich

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

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’m digging into how you can develop a budgeting system and process that works and is one that you don’t hate. During the episode, we’re walking through five steps that you can follow to implement your own budget. But before doing that, we’ll discuss why it’s crucial to do a financial vitals check along with some vision setting to get clear on what it looks like to be living your rich life.

Tim Ulbrich 00:32

Alright, YFP community, I’m really excited to invite you to our next webinar on March 7, at 8:30pm/Eastern: Budgeting Blueprint, What Zero Based Budgeting Is, Why It Works and How to Start One. This webinar is different than webinars we’ve done before. Not only am I gonna dive into the ins and outs of the zero based budget and the power behind assigning each dollar a job, but I’m going to be doing a live demo of a zero based budget using the YFP budget template. And we’re going to be anonymously featuring real pharmacists’ budgets for you to see. So here’s the deal. First, I want you to register for the webinar. It’s free, visit yourfinancialpharmacist.com/budgetwebinar to save your seat. Again, that’s yourfinancialpharmacist.com/budgetwebinar. Second, we’re gonna be giving away three $50 amazon gift cards to pharmacists who submit their budget to be featured and who attend the webinar live. Here’s how you can do that: you go to download your FREE zero based budgeting template at yourfinancialpharmacist.com/budget again, yourfinancialpharmacist.com/budget, then go ahead and fill out your budget with your numbers. If you’ve never used a zero based budget before, don’t worry instructions are included in the template that will help you walk through the process. Make sure to save your budget, send us an email with that budget attached at [email protected]. And make sure to include the word “budget” in the subject line so we can quickly identify your template. In the email, I would love for you to also share any additional information that would be helpful for me to know, whether you’re a single income earner, whether you have dual incomes in the household, if you have any children, where you live. And of course, if you have any other questions that you’d like me to answer as it relates to your budget template. Then make sure to attend the webinar live for your chance to win one of the three $50 amazon gift cards. If you don’t want to turn your budget, no problem make sure to register for the webinar and we’ll send you the replay if you can’t join us live. Can’t wait to see you there and see the real life budgets from pharmacists in the YFP community.

Tim Ulbrich 02:37

Hi guys, Tim Ulbrich here. This week, we’re gonna be talking all about how to develop a budgeting system that works and hopefully is one that you don’t hate. Now if we’re being honest with ourselves, who gets a little nauseous when the topic of budgeting comes up? I mean, besides the future financial nerds out there, not many are a fan of the whole budgeting thing. Quote, “It takes too much time.” “I already know how much I spend.” “I don’t know how to make one and follow it.” “I’m afraid of what I might find when I track my expenses.” “I don’t like to be so restricted.” “I make enough money so I don’t need a budget.” These are just some of the most common reasons that I hear for all of the hate surrounding budgeting. So in that light, what if we thought of the budget instead as a mechanism by which we achieve our financial goals? It’s simply the roadmap. It’s the execution plan that we have for the vision for living our rich life. It’s the way that we’re going to achieve what we set out to achieve. Now what are the most common things I hear pharmacists say is, “Tim, I make a great income. But I don’t feel like I’m progressing financially.” And one of the greatest threats to a pharmacist long term financial success is believing that a six figure income equals financial success. That mindset I can guarantee you will hinder progress. And here’s why if you take the average pharmacists salary, a reasonable take home pay after taxes after health insurance premiums after any type of employer retirement contribution is about $7,000 per month, right, give or take. And if you assume the average student loan debt on a 10 year standard repayment, plus let’s just say a $400,000 home and interest rates today that adds up to about $4,500 per month or 65% of a pharmacist take home pay. Let me say that again. Between the average student loan debt and a $400,000. home on a 30 year mortgage. Right. I know some people live in higher cost living areas, some people live in lower cost of living areas. That adds up to about $4,500 per month of committed expenses or looking at it another way about 65% of that take home pay number that I just mentioned. That means we have about $2500 left each month for everything else, right all the other home related costs, property taxes, homeowners insurance, upkeep, of course food, clothing, car payments, gas, other debt payments, insurance premiums, additional savings, and not to be forgotten the more enjoyable discretionary expenses like vacation, experiences, eating out, giving, and so forth. So I think it’s safe to say that most pharmacists didn’t spend six to eight plus years training to get into this profession, to work hard to find themselves living paycheck to paycheck. Now, obviously, some pharmacist households have more than one income, so we have to factor that in. But regardless, we can see that the take home pay of a pharmacist only goes so far. And that’s why it’s critical that we shift the mindset that pharmacists make a great income. Yes, it’s a good income, one that is more than $50,000 higher per year than the average household income in the United States. So it’s a good income, objectively speaking. And so it’s a tool and it’s a pretty good one at that. But without a plan, it is going to have significant limits. So shifting your mindset around how much you make, and how far that income will go is the most important thing that you can do for your financial plan. Why? Because everything else will flow from that mindset, how you save, big purchase decisions, how you handle your debt, ideas for growing your income, and so on. So with that in mind, with the plan that we need to have one, right, we need to have some direction to make sure that we’re achieving our long term goals.

Let’s talk to you five steps to developing and automating a budget that works and hopefully is one that you don’t hate. Step number one is we have to do a financial vital check. Alright, before we get into the vision, before we get into the budget, we have to assess where we are at today. And sometimes this is painful. Sometimes this is exciting, right? Depending on the progress that we’ve made thus far. We need to really honestly assess are we on track? Are we ahead? Are we behind? And what does that even mean? And we don’t want to start running forward until we know where we’re at. And we want to find out what path we want to be running on. And a great starting point, certainly not the only place to be but a great starting point for the financial binos check is to really be tracking your net worth on a regular basis. Now, if you’ve been listening to the show, you’ve heard me talk about net worth many times before. Net worth is simply your assets or what you own, minus your liabilities or what you owe. And as I’ve shared often in my journey, paying off $200,000 of student loan debt and coming out of a significant amount of debt really into a period of trying to grow that net worth. This was a significant part of our journey, really shifting that mindset from income to being a tool, right income not being the end all to really being able to move that income to growing assets, paying down liabilities, and therefore growing net worth.

Now Dr. Tom Stanley in the book, The Millionaire Next Door, which if you haven’t read before, I’d highly recommend it. He says that one of the reasons that millionaires are economically successful is that they think differently. One of the reasons that millionaires are economically successful is that they think differently. And part of what he’s talking about here is this concept of income versus net worth . They recognize that income is a tool, but income by itself does not mean financial success. Now, what should be our net worth? Right? That’s an interesting question, what should be our net worth? And of course the answer that is it depends. But Dr. Tom Stanley in the book, The Millionaire Next Door gives us a calculation for expected net worth. And he says that your expected net worth is your age times your gross annual income divided by 10.

For example, if we had a 45 year old pharmacists making $140,000 per year, if we took 45 as their age, we multiplied it by $140,000 of income, we divide that by 10. That’s $630,000 would be their expected net worth for that 45 year old pharmacist making $140,000. Now in addition to net worth, that’s just one calculation. We certainly don’t want to hang our hat on that. There are other areas inside of this financial vitals check that we should be thinking about. Things like, where are we at with the emergency fund? Is that a box you’ve already checked? Is that something we need to focus on? Perhaps you looked at that several years ago, and now we need to update that because expenses have gone up. So where are we at with the emergency fund? That’s one part. Do we have revolving credit card debt? If so, typically, because of where those interest rates are we going to focus on that before we look at other parts of the plan. Have we landed on, for those that have student loans, have we landed on an optimized student loan repayment strategy? Critically important, many different pathways we can go. We know that certain strategies can be more advantageous than others in terms of cash flow, what we pay out of pocket, potentially forgiveness. So have you critically evaluated your loan repayment strategy? Other areas of the financial vitals check are we set with things like own occupation, Long Term Disability Insurance, or for those that need life insurance, we have a good term life insurance policy that’s going to cover the needs that we have, are we on track with retirement savings? Right?

We’ve talked about all these topics on the show before these areas, why it’s important to start here with the financial vitals check is all of these areas are going to potentially impact cash flow, and give us insight into where we want to prioritize and focus with the budget because you’ll see here in a moment, then we talk about how to execute on the budget. One of the things we need to know is what are the goals that we want to include in our budget? What are we focusing on? What are we prioritizing on in doing this vitals check is going to help us in part, identify what those areas are. Now if you want more information on this concept of financial vitals checking, you want to do your own financial vitals check, we have a neat tool available for free. If you go to yourfinancialpharmacist.com/financial-fitness-test. That’s our financial fitness test, again, yourfinancialpharmacist.com/financial-fitness-test that will take you to a quick interactive tool, and it’ll help you identify what some of these areas are to focus on. Again, we’ll link a link to that in the show notes. So that’s step one, doing the financial vital check.

Tim Ulbrich 11:40

Step number two, again, we’re not even in the budget yet, right? Step number two is setting the vision. I firmly believe, we firmly believe, that without a compelling vision, the budget will feel restrictive, right. Without a compelling vision, the budget will feel restrictive. And I can almost guarantee you as well that you will run out of gas at some point in time, if you don’t have a compelling vision, only to find yourself and the whiplash between, in and out of being intentional with your finances. Like we tend to approach other areas of our life, right, such as fitness, such as our diet, and so forth. If we have a compelling vision, think of that as the engine for the financial plan, especially if you are in a season of grinding it out or cutting back, which hopefully is temporary. But especially in those seasons, we want to have a very compelling vision that’s going to drive us forward and keep us motivated. So first things first, what does your rich life look like? What does your, keyword there, your rich life look like? I love this quote quote from Roy Bennett. He says, “Dream your own dreams achieve your own goals. Your journey is your own and unique.” That’s so important here, when we think about setting the vision for living a rich life. When we talk about our financial plan and our goals. It’s so easy to get caught up into what are other people doing or the comparison game. What does it mean for your family to be living a rich life. If we can get clear on that -something we’ve talked about on this show before – that’s gonna help us really have a strong plan when it comes to how we’re not only going to implement the budget, but how we’re also going to be able to achieve other financial goals like long term savings, and retirement. Don’t underestimate this step. Step number two, setting the vision think of this really as the window in which we’re looking through as we’re making any of the individual financial decisions.

Tim Ulbrich 13:44

Alright, step number three, is I want you to track back your spending 90 days. So before we get into the spreadsheets, before we start to set the budget going forward, I want you to track back you’re spending 90 days right? This is the audit of the expenses to identify how have we been spending our money before we set what the goal is going forward. Now, this is really easy to do. Thankfully, in 2024. Many banks, many tools, software options that are out there, that we can quickly pull statements from credit cards, from debit cards, from various accounts, and be able to aggregate these and many of them even automatically will categorize them for you. Sometimes you gotta clean that up. But this is a process that we think is really important before we set the plan going forward. Now 90 days, I believe is an important window of time, because in any given month, right in any 30 day period, we can have some anomalies with the budget that might not be “normal.”, right to the month that we would have throughout the year. And so 90 days is going to help to average that out a little bit. That’s one of the reasons we want to look back 90 days but also by looking back 90 days we’re going to start to identify some patterns of things that we might want to adjust or at least be aware of as we set the budget and plan going forward. So that’s step number three is we’re going to track back 90 days categorize those expenses, really look at what is our spending patterns, what’s the spending behaviors? And there, we’re going to quickly identify what’s the difference between our expenses, and what’s the differences between our take home pay, right, and that’s going to help us identify what we have to work with for the budget.

Tim Ulbrich 15:21

Alright, step number four is then actually setting the budget. Now, this is intentional that we don’t start here, right, I firmly believe from experience from working with many pharmacists on this that if we start with a budget, we tend to lose that momentum that I’ve been talking about. And especially if we have two people that are working on this together, where maybe they’re not on the same page financially, we want to first get clear on the vision, right? If we can have the shared dreams, the shared vision, I’ll never say the budgeting process is easy. But it’s more palatable when we’re working then from that mindset where, okay, now the budget is simply the execution of the vision that we’ve agreed upon. Right. So we don’t want to start here with a budget.

Of course, there are many ways to budget, some of you might be familiar with budgeting methods, such as the 50,30, 20 budget, which is about 50% of your expenses should be for essential, or excuse me, 50% of your income for essential expenses, about 30% of your income for discretionary expenses, those are the things that are the nice to haves, but we could cut them if we needed to cut them, and then about 20%, that’s going to go towards savings or investments. So there’s different models and frameworks of that. But many of you may be aware of something like that. There’s also budgeting methods that are known as like the no budget budget, which simply means that you identify, you know, what are those critical expenses that you have to fund each month, and then you just don’t overspend your income beyond that, right. And so that’s a method that we see people that are a little bit further in their career, that have a more significant rhythm and cadence to what they’ve been doing over a long period of time. They have a good handle on their expenses and their goals and whether or not they’re on track, that might be something that they’re not tracking in such a granular way. Okay, so lots of different ways to budget I’m going to focus though not on the 50-30-20 budget, not on the no budget budget, I’m gonna focus on the zero based budget, because I believe that while this isn’t for everyone, I believe that for many people that are trying to get either on track, let’s say you’re just getting started in your career, and you’re trying to develop a system that makes sure you’re setting yourself up for a good long term plan and that you have a good foundation, I think this is a great way to get started. And then you can pull back over time, or for those listening saying, hey, maybe you need to get back on track, or I’ve kind of lost my way. And I want to have a season of really getting refocused. I think the zero based budget method can be a way to do that.

Now, as a reminder, if you want to download the YFP budget template, so you can work along side as you’re listening, hopefully, you’re not driving as you’re doing this, you can go to yourfinancialpharmacist.com/budget to get that Excel template for free. Okay, so inside of this step of the zero based budget, I’m gonna walk you through five steps of how to complete the zero based budget. Step number one is you have to know your take home pay. Now, as obvious as that sounds, this can be challenging sometimes, right, especially for folks that are just getting started. You know, I see this often from a transition where someone’s going from student to resident or student to fellow and then they’re going into the first job, right? There’s that change that’s happening, or individuals that are going from one income to two incomes in the household, that certainly can be a season of change as well, or for those those seen that variable income. Right? Whether that be you know, side hustle income, additional income, or you don’t work consistent salary types of positions. This can be sometimes challenging, but we have to know on average per month, and for those of you that have variable income, we want to be conservative in this estimate. We have to know on average per month, what is our take home pay, right? This is the amount that you’ll be working with each month to cover your expenses and to put to work to achieve your financial goals. The take home pay or net pay is the amount that shows up on your paycheck, every pay period after taxes after health care insurance premiums that you pay after any retirement contributions and any other deductions that are withdrawn from your base pay or your gross pay. Okay, so for students, any students that are listening, right, this could also potentially include things like student loan disbursement money, plus any earned income that you would have in internships and so forth. So that’s step number one is that we have to determine our take home pay.

Step number two is we then want to account for and subtract our necessary or essential expenses. Now, the definition of necessary can be debated but for the purpose of this activity, let’s include the following as necessary or essential expenses. These would be things like housing, transportation, food, utilities, insurance premiums -if that’s applicable-and any minimum payments on your debts that you need to make. Now in this step, consider your food expense as what you need as an essential right, anything else that would be dining out, we’re going to include in discretionary in step number three in this budgeting exercise. Okay, so that’s step number two is we account for all of our essential or necessary expenses. And we’re working down from our take home pay.

Step number three, then is we’re going to determine how much we spend on discretionary expenses. Think of discretionary expenses as the nice to haves, but in a true financial emergency, they could be cut, if you needed to cut them, right, these would be things like eating out, you know, trips, extra trips, or shopping, extra payments on debt, clothing, expenses, beyond the minimum, you know, housing upgrades, and so forth. Right, it’s very easy to justify any one of these as essential. So it’s important here to be honest with ourselves, when evaluating this category. If you have no idea how much you spend on these types of expenses in a month, a good place to start is to review these from again, as we did earlier, looking back 90 days to review what you’re spending in these areas in various statements and categorize these whether that’s credit card statements, debit card statements, whatever might be the source of those expenses. Now, I want to emphasize here that discretionary expenses are not bad, right in any way, shape, or form. I think sometimes we get to this step, and we start to have some self judgment, and a little bit of questioning, Well, should I be spending money here? Should it be spending money there? Discretionary expenses, and of themselves are not bad, we’re just separating them from essential expenses as we look at this exercise. In fact, they’re an important part a very important part of living the rich life that we want to live, right? Yes, we’ve got to pay down debt. Yes, we have to save and invest for the future. But we also want to enjoy some of these things along the way. So that’s step number three is determining how much to spend on discretionary.

Step number four, then, is calculating what we call disposable income. Remember, we started with take home pay, we subtracted essential expenses, we subtracted discretionary expenses. And now what we’re trying to determine is what is the disposable income. So this is the amount that we calculate by taking, again, the take home pay, subtracting essential and discretionary expenses. This number is the amount that you have to put towards other financial goals, whether that’s building an emergency fund, whether it’s saving for kids college, whether that’s additional retirement savings, down payment on a home, second property, whatever might be the case. So for example, if you have a take home pay of $7,000, you have necessary expenses of $3,000, discretionary expenses of $2,000, you would have leftover $2,000 of disposable income that we can identify and work with and put towards other goals. Now, why this budgeting method, I think works well and hopefully is one that you don’t hate is we are doing this proactively, before we actually earn the income. Right? We’re doing this proactively before we actually earn the income. So, if we can identify in advance what our goals are, and we can identify how much we have to allocate towards those goals, then the next step we’ll talk about is how to actually make sure we distribute them accordingly. All the sudden, we’re thinking in a way that we are pre funding our goals, right really important, rather than waiting to see what’s left over at the end of the month. And that is what we typically see is sure this takes time to get set up. But when we have this system humming, when we see that we have disposable income, or we thought about that to assign to our various goals, and we know that we’re funding those goals, we can really see some feelings of momentum and progress that are taking place. So that’s step number four, calculating your expense, disposable income.

And then step number five is allocating that disposable income to your goals, right. This is where I really feel like the magic happens: allocating your disposable income to your financial goals. And again, we’re doing this proactively before we earn the income, or at least preparing for this. And then once we earn the income, we’re going to allocate accordingly. So if the amount of disposable income, right, in step number four, when we calculated that disposable income, if the amount of that disposable income isn’t enough to meet the goals that you’ve set and the timeframe that is desirable to you, or you find out that you have a deficit here, well, this is where really where the rubber meets the road. We’ve got some work to do. Right, we’ve got two options. We can adjust our goals, I guess three options, we can adjust our goals, we can cut our expenses, or we can try to grow our income and perhaps it might be a combination of those three, but this is really where we shine a light on the reality of where we are at and so often with the financial plan. The stress comes from living in the dark, right wondering, I hope, I wish, I dream are we going to be able to do this? And we’re going to be able to do that? Really, this system is telling us where are we at? And what are the areas that we want to focus on? And what are the dollars that we have available to do that if we can’t meet those two things? What adjustments do we need to make? Do we need to adjust our goals? Do we need to cut our expenses or, and or are their options to grow our income? Now, the reason why this is called a zero based budget is because at the end of step number five, where we’re allocating our disposable income to our goals, we should have “spent”, “spent” because we’re doing this proactively, our entire income, meaning that every dollar has been assigned, and we have a $0 balance remaining, right, because we’ve allocated every dollar to essential expenses, discretionary expenses, and then ultimately, to the goals that we’ve determined are most important.

Alright, so those are the five steps of creating the zero based budget. Now, if we zoom back out, remember, where did we start? We started with doing a financial vitals check. Where are we at today? What what is our net worth position? What are the areas of the financial plan that we want to focus on? We then talked about setting the vision, right? What does it mean, for us? Our unique plan and vision for living a rich life? How are we spending our money? How are we spending our time? We then talked about tracking back 90 days, so we can get an idea of what our spending is in various categories of the budget on average each month. And then we talked about setting the budget, right. And that was the five steps I just reviewed with a zero base budget.

Tim Ulbrich 26:31

Now the final step of all this part number five years really tracking and automating this system. Now how you choose to track this really doesn’t matter to me, at the end of the day, it’s the system that works best for you. And is the system that is feasible for you to keep going, at least for the foreseeable future. So when I asked a group of pharmacists, hey, what system do you use to track? You know, some people use some of the fancy softwares and tools that are out there, such as YNAB, or Every Dollar, just a couple examples, some use a tool that’s provided to them through their bank or the credit card that they use. Most people I would say, use probably a Google spreadsheet or some type of Excel template. So how you track it to me, doesn’t necessarily matter. But the second part of this final step, right, I mentioned, track and automate. Track and automate when it comes to automating your financial plan. It is so obvious, so effective, so easy to implement, but so many people aren’t optimizing this.

Think of automation as the mechanism by which you’re going to put your budget that we just said, we’re going to put this to work for us each and every month, because we’ve already done the hard work to proactively define what are our goals? And how are we going to prioritize and fund those goals. Now, I cover this in detail at length in Episode 341, where I talked about five financial moves to make in 2024, I talked about the concept of automation, I talked about exactly what the system looks like for Jess and I and our own financial plan. So make sure to go back and listen to that and how you can begin to implement automation as a part of your financial plan. Alright, so there you have it. Five steps that you can use to implement a budgeting system and process that not only hope, hopefully helps you achieve your financial goals. But I also hope makes this topic just a little bit more palatable. So we talked about the importance of doing that financial vital check, setting the vision, tracking back 90 days, setting the budget, and then developing a process to track and automate that along the way.

Alright, as we wrap up today, an important reminder about our webinar coming up on March 7 at 8:30pm/Eastern, Budgeting Blueprint, What Zero-Based Budgeting Is, Why It Works, and How to Start One. I’m really excited to walk you through in a visual manner how you can implement your own zero based budget as well as to anonymously feature other real pharmacists’ budgets for you to see. So to get started, you can register for the webinar for free again, you visit yourfinancialpharmacist.com/budgetwebinar again that yourfinancialpharmacist.com/budgetwebinar to save your seat. We’re gonna be giving away three $50 Amazon gift cards of pharmacists who submit their budget to be featured and who attend the webinar live. So as a reminder to have your template, your budget template featured, you can download that free zero based budget template yourfinancialpharmacist.com/budget, fill it out with your own numbers, send it back to us attach it [email protected], in the subject line make sure you note budget and then if you have any questions in your own budget template you want me to address during the webinar make sure to include those in the email as well. Alright, thanks so much for listening to this week’s episode of the YFP Podcast. We’ll catch you again next week. Take care.

Tim Ulbrich 29:51

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 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 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 Pharmacists Podcast. Have a great rest of your week.

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YFP 342: Replay – How Two Pharmacists Paid Off $250k of Student Loan Debt

Posted on January 18, 2024January 18, 2024 by YFP Media

Kristen & Nate Hedrick share their journey paying off $250k student loan debt from the motivation to the role of side hustles and real estate investing.

Episode Summary

How do you go about aggressively paying off a $250,000 student loan debt without feeling overwhelmed? To help answer that question, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is joined by fellow pharmacists Nate Hedrick, PharmD, and Kristen Hedrick, PharmD, BCACP. The Hedricks tell us how they successfully paid off over $250,000 in student loan debt, their motivation for tackling that debt, the pivotal moment that sparked making repayment a priority, and the role a side hustle and real estate investing played in their journey. After a brief history of Kristen’s background, listeners will hear what motivated the couple to take an aggressive stance on their debt repayments, how a life-changing event and one book altered their financial philosophy, and how the pandemic helped them focus on their strategy. Nate and Kristen share their reasons behind paying their debt off now instead of putting their money toward investments and how they found an additional $3,443 per month to make their goal attainable by reducing expenses and increasing their income. This earnest conversation takes us through the possibilities of working full time, raising a family, making investments, and paying off a huge debt, all at the same time. Nate and Kristen talk about their life after paying off this debt and share some advice for pharmacists who may be struggling with a similar debt situation.

About Today’s Guests

Nate and Kristen Hedrick met at Ohio Northern University and were married in 2013. Nate is a pharmacist with Medical Mutual and a real estate agent with Berkshire Hathaway. Kristen is a pharmacist with Bon Secour Mercy Health. Together, they graduated with over $300,000+ in student loan debt. They enjoy visiting National Parks as a family. Today they live in the suburbs of Cleveland, Ohio, with their two daughters, Molly and Lucy, and their rescue dog Lexi.

Key Points from the Episode

Kristen’s background, how she ended up in pharmacy, and what she’s doing now.
What their student loan debt looked like at its peak.
How student debt can creep up and surprise you.
The initial feelings the couple had towards their debt and their plans to pay it off.
What motivated our guests to come up with an aggressive plan for paying back their debt.
How a life-changing event (and a book) in 2016 changed everything.
The global pandemic as a moment of inspiration.
What they had to change in their lives to be able to make the monthly repayments.
Paying off debt now versus investing for the future.
The way the couple used ‘double motivation’ to reconcile an age-old debate.
How our guests were able to raise a child, invest, and pay off a huge debt at the same time.
Nate’s decision to pursue real estate investing and what that meant for their debt repayments.
The approach the couple has taken to make real estate investing work for their family.
Other strategies that helped to pay off the debt aside from cutting expenses and real estate investments.
The benefits of receiving objective, third-party advice.
What life is like now after paying off their massive debt.
How paying off the debt helped Nate make an important career decision.
Kristen’s advice for the pharmacist struggling with debt.
Nate’s parting words of wisdom.

Episode Highlights

“That was the worst that it got and, that same month, for what it’s worth, we had a negative net worth of $306,000. We had about 10k to our name and a bunch of debt to add on to that.” — Nate Hedrick, PharmD [0:03:44]

“I had no plan early on until we developed the ‘why’, which was getting our financial house in order so that we could live the way that we wanted to.” — Nate Hedrick, PharmD [0:06:23]

“The expenses were the catalyst, and then it was the extra income side of the equation that really boosted everything to actually make it possible.” — Nate Hedrick, PharmD [0:13:37]

“Spending more time with the kids without having that student loan debt, and being able to do more things and travel more, it feels like it’s definitely paying off in the end, with making some of those sacrifices.” — Kristen Hedrick, PharmD, BCACP [0:17:16]

“One great thing about real estate investing is even if something happens, you still own a building.” — Kristen Hedrick, PharmD, BCACP [0:22:00]

“Find something that is going to supplement your life that the more effort you put into it, the more reward you get out of it. That is a really great way to set yourself up for success.” — Nate Hedrick, PharmD [0:29:32]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] 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 Kristen and Nate Hedrick to discuss their journey of paying off $250,000 of student loan debt. In this show, we discuss their motivation and why, for aggressively paying down the debt. What the pivot moment was that motivated them to make the debt repayment a priority, how they were able to come up with more than $3,000 per month extra to throw towards the loans, and the role a side hustle and real estate investing played in helping them pay down the debt.

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 240 households in 40-plus states. YFP Planning offers free only, high-touch financial planning that is customized for 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 Nate and Kristen Hedrick to learn how and why they aggressively paid off $250,000 in student loan debt.

[INTERVIEW]

[0:01:23.4] TU: Kristen and Nate, welcomed to the show.

[0:01:24.7] NH: Hey Tim, good to be here.

[0:01:26.1] KH: Hi.

[0:01:27.0] TU: So Nate, obviously, you’re a frequent flyer. You’re old news so I’m not even going to spend a whole lot of time focusing on you. Many folks have heard you on the podcast before, whether it’s this show, talking about home buying, whether it’s the Real Estate Investing podcast on Saturday mornings, of course, Nate being the cohost of that show.

So, we’re going to focus a little bit more on Kristen’s background as we get started, and we’re going to jump into more about your debt-free journey and how ultimately, you guys were able to knock out $250,000 of debt, and what that has meant to you guys personally, to your family, as well as also the financial goals and plan that you have going forward.

So, before we jump into that debt payoff and that journey, Kristen, let’s start with you. Tell us a little bit more about your background, what drew you into pharmacy, where you went to school and the work that you’re doing now.

[0:02:13.0] KH: Yeah, thanks. I had some extended family members in pharmacy so I just thought it would be a good career path, and looked at the different pharmacy schools and found my way to Ohio Northern in the middle of cornfields, and no cellphone reception and for some reason, that’s where I wanted to go. I think we all know it’s a great campus and community there.

So went to Ohio Northern and that’s where Nate and I met. I completed my residency here in Cleveland, Ohio. Now I work for a large health system doing population health on clinical pharmacy, and following patients with their chronic disease states and helping them with their medicines, and helping in here in Cleveland.

[0:02:50.8] TU: Kristen, it’s funny you mentioned the cellphone reception in Ada Ohio, Ohio Northern University. I remember, I maybe as a P3, P4, just a few years ahead of you guys, but it was a big deal that they added a tower on campus, and I think we got one bar, maybe two bars, but not a whole lot going on in Ada Ohio. I had the chance to go back recently and take Jess and the boys. It was so fun to see campus and really relive some of the memories in that place.

So Nate, tell us about the student loan debt at its peak? What were you guys working with and then, from there, we’ll get into more of some of the motivation and journey of paying it off.

[0:03:26.4] NH: Yeah. So, when we graduated and totaled everything up and, I think it was even a month or two after we graduated that I even wanted to look at it. Because it was the initial plan of, “I just won’t look at it and then it won’t be a problem.” And when we totaled it all up, looking back at our highest count, we were at $316,000 in student loan debt at one point.

So, that was the worst that it got and, that same month, for what it’s worth, we had a negative net worth of $306,000, so we had about 10k to our name and a bunch of debt to add on to that.

[0:03:54.8] TU: I’m curious, did that surprise you guys? One of the stories I often share is that, it’s somewhat embarrassing, but when I was in pharmacy school, it felt a little bit like monopoly money, and it was all of a sudden when I crunch the numbers and I was like, “I owe how much, and how much interest, and what’s my net worth?” It just caught me off-guard, and it shouldn’t have. Were you expecting that or was that number somewhat a surprise at that point?

[0:04:15.4] NH: I agree, it was just totally like made up funds, you know? Every quarter or every semester, I’d have to go and submit for what I needed, and it was the tuition plus a little bit of living expenses, and I would just submit for it and it would get added into this imaginary pile of money somewhere, and I don’t think I ever checked the balance while I was in school, I don’t know why, I don’t know why I would have.

[0:04:35.7] TU: You’re dating yourself Nate, when you talk about quarters by the way. So that ain’t a thing anymore.

[0:04:40.7] NH: Old school, how I work.

[0:04:42.7] TU: Kristen, tell us about the plan that you guys had for the student loans after graduation, after you got married in 2013. How did you feel about the debt overall and then, what was the thought in that moment about how are you going to pay this off?

[0:04:55.7] KH: I think our main thought was it’s overwhelming. It’s just such a large amount that it feels so ambiguous that we thought that we had this plan. We had always wanted to try to pay it off within 10 years. I think I was a little more on track of, “Oh, I want to pay this off in 10 years” and we had some advice from a previous financial advisor that had said, “Oh, it’s just student loan debt, everyone has it, it will be okay.” We changed it to 30 years so we could have minimum payments but always pay extra if we wanted to and, ultimately, we just found that that eventually did not work as well for us.

We needed a more targeted plan to get us on track with what we were doing. We had always been paying the amounts, but I think it was how we were planning to target to actually pay it off. It always felt like this end date that we were never going to get to.

[0:05:44.4] TU: One of the questions I like to ask folks, and we’ll talk more in a little bit about how aggressive you guys were to really get a chunk of this paid off, but I like to understand, what’s the why? What’s the motivation behind it? It’s one of these things, as you mentioned, you can take them out 25, 30 years if you want to. Obviously, you guys made a good decision to be much more aggressive. Tell me more about for the two of you, for your family, why was that important?

[0:06:08.2] NH: It’s funny you say that because I think until I had a why, it wasn’t important. Like I said, I didn’t look at it, I barely wanted to check it. I think at one point in residency, I put myself on the graduated repayment plan and my only motivation was because the payment today is lower and that seems like—that seems better, right?

I had no plan early on, until we developed the ‘why’, which was getting our financial house in order so that we could live the way that we wanted to. Travel, work less, work in the capacities that we wanted to, all the things that have led us to this point. Until I had that in place, there wasn’t a why and it didn’t matter.

[0:06:42.7] TU: Yeah, I think that’s such a good encouragement for folks that are in the midst of their journey, or maybe have wondered into the repayment or for that matter, the financial plan at large, and feel like, “Hey, maybe I’m progressing but not as quickly as I would like to. I’m a little bit stuck.” Really going back to what gets us excited, right?

The topic of money, money is a tool. So, what gets us excited, why do we care bout this topic of money, why do we care about debt repayment, why do we care about saving/investing for the future, why do we care about giving? And then using that as the motivation to drive some of the action and the plan going forward.

So, Nate, what happened in 2016 that was really a motivation to say, “Hey, we’ve got to do something different?”

[0:07:22.0] NH: Yeah, that really is when it changed for us and, again, we’d been paying on them and, every once in a while, we get the idea that, “Hey, we should throw in some extra money because these loans are huge.” We would do it for a couple of months and I feel like we just were inconsistent. But in 2016, we got pregnant with our first child and, again, I tell this story on the podcast several times, but I read Rich Dad Poor Dad and it completely changed my mindset about money and what I wanted to do with money and what I wanted to do with my life and work, and just how I looked at finances.

It’s crazy it took that long to figure that out but I had no formal financial education. We go through pharmacy school, not business school, and until I read that book and changed how I wanted to approach finances in general, again, I didn’t have that why behind it. I didn’t have that motivation, so that’s what really jumpstarted us. I think it was a combination of, “Oh crap, we have a kid on the way and we have to pay for a lot of stuff” and again, this mindset shift that occurred, at least for me.

[0:08:16.1] TU: Kristen, I’m curious. I can just see Nate, because I know him now, I could see him like this totally nerding out over Rich Dad Poor Dad and coming to you with all these ideas and, “What about this, what about that?” Were you equally on fire in that moment or was there different motivations that really led you to say “Hey, we’ve got to do this differently?”

[0:08:34.4] KH: Yeah, I think I had always wanted to pay off the loan. Again, it was just so—it was a large amount that I think I didn’t know how to get there. When Nate said he read Rich Dad Poor Dad, he kept talking about it and talking about it. I think finally, in 2019, I read it, I said, “Oh, this is a really good book, I should have done it sooner”

So, I think we are a really good team together, in trying to work together and get those payments down, and Nate was very much more into it. I think at the time, I was like, I’m growing a human, I’m just going to keep doing what I’m doing, and that was the time that Nate entered real estate. He’s told this story before but, I’m six months pregnant and he goes, “Oh, I think I want to get my real estate license.” This is a time most people would have been getting board certified.

He’s like, “I’m going to go get my real estate license.” He had classes multiple times a week and I’m pregnant, trying to take care of the house and do all these things, getting ready for a baby. So, it paid off in the end and I’m glad that he did it, but I think in the moment there was also that stressful situation for me, but he’s a jack of all trades. He does lots of things and keeps busy, so it’s good.

[0:09:36.0] TU: We’re going to come back to that in a little bit, of what role did that play, Nate, for you, in terms of pursuing that, as you call, a side hustle. It’s much bigger than that, the work that you’re doing now, obviously, but why was that so instrumental, and not only to the numbers but also to some of the mindset and the motivation behind the financial plan and the journey that you were on?

I want to first talk about, though, Nate, walk us through what happened in the pandemic that really allowed you guys to say, “Hey, we’re going to get specific about when we’re going to payoff a big chunk of this debt, what it’s going to take each month.” Talk to us about what happened during the pandemic that led you to the decision around how you were going to pay off a huge portion of that debt.

[0:10:15.5] NH: Yeah, so, like I said, 2016 is where we started getting pretty serious, but even then, it wasn’t truly resolute plan, right? It was just, “Okay, we really got to be focusing on throwing extra money at this” and we did a lot better. But in 2020, we had a month or two in the pandemic and realized, “Okay, we’re not traveling as much, we’re not going to be going out to eat as much, everything shut down, let’s use this time to take the extra money that we’re not spending and really attack that loan.” At one point and, again, we were talking this morning, it was right at the end of the year, we said, “Okay, this thing is not going away, let’s really use next year to just get rid of this loan.”

So, right in December of 2020 and going into the beginning of the New Year, we said, “Let’s figure out a number. What is it that’s going to take to get this loan knocked out at the end of the year? Who cares of the balances right now, we’re going to do it in a year, let’s make sure to get it done.” So, we did some crunching of some numbers and basically said, “Okay, if we can pay everything we’re paying today but also throw an extra $3,443 at the loan every single month, mine will be gone by the end of the year and it will be just knocked out.”

So, that number, I wrote it on the big note card over here and it became like—actually got it here, I’ll grab it. Here you go, so there’s the evidence, right? 3,443. So, that became—I put that everywhere and it became the mantra of like, “If we can do that every single month, this will be gone” and that was such a huge motivator for us.

[0:11:32.8] TU: I don’t want to brush over that, because we’ll talk about it, I mean, that’s a big number, so we’re going to talk about the how of that, but tell us more about how you were able to get to that conclusion and get on the same page with that conclusion? What I’m specifically getting at here is, was it a, “hey budget status quo and we’re going to find ways to grow our income”? Was it a, “we’re going to cut some expenses”? How did you guys work through the details, Kristen, to ultimately say, “Yup, it’s $3,443 and this is how we’re going to do it.”

[0:12:04.5] KH: I think it was a little bit of a combination of both. During the pandemic, we had a little bit more interest. I think also, in doing some real estate investing and had an opportunity, we said, “Okay, do we take this money and do we put it towards real estate or do we pay down the loan more?” and eventually, we decide real estate, but we said, “Hey, like, maybe we should aggressively pay off our loan a little bit more if we are traveling and doing these things.”

So, I think in December, we had a lot of discussion about it and both of us just decided yes, we both want that to be our goal, that starting January 1st, we really start cutting back on what we’re spending. I think, really, from any area that we could, we went thorough our budget, we scrubbed it. We said, “What are we spending money on, what are the subscriptions we have, what can we cut out, what can we save money on?”

“Which of those little purchases can we just stop doing? Which things do we think that we need, can we actually hold off on buying?” and then, certainly, Nate’s side hustle helped with that as well. So, I think it was both a combination of, let’s cut back to really bare minimum spending. We weren’t eating out, we weren’t getting the extra cups of coffee from Starbucks, we weren’t doing the purchases at Target that said, “This is what you need, and this is in the dollar spot.” We just stopped all of that. And Nate worked as hard as he could with his real estate; it really is a motivator to keep putting that extra money towards it as well.

[0:13:22.3] NH: Yeah, I think we quickly realized that trying to find for an extra $3,000 in the budget. We weren’t over spending by three grand every month, that was not it, so it became my challenge to say, “Okay, well, how can I work at this side hustle to really get us the rest of the way?” So, the expenses were the catalyst, and then it was the extra income side of the equation that really boosted everything to actually make it possible.

[0:13:44.7] TU: Yeah. What I love about that is, certainly, cutting expenses, especially short-term, if you’re focused on a goal, you were talking about debt repayment, can be really valuable but it also can be a grind. I mean, it can be soul sucking sometimes, you know?

I think that one of the things I love about the approach that you took is that if you’re moving both sides of the equation, there’s a different level of momentum and mindset that come from that. Maybe the numbers aren’t as big for other folks that are pursuing ideas, but if you can both focus on, “Hey, how can we draw the income and how can we keep the expenses?” you all of a sudden feel like you’re picking up momentum in a significant way, but I don’t want to brush over that number.

$3,443 per month, that’s, for many pharmacist, if we assume, hundred, $120,000 of wage, it’s like, it’s about half of take home pay. I mean, for a lot of folks, we look at that at a monthly basis so that’s certainly commendable, and that’s a big number. Nate, I want to ask the question that I know the listeners are thinking, which is Nate, Kristen, you guys are smart. $3,443, why not invest that money?

Why not put that out so we could see that grow and compound over 20, 30, 40 years? Like, how did you guys reconcile this ongoing debate, which is maybe a little bit of a moot point right now because the administrative forbearance, but this ongoing debate of, “Should I pay down the debt or should I invest for the future?”

[0:15:03.9] NH: Yeah. This is something we struggled with for years. Should we go out and buy another rental property or should we just take this money and throw it at the loan? That’s been the back and forth. Like Kristen was saying, we were evaluating whether we should be doing real estate or paying down the debt.

We challenged ourself to say like, “Can we do both?” and so, for me, again, working and trying to add extra income to the equation. It became a game of, “Okay, if I can make $3,000 a month extra, that’s going to get us there. But if I can make 4,000 or 5,000, that’s another couple of grand I can put at the real estate investing budget.”

So what we have, we had a bucket in LI, in our LI bank account, that was the real estate investing fund and we still have that, we still use it, it is a great way to separate our money. I had to pull from that in any month that I didn’t make enough income to really make the difference, I had to pull out of that. So it was like this, I was afraid to give it up. So it became a challenge to myself and to us.

We need to cut our expenses and raise our income in a way where I can keep padding that account, that bucket, while also meeting our number. It was a double motivator of let’s get rid of the debt and I don’t want to lose sight of the other thing that I’m really passionate about. So, let us find a way to do both.

[0:16:09.8] TU: Kristen, we both know that kids could be expensive. We love them, but it can be very expensive. I think one of the challenges folks have that are raising young family, whether it is debt repayment, whether it is achieving other financial goals, is it’s an expensive phase of life, right?

The data suggested it’s multiples of hundreds of thousands to be able to raise a child, and I am curious of how you guys were able to reconcile this with young ones? I know you guys are so active and intentional as a family now. When you’re looking ahead to say, “Hey, this is a sacrifice now but it is going to allow us to really push our goals forward as a family later in the future.” Tell us about your thoughts on that.

[0:16:46.9] KH: For sure. I remember being pregnant in 2016 and just thinking like, “Oh my gosh, I already feel like we’re living paycheck to paycheck, how are we possibly going to raise a child and afford daycare?” We even joke now, our big expense is mortgage. Childcare and student loan debt was there, our mortgage was the least expensive of all of those.

So yes, certainly having kids is—we always felt like we knew we wanted to have kids and it was just figuring out how do we plan for that. I think, especially now, spending more time with the kids too without having that student loan debt and being able to do more things and travel more, it feels like it’s definitely paying off in the end with making some of those sacrifices or making those adjustments.

Really, that mindset change, I was joking this morning, like you said Tim, it’s mindset changing. In 2021, we actually kept a list of things of, what are things we didn’t buy that we’re going to buy when the student loan is paid, and I was laughing because I’m like, “I still haven’t even bought these things yet.” We just found that maybe we don’t actually need them.

[0:17:44.7] TU: Yeah and some of those behaviors. That’s what I always encourage folks, whatever goal you’re working towards, some of those behaviors you implement in that season will stay with you for the long run. Certainly, there’s a time and place to loosen the reigns a little bit and make sure we’re living a rich life today as well as planning for the future, but we’ll talk about what that looks like for you guys.

But some of those behaviors can stay longer, which I think is really an incredible part of the journey. I want to touch on two things we’ve mentioned I think play a really important role to this journey, which is, number one, that you talk about the side hustle you had working full-time as a pharmacist, as a real estate agent that allowed you to accelerate some of the goals and momentum.

Then the second being the investing in real estate, which much of our community already knows the work that you there on the Real Estate Investing Podcast but talk to us first about the side hustle as a realtor. When did you become a realtor, why did you become a realtor and you know ultimately, how have you been able to balance this while you are also at the time working full-time?” You are raising a young family, tell us about the decision to pursue that work and the role that it played and the debt repayment journey.

[0:18:51.3] NH: Yes, I mentioned that mindset shift that occurred in 2016. I realized I needed something else that was going to be able to supplement my pharmacy career, something where I could put extra effort in and get extra reward from doing that, real estate became a natural fit. Again, it is mentioned a dozen times in Rich Dad Poor Dad and I started reading other things about ways to diversify income streams and, you name it, right?

Real estate was in that conversation. I talked to my father-in-law who has been in real estate for years and he’s like, “You should just get your license.” At the time that felt like, “Well, that’s a different career. I can’t do that” but as I looked into it, it was actually a really reasonable option to supplement that. So I went, like Kristen said, to classes in 2016, got licensed in early 2017 and I assumed that everyone was all of a sudden coming to me, right?

All my family and friends were going to flock to me and say, “Nate, buy and sell me a house” and it was, I think, eight months before I had a real client and actually closed the deal. I mean, it was a long time, and that’s because I wasn’t putting the right amount of effort into it and I wasn’t targeting what I needed to be doing, right? I wasn’t niching down and, again, that’s what led to the creation of real estate RPH and all the work that I do with pharmacists and the real estate community.

All those things progressed down the road to the point where I am at today where, again, now I get to work with a bunch of active clients here in Cleveland. I help people all over the country with our real estate concierge service and it is a really cool way to put my passion for real estate into the world of pharmacy that I started out in and, again, it’s also been a great way for us to supplement our income stream just because it is something where I could put more effort in and get more dollars out as a result from doing that.

[0:20:21.6] TU: Yeah. I want to put a plug in, just so you don’t have to as well, but I think that service has really been so valuable to the community. So, if folks are looking to buy a home, sell a home, looking to buy an investment property and they’re looking for an agent that would be a good fit for them. It is okay if you’re not in the Cleveland area where Nate is, he’s built a network of agents all across the country that have supported other pharmacist.

So, if you go to yourfinancialpharmacist.com, you click on home buying, you’ll see a section for find an agent and from there, you can get connected with Nate further.

Kristen, I want to ask you about the real estate investing side just because Nate talks about this on the podcast every week but I know, because I’ve seen it offline through some of the times I am talking with Nate, you guys are crunching numbers on the property and you’re on the spreadsheets punching numbers, “Is this a good deal, is this not a good deal?”

Tell us more about the vision that you guys have had for real estate investing for you as a family, why that’s been a good fit, and the approach that you’ve taken thus far in your real estate investing journey?

[0:21:17.5] KH: Yeah, I think we always had an interest in real estate investing. You know, my family has some experience with that, like Nate mentioned, my dad is a realtor, so we knew its something we eventually wanted to do. It was just figuring out ,how do we put it in as part of our plan? But when Nate said he was interested, I was all onboard, but I was also that type-A risk averse pharmacist as in, “How do we do this? I have no idea.”

I vividly remember a lot of my commutes, listening to Bigger Pockets, reading a lot of real estate books just to fill my brain with the information I felt that I needed to feel comfortable with real estate investing, and we always knew that we wanted to have those properties. I think one of the biggest things I had learned from Bigger Pockets was, one great thing about real estate investing is even if something happens, you still own a building.

You still have something physical there that you could sell and we just—we always knew we wanted it to be something to supplement with one of our investments.

[0:22:13.4] TU: Yeah, so right now you guys have property, correct me if I am wrong, you’ve got property in Northeast Ohio and then you’ve also got property outside of the area, correct?

[0:22:22.0] NH: Yes, so we’ve got properties here locally and then some up in Michigan as well.

[0:22:25.7] TU: Awesome, love that. And folks can tune in to the Real Estate Investing Podcast for more stories of other pharmacists real estate investors. So, we’ve talked about really three main buckets that were instrumental in paying off this $250,000 of debt and that was, I categorize it as hustle, cutting your expenses that more than $3,000 per month, growing the income through the side hustle, and then also looking at how you’re able to build a real estate investment portfolio. We’re there other strategies that helped you along this way of paying off this debt?

[0:22:55.8] NH: There are little things. I think one that comes to mind for me is that we refinanced that loan, I think four different times, and a lot of that was because we were getting low interest rates every single time, and the other is because we were able to get big bonus. So, if you have been on any of the YFP resources for loan pay down or for loan refinance, you get cash bonuses depending on your loan balance.

A couple of times we would go out and refinance it, wait a couple of months, refinance it again, and we’d get a check and a lower interest rate, it just made a ton of sense. So, that was a little thing that helped quite a lot along the way.

[0:23:24.2] KH: I think another thing that really helped us was working with Tim Baker and the planning team at YFP. They were very much instrumental in guiding us through and helping us make the decisions. You know, I grew up putting my money under a mattress making sure it was nice and crisp and counting it every week. When we started this journey, Nate wasn’t financially savvy until 2016, when he got more into it after reading Rich Dad Poor Dad.

So, I think working together in having a third party objectively look at everything and give us some guidance was really helpful as well.

[0:23:55.9] TU: You don’t have to make Tim’s ego any bigger. No, I’m just kidding. I can see he is listening to that. So the question that I am begging to know the answer to is, you guys were throwing a huge amount of money at this debt. Obviously, at some point, you got that debt paid off and, all of a sudden, you’re not having to make that big of a payment anymore. I often think about this in the context of my journey and I often chalk it up to where did that money go.

Well, more kids, kids got expensive, other things come along the way, but I also know you guys have been really intentional as a family about what are we trying to do in terms of experiences and how we want to be intentional with the resources and the money that you have each month. So, Kristen, talk to us about this journey after the $250,000 of debt, where no longer making this massive monthly payment. What’s happening? What are we doing?

[0:24:43.5] KH: Well, we went to Disney World. I feel like that’s the most appropriate thing, you know? Honestly, in some parts, it feels like it hasn’t changed at all. We still have a lot of that mindset with being frugal and still saving for our future, but also trying to live in the moment, and we have done a lot of life planning as well and things that we want to do. I think we’re working on travelling more.

Like I said, we went to Disney, hopefully some other trips coming up, just being able to spend more time with the kids I think. People with children understand that the first five years before they start school is just hectic and overwhelming. We were just trying to take in all these moments before they head to school officially.

[0:25:20.1] TU: I love that. Right, it goes quick and everyone says that, but it’s real, and I think the intentionality around these experiences and making sure there’s the budget there to support those experiences and to be able to enjoy those moments along the way. Nate, you recently shared publically your decision to go from full-time to part-time work in your pharmacist role. So we’re going to officially call you a pseudo pharmacist now.

[0:25:41.7] NH: That’s fair.

[0:25:42.9] TU: How much of a factor was getting to this point of having this $250,000 of debt paid off, how much of a factor was that and being able to approach that decision and ultimately, feel confident in that decision.

[0:25:55.4] NH: Yeah, it was huge. I mean, I can’t say that when we stared off that was the plan but as we get closer, we realized that it was a possibility, and I looked at the timing and I looked at where we were at and I said, “Look, this is like the last summer before our oldest goes off to kindergarten and then it is just going to get crazier and crazier as time goes on” So I took a step back and said, “Now that this debt is gone, we really can take a step back.”

Kristen has been so supportive and helpful in allowing me to do that, but it’s been really cool because now I can just focus on them for the summer and those extra 20 hours that I found every single week is just, I’m on the kid’s schedule. Like the other day, it was raining in the morning and so we went to the movies and we saw a kid’s movie and then we got out and I was like, “Hey, it’s sunny. Let’s go to the playground” and so we did that.

It was just really cool to be on their schedule rather than some work schedule or something else that I had to do or had to get done. There wasn’t a timeframe anymore and that’s been really cool and again, without that debt being gone, there is no way we could have done that.

[0:26:51.3] TU: Yeah, what I love is I think both of you are such a great example. Where yes, you’ve got a PharmD, yes, you’ve got residency training, yes, you could continue to climb certainly in various clinical roles and there’s the opportunities always there and will be there, but you also have some opportunity for flexibility in those roles and I think sometimes we don’t think creatively enough as pharmacist about how we’re going to use our time each week, and that can change season to season.

I work with other pharmacists who went through a season with young family and others where they pivoted to part-time roles or more flexible schedules and then that changed the game at a later point in time. So I think there’s opportunities to make sure that we are coordinating our work plan with our life plan and with the financial plan as well. Kristen, I’ll start with you and then Nate, if you have other thoughts as well.

I’m someone listening who, maybe I’m a student, and I am like, “Oh my gosh, thanks so much I feel depressed about the journey ahead” or maybe I am in the middle of the debt repayment journey and I just feel like, “When does this going to end?” or I feel like I am spinning my wheels. What advice would you have for pharmacists that are in that debt repayment journey as they’re trying to really navigate that path forward?

[0:27:58.8] KH: Yeah. Not to sound cheesy, but I think a really big player, at least for me, was the YFP planning team. We felt like we had a plan but we weren’t really sure if it was a good plan, and really it was after I had our second child and I was listening to a lot of podcast. I was walking everyday on maternity leave and I was listening to podcast every time I would go for a walk and I was like, “We really need to look at this.”

I feel like we need a more set plan as to what we’re doing, especially since you’re at such an integral point of your life where you want to be able to spend extra time with the kids, but you also may feel like you can’t financially do that, and so I think having that, like I said, that objective third party look at what you two are talking about as a couple can be really, really helpful, and also helped us look at a lot of our other financial plan with the investments.

Like, can we get into more real estate investing, are we contributing enough to our 401(k)? Are we doing things that seem like we should be doing? I think that is really, really been a big impact on us on being able to achieve this.

[0:28:55.0] TU: Nate, any other words of wisdom, advice you’d have to folks that are kind of in the thick of it, if you will?

[0:29:00.6] NH: Yeah, I think for me, again, just for me at least, what were just this mindset shift away from being stuck at, “Okay, I only have—this is my income” right? “If I make a $110,000 a year as a pharmacist, that’s all I’ve got and there is no other opportunities and I have to make it work with that money.” I challenge everybody out there, and there’s a thousand and one different ways to do this, but you should find something where the more effort you put in, the more you get out of it, and it doesn’t have to be money, right?

That can be just time, that can be time with your family, that can be things that you enjoy doing, whatever that is, find something that is going to supplement your life that the more effort you put into it, the more reward you get out of it ,and that is just a really great way to set yourself up for success.

[0:29:40.9] TU: I love that. To reiterate what we talked about a little bit ago, the dollars are one piece of that, but don’t underestimate the momentum that comes from that as well, and that momentum is so important as it relates to the financial plan. You’re related to the debt repayment but I always stick to the other parts of the plan as well. Again guys, congratulations on knocking out this huge chunk of debt.

Really incredible to hear the story and the why behind it and how you’re able to do it, excited for what lies ahead of you guys and thanks for taking time to come on the show.

[0:30:10.5] NH: Thanks Tim, we appreciate it.

[0:30:11.6] KH: Thank you.

[END OF INTERVIEW]

[0:30:12.3] 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 341: 5 Financial Moves to Make in 2024 with Tim Ulbrich

Posted on January 4, 2024January 3, 2024 by YFP Media

Tim Ulbrich, YFP CEO, shares 5 key moves for financial success, emphasizing automation, proactive tax planning, document organization, and continuous learning.

Episode Summary

In the first episode of the New Year, YFP CEO and financial educator, Tim Ulbrich, unveils a financial roadmap for 2024, emphasizing five key moves for achieving financial success and living a rich life. Tim highlights the pivotal role of automation in financial planning, proactive tax planning, the importance of organizing financial documents and the significance of continuous learning. He shares his personal financial goals and the systems he uses to organize and prioritize his financial goals. Tune in to gain insights and actionable steps for mastering your finances in 2024.

About Today’s Guest

Tim Ulbrich is the Co-Founder and CEO of Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 15,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements. To date, YFP has partnered with 75+ organizations to provide personal finance education.

Tim received his Doctor of Pharmacy degree from Ohio Northern University and completed postgraduate residency training at The Ohio State University. He spent 9 years on faculty at Northeast Ohio Medical University prior to joining Ohio State University College of Pharmacy in 2019 as Clinical Professor and Director of the Master’s in Health-System Pharmacy Administration Program.

Tim is the host of the Your Financial Pharmacist Podcast which has more than 1 million downloads. Tim is also the co-author of Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth. Tim has presented to over 200 pharmacy associations, colleges, and groups on various personal finance topics including debt management, investing, retirement planning, and financial well-being.

Key Points from the Episode

Financial moves for 2024, including saving and automation. [0:01]
Balancing financial goals with living a rich life today. [3:04]
Proactive tax planning for financial success. [8:21]
Common tax mistakes and planning for tax season. [12:19]
Organizing financial documents for peace of mind. [14:43]
Automating financial planning for maximum profit. [20:19]
Prioritizing sinking funds for various financial goals. [25:21]
Prioritizing savings goals using a systematic approach. [28:24]
Financial moves for 2024, including automation and learning. [34:36]

Episode Highlights

“I get excited with the turning of the page into the new year. Not as a complete reset, but as an opportunity to really look more closely at the priorities that have determined to be most important to me, personally and professionally.” –Tim Ulbrich [02:22]

“Now tax in my opinion, is one of the most under appreciated and overlooked parts of the financial plan.” –Tim Ulbrich [08:27]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRO]

Tim Ulbrich 00:01

Hey everybody, Tim over 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 kick off the new year by covering five financial moves that you can make in 2024 to jumpstart your financial plan. So whether your plan is humming or you’re looking to get refocused and back on track, my hope is that this episode will challenge and motivate you as you set your own goals and plan for 2024. During the show, I talked through why it’s important to set a plan that includes both saving for the future and living a rich life today, I discuss an often overlooked part of the financial plan that perhaps needs more love and attention, why automation should be a key part of your financial planning strategy, and much more. Before we jump in, I want to let you know about a free webinar that I’m hosting coming up on Monday, January 8, at 8pm/Eastern, it’s gonna be a party, and I don’t want you to miss it would love to see you there. During this webinar, master your money in 2024. I’m gonna cover my playbook going from $200,000 in debt to becoming a seven figure pharmacist. Specifically, I’m going to cover how to get clear on your vision for living a rich life, the system and money management routine that we use to get out of debt and save our first million, how to automate your plans, so you aren’t wondering if you’re on track to reach your goals, and how to determine your retirement numbers. If you can’t make it to the webinar live, no worries, we’ll send out a replay to those that register. But if you do attend live, you’ll have a chance to enter a giveaway where two live attendees will be selected for one of the following: $100 Amazon gift card or a YFP bundle including YFP tshirt, YFP pullover and your book of choice. You’ll learn more about the webinar and register your yourfinancialpharmacist.com/2024. Again, that’s yourfinancialpharmacist.com/2024. Alright, let’s jump into today’s episode, five financial moves that you can make in 2024.

Tim Ulbrich 02:03

Hi, there, Tim Ulbrich here and Happy New Year! I’m so excited to be kicking off 2024 with you here on the YFP podcast. Thank you so much for listening and for joining the show. I hope you had some time over the last several weeks to reflect on 2023, think about what’s ahead for 2024, hopefully unwind and spend some time with loved ones as well. I get excited with the turning of the page into the new year. Not as a complete reset, but as an opportunity to really look more closely at the priorities that have determined to be most important to me, personally and professionally. And to make sure that the schedule and activities align accordingly. And I hope the same is true for you. And as we talk about that turn into the new year, as it relates to the financial plan, I’m going to cover five financial moves that I think you should consider implementing here in 2024, if you’re not already doing so, in your own financial journey. We’re going to talk through each one of these in detail. I’m going to talk about how I’ve implemented this in my own life as well as why I think about each of these five areas really is core to your long term financial success.

So let’s kick things off with number one, which is making sure that our financial goals strike the balance between living a rich life today, as well as planning and saving for the future, right? We need to be thinking about tomorrow, we have to be planning and saving for retirement, making sure that we’re focused on moving our net worth in a positive direction, net worth being our assets, minus our liabilities, making sure that we’re taking care of our future selves saving for retirement filling those investment buckets, all of those things are a priority. And I hope you have some plans and goals around those in 2024. But let’s not lose sight of those goals that help keep us focused on living a rich life today while we’re planning and saving for the future, while we’re planning for tomorrow. So perhaps for some of you listening, you’ve long dreamed about a certain experience that has taken a backseat to the busyness of life. Maybe that’s as small as a weekend getaway. For those that have young kids, I know how difficult that can be. Or perhaps for some of you this is a big stretch goal, may be something as big as a year off, traveling the world having those lifetime types of experiences, those bucket list type of experiences that are most important to you.

You know, I think back to Matt and Nicky Javert that we featured on the podcast that traveled the world. Nick Ornella that took a year off from his job as community pharmacist to travel the world. We’ll share both of those episodes in the show notes. So no matter where your experience or goals live, there is no right or wrong. Each of us are on our own journey. Perhaps it’s something that’s experienced focus that hasn’t been a priority that you’d like to make a priority in 2024. But how about those interests, or hobbies that we used to long for and prioritize that have gotten lost again and that busyness of life and work? So for me in 2023 This wasn’t a financial expense, but it was something that brought great joy. One of the activities that I wanted to pursue was getting back into playing volleyball, something I had done competitively throughout high school, something that the busyness of life, other priorities and work just fell by the wayside. And I did that through a local rec league and that brought incredible joy to me throughout the winter. Or what about that side hustle business or project that you’ve been dragging your feet to take the first step on, or perhaps volunteering or giving opportunities that have gotten lost in the shuffle of other priorities of the financial plan.

So let’s make this year the year that we move the needle on both yes, those long term savings and investment goal saving for our future selves, while also prioritizing living a rich life today. Now, here’s the reality when it comes to setting and achieving our goals, many of us probably need to simplify and clarify our goals to put them in focus. There’s lots of competing priorities, regardless of the stage of life that you’re in. And so I would encourage you to put them down on paper, something that we’ve been doing inside of the YFP plus community last month in December of 2023, was writing down our goals in a measurable time oriented way over the next one year, two to three goals in each of the four areas that mean most to us and our own wellness, of course, finance here, we’re talking about one area of wellness, and sharing that out with one another as a mechanism of both accountability to do the activity, as well as hopefully encouragement and accountability and achieving those goals. So put them down on paper, identify two to three financial goals that you want to achieve over the next year. And again, yes, we’ll have some of those objective things, right saving for the future, investing in 401Ks and IRAs and all those types of investments. But I would challenge you: do you also have components of your financial plan that are aligned with living that rich life today? So we’re not talking about being specific, I’m referring to having a what, to having a when, and to having a why. To having a what, a when, and why. So for example, for us in 2024, one of the experiences we’re hoping to achieve is to go out west to visit some of Jess’s family in Montana in the summer of 2024. We know that’s an expense, right? Traveling from Ohio to Montana, we’ve got four young boys, whether we fly whether we drive, experiences along the way, that’s going to be a large expense. So when it comes to us, that might look like something that hey, by June 1 of 2024, we will allocate $5,000, so that we can take that trip out to Montana, and have that experience with our boys and be with our family, though that’s out there, right? We’ve got a what, we’ve got a when, and we’ve got a why. When we have a what, when and why, we can start to not only make that goal come to life, but we can implement that in a monthly plan to see what it’s going to take for us to be able to achieve that goal. And we’ll talk more about that later on this episode.

So again, before you set your goals for the new year. Get clear on the why right? Do your goals motivate you do your goals inspire you and for those that are you that are doing this together with a significant other, a partner or spouse, starting with the goal, starting with the vision, starting with the dreams and getting aligned in those areas, is going to really help the rest of the financial plan to flow. So that’s number one on our list of five financial moves that you can make in the new year, making sure that your goals include and strike the balance between living a rich life today, and planning and saving for the future.

Alright, number two is taking your tax strategy to the next level taking your tax strategy to the next level. Now tax in my opinion, is one of the most under appreciated and overlooked parts of the financial plan. And I want you to think about tax as a thread that runs across your financial plan, perhaps one that maybe you’re not thinking enough about that. Ideally, we are proactively considering and evaluating when we are making our financial moves. Now this sounds so obvious, but I historically previously have viewed tax very much in the rearview mirror, right we have to file by April 15, or thereabouts each year to meet the IRS requirements. We don’t want the IRS coming knocking at our doors. And when we do that we are accounting for what happened in the previous year. Now thankfully, because of our tax team, because of our attention and focus on this topic, I’ve become much more proactive in my tax planning as a part of the financial plan. But in years gone by, we would file our taxes and then we’d hold our breath right? Are we going to get a refund? Or are we going to have taxes that are due do we do we do our withholdings correctly based on differences in charitable giving from one year to the next right all of these factors?

I didn’t have a great picture on come that time of tax filing, what was going to happen, right, and that is less than ideal when it comes to optimizing this part of the financial plan. It’s so again, we need to shift our attention from tax preparation to tax planning. One is proactive. One is reactive right again when we go to file and we complete that paperwork whether you do that yourself whether you hire professional that is looking backwards if we start to think more proactive, hopefully at the point of filing, yes, we’re going to do that work, we have to do that. But we’re then looking ahead to say, hey, based on that information, based on the rest of our financial plans, based on our personal situation, based on changes that we know are coming or goals that we have, what can we be doing strategically in advance throughout the rest of the year, to make sure that we’re paying our fair share of taxes, but no more. So if you don’t already know your key tax numbers, I’m referring to things like marginal tax rate, effective tax rate, adjusted gross income, let’s make a commitment this year to get started and to learn more.

Now, I would love if you would get out the IRS Form 1040, we’ll link to it in the show notes. And just spend 10 to 15 minutes to make sure that you understand the terminology and the flow of dollars. I get it. It’s nerdy, right. And whether you like this subject, or you don’t you do it yourself, you hire someone else. Understanding these numbers and understanding the flow of dollars, and what those terms mean and how it ultimately affects your marginal and your effective tax rate is going to be really important as you think about the strategies, and you’ll be able to directly see how certain strategies you can implement in the financial plan are going to have an impact on the overall taxes that you pay. So as one example, AGI adjusted gross income has huge implications for those that are going through student loan repayment, right income driven repayment calculations, especially for those that are pursuing the Public Service Loan Forgiveness strategy, your adjusted gross income is directly tied to the monthly payment that you’re going to make under student loan. So if we understand that, we can then start to think about, well, hey, are there strategies I can use that can perhaps reduce or lower my AGI adjusted gross income? Not by making less than one do that, but by making contributions to things like traditional 401 K or traditional 403B accounts? Or how about health savings accounts? Right? These are types of things that can reduce our taxable income, therefore reduce our monthly student loan payment, which is a great thing, especially for those that are pursuing tax free loan forgiveness, all the while we’re accruing tax deferred savings into the future. Just one example of how important the proactive planning can be.

Now on episode 309 of the podcast, we’ll link to that in the show notes. Our CPA and Director of Tax Sean Richards covered the top 10 tax blunders that pharmacists make. So whether you have a negative net worth, or you have several million dollars saved, I think you’ll find a lot of value in that episode. Sean, reflecting on the recent tax filing season, where he filed he’ll correct me if I’m wrong, I think over 200 something returns for the different clients that we worked with. And what he saw as the most common mistakes that pharmacists were making. Some of those things, including having a surprise bill, or refund due at filing, probably the most common thing that we see, including some of the surprises that are causing that issue, right. And so what we want to be doing ideally is we’re shooting for zero, we don’t want to have an interest free loan that we have out to the government. And we also don’t want to have a surprise bill that’s due that we’re not ready for. So what are the common things that cause that refund or cause that bill so we talked about that on that episode. Another common mistake he discussed was pharmacists not employing a bunching strategy for charitable giving. So for those that are giving, especially giving at a significant level, and aren’t following the standardized deduction, Is there perhaps some strategy in the in the bunching of charitable contributions that can reduce one’s tax rate. He also talked about a common mistake he saw a new side hustlers and business owners not planning for taxes.

So earning income and being surprised by not paying estimated taxes along the way. We talked about under estimating the power of the HSA, the health savings account and an oldie but a goodie, not factoring in public service loan forgiveness when choosing tax filing status as married, filing separately or married filing jointly. So make sure to check out that episode episode 309. And easy to see as you hear some of those common examples why having a proactive tax plan is worth its weight in gold. Now, as we turn the page into the new year, this is a great time to be planning, right? We’re getting ready to go into tax season that mid April deadline that we talked about. So now is the perfect time to be thinking about the upcoming tax filing season. Our tax team is ready to help, yes with the filing, but also as I discussed here, with proactive year round tax planning. We do that through our comprehensive tax planning service you can visit YFPtax.com to learn more, and to see whether or not those services may be a good fit for you. Alright, so that’s number two on our list of five financial moves to make in the new year. Take your tax strategies the next level.

Number three is button up your financial documents. Button up your financial documents. Now getting organized with your financial records, I believe plays a significant role, not necessarily in terms of moving the needle on your net worth, but in making sure that you and others have access to all of the information that you need to make informed decisions with the financial plan. So think for a minute about all the financial accounts that you have out there, all the different documents, insurance policies that touch a certain part of your financial plan, the list quickly grows to one that is overwhelming. And the more you operate in your own system, the longer time goes by where you’re operating in your own system, the easier it is for you to navigate, but perhaps harder for others to navigate and unravel, should they need to do so in the future. And that’s where this concept of buttoning up your financial documents comes in. That’s where this concept of a legacy folder comes in. I first heard of that idea of a legacy folder, when I took Dave Ramsey’s Financial Peace University probably 10-12 years ago at this point at our local church. And I remember walking away thinking, wow, that is so simple. So obvious. Why haven’t I done that yet? Why haven’t Jess and I done that yet, as a part of our own plan. So essentially, the idea of a legacy folder if that’s a new concept to you, whether it’s a physical folder, and electronic folder, or a combination of both, it’s a place where you have all of your financial related documents. So in the event of an emergency, others would be able to quickly access your financial situation and not just access but be able to pick up and understand what’s going on and to be able to make key decisions in your absence. So we just went through updating this and shifting everything to an electronic version. So that in the event of something that happens to Jess and I those caring for our boys, along with the financial planning team at YFP have access to all of the necessary information. So here’s how we have organized it certainly not the only way to do it. But here’s how we have organized it in a combination of Google Drive, and a safe at home that has a passwords, all of our passwords stored in a One Password account. So we have nine different sections, I’ll describe them briefly, this sounds overwhelming, it did take a commitment of time to get started. It takes a commitment of time to update. But I will say there’s an incredible feeling of peace and momentum that comes from having this done.

So section one for us is what we refer to as important documents, okay, birth certificates for us, for our kids ,social security cards, marriage certificates, passports, all of these we have in a fireproof safe at home. And we have them just referenced as being there in the electronic version that we share with the financial planning team as well share with those that would take care of the boys in the event of our absence. So that’s section one important document.

Section two is all of our insurance policies and information – auto insurance, homeowners insurance, umbrella insurance, health insurance, long term disability, term life insurance policies for myself, for Jess, for the business, etcetera.

Section three is estate planning documents. So we have a hard copy of these in the safe that have been notarized and electronic version that’s uploaded in the Google Drive. So these are things like the revocable trust agreements, health care power of attorney living will last will and testament.

Section four is the car titles. Now, I’m not sure how valuable these are given our current condition of our Swagger Wagon, but they’re there nonetheless. So section four is the car title.

Section five is our home ownership documents. So this is the deed to the home, our home equity line of credit or HELOC information, we have another copy of homeowners insurance policy here just so it’s all contained in one section.

Section six is a summary of our financial accounts, our net worth tracking sheet, as well as our Social Security statements. So I’m going to talk about more of this in the webinar on January 8, and actually kind of show you the system that we have set up. But here I just have a quick summary, think of it as a table of contents of all of our financial accounts that are out there. So for example, we use Ally for checking and savings accounts, where we have our treasury bonds, where we have our different investment accounts, 401K’s, IRA accounts and so forth. So it’s just a quick summary of what is the account type, where’s the account. And then as I mentioned, we store all the passwords in a separate secure One Password account. We also have in this section, a net worth tracking sheet. So each month, we track all of our assets, all of our liabilities, we add those up assets minus minus liabilities equals net worth. And we’re tracking our progression of net worth over a period of time. So it’s a way that Jess and I can just quickly look at a 20,000 foot view of where’s our overall financial health whereas the overall trajectory of the net worth.

Section seven is our tax returns for personal and business tax returns.

Section eight is all of the records related to the business. So a summary of the different entities, legal documents, operating agreements, buy/sell agreements, etc.

And then section nine is just a miscellaneous so information about utilities and other accounts that don’t fit in the previous sections. Again, it takes time to get that started, but it’s something that you can act upon pretty quickly in the new year, and I encourage you to set an annual recurring reminder, whether that’s the turn of the new year, perhaps it’s daylight savings time or something else, that you just remember to update those documents as needed periodically.

Alright, so that’s number three in our five financial moves to making 2024, button up your financial documents. Number four is my favorite. This is the area that I think has moved the needle the most for Jess and I, in our financial plan over the last decade or so. And that is automation, making sure that you have a system and ideally a system that is working for you. Now, when it comes to automating your financial plan, again, I think just like the legacy folder concept we talked about, it’s so obvious, so effective, so easy to implement. But many people I don’t think are optimizing this. So think of automation, as the mechanism by which your income is working for you. And it’s automatically funding the priorities that you’ve already set, and determined to be most important in advance. Now, I know I’m not alone, when I say that I was feeling for some time that there are multiple financial priorities that are occurring at once that are swirling around in my head. And it can be overwhelming to think about what are those priorities? In what order? And how do we allocate the limited resource of limited income that we have to those? Should we focus on one? Should we focus on two? Should we focus on three? And so much of the stress around the financial plan, I believe, is from all of that unknown, and anxiety swirling in our heads, right? If we can get that down onto paper, and if we can start to put some numbers and a plan to it and prioritize it, we may not always like the outcome of how fast we may or may not be able to achieve those goals. But once we have a plan, once we articulate it, once we know we thought about it, we prioritize it, I think there’s a lot of clarity and momentum that can come from that. So automation helps put those goals into action. It takes the stress out of wondering whether or not they’re going to happen. So whether it’s saving for an emergency fund, whether it’s saving for a vacation, paying down debt, whether it’s student loan debt, consumer debt, auto loan debt, mortgage debt, whatever type of debt, whether it’s saving for retirement, saving for home, saving for investment property, automation helps identify and prioritize these goals and assign your income accordingly. Yes, it takes a bit of time to set up, perhaps not as much as you may think, because you hear about it. But once it’s set up, it provides a long term return on time benefit, but also better yet, as I mentioned peace of mind and feeling of momentum knowing that you’ve thought about prioritize and have a plan in place working itself to fund your goals.

Now, Ramit Sethi talks about this in his book, I Will Teach You To Be Rich, he does an incredible job of teaching automation credit to him. And he says that automating your financial plan will be the single most profitable system that you’ll ever build. And I remember hearing that and thinking, Man, that’s a big, big promise, right? But it is 100% true. Automating your financial plan will be the single most profitable system that you’ll ever built. So if you’re not already doing this, I want you to imagine a future state. Imagine a future state where your financial goals and priorities are clearly defined. You’ve determined how much of your monthly budget is available for these goals. And you have a system in place to automatically fund these goals every month so you get paid and your money is being distributed automatically. Paycheck comes in dollars are being funded to the goals that you’ve already determined and prioritized to be most important. Okay, so what does this look like? Here’s how Jess and I are currently implementing this. Now, previously, we adhere to a zero based budget, which I think really did help us laser in and focus on our expenses and account for every single dollar that we earned. That’s the premise of a zero based budget. I think that method works out really well, especially when you’re getting started or feel like you need to get back on track. But over time, we’ve loosened this up knowing that once we account for all of our monthly commitments, right, our monthly commitments, being mortgage insurance, property taxes, giving, groceries, subscriptions, utilities, etc. Once we account for those, and those are largely fixed, outside of some variation in utility payments, we have a certain amount of funds after we account for those things that we know can be allocated in two general buckets with several options within those two general buckets. So what are those two general buckets? General bucket number one is what we call everything else. So this includes things like gas, miscellaneous trips to the store, family experiences, family entertainment, eating out, et cetera. And we track this, Jess and I track this, in a shared Google Sheet. And I’ll talk more about this in the webinar on the eighth and what the system looks like. That just helps us make sure we don’t overspend this category. Okay, so we started with our total income. We define our total take home income. We then define, as I mentioned, all of those fixed expenses and aren’t really shifting too much from month to month – mortgage, insurance, property taxes, giving, groceries, subscriptions, etc. And in days gone by that would also have been debt payments. And then what’s left over, we’re going to allocate into two general buckets and what I’m talking about is this first general bucket of everything else.

The second general bucket is what we think of as our sinking funds. It’s the second bucket of funds that we want to predefine prioritize, set allocation amounts, and then set up auto-contribution of funds. So what do I mean by the sinking funds? Okay, so for us in 2024, the areas that we’re focused on are funding an HSA, I’ll talk about each one of these more detail, finishing our basement, funding that 2024 vacations, as well as saving for a summer vacation 2025, funding our Roth IRAs, funding the next car purchase, and then thinking more about the boys 529 funds for college savings. So for us in 2024, as we sat down and thought about what is the greatest priority, those are the things that rose to the top that we wanted to fund with these bucket two funds that I’m referring to, right, the sinking funds. So in this scenario, and within our discussion of automation, we would look to estimate the available pool of funds per month or per year divided by 12, we would then prioritize the list, determine the allocation order in the amounts. And then as I mentioned, we would automatically fund those and set up a recurring contribution. So for example, let’s walk through this let’s say that we assume that for the year, let’s assume we have $3,000 a month, or $36,000 for the year available to disperse across these bucket two goals. So again, I’m not talking about the expenses that we know we’re going to fund every month, we talked about that mortgage, insurance, etc., property taxes. I’m not talking about that everything else bucket that we know a certain amount for family experiences, for gas, other trips that we may take out. I’m referring to this bucket of sinking funds.

So let’s assume we have $3,000 a month or $36,000 a year to put towards the sinking funds. Now for some of you listening, you may think, Hey, we’ve got a lot more. That’s great, right? We want to be intentional with that. And for some of you, you may be thinking, Wow, we got a lot less, right? And so we have to focus on again, everyone is on their own journey. So how do we take this $36,000 a year? How do we take this $3,000 a month if we use that as an example, and disperse that across the different goals I just talked about: HSA funds, finishing the basement, Roth IRAs, car fund, etc. So for us, the HSA is really a top priority, not just because of the triple tax benefits. I know we’ve heard about that on that on the show before. But since we have a high deductible health plan, and we have four active boys, right, so we really need to minimize our risk there. And we’ve got a really high deductible as well as a high out of pocket max. So we know that we want to max that out and 2024. That’s $8,300 a year as a family contribution. And so we were going to do that as priority number one. So once we fund that HSA< again, we started with $36,000 a year, we fund, fully fund the HSA $8,300/year, we’re now left with $27,700. So working down the list, what’s priority number two? So for us priority number two is finishing the basement. Now we’ve been planning for this for years. And we’ve decided that based on this phase of life we’re in we’ve got boys ages 12 to four, it’s a great time that we want to make the most out of the space and we want to really make this project happen. For us, it’s the example I’ve referenced in financial move number one, right? Finding that balance between saving for the future and living a rich life today. Now, does finishing the basement financially make the most sense, right? Does does it objectively may make the most sense when we compare it against other types of things like Roth IRAs, or 529 funds, and be able to save and invest for the future? The answer is no. Right? It doesn’t objectively rank higher, any money that you’re going to save and compound over time is going to beat any expense, right? That’s just an objective fact unless that money loses a significant amount as you invest it. But as we step back, and as we look at for our family, finding that balance between living a rich life today, as well as planning for the future, as we look at the progress we’ve already made towards retirement savings, we’ve decided that in fact, we’re going to make this a priority over some other investment and savings accounts. Now, to be frank, I wish we would have done this sooner. And so we’re going to pull the trigger and make this happen in 2024. So for this example, let’s assume that it’s going to cost $25,000 to do the project. And let’s assume we already have $15,000 saved so we need $10,000 more to get the project done. So again, we started with $36,000. We fully funded the HSA at $8300. We’re going to now add another $10,000 in the basement. So we’re left over with $17,700.

Moving down the list of priority number three. So continuing this theme of finding that balance between living a rich life today and tomorrow, we want to prioritize two family experiences in 2024. One being a summer trip to the Fingerlakes that we take with my family. We’ve done this for several years. And another being a trip out west to Montana, I mentioned that a bit earlier. So let’s assume for both of those, that’s going to cost a combined $7,000. So after we subtract that, we now have $10,700 left.

Moving down the list. Next up for us is Jess’s Roth IRA, that’s going to cost $7,000 to fund and max that out and 2024. After we do that, we’re left with $3700, then let’s just round this out by assuming we’ll allocate the remaining amount to my Roth IRA to do a partial fund. Now, you can see this system and process that we worked through right, we identified the total estimated annual amount, you can do the same thing, divide that by 12 for monthly. We listed out the goals, and we match those up to prioritize accordingly.

Now, here’s the disappointing part. Or perhaps, depending on you look at it, it may be exciting is as I do. In this example, we have fully funded several goals, right? We fully funded the HSA, we fully funded finishing the basement, we fully funded to 2024 vacations, we fully funded just as RIA, we partially funded my Roth IRA. But we had several things that I mentioned that were left unfunded, okay? The kids 529 accounts and the summer 2025 vacation, as well as the next car fund. So we have a couple options here. We can go back to the drawing board and redistribute right, lower some of the other ones and partially fund some, and then have others that we are able to partially fund. Or we can stay as is knowing that if additional funds become available, right, whether that’s in the form of for us additional income, it could be tax refunds, although hopefully we’re doing a good job planning and that’s not the case. It could be side hustle income for some of you. It could be picking up extra hours, it could be gifts that you receive, whatever might be the additional income, we know that we have a system and a list that is prioritize that if that income comes in, we know exactly where we’re going to allocate that. And that is the power of automation. That is the power of having a system.

So one step further, what does this practically look like for us in terms of implementation? And I’m going to show much more of this during the webinar on the 8th, I’m really excited about that. So we use Ally for all of our online banking. Now, this is not a commercial for Ally. We really liked them. We’ve used them for several years. I like the capability they have with saving buckets and other features. But you can build a system like this, and many different types of savings accounts. So for us direct deposit from work income goes into Ally, goes into a checking account. And since we know the amount required per month to allocate to the goals we decided upon, there is then a bucket labeled for each of these goals inside of Ally. So the transfer of funds goes from checking account where the direct deposit comes in to savings account. And then within the savings account, we have a predefined bucket. So essentially what this looks like is you’ve got a certain amount of dollars, let’s say $30, or $40, or $50,000 in a savings account. But once you click into that, you see all these different sub-buckets for things like vacation, for a basement remodel. And again, you can do a multitude of different buckets, I think you can do up to 30 or so inside of Ally. In the case of for us, the IRA, the Roth IRA and HSA savings, you know, we could put those in the bucket as well inside the savings account, but we’re gonna set those up to be an auto contribution directly into the investment account, right? We want those dollars working for us as quickly as possible. So again, imagine that flow you get paid, right, we’ve identified the buckets that auto contribute into the buckets, because we know we’ve already accounted for it inside of the rest of the bucket and rest of the budget. And then that’s working for us once we have the system set up. Now depending on when you get paid for us, it’s the first of the month. But for you it might be two times a month. But regardless, once you know when you get paid and once that’s consistent, we know that anytime after the first so we get paid around the first of the month, as well as the 15th. But we use the first as our metric for when we’re going to auto fund these goals. So anytime after the first it could be the third, it could be the fourth, I think I have most of them set up on the fourth, we can have that auto transfer established to go from checking to savings to the bucket leaving only in checking what is left to pay off the credit card each month. And so that all other dollars, they have a purpose, right? They’re being defined and allocated towards a goal. That is the system of automation. And I’m gonna talk more about that in the webinar on the 8th. I’m gonna give you some visuals and show you how to set up so you can make the most of it for your own financial plan. So that’s the fourth financial move. I think the one probably that can move the needle the most. Automate your financial plan have a system in place.

And finally number five is set your learning plan. Now when it comes to personal finance, I believe strongly that there is no arrived with the financial plan. Right? This is constantly evolving. It’s constantly changing. And a commitment to ongoing learning and having the humility to understand that there’s much to learn, and that mistakes are inevitable, is really key to long term success. So next week episode of the podcast, I’m going to feature ten personal finance books that I think you can/should read in 2024 that have had a profound impact on my own journey. So make sure to tune into that episode. I don’t want to spoil the goods here. But it’s important that you define that learning plan and path that works best for you.

One of the greatest advantages that we have of living in the 21st century is that we have access to learning just about anything that we want. And often we can do it at a low or no cost, right. Thank you very much to our local public library. So whether it’s reading books, great to have at it! If it’s podcasts, blogs, videos, there’s many options out there, find the learning path, that means the most to you and has the significance and really engages you in the learning process. And I would encourage you -learning is one thing, right? But learning plus action plus accountability is really where things start to happen. So that’s number five of our five financial moves to make it 2024. Set an intentional plan around what you want to learn in this new year. And then determine what are those resources, what are the blogs? What are the books? What are the podcasts that are going to help you get there and I hope YFP will be an important part of that journey.

Alright, before we wrap up today’s episode, I want to remind you of that free webinar I’m hosting on Monday January 8 at 8pm/Eastern: Master your Money. This webinar, Master your Money in 2024 and a cover my playbook going from $200,000 in debt to becoming a seven figure pharmacist. Specifically I’m gonna cover how to get clear on your vision for living a rich life, to make sure we had that vision in place, the system and money management that I’ve used that we’ve used Jess and I, to get out of debt and save our first million. How to automate your plan. I’ll show you step by step process for automation. So you’re wondering if you’re on track to achieve your goals, and how to determine your retirement webinar. As I mentioned before, if you can’t make it live, no worries, we’ll send out a replay afterwards. But if you can make it live, we’d love to see you there and you’ll then be eligible for a chance to enter a giveaway. Two live attendees will be selected to either receive $100 Amazon gift card or a YFP bundle including a YFP t-shirt, YFP pullover and a YFP book of your choice. You can learn more at register at your yourfinancialpharmacist.com/2024. Again, that’s yourfinancialpharmacist.com/2024. Cheers to a great New Year. Have a great rest of your day.

[DISCLAIMER]

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 to provide and should not be relied on for investment or any other advice. information to 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 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, 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 Pharmacists podcast. Have a great rest of your week.

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