Budgeting / Saving Podcast

YFP 340: YFP Podcast Replay – How to Teach Your Kids About Money and Investing

Posted on December 28, 2023December 26, 2023 by YFP Media

Dylin Redling and Allison Tom discuss their journey to FIRE and their book for kids on investing and personal finance, sharing practical advice and tips.

Episode Summary

On this episode Tim Ulbrich welcomes Dylin Redling and Allison Tom, creators of Retireby45.com and authors of two books, Start Your F.I.R.E. (Financial Independence Retire Early): A Modern Guide to Early Retirement and Investing for Kids: How to Save, Invest and Grow Money. Dylin and Allison achieved ‘financial independence retire early’ status in 2015 when they were in their early 40’s. Have you ever thought to yourself, I wish I had learned more about the topic of personal finance sooner? If so, that’s exactly what today’s show is all about as Tim interviews Dylin and Allison about their work with their book, Investing for Kids. They discuss practical advice and meaningful activities to help with teaching kids about money and investing.

About Today’s Guests

Dylin Redling and Allison Tom are a married couple living in Oakland, California. After working for 17 years in the tech industry in San Francisco, they left the workforce in January 2015 and never went back.

They own and operate the website RetireBy45.com, which provides inspiration, tips, and resources for achieving FIRE (Financial Independence / Retiring Early) and making the most of the FIRE lifestyle. In 2020, they wrote and published two books: “Start Your FIRE: A Modern Guide to Early Retirement” and the best-selling “Investing for Kids.”

They love food, fitness, and travel. Their goal of “60 by 60” is to visit 60 countries by the age of 60.

Key Points from the Episode

Learn about Dylin and Allison’s book for kids ages 8-12 called, “Investing for Kids: How to Save, Invest, and Grow Money”
Dylin and Allison’s first book was “Start Your FIRE: A Modern Guide to Early Retirement”
Their book for kids is easy to understand with lots of activities and lead by the colorful characters called the Dollar Duo: Mr. Finance and Investing Woman
Career paths and choices led Allison and Dylin to live in the Bay Area of California
When Dylin had pneumonia and was in the ICU for many days, the couple began to ask themselves, “Do we want to work for 25 more year?”
Dylin’s pneumonia experience along with changes in their careers led them to pursue with FIRE (Financial Independence, Retire Early) journey
Because they are passionate about learning about personal finance, they felt inspired to reach a younger audience
Dylin and Allison believe it is important to have a healthy respect for money, even in the age of digital currency
They hope their book can be read with an adult so that it can lead to good conversations about personal finance
Good finances early on can put you in a good position to be in control of future opportunities

Episode Highlights

“So there are plenty of ways to cut costs in your life that are relatively painless, that we’ve talked about all the time, so there are just different ways to do it to achieve FIRE. And some people don’t even choose to do the early retiring like my father is the example. So retirement is really more of the optional part. We’re not saying you have to retire, you have to leave your job and just sit around drinking mojitos all day long, although it’s certainly not a bad lifestyle. But you know, the retiring part is up to the individual. “ – Allison Tom

“So we love our FIRE lifestyle and the fact that we left our W2 jobs in our 40s, but we know it’s not for everybody. But what we do also know is that the concepts of Financial Independence are good for anybody, no matter when you might want to retire. And those concepts are really about doing the right thing with your money. So it starts with saving, it starts with being somewhat frugal — and when we say frugal, we don’t mean living a spartan lifestyle. We just mean not going crazy with money with spending on things that you don’t want or that you don’t need or you feel like you have to keep up with the Joneses and get a brand new SUV every two years.” – Dylin Redling

“I got to college, and then I had my first credit card that I just — oof. It was bad. I did not understand the concept of paying credit cards and interest rates and late fees and minimum payments. And so, you know, I got in trouble with credit cards after I graduated. And it wasn’t until after that that I thought, oh, I really need to learn more about what’s going on here. And so I started watching some shows on PBS, but by then, you know, I’m in my early 20s at that point. My learning took a lot longer for the habits to become engrained in me. So you know, I really do think that if kids could see this stuff earlier, it would be so much more impactful.” –Allison Tom

“That’s the beauty of the time being yours is you can make it whatever you want to do. We also do a lot more work with our community that we never had time to do when we were working. So we’re a lot more invested in our neighborhood, and we spend more time working with businesses in our neighborhood to bring in more business. So having that luxury of time means you can go explore whatever interests pop up.” – Allison Tom

“And so as the educators come up with their curriculum, I think honestly, a lot of adults are really intimidated by personal finance. And so it’s something that seems easy enough for them to cut out of the education system as an elective because well, if they don’t understand it, then kids aren’t going to understand it. And if they’re intimidated by it, then kids are definitely going to not understand it and be intimidated by it, so let’s not even talk about it, which actually is one of the reasons why we thought it was important to write the book.” – Allison Tom

Links Mentioned in Today’s Episode

Episode Transcript

(INTRO)

Tim Ulbrich: Dylin and Allison, welcome to the show.

Allison Tom: Thanks for having us.

Dylin Redling: Thank you very much. Great to be here.

Tim Ulbrich: I’ve very much been looking forward to this interview to talk more about your story achieving financial independence and early retirement and more specifically, the work that the two of you did in writing “Investing for Kids: How to Save, Invest, and Grow Money.” And Dylin, let’s start with you only because we share an Ohio State connection since you’re an alum so go Bucks. Why write a book specifically designed for kids about investing? What was the motivation behind your work?

Dylin Redling: Yeah, well, first of all, go Buckeyes. Yes, a great connection there. It’s interesting because I’ll start off with the interesting fact that Allison and I actually don’t have kids. And so you would think that the impetus would have been we had our own kids and we taught them financial literacy and it inspired us to teach more kids. But in fact, we sort of stumbled into this book. This is our second book. Our first book is called, “Start Your FIRE: A Modern Guide to Early Retirement.” And it’s all about early retirement and financial independence, which that book just poured right out of us because it’s something that we live and we know very well. And what happened was the publisher who we worked with on that book came back to us a couple months after that book was published and said, “Hey, we have an idea for this other book. And it’s investing for kids ages 8-12. And what do you guys think because you know about investing and financial concepts, and we think you guys might be able to pull this off.” And we thought, wow, we don’t have kids, we’re not teachers, we don’t hang out with kids. We have a few friends with kids, but we don’t spend a lot of time with them. And so we thought, man, this sounds really challenging and daunting. But it was during the 2020 year of COVID, so we had a lot of time on our hands. So we thought, let’s just go for it. And we dove into it, and it was very challenging because we wanted it to be interesting for kids and informative and fun but somehow, we put our heads together and we had a really good editing team that helped us with some of the concepts to relate to kids. And that’s — and we just dove into it and we just made it happen.

Tim Ulbrich: And I think you guys did an awesome job. You know, one of the things that stood out to me as my wife and I were looking through this book as parents of four young kids trying to teach this topic of money is that’s it’s very hands-on, it’s relatable, it’s digestible, lots of activities, really cool ideas. You know, I often find myself, especially writing, talking about this topic regularly, presenting on this topic, you take for granted how you learned some of this information along the way. You know, I often think, OK, take a concept like compound interest or, you know, mutual funds or index funds or ultimately trying to determine what your retirement savings goals, any of those concepts, and it’s very easy to get lost in the weeds. And I think it’s often hard to figure out, how am I going to break this down and teach this with my children and really work through this? And so I found myself looking through this, not only learning myself of oh, that’s a really neat way to teach a different concept or a very visual way or a nice activity to apply that information. So I think as I looked through this, whether someone is more advanced in their own knowledge and understanding of personal finance or whether they feel like they could also learn from these concepts, either one I think this book could be a really good guide for them alongside of working with their child. So great work in the work that you put together with the book. And Allison, knowing your background is a technical project manager, I’m curious, I mean, how and why did you catch FIRE — pun intended here — with this topic, not only as an individual pursuit for financial independence but also in wanting to help guide others to the work that you’re doing with RetireBy45.com and with the book “Investing for Kids.” Where does the interest come from?

Allison Tom: Part of it is that my college degree is actually psychology and education. So I had all these grand ideas of becoming a teacher, an elementary school teacher, after I graduated from college. But you know, after a couple of years, it dawned on me that frankly, our teachers are woefully underpaid. And there was pretty much there was no clear financial path for me to continue being a teacher making the salary I was making, so I was living in Boston at the time and I moved back to New York where we eventually met waiting tables, of all things. And we came out to San Francisco on a whim, we were on vacation, we were in our mid-20s, we thought, alright, let’s check out San Francisco. And so I bounced around from career to career and ended up on a consulting company that eventually brought me into the technical world of the Bay Area. But you know, so being a project manager is basically being a glorified teacher. So it’s dropping people, wrangling people to do things that you want them to do but do it in a way that makes them want to be — work as a team and learn from each other. So in a way, it was being a project manager was — it had very similar tendencies as it was being a teacher. And so we had always thought, oh, it would be great to retire early, but we didn’t really know what retiring early meant. We thought, oh, 55, that seems like a really good age to retire. It’s earlier than 65, but it seems so far in the future. And living in the Bay Area, our expenses were so high that we were like, there’s no way, even if we’re making decent salaries between the two of us that we’re ever going to retire. But about 11 years or so ago, Dylin came down with double pneumonia and was in the ICU for about 10 days and in the hospital altogether for almost two weeks. And that for us was a light bulb moment because he was within a 50/50 chance that he would make it. And so you know, after that, we kind of thought, OK, do we really want to keep working for the next 25 years or so? And so we kind of like made it our goal to get out of the rat race as soon as we could. And so we kind of fell into by accident. We can talk about that later, but it just — it kind of was a natural progression from all of the things that we’ve been doing over time.

Tim Ulbrich: Yeah, that makes sense. And I appreciate you sharing some of the background and story. We’ll come back to how you got to that point of early retirement, obviously as I mentioned in the introduction, early 40s to be able to accomplish that goal, and we’ll talk a little bit about how you got to that path, why that was possible as well. And so let’s first dig into some of the book of “Investing for Kids.” Let’s start with the main characters of the book, the Dollar Duo: Mr. Finance and Investing Woman. Allison, tell us more about these two characters, how you came up with the idea, why it was important to the overall text, and how those characters can really help the learner, again, 8- to 12-year-old is the target group here, engage with the material throughout the book.

Allison Tom: Well, first of all, it was kind of funny, today is actually Superheroes Day, so –

Tim Ulbrich: There we go.

Allison Tom: It’s a perfect segue into the topic. We were actually taking a walk one day as we were writing the book, and we were talking about politics, of all things. And we were trying to figure out in the administration, whichever administration, whoever won the presidency, what each president could do to make their administration better. And so we kind of were talking and talking about of all things, the Justice League of America and who we would think would be a good fit for making this country a better country. And so the whole idea of the Justice League, kind of thought, we thought, oh, superheroes. Kids love superheroes. Let’s talk to our publisher about bringing in some superheroes. And we were like, well, I don’t know if they’ll go for that, there’s some extra graphics involved and it could be expensive, but we felt that it would really be a good way for kids to relate to finances. And so we kind of pushed hard for this idea of having superheroes teach kids finance.

Tim Ulbrich: Yeah, and that stood out to me in addition to how visual it is. This does not — especially for a topic like investing, right, can be weighty at times, it can be overwhelming, I often find myself when I’m giving a talk on this topic, starts with excitement often when we think about what the — and then you get into the weeds and you see the eyes gloss over, right, and other things. And this does not read like a textbook in any way, shape, or form. And I’m grateful for that. So thank you for the illustrations, the activities, the superheroes, but I think it very much reads like an interactive, applicable, nuts-and-bolts, important information, but how do I actually apply it and hopefully get excited about this information. Again, we’re thinking about an 8- to 12-year-old of wanting to really hopefully empower them to be excited with this for the rest of their own financial journey. And I very much read this book, as I mentioned, being a father of four boys who also lives and breathes personal finance, I really do often find myself in conversation with my boys about money. And honestly, I struggle at times with making the topic of money tangible and meaningful. And it can feel abstract, especially when I find myself trying to say and teach a principle that I very much understand but it feels more abstract as I talk it out loud and especially when you start to view it through the lens of a child. And so I like how you start the book with Chapter 1 on Money 101. You cover important topics like money doesn’t grow on trees, ways to earn money, a little bit of entrepreneurship in there, which is really cool, the history of money, where to keep money. And so Dylin, here’s the challenge that I’m seeing with my boys. In the age of credit cards, debit cards, direct deposit, online banking, digital currency, electronic payment methods, it can feel difficult to teach a child about money when you don’t see it. Right? There’s very little actual, physical cash and therefore, it can be hard to connect work and I think the opportunities from work with earning money and therefore, the opportunity to then save and see it grow. So what are some tips and strategies as you put this book together as well as the other teaching you’ve done on this topic about how can we teach kids about money in a way that it can be relatable, it can be tangible, and then hopefully it becomes memorable for them.

Dylin Redling: Yeah, you know, that’s a really good point about money being very digital in this day and age. I remember when I was a kid, one of the coolest things was my grandmother would give me and my cousins 50 single dollars for Christmas and for our birthdays. They would come in a little box just big enough to hold those 50 $1 bills.

Tim Ulbrich: I love that.

Dylin Redling: And — yeah, it was really cool. And you know, $50 back then for a kid was a lot of money. And those 50 $1 bills would last a really long time. I would take them into the arcade, into the pizza parlor, whatever. And so maybe one way to do it is to actually bring back physical money. And I don’t think the amount really matters that much. But like you said, I mean, being able to tangibly feel it, see it, and understand it, it helps a lot more if you’re using physical money. And I’ll actually give an example of that we used on our blog and in actually “Start Your FIRE” book. I don’t think we mentioned it in “Investing for Kids,” but it’s a little story I like to tell about a money lesson that I actually learned from Allison when we were waiting tables in New York. So we met in a big restaurant in Times Square, and Allison grew up with a little bit of a better financial education in her household than I did. My single mother was wonderful, but it was all paycheck-to-paycheck, there wasn’t a lot of saving or investing. So I came into our initial relationship not very good at dealing with money. So anyway, we were waiting tables. So all of our money pretty much was in tips. So we would have tons of cash. And I remember just putting the money — I would wad it up into balls, I would stuff it into all four of my pockets because I was busy. And then we would go out afterwards and Allison saw how I was treating my money, and she was like, “What are you doing? How do you even keep track of that? That’s awful.” And so she taught me this little lesson. And she doesn’t even remember this because this was 25 years ago, but it stuck out in my head. And basically, I call it the Wallet Lesson. When you take all of your bills and you put them nicely, neatly in order from small to big or big to small, whatever works, fold it neatly into your wallet. And it’s really simple, but the reason it was impactful for me is because it just got me to think about how to respect and treat money. You know, you work really hard for money –

Tim Ulbrich: That’s right.

Dylin Redling: And if you don’t treat it well, you don’t respect it, you know, that $50 might not seem like a big deal. But when it gets to $100,000 or $500,000 and you don’t have that same respect and feel for what that money represents and how hard it was to earn it, you’re not going to put it and treat it and save it and protect it as well as you could.

Tim Ulbrich: Such a good example of a behavioral move, right? The number of dollars didn’t change, but how you treated them, how you respected them, how you viewed them, and I think many of our listeners, we talk on this show often that I believe personal finance, it’s about the math and it’s about the behavior, and both of those are very important and some of those types of moves or here, teaching kids in that way, I think can be very powerful as well. Allison, Chapter 2, save your money, you have an activity titled “Be an Interest Rate Detective.” I love this. I thought this was a really cool interactive activity where you challenge the reader to work with an adult to research interest rates for a local bank savings account, a CD, so a Certificate of Deposit, and an online savings account. So again, this was just one of many example activities you have throughout the book, but why is an activity like this so important in terms of someone being an interest rate detective to experience and go through as they begin their journey of understanding some of the basics of investing?

Allison Tom: So part of it is we wanted all the activities to be something that kids could do with the adult in their life. And we didn’t assume that every child has a parent because we know in this modern day and age that families are different nowadays, and you might have two moms or two dads or a grandmother or grandfather or a guardian of some sort. So we wanted something that people could do together with — kids could do together with someone else. And we thought, oh, it’s going to be interesting because banks are closed during COVID. When we were writing the book, it was right in the heart of shelter in place. But we thought, well, you know, kids have access to — most kids have access to a computer, they can at least walk around to a local bank and banks always have their advertisements on their windows with their interest rates. But we thought it would be an interesting way for kids to see what is in their environment and practice some good behaviors like oh, what does interest rate mean? What is APR? Those are, they’re jumbled letters and so you actually learn what the acronym stands for. And so we want to make sure that kids could kind of connect their physical world to their these abstract ideas about money. So all these activities are kind of a way to get kids to start thinking about it, and we were like, oh, kids aren’t really going to want to do activities, it’s extra homework. So we tried to make them fun and things that they could actually do and feel like they were learning something.

Tim Ulbrich: And I think this was a good example where the activity really, to me, is a rabbit hole of other learning, right? So if you go to the bank and do this activity, just like you suggested, Allison, it leads to other conversations and questions like, what is the federal reserve? And what is an insured account? What does that mean? You talk about that in the book, you know, how do you explain the federal reserve? What is compound interest? Why is that so important? What is principle? What’s interest? What do terms mean? And I think it, again, leads to further conversations, which obviously hopefully spark some motivation and curiosity to learn more on this topic. Dylin, in Chapter 3, Introduction to Investing, you cover very important topics, you know, why to invest, risk v. reward — and I love the Risk-o-meter throughout the book, that was really neat — liquidity, the importance of conducting research, and connecting back to my previous comment about the difficulties teaching a child about money when it may not be tangible, you can’t see it, can’t feel it type of a mindset, I think this is another area where parents may feel challenged to teach a child the importance of investing when again, it might feel somewhat abstract and here, we’re talking about delayed gratification, right? So not spending money on something today that has an instant reward. I think back to my childhood, it was driving to the corner store, buying baseball cards, buying candy, you earn the money, you spent the money, you saw the reward instantly. So here, the activity on investing, which I thought helped to really drive this concept further, you talk about an activity of picking a stock and really going through that process of understanding what’s involved there. So talk us through that type of an activity, what’s involved in that, and why that’s important to help a child relate to the concepts of investing.

Dylin Redling: Yeah, sure. It’s interesting because I can also relate it to how Allison and I do our own investing. And most of what we do, to be honest, are buying mutual funds and index funds. We don’t do a lot of single stock buying. However, there are some advantages to just helping a child or anybody, really, think about, well, if you were to buy a single stock, what would the thought process be when you do that? We actually just wrote an interesting post on our blog just about a week ago where we had $10,000 that we wanted to experiment with. And what we did is we selected five different stocks to invest that $10,000. So $2,000 per stock. And I went through the process in that blog post of why we would do this. And it wasn’t to get rich quick or to see what would happen in a week or a month. This particular blog post talked about a one-year time frame. And it’s the same with the activity for the child. I think we used a shorter — a relatively short time frame so they could at least measure their success. At the end of the day, investing, as you know, as your listeners know, it’s very much a long-term process where you’re investing over years and decades. But again, to get the child to think about some of the things that you might want to think about with whether you’re investing in stocks or any sort of investment, what are the things that go into that thought process? And so getting back to that blog post I wrote, some of the stocks that I suggested that we test out, one was a blockchain ETF. So now that bitcoin and other coin-based just went public, those are things that we wouldn’t necessarily invest in directly. But a blockchain ETF is an example of a way you could dip your toe into that technology. So that was the thought process there. Another example was a cruise company, NCL, Norwegian Cruise Line. Now that COVID is starting to disappear and everyone’s getting vaccinated, people, there’s this pent-up demand to start traveling again. So we thought, hey, in the next year, NCL may actually start to do really good. And they even have a program where if you have 100 shares, you get extra bonus points. And so the idea is to think about all the different aspects to that investment, like how does it relate to what’s going on in the world right now? And what other pros and cons are there to that investment?

Tim Ulbrich: Yeah, and I think we share your philosophy. What I heard there is our planning team often says a good investing plan should probably be as about boring as watching paint dry.

Dylin Redling: Right.

Tim Ulbrich: At the end of the day, it’s about a long-term play. But I like this activity as a concept. You know, I remember I had a great Econ101 teacher that had us do a similar activity. And it’s very memorable because it also leads to many other conversations like well, what type of influence does my marketing have? Or I thought this was going to go this way, and it didn’t go this way. Maybe I had some overconfidence in my selection of things. So why is diversification important? So I think, again, reading it and doing it, two very, very different things. And I think people experiencing this firsthand, especially you think of an 8- to 12-year-old, a very kinesthetic learner, right, hands-on experience that moment, be able to learn through that experience. Allison, as I went through the book, many times I thought to myself, man, what if I would have had some of this information earlier? What if I would have had this in middle school or high school or perhaps even earlier? And shoutout to my parents, who did an awesome job of the foundations, grew up in a small business, felt like I had a little bit of a head start. But outside of some K-12 programs and in higher education, I would say it’s largely absent, maybe some elective courses or some opportunities. And so I can’t help but think like, why aren’t we doing more of this? Why aren’t we covering more of this in a K-12 education? I mean, this type of book, this type of experience, these types of activities would be a home run in teaching kids about money. Here, we’re taking 8-12 investing, but obviously we all know it’s broader than that as well. So question here, I’m not asking you to solve the personal finance educational system woes, but why do you think this is not more foundational to our educational system in terms of personal finance education?

Allison Tom: Right. So I think part of it is that our generation didn’t really learn this either. And so as the educators come up with their curriculum, I think honestly, a lot of adults are really intimidated by personal finance. And so it’s something that seems easy enough for them to cut out of the education system as an elective because well, if they don’t understand it, then kids aren’t going to understand it. And if they’re intimidated by it, then kids are definitely going to not understand it and be intimidated by it, so let’s not even talk about it, which actually is one of the reasons why we thought it was important to write the book. We didn’t get this education when we were growing up. I know my parents are second-generation immigrants. And so the money lessons that they learned were from their parents, who grew up during the Great Depression. And as immigrants coming over to this country, they just pooled their money and they saved and they saved and they worked 20 hours a day to make money and then they would maybe invest it in the bank, although plenty of my relatives didn’t even bother with that. So my lessons growing up were save and save and save and save. I had a little piggy bank, and I would put all my coins in from the piggy bank, but that was the only thing that I learned. And so it wasn’t until I got to college, and then I had my first credit card that I just — oof. It was bad. I did not understand the concept of paying credit cards and interest rates and late fees and minimum payments. And so, you know, I got in trouble with credit cards after I graduated. And it wasn’t until after that that I thought, oh, I really need to learn more about what’s going on here. And so I started watching some shows on PBS, but by then, you know, I’m in my early 20s at that point. My learning took a lot longer for the habits to become engrained in me. So you know, I really do think that if kids could see this stuff earlier, it would be so much more impactful. You know, I’ve talked to a girlfriend of mine, her daughter is 17 and she read the book and she was like, “Yeah, you know, I’m going to start doing the savings plan when I get a job.” My friend was laughing because she’s like, my daughter doesn’t have a job. But she was just like, she got inspired by it, and I thought, oh, if we could just get kids to learn this stuff sooner –

Tim Ulbrich: Yeah.

Allison Tom: All the great things we could do with them. So hopefully. Hopefully.

Tim Ulbrich: Yeah, and I love that, to that point, Allison. I think it was early in the book, you have the reader go through an activity where they identify problems, things that could be improved upon, right? And one of the things I often say is that any business is a solution to a problem, and that solution is one that people care about and are willing to pay for. And you know, I love that because I think for a child, like if they can think about, what are some things that could be done better? You know, one of them you proposed in the book, which was really cool because we recently just bought this — or actually we got it as a gift for our kids from our family — is you mention like chess. Really hard game for kids to play, kids to learn. Why isn’t there a solution out there that can make chess easier to play? Sure enough, there is. There’s a card game where you draw cards, you learn the basic moves of chess. So things like that, I think you’re inspiring some of the creative thinking, the problem solving, and laying some of the seeds of entrepreneurship or even for those that don’t own their own company, which would be the vast majority of folks, intrepreneurship, how can you be a problem solver within your organization? And how can you create solutions that make you a valuable asset within that organization? I want to shift gears a bit to connect some of the work that you have in “Investing for Kids” with what you cover in your site, Retireby45.com. You mentioned your other FIRE book as well. And I got the impression that you both, you believe that everyone could put together — especially an 8- to 12-year-old reading the “Investing for Kids” book — put together a plan for FIRE, again Financial Independence Retire Early — by the age of 45. So Dylin, our listeners know firsthand that time in the market equals success, and that compound interest, as you mentioned in the book, is the eighth wonder of the world. So we know the math is possible if someone starts at an early age. But why do you think it’s important that someone plans for FIRE by the age of 45?

Dylin Redling: Whether you’re able to retire in your 40s or your 50s or you do a traditional retirement in your 60s or even beyond, Allison’s dad, for example, is 70 now — or slightly older — and has no intentions of stopping working even though Allison suggests that he stop and enjoy life. But he’s got a job that he really loves. And so there’s a lot of people out there that are like that. So we love our FIRE lifestyle and the fact that we left our W2 jobs in our 40s, but we know it’s not for everybody. But what we do also know is that the concepts of Financial Independence are good for anybody, no matter when you might want to retire. And those concepts are really about doing the right thing with your money. So it starts with saving, it starts with being somewhat frugal — and when we say frugal, we don’t mean living a spartan lifestyle. We just mean not going crazy with money with spending on things that you don’t want or that you don’t need or you feel like you have to keep up with the Joneses and get a brand new SUV every two years. So there’s that, and of course investing wisely. And you know, we have another story that we write out on our blog, which kind of I think can be somewhat inspiring to people who are in their 20s and maybe haven’t really done anything with their finances yet. We, as Allison alluded to earlier, kind of our story is we met in New York and then we moved to San Francisco. And we were in our mid-20s at the time. And we still hadn’t invested a dollar yet. And it wasn’t until our late 20s that we got “real jobs” with a 401k plan and that sort of thing. And so it wasn’t until our late 20s that we really started investing. And our entire investment life cycle, if you will, was about 17 years from our late 20s to our early 40s. And in that time, we just were so diligent about dollar cost averaging, we did — we invested into both our 401k, our IRA, and a taxable account once we got some extra income literally on a weekly basis for years and years and years, no matter what the market was doing. Through the 2001 .com crash because we’re both working in that industry and of course through the ‘08-’09 recession. Never stopped. And so those kind of habits, again, are good for anybody no matter what your retirement goals are, just really those financial habits are going to put you in a great position.

Tim Ulbrich: Yeah, and I’m glad you shared that, Dylin. One of the questions I had for you was I read your story of not really late 20s, early 30s getting serious about investing, but retired or achieving FIRE by 43, 44, so short window of time, right? We tend to think of a very long trajectory of savings. You mentioned 17 years. So my question was what was the secret sauce? And if I heard you correctly, it was tax-advantaged accounts, 401k’s, IRAs, some taxable accounts and dollar cost averaging and being consistent. Is that fair?

Dylin Redling: Yeah. You know, a couple other things we did — we did the phrase “side hustle” is really popular now. But when we did it, we just called it a side business. This was in the mid-2000s. I came up with an affiliate marketing business that I ran on the weekends. And it ended up being a third income for us. So there’s things like maximizing your income. And then another concept — I’ll shoot it over to Allison to talk about — is geographic arbitrage. And that helped us kind of move about nine years ahead of schedule. Do you want to talk about how we did that?

Allison Tom: Sure. So geographic arbitrage has a lot of different meanings in the — for people. And the gist of it is that you leverage your current salary and move to a lower cost location. And so most people think that is oh, I’m going to make my United States salary and move to Thailand or Costa Rica, where the cost of living is exceedingly low. We did it by moving from San Francisco to Oakland, California, which geographically is a 10-mile difference but at the time, we were able to save about 50% on our housing costs.

Tim Ulbrich: Wow.

Allison Tom: So yeah, it was pretty insane. For being 10 miles away, two or three train stops away on our BART system, we were able to pay off our condo in Oakland in cash by selling our place in San Francisco, which alleviated all the mortgage payments, the increase in property payments and our insurance went down as well. So that, Dylin calculated later, saved us probably about nine years of working because our mortgage in San Francisco was so astronomical that just cutting 50% off just pushed us into the financial independence sphere that much sooner. So it’s things like that. Obviously not everybody is going to be able to save 50% of their housing by moving 10 miles away, but there are other ways to do it. You can do things like house hacking where if you have space on your property, you could build an extra unit and rent it out or if you have an extra bedroom, you could rent it out and have a roommate or Airbnb it. So there are ways tod do it without going through the extreme example that we had. So there are plenty of ways to cut costs in your life that are relatively painless, that we’ve talked about all the time, so there are just different ways to do it to achieve FIRE. And some people don’t even choose to do the early retiring like my father is the example. So retirement is really more of the optional part. We’re not saying you have to retire, you have to leave your job and just sit around drinking mojitos all day long, although it’s certainly not a bad lifestyle. But you know, the retiring part is up to the individual.

Tim Ulbrich: Yeah, I’m glad you said that, Allison, because I know many of our listeners love what they’re doing as pharmacists and they worked hard, and they got a doctorate degree and they have student loan debt and they invested in that education. And so my read is that many pharmacists are captivated by the idea and the power of financial independence. And you know, I believe that’s a goal we all should strive for for a variety of reasons with RE, Retire Early, being one of those perhaps reasons, but other things as well in terms of why that financial independence may be important. So nine years, nine years was estimated from that one decision, which I’m coming full-circle, Allison, about what you shared at the beginning of Dylin being in the hospital with double pneumonia. And when you start to think about the value of time, I mean, nine years and doing some of those calculations and what does that mean for one’s personal situation, I think that’s a really powerful example of taking something that can be mathematical or objective and looking at it in a different mindset. If we were to make this move or this move, what does that mean for us in terms of timeline to retirement, working part-time, pursuing another opportunity, what does that mean for one’s goals towards financial independence? I’m glad you discussed geographic arbitrage because one of the things we see in our profession in pharmacy is that unfortunately, a pharmacist’s income usually does not translate with cost of living. So here I am in the Midwest and that income for a pharmacist in the Bay Area might be a little bit more for a similar role but nowhere near the cost of living difference between Columbus, Ohio and San Francisco, California. So I think this is a move, especially for many of our listeners that might be saying, you know, ‘I’m making a decent income, but I’ve got a lot of work to do on student loans, I want to invest, I want to buy a home, I want to do this or that. And at the end of the day, there’s only so much income.’ So is a move, whether it’s near, within 10 miles, or something a little bit more significant, is that an option that somebody may be able to pursue? Allison, what have you guys been doing since achieving FIRE? You know, what’s been the goals, what’s been the priority, how have you been spending time? I think that’s one of the other common objections that comes up is like, if I retire at 45, like I don’t even know what I would do with my time. Tell us a little bit about that journey since you guys have achieve FIRE.

Allison Tom: So it’s funny, we — so we FIREd quite by accident. We were both working in tech startups, and Dylin got laid off and then I got laid off about five weeks afterwards. And so we kind of took the time after we were both laid off to travel a little bit. That was one of the things that two people who are working can’t always schedule, coordinate their schedules, to take some time off. And so we thought, alright, this is the perfect time. We went to Europe for two weeks and did a cruise around the Mediterranean and had a blast and then came back and thought, alright, we’ve got to get back to work. So we went about — we went on interviews and we just saw just how miserable people were at their jobs. Just so stressed out, and I interviewed with this one guy who was like, “You need to tell me who said this about us so I can go talk to them.” I’m like, I don’t want to work for you. You’re scary. And so you know, the three months turned into six months and then nine months and then Dylin figured out kind of like back of the envelope math, figured out that we could actually retire without having to go back to work anymore. He stumbled into the 4% Rule, which we still hadn’t at that point heard the term FIRE before. You know, the first few years we did a fair amount of traveling domestically. Like we would go back to visit his mother and my father, who both live on the East Coast, which is one of the things you just don’t get time to do when you’re working is spending time with family. And so you know, if we would go back East, we would maybe spend two days with each parent because they don’t live that close to each other. And now, we can actually go and spend a week with each parental unit. And that makes a big difference because, you know, they’re getting older and living across the country, it’s harder to connect with them. So we do a lot more slow travel where we don’t have to feel rushed between people. And then it’s funny because we — our retirement has changed as time goes by. So for people who are concerned that oh, what am I going to do with my time? Your time is yours. You can now make your own schedule. And that, to me, is the beauty of not just financial independence, it’s financial freedom because you can choose what you want to do. And so you know, the first two years were traveling domestically, the second two years were more about traveling internationally. And we had two cats that passed away at 19. So for us, they were like our kids. And so we did not do a lot of traveling away from them until they passed on. And so once they did, we’re like, alright, we’re going to go crazy and go travel around the globe. And so the last — and then the last two years have been focused on writing books and going to financial conferences and kind of learning from others and then applying that and communicating out to audiences like yours. That’s the beauty of the time being yours is you can make it whatever you want to do. We also do a lot more work with our community that we never had time to do when we were working. So we’re a lot more invested in our neighborhood, and we spend more time working with businesses in our neighborhood to bring in more business. So having that luxury of time means you can go explore whatever interests pop up. So you know, did we ever think that we would be working with small businesses two years ago? Probably not. But now we are, and we’re advocates for small businesses in our neighborhood, and that’s something we would never have thought we would have done when we first retired.

Tim Ulbrich: That’s very cool. And I read as well your goal of 60 by 60. Sixty countries to visit by the age of 60. If I understand it, you’re about halfway through. Looking forward to following your journey. I’m hopeful you’ll be blogging about it along the way as well. Dylin, I’m going to throw the last question I have over for you. And one of the things I think about when it comes to early retirement and achieving financial independence or the FIRE movement is that it really does require delayed gratification and at times, you mentioned the word frugality earlier. And that frugality can be at various levels. As you mentioned, we’re not necessarily talking spartan type of frugality. My question here though is how do we strike the balance? You know, whether it’s for ourselves or teaching our kids about saving and investing to take care of our future selves but also valuing and making sure we understand that it’s important that we enjoy some of the money along the way as well. I find myself often struggling with this individually of, OK, I know I need to take care of my future self and probably sometimes I do that at the expense of the experiences and the enjoyment today. And I think striking this balance is really important. What are your thoughts on that?

Dylin Redling: You know, I’ll actually plug a couple of other books besides ours that I really like. One is “A Simple Path to Wealth” by Janelle Collins, which I highly recommend. And another one is actually one of Allison’s favorites. It has a funny title, it’s “I Will Teach You to Be Rich” by —

Allison Tom: Ramit Sethi.

Dylin Redling: Ramit Sethi. And we saw him speak. He was a keynote speaker at FinCon a couple years ago. And one of the things that he said, which really resonated with me and it goes to your question, is spend liberally on things that you enjoy. But hold back aggressively on things that are not important to you. And it’s a very simple concept. But again, it goes directly to your question, and it’s really — maybe you or your kids or whoever’s thinking about this makes a list. Here are the things I’m passionate about. Here are the things that I really enjoy. I love travel, I like eating out at restaurants, I like entertainment, sports, whatever it is. And I’m going to set my budget to focus on those things. I’m going to be OK — maybe I’ll go to a World Series game because I’m a huge baseball fan. Or I’m going to set a goal to go to every baseball park in America. You know, whatever that goal might be. Conversely, think about the things that aren’t that important to you like maybe a brand new car is not important to you, so you drive your car for 10-20 years and you really just never focus on spending a lot of money on that. And so those are the concepts that I think are something to really think about. And for us, that’s what we’ve always done. When people look at our lifestyle from the outside or even some of our friends, you know, they may think, wow, we’ve always lived in pretty expensive apartments — or condos or houses, so they might think, wow, they spend a lot of money. But if you look a little deeper, like we had a car for almost 20 years. We had a Volkswagen Jetta. We just recently got a new-to-us couple years old Toyota Corolla. So there’s an example where we just — you know, having a brand new car wasn’t that important to us. But again, we have the 60 by 60 goal. So travel is really important to us. And we have no problem spending that extra money to go travel for a few months and really try to see the world because that’s something that we’re passionate about. That being said, when we do travel, we try to — we don’t stay at four-star hotels because part of our kind of nature is to also find some deals here and there and to just spend consciously, to just spend our money kind of wisely.

Allison Tom: We prefer to spend money on the experiences rather than the hotel room that we’re putting our suitcase in.

Tim Ulbrich: Yeah. And I was at that keynote that you were at, and with Ramit, and I’ll never forget it. I mean, the concept that he talks about in “I Will Teach You to Be Rich,” money dials, right, is find the things that are of value to you and dial it up. And find the things that are not and dial them down. And you know, I remember hearing that, and I was like, heck yeah. It just makes so much sense. And you know, to the comment of experiences and even the literature really showing happiness related to money, it’s experience and giving typically are the areas where we see that biggest connection. So Allison and Dylin, I really appreciate you guys taking time to come on the show. Kudos on the work here with “Investing for Kids,” I really enjoyed it, as well as the work that you’re doing at Retireby45.com and your other book, “Start Your FIRE: A Modern Guide to Early Retirement.” As it relates to the book “Investing for Kids,” I hope our audience will pick up a copy of this, available at Amazon, Barnes & Noble, many other online vendors as well. I really did find it engaging, it was rich with relevant information, practical exercises to apply the information, as I mentioned, certainly does not look, feel, or read like a textbook. And so I think many in our community are going to find it helpful. What’s the best place for our audience to go to follow the work that the two of you are doing?

Dylin Redling: Well, our — I’ll plug our website, and I’ll have Allison plug our Instagram account. Retireby45.com is our website, and we blog there on a once or twice a month with a fresh new blog post, and we have a bunch of stuff on there, courses and other things. And then Allison’s been working on really putting together a pretty cool Instagram account.

Allison Tom: So we have Instagram and Twitter both @retire_by_45. Yeah, it’s been an interesting challenge trying to get into the social media, the social media space.

Tim Ulbrich: Very good. We will link to both of those in the show notes as well as the Retireby45.com as well as the books that we’ve mentioned, not only your books but the others that you referenced as well. So the two of you, thank you again very much for your time. I really appreciate it.

Allison Tom: Thanks, Tim. It’s great.

Dylin Redling: Thanks.

Allison Tom: O-H

Dylin Redling: I-O

Tim Ulbrich: I-O!

Dylin Redling: Thanks, Tim. Great talking to you.

Tim Ulbrich: 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 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]

Current Student Loan Refinance Offers

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

Recent Posts

[pt_view id=”f651872qnv”]

YFP 304: How This Pharmacy Entrepreneur Helps Pharmacists Transition Into Their Careers in Canada

Posted on April 20, 2023April 19, 2023 by Caitlin Boyle

Havalee Johnson, pharmacist and Founder of Immigrant PharmAssist, shares how and why she made the move from Jamaica to Canada, how her business helps immigrant pharmacists transition into their careers in Canada, and her business goals.

About Today’s Guest

Havalee is a Jamaican immigrant in Canada. She holds dual pharmacist registrations in both countries and has a combined 8 years of practice experience. Feeling the need for growth and expansion in her life and career, Havalee successfully pursued her pharmacist licensure in Canada, completely self-sponsored, and moved from Jamaica to Canada at the onset of the COVID-19 pandemic in early 2020. She seamlessly transitioned and integrated into the Alberta healthcare system where she practices as a clinical pharmacist. Havalee is people-centric and multi-passionate and loves to help, empower and inspire others. Noting the myriad of challenges encountered by pharmacists’ peers and colleagues who have been unsuccessful in their many attempts to transfer their licenses to Canada, Havalee is on a mission to support and assist as many immigrants as possible. Through her business Immigrant PharmAssist, she helps international pharmacist graduates (IPGs) successfully navigate and accelerate through the licensure process so that they can smoothly transition into their lives and careers while thriving as newcomers in Canada.

Episode Summary

Havalee Johnson is a pharmacist in Alberta, Canada, and her new company, Immigrant PharmAssist, focuses on helping fellow pharmacists transition to a pharmacy career in Canada. After explaining why she stepped into a career in pharmacy, Havalee gives details on her community pharmacy experience, why commitment is one of her most important values, and the financial strategy she implemented to make the move from Jamaica to Canada. Havalee then opens up about what she wishes to accomplish with PharmAssist, whether pharmacies in Canada and America are going through the same struggles, common misconceptions that she encounters about moving to Canada, and where her business needs to be in the next three years for her to consider it a success.

Key Points From the Episode

A warm welcome to today’s guest, pharmacist and entrepreneur, Havalee Johnson.
Havalee’s background in pharmacy, including where she trained and her first job after school.
The community pharmacy experience that made her enroll in pharmacy school.
Why the John Assaraf quote about commitment resonates with Havalee and her life’s journey.
Havalee’s reasons for immigrating to Canada.
Her financial strategy for moving to Canada, and her unique relationship with money.
The problems that she is trying to solve with her business PharmAssist.
Why Canada is an attractive destination for pharmacists to consider.
Whether pharmacies in America and Canada are experiencing the same challenges.
Common misconceptions that aspiring pharmacists have about moving to Canada.
Where Havalee wants her business to be in three years to consider it a success.
The mindset shift that has had the biggest impact on her life since moving to Canada.
What Havalee does to reenter herself when she feels overwhelmed and out of focus.

Episode Highlights

“I’m a very committed person. And it’s not just in my professional life, it’s in every area of my life. If I have an appointment with someone, I’m going to make that commitment; I will show up for the occasion. If I have to do something, I just get it done.” — Havalee Johnson [08:47]

“When other people are having challenges or they have this sort of mindset that things will not work out, it’s because their level of commitment is not in alignment with what they think they truly want.” — Havalee Johnson [09:18]

“There’s so much wealth and information tied up in knowledge. It is very indispensable.” — Havalee Johnson [18:05]

“I worked, I saved, I bought the things that I needed to buy. I didn’t focus on the things that I wanted. It’s called delayed gratification. A lot of us know about it but we don’t subscribe to it.” — Havalee Johnson [18:40]

“It is not a matter of resources, it’s a matter of being resourceful.” — Havalee Johnson [27:39]

“I’ve embraced the fact that if I want to get to where I want to go, I need to do things differently and I have to invest in me. And not just investment in terms of monetary investment, but invest in my mindset, in up-leveling my mindset.” — Havalee Johnson [34:23]

Links Mentioned in Today’s Episode

Episode Transcript

EPISODE 304

[INTRODUCTION]

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

This week, I welcome to the show, Havalee Johnson, a pharmacist-entrepreneur from Jamaica, who helps pharmacists transition into their careers and thrive as newcomers to Canada. During the show, we discuss why she decided to move away from her family and hometown in Jamaica to live and practice some 2,000 plus miles away in Canada, some of the biggest misconceptions that folks have about moving to Canada as a licensed healthcare professional and the steps that she took financially to pay off her student loan debt, her car, accumulate savings, and to ultimately fund the move and transition to Canada.

Now, before we jump into the show, I recognize that many listeners may not be aware of what the team at YFP Planning does in working one-on-one with more than 280 households in 40-plus states. YFP planning offers fee-only, high-touch financial planning that is customized for the pharmacy professional. If you’re interested in learning more about 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 Havalee Johnson.

[INTERVIEW]

[0:01:29.4] TU: Havalee, welcome to the show.

[0:01:30.6] HJ: Hey Tim, thank you for having me.

[0:01:33.1] TU: Really excited to follow up on the conversation from a couple of weeks ago to share what you shared with me, which is a really cool career journey and I think an inspiring story for many with the work that you’re doing now with pharmacists. We’ll get to that here in a little bit.

Let’s start with your career journey. What led you into the profession of pharmacy, where did you do your pharmacy training, and what was your first job out of school?

[0:01:56.1] HJ: Oh, that’s interesting. So interestingly, my first job, I will start with that one, my first job was in a pharmacy, that I think propelled me into my career being a pharmacist because I never wanted to be a pharmacist growing up. So my back story is that I was born and raised in Jamaica.

I lived in Jamaica for pretty much my entire life until I moved to Canada at the start of 2020, and that’s where I also did my training in Jamaica, at the University of Technology. I did my undergrad studies with my bachelor of pharmacy degree. So it’s interesting that I never thought of pharmacy, it wasn’t on my radar.

But as a student in high school, we were required to do some voluntary work prior to graduating and it so happened that I volunteered at the hospital’s pharmacy. So that was my first introduction to pharmacy but I never thought anything of it then. But after I completed six form, which is the equivalent of community college. In Jamaica, you can go to six form if you’re in high school.

You do your A-level studies and then you move into university. One of my colleagues was like, “My mom was saying pharmacy is a cool profession and all this stuff.” I was like, “Pharmacy? No.” I actually wanted to become a linguist. I was the Spanish student, I was the math student, and I did a mixture of the sciences and the arts. But as I’ve told you before, Tim, when we met, that I’m very multi-passionate and a multi-potential.

So I could just basically segue from pharmacy into just about anything, which to me that right now is really exciting. I started my pharmacy career in Jamaica where I practiced for five years before moving to Canada, where I interestingly transferred my pharmacist license and I practice as a pharmacist in Canada as well.

[0:03:45.1] TU: What I like about what you just shared there, Havalee, is that pharmacy is a part of your story, it is not the only story, right? So it’s an important part of the journey, you’re obviously helping other pharmacists but you know, you mentioned you can pivot in different directions. We’ll talk about the value of diversification here in a little bit and if I heard you correctly, it was a hospital experience that led you into pharmacy school. But you would end up practicing in community for a while, is that correct?

[0:04:11.0] HJ: Yeah. So after high school, so we had financial challenges growing up and my mom was basically a single parent and my sister went to nursing school prior to me going to pharmacy school, and she was like, “I can’t afford to send you both to university at the same time. So you have to work for a year.” And I was like, “No way, I’m not working.” Because for me, school was the only thing that I knew and actually, I found my value and my education.

As I told you from my back story that I never felt worthy, and I was told growing up that I was ugly. So, I just buried myself in academics. So when my mom told me I had to work prior to going to university, I was crushed. And I thought she was actually kidding but she was serious. So she went and got me a job basically. She made recommendations because she loves to talk about her children and she found a pharmacy owner.

She was like, “My daughter, she’s very brilliant, she’s interested in starting in pharmacy.” I did not want to go to work in a pharmacy. I wanted to go to university and I did an application to the pharmacy owner. That’s an interesting part of my story, we’ll have to talk about that another time, but it was my penmanship that was the hook. Like, my penmanship is really great, if I may say so myself.

So the owner saw my penmanship and he’s like, “I need to meet this person” and so I interviewed. My personality and I fit right into the pharmacy setting. I worked there for 15 months as a pharmacy assistant. So that was my first introduction to business as well because I got to do a little bit of cashiering, I did the OTC stuff, I got to do account reconciliation, I got to do just about every little thing in the pharmacy.

So I was like a floater and I worked there, but the impression that was left upon me by the pharmacist, who was the chief pharmacist at the time, her name is Alicia. Alicia, she was very impressionable. She was very proficient. She was very professional and I like the way she dealt with the parents, and that was my inspiration for going to pharmacy school. I wanted to emulate her and I was like, “Wow, this is really nice.” I enjoyed my 15 months there and I apply for pharmacy school.

Interestingly, I applied for pharmacy school prior and they didn’t have any space and they’ve gotten a letter, an email, a letter saying that I didn’t meet the qualification requirements. I reapplied the following year and I got through but all they needed to tell me was that they didn’t have any space. They didn’t have the capacity but I applied, I reapplied because I’m not the person who gives up easily. With the same credentials, I got in and then I had a whale of a time.

I suffice to say, I mentioned earlier that we had financial challenges and then the pharmacy was how I got through university. My mentor, my support system came through the pharmacy and that was how my accommodation was paid for. That was how my books were taken care of, that was when I got my first laptop.

I was 20 years old when I got my first laptop and just looking back now, it’s amazing to see how far I’ve come since then. Yet, that’s how I got through pharmacy school and I mentioned my friend Alicia the pharmacist, every single month that she got her salary, she sent me some pocket change, every single month, and I just feel so blessed.

[0:07:32.9] TU: Let’s make sure Alicia hears this episode, we’ll have to share it with her as you give a shout-out to her. But one thing that really stood out to me when you and I talked a couple of weeks ago is, you know, I have the opportunity to talk with different pharmacists, pharmacy owners, entrepreneurs all across the country every week, which is an incredible part of the job and the work that I have and doing the podcast.

But something really stood out about our interaction. I think it was your mindset, it was your passion, your enthusiasm, your resilience, you described that a little bit, your optimism, it’s contagious. And you shared recently on LinkedIn a quote by John Assaraf. You said, “If you’re interested, you will do what’s convenient. If you’re committed, you’ll do whatever it takes.” Tell us more, why does that quote resonate with you and resonate with your own journey?

[0:08:23.3] HJ: It absolutely does. Thank you for bringing that up. I tend to forget the things that I put out there sometimes because I’m just, you know, going from what’s inside that I wanted to share. But again, I buried myself in my academics and I found that for me, things just seemed so easy. And it’s just when persons are approaching me and asking, “How did you do this, how did you accomplish this?” that I realized that I was a very committed person. And it’s not just in my professional life, it’s in every area of my life.

If I have an appointment with someone, I’m going to make that commitment, I will show up for the occasion. If I have to do something, I just get it done. So there are no entrances and even if there are obstacles along the way, it doesn’t prevent me from going ahead because I’m so committed to whatever task it is that I have in front of me, whatever commitment that I’ve made. So, when other persons are having challenges or they have this sort of mindset that things will not work out, it’s because their level of commitment is not in alignment with what they think they truly want.

So I thought that quote was fitting for the post that I did. I didn’t realize that it had gone over on to your platform as well. So thank you for the reminder, but I’m actually very committed and it makes the process much easier. It makes things — like, you don’t focus on the problems when you’re committed, you find creative solutions, and one problem has more than a thousand solutions if we were to go through and think about it logically.

[0:10:01.2] TU: Yeah, I mean, mindset really matters, right? I think that’s what you’re alluding to there and you could have two people that are facing a very similar problem but how they approach it and how they receive that challenge can be night and day. I had a chance to talk with Lauren Castle recently on the podcast, who is the founder of The Functional Medicine Pharmacist Alliance, and she talked about a book that its purpose is not a side hustle.

Meaning, what you said is, we bring our purpose and our intentionality to every single interaction, every single day. Now, easier said than done, right? And I often wonder, “Hey, what would the day look like as a parent, as a father, as a business owner, what would it look like if I did that every moment?” But such a good reminder.

Let’s talk about your transition to Canada. So you mentioned your upbringing in Jamaica. After pharmacy training, you worked a little over five years in community practice and then ultimately, you make a bold decision to move 2,000 plus miles to Canada, away from your home country, your family, your friends, your professional network. Why, what led you to that decision?

[0:11:07.0] HJ: I just don’t, it just came out of nowhere. I think Canada for me signified not security, because there’s not security anywhere, but Canada had some of the things that I desired as an adult. For example, growing up, our healthcare system is not the best. I’m not here to criticize our healthcare system but I lost my dad through him having health challenges going through dialysis, kidney failure, we couldn’t afford the dialysis.

I recognize that in order for me to serve people, I need to be healthy and I need to have that access. I’m not focusing on being ill but if things were to happen, if things were to hit the ceiling, I want to know that I have the accessibility. Also, when I completed pharmacy school, I got a statement for three million Jamaican dollars for my student loan debt.

I was like, okay, I didn’t come from the typical middle-class or upper-class family that had the financial means to send me to school. I had that. I was like, “Okay, I need, when I start my family, for my children to have access to work less education.” That was one of, again, these things were my deep why’s. Why I decided Canada.

Canada is underpopulated and they love bright young minds. I should just try for Canada and I had that thought when I went into the pharmacy. The first pharmacy I worked in after I got my license, my boss actually, they were selling the pharmacy and they were like, “Are you interested in buying?”

I’m like, “No, I’m on my way out of here.” I just told her, “I’m on my way out of here.” That was 2015. I didn’t know how, I didn’t have any connections. At that time, I had persons telling me I needed to go back to school and here I am, in three million dollars worth of student loan debt, now I’m at the phase in my life where I think I need to acquire things, which no, in retrospect, I didn’t need to acquire things. I need to acquire experiences instead.

So I had Canada in mind and I made it happen. I was committed, I did whatever it took. I had the two jobs. I was trying to be very savvy with my finances because again, we had the challenges of not having things that other children had that you probably, why you would have had but no, I’m like, it’s okay. I didn’t really need them but the mind of a child is totally different from the mind of an adult.

When you’re a child, you’re very impressionable and we have very receptive minds but as an adult, you know that you might need to be receptive as well as fertile and the things that we allow into our spaces has to be totally different from the focus we had when we were much younger.

So, I had Canada in mind and I’m like, “Okay in Jamaica, you get two months maternity leave when you start your family” and I was like, “That’s no time for you to nurture and care for an infant” and I’m like, “Okay, Canada, you could get up to a year as maternity leave” and also the scope of practice.

I was frustrated at times, so I had to do a year’s internship in the hospital after pharmacy school and I was frustrated with the way things were systemically, like the things that patient — I’m very passionate about patient care and I’m an advocate for people because I treat people the way I would want to be treated, the way I want my family members to be treated. And they have to go through too many hoops and hurdles to get even a registration number and a prescription, for example. These are things that I would have done differently but I’m not in administration.

I’m not in a certain position to implement those changes. So when I completed my internship, I said, “I cannot work with this system because it’s not in alignment with me.” And then going into community, I had so much autonomy and my boss’s wife is a pharmacist and my boss. They respected me, they allowed me to practice to my fullest scope but my scope was still very restrictive.

If the doctor wasn’t available, I couldn’t fax, I could make changes to the prescription. I love that about Canada, because the scope of practice here is that much greater. You can adopt a prescription, you can prescribe for a minor ailment, you can order labs, you can see the patient’s actual lab results, and that to me was exciting and that was one of my reasons for wanting to move to Canada as well.

[0:15:29.1] TU: And when you take a bold move like that, whether it’s moving from Jamaica to Canada, whether someone decides they’re going to start a business, which you did that as well. We’ll talk about that here in a little bit. But any bold move I think often requires one to feel like they’re in a sound financial position to make that move with confidence, and I talk about this in the show all the time.

If you’re starting a business, not that we need to have every single T crossed and I dotted with our financial plan, but we want to have some level of a foundation that we can approach that business with confidence, and not be having the stress and anxiety of personally not being where we need to be. So I ask that because, for you, you shared with me before that you paid off three million dollars in Jamaica debt from pharmacy, which was equivalent to about 30,000 in Canadian, is that correct?

[0:16:20.1] HJ: Correct.

[0:16:21.1] TU: Paid off a car, you accumulated savings, there is cost of moving, what was the strategy for you to get yourself in the financial position to be ready to make that bold move?

[0:16:33.6] HJ: Thank you for that question. I think that my relationship with money is very unique. I used to say that I don’t know how my mom makes more than a hundred cents out of a dollar because she did it, and I think I got some of that from her in terms of being very savvy about my finances. The minute I started working, I said I’m going to start saving towards this Canada journey, and that’s what I did.

I earned, I took care of my obligations. So in pharmacy school, we actually learned about the reducing balance method. I’d never done any business subjects, I never done accounting prior, I learned about the reducing balance method. I applied that to my student loan and my debt payoff but I also did it smartly. I also referenced my friend Alicia. She allowed me, whenever I needed to do any business transaction, not business but any personal related transaction if I wanted to travel to buy an airline ticket.

She was the person that got the credit card print posts from. You use, you pay on time and in full so you don’t accumulate an interest, and then I just started learning that, “Okay, if I use it directly after the due date, I get at least 51 days to make that payment.” Because the date for the statement will come and then you’ll have time to pay. So I adopted that from Alicia, that was where it started initially and then I started reading the financial section of the local newspaper.

There’s so much wealth and information tied up in knowledge. It is very indispensable and I did that, and using my credit card to pay down my student loan was a part of my strategy because I had a credit card that had cash back. So I would pay the student loan and I’d get back some of the money and I built up great credit. I honestly never checked my credit back in Jamaica, but I knew that my credit was great because I started out with a credit card of USD 100,000 in 2016 and by 2018, my credit limit increased to over a million dollars.

So I worked, I saved, I bought the things that I needed to buy, I didn’t focus on the things that I wanted. It was called delayed gratification. A lot of us know about it but we don’t subscribe to it . And just being very disciplined in my finances, paying my debts, honoring my financial obligations, doing everything that I needed to do, it allowed me to save and I also set up, I didn’t even know for sure but I invested in a life insurance investment policy.

I just heard about this in financial advisor. I called him up and met with him, he explained some stuff to me, then it was just all his. I didn’t understand what were mutual funds, I didn’t know the jargons, I didn’t know what was going on behind the scenes but I knew I needed to make plans and preparation for my future. So I invested in a policy and I started saving every single month from my salary.

I told myself, “This is my retirement plan” and over a period of time, it accumulated so much funds. I was like, “Whoa, this is amazing.” It is amazing to see the tiny steps that we take, and over time, we adapt quickly and I think that was a very big thing for me. But I think it really boils down to me being the disciplined person that I am with my finances. I have never paid any money for credit card interest while I work in Jamaica. Never.

I paid on time, in full, and over a two-year period, I got back over USD 130,000 in cash back just by using my credit card.

[0:20:19.6] TU: It makes sense when you’re paying big student loan payments, right? And the cashback of that. So I’d like what you share. I think there’s a couple of things that really stand out there, your relationship with money and really, understanding what is that, where does that come from, our upbringing typically, what are the good things that we have a positive relationship with money, what are the not so good things.

Being aware of that and then really, what I heard is a lot of discipline in setting your goals and being intentional with how you were going to achieve those goals, which obviously, allowed you to make some of the transitions and move that you did make.

I want to shift gears and talk about the work that you’re doing through PharmAssist and as you say on LinkedIn, “I help pharmacists transition into their careers and thrive as newcomers in Canada.”

So two questions for you here, what problem are you trying to solve with this business, and what benefits does living in Canada for pharmacists, that it may be an attractive option for people to consider?

[0:21:17.0] HJ: Thanks for that question, Tim. So in my business, actually I just studied shortly a backstory, PharmAssist started off as a podcast but it was a podcast to help patients, because I wanted to use my voice that I wanted –

[0:21:29.9] TU: I saw that, I found it, yes.

[0:21:32.4] HJ: You did? I wanted to utilize my voice in a way that could be meaningful and impactful. I’ve always stayed away from public speaking, anything that required me to be in the spotlight. So, I started PharmAssist but I didn’t, at the time, know how to get in front of the right audience, but it was well working in pharmacy. I’ve noticed certain trends, I saw the frustration, I heard the stories.

I’ve met several international pharmacists who were struggling and when I say struggling, in terms of transitioning into their careers in Canada. They’re already in Canada but their credentials have not been recognized. And if you have noted recently on my platform, I’ve been talking about decredentialization, having high credentials is not yet recognized. So you end up doing survivor’s jobs and so your income earning potential has been significantly diminished.

So what I aim to do is to empower especially persons who are coming into Canada to let them know, “Hey, there is a possibility for you to transition smoothly into your career.” You can take an alternative route than coming to Canada as an international student, which is I believe one of the most expensive roads to come to Canada, or even coming and not having your degrees transferred, getting, passing your board exams.

Getting your pharmacist license recognized so that you can continue in your practice to create impact but also to make an income so that you can have a higher standard of living. I successfully transferred my license and I started while I was working in Jamaica, because I was so fortunate I had the discernment to know that if I move to Canada prior to getting my license, I’m going to have to move into the fast lane, but also be doing menial jobs, low income, so I might end up burning out.

I need to be doing maybe two or three jobs just so that I can survive because when you convert the dollar, it’s totally about being a millionaire in Jamaica. I’m a ten thousand-narian in Canada. A million Jamaican dollars is 10,000 Canadian. So it doesn’t stretch very far, especially with the cost of living. I wanted to help those international students who have the misconception that they need to first move to Canada and get their credentials transferred.

But if their desires or they desire to move to Canada, there is a way for you to zone in focus on passing those exams and getting into practice because statistics show that it’s in the low 40s the amount of international students who pass the exams, the statistics are very low. I think, again, it’s because of lack of knowledge. People are not aware of the commitment that they need to make to pass the exam.

The investment that they need to make to get through the programs that they need to go through so that they can, and I believe every single pharmacist across the globe, they are capable of going into their careers in Canada successfully, it’s just that they don’t know the right strategy. They need someone to maybe hold them accountable, someone to show them what pathway they need to take, what direction they need to go. They just probably need like a human compass and I think that’s where I stepped in.

[0:24:55.8] TU: They need a guide, right? They need someone that will help them along. I’m curious, our listeners know very well that there’s many challenges right now in community retail practice in the United States in terms of burnout and expectations and staffing. There’s obviously a lot of work that’s being focused in advocacy on that.

Because of that, are you seeing interest from pharmacists in the US potentially moving to Canada as well, or are those same challenges we see in community retail practice here in the US, are those very similar in Canada?

[0:25:28.7] HJ: I have seen interest from pharmacists in the US who want to move to Canada for a myriad of reasons including — it’s like in the US, where it’s state-to-state practice, each state they have their own scope of practice or their own regulations. It’s the same thing in Canada with provinces, but a province like Alberta where I was practicing, we have a wide scope of practice.

So it may be for the scope of practice, it may be to escape the burnout. The thing about pharmacy practice in Canada as well, because immigration, and people are coming in full force. A lot of people are migrating to Canada then the workload becomes that much heavier as well. So there is burnout being experienced by pharmacists in Canada as well but it depends on the settings.

It depends on whether you’re working with a corporation or if you are working for an independent, or you could be working in just about any setting. But I don’t know if the challenges that are being faced in the United States if it’s that the same magnitude in Canada. Again, the cultures are very different, things are quite subtle here and maybe Canadians, they don’t want to seem as if they’re complaining.

But a lot of the challenges that people are experiencing in the US I can say that, from my own experiences, that some of them are similar in Canada. It’s just that people are not advocating at the level that it’s been done in the US.

[0:26:59.4] TU: Havalee, as you are talking to people that might be thinking about making the transition as a pharmacist to Canada, I suspect you hear from a lot of folks that their interested but they may have some type of misperception about what that transition may look like. Is there a common one that typically folks have that might hold them up in their journey?

[0:27:18.4] HJ: Yes, Tim. So one of the most common misconceptions that persons have in terms of transitioning into their careers in Canada, they believe that they don’t have the money to get it done. They don’t think they have the financial needs. And I am here to tell them that, like my coach said to me, it is not a matter of resources, it’s a matter of being resourceful. So a lot of these folks who, they will say, “I am going to pursue the school road, I am going to apply for school.”

And this is where the misconception comes in, because it is more expensive for you to apply as a student than it is to apply to transition into your career as a pharmacist, and even to move to Canada as a pharmacist, as a skilled educated professional. And this is not limited to pharmacy alone. I’ve had just today a connection on LinkedIn sent me a message saying, “Hey, I came to Canada as a student and it lasted for three months and then I just spent my six months and I returned home because it was so expensive.”

The connection just said, “I spent 15k.” And if you are moving to Canada as a skilled, educated professional and you are a single person, you need about 14k to show the government proof of funding, about 14k. If you come as a student for one semester for three months, that’s 15k. You will not see that money again. The money for a year of residency, you will get to keep that money.

So the misconception is, “I need to come as a student, ride along on the struggle bus, and then struggle to get my credentials transferred, and then five years later, I’m still not registered.” I’ve had a colleague in pharmacy who has been in Canada for 10 years and still unregistered. I’ve had a colleague who’s been in Canada for four years and still unregistered. Another misconception if I may is that the exams are too hard.

Because the statistics are low, it doesn’t mean that it’s not passable. You just need to have a strategy, you need to have a plan, and you need to have your commitment. You need to have these things in place and once you pursue the exam, it’s kind of like going to pharmacy school, there’s no difference. You go through the exam, you pass your exams, you can transfer your licenses. So those are two of the biggest misconceptions that I have had.

[0:29:48.8] TU: Havalee, I am curious, since you are on the front end of this business journey, which I think many people will find refreshing hearing some of the early experiences you’ve had of starting the business. I’m curious, as you think out let’s just say three years as a marker, what does success look like for you three years from now?

Personally, with the business, I mean, I’m sure there is a lot of overlap there but as you’re at the beginning of this and obviously, you’re in the day-to-day, you’re kind of in the weeds, you’re thinking about growing it. But I know when I have these conversations there’s often these feelings of, even if it’s not clear, I kind of see the vision of where things are going. What does that look like for you in three years?

[0:30:26.5] HJ: In three years from now? Wow. I see myself running a very well-organized, fully-automated, technologically included business that merges healthcare with immigration. In three years, I see myself there. I see myself onboarding more people to solve the many problems that we have, whether it’s in the health system and also to help a lot of people to change their lives. The way immigration and moving to Canada has changed my life, I want that other person to have a similar experience and especially if they have a family.

They will get that social support and also to help them to up-level in their finances. I could introduce them to Tim. I was like, “Tim is a financial pharmacist.” Yeah, so in three years from now, I can see myself positioning myself in the marketplace as the go-to person for any internationally educated pharmacist as well as persons who are interested in migrating to Canada.

[0:31:29.8] TU: I love that. Here’s the reason why I asked that question, well one, I’m curious but two, as I talk with a lot of aspiring or early pharmacy entrepreneurs, I’m often encouraging them like you’re in the weeds, you’re building it, you’re wearing every single hat of the business. That’s what you need to do when you get started but it’s so important even if you don’t know exactly where things are going to go, because none of us do.

This will evolve over time. It is so important to have even a fuzzy north star of what is this vision for a couple of reasons, one, that gives us the focus of, “Does the activities I’m working on, the products and services I’m developing, how I’m spending my time, does that line up towards that vision?” And obviously gives us clarity to the messaging that we have both for ourselves as well as externally.

Then I think it also provides a really important source of motivation, right? Because something you just shared there highlights that so well. You said, “In three years I really see running a well-oiled technologically included business with a lot of automation that is focused on the intersection of immigration and healthcare.” Now, pharmacists moving and practicing in Canada, that can be one piece of that business, right?

But the intersection of immigration and healthcare is a much bigger vision and obviously, you are taking a very important first step right now. So I love that you’ve thought about that. I think it is such a good example of what are the things that I am doing right now, the steps that I am taking, the efforts that I’m moving, the products and services I’m developing, and how does that align with where I want to see things going in three to five years, so really cool.

Thanks for sharing. I want to wrap up by asking you two questions, which I have stolen from Tim Ferriss who ask some really great questions on his podcast. That first question is, in the last let’s say couple of years since you’ve made this transition, what new belief, behavior, or habit has had the most significant impact on you personally or professionally?

[0:33:34.0] HJ: So over the last five years or let’s say ten years, let me just even say even three years, a lot has shifted for me both personally and professionally and I’ve had to embrace a new mindset, I’ve had to embrace a new philosophy and I’ve had to become a student. I have had to question my belief system and the things that I grew up knowing. I’ve had to unlearn a lot of the things, unlearn the belief that I wasn’t worthy enough, I wasn’t good enough.

That there were limited supplies of everything out there when there actually is an abundance. I’ve had to retrain my brain and I’ve gotten into personal development. But one of the things that I’ve done most is embrace the fact that if I want to get to where I want to go, I need to do things differently and I have to invest in me. And not just investment in terms of monetary investment, but invest in my mindset, in up-leveling my mindset.

So, I’ve had to surround myself with other women in business, in a community setting where there are people who are empowering you and inspiring you and not just settling for mediocre things. I’ve had to make that shift and I’m so grateful that I’ve had, again, the discernment to know that. If I see things going on a particular trajectory and they want a different outcome, then I can. I have the power within to change that direction, so yeah.

[0:35:05.5] TU: That’s a really good one. I think it’s so important that we are aware of what are those external influences or the stories that we’re telling ourselves that are leading to some of those self-limiting beliefs and behaviors that we have. Well, one of the real examples of this, you probably see this all the time is you mentioned the 40% passage rate of that examination, right?

I can almost assure you that if you talk with someone that does not know that number and you know, maybe they are confident about this transition, they’re feeling good about it, they’re confident in their abilities and all of a sudden, you throw that number on them like I am sure you can see the confidence and the demeanor change, and all of a sudden the ceiling comes down of what they think is possible.

I think it is so important that we’re constantly examining where do these beliefs come from and why do I have this ceiling in my mind? We all have them, when we think about our goals over the next year even in 2023, even if we are challenged to think big, dream big, we all have a ceiling. It is just a really interesting question of like, “Where does that come and why is that there?” Gay Hendricks talks about this in The Big Leap, which is a great book that I kind of –

[0:36:12.5] HJ: That’s the book that I just completed, just completed.

[0:36:14.5] TU: Oh cool.

[0:36:15.6] HJ: Yes, talk about that ceiling and how when we get there, we tend to self-sabotage. I love that book, I love the concepts that it brings across.

[0:36:25.7] TU: My second question for you Havalee here again, stealing this from Tim Ferriss is when you feel overwhelmed or unfocused, what do you do to refocus and get yourself back on the right path?

[0:36:36.5] HJ: So, I tell people that I have a really short attention span but that’s not true. What I’ve come to realize is that I’m not focusing on the most important things that I need to get done, so I get distracted. I get sidetracked. Whenever I feel unfocused or overwhelmed, I first have to check my environment. What is it in my environment that I need to remove? What is it that I need to, what systems do I need to put in place? What habits do I need to reinstall?

For me, I listen to Patrice Washington’s podcast, where she said, “Clutter is a physical manifestation of chaos in your mind.” I check my environment to see if everything is organized, what do I need to clear out. I also try to do some brain dump, I do write out the things that just free up my mental queue. I also do journaling and sometimes I do meditation, I don’t do it often enough. I know I need to get centered and get focused and get realigned and write out the things that are most important to me.

What is it that I need to get done right now that’s going to have the greatest impact on the big goals that I have for myself and just to add to that, it’s funny that when I was operating in my imposter syndrome, that I felt fearless because I didn’t know that I had imposter syndrome. I was just smashing through goals and moving from one goal to the other and then when people were like, “Okay, so how did you do that?”

I was like, “It’s no big deal” because I was just operating. But now that I am more centered and becoming more aware of who I am and what I bring to the table, I am smashing through my imposter syndrome and just showing up anyway and trying to de-identify. It will take some time but try to de-identify, I need to divorce imposter syndrome altogether so that I can operate in my greatness and operate in alignment.

[0:38:38.5] TU: I love that reflection and I think the comments you have about clutter are really interesting. I found that as well that sometimes it needs to be a brain dump, sometimes it needs to be a physical organization of the space so that we can focus and align and get ourselves working on the thing that’s most important.

Other times I have found that sometimes we’re not working on the most important task, because typically there’s some fear that might be underlying us wanting to lean into that. We’re working on something that’s maybe a little bit easier or not as significant or that fear doesn’t reside is kind of an escape route, that typically fear of failure, but it could also be fear of our identity or what other people think, fear of success, exactly, so.

[0:39:20.2] HJ: I have experienced that myself.

[0:39:22.6] TU: Yeah, an important question for folks to reflect on, if you find yourself often not focusing on perhaps the most significant or meaningful work that you could be doing, what’s driving that and if it’s fear, what’s behind some of that fear? So Havalee, this has been awesome as I knew it would be. Where is the best place that folks can go to learn more about you and to follow your journey?

[0:39:44.8] HJ: Oh, absolutely. So I may be found on LinkedIn, Instagram, and Facebook. I go by my actual name Havalee, surname Johnson. On Instagram, I’m @havalee_89. On Facebook, I’m Havalee Johnson and that is in fact my real name. I’ve had persons reach out to me like, “What is your real name?” I say that’s my real name.

That it’s because a lot of persons have been scammed, a lot of persons have had encounters with people who are not authentic and so they’re questioning whether or not this person is real. Like out of nowhere Havalee showed up prior to March, April of 2022, I was a ghost on LinkedIn. I would not show up, I would not write anything, I would not advocate.

If Tim had asked me to appear on his podcast, well, he wouldn’t have known me but if he just mysteriously came across me and say, “Hey, would you like to be on my show?” I’d be like, “No.” I have passed up important opportunities in the past. So I appreciate being on your platform, Tim. Thank you so much for having me and it was so great connecting with you on LinkedIn, that’s where it started.

[0:40:53.2] TU: Thank you for saying yes and I hope folks will follow your journey. I’ve enjoyed it as well. So thank you for taking time to come on the show, I appreciate it.

[0:40:58.7] HJ: Thank you for having me.

[END OF INTERVIEW]

[0:41:00.0] 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 on 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 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]

Current Student Loan Refinance Offers

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

Recent Posts

[pt_view id=”f651872qnv”]

YFP 288: An Interview with Suze Orman (YFP Classic)

Posted on December 29, 2022March 10, 2023 by Caitlin Boyle

This week we replay a YFP Podcast Classic. Suze Orman, #1 New York Times bestselling author on personal finance with over 25 million books in circulation, joins Tim Ulbrich on today’s episode. They talk about her most recent book Women & Money: Be Strong, Be Smart, Be Secure and the advice Suze has for pharmacy professionals feeling overwhelmed with their student loan debt and managing their financial plan.

About Today’s Guest

Suze Orman has been called “a force in the world of personal finance” and a “one-woman financial advice power house” by USA today. A #1 New York Times bestselling author, magazine and online columnist, writer/producer, and one of the top motivational speakers in the world today, Orman is undeniably America’s most recognized expert on personal finance.

Orman was the contributing editor to “O” The Oprah Magazine for 16 years, the Costco Connection Magazine for over 18 years, and hosted the award winning Suze Orman Show, which aired every Saturday night on CNBC for 13 years. Over her television career Suze has accomplished that which no other television personality ever has before. Not only is she the single most successful fundraiser in the history of Public Television, but she has also garnered an unprecedented eight Gracie awards, more than anyone in the entire history of this prestigious award. The Gracies recognize the nation’s best radio, television, and cable programming for, by, and about women.

In March 2013, Forbes magazine awarded Suze a spot in the top 10 on a list of the most influential celebrities of 2013. In January 2013, The Television Academy Foundation’s Archive of American Television has honored Suze’s broadcast career accomplishments with her recent inclusion in its historic Emmy TV Legends interview collection.

In 2010, Orman was also honored with the Touchstone Award from Women in Cable Telecommunications, was named one of “The World’s 100 Most Powerful Women” by Forbes and was presented with an Honorary Doctor of Commercial Science degree from Bentley University. In that same month, Orman received the Gracie Allen Tribute Award from the American Women in Radio and Television (AWRT); the Gracie Allen Tribute Award is bestowed upon an individual who truly plays a key role in laying the foundation for future generations of women in the media.

In October 2009, Orman was the recipient of a Visionary Award from the Council for Economic Education for being a champion on economic empowerment. In July 2009, Forbes named Orman 18th on their list of The Most Influential Women In Media. In May 2009, Orman was presented with an honorary degree Doctor of Humane Letters from the University of Illinois. In May 2009 and May 2008, Time Magazine named Orman as one of the TIME 100, The World’s Most Influential People. In October 2008, Orman was the recipient of the National Equality Award from the Human Rights Campaign.

In April 2008, Orman was presented with the Amelia Earhart Award for her message of financial empowerment for women. Saturday Night Live has spoofed Suze six times during 2008-2011. In 2007, Business Week named Orman one of the top ten motivational speakers in the world-she was the ONLY woman on that list, thereby making her 2007’s top female motivational speaker in the world.

Orman who grew up on the South Side of Chicago earned a bachelor’s degree in social work at the University of Illinois and at the age of 30 was still a waitress making $400 a month.

Episode Summary

Happy Holidays! This week, we bring back a YFP Podcast classic! YFP Co-Founder & CEO, Tim Ulbrich, PharmD, is joined by the one and only, Suze Orman. Suze, #1 New York Times bestselling personal finance author with over 25 million books in circulation, talks about her book, Women & Money: Be Strong, Be Smart, Be Secure, and shares advice for pharmacy professionals feeling overwhelmed with their student loan debt and managing their financial plan.

Suze shares her journey of being a waitress until she was 30 years old and going through a loss of $50,000 from an investment through Merryl Lynch in a three month time period. This is where her passion for personal finance began. Suze landed a job at Merryl Lynch, quickly began rising in rankings and eventually started her own firm. Suze became an advocate to ensure other people’s investments make more money than she’s earning.

Suze says it’s important to have a healthy relationship with money and that there is no shame big enough to keep you from who you are meant to be. She shares that fear, shame and anger are the three internal obstacles to wealth.

In regards to student loans, particularly for those with the biggest debt loads, Suze says that first and foremost you have to understand the ramifications that unpaid student loan debt will have on your life. She suggests following the standard repayment plan to minimize the additional interest and amount added on the end of loan (if following an income driven plan), and the taxes to be paid if the loan is forgiven. After paying off your student loan debt, Suze says that you can start dreaming. If an employer offers a 401(k) or 403(b) with an employer match, Suze suggests to contribute to the retirement account only up until the amount of the match.

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey, everybody. Happy holidays. 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, our team at YFP is taking off an annual tradition for us, as we reflect on the year behind us, plan the year ahead, and most importantly, spend time with family and friends. Since our team is on a break this week, I’m bringing back one of our most listened to episodes of all time. That’s an episode from July 2019, where I had the pleasure of interviewing the one and only Suze Orman, a number one New York Times bestselling author on personal finance with over 25 million books in circulation.

On the show, we talked about one of her books, Women & Money: Be Strong, Be Smart, Be Secure, and the advice she has for pharmacists, as it relates to managing their finances. Now, Suze has been called a force in the world of personal finance and a one-woman financial advice powerhouse by USA Today. She’s a number one New York Times bestselling author, magazine and online columnist, writer, producer, and one of the top motivational speakers in the world. Orman was a contributing editor to the O, The Oprah Magazine, for 16 years, the Costco Connection magazine for over 18 years, and hosted the award-winning Suze Orman Show, which aired every Saturday night on CNBC for 13 years.

With that said, it’s without question and honor to welcome Suze Orman to the YPF Podcast.

[INTERVIEW]

[00:01:28] TU: Suze, before we jump in to discuss how pharmacists can be more intentional with their financial plan, I want to give a shout-out to one of our avid listeners, Amanda Copolinski, who is a super fan of yours that said, “Tim, you need to interview Suze on the podcast. Her message will resonate so well with your listeners in the financial issues that pharmacists are facing.” So while you have impacted millions of people, Amanda is one of those. Because of your work, your message will now impact thousands more in our community. So thank you so much for coming on the show.

[00:02:00] SO: You’re welcome. But, Tim, I just have to say one thing about Amanda, seriously. Amanda asked, and because she had a voice, because it is so important, particularly, that women have a voice, and they ask for what they want, and because she asked for what she wanted, even though it was for the good of all, it obviously was also good for Amanda. She got what she wanted. So if we can just learn to ask for what we want, I mean, what’s the worst thing that could happen? I say no. So then it wouldn’t have mattered if even – Do you see what I mean? So, Amanda, you go girl, you go girl, you go girl. All right, we can go now.

[00:02:41] TU: So before we jump in and talk more about your book, Women & Money: Be Strong, Be Smart, Be Secure, I’m curious and want our listeners to know as well a little bit more about your background into this world of personal finance that has led you to transform millions of people on their own financial journey. Were there a series of events or an aha moment for you that set you on this path, on this journey to teach and empower others about personal finance?

[00:03:07] SO: Yeah. It was a very simple story, actually, where I was a waitress till I was 30 years of age in Berkeley, California. Having been a waitress for seven years, making $400 a month, to make a very long story short, I had this idea that I could open up my own restaurant because I made these people a fortune with all my ideas. My parents had absolutely no money. My mother was a secretary. My father was sick most of his life, blah, blah, blah, blah. And the customers I had been waiting on lent me $50,000 to open up my own restaurant.

So I’m, again, making a long story short. They had me put that money in Merrill Lynch, which was a brokerage firm. I had a crooked broker. Within three months, all $50,000 was lost. Now, I didn’t know what to do, and I thought I know I can be a broker. They just make you broker. Because during those three months, I really loved starting to learn about a world that was so foreign to me. I didn’t even know what a money market was or Merrill Lynch was.

Anyway, I went and applied for a job at Merrill Lynch because I knew I wanted to pay these people back that lent me $50,000, and I wasn’t going to do that at $400 a month, which was my salary as a waitress. They hired me to fill their women’s quota. While I was working for them, I realized what my broker did was illegal, and I also had been told that women belonged barefoot and pregnant. They had to hire me, but they would fire me in six months. So while I was working for them, I sued them with the help of somebody who worked for Merrill Lynch who told me what had happened to me was illegal. Because I sued them, they couldn’t fire me.

During the two years until it came to court, and they then settled outside of court because I was their number six producing broker at the time, but what happened was during that time, those two years, I realized, oh, my God, how many people out there don’t have the money to lose? Like all right, I was young. I could have somehow come back. But what if it were my parents? What if it were your parents? What if it was somebody who that was every penny they had to their name?

Even though I was a financial advisor, in terms of serving people at that time, I became an advocate to make sure that every single person that invested money, that their money meant more than the money I was going to earn off of them. I put them before me. People first, then money, then things. It was those people that mattered because I was one of those people. Before you knew it, I just rose and rose in the ranks, started my own firm, and here we are today.

[00:06:20] TU: Indeed. I think that’s a good segue into talking about your million-copy,

number one New York Times bestselling book, Women & Money: Be Strong, Be Smart, Be Secure. As you may or may not already know, the profession of pharmacy is made up of a majority of women, approximately 60-40 split, two-thirds, one-third of graduates today, roughly speaking. So I think this message in your book is certainly going to resonate with our audience.

You start the book with a chapter titled Imagine What’s Possible, and there’s a passage in there that I want to briefly read that really stood out to me. You said, “Women can invest, save, and handle debt just as well and skillfully as any man. I still believe that. Why would anyone think differently? So imagine my surprise when I learned that some of the people closest to me in my life were in the dark about their own finances. Clueless or, in some cases, willfully resisting, doing what they knew needed to be done. I’m talking about smart, competent, accomplished women who present a face to the world that is pure confidence and capability.”

So why, Suze, is this topic of personal finance, even for well, smart, accomplished women, such as the pharmacists listening, and heck, regardless of gender, I would say this is true. Really smart people that often can’t effectively manage their money. What are the root causes for them?

[00:07:42] SO: Yeah. You just used the word can’t. Oh, they can. Women have more talent in their little fingers, I’m so sorry to say, more capability than most men have in both hands, really. I don’t say that as a put-down to men. It’s just that women hold up the entire sky here in the United States. They take care of their parents, their children, their spouse, their brothers, their sisters, their employees, their clients, their patients, everybody, their pets, their plants. When it’s all said and done, when they’re 50 or 60 years of age, that’s when, for the very first time, they start to think about themselves.

You have got to remember that women have the ability to give birth, in most cases. They have the ability to feed that which they have given birth to, in most cases. So a woman’s nature is to nurture, is to take care of everybody else before she takes care of herself. So it’s not that she can’t. It’s she doesn’t want to. She doesn’t want to. She wants to make sure that her kids, in particular – A woman will do anything to make sure that her children are fine. That is not true with men. That is not true with men.

I used to think that it was until 2008 came along and when people were laid off of their jobs. They lost their home. They lost their retirement. They lost everything. Women would go back to work, working three or four jobs, a waitress, a cocktail waitress, anything, just to put food on the table. A man, if they had a $200,000 job, would not go back to work if all they were offered was $60,000. They weren’t going to do it.

Again, it’s not putting men down. Please, men, don’t think that because I don’t put you down. It’s the socialization effect of the difference between a man and a woman. So a woman just will do it all, but she won’t take care of herself. She chooses not to. In any aspect, she’ll only take care of her household expenses. You know why? Because her house holds everybody that she loves. That’s the only difference. That’s the only difference, boyfriend. That’s the only difference.

[00:10:06] TU: Which is a good segue to talk about healthy relationships with money because in the book, you mention that in order to build a healthy relationship with money, there are attitudes that women need to get rid of, with the first of these being these weights or burdens that you referenced that are commonly carried around, one being the burden of shame and the second being the tendency of blame. Can you tell us more about this concept of blame?

[00:10:29] SO: Yep. You know, in the book, I talk about truthfully that there is no blame big enough or shame big enough to keep you who you are meant from being. There just isn’t. Sometimes, we’re ashamed that we don’t know about money. Sometimes, we’re ashamed that we don’t have the money that we need to be able to give our children what they want.

Now, what I just said was very heavy, believe it or not, because it’s really difficult. I mean, I just experienced it. I had my niece here. In fact, I had all my nieces here, but one in particular that has a five-year-old child who loves Pluto more than life itself. He literally thinks Pluto is alive. He said to me, “Aunt Suze, how do I get a real Pluto?” I mean, “You mean a dog?” He said, “No, really. I want this Pluto to be alive.” You could just see, you want to give this kid anything this kid wants because he’s so fabulous. Not that – All your kids are fabulous, to you, anyway.

So a mother feels, especially if she’s a single mother, that she has to make up for the loss of a father figure or another mother figure or parent figure, and she does it usually by purchasing things for her kids because when they go to school, oh, but this kid has this cute backpack, and this kid has this, and look at these watches, and look at this iPhone. So it becomes very interesting that a lot of times, you’re ashamed of what you yourself don’t have. You’re not proud that you have anything. You’re ashamed of what you don’t have, and you blame it, usually, on somebody else. Or you blame it on yourself.

It’s – Fear, shame, and anger are the three internal obstacles to wealth. They just are. I have people – I know you’re talking about the book right now, but my true love at this moment in time is the Women & Money podcast because it’s on the Women & Money podcast that you can hear. You can hear via the emails that are sent in the shame and the blame that women feel, the anger that they have at themselves for staying in a relationship that they don’t want to be in, but they don’t have the money to leave, the confusion that’s out there. A lot of these women are so powerless because they’re not powerful over their own money.

[00:13:10] TU: In the book, you go through a detailed financial empowerment plan, which I think is incredibly helpful for our listeners to hear more about since we know many pharmacists are struggling with spinning their wheels financially, graduating now with more than six figures of student loan debt, the average about $166,000, having many competing financial priorities with home buying, starting up a family, building up reserves, saving up for retirement. The list goes on and on. So the question is where does one start when they are looking at so many competing financial priorities, and it can feel so overwhelming?

[00:13:42] SO: You start by, number one, really understanding the ramifications that student loan debt that goes unpaid will have on your life forever. So your number one, bar none, is your student loan debt, and you have got to understand the difference between paying back student loan debt on the standard repayment method and the income-based repayment methods. You have to understand that in your head, if you think, “Oh, I have all this debt. I’m just going to pay back a little bit because I don’t have that much of an income, and they’re going to forgive it in 20 or 25 years. I’ll be OK,” no, you won’t.

You won’t because if under the standard repayment method, your monthly payment should be $1,500 a month, and under income-based repayment, you’re only $750 a month, that $750 difference gets added onto the back end of your loan, plus interest. When they forgive it, when a debt is forgiven, you need to pay taxes on that, as if it were ordinary income. It is possible that if you do that over 20 years, you’re going to end up owing more than you even started with that they’re going to forgive.

So you have to be realistic here. If you’re going to go in this industry, if you’re going to become a vet, if you’re going to become anything with massive student loan debt, then you have to put your priorities in place. Your first priority is your student loan. After your student loan, hopefully, on the standard repayment method, it is paid off, then start dreaming. Ten years isn’t that big of a deal. It will come, and it will go. But don’t try to do it all at once.

[00:15:45] TU: Yeah. That’s really timely. I know for many pharmacists that are listening to this, they’re looking at, as I mentioned, six figures of student loan debt, $160,000, $170,000, $200,000 of loan, unsubsidized many of those, interest rates that are at six to eight percent. So obviously, those interest rates and the growing interest and the baby interest can have an incredible negative impact on their financial plan.

That being a good segue, I think, into the conversation about loan forgiveness, which has gotten a lot of attention with the upcoming presidential elections, and we’ve had some discussion with Bernie Sanders, Elizabeth Warren, have forgiveness plans that are out there. Not even getting into specific candidates or politics or the individual policies, I think it brings up an interesting discussion around loan forgiveness and the positives and benefits of that, relative to what people learn through the process of paying off student loans.

I know, for me, individually, going through the process of paying off more than $200,000 of student loan debt, there was a lot I learned and that my wife and I learned through that lesson in terms of budgeting, working together, setting goals. But I also understand that for many, and certainly would have been the case for us as well, not having that debt would have been fantastic. So how do we reconcile forgiveness relative to being able to learn through that process?

[00:16:58] SO: First of all, let’s talk about student loan debt to begin with and the viability of it. Is everybody crazy that we should have to pay, our children should have to pay $200,000 for a college education?

[00:17:13] TU: Amen.

[00:17:14] SO: Like is that, just to begin with, the sickest thing you have ever heard in your life? So while everybody’s dealing with the debt that we have, what we also should be dealing with is why are we paying that kind of money? Listen, if that’s what these financial institutions need to keep the buildings and the teachers and everything going, maybe we need to go to online universities that are fully credited that everything is done online because the burden that these kids are leaving school with is so heavy. It is the number one question that I am asked. What is so sad, it is the number one question that I do not really have an answer for because they will not let you discharge it in bankruptcy. They do not –

I mean, it is crazy that you pay the same amount of money to get a master’s in social work as you do an MBA. Really? So tuitions, number one, should be based on the area that you are specializing in. Hey, if you’re going to graduate and you’re going to make $200,000, $400,000, $500,000 a year, fine. Then you start spending money that then subsidizes those that are going to make $30,000 a year because they want to be a teacher. Or whatever it may be. But I do think what’s going to start to happen is that people are going to have to start going to community colleges for the first two years or so, and then probably switch over. But then, you have to be crazy if you go to a school that’s $50,000 a year.

Now, with that said, I get when you want to be a vet, when you want to be a pharmacist, when you want to be a doctor. That’s what they charge. So if you know, if you know beforehand that that’s what it’s going to cost you, and you have an unsubsidized loan, which means that it is growing while you are in school, can you at least pay the interest on that loan while you’re in school?

I know everybody’s going to say, “But, Suze, I’m working full-time at school. I can’t.” Oh, yes, you can. I had to put myself through school. I worked until 2:00 AM every morning. I started at 7:00. I worked seven days a week for four years straight. Don’t you dare tell Suze Orman you can’t do it. You most certainly can. You just don’t want to. When you have debt that you can’t pay back, this is not a choice if you can or you can’t, if you want to or you don’t want to. You have to, and it’s – I don’t mean to sound harsh to you, but you’ll thank me years from now that at least you haven’t accumulated an interest rate on top of everything else.

[00:20:02] TU: Suze, one of the most common questions that I get and I’m sure you get all the time as well is how do I balance paying off my student loan debt relative to investing and saving for the future? As we think about pharmacy professionals specifically, many of them have gone through lots of education to get where they are. They may have four years of undergrad. They have four years – Likely, some people more in terms of getting their doctorate degree. They may go on and do residency training.

So here they are, and they look at the clock and say, “Yes, I’m young. But I also know I need to aggressively save, and I keep hearing the message of I need to be putting away money for the future. But I’ve got $160,000, $180,000, $200,000 of student loan debt, unsubsidized loans, six to eight percent. So how do I balance the two of these?” What advice do you give people to help them think through that?

[00:20:48] SO: I would not not pay a student loan under the standard repayment method in order to then save in a retirement account. Obviously, if you work for a corporation that gives you a 401(k) or a 403(b) or whatever it may be, and it matches your contribution, then you have absolutely no choice whatsoever but to absolutely at least invest up to the point of the match. After that, your very first bill that has to be paid before you can decide anything is your student loan repayment.

After you know what it’s going to cost you to pay on your student loan, then you have to make a decision. Oh, do I have to move in with six or seven kids and all live together in order just to do whatever? What do I have to do after that payment? Is there any money left over? If there is, what will it allow me to do? It may only allow you, I know you’re going to really think I’ve lost it, to move back in with your parents for a number of years.

[00:21:53] TU: You’ve got to do what you’ve got to do.

[00:21:54] SO: You’ve got to do what you’ve got to do. For all of us to make it in today’s society, we have to either really enhance the nuclear unit and nuclear family, and really help each other. Or if we can’t do what we’re born into, then create our own nuclear family, whereas five or six of you get together and you go, “Okay, we have this problem.” It’s not like communal living, but it’s how do we solve this problem? So rather than you each have your own individual apartment, you each have your own car, you each have all of this stuff, what can you do as a group of people? Uber and Lyft and Zipcars, all of that came, especially Zipcars, about people who couldn’t afford to have their own car.

Again, I don’t mean to be Suze Smackdown here. But I do want you just to be realistic about your life and the independence dream, living on your own, having all of these things. Nothing will give you more pleasure than having money versus things.

[00:23:08] TU: Yeah. My wife and I talk often, as we think about our own financial situations, that we felt some of that pressure in our mid-20s of wanting to live up to the lifestyle that our parents have gotten to after 30 or 40 years. So I think really reshifting expectations and thinking about specifically today’s pharmacy graduates just really has to be intentional with their financial plan and change some of those expectations to set them up to be successful in the long run.

Shifting gears a little bit, I want to talk about planning for the future, and we recently had on the show Cameron Huddleston, author of the book, Mom and Dad: How to Have Essential Conversations with Your Parents About Their Finances, an excellent book that has me thinking more and more about the significance and importance of healthy and open financial conversations with family about money and ensuring that the estate planning process is well thought out and is in place.

I noticed that you offer a protection portfolio that is meant to help people take the worry out of protecting themselves, their assets, and their family. So tell us a little bit more about why this process of having a protection portfolio in place is so important and what information is compiled in a portfolio like this.

[00:24:19] SO: What’s really important is for everybody to understand that we have no control over the things that happen to us. Are we going to be in an accident? I mean, really, just the other day, Tim, you know I live on a private island, and I’m driving down this road. I mean, there are no cars on this private island. There are only golf carts. There were only like – There’s 80 homes. There’s nobody here most of the time. I’m driving back to my house, and I come up on a golf cart that overturned on these four 20-year-olds, and they were seriously hurt, all right? I mean, five minutes before then, they were on this private island, having a fabulous time. Now, I’m like, “Oh, my God.”

So anything can happen at any time, and every one of you needs to be protected against the what ifs of life. May you always hope for the best, but may you plan for the worst, whether it’s an accident, an illness, an early death, whatever it may be. The number of emails I get from 40-year-old women, 50-year-old women, 30-year-old women saying, “Suze, my spouse died. I have three kids. I never expected to be in this situation.” They go on and on and on about it.

This is also, what I’m about to tell you, very important if you have parents. Because if you have parents, the question becomes like – My mom lived till she was 97. If something happens to your parents, they lose their mind, so to speak, they have dementia, they have Alzheimer’s, and they can’t write their checks anymore or pay their bills, who’s going to take care of them? You can’t do anything for them, unless you have what I call the must-have documents. Not only a will, a living revocable trust, an advanced directive, and a durable power of attorney for healthcare. You must have those.

But most of the time, lawyers tell you, “All you need is a will.” Oh, give me a break. The less money you have, the more you need a living revocable trust because wills make it so that in most cases, if you own a piece of real estate or whatever it may be, your estate has to go through probate. Guess who gets the probate fees? The lawyer that told you all you need is a will. So a living revocable trust not only passes your assets from one person to another within a two-week period of time, no fees, nothing. But in case of an incapacity, it will say you can sign for so-and-so. So-and-so can sign for you. It sets up your estate every way you want it, and it also helps you because minors cannot inherit money.

So if you have young children, and both you and your spouse are killed in a car crash, something happens, the money can’t go to your minors. If you left your money to them via your will, good luck. It’s going to end up in a blocked account until they’re 18. So with that said, most trusts, if you go to see a trust lawyer, first of all, you have to know there are good trust lawyers. Most of them are not, are at least $2,500. Every time you make a change, $500, $1,000, you’re just sitting here talking to me about you don’t have even have enough money to pay your student loan debt. Where are you going to get $2,500 to do a will, a trust, an advanced directive, a durable power of attorney for healthcare? Every time you need to make a change, where are you going to get the money to do that?

So years ago, with my own trust lawyer, I created what’s called the must-have documents. These documents are my documents. If you were to look at my trust, my will, everything, you would see these. But I wanted to do it at a price that every single person could afford. So we created over $2,500 worth of state-of-the-art documents for approximately $69. What’s great about these documents, not only are they fabulous. Every time the law changes, they automatically get updated, but you can change it as many times as you want.

So if you go from one kid to two kids, you go back to your computer, you change them. So you never have to pay for it again. If you’re interested, really, in that offer, you can just go to suzeorman.com/offer. Through there, it’s $69. Otherwise, you’ll see it sold for $100, $90. They’re sold for all over the place. But these documents have changed the lives of millions and millions and millions of people over the years.

[00:29:28] TU: Yeah. I think it’s also important for our listeners just to consider the peace of mind of having all of this together. When you think about all of the things that are found in estate planning documents, and my wife and I went through this process we’ve talked about on the podcast before, where you put together insurance policy information and where your accounts are at and birth certificates and all of the papers that would need to be readily accessible, in addition to all of your estate planning documents. To get there and the conversations you have and the peace of mind it provides is incredible. Again, suzeorman.com/offer will get you there.

Suze, I want to wrap up our time together by talking about legacy, and I’m fascinated with learning more about what drives very successful, highly influential individuals such as yourself to take on the life’s mission and work that they do. So for you, as you look back on a career that is undeniably wildly successful and that has positively transformed the lives of millions of people, what is the legacy that you’re leaving?

[00:30:31] SO: I hope the legacy that I leave is that women in particular, but men as well, but women in particular really know that they are more capable than they have any idea, that they will never be powerful in life until they’re powerful over their own money, how they think about it, how they feel about it, and how they invest it, and that every one of them, one of them, has what it takes to be more and to have more. They just have to want to.

I don’t really know. I don’t know how to answer that because I never think about what I’m going to leave. I only really think about what I’m doing. I can tell you right now, like one of my friends said to me, “You just can’t help yourself, can you, Suze Orman?” So with the Women & Money podcast, people write in their emails. I keep saying, “I’m not going to answer them. I can’t answer all these emails.” Now, I’ve answered almost every one, except four. I’ve got four left, and then they’ll mount up again, and blah, blah, blah, blah.

But I have such a desire for every single woman and the men smart enough to listen, but really for every single woman to get the right advice, the best advice, to start to educate them so that they become smart enough, strong enough, secure enough. So they can start educating their daughters and their sisters and their aunts and their moms and their grandmas and everybody. So that we start really teaching one another because I’m just so afraid of where this world – Truthfully, the hatred in this world that we are experiencing right now, I am very afraid of where it’s going to take us next year. So I hope I leave a legacy of love and power. That’s what I really hope I leave.

[00:32:45] TU: Yeah. What really stands out to me, Suze, the work that you’re doing, and you alluded to this, is the generational impact that it’s having, and that will forever go on. I mean, that’s an amazing thing, when you think about transforming somebody’s personal financial life. Let’s say they’re a mother, and they pass it on to their kids and their friends and their cousins and their network, and that gets passed on to another generation. That is incredible transformational work that will forever have impact. So I thank you for that work, and I know it’s had an impact here on me in even having the opportunity to talk with you today.

To our listeners, as Suze mentioned, she responds to her requests as it relates to the podcast that she has each and every week, the Suze Orman’s Women & Money podcast. So if you have a question for Suze that we did not touch on during today’s show, make sure to reach out at [email protected].

Again, as a reminder, make sure to head on over to suzeorman.com, S-U-Z-E-O-R-M-A-N.com, where you can learn more about Suze, including her blog, the podcast, comprehensive resources, live events that she hosts, and books and products that are designed to help empower you in your own financial plan.

Suze, again, thank you so much for coming on the show, and I’m grateful for what you were able to share and the impact that it will have on our community. Thank you very much.

[00:34:04] SO: Anytime, boyfriend. Anytime.

[END OF INTERVIEW]

[00:34:07] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

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

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

[END]

Current Student Loan Refinance Offers

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

Recent Posts

[pt_view id=”f651872qnv”]

YFP 286: YFP Planning Case Study #5: Modeling Retirement Scenarios and How to Handle a Large Cash Position

Posted on December 15, 2022March 10, 2023 by Caitlin Boyle

YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP® is joined by Kelly Reddy-Heffner, CFP®, CSLP®, CDFA®, and Christina Slavonik, CFP® to discuss retirement scenarios and how to handle a large cash position in this YFP Planning Case Study.

About Today’s Guests

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

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

Christina Slavonik, CFP®

Christina is a Certified Financial Planner™ located in Texas and has over 15 years of financial planning and industry experience. She received her Certificate in Financial Planning from Southern Methodist University.

Christina is passionate about helping clients live their best lives now while not losing sight of the future. She enjoys the collaborative approach of creating a custom financial plan with her team at YFP.

Episode Summary

YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP®, is joined by Kelly Reddy-Heffner, CFP®, CSLP®, CDFA®, and Christina Slavonik, CFP® to discuss various retirement scenarios and how to handle a large cash position in this YFP Planning Case Study. Tim Baker introduces the fifth case study, examining the fictitious couple, Jane Smith and Tyra Lee, from Westchester, Pennsylvania. Jane, age 59, is a Certified Registered Nurse Anesthetist, and Tyra, age 60, is a pharmacist working part-time. Jane and Tyra also have two teenage boys, Thomas and Robert. During the discussion on this case study, listeners will learn about the couple’s plans to retire in three to five years, earlier than previously expected. Tim, Kelly, and Christina discuss options for care and long-term care insurance concerning Jane’s elderly mother, college plans, and a recent car purchase for their children. The discussion leads to considerations for how the couple might handle their massive cash position and whether or not to pay off debts with their reserves. Tim, Kelly, and Christina talk through the couple’s housing situation as they transition to retirement, their plans for purchasing a cabin or potential forever home, and how that may impact the financial plan.

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TB: You’re listening to the Your Financial Pharmacist Podcast, a show all about inspiring you, the pharmacy professional on your path towards achieving financial freedom.

Hi, I’m Tim Baker and today I chat with two important team members at YFP planning Kelly Reddy-Heffner and Christina Slavonik, both CFPs.

In this episode, we discuss our fifth case study of a fictitious couple Jane Smith and Tyra Lee, and their teenage kids Thomas and Robert. Jane is 59 and is a certified registered nurse anesthetist while Tyra, age 60, is a pharmacist working part time. We cover a bevy of topics that include in retirement in three to five years, where we model out different scenarios using our financial planning software. We chat about long-term care insurance, how to handle their massive cash position, and whether they should pay off some debt, their housing situation as they transition into retirement, college planning for the boys, and potentially how to handle care for Jane’s elder mother.

[INTERVIEW]

[00:00:58] TB: What’s up everybody? Welcome to YFP planning case study number five. So, I am joined today by Christina Slavonik and Kelly Reddy-Heffner, two of our CFPs on the YFP planning team. So, Kelly and Christina, welcome.

[00:01:14] CS: Thank you, Tim.

[00:01:15] KRH: Thanks, Tim.

[00:01:17] TB: So, we are recording this right before Thanksgiving. So, excited to get this recorded in the books and then enjoy some time off with family. I just would like to say that we are very thankful for all the listeners out there, thankful for the community that we’ve built, thankful for the two of you, Christina and Kelly being part of the team. And yeah, just really excited for the upcoming holiday season. Let’s jump into it.

So today, we are exploring a couple in Westchester, Pennsylvania, Jane Smith, and Tyra Lee. So, Christina, you’re going to take us through the first part of the fact pattern, Kelly is going to get into goals. And then, I’m going to talk about the wealth building, wealth protection tax and some of the miscellaneous stuff. And then we are going to dissect this client case study and see what are some planning opportunities? What are the things that should be discussed with the client, that we should really get in front of to make sure that they are on track with their financial plan? So, Christina, if you please kick us off on Jane Smith and Tyra Lee.

[00:02:18] CS: Sure. So, the clients we’re looking at today are Jane Smith, who is a CRNA, aged 59, makes about 194,000 a year and Tyra Lee, who’s a part time pharmacist, age 60, salary is 65,000. They are married filing jointly. They have two sons. I have Thomas, who is age 17, and is currently a student, and Robert, who was 14 and currently a student as well. They reside in Westchester, Pennsylvania, annual gross income is 259,000, which breaks down into monthly around 22,000, and then net after taxes and whatnot, 15,000.

Expenses for these people are fixed at about $5,977 a month. Variable expenses are the 4,500 a month, and the savings of about 4,400 or so. Their current living situation is they’re in a five-bedroom, single-family home outside of Philadelphia. They apparently have a great first floor master. And if Jane’s mom had to move in, they could accommodate her as she is ill and cash resources are currently limited.

[00:03:37] KRH: Complicated, right? This seems like a scenario that we’re seeing a little bit more of with some of our like pre-retiree clients, just that intersection between nearly adult children, but not quite adult and parents kind of having some needs as well. They both would like to retire over the next couple years. But they are thinking through making sure the children are taken care of, parent needs are also taken care of. They have a fairly large cash position and are not sure if they should leave it in cash or pay off some things. They have that home in Philadelphia that they like, it’s functional, but they’re not sure that this is the forever home where they want to stay indefinitely.

With the kid’s college tuitions, one tuition has is about to start, I think based on the age. One is a little bit further in the future, but they kind of want to see what the 529s are going to cover, and what they can maybe do out of pocket and what they simply can’t do. They’ve asked about long-term care insurance, kind of understanding the premiums and how those could change in the future. They might want to buy a lake cabin, maybe that could be the forever home or the primary residents. If they wanted to retire earlier, they had started at age 65. Could they do it like 62, 63? They’ve got a little bit of debt. They have a car note for their own vehicle, 1.9% interest rate. There’s three years left on that note. They also bought a car for the teenage children, so there is a payment of 545 per month, interest rates 2.25, three years also left on that. Obviously, they made those purchases prior to our current interest rates, or it would be much higher. They also have a reasonable interest rate on their mortgage at 2.75. But it is a pretty recent purchase. So, the amount left on the mortgage is pretty high and that monthly payment is 2,858. So, early in that, and that’s one of their questions.

[00:05:58] TB: So, picking up on the asset side of the of the ledger, Kelly had mentioned that they do have a good amount of savings tucked away. So, 143,000 in a joint savings account, 3,000 in check in, and then another 9,000 in an HAS that’s Jane’s. From a 401(k) perspective, looks like Jane is putting in 11%, which is the max for 2022, 20,500 into her fidelity 401(k) through her employer that’s invested in a target date fund for 2030. Tyra also has a 401(k). She’s putting in 31.5%, which is also max amount of 20,500.

Now, for the two of them, one of the things we’ll talk about that you have a catch up available if they want to do that, but she’s also her Vanguard, she’s in a Vanguard target date 2030. Jane has a Roth IRA. This is from a previous employer. It’s invested in a Vanguard 2030 fund. She’s not contributing anything to that presently. Tyra has a SEP IRA from her previous consulting work as a pharmacist. It’s 100% in the S&P 500. So obviously, there’s some little bit differences there in their allocation. And then they also have a taxable account that they’re putting in about two grand a year, $167 a month into a Vanguard target date 2060 fund.

So, it looks like this is going to be maybe a retirement fund, maybe for the boys. We have to kind of get some clarity on that. They do have a primary home that’s valued at 920,000 versus the 683,000 and change that’s left. And then, looking to potentially, maybe buyout another property that they could transition to. We’ll talk about that in a bit.

Overall, you’re looking at total assets, about 1.9 million, total liabilities of just over 725,000. So, net worth is about $1.25 million. We look at the wealth protection stuff. Jane has an individual policy, 1.5 million that expires at age 65. She also has a group policy through employer which is one-time income 194,000. Tyra has a $750,000 policy that also expires at age 65. And then she also has a onetime group policy through employer which is 65,000. They both have short term and long-term disability through their employer that pays out a 60% benefit for short term and long-term disability. They both have their own professional liability policies. And the estate planning documents are up to date.

But one of the things that they’re not sure of is if Jane’s mother has anything, which obviously can affect their financial plan. From a tax perspective, they use YFP Tax. So, thank you very much for that. They’re concerned about their pretax retirement investments and when Roth conversions might be helpful, so obviously there could be time where they’re maybe sunset into retirement, so they might be in a lower tax bracket. So, it might be beneficial to convert some funds over to the Roth. And then Tyra is willing to work more over the next several years if both can retire early. They’re wondering if they should pay off their debt based on the interest rates, and they also want to make sure that they are maximizing the FASFA for their sons.

So, a lot of stuff to talk about. What are the big things, I guess for you, Kelly, that jump out, that you would want to tackle first with regard to Jane and Tyra?

[00:09:07] KRH: Probably the first two is just like the taxable account, the cash position, like having a good understanding of what they have those in place for. Is it a future expense that’s very short term? Is it something more intermediate where we could do a little bit more with those resources? I do think for the wealth building, probably three of the investments are okay-ish, like the target date funds of 2030. I would want to just double check what’s in those funds, make sure they’re close to the right asset allocation, but the SEP IRA for retirement is a little bit more aggressive than it should be for their age, and I suspect the Vanguard target date 2060 potentially could be as well. That seems to make it seem like it’s for retirement, if it’s in the target date fund, but something that I would agree should be confirmed, for sure. But also, what Jane’s mother’s need is, I think, if some of the cash has been earmarked towards helping with some of her care, that would make a difference in kind of the recommendations for how to best put it to work, short term, midterm or long term.

[00:10:27] TB: My thoughts on the on the estate plan documents. I definitely would run out would want to run those to ground. We had some content about a book about how your parent’s estate planning or lack thereof can really affect your own financial plan. “Mom and Dad, we need to talk.” We can link that into the show notes. But I think that’s a vulnerability, and we want to make sure that that’s lined up. So, we’re not having to sue for conservative ship or do things that, if those documents are in place, are really going to put us in a bind later on.

From an asset allocation perspective, Christina, how would you broach this subject? Because obviously, there’s, Kelly’s point, digging in to fidelity 2030 target date fund, Vanguard target, not all target date funds are created equal. We have one that 2030 is probably a little bit – we’re going to be a little bit more conservative than the S&P 500, or the 2060. So, what would be your process to kind of get them in the right model right now, three to five years from retirement, they’re probably going to want to be the most conservative that they ever want to be. Because if the market dips now, it’s very hard to uncover, and that’s where we have to start having conversations of potentially pushing retirement age back, which is not a fun conversation to have. So, from an asset allocation perspective, how would you tackle that with Jane and Tyra?

[00:11:46] CS: Sure. So, first thing I’d want to look at is taking a deeper dive, like what exactly is built into these target date funds? How are they allocated? Mostly looking at the ratio of equities to bonds. So, someone who’s about three to five years out, they can be a little risky, but we want to see more of the bond exposure. Things starting to dial back, their savings years, so maybe looking more at a 60% equity, 60% to 70%, equity 30% to 40% bond allocation for them. And yeah, and then revisiting the S&P 500, for sure, since that is definitely a lot more aggressive than we would want them to be invested at the moment.

Also, another thing to consider too, Tim is we got to get people thinking too, what does my cash needs? What are those going to look like, as I’m getting closer to retirement? So, yeah, we might have some money earmarked that we could be investing, but we still need to have money set aside for emergency fund. Maybe, as you get closer to the retirement date, like have at least a year or so of cash saved up, that is one thing that we’re considering keeping it in a money market, or high yield savings type of environment as well.

[00:13:06] TB: Yeah, for sure. I mean, I think really looking at our processes to really look at the investments by approaching the client with a risk tolerance and seeing what comes out there. And then kind of comparing that to what we think their risk capacity is. So, risk capacity being like, what is the risk that they should be taking? The risk tolerances, what is the risk that they want to take? And they should be taken to your point, Christine, a lot less risk, because we want to really protect that principle. We don’t want to lose anything, and potentially have to push back the retirement or do something different because of where the markets are going.

So, I think foundationally, making sure that that’s there is going to be really important. And to Kelly, your point, 143,000 in cash money savings is a good chunk of change. Christina, you mentioned like, you didn’t say the bad word, but the bad word would be like, what is the budget had been through retirement, which is going to shape the emergency fund. It’s going to shape a lot of things, what’s the retirement paycheck going to look like? The clarifying questions I would want to have is like, what is that 143,000? Is that to pay Thomas’s tuition next year? Do we run that money through the 529? I don’t see a 529 on the balance sheet. But the benefit that PA residents get from a state tax deduction is pretty generous. I think it’s 16,000 per beneficiary, 30,000, 32,000 per filing jointly.

So, if you can shelter some of that, that would be great. But what is the savings account for? What’s the taxable account for? Is the taxable account, is that earmarked for retirement? They’re in a position right now where I’m assuming Jane, if she’s not beyond 59 and a half, she will be sued. So, all of these 401(k)s, Roth IRAs, SEPs, like they can be accessed and used for whatever purpose so we can use some of that money for things that are other than retirement, but I would just want to clarify, what’s the savings account for, what’s the taxable account for, et cetera, before we kind of get into how to deploy these accounts, and again, making sure that, we need an emergency fund, let’s not invest it in a risky way. But we want to get that yield. I think, high yield savings accounts are now at 3%. You can get CEs at 4%. Even the eye bond is still attractive. I think it’s 6.8% plus a fixed rate at point 4%. So, there’s some liquidity issues there. But that might be a good place to park some dollars. You can put up to $10,000 a year there.

So, Kelly, if they’re asking, are we on track for retirement? How do we best answer that question? I’m a visual learner. So, are there things that we can show the client to kind of model that out a bit? What’s that look like on your end?

[00:15:50] KRH: I think these are very, very good questions that we do get from clients. And we ask clients to work on uploading and linking documents to eMoney. So, it’s a software tool that we use, that can be very helpful and looking at where things are at. Even to answer the question about the 529, they’re not listed on their spreadsheet. But they do have –

[00:16:17] TB: Oh, they do have. Okay, good.

[00:16:19] KRH: – do have them. And actually, they don’t pull across on a balance sheet either. So even when we’re working with eMoney, because they’re technically assets for the beneficiary. So, there are the two 529s in place. And you’re right, that Pennsylvania is quite 529 friendly with the rules. But when we get that question, like, good, not good, like we do a nest egg calculation, but then we can also go in the eMoney and look at goals, just to see overall. I’m going to pick one of the scenarios that they were kind of asking about the retire early. The baseline facts is like, based on now how things look towards retirement, and they originally had an age 65.

So, we’ve got the 65 in here, this 95% would suggest like, looks pretty good for being able to retire at that age. We have a couple expenses embedded in. We’ve got college costs, but we can add in college, I mean, we could probably spend the whole rest of the day and Thanksgiving, turkey dinner, talking about things we can do in eMoney. But just to give a high-level overview, we can enter education as like only the 529s cover that expense or do they want to pay out a cash flow a certain amount to help with that goal. We can enter specific school, so they wanted to see public school, public state school, and they wanted to see a private school just to have a comparable.

So, we’ve added in both of those. From here, I like to look at some cash flow reports, so this gives you a like, this looks reasonable and doable. Even the retire early like looks pretty reasonable, but then it is good to see the layers just to make sure things are input pretty well to reflect what the client wants to accomplish. Do the expenses. Tim, you’re right, spot on, are the expenses accurate for what the client is looking to do? So, we entered in living expenses, their liabilities, going to be the mortgage. They have some other expenses added in so they have car purchases every couple years. This is the 529 expense coming across.

So yeah, we do like to take the information that the client provides. Our data is only as good as what accounts are linked. But then we can go back in and run some of those scenarios too. Can they buy the lake cabin? Now, it’s entered as an additional property, not instead of their primary residence. This is less successful. We do like to see above 80%. I guess, I probably on the conservative side like to see 85 to 90. I think when Christina and I look at scenarios, because there’s things that can happen in between that really do impact. Like this really does not include Jane’s mom. Does a certain amount need to be embedded to help Jane’s mom and what is that amount per year? But we can add that? Is it an extra $1,000 a month for her care? Is it 500? Is it something different? But those are important combo situations like what do Jane and Tyra collaboratively think they can do? The conversation is really important with both of them. They have to be on the same page about what they’re willing and able to do and maybe make tradeoffs about to help in that scenario.

[00:20:19] TB: Yeah. So, for those of you that are listening to this, maybe in the car, don’t necessarily see the visual, if you’re not watching us on YouTube, on our channel, what Kelly is really presenting here is an illustration of what ifs. If we buy a lake house to retire early, what is the probability of success, if we have to use these monies for different goals that we have? Are we still going to have money at the end of our plan?

So, what the tool does is that it uses simulation, it uses 1,000 randomly generated market returns and volatility, called trial rounds to say, okay, 95% or 950 times out of 1,000, there’s going to be money leftover of the plan, and anything above the threshold of 80% or 82%, is good. And typically, if it’s lower, we’re going to adjust the plan as we go to make sure that there is money left over. So, the idea is to keep, there is money, between now and then when you when you pass away.

So, the nice part about this is it allows us to kind of toggle on and off different scenarios, to see how it affects the overall nest egg, so to speak, and provide some math behind it. So, the nice part about this is that, you can kind of talk to the client, and you can talk to Jane, you can talk to Tyra and you say, of all these different things that we’ve extracted from your goals, whether it’s a cabin, or being able to take care of your mom, or retire at this age versus this age, what’s the most important? And then basically turn those on and off to see, okay, once we get to this threshold, then the plan might be in jeopardy and we can adjust from there.

But I think this is great, and a visual perspective, and this is the way I learned. I think, like from a client impact, I think, this is huge. Yeah, this is great modeling Kelly. Christina, when you look at this particular client, at least from some of the models that we’re seeing, are there things that you would want some additional information, whether it is Jane’s mom, or maybe more additional information on what is the goal for the education planning? Is it the put the boys through four years of school? Is there a certain percentage? Are we using some of that? Are we counting on scholarships? Are we counting on debt? What are some of the approaches that you would take with the client to kind of refine this out a bit?

[00:22:39] CS: Yeah. So again, just digging more into the weeds. And to your point with the education. Yes, are they going to be relying strictly on loans? Or are there scholarships involved? Or is it a combination of all three? Are they going to be funding, maybe a third of it, from their cash flow? Some from the 529, others from scholarships?

So, we’d like to see some diversity, so to speak, when it comes to funding college needs, especially if 529 is not going to carry the weight. And then looking at savings and withdrawals for the education expenses, as is it does look like there is going to be a shortfall. So, having more of those conversations, again, what is the 143,000 saved for? Is part of that going to help Thomas and Robert. But then again, looking back at what they had given us with the 529, how is it invested? Kelly, when you had shown us that it looked like it was probably just in the money market at the moment, and I would be more curious to see, well, A, is it linking properly. But B, is it indeed invested? You have to have a good solid allocation in there, if you want that money to work for you, over the period of time they have left.

[00:23:53] TB: And probably a good chunk of that money for Thomas, who’s the 17-year-old should be for a money market. It’s almost like you were saying like you want, maybe, like a year’s worth of cash for retirement. That might be true for the first year or so for tuition. But then the balance of that should be invested. I think Thomas had 45,000. So, a good chunk of that should be either in a balanced fund or something like that. For Robert, who is 14, and he saw us four years until the first year, we probably can be a little bit more aggressive. And then, as we get closer, same thing with retirement, we’re having more of a bond allocation, less of an equity allocation. The money mark is going to do well today just because of inflation, but you’re also being killed by that purchasing power that’s kind of being eroded every year.

So, what Kelly is showing right now on the screen is kind of the shortfall, the projected shortfall for the education expenses and it basically showing us what percent is underfunded, which is not necessarily a bad thing. We kind of talked about the rule of 33% and where we want, if we’re saving for a kid, a kid’s college, and we don’t really know what our goal is, it might be okay, we’re going to try to get x amount into a 529, pay x amount from , in that year, that’s the salary in that year for college. And then maybe the last third comes from scholarships, student loans, et cetera.

So, this is kind of showing us what has been underfunded so we can kind of plan for that and know what to do, so great stuff. Kelly, can you shift back to the case study real quick, I want to have a discussion that we really haven’t had much discussion on. We talked about Social Security in the past, I think, again, pulling their statements is going to be really important to see where they’re at. But I really want to talk a little bit more about the long-term care, and then Medicare decisions. So, walk me through, how would we approach those? Obviously, these are two things that, I think, there’s a lot of kind of negative press around long-term care insurance. It shouldn’t be something that we sell fund. What is long term care insurance? Why do I need it? So, I guess, let’s start there, how would we approach this particular risk that Jane and Tyra have to their financial plan?

[00:26:12] KRH: I will admit, it is a little bit newer territory for us, like typically, with our client base, we’re not having a ton of conversations about an immediate need. So, we have done some work recently, just to be better educated and to kind of get up to speed on some of the products. So recently, talking through kind of two products. One is a pretty traditional, like, pay a premium, get a policy, and it covers a certain amount of care per day, calculated out on an annual basis. And one of the biggest issues with those policies is like premium goes up. We had some education that I found to be very concerning, and enlightening, just so we know the premiums can go up. But with state regulations, there’s not a ton of regulation on how much the premiums can go up. So, that’s one of the challenges is like, if you buy a policy, you have it for like 10 years, your age 75, and the premium goes up and it becomes unaffordable. Pay 10 years into it, but you have to stop, that’s a concern.

So then, there’s a hybrid product that has some insight into that premium piece, but also provides a death benefit. Because the other concern is you never need the long-term care. You’ve paid for this premium, you have, unfortunately, a death event, without any care happening, and all that money has not been allocated anywhere else. So, there are some things out there. I think that’s kind of one of the things we’ve been working through, is understanding those policies, and then write the comparable, like many insurance products, is like if you paid for it out of pocket and funded it yourself. So, kind of running some scenarios like, that’s one of the things we started to build out, and that eMoney scenario was, if you take the premium and put it away, like how much could that grow? Because it seems like the premium, happy medium timeframe is like age 60 to 65 to start a premium then.

But again, a lot of things that we are learning about too, because there’s been a lot of movement. I think there used to be the person that was talking with us about it, like thousands of long-term care providers, like insurance providers, and it’s down to a very small quantity now, so a lot has changed.

[00:28:46] TB: Yeah, when I was first getting into the industry, it was that and it was tons of providers, premiums going up. I think the industry didn’t have enough information, because this is kind of a newer product, and some of these policies were priced, not correctly. They were – I think it was like low interest rate environment, which makes it makes it tough for them. People are living longer, or they’re alive longer with conditions that pay out a policy, because our medicine is better. I think though that, we’ve kind of gone through the burst of the bubble. I think a lot more of these policies have stabilized. I think you can still see increases I think the hybrid model is good in a sense that there are – it’s guaranteed, so your premium is fixed. Whereas, that’s not necessary for long term.

To back up, for those that are thinking like what are we talking about, long-term care, really what it is, it’s a broad range of skilled custodial and other types of care that’s provided over an extended period of time, due to things like chronic illness, physical disability or some cognitive of impairment. And the scary number of this is like roughly 60% of Americans are going to need some type of like long-term care in their life, and I think that number is continuing to go up. So, this is where, I think, a lot of people think of like nursing home, and that’s not we’re really talking about. I think the idea behind aging in place and keeping you in the home, as long as possible.

So, if you are getting older, and you’re starting to have problems bathing or dressing or with personal hygiene or eating, you would have someone come in and help and aide. For a lot of people, it’s a family member, or it’s a spouse, which can take a toll on their own mental, physical and financial health. I think, my perspective on this is evolving, but I think that studies have shown that couples, when they look at this type of care, are willing to spend, on average, in the range of $2,500 to $3,000 per year to get some type of policy, and you can get pretty decent coverage by doing that. I think it’s establishing a baseline at least to cover like home care. So, to have somebody come into the house and 80% of care that is provided through these policies, is homecare.

I think conversation, is what really what we need with Jane and Tyra. I think it’s to kind of demystify it a little bit, maybe not make it as scary as I’ve been led to believe or has seen. Because this is a major risk, like if you can – this can be a major drain on the financial plan if you don’t have that large reserve of cash or investments, or a policy in place. So, I think it’s important to kind of get in front of it, and just have a have a good conversation and at least have a baseline policy for homecare, I think would be a good starting point. And then see like, what are the social like, is Thomas, is Robert, are they going to be a safety net? Or my dad always says, “Just put me on the ice float and give me the Eskimo retirement.” That’s kind of what he’s looking for.

But I think, some of the social networks that you have, in terms of talking through this is going to be important as well.

Christina, how about Medicare? What’s your take on this? Obviously, they’re a couple years away from enrolling in Medicare. But how do you approach this with Jane and Tyra in terms of how that works?

[00:32:21] CS: Yeah, so I think it’s just giving them a high-level approach to what to expect like a year in advance. So, when you reach age 65, the window opens up three months before their 65th birthday, and they have until three months after their 65th birthday. So, in essence, is a seven-month period. You can go in, enroll your Part A, Part B, if necessary. Most of times, it will be, because if you’re retiring, you’re going to be off of your employer’s medical plan, and you may not have to worry about correlating benefits at that point. So, it’s really not that scary. And then, on an annual basis, once they are involved with Medicare, there’s ways you can change up your plan or your drug plan as you need to, and there are resources and people to help you with that.

[00:33:12] TB: Yeah, the enrollment period is going to be super important, right? It’s typically three months before you’re 65, and then three months after you turn 65, so it’s like a seven-month enrollment period for initial. You want to do that so you’re not penalized later, that can happen, so you don’t want to blow through that enrollment period. I think that you get a ton of mailers for that to remind you.

But I think the big decision from there is like do I do Original Medicare A and B? Or do I do a Medicare Advantage plan which is a kind of more like private insurance HMO that Medicare reimburses for on a per participant basis? There’s I think, hundreds of plan Ds, which is the prescription. Do you get a Medigap policy with Original Medicare? There are so many things that go into this. And that’s going to go into like, what’s your view on, do you want convenience? Most providers will accept Medicare insurance, but it’s not necessarily as simple as maybe like a Medicare Advantage. If you’re going to be a snowbird, like if they decide, “Hey, we’re going to buy this cabin, but we also want to buy a place in Florida.” Having care coordinated between those two, if you’re in a Medicare Advantage is more like an HMO. So, if you’re out of network, that can be problematic.

There’s lots of different things that go into this. At the end of the day, this is probably one of the bigger concerns, I think, that people have is like, what does this look like? If there is a gap, if they decide to retire before age 65, what do they do? Is that something like Cobra? Does the employer offer anything that’s becoming more and more of a dinosaur feature of late? The other thing that we didn’t mention that, Christina, we were talking about off mic was like, even long-term care insurance, I think we’re seeing that show up on an employer benefit. So, really taking a look at that and what’s provided there. The big things with long-term care, just to circle back to that is like, when we’re looking at this, what is the monthly benefit that we’re targeting? If we are trying to cover home care, you can – Christina was telling me about this awesome calculator that you can find at your state, this is what it costs. So, it’s 5,000, it’s 6,000, like, we’re going to target that. What’s your deductible period? So, that’s the elimination period or the time you have to wait before you have benefits. So, a lot. It’s just like disability insurance, a lot of them are built as 90 days. How long is the benefit going to pay out? And then like, do you want an inflation rider?

So, to circle back on those things, those are the conversations we’re going to having concert of like, what do we do with Medicare? If there is a gap in Medicare, what do we do, et cetera? But I think Kelly, the only other thing that we probably should discuss briefly, that the client brought up, I think this is the one thing that I have outstanding here is the debt. So, one, is should they be concerned about the amount of mortgage debt? Should they use some of that cash set savings for the car note and pay it off? Obviously, interest rates have moved a lot, over the last year or two. So, what would be your answer to that question? Obviously, we probably need some more context with what’s going on in different parts of the plan. But how would you approach that with them?

[00:36:07] CS: Right, so it is interesting, like, I think just baseline, high level, the mortgage, usually, it’s more desirable to not have a mortgage in retirement to have the cash flow be less. But I am intrigued by like, this is not the forever home. It’d be nice to know, well, like how long? When would the transition take place to either a smaller home or to that cabin? We see a lot of people talk about being expats too, which is kind of interesting, depending on what happens with Jane’s mom and the kids in college, is that on the radar as well?

So, like the mortgage, I feel like normally would be a priority to not have on the table. But in this case, I don’t have as much of a concern about it, if there is a potential for a transition that we can talk through, to see what is affordable. Is the 2858, is that affordable in retirement with the rest of the expenses? The cars, I would say that interest rates are lower, which is good. I wonder if maybe the kiddos would like to contribute and pay off if they’re going to eventually take ownership of the car. I feel like having the kids have some type of responsibility, some piece of the puzzle that they have to take care of, whether it’s paying part of their car insurance, definitely upkeep, maintenance gas. I personally think it’s an important piece for them to feel some type of responsibility. So, I guess I’d be curious as to their student jobs and the college, and can they help take care of the one vehicle. I guess, I’d be inclined to maybe pay off the other depending on what the other goals with the cash flow is.

[00:38:03] TB: Yeah, mathematically, I wouldn’t be in a rush to pay off the notes if you can get 3% in a high yield and both these notes are 1.92, 2.25, doesn’t necessarily make sense. But some of that is just kind of peace of mind to clear the balance sheet on the liability side. But the mortgage is I think the bigger one, the bigger shoe that we’d have to figure out, like how it’s going to drop because there’s some equity in the primary home, what it’s valued at, versus the mortgage. My big thing is if they buy the cabin, they would have essentially two mortgages, that if they sold the primary house, they could pay off the original mortgage and maybe apply some of that back to the cabin. It’s just a matter of like, what’s their comfort level in terms of carrying a mortgage debt into their 70s, 80s, et cetera.

So, there’s nothing concerning about, I think they’re on a fixed rate for the mortgage, so it’s not like it’s a variable rate or an arm or anything they have to worry about, but it’s just kind of the comfort level and then how is that, to your point, that 2858 go into play on a fixed income when we’re talking about generating a paycheck from Social Security, from the retirement assets and maybe any part time work or whatever they’re doing, so that would be the main concern.

What did I miss guys? I feel like we covered a lot of ground here. This was great. This is a great case study. Did we did we miss any question?

[00:39:30] CS: FAFSA, Tim, which is –

[00:39:31] TB: Oh, yeah.

[00:39:33] CS: I mean, it’s mostly income in the formula and probably like that cash might be a little bit of – if you’re planning to use it for college expenses, like running it through the 529. Yeah, I guess if they retired, there’s the two-year look back period. So, at least Thomas would be pretty well through school. I think by the time, if they retired, but they might have an impact on Robert’s last year or last two years. But we get questions about maximizing the FAFSA and again, with the income being the biggest component, we don’t know what the kids’ assets are, those aren’t entered in the eMoney, usually don’t ask about those. But I guess I’d inquire about those too, make sure if they have an UGMA and UTMA that they spend those down first before the 529s, since they count different in the formula.

[00:40:34] TB: I think one of the things that I would say is I think some sometimes people are, because of the formula, they detract it from putting money into the 529. But I think, having that pot of money there that’s grown tax free, if it’s used for education expenses, is more valuable than I think not doing it because you think that the FAFSA equation is going to change.

So, just like, what we talked about, sometimes people do weird things that are out of character because they’re trying to like save on taxes. If going to college is a big part of the plan for your kiddos, the 529 is going to be one of the best – it’s depending on your state, but it’s going to be one of the better vehicles to do that and I wouldn’t let the FAFSA formula detract anybody from doing that. But I think, yeah, probably looking at some of those assets. I know you can also put assets in. I think grandparents’ name, and I think that doesn’t necessarily capture in the equation. So, definitely something that we want to look at as we’re tackling the other parts of the financial plan, so good stuff guys. I appreciate the chat here. I think very, very productive. And yeah, just look forward to doing more of these in the future and thanks for lending your opinion and how this client is shaping out. So, enjoy the holiday.

[00:41:55] KRH: Thank you.

[00:41:56] CS: You too. Thanks.

[00:41:57] TB: All right, take care.

[OUTRO]

[00:41:58] 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 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 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]

Current Student Loan Refinance Offers

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

Recent Posts

[pt_view id=”f651872qnv”]

YFP 269: How to be Frugal During Inflation

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

How to be Frugal During Inflation

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

About Today’s Guest

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

Episode Summary

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

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

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:01] TU: Hey everybody, Tim Ulbrich here. And thank you for listening to the YFP Podcast, where each week we strive to inspire and encourage you on your path towards achieving financial freedom.

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

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

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

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

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

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

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

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

[INTERVIEW]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[OUTRO]

[00:34:02] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archive newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacists, unless otherwise noted, and constitute judgments as of the dates publish. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more info information, please visit yourfinancialpharmacists.com/disclaimer.

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

[END]

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 212: Checklist for Building a Strong Financial Foundation

Posted on July 15, 2021November 2, 2022 by yfpadmin

Checklist for Building a Strong Financial Foundation

On this episode, sponsored by CommonBond, Tim Ulbrich shares his checklist for building a strong financial foundation.

Summary

Tim Ulbrich shares insight from one of his most popular talks for pharmacy students and recent pharmacy graduates, Preparing to Be Financially Fit. In this episode, he walks the listener through his checklist of five items and actions necessary for a solid financial foundation.

Develop and automate a monthly system: Not only is it a good idea to create a vision for success with tangible goals and a budget for each month, but it is also equally important to automate when possible to get out of your way when it comes to saving, investing, and planning.
Knock out the baby steps: Work to eliminate high-interest credit card debt and build your emergency fund.
Have a student loan repayment plan: Inventory your student loans and determine your starting point. Work on a strategy to pay loans down. Your repayment options may include tuition reimbursement or repayment, loan forgiveness, or refinancing.
Prepare for the catastrophic: This checklist item is referring to various types of insurance. Pharmacists should plan for potentially catastrophic events by ensuring that you are aptly insured both professionally and personally.
Develop a plan for long-term investing: Lastly, a long-term investing plan is key to your financial independence and freedom however that may look for YOU.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, everyone. Tim Ulbrich here, and I’m flying solo this week as we talk about a checklist for building a strong financial foundation. Now, we’re a little bit over the halfway point through the year, and perhaps if you were like me for this year, you set some big, audacious goals, hopefully some of those financial goals, at the beginning of this year in December or January. And here we are, and maybe those goals have fallen by the wayside or we’ve forgotten about them. And this is a great time of year to bring those goals back, dust them off, and see where we’re at and adjust and see what we need to make for the second half of the year. And that’s what we’re going to talk about today when we talk about a checklist for building a strong financial foundation. My hope is that whether you’re listening and you’re someone who’s got $300,000 in student loan and feel like you’re spinning your wheels with trying to figure that out among other goals or whether you’re listening and you’re someone who’s got a net worth of $1 million or more, my hope is that everyone can take at least one or two things away from this episode.

You know, it dawned on me that one of the most common talks that I give to a group of pharmacists or pharmacy students or residents is preparing to be financially fit. And in that talk, I talk about five things that I believe make up a strong financial foundation. And the way I describe that financial foundation is if we think about our financial plan as if we’re building a home, right, before we can talk about or even think about the upgrades or the remodel of the kitchen or finishing the basement or adding on that patio or deck or even upgrading our landscaping or lighting, we’ve better make sure we’ve got good foundation in place from which we can then grow and make some of those decisions. And the same is true with our financial plan. And so sometimes, we’ve got to go back to the basics no matter where we are at our financial journey and make sure that we’ve got a good, solid foundation in place, one that doesn’t have any cracks or if we identify cracks, we fill some of those cracks in so that we can build and walk confidently in our financial plan, knowing that we’ve done the hard work to put that foundation in place. And one of my key takeaways and hopes for this episode is that we can all recognize that building wealth, achieving financial independence, living a rich life, whatever we want to call it, is really dependent upon having a good, solid foundation in place. So I’m going to walk through five areas that I believe make up this foundation, a checklist for building that foundation and within each one of these, I’m going to provide some additional resources and more information that you can dig deeper on any one of these topics.

Alright, so let’s jump in. No. 1 is Developing and Automating a Monthly System. Developing and automating a monthly system. Now what I’m talking about here — and you probably figured this out — what I’m talking about here is a budget, right, is a system, is a playbook that we can follow each and every month. And then we automate that system and really get ourselves out of the way so we can ensure we achieve our goals. I often don’t lead with the term “budgeting” because it’s not flashy, it’s not exciting, but it’s so foundational to the financial plan, no matter what budgeting method or process that you use.

So in this first step of developing an automated monthly system, you know, a few things that we need to think about. No. 1 is we’ve got to have a vision. We have to know where we want to go before we can take some steps forward. So before we get into the weeds of what budget system or template or method or tool or app, we’ve got to know where we’re going, right? We’ve got to take a look up and see what’s the vision? What’s the path? What’s the guiding light for our financial plan and the decisions that we’re going to make and ultimately the goals that we want to achieve? And we do this by asking ourselves some big, yet important questions, questions like what does financial success look like for you? For you individually, what does financial success look like? How would you define that? You know, why do you care about this topic of money to begin with, right? Money is simply a tool. So why don’t we care about this topic of money. Or perhaps another question may be one that I ask to many folks. You know, if you were to fast forward 25 years and look backwards, what would need to happen that you would think to yourself, you know what, well done, really good job with that whole topic of personal finances? You know, we believe at YFP Planning that really good financial plan takes care of your future self but allows you to live a rich life today, right? We’ve got to have this balance of the future, we’ve got to be looking ahead. But we also need to be prioritizing the things that are most important to us today. So when we’re talking about developing an automated monthly system, we’ve got to first start with the vision.

You know, next from that vision, we’ve got to set some tangible goals, right? So we’ve got to come away from the clouds, come down from the clouds and that dream and vision we have, and let’s set some tangible goals. You know, what are three or four things that we want to achieve over the next 6 or 12 months such that if we achieve those, we’re on the path towards achieving our long-term vision. So we’ve got to set some tangible goals and the more specific, the better.

Then we’ve got to track our spending, right? We’ve got to look backwards and say, ‘OK, I’ve got this vision. I’ve got these goals. Am I actually spending in a way that’s going to allow me to achieve these goals?’ I always encourage folks to do a 90-day lookback at their spending. This can be humbling. This can be eye-opening at times. Often, we may underestimate our true expenses in any given category. And perhaps for some of you, that’s not the case. But this is a good snapshot, 90 days. We’re not necessarily just looking at one month, which may be an outlier for any reason, but getting a good average over a 90-day period of how we’re spending in any individual category of the budget.

Then once we’ve set the vision, once we have some tangible goals, once we’ve looked back at our spending, now let’s jump into the budget, right? And a good budget I believe is one that we’re really proactively thinking about how we’re going to direct our dollars and how they’re going to be spent and allocated toward the goals we want to achieve. It’s that proactive intention in addition to then tracking the expenses throughout the month. And then finally, we want to implement a system that can automate the process. You know, one of my favorite interviews on the YFP podcast was when I interviewed Dr. Daniel Crosby, who’s the author of “The Behavioral Investor.” And he studies how we think and behave around this whole topic of personal finance. And one of the things he said, which really resonates with me and his research supports, is that we often individually, ourselves and the decisions we make are often some of the biggest barriers that we put in front of our financial plan and achieving the goals that we want to achieve. And so automation, Ramit Sethi does a great job of talking about this in his book, “I Will Teach You to Be Rich.” Ramit Sethi talks about how automation can be one of the most powerful and profitable systems that you can build when it comes to your financial plan, right? So once we’ve done the hard work of setting the vision and we have some tangible goals and we know and can track our spending and we’re then able to set the budget, let’s put on automation, let’s fund our goals first, and let’s feel confident in knowing that we’ve developed a system that’s going to help accelerate our financial plan.

So that’s Step No. 1 here is Developing and Automating a Monthly System as we work towards this checklist for a strong financial foundation. Some resources here I would point you to is we’ve got an Excel budget template at YFP that we’ve developed. Certainly not the only way to do budgeting. At the end of the day, a good budget is one that works for you. But if you’re looking for a place to get started or perhaps to take a new, fresh look at the budgeting system you have, you can go to YourFinancialPharmacist.com/budget and download that Excel template. Another resource here I would point you to is Episode 057 of the podcast. We talked about the power of automation in your financial plan. And so that may be another one to visit if you want to learn more about that concept of automation and how to implement that in your own system. So that’s Step No. 1, Developing and Automating Your Monthly System.

Step No. 2 is Knocking Out the Baby Steps. Now, if we think about the foundation as five physical bricks that’s making up a foundation, these five things that we’re talking about, I tend to think of this one, No. 2, Knocking Out the Baby Steps, as if it’s really the foundation of the foundation, if you will. Brick No. 1, right? And so we’re talking about the things here that for some of you that are listening, if you’re thinking, Tim, I just feel overwhelmed with multiple goals that I’m trying to achieve, I don’t know where to start. Perhaps I’ve got six figures of student loan debt. You know, I’ve got decisions that I need to make around some credit card debt. And I want to build an emergency fund or grow my emergency fund. I’m trying to purchase a home or I’ve got expenses for the family. I really want to accelerate my investing plan, and I just don’t know where to start and how to prioritize this. Knocking out the baby steps, this Step No. 2, is really meant to be the first step from which you then build even further. And the two things I’m talking about here are high interest rate credit card debt and emergency fund. So these are the two baby steps that we need to think about as we walk into our financial plan. Now I think these are fairly obvious, two things we’ve talked about on the show before, high interest rate credit card debt, we’re talking about here not any credit card expenses or bills that you pay off each and every month but rather that revolving credit card debt that’s accruing double digit interest, cards that are accruing 15-25% interest. And for obvious reasons related to that interest rate and the impact that that can have on the rest of your financial plan, we’ve got to knock that credit card debt out, that high interest rate consumer debt out as soon as possible. So think of this as really the piece where we need to stop the bleeding, right? We need to stop the bleeding before we can then begin to take some of these other steps forward.

The second part here of the baby steps is the emergency fund. We’ve talked about this before on the show, Episode 026, we actually talked about both of these things of baby stepping into your financial plan. And emergency fund, you know, some general rules of thumb that I think about are 3-6 months worth of expenses, 3-6 months worth of expenses. There’s some determination and of course decision-making in there. Is it 3 months? Is it 6 months? Is it somewhere in between? And that depends on several factors. We’re looking here, in my opinion, at an emergency fund as a place where we’re not necessarily very excited about the growth or the interest or the accrual of that account. This is the place where we want this account to be liquid and accessible, where we can get to this money when an emergency happens without disrupting the rest of our financial plan. So we’re going to be doing our investing elsewhere in the financial plan, right? So we want this to be liquid, we want it to be accessible, perhaps it’s going to earn a little bit of interest, nothing too exciting in the moment based on what rates are at on things like long-term savings accounts and money market accounts and so forth. But the purpose here is really more about the liquidity and the accessibility of this fund. So that’s Step No. 2 here, Knocking Out the Baby Steps, high interest rate credit card debt and the emergency fund.

No. 3, Having a Student Loan Repayment Plan. Now, notice I did not say being debt-free. Right? For some of you, perhaps that is the case. Maybe there’s an aggressive debt repayment. But for others of you, it may be loan forgiveness. And that might be 10-year Public Service Loan Forgiveness. That might be a longer time period of non-Public Service Loan Forgiveness or 20-25 years. This might be a federal plan that’s going to take a little bit longer or, again, could be an aggressive payoff. So it’s about having a plan. You know, so many folks that I talk to — and I felt this very much in my own journey, sometimes it’s about the intentionality of knowing that you’ve evaluated the options that are available to you — here, we’re talking about student loans — that you’ve weighed those options, you’ve considered those in the context of the rest of your financial plan and your goals, and you’ve made a decision and determined a path forward and have a plan for how and when this debt is going to get paid off, whether that debt getting paid off is 10 years from now, whether it’s two years from now, or whether it’s even longer or shorter than either of those. So this group listening knows very well, whether it’s those that are in the weeds of those or just been aware of the conversation around student loan debt and pharmacy education, but we’re facing a significant challenge right now. Today’s graduate is the median indebtedness of a pharmacy graduate right now is $175,000. Ten years ago, that was $100,000. We’ve seen a $75,000 increase in the median indebtedness of a pharmacy graduate over a 10-year period. That is what it is. Right? And if you actually look at that stacked up against what a pharmacist is making as reported by the Bureau of Labor Statistics, you know, pharmacists’ income generally speaking have been relatively flat, right? We’ve seen some rise that you could argue accounts for some cost-of-living adjustments. But really, outside of that, we’re not seeing a significant bump up that would account for anywhere near what we’re seeing in terms of the rise of student loan debt.

And so we’ve got some work to do to put this plan together. And Step No. 1 is we’ve got to inventory our loans. We have to know exactly where we are at today. And I suspect many of you have already done this. This is knowing a list of my federal loans, a list of my private loans if applicable, who’s the loan servicing company, what’s the type of loan, what’s the interest rate on that loan? We’ve got to know everything about these loans so we can then determine what might make the most sense from a repayment option and strategy. And the reason why the inventory is so important is that often the loan type is going to direct, especially as we talk about federal options, is going to direct which repayment options may be available to you. And so sometimes — great example would be Public Service Loan Forgiveness — sometimes there’s some work that we have to do to consolidate those loans to then open up repayment options that allow us to pursue certain paths such as Public Service Loan Forgiveness.

So there are three main buckets — when we talk about student loan repayment, there are three main buckets that we want to be thinking about. And I encourage you to think about them in this order. No. 1 is tuition reimbursement repayment. No. 2 is forgiveness. And No. 3 is just paying them off. And that could be paying them off either staying in the federal system or paying them off by moving those loans with a private company through the process known as refinancing. So when we think about these three options, if I had to go from those that would have the least number of listeners probably pursuing it, it would be probably tuition reimbursement payment, a little bit more would be forgiveness, and probably more would be that third bucket where you’re going to pay them off either through a refinance or through staying in the federal system. That first bucket, tuition reimbursement repayment, is referring to those pharmacists who enter employment situations where typically in exchange for some type of service — so think like military pharmacist types of positions, Indian Health Service and so forth, some VA locations through the Education Debt Reduction program — typically in exchange for some type of service, you’re going to have a portion or maybe in some cases all of your student loan balance that might be forgiven. And more often, we think here of federal programs. There are some situations where there are state-based programs. So for example, here in Ohio, there was a program for a period of time for pharmacists that were working in qualified healthcare clinics that were serving patients that were adversely impacted by the opioid epidemic, so think of pharmacists that might work in like federally qualified health centers, could be charitable pharmacy organizations and so forth. More often than not, though, we’re thinking here about federal programs. But it is worth looking into anything that might apply on the state level. So that’s the first bucket. The second bucket is forgiveness. Now within forgiveness on the federal level, there’s two options: one that is better known, Public Service Loan Forgiveness. We’ve talked about extensively on this show. It’s gotten a lot of national attention, some good, some bad, more bad. But I think that probably hasn’t been necessarily fair to that plan. And then the second option, which is not as well-known, is what we call non-Public Service Loan Forgiveness. And there’s some key differences, three things that I really think about differentiating PSLF and non-PSLF. No. 1 would be who you work for. So with Public Service Loan Forgiveness, you have to work for a qualified employer. Typically this is going to be a 501(c)3 not-for-profit organization for most pharmacists. Some also would be a federal agency or organization. So think of pharmacists that are working in a hospital or health system setting, perhaps an academic environment and so forth. So that’s the first main difference between the two is who you work for. So PSLF, you have to work for a qualifying employer. Non-PSLF, it doesn’t matter who you work for. Second thing would be the time period. So with PSLF, it’s 120 payments, does not have to be consecutive, but 120 qualifying payments until you can apply for and receive tax-free forgiveness. So minimum of a 10-year period. With non-PSLF, you’re looking at a 20-25 year timeline. Third main difference is related to the taxes and the forgiveness. So with PSLF, if we cross our t’s and dot our i’s, that’s tax-free forgiveness. And with non-PSLF, it is taxable forgiveness. So let’s say 20 years from now, you go to — you’re at the point of forgiveness for the non-PSLF option with an income-driven repayment plan. Let’s say you make $100,000 in that year and you’ve got $100,000 that’s to be forgiven. And that year, your income would be taxed — or you’d have a taxable amount that would be $200,000, not $100,000 because that $100,000 that’s to be forgiven would be treated as taxable income. So this is referred to in the student loan groups as the tax bomb, right? So something we’ve got to be thinking about, we’ve got to plan for if we’re going to be pursuing this option. To many pharmacists that don’t qualify for PSLF and especially those that have a higher debt load, this is something that may be a viable option. And then the third bucket, as I mentioned, is we’re just going to pay them off. So we’re not going to have someone else reimburse/repay, we’re not going to have forgiveness, we’re just going to pay them off, either in the federal system or moving with a private lender through refinance. Now lots of logistics to think about here if you do refinance, different terms, different rate considerations, companies have differences between them. We’ve got lots of resources available on this at YourFinancialPharmacist.com on refinancing, fixed v. variable rates and so forth. And then not all the benefits and considerations are the same in the federal system as they are in the private. So things like income-driven repayment plan, forbearances, forgiveness upon death or disability, these are things that you want to be thinking about if you’re going to move your loans from the federal into the private system.

So I’m just scratching the surface here as we work through this checklist of a strong financial foundation and we talk about having a student loan repayment plan here in No. 3. I would point you to a great resource that was written by Tim Church, “The Ultimate Guide for Pharmacy Student Loan Repayment,” where it’s a blog post, really more of a mini e-book. He did an awesome job of going through a comprehensive, in-depth look at student loan repayment. And you can access that for free at YourFinancialPharmacist.com/ultimate.

OK, so that’s No. 3, Having a Student Loan Repayment. No. 4 is we have to Prepare for the Catastrophic, perhaps the least exciting part of the plan to be thinking about. So here, we’re talking about insurance, right? And while there’s many types of insurance that we want to be thinking about, of course health, auto, home, renter’s, etc., the ones I’m mainly spending time here on in No. 4 is professional liability, term life, and long-term disability. Now we’ve talked about these on the show before, Episode 155 we talked about the importance of professional liability insurance, what it is, why it’s important, who needs it, what to look for when shopping for a policy. So I’d check that out. We also have a great resource on term life and long-term disability. If you go to YourFinancialPharmacist.com main page and click on “Insurance,” you’ll see that information there. And my encouragement for you in this section as we talk about insurance briefly is please take the time to really understand these policies, as non-exciting as it may be, these are incredibly important. And I think this is an area where it’s easy to either be under- or over-insured. And both of those are things that we want to try to avoid. Right? Of course, under-insured, if we have a need for something like term life insurance or long-term disability and we don’t have that policy, that could perhaps be catastrophic to the financial plan, especially as we’re doing the hard work in the other areas that we’ve already talked about. But the other side of the equation also has a cost associated with it, right? If we have a policy which perhaps is more than we need or is not a best fit for our current needs in our financial plan, then that means those are dollars that are going towards a certain part of the financial plan that perhaps we could allocate elsewhere, whether that be investing or debt repayment or another part of the financial plan. So both are important. And this is an area I talk with pharmacists commonly about. And this is an area where I think that someone like a fee-only financial planner can really help provide objective advice and really be able to point someone in the right direction where they don’t necessarily have a vested interest in terms of how those policies are being sold. So make sure to check out some of the resources here on professional liability, Episode 155, and then term life/long-term disability by going to YourFinancialPharmacist.com, clicking on “Insurance.”

No. 5 here is Developing a Plan for Long-Term Investing. And we have talked extensively on the show about investing, from some of the basics, you know, in terms of what are the different accounts, whether that’s a 401k, a 403b, a Roth IRA, a traditional IRA, HSAs and so forth, and you can find all of that on previous shows. We’ve got more information on the website. We’ve also talked about things like the priority of investing. So you know, if we know we need to save each and every month, well, how do we begin to think about the priority? Right? We’ve got considerations around employer-sponsored retirement accounts, individual accounts, perhaps some other investment opportunities like real estate. And so how do we begin to think about the priority of investing? Very important topic. We’ve also talked about things like fees and how do we keep fees low? And if at the end of the day we’re going to be doing the hard work to save, how do we make sure we’re doing that in a way that is tax-efficient and we’re doing that in a way that is minimizing the fees that might eat away at that investment. So I would encourage you to think about at least the beginnings — remember, we’re talking about the foundation here — the beginnings of your long-term investing plan in three stages. And that is setting the vision, Part 1, then determining what the need is or how much to achieve that vision, that’s Part 2, and then we get into the x’s and o’s in Part 3 of actually determining how much are we going to save every month and where are we going to allocate those funds? And within those funds, how are we going to determine what we’re investing in, which aligns with our goals, which aligns with our risk tolerance and all of the other things that I’ve previously mentioned.

And so this is an area that I think for folks that are really at the beginning of their financial journey or even folks that maybe are listening and you’ve amassed a half a million a million dollars of wealth just through consistent, regular contributions into tax-advantaged retirement accounts but necessarily haven’t dug into the details or thought about how to take that to the next level, right? Both of those could apply. And so my encouragement for both groups and folks that are in between there is to really take a step back and ask yourself, what is the vision for my long-term investing plan? I mentioned at the beginning, money is simply a tool. What’s my vision for retirement? What does that look like? What do I want to do? What do I want to accomplish? Because that’s going to then inform how much do I need? Once I know what the vision, once I know what I want to accomplish, I can then start to determine OK, how much am I going to need to be able to make that a reality? Now, for those of you that have done this step, how much you need, you might have run some numbers in a nest egg calculator, it’s a topic that I often talk about when we’re speaking and sometimes I’ll even have folks that will go through that in real time. And inevitably, anytime we go through a nest egg calculation, you can see kind of that glossed-over look when you punch in the numbers and you hit “Calculate,” and you see that number that’s $3, $4, $5, $6 million. And it becomes number one, very overwhelming and number two, it feels very abstract in the moment. Whether retirement is 20 years away, 10 years away or 40 years away, that can be a big number that it’s hard to say, what does that actually means today? What do I do with that number, right? And so I think a good financial plan will really take that information and distill it down to OK, let’s discount that information back to today’s numbers, what does that mean for how much we need to be saving each and every month, and then let’s begin to put a plan in place and automate that plan so we’re contributing in a tax-efficient manner, we’re keeping the fees low, and we’re allowing compound interest to do its magic and time value of money to take its course. Right? And so we’ve got to bring it into terms that allow us to digest this and make it real or otherwise we’re going to get some of that paralysis analysis, five years goes by, 10 years go by, and we feel like we’re trying to play catch-up on our investing plan.

So as we walk through these five steps, we talked about developing and automating a monthly system, No. 1. We talked about knocking out the baby steps, No. 2. We talked about having a student loan repayment plan, No. 3. Preparing for the catastrophic, No. 4. And then No. 5, developing or perhaps accelerating your long-term investing plan. And for those that are listening, I want you to imagine for a moment, I want you to imagine for a moment that you’ve got a sound monthly system in place that accounts for all of your goals. You’ve thought through the things that are most important to you. You’ve looked at your current expenses. You’ve built in those goals into a monthly system, and you’ve automated the savings to begin to realize those goals. Imagine that just for a moment. I want you to imagine for those that are struggling with ‘I need to really flesh out and build out the emergency fund,’ or ‘I need to knock out that credit card debt,’ what would it feel like if you no longer had any credit card debt? What would it feel like if you had a fully-funded emergency fund? What’s next after that? For those that are thinking about their student loans, right, it’s hard to often look at other things when you’ve got a huge balance of student loans. As I highlighted earlier, yeah, you know, getting that to $0 is a goal, of course. But what would it feel like if you had a plan, knowing that you’ve evaluated all of the options, all of the federal options, forgiveness, non-forgiveness, private, etc., you’ve looked at the numbers, you’ve thought about the other considerations, you’ve determined a path forward that is best for you personal situation, and you’ve determined a plan that now allows you to look at your monthly expenses knowing that you’ve put a plan in place that that repayment option is best for your personal situation and you know exactly what that’s going to cost each and every month to achieve that goal and when you’re going to have that debt paid off? What would it feel like for those that are thinking, you know, ‘Am I underinsured when it comes to things like long-term disability or term life?’ or perhaps folks that are feeling like, ‘You know what, I bought a policy awhile ago that maybe wasn’t a good fit.’ What would it feel like if that got shored up? If we really looked at making sure we’ve got the right amount of insurance, not too much and not too little. And what would it feel like if we had a sound vision for the future of our financial plan in terms of what retirement may look like? And how much we would need to accomplish that goal and what it would take on a month-by-month basis — and of all of the financial lingo of 401k’s and IRAs and HSAs and brokerage accounts and all of these other options that we had a plan and path forward, knowing that we’re saving x per month with this goal, and we’re going to do it in this account with this strategy?

So I think as we think about those, even as I’m reflecting on those in my own personal journey, you know, there’s always work to be done. Right? Whether, as I mentioned at the beginning, whether you’re listening and have a net worth of $1 million or net worth of -$500,000, there’s always work to be done. And while there’s always work to be done, wow, what a different position and mindset to be in when we can operate from a place knowing that we’ve got a strong foundation upon which we can build the rest of our financial plan. And so I’d be remiss here if I didn’t highlight that what we do at YFP Planning, one-on-one comprehensive financial planning, this is it, right? We’re looking at every situation on an individual basis to determine what does this foundation look like for you or for a pharmacist who’s really trying to focus on accelerating the second half of their career, is approaching retirement and wants to really think about more of the distribution phase and what’s involved in that from a tax standpoint. One-on-one financial planning allows us to really dig deep and really evaluate your situation on an individual basis. And so I would encourage folks if that’s something that you’ve been thinking about, you can schedule a free discovery call to determine whether or not what we offer is a good fit for you. You can do that at YFPPlanning.com, you can schedule a discovery call and learn more about what that looks like.

As always, I appreciate you joining for this week’s episode of the Your Financial Pharmacist podcast. And I think we have an exciting second half of the year ahead. If you’ve liked what you heard on this episode or previous episodes, please do us a favor and leave a rating and review on Apple Podcasts or wherever you listen to your podcasts each and every week. That’s how more pharmacy professionals can help them to find this show and ultimately help us on our mission of helping as many pharmacists as possible achieve financial freedom. Have a great rest of your day.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 211: The Ins and Outs of the 529 College Savings Plan

Posted on July 12, 2021November 2, 2022 by yfpadmin

The Ins and Outs of the 529 College Savings Plan

On this episode, sponsored by Insuring Income, YFP Co-founder and Director of Financial Planning Tim Baker takes a deep dive into the 529 plan. He discusses a framework for how to project and save for kids college along with the construct of 529 plans including what they are, tax advantages, what are qualified and non-qualified expenses, and considerations when investing money within a 529.

Summary

Pharmacists are well aware of how expensive college costs and that paying for it is no easy feat. The average student loan debt load pharmacists graduated within 2020 was $175,000 and the cost of college will likely continue to rise. The 529 college savings plan is a tax-advantaged account that is an option families are using to help get in front of the cost of college.

Tim shares that he and his wife are saving an education nest egg for their two children, however, they are not going to forgo saving for their own retirement or other priority financial goals. When it comes to advising YFP Planning clients, Tim mentions that it really is a personal preference; some clients want to completely fund their children’s education expenses, some want to support in a small way, and others aren’t interested in putting money away to pay for it. Tim shares a framework that folks can follow if they are interested in helping their kids pay for college but aren’t sure where to pull the money from. The framework follows a three-bucket rule where the first third of the money for college comes from your current salary (which is really your future salary at the time your child is in college). The second third is made up of money that you’ve saved in the past such as from a 529 plan, brokerage account, savings account, Roth IRA, etc. The final third is money from scholarships, grants, and loans that your child will/can receive.

Tim also talks about the ins and outs of the 529 plan and answers some questions asked in the YFP Facebook Group.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim Baker, deep dive on 529s. Are you ready?

Tim Baker: Let’s do it. Yeah, excited.

Tim Ulbrich: So this is a follow-up from Episode 195, so we talked about saving for kids’ college in that episode. And we’re going to link to that in the show notes. But we wanted to dig deeper on 529 given that a number of our clients and the YFP community members are at various stages of kids’ college planning, some perhaps on the front end, just getting started, others on the back end, you know, distributing those funds or maybe even some further along that are helping with the grandkids or other family members’ college savings. So we want to dig deeper into the 529. We also had a recent blog post by Dr. Jeff Keimer on seven things to consider before starting a 529 plan on the YFP blog. Make sure to check that out. We’ll also link to that in the show notes. And here, we’re going to dig into some common questions that come forward as it relates to college savings. Now, we don’t need to tell this group about why college savings is necessary. I think many pharmacists are well-versed in student loan debt, unfortunately. Average graduate in 2020 faced about $175,000. This is a $1.7 trillion problem that we have as a country. And so obviously the goal with 529 savings is to try to get out in front of that. Tim, tell us from your perspective, obviously a parent of young children yourself, what is your personal thinking, your framework for saving for kids’ college. And not only how you think through this for your own children but also ultimately guide some of our clients at YFP Planning.

Tim Baker: Yeah, so it definitely is a — it definitely is a personal preference, Tim. So like I can kind of share with you my own and then kind of what I hear from clients. So you know, when I grew up in the great state of New Jersey, the Garden State, way back in the day, my mom was a teacher, my dad worked for a chemical company, Rohm and Haas in Center City, Philadelphia. And basically, the message to us was, ‘You’re on your own, kids. Like figure it out.’ And that kind of — I think it was partly to light a healthy fire under our rear end to make sure that we were good in school and we got scholarships and we just put ourselves in the best position to pay for school. They ultimately I think did help my siblings. So I think a lot of it really stems back to like how you were kind of raised in terms of your own parents and how they brought you up. So some people, they — it’s par for the course, they do the exact same thing that their parents did. And some people are the exact opposite. Or if you overlay kind of the horrid state of higher education and what it costs and what it’s doing to a lot of pharmacists coming out of school, that also plays a part. So I’ve heard everywhere from, ‘My kids are on their own,’ to, ‘I don’t want my kids to ever have to go through what I’m doing.’ So I would like a 100% solution for undergrad and also postgraduate school. Because a lot — you know, unfortunately, a lot of the pharmacists that we work with, I hear this — I don’t know if you hear this, Tim, when you’re speaking to prospective clients of YFP is — ‘Yeah, I didn’t really have many loans coming out of undergrad but then when I hit pharmacy school, now I have $150,000, $175,000, $200,00.’ So a lot of people are like, ‘Yeah, I would just like to get through my kids’ undergrad, but that doesn’t necessarily solve the problem. So me personally, Shea and I when we look at our kids, Olivia and Liam, Olivia who’s 6 and Liam who’s about to turn 2, it is definitely an exercise too that we want to help them as much as we can. And we want to be able to have a good education nest egg, so to speak, there for when they do go to school if they decide to go to school. But we are not on the one side of the spectrum where we’re going to forgo things that we want to do today, our own retirement, etc., just to hit that goal. So it’s a personal preference, though. I’ve actually heard of clients say like, ‘We’re just going to have the one kid because of the education and we want to basically put them in the best situation as possible.’ That’s a preference. What I’ve found in most cases is that clients have a semblance of kind of like what they want to do, but they have really no idea of how to actually go about like setting up an account or funding it or all of kind of the ins and outs of that. And that’s obviously some of the things we’re going to talk about today.

Tim Ulbrich: Yeah, and one of the things that I like — and again, we’re talking just basics here in a general framework. And a shoutout here to Kelly Redy-Heffner, one of our lead planners at YFP. You know, she mentioned a framework, a third, a third, a third, which to your comment, you know, there is no one right answer when it comes to kids’ college savings. So keep in mind as we talk about these buckets, but I think this is a good just general framework that folks can wrap their arms around and begin to think about alright, I like that, I don’t like that, or how do I modify that for my own personal situation. So tell us about what those buckets are, Tim, when we say a third, a third, a third for college savings.

Tim Baker: Yeah, so you know, one of the components of education planning is the funding aspect. We’ll talk about the vehicle with the 529 here more so. But the funding aspect is super important. So what the 1/3 Rule states is essentially that — and these are, this is typically like what we put in front of clients if they don’t really know what they want to do. But then once we have this as kind of our rule of thumb, then this is how we basically design the plan around it and actually show them the numbers of what they need to do. So the ⅓ Rule states that when you look at the tuition and fees and all the expenses related to going to college, we want to basically divide up where that money is coming through by really into three buckets. So the first bucket or one-third of the money is going to come from current salary. So what that — so we say current, but we actually mean future salary. So example: When Olivia, my daughter, is 18, so 12 years from now, whatever money I’m making and Shea is making, one-third of that we would cash flow to wherever she’s going in terms of tuition. So that’s the first bucket. The second bucket is basically what we’re going to be talking about today is what’s saved, you know, in the past. So this is like the 529 account, this is maybe a brokerage account, a Roth IRA, a savings account, a piggy bank, maybe an investment property that you invested in, so all the different kind of creative ways that we’ve basically saved and invested money over the course of the child’s life. So that’s the second bucket. And then the third and final bucket would be the scholarships, the grants, the financial aid or even the loans that that is student receiving as they’re going to college. So one-third for kind of cash flow in the moment, one-third from what we save and invest in over the course of the child’s life, and one-third from grants, scholarships and aid and debt — aid and loans to kind of basically put that picture together.

Tim Ulbrich: So let’s jump into the 529 plan, Tim, a little bit further.

Tim Baker: Yeah.

Tim Ulbrich: And give us the high-level, 101 definition of a 529 plan.

Tim Baker: So the way that I look at a 529 plan, a 529 plan is basically, it’s like a 401k or an IRA for your education. So the idea here is that you set money aside into an account that you typically fund with after-tax dollars — now, some states allow deductions and even credits to fund a state plan. So you fund it with after-tax dollars. Those dollars grow tax-free. And then when you distribute them for the purposes of higher education or even K-12 now, they come out basically tax-free. So one of the big things that we often throw around is like, what’s this whole thing of growing tax-free? So some people are like, ‘Well, why wouldn’t I just invest this or save?’ So to kind of just illustrate this point, if you are in a tax-advantaged account like a 529, when you invest — say you buy inside of that account a XYZ mutual fund. So you buy that at $100, Tim. And over the next — so you buy that right in the year of your kiddo’s birth. So that particular mutual fund over time, over those 18 years, is going to go from $100 to $200 to $500, whatever the share price is. And then say in 18 years, you sell it for $500. If it is outside of an account like an IRA, like a 529, and it’s in a brokerage account, a taxable account, you have to pay tax on those capital gains. So in this case, $400 per share times the amount of shares that you have. So the tax bill on that can be pretty prohibitive in terms of like what is actually left for you outside of paying Uncle Sam. So obviously if it’s held for a long period of time, you have long-term capital gains, which for most pharmacists is going to be about 15%. So inside of a 529, you don’t have capital gains. You basically — that’s the tax advantage, that it can grow from $100 to $200 to $500 — and that $400 gain, as long as it’s inside of that account, you don’t pay tax on. That’s the beauty of the 529. Now, the problem is a lot of people are like, ‘OK, what’s the catch?” Right? So for retirement plans, you can’t take it out unless you’re a certain age and all of these other things. And for education, there are some drawbacks. One is if you distribute it that are not for education costs, there’s a 10% penalty. You know, you do have to pay the taxes on it, etc. But if you do use them for qualified expenses, then that tax advantage holds true.

Tim Ulbrich: Good breakdown. I think sometimes we just throw around terms like tax-advantaged and so forth. So that’s really helpful. And I’m going to jump into some common questions I think that come up that folks may have about 529 accounts. And some of these are going to be coming from YFP community members who have posted questions in the YFP Facebook group. And I think these questions all fit into one of two areas. When I think of 529, there’s really two phases for saving for kids’ college. And this feels very similar to how we think about saving for retirement. And that’s the accumulation phase where we’re trying to fund the future need. Here, we’re talking about the cost of college. And then there’s the withdrawal phase, and then we get into different concepts and perhaps questions around there as well. And you already outlined some of the tax advantages, and I think that’s probably one of the most common questions, and you mentioned how the taxes can work in terms of that tax-free growth. And then as long as we’re using them for qualified expenses, we can pull them out without penalty. And then you also mentioned that many states offer some type of state income tax deduction or credit. And I just wanted to give folks one example of that. Here in Ohio, in the great state of Ohio, Ohioans can deduct their Ohio 529 contributions from their Ohio taxable income up to $4,000 per year per beneficiary. So you know, when you’re talking about that from a state savings, is that huge sums of money? Not necessarily, but you know, every little bit helps in terms of what you might be able to save on some of your state taxable income. So Tim, let’s talk about qualified and unqualified expenses. So we want to make sure, of course, that if we’re saving this money — you mentioned what’s the catch? — if we’re saving this money and it’s growing and we’re ultimately going to put it to its best use and not have to pay penalty, we want to make sure that we’re thinking about what is qualified and what is not qualified. So walk us through some of the common qualified expenses and some of the common nonqualifying expenses.

Tim Baker: Yeah, so you know, typically the things that you think of that are qualifying are kind of the common things. So that’s going to be like tuition, room and board, fees associated with tuition, that type of thing. And it could be food, it could be textbooks, transportation, those are — actually transportation is not. Sorry, transportation is not typically part of that. But these are books and supplies. It could be expenses for special needs. A lot of the computer and technology and internet, those are all under that. And that has kind of changed over time. So a lot of it is — and I suspect, so like one of the things that people kind of get tripped up on, Tim, is like, ‘Well, you know, I would like to do this, but I feel like it’s too restrictive..’ And even in our lifetime, you know, in really the next last 10 years, they’ve become more — or they meaning the government — has become more and more less and less restrictive in terms of what these dollars are for. So like as an example, you used to not be able to use it for trade school and things like that. Now you can. You used to not be able to — which is crazy, and they even still cap it, which I’m not sure why they do this — but you used to not be able to pay — if you had money in a 529, you couldn’t use it to pay your loans without — that was an unqualified expense, which is crazy. Now you can. I think the cap is $10,000.

Tim Ulbrich: $10,000. Yep.

Tim Baker: So the use is broad, and I expect it to be more broad in the future. The other big thing that has changed with the 529 that has really allowed to open up other doors is you can now use it for K-12 expenses. So Tim, if you ever were to decide to send the boys to private school, you can actually use that. In a lot of cases, it’s less of an accumulation, it’s more of a pass-through because obviously your boys would be going through school now. But if you were to — if you wanted to set up a 529 for grandkids for K-12 or even their college, it would be more of an accumulation. So in terms of qualified expenses, it’s fairly broad, and I think it’s going to continue to broaden as we go, even as more nontraditional ways of education sprout up. I think that the 529 will be — I anticipate that they’re going to continue to try to find ways to mitigate this issue with just rising expense and debt levels, etc.

Tim Ulbrich: Yeah, I agree with you. I think if anyone’s been following along in the national conversation around student loan debt, I think it feels like we’re in a direction towards, ‘What can we do to try to minimize that?’ And I think one way might be to loosen up even further, although to your point, it’s come a long way in terms of 529 qualifying expenses. Tim, what are some other downsides — if any — to the 529 that folks might want to consider beyond potential penalties for nonqualifying expenses. We’ll talk in a moment about, ‘Hey, what if my child doesn’t end up going to school?’ and using this. Any other downsides that come to mind that folks would want to at least consider and evaluate as they’re making this decision?

Tim Baker: Yeah, so some of the downsides would be, you know, not being able to use the dollars for like what we would consider unqualified expenses, which might be like college application and testing fees, which we know can be fairly high. It could be you can’t use them for transportation, health insurance, extracurricular activities, and some room and board costs, which again can add up. So that’s one of the things that’s a downside. I think the other thing would be the fact that, you know, because you have to use it for higher education and if your kid doesn’t go to college, like what do you do with the money? So I think that you don’t lose the money. I think some people think like, if I put that in and they don’t go to college, I can never get it back. At a minimum, you would take a haircut, a 10% penalty and pay the taxes on those gains, and that wouldn’t necessarily be ideal. But you could think really beyond traditional college. So again, I think as the government continues to look at this, whether it’s helping another college with K-12 or re-assigning the 529 or basically changing the beneficiary from one kid to another, you can do that. You can transfer it to another account. It could be going back to college yourself. Like if you decide — if a kid decides that they don’t want to do this, you can use it for that. Or at a minimum, you can withdraw it. So I think if there is an iota — and again, not advice — but if there is an iota that your kid is going to do something post-high school, I would plan for it. And a lot of the — I think it also depends on the state because of the state deductions will incentivize that. But even like the tax benefit of growing it tax-free, if you’re looking at 18 years, if you’re looking at 10 years, that’s a real period of time where you can get a lot of gain out of an investment account and to be able to direct. And it could be a legacy, Tim. It could be a legacy thing, Tim. Like Liam, like if Olivia doesn’t want to go to school or say she gets accepted to West Point and we don’t need it because there is no tuition, it’s just time service, we would basically shuttle that off to Liam. Liam would get the account. But then if he decided he wanted to start a business or things like that, I think what I were to do in that moment — unless I really needed to use the cash — I would look at my nieces, my nephews, I would potentially look at it as a legacy thing to send my grandkids to college.

Tim Ulbrich: Yeah, let it ride.

Tim Baker: Yeah, let it ride. Just let it do its thing. And you know, allow that to be a legacy thing for me that I know we have clients that — the lucky few that get through pharmacy school that’s like, ‘Oh, my grandma and my grandpa sent us.’ Like I would love to be able to give that gift. I’m not thinking about that, that’s chess right now. I’m really trying to think about our kids. But if that situation would arise, I would take that one-third pool of money that we’re working towards and either repurpose it for the other child or look at the next generation.

Tim Ulbrich: Tim, you know, I often say when I’m speaking with a group about kind of Investing 101, that when it’s something like a 401k or an IRA, Step No. 1 is you actually put the dollars in. Step No. 2 is then you actually figure out what you’re going to do once those dollars are in the account. Same thing here, right? We’re talking about money that hopefully is going to grow over time, which means we’ve got to have some thought and intention to how we’re investing that money. So clearly, this is not meant to be investing advice inside of a 529, but just talk to us about how you think through that or how you work through that process with clients of, you know, it’s great we’re saving. But now we’ve got options. And how do we evaluate that and is that just a very similar process to what we’d be thinking about as we would in a 401k or in IRA or even in a brokerage account?

Tim Baker: So yeah, so this is another big piece of like now that we have — like we’ve identified what we want to save and in this case, we’re talking about the 529 so that’s kind of the organization of the account. The second piece is kind of the contribution/funding of it. But really, the last piece is kind of the allocation. And this is kind of how we break down recommendations for clients. And again, it’s going to dependent on their situation, their goals, the state they live in, their tax situation, etc. The allocation piece is just like retirement plans, 401k’s, the by-and-large most popular thing that we see is the target date fund. The target date fund says, ‘OK, if my kid is going to go to school in 2030,’ it basically has an allocation that changes over the year. So it goes from more equity-focused the further out and then basically changes and alters itself as it gets closer to that 2030 timeline and becomes more bond-focused. So the target date fund for 529s, you know, that’s basically how it works. Personally, I don’t like target date funds, not because they don’t work. They do. But more so because they’re more expensive. So you know, for our kids, we just use like a total market. So the Maryland 529 — we’re moving everything over to Ohio now — you know, there’s a total market fund that we use that we want to be super aggressive and then as Olivia gets closer to her, I’ll just do that manually. Now I do that because that’s what I do for a living. Some people, if it’s kind of out-of-sight, out-of-mind, they’re not working with an advisor, they maybe should look at a target fund. But just know that dollars are going to be a little bit higher in terms of expense ratio and things like that because they’re doing that work for you. So I think the other thing too from — the reason I don’t like target date funds in particular with regard to retirement is that a lot of people, the retirement date is a little bit more — it’s more of a moving target whereas not so much with college. Most of the time, a child graduates high school and they’re going to be off to college the next year. But that could be another reason that you don’t necessarily look at the target date fund. But yeah, when you look at most 529s — and again, the 529s are not created equal. There are some that are really good, meaning they offer good — or they offer an array of investments that are out there that are cheap. Some, there’s a lot of fees and higher expense ratios that are not necessarily great for the investor. So a lot of that is dependent on the type of plan that you’re in and where you’re at.

Tim Ulbrich: Hey, that sounds like an episode we just did recently on not all investments are created equal in terms of fees.

Tim Baker: That’s right.

Tim Ulbrich: So same thing here.

Tim Baker: That’s right. Yep.

Tim Ulbrich: Tim, one of the questions we had from the Facebook group, Ernesto asked, “Can you start these for nieces and nephews?” as one example. I guess others may think of the same thing for grandkids. We talked about the transfer of them, so you used the example if Olivia or Liam doesn’t use it that you might be able to transfer it to your nieces or perhaps in the future grandkids. What about actually starting or opening an account for a niece, nephew, grandchild, etc.?

Tim Baker: Yeah, you can absolutely do that. And I think maybe a downside is how it affects financial aid. So you know, the — it does affect financial aid when it’s owned by a parent. But the benefits that you receive, it’s going to be very slight how it affects financial aid. For a child, you definitely don’t want to have it in — the ownership in the child’s name. But for someone like an uncle or a grandparent, I don’t even think it’s on the radar. So yeah, you can absolutely do that, get your tax deduction too as you go, which is nice. In terms of like changing ownership, you know, you can do — I think you can do a rollover, so I can move money from Olivia to Liam. I think you can do that partially. You can do a partial rollover, or you can just do a straight beneficiary change where you’re saying that this account is no longer for Olivia, and now it’s for Liam. So I think there’s a wide variety of how you can kind of manipulate that, which gives you kind of maximum flexibility to kind of get the most out of the plan.

Tim Ulbrich: Another question we had was from Casey, which is one that I have heard before. So I know this comes up often. And in addition to giving a shout-out to Kelly Redy-Heffner, which was pretty awesome, Casey asked, “Main question is 529 v. IRA. Should I instead put the money in an IRA so I can have more options to invest, also more flexibility if continuing education is not desired and take out only the amount that would not give a tax penalty, i.e. after five years? Are there percentages to manage the accounts or are 529s and IRAs usually similar?” So this question I think often comes up of like, why not just use something like a Roth IRA when you think about kids’ college?

Tim Baker: Yeah, I mean, again, just like IRAs are not created equal, obviously I know that the IRAs that this client has are very efficient, you know, because we want to make sure that we’re not paying any fees that we don’t need to. I still — I think because of the — from a tax perspective, they’re still going to be very similar in terms of growth. But I think especially because if you’re in a state that gets a benefit, I think it’s worth it. So you know, what most people forget is like with a Roth IRA, if you contribute to a Roth IRA, any dollars that you put into a Roth IRA, you can get out of the Roth IRA penalty-free and really tax-free. So like your basis really for any purpose — so if I wanted to buy a sports car, I can move money out of my Roth IRA without penalty or tax as long as that is — it’s not the earning. It’s just that. And the savings really too for the education accounts, like you know, if it’s used for — when it gets penalized is the earnings. So they don’t want you to have any kind of that unfair advantage. So I still like for if there’s an option for if the education stuff is on the table, I still like that — even given this idea that I think it’s going to be broader in terms of what it can be used for — I still like the 529, even though typically they can be a little bit more expensive. But the thing that most people don’t know is that you can basically open a 529 in any state. So if you look at the state of California, which unfortunately does not offer any type of deduction or credit for California taxes, you know, you can go out and look at what are the best 529s that are out there? Two of the ones that are typically popular are Nevada, which is run by Vanguard and we know why, Vanguard is very efficient and affordable, and then typically the Utah 529, which is also another good one. So you can go and open those. I still think that the benefits you receive inside of the 529, even with a little bit more expense compared to the IRAs, is worth it.

Tim Ulbrich: Yeah, the other thing I think about, Tim, here too in addition to the state income tax benefits, if that is applicable, is I do think there’s something powerful just about the behavioral separation.

Tim Baker: Yeah.

Tim Ulbrich: Like, you know, you and I have talked about this because I asked you this question several years ago as we were just thinking about this with the boys. And I think it’s true. Like you know, maybe the math doesn’t necessarily change, but there’s the kids’ college bucket and then there’s the retirement bucket. We’re thinking about long-term savings. And I think there is something valuable for having that focus where you’re budgeting and thinking about one and you’re budgeting and thinking about the other. Not to say you couldn’t get to that same outcome if it was all in one bucket, but I think that value of separating them sometimes and having fresh attention on each of those and their individual goals can be really important.

Tim Baker: Yeah, what I think too is like, you know, people that can contribute to an IRA or a Roth IRA, they have to have earned income. So if we are trying to open one for your son Sam, even though I think they’re going to building this multimillion-dollar company with the Ulbrich Brothers LLC, he has to have earned income to be able to fund that IRA and use it in the future for education or you carve those dollars out of your own contribution that you and Jess are putting into the IRAs and then it’s kind of like bucket confusion, which again, I’m a big believer in clearly delineating what is this account for, what is that account for, because it can get lost in the shuffle. ‘What are we doing? What are we not doing?’ type of thing, so I think the benefits are similar, but I think yeah, when you go down to the behavioral and drawing clear lines of OK, what is this money for? and not get it kind of confused with your retirement assets, then I think that’s a plus as well.

Tim Ulbrich: Last question I have for you here I think is a good one because it probably will come up in this situation but perhaps also others that might be thinking about K-12 education. So question here from Katie in the YFP Facebook group is, “Cash-flowing husband’s grad school. Is it worth it to put it into a 529 prior to tuition being due? Then pay it via the 529.” So she says, “In Illinois, there’s a significant state tax deduction. We would not be using it for the investment options since we’re only saving one semester ahead.”

Tim Baker: Yeah, so yes. So in this case, you would think of the account less as an accumulation and more as a pass-through. So you know, you would basically seed the account with what you would need for that semester of tuition and then basically get the deduction for Illinois and then kind of rinse and repeat until you’ve really maxed it out for the year. So if you lived in California, as we previously stated, that doesn’t have a state deduction — I don’t think Kentucky or North Carolina do either — you would — I think Maine is the last state that doesn’t either — there would be no reason for you to do that because if you did, if you were trying to get like gains, then the gains would be so minimal because as soon as it goes in, it goes right out. So it’s kind of like also sometimes when you fund an FSA for dependent care, it’s to get that money into the account so you can get the deduction. Then you’re basically paying your daycare or whatever, it’s kind of the same idea. But it’s a great benefit because it — every little bit helps on the tax side. So you know, and I know Illinois state taxes can be somewhat brutal.

Tim Ulbrich: Great stuff, Tim. Really appreciate the deeper dive into 529s. As I mentioned at the beginning of the episode, if you haven’t yet done so, check out Episode 195 where we talked a little bit broader about kids’ college savings and we included some of that discussion on other options beyond the 529 as well as the recent posts from the YFP blog, “Seven Things to Consider Before Starting a 529 Plan.” And for those that are in the midst of saving for college in a 529, whether you’re in the beginning of that journey, whether you’re in the withdrawal phase of that journey, or perhaps, again, even saving for other family members, we’d love to talk with you to see how this fits as one part — an important part, but one part of the overall financial plan. And so if you’re interested in that conversation and evaluating the fee-only comprehensive financial planning that we do at YFP, make sure to book a free discovery call at YFPPlanning.com. As always, we appreciate you joining. And hope you have a great rest of your day.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 210: Why Net Worth Matters

Posted on July 1, 2021November 2, 2022 by yfpadmin

Why Net Worth Matters

On this episode, sponsored by APhA, Tim Baker discusses why net worth matters, how to calculate your net worth, and why net worth, not income, is the true indicator of your financial health.

Summary

Net worth can be the most critical data point for determining your financial health. Tim Baker explains how to calculate your net worth, detailing that it can be as simple as the value of your assets minus your liabilities. Tim shares that many people do not know their net worth because few tools available to the general public can quickly aggregate that information. Years ago, you would take out a pen and paper and compare assets to liabilities. Now, you might do that same work in a spreadsheet, but the document wouldn’t be a living document like your net worth truly is. Tim also details which items to include in asset and liability columns and why certain accounts or property might remain off the balance sheet.

Mentioned on the Show

Episode Transcript

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

Tim Baker: Hey, Tim. Good to be back. Glad to chat with you for a full episode here. Excited to dive into today’s topic.

Tim Ulbrich: Yeah, really excited to talk about net worth in detail, a concept, a term we’ve mentioned many times but I don’t think we have thoroughly explained, really dug into how is net worth calculated? Why is it so important to the financial plan? And why do we choose to use net worth as one factor in terms of how we price our financial planning services? And so we’re going to talk about all of that and much more on today’s episode. I want to start briefly and mention to our listeners that net worth for me individually is something that is really important when I think back to my own personal journey and financial plan. So 2012 — short story here — 2012, four years after I graduated with my PharmD, my wife Jess making a good, decent, six-figure pharmacist income, and realized at the moment after hearing about this term of net worth, realized that I had a net worth that was -$225,000. And we’re going to talk in a little bit about how to calculate that. But that was a very pivotal moment for Jess and I and our financial plan to say, wait a minute. Income looks good, we don’t feel like things are necessarily off the rails in any way, but mathematically, the net worth is not necessarily showing that we’re in good financial health and good financial position. And so that was a key moment for us to really turn the ship in terms of our financial plan and ultimately led us to paying off the rest of our balance of a pretty big amount of student loan debt and then obviously able to move on to other financial goals from there. So Tim, for you, when did you realize that net worth was not only important to you individually but also really such a primary factor that you built it into the financial planning model that in terms of how we charge clients, that one factor of that is net worth.

Tim Baker: Yeah, it’s a great question, Tim. And I think like you talk about your personal story, like same. Like I’ve gone through phases of my life, I look back even growing up and when I was in high school I was really a good saver. You know, we were kind of told that we had to pay for college and if we wanted to drive and all that kind of stuff that we were kind of on our own. So I kind of went through this period of being like a really good saver. And then when I was at West Point, my first year at the academy, you know, 9/11 happened and our view of the world drastically changed. And I think my spending kind of changed with it. I was kind of more of like a YOLO, not necessarily worried about tomorrow but really focused on today. And from a spending perspective, that didn’t really help me, my balance sheet. So I’ve definitely gone through times in my life where my net worth was not growing. And I don’t know that for a fact, but I just know that some of the debt that I was taking on and that my savings was not growing, that was the case. And I think part of the problem or part of the reason that a lot of people when they hear “net worth,” they’re like, “I don’t even know what mine is,” because there’s not really an app for that, so to speak, where it ties everything together. So we know that hey, we can kind of see what our credit card bills are, and we can kind of see what’s in our checking account and we might look at our 401k from time to time and our home value and what’s left on the mortgage, but really to tie that together, it takes a bit of work to do that. But then I kind of evolved and got into financial planning and really my mindset around money has really changed and really even has changed even more so so I’m less — you know, I kind of went from YOLO to being a financial planner and kind of believing a lot of the things that a lot of the gurus in save, save, save. But I think I’ve also softened on that a little bit in terms of like having a strong financial plan is important and making sure that the numbers are moving in the right direction, the 1s and 0s with regard to your net worth. But that ain’t the end-all, be-all, Tim. And I know we talk about this obviously a lot. It really is an exercise in trying to thread the needle between again, taking care of yourself today, so YOLO, but also making sure that we can retire comfortably and we want to plan for tomorrow. So in terms of planning, you know, when I started Script Financial way back in the day before YFP Planning and our work together, you know, I was looking at what a lot of financial planners were doing, and I came across this income and net worth model. And the more I thought about it, I’m like — and this is as I was trying to, even before I launched my firm that was really dedicated to helping pharmacists with their financial plan — I was like, I really like that because it’s kind of — it captures everything. Like everything financially typically touches the balance sheet, right? So you know, so if you’re thinking of like, what is net worth? Net worth is really, it equals your assets, the things that you own, so think checking, savings, investment accounts, the value of your home, minus your liabilities, which are the things that you owe, so student loan debt, credit cards, the mortgage left on your house, the loan to your crazy uncle Steve for whatever, like those are the things that are the subtractors. And that’s your net worth. And for a lot of pharmacists, especially starting out, that can be super negative. So we’ve had clients that have come on that their net worth is almost -$1 million, but then we also work with clients that are multimillionaires. So to me, it made sense to really focus on the net worth because we can’t control everything about the financial plan, but there are a lot of things that we can control, and I think the net worth kind of encapsulates a lot. And I think it’s the biggest, it’s the best number to focus on as you’re trying to view progress and improvement with regard to the financial plan over time.

Tim Ulbrich: So Tim, as you mentioned, simple calculation, right? Net worth is assets, what you own, minus liabilities, what you owe. Some common questions I think that I know I’ve gotten and I’ve thought myself when people actually start to put pen to paper here are, you know, what assets might I include or not include? I know there’s some thought about like depreciating assets such as a car. Is that something I should include as an asset or not? And then on the liabilities side, things like revolving credit card debt or obviously that could be ongoing with interest accruing but things that pay off each month or those types of things. So when you’re actually getting in the weeds on assets minus liabilities, is this worth really starting to get into ah, is this truly an asset or is this not an asset? This has this tax and so forth. How do you think about what actually falls into these or does not fall into these buckets?

Tim Baker: Yeah, I mean, it goes back to that whole idea of like garbage-in, garbage-out, right, Tim? So the better the data is, the more accurate and the more empowered you can potentially be to make good decisions. Something like a 401k and the value of your home, that’s a no-brainer because for most people, that’s typically the largest assets that is on the balance sheet.

Tim Ulbrich: That’s right.

Tim Baker: The home is going to be a little bit of a moving target because, you know, you look at the Zestimate, you might say, “No way that I can get that for my house,” although, right now everything is en fuego. A home — and yeah, something like that, what people will pay for is, that’s the value. So that can be a little bit of a moving target, but I think it’s worth tracking over time. The question about a car, you know, like when we talk about that, we typically don’t include that because in most cases, the value of the car depreciates as the note does in a lot of ways. Now if you buy a car cash, then maybe that’s a different story. But things like a credit card, yeah, I mean, if you have a balance that you’re carrying, I would definitely include that. If you don’t, maybe not, if that’s your behavior. But I think like — so back in the olden days, Tim, this would be like a pen and a notepad, right? So you would put all of your liabilities on the left side, big line down the center, put all your assets, add those up, and then basically what’s the difference, and that’s your net worth. Now, you know, either with Excel or something like that, you can do it a little bit — that’s still manual because you still have to look at these balances. But there are lots of tools out there that you can actually aggregate all of the different financial institutions that you’re using. So for our tool, basically when a client comes on board, once they become a client, the first thing that they do is we send them a welcome email and they get links to their client portal, and they link their checking, their savings, their credit cards, their student loans, their mortgage, basically all of their financial accounts. And for a lot of people, Tim, if you think about it, it’s the first time they’ve seen all of their stuff in one spot. So like how can we plan for things if we don’t really know what we have or we know kind of in the abstract of what we have. But then especially for couples, right?

Tim Ulbrich: That’s right.

Tim Baker: It’s the first time that they see all of their stuff in one spot. So you know, and that’s because we bank over here, we invest over here, our student loans are over here, so to have that on one platform, that is so powerful just to see like where the heck are you? Where are we at? Which is a big component of — it’s half of the equation of when I say, “It depends,” that’s one of the big components is like, where are we at, so that we can advise you on where we want to go. I think the net worth, again, and what you include in that, by and large, you want checking and savings, your cash accounts, investments, the value of your house, student loans, credit cards that you’re carrying, personal debt, mortgage, etc. Some of the other stuff might be if you have like fine art or things like that, you can include that all in there. But you know, depending on how big that is in your portfolio, I know there’s some people that their business is one of their biggest assets that they would account for on their net worth or maybe a cash value life insurance. So it’s going to depend, but I would say don’t get lost in that minutia. I think the act of just going through it and doing it and just seeing — it’s just like budgeting, right? — just seeing what works, what doesn’t work. If you don’t think that tracking x number is important, then don’t do it. So that’s my thought.

Tim Ulbrich: Yeah, no fine art in this house, Tim, with four boys. So that would get trashed for sure.

Tim Baker: Yeah.

Tim Ulbrich: You know, I was just logging on, we use, as you alluded to, we use a tool for our planning clients called eMoney. And one of the things I love about that is, you know, I just logged onto my account, front and center is net worth. Right?

Tim Baker: Yeah.

Tim Ulbrich: And you know, we talk about in the book “Seven Figure Pharmacist” that net worth is really your financial vitals check. It’s a great indicator of your financial health. And I find this helpful because there’s times — and it can be days, sometimes it’s within a month — where you’re like, man, things are going really well or the opposite, I feel like things are falling off the rails financially, right? And then you log on and this allows you to take a step back and say OK, what is the direction that things are going? And what’s happening in the asset column, what’s happening in the liability column? And I think having this front and center and tracking the progress over time and obviously through growing assets and paying down the liabilities, we want to see this number tick up over time. And of course, that’s going to be a big part of what we’re trying to do with the financial planning process. Tim, talk to us for a moment, you know, Sarah Stanley-Fallaw, who we had on, author of “The Next Millionaire Next Door” on Episode 200, in that book and I also remember discussion of this in “Rich Dad Poor Dad,” this idea of income-affluent versus balance sheet-affluent. Talk to us just a little bit at a high level, you know, what those two things are referring to and why this mindset is so important.

Tim Baker: Yeah, so I think so many — and we talk, we actually talked about this or around this, Tim, in terms of like YFP and the growth of the business where like we have these revenue goals and things like that and we really want to grow YFP and really touch as many pharmacists as we can. But that’s an ego metric, right? You know, to say, hey, we grew this many in terms of in revenue. It’s the same with income. What really matters from a business perspective is profitability. And it’s kind of the same on the individual side is — and we’ve talked about it, although we kind of do talk out of both sides of our mouth. So like one of the things that we’ve said, especially with pharmacists that are coming out that may have bought into the mantra of like, hey, don’t worry about your student loans, don’t worry about your finances, once you get that six-figure income, everything works itself out. And we know that that is not necessarily true. But the flip side of that, Tim, is one of the most valuable things that a pharmacist has with regard to their finances is their income, right? So without income, nothing moves. I think when we look at income affluence versus like balance sheet affluence is that we also know that there’s a lot of people and listeners out there, you can be one of them, I used to be one of these people, you could have friends and family that are like that, is that if you earn $100,000 and that’s the money that comes in the door, $100,000 goes out or $120,000 goes out because it’s kind of an exercise in keeping up with the Joneses. And the whole idea behind “The Next Millionaire Next Door,” which was following up on “The Millionaire Next Door,” is the whole idea is that most millionaires that you come across are not flashing it around. Right? So they’re not driving the $80,000 sports car, they’re not living in certain neighborhoods. So the idea is that this is more about what you keep, right? So to grow wealth over time is to kind of steer clear of some of those more ego things and really direct resources to what matters most. So like I don’t have a problem with a client spending money on a luxury sports car if that lines up with their goals and what their view of a wealthy life is. But we also know that money is a finite thing, so we can’t necessarily have our cake and eat it too in every part of our financial plan. So there is give-and-take. So what we try to do is really shift the idea behind, hey, this is the amount of money that we make to really focus on the net worth and show how that really drives progress and drives the conversation of what is a wealthy life. Because there’s a lot of people that make seven figures worth of income and have nothing to show for it. They’re not necessarily achieving their goals of travel and being able to take care of loved ones and giving and being able to be on track at a certain retirement age. So that is really what financial planning is designed to do is to align this great resource that pharmacists have and direct that towards the goals that they have to make sure that we’re maximizing or optimizing what a wealthy life is for that particular individual.

Tim Ulbrich: Yeah. And Tim, I want to talk about that further because I think that concept of living a wealthy life, you know, I suspect many pharmacists like myself might be of the mindset of, hey, I can squirrel money away and I can save it for the future, but I think there’s balance when it comes to the financial plan. And I think this is one area, to your credit of the model that we’ve built at YFP, that our planning team does an awesome job, and that’s ensuring that one’s financial plan is considering both the now and the future. As you say, it can’t just be about the 1s and the 0s in your bank account. So we’ve got to find this balance between taking care of your future self but also living a rich life today. And that really comes down to quantitative and qualitative factors of the financial plan. And I think financial planners are known for focusing on the numbers, right? And we’ve really built a process I think that is so important that we’re also covering some of the things that aren’t numbers-based. And certainly they could be number-based if we’re going to determine how we’re going to spend and allocate money, but in terms of goals and things we want to achieve, it’s not about, again, the 1s and 0s in the bank account. So tell us from the planning perspective, what does this actually look like? You know, I’m a new client, I’m meeting with you, like how do I actually begin to tell that story and what are you doing to extract this information so that we can then weave that into the numeric part of the financial plan?

Tim Baker: If we start with the balance sheet, Tim, right, so the net worth, we’ve got to know where we’re at, right? That’s the vital check that we’re really looking for. So that’s really our first data point. The second part of that is now that we know where we’re at, where the heck are we going? So that is where we actually slow down and ask clients some introspective questions about like what is, what do you want out of this life? What is a wealthy life for you? Like if today was your last day, what would be things that you haven’t yet done that you want to do? Or if you had 5-10 years left or if money were no object, what would be the thing that — how would you build your day-to-day schedule? So like really kind of going through a series of questions and extracting information so it really paints a picture of now that we know where we’re at, at least financially, where do we want to go? And those two things, Tim, is what changes the whole answer of like, ‘Hey, well, should I do this or that?’ Before I know those things, it’s like, ‘Well, it depends.’ Now that we know these things, where are we at and where are we wanting to go, we can actually advise clients on their financial plan. So how we do that really is to look at all the different pieces. So like once we figure out that picture, our job, which ultimately, our job as a planning team, which ultimately supports our mission at YFP which is to empower a community of pharmacists to achieve financial freedom, our mission in the planning team is a little bit different. It’s a little bit more granular. Our job with clients is to help clients grow and protect income, which is the lifeblood of the financial plan — without that, nothing moves — grow and protect your net worth, which is essentially what sticks, while keeping your goals in mind. That’s our jam, right? So that’s how we feel that we can best help pharmacists achieve financial freedom. So we do that through all the different pieces of the financial plan, which is fundamentals, which might include savings plan and debt management, cash flow and budgeting, insurance, investment, the tax piece, the estate plan, and then all of these other supplemental pieces like credit, salary negotiation, the home purchase and real estate investing, education planning. It might be ‘I’m an entrepreneur, I want to start a business.’ All of that stuff basically are the — those are the processes that get us to really refining out the financial plan and then the quantitative, and then we kind of observe the quantitative and qualitative results and then adjust from there. So the quantitative results, the one that we focus on most, is the net worth. So the idea is that when you become a client, we’re going to say, “Hey, your net worth, you’re starting at -$50,000. And our hope is in a short amount of time, we go from the negative to the little bit less negative to the positive to that multi, that seven-figure pharmacist status.” Or if you’re already positive, it’s to kind of keep that rolling and make sure that we are efficiently growing the net worth. I think the other thing, which I think often gets lost with other financial planners, is the qualitative. It is really that, the things that are outside of the 1s and 0s, which for pharmacists, sometimes that could be tough, Tim, because you guys are scientists, you want to say, “OK, what’s — if I pay this amount in fees, this is what I want to get back.” I completely get it. But to me, it’s the qualitative stuff that really is typically the things that when I get off of a call or I’m here and Robert and Kelly talk about their interactions with clients, that I want to run through a wall because I’m just so jacked up about like what we’re doing and how we’re transforming clients. Like that’s the special stuff. And I really, what I really like to say is that we want to build out a life plan that is supported by the financial plan, not the other way around. Right?

Tim Ulbrich: Yes.

Tim Baker: That’s our jam.

Tim Ulbrich: So important, the life plan that is supported by the financial plan. I just think that’s a completely different way of thinking. You know, I’m going to overgeneralize the industry for a moment, but I think that, again, it’s easy to focus on the numbers, and we’ve talked extensively on the show about why often that may be the case, you know, all the incentives in terms of why the dollars. So if you’re sitting down with a client, you know, and this is one of I think the beauties of a fee-only model where you’ve got their best interests in mind, if something is more experience-based, Tim, sometimes that might be let’s spend some money to make this happen because we said it’s important, and we’ve accounted for it in the rest of the goals and what we’re trying to do. Now, again, it’s a balance. We need to take care of our future self while taking care of ourself today and living a rich life. But you know, that traditional model would be take that money and stuff it into an IRA because that might be a greater percentage of fees — you know, we talked about fees recently on the show. So I think that is so important when folks are looking for financial planning, whether that’s with us or somewhere else, is is that life plan being connected and have a strong connection thread with the financial plan? And I’ll say from personal experience, Tim, for Jess and I working with you, like it just feels like life goes by at lightning speed. And part of that may be phase of life, you know, young family, whatever. But just to slow down and not only think about these goals but then to have somebody actually put these back up in front of you every so often and say, “Hey, Tim and Jess, you guys said this was important. Like what are we doing about it?”

Tim Baker: Yeah.

Tim Ulbrich: You know, “What are we doing about it?” And I need that because I am the person that I’ll try to squirrel away $4 instead of $3 million. And I know, like I know in my head, that when it’s all said and done, I’m not going to care if that was $2.5 or $3 or $3.5 and $4. Like there’s a point where enough is enough, but it’s the experiences and the other things that I think are really going to matter.

Tim Baker: Yeah. You are going to look back and be like, ‘Ah, I wish I would have done this with Sam and Everett and Levi. Like I wouldn’t — and Ben and done all these things.’ And we’ve talked about this, and I’ll cite a personal story. You know, my wife and I, we’ve been saving money really to kind of look at the next level from a real estate perspective, and we kind of just took a pause and we had this extensive conversation of like, do we really want to do this? You know, Olivia is our 6-year-old, we have Liam who’s turning 2. And we really have a window of time, right? We have a window of time where we have them as a captive audience, right? Maybe 10 years before Olivia is like, ‘Dad, get out of my face.’

Tim Ulbrich: Yeah, you’re going to be still cool for awhile. Yeah.

Tim Baker: Yeah, like so I look at that like my dad — actually, my dad jokes do not land with her. She’s like, ‘Daddy.’ So I’m already losing that a little bit. But in terms of being able to spend time and have those experiences, that’s a small window. It is a very small window. And the discussion is really around should we put this into an investment, which from a number perspective is going to be probably the best thing that we can do, right? There’s no guarantees, right, with real estate or any investment. But to put this chunk of money there or do we do what my vision was in my life plan — so I’ve recently completed the Registered Life Planning designation, and when I was life planning, I still remember it like it was yesterday. You create this vision, and you create this energy behind this vision sometime in the near future. And for me, it was buying an RV and having the freedom in the summers and on the weekends or long weekends and maybe weeks at a time to go and travel and adventure and see national parks and things like that. But part of me, Tim, is like — the financial planner in me is man, if we purchase an RV, that’s a use asset that’s depreciating over time, I can’t rent that — I guess I can kind of rent it out. And it’s kind of nonsense, right? It’s kind of like a no-brainer. And it’s a struggle, right, even for me where I’m pushing, we’re pushing clients to really achieve that wealthy life. This is the thing when I talk about it, I get excited and passionate about. And for some people, it’s starting a family, for some people, it’s playing in a band. For some people, it’s horseback riding. These are examples that we’ve had with clients that, you know, they were like, when they talk about it, they just light up. And I’m like, this has to be in your financial plan. Like when you talk about becoming a mom or you talk about before you were in pharmacy school, these were the things that you were passionate about. I know we have, and I know we have some credit card debt, and I know we want to get the investment game rolling, but we’ve got to stop and smell the roses along the way and make sure that we’re taking care of ourselves today. So it’s just a passion of mine, and these are the things, like when you kind of look at a situation that clients think — and we know this with millennials in particular but we’re seeing it with like sandwich generation and Gen X and even Baby Boomers in terms of how they can retire, with millennials, it’s everything is going to the right. Like marriage, home purchase, kids, and I want to challenge that. I want to — if you work with a professional, I want to challenge that. And I think if we’re doing things — and sometimes, we as a team, we don’t necessarily think about all the things that we do technically, the things that most people expect about an efficient debt payoff process, an efficient investment process, efficient tax plan, like we don’t really think about those as much as we should, and we should pat ourselves on the back in terms of what we do with clients. But that to me is like table stakes. It’s the next level of things to then challenge the client of like, ‘Well, maybe that timeline of 5 years is not accurate. Maybe we can do a little bit more.’ And I think if you then couple that with an efficient budget and spending plan, I mean, really the sky’s the limit. And that’s what I really get jacked up about. You know, I get jacked up about the pharmacist that says, “Hey, here’s my 4-month-year-old, this is your fault, Tim,” in more of a conversation like, we thought that we would have to wait so much longer, not because we paid off our loans or we did this or that, it’s because we have confidence in our plan. And that to me is what continues to drive me and jack me up and really push forward, and that’s why we get up in the morning to really push forward that mission, again, to empower pharmacists to achieve financial freedom. It’s a great job, it’s a great position to be in to be able to influence that in such a way.

Tim Ulbrich: Tim Baker, great stuff today. Loved the discussion on the importance of net worth and setting both quantitative and qualitative financial goals. And throughout the episode, several times we mentioned and referred to specific parts of our planning process at YFP Planning. So for folks that are listening to today’s episode and are interested in learning more about our one-on-one comprehensive financial planning services, you can head on over to YFPPlanning.com, you can schedule and book a free discovery call and determine whether or not our services may be a good fit for you. As always, we appreciate you joining us for this week’s episode of the Your Financial Pharmacist podcast. Please do us a favor and leave us a rating and review on Apple podcasts or wherever you listen to the show each and every week. That helps other pharmacy professionals find out and learn about this show. Thanks again for listening, and have a great rest of your week.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 207: How to Avoid These 6 Common Financial Mistakes

Posted on June 10, 2021November 2, 2022 by yfpadmin

How to Avoid These 6 Common Financial Mistakes

On this episode, sponsored by Insuring Income, YFP Co-founder and Director of Financial Planning, Tim Baker, discusses common financial errors ranging from those made with investing, insurance, credit, and more. Whether you are just getting started with your financial plan or looking for a tune-up, this episode will help you avoid the most common financial blunders so you can maximize your financial plan and achieve your financial goals.

Summary

Tim Baker and Tim Ulbrich discuss six common financial mistakes and how to avoid them. While financial mistakes may seem inevitable, Tim and Tim speak from their own experiences with financial errors and share ways to prevent these mistakes from impacting your financial plan and financial goals.

Common financial errors discussed in this episode include:

1. Not taking advantage of employer match

When you don’t take advantage of your employer’s match, you essentially turn down free money. Many people don’t take full advantage of employer matches because they are not auto-enrolled to do so. Getting the maximum amount out of your employer match increases your compound interest over time.

2. No budget or no financial plan

Without a budget or financial plan, it is increasingly difficult to reach your financial goals. The budget is not a one-size-fits-all and should custom fit your personal experience and what works for you.

3. No insurance or inadequate insurance

As a pharmacist with a spouse, house, and mouths to feed, you should be aware of your insurance needs and insured for an event that will require insurance ranging from life, disability, or professional liability insurance.

4. Failure to monitor your credit reports

Tim Baker recommends checking your credit reports twice a year – he pulls his reports with the changing of the clocks for daylight savings. With the increase in the digital nature of personal information, it is critical to monitor your credit for errors and identity theft.

5. Not investing or not having the right attitude when it comes to investing

Being risk-averse may impact your long-term financial plan. Building and maintaining an appropriate asset allocation that matches your goals, risk tolerance, and time horizon while avoiding impulse purchases or hunches is a more intelligent way to positive investment returns.

6. Not utilizing professional advice

Financial professionals know what they are doing, and hiring someone allows you to have more free time to do the things you want to do.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Tim, welcome back to the show.

Tim Baker: Hey, Tim, thanks. Thanks for having me back. It’s been awhile.

Tim Ulbrich: What’s new and exciting from YFP Planning’s perspective?

Tim Baker: It feels like a lot, Tim. I feel like this year is full of change and we’re excited. A lot of things going on in the background. We’ve had our lead planners out in Columbus to do some planning. It was good to kind of meet up and now that people are getting vaccinated, to be able to meet up and do some planning and talk about our goals. And that was exciting to kind of show the new office, which people may or may not know that YFP has bought headquarters in Columbus. And we’re in the process of kind of renovating a little bit and getting that ready for us to move here in — move in here shortly. And that’s been exciting and having to deal with contractors, maybe not as exciting. I think the team has continued to expand. We finish up tax season here, which is always hair on fire, and we had a lot of good help to go through that. But we actually welcomed back a former team member, now current member again, Christina Slavonik, who worked with me a year or so ago and decided to kind of come back into the fold. And we’re super excited to have her as part of the team. And yeah, so lots of changes, but all good things I think.

Tim Ulbrich: Yeah, certainly excited to have Christina back, what that means for our team. Pumped up about the new office and it’s an open invitation to any of the community that’s in Columbus or finds their way traveling through Columbus, we’d love to host you and have a chance to meet up with you. Please reach out to us. And a shoutout, as you mentioned, Tim, to our tax team. I mean, over 250 returns that we filed this year, lots of wrenches that were thrown their way with extensions and delays in state extensions and legislative pieces that were being passed in the middle of tax season. And I thought they handled it well, and we’re ultimately able to serve the community, and we very much believe tax is an important part of the financial plan. So excited to see that continuing to grow. So today, we’re talking all about common financial errors. And you and I know that financial errors seem inevitable. We’re all human; we all make mistakes. And one of our goals with YFP is to help you, the YFP community, and certainly our clients as well, to avoid as many financial mistakes as possible. And certainly we have lots of resources that are here to help in this, whether it be this podcast, blog posts, checklists, calculators, and certainly our one-on-one comprehensive financial planning services as well. And just to be clear, this is not about shaming by any means. This is about learning and hopefully avoiding a repeat of making the same mistakes. So if you’ve already made some of these mistakes, certainly Tim and I have. We often talk about these between the two of us. We’ll that here again today. So if you’ve made some of these mistakes, certainly this is not about beating yourself up. Take what you’ve learned and certainly apply that information, and hopefully that can help with avoiding future mishaps or help you to spread the word and encourage and teach others along the way as well. So Tim, let’s get to it. We’re going to warm up with what many consider low-hanging fruit. No. 1 financial error/mistake I’m going to list here is not taking advantage of the employer match. So talk to us about the employer match and why not taking advantage of it is a significant financial error.

Tim Baker: Yeah, so I think this is where often we say, it’s free money. So not often do you ever come across a situation where there’s money to be had, you know, without anything in return. So I think in a lot of cases — and I know there’s some gurus out there that say like if you’re in debt, you shouldn’t even do this, and I would probably disagree with that. I think there are some exceptions if you have lots of high interest like credit card debt, consumer debt, then this might be a situation where you don’t want to get the match. But I would say for the most part, if your employer has a 401k or a 403b match or whatever that is, you want to make sure that you are taking full advantage of that. Most employers are going to have matches that are going to incentivize you to put anywhere between 2-6% to get the full match. There are some that are designed to push you a little bit further. But for the most part, if you’re in that sweet spot of putting in 2-6% of your income into a 401k to get a full match, I would say to do that. The reason that you want to do this is because if you can get that dollar, those dollars deferred and into that retirement account, this all goes back to the concept of time in the market versus time in the market. And really taking advantage of more compounding periods to take advantage of the compound interest. So if you’re out there and you have — you’re looking at your student debt or if you have sizable consumer debt and you’re like, man, I just feel like I put money in and it stays the same, that’s compounding interest kind of taking advantage of you. And what we want to do is flip the script a bit and get that to where your money is making money. So Albert Einstein has said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” So the idea here is that you can get your money to work in the investment world and keep it working and allow those dollars to make baby dollars and they make baby dollars. That’s the idea here. So it’s really about time in the market. We see this as less and less of an issue now that I think it was the Obama administration, you know, has really pushed 401k plans to have an auto-enroll feature. So based on studies on this, if we are the variable that gets in the way, meaning people, that we typically are going to go with whatever is the default. So if the default is not to enroll and you have to actually take steps to do that yourself, we’re not going to do that. If the default is that we’re already auto-enrolled, then that’s what we’re going to do. So a lot of these plans — and Tim, our plan has this — is that after a certain period of time, we auto-enroll participants and we say, “OK, we’re going to auto-enroll them at x%.” For ours right now and for — speaking of the YFP 401k — we auto-enroll at 3%. The maximum match is if they put 4% in. So they would just have to go in and make that determination that they would like to do that. So auto-enroll features on 401k’s have made this a little bit less of a common mistake, but they’re still there, nonetheless, and we still come across more than you would think of those that are not putting in at least to get to the company match. And just to kind of put a bow on this, think of this in this light: You know, if you’re a pharmacist and we use round numbers here — if you’re a pharmacist and you’re making $100,000 and your company offers you a 3% match, think of that — and you’re not taking advantage of that right now, think of this as like a 3% raise where you are making $103,000 because $3,000 of that is going into your company 401k. And it’s surprising, you know, I think if you — dependent on the 401k — and I know we’re going to talk about the fees in an upcoming episode — but dependent on the 401k, it’s surprising how quickly those types of accounts can grow if you are deferring dollars out of your paycheck so you’re hopefully not missing it too much, it invested in the right way, and it’s not being eaten away by fees. It’s surprising how quickly those accounts can grow. This is a big, big miss if you’re not necessarily taking advantage of a match.

Tim Ulbrich: Great stuff, Tim. And I think just to further highlight time value of money, and I think for those that are listening that are especially getting started on the employer contribution side and perhaps aren’t leaning into that match yet, there is some trust in the momentum in compound interest, right? You can run the calculations, see the numbers, but it does feel like early on that you’re putting money in and you’re not seeing that growth until obviously those funds get to a certain balance and then you start to see the momentum of the growth on the growth. But to take your example, Tim, of somebody making $100,000, 3% employer match, $3,000, I would encourage folks to also think about it’s not just that $3,000. It’s what would that $3,000 be worth in 25 or 30 years? Right? So you know, that $3,000, if that were to grow at let’s say 7% average annual rate of return over 25 years, that $3,000 in 25 years is worth more than $16,000. So time value of money is not just what does it mean in today’s dollars, but what would it also mean in the opportunity cost of not investing those dollars? So that’s No. 1, not taking advantage of the employer match. No. 2 is no budget, no financial plan. Harsh words, Tim Baker. What do you mean by that? And you know, budgeting, spending plan, whatever we want to call it, why is it so critical to the financial plan?

Tim Baker: And some people would disagree with this. But I guess some people, especially if they might lend credence to like, you know, if you’re starting out, if you’re a new practitioner, definitely budget. If you get to a certain inflection point, you don’t need to budget. I would disagree in a sense. If you think about this in terms of like if you think about your household and the salaries you make as like revenue, if you’re a household and you’re making $200,000-250,000 as a household and you equate that to like a business and a business making that revenue, businesses are going to have budgets, they’re going to have projections, they’re going to bucket money for certain — just like we do, Tim, at YFP. You know, we have ‘this is the amount of money we want to spend on marketing, and this is the amount of money that we want to spend here and there.’ Like that’s a budget. And I would say that if you treat your household as a company, like you’re going to earmark those for different purposes. So I think this is a way of how you go about and do that. So I think where budgeting kind of gets a bad rep is the $0-based budget where every dollar has a job and you basically assign a purpose for every dollar that kind of flows through the household. And for some people, that can be super arduous, that can be super over-the-top. But I don’t necessarily think it’s an exercise that doesn’t have merit or value. But I think typically as you go, you find the flavor of ice cream that works for you. So there’s lots of different types of budgets out there. You know, you have the $0-based. I’ve seen a line item budget, I’ve seen a pay yourself first budget. There’s a lot of different ways to go about it. I think at the end of the day, a budget goes back to what is the intention of the resources that you have.

Tim Ulbrich: Absolutely.

Tim Baker: And applying that to — and by intention, we typically mean like goals. So what are the goals that you have? What are you intentionally trying to achieve with the six figures of income that you’re earning? And how do we go about that? So the budget is typically the structure or the steps to go from ‘Hey, I want to travel,’ or ‘I want to be able to give back,’ or ‘I want to be able to take care of an aging parent.’ The budget is typically the mechanism that allows that to kind of come to be. So I would say that this is typically lockstep with the savings plan. Most financial planners, in my opinion, they’ll say, “OK, your savings plan is your emergency fund, and that’s it. So you need to have $20,000 in your emergency fund as an example or $30,000 in an emergency fund,” and then it stops there. I think it needs to go further. So I think your budget and how you’re spending needs to kind of be in sync with how you’re deliberately saving for different things that are basically on the docket for goals. So — and I wouldn’t even call this a step, Tim. It’s a process. I’m a big Sixers fan, trust the process. Hopefully JoJo is going to come back —

Tim Ulbrich: I was going to say…

Tim Baker: No, but it’s a process. And I think what people do and where they get hung up on budgeting is that it’s more about striving for improvement and not perfection.

Tim Ulbrich: Yeah, that’s right.

Tim Baker: We want everything to be balanced, we want everything to kind of line up. And in most cases, that’s not going to happen. So depending on the budget and what flavor that suits you best is going to really allow you to kind of figure out how it works. So to me, this is really about being more intentional with spending, being more intentional with kind of top-line revenue. So this is not just an effort in kind of an exercise in scarcity of like, hey, this is what the pie is. I want to challenge you to grow the pie. So to me, it’s looking at both sides of that equation and really striving for improvement of what you’re trying to accomplish and not perfection. So I think that if you can kind of wrap your arms around that and not be wed to one way of doing things, then I think you’re going to see improvement. So and there’s lots of different tools out there, technologies, Mint, YNAB, some people use good old-fashioned spreadsheets, some people use envelopes, like physical envelopes to do this. At the end of the day, you know, I think the question you should be asking is, am I intentional with how I’m spending? Am I intentional with how I’m bringing money into the household? And does this align with the goals that I have set out for myself. And if it doesn’t, then I think that’s where you kind of need a little bit of a gut check to make sure that you’re on track.

Tim Ulbrich: Yeah, intentionality really stands out there to me, Tim, whether someone’s listening and they’ve got a net worth of -$400,000 or a net worth of $4 million. The process may look different, the intensity of the month-to-month might look very different, but at the end of the day, like budgeting, whatever you want to call it, to your point about looking at it from the point of a business, it’s about what are the goals, what are we trying to achieve, and then what’s the plan to make sure that that’s a reality. And the buckets might look bigger or smaller, the process might look more or less intense. But it’s about being intentional with the goals and the plan. For those that are looking for a starting point, a template, a process, you can go to YourFinancialPharmacist.com/budget. We do have a spreadsheet that you can get started with, certainly not necessarily the ending point. You can implement technology tools and evolve it from there, but that can be a good starting point. So that’s No. 2, no budget, no financial plan. No. 3 is no or inadequate insurance. I’ve mentioned before, Tim, on this podcast that insurance I think is an often overlooked part of the financial plan for obvious reasons. Thinking about something like a death or a disability or a professional liability claim isn’t necessarily the most exciting thing to think about when it comes to financial planning, especially when we can think about things like investing or saving for the future or getting rid of that student loan debt. So tell us here about what you see as some of the common pitfalls around inadequate insurance coverage.

Tim Baker: I think what a lot of people default to, a lot of pharmacists default to, is that what their employer provides as part of their compensation package is the plan for their insurance. And it’s not. It’s typically — we view it as a benefit that should be taken into consideration as we’re building out an insurance plan for your financial plan. And we’re really talking about the protection here, so like what we talk about with our YFP planning clients is how are we helping them growing and protecting — so protecting being the operative word in this step — their income and growing and protecting their net worth while keeping their goals in mind? So protection here is what we’re talking about. And typically, you know, what we focus on is things like life, disability, and professional liability. So your employer might provide you different coverages based on the employer. And that’s going to mean different things to different people, depending on their life situation. But oftentimes with pharmacists, you need to take more action in this or you run the risk of exposing yourself to a loss that could potentially be catastrophic. So you know, health insurance — so I would say that the one thing that is a plan and not necessarily a perk is health insurance. So health insurance, you’re typically best to go with the group policy, although that could change in the future. That could change where the way that employer compensation packages are designed in our country is that if the government isn’t providing that, it’s health insurance the employer does. That could change in the future, and we’ve seen that with things like pensions and 401k’s where pensions have gone away and they’ve been more robust, and a lot of it put the onus back on the employee for saving for retirement. So that could change in the future. But if we break down the insurance piece, a big miss is if we say not having adequate insurance is knowing what to have, knowing what you think that you need from particularly a life and disability insurance policy. You know, I typically say with regard to life insurance — and another piece of the protection of the financial plan is estate insurance — is that typically when you have a spouse, a house, and mouths to feed, those are typically going to be the opportunities to make sure that you are protected from a life insurance perspective and from an estate planning perspective. So more often than not, pharmacists are going to need a lot more of a benefit than what their employer can provide. So that’s typically where you want to go out into the individual policy world and make sure that you are fully protected. That’s one of the problems in the financial services industry too is like we come across a lot of pharmacists, Tim, that they might be 27 or 28 and they’ve been sold a crappy insurance policy, life insurance policy, that they don’t need, right? Because they don’t have a mortgage, they don’t have other dependents relying on them, their loans are going to be forgiven upon death or disability, so it’s just a policy that they probably don’t need right now. So it’s kind of like you have a hammer and you see a nail and it was a good cookie-cutter solution for everyone. One of the mistakes here is not understanding the need. So like we’ll have clients that will come in that will have young kids and things like insurance are not even brought up. And I look at that and I’m like, that’s a big risk. Like the student loans are important, and you’re talking about real estate investing and some other things, but like we probably need to address this first. So — and it’s typical, right? We don’t want to — we typically think that it’s not going to happen to us, a premature death or disability. So it’s very natural. So that’s part of the planner’s job is to kind of bring that to the forefront and make the proper recommendations. The other thing we’ve been talking about is disability insurance. So these are typically more likely to happen and typically more expensive because you typically have medical bills that are going to pile up as a result of a disability. So having the proper insurance there, whether that is through your employer or your own policy or buying a supplemental policy to kind of make you not whole but make you to — indemnify you to a certain threshold that you feel like you can continue the household, that’s a big thing. And a lot of these policies, the way that they’re written don’t provide a lot of protection. So it’s really looking at does it make sense to add a policy for yourself? So the idea here is that the sooner, the better. Whether it’s life, disability, the younger that you can get these policies in place, typically the better from a cost perspective. A lot of the policies that you have through your employer, the group policies, they’re not portable. Or if they are, they’re not great compared to the individual policies. So I think if you can have these separate from the employer, it makes a lot of sense with regard to protecting your financial plan.

Tim Ulbrich: Yeah, and I think you’ve covered a lot here, and there’s just a lot to think through. And we’ve only talked through very briefly three different areas. You mentioned professional liability, life, disability. But questions of like, what do you need? What do you not need? Based on what you do need, how do you shop for those, looking for policies that — and getting advice that really has your best interests in mind to make sure you’re not underinsured or overinsured? What does your employer offer? What do they not offer? What’s the gap? What are the tax implications? So important part of the plan. I think our planning team does an awesome job of weaving this in and for folks to consider, are they underinsured? Do they have adequate insurance or not? And how does that fit in with the rest of their financial goals and plans? So that’s No. 3, no or inadequate insurance. No. 4, Tim, failure to monitor credit reports. Wow. When I think of checking a credit report, I think of boring, No. 1. No. 2 is necessary, right? So you know, why is this such an important step? How often should one be doing it? And why do they need to monitor credit reports over time?

Tim Baker: Yeah, and I would definitely chalk this up to like to stage of life. So you know, if you’re more Gen X or Baby Boomer, this might not be as important because you might not be making the big decisions, although you could be sending kids to college, there might be some loans that you’re taking out. But I would say that if you’re — a lot of the clients that we work with, you know, especially as they’re starting their careers, there’s a lot of decisions that are being made that credit granting is on the table. So that’s like home purchase, car purchase, things like that. Naturally, because of age of credit, your credit is going to become stronger and stronger as you go because that’s the way that the factors that kind of go into your credit score, age of credit is a big one. But I think the big thing that is kind of universal here that is becoming more and more of a thing is just the identity theft stuff. So as our lives become more and more digital and there’s more exposure to theft, it’s kind of this cat-and-mouse game. It’s not really a question of if, it’s really when. Having kind of eyes on this is really important. So I like to typically recommend that we check credit at least twice per year. So I kind of do it when the clocks change, so when we spring forward and fall back. I myself have gone through this exercise. I’ve found large enough mistakes on my credit report that drastically changed my credit score. And this is even — like when I first started advising clients on credit, this was before the days of like banks learning kind of suspicious behavior. A lot of these banks, a lot of these institutions, they’ve come a long way to alert you and kind of give you some structural things to look at, you know, if you have expenses that are out-of-state or whatever. Even in that environment, there were some things that were from my credit report that should not have been there, that drastically changed my score. So typically, you see differences in scores because you have different formulas that every Equifax, Experian, Transunion are using to calculate your score. Different creditors are going to report differently. So if you buy a Toyota, they might be really good about reporting to Equifax but not Transunion for some reason. Or Mastercard is really good, but this other company isn’t. So you’re going to have different inputs. And really, that’s going to be the big factor that will see why your scores are different. But I think the big thing for all those that are out there listening to this is going to just be from an identity theft. And I’ve looked at client credit reports, and I’ve made comments about hey, these are things that we can do to improve this or these are different factors to consider, but I can’t look at a credit report and know that hey, this doesn’t belong there. So it’s really kind of home cooking that is really important here. So the Fact Act that was enacted I think in 2003 allows you to access your credit report for free one time per year from each of the three reporting agencies for free. So you go to annualcreditreport.com. It sounds fake, it sounds kind of hokey, but that’s the way to — the site that you want to go to is annualcreditreport.com, and pull your credit score from each of the reporting agencies. I would just kind of rotate them through and take a glance at it, see if there’s anything fishy or — and then you can always dispute things that are inaccurate, and it’s pretty easy to do that on the website there. So that would be a big thing that I would make sure that you want to build into your practice.

Tim Ulbrich: Yeah, I think to your point, this is a good maintenance part of the financial plan, right? It’s like periodic oil changes, like we’ve got to be doing this. I like your rhythm of when the clocks change, twice per year, again, annualcreditreport.com. We talk about tax being a thread of the financial plan, credit is a financial — is a thread of the financial plan, impacts so many different areas, whether that would be home buying, real estate investing, business purchases, you mentioned identity theft, so something we’ve got to stay on top of. We did an episode, Episode 162, where we talked all about credit, importance of credit, improving your credit, understanding your credit score, credit security practices, so I’d encourage you to check that out. Again, Episode 162. Tim, No. 5 here on our list of common financial errors is not investing or improper attitude towards investing. Now, I think we’ve talked a little bit about not investing when we talked about not taking advantage of the employer match. So obviously time value of money, compound interest, we’ve got to be in the market. Talk to us more about the improper attitude towards investing. What do you mean there?

Tim Baker: Yeah, so I think there’s like two extremes here when I would say that typically doesn’t necessarily align, which I think with what I think is a healthy investment portfolio. So one is not wanting to dip your toes into the market. So I kind of hear like, ‘Oh, I don’t want to take risks. I don’t want to lose any money.’ And I think for us to kind of stay in front of things like the inflation monster, like taxes, you can’t just stuff your mattress full of dollars and hope to one day be able to retire comfortably. You know, so it’s kind of like if you want to make an omelet, you’ve got to crack some eggs. So the idea here is that we need to build out a portfolio that takes risk intelligently but that is over the course of your career in line with what you’re trying to achieve. And most people, you know, if you’re in your 20s, 30s, 40s, and maybe even 50s, they typically are more heavily weighted in bonds than they need to be, in my opinion. So you know, a lot of people when the market crashed at the beginning of the pandemic, they’re like, oh my goodness, Tim, like I want to take my investment ball and go home, meaning like I want to get out of this investment. And the idea is no, like let’s keep going. Either let’s put more money in or let’s hold the course. So you want to do exactly what the opposite of how you feel. So you know, the big drivers in your ability to build wealth over time from an investment perspective is that you have the appropriate asset allocation, so the mix between stocks and bonds, and really driving your fees as low as possible with regard to the investments. In a lot of cases, when we look at our clients, there’s a lot of opportunity for improvement there. And one of the things we talk about in webinars and even in our presentation with clients is that you look at all the variables in investing, and we have conservative — we talk about Conservative Jane. So Conservative Jane makes $120,000, she gets 3% cost of living raises, she works for 30 years, but she doesn’t invest the dollars. She basically keeps them in cash or like a Money Market. At the end of that time period, she has $600,000. But then we look at Aggressive Jane, who does the exact same thing except the only thing that she changes — and I think the big thing is she puts 10% into her 401k — the only thing that Aggressive Jane does differently than Conservative Jane is that she trusts the market in the long run. So the market returns about 10% year over year, and we adjust it down for inflation to about 6.87%. And Aggressive Jane is not saving harder, she’s not working longer, she’s not making more money, she’s just trusting in the market over that amount of time, and the swing is about — I think it’s $1.2 million. So Aggressive Jane at the end of those 30 years will have $1.8 million. So that’s very impactful if you can internalize that and bake that into your investment strategy is really trust the market. Over long periods of time, it’s very predictable. The only other thing I think I’ll say about this is the other side of that is that people have maybe unrealistic expectations of their investments. So they think that if they invest a certain way for four or five years that they’re going to have this portfolio that it can live off the interest. That’s not the case, you know. And I think that there is a lot of speculation and things like that where you’re heavily invested maybe in crypto or these certain stock that can get you into trouble. And I typically say that it’s not that there’s no room for that, it’s that the overwhelming majority of your investments should be super boring and bland and not exciting at all. And typically the more exciting that the investments are, the worse it is for you, the investor. Keep that in mind as well.

Tim Ulbrich: Tim, I would argue — and you probably see this with clients and our planning team does as well — I’m not sure there’s a harder time than right now to trust the market over a long period of time and stay the course. You know, you mentioned that a good long-term investing plan — I’ve heard you say before — should be as boring as watching paint dry, right?

Tim Baker: Mhmm.

Tim Ulbrich: And I have that head knowledge, like I agree with that and I suspect many of our listeners do as well, but pick up any news cycle for 24 hours, right? I mean, whether it’s — and I’m not saying any one of these alone, to your point, is necessarily a bad thing or that folks shouldn’t be doing them — but whether it’s news around crypto or NFTs or ESGs or think of what happened with GameStop and Robinhood and others, like and I think it really challenges like the philosophy and you really have to be disciplined in like tuning out the noise for long-term investing strategies. Now again, I want to highlight, I’m not saying any of those things doesn’t necessarily have value or doesn’t have a place in one’s plan, but if the vast majority of an investing plan should be boring and should be over a long period of time, we’re trusting the market, it’s hard right now. I mean, it’s hard. Are you feeling that pressure not only individually but I sense from clients you’re probably seeing some of that as well.

Tim Baker: I kind of don’t listen to it. I don’t really read much — I mean, I try to read into it just to have an understanding of what’s going on, but I guess for me, I don’t feel the pull like I used to back in the day. One, because it’s a very humbling experience, and sometimes my clients haven’t been humbled. But like I kind of equate this, Tim, to kind of go a little bit off topic here, it’s like have you ever been around someone that’s like, man, the world is going to heck, this generation, whatever. And I think back on like well, what did they say about like the hippie, like free love? I feel like it’s always — like they probably were saying that about the dot-coms when before that, so there’s probably always been things like that that have tempted people to kind of go awry. And maybe cryptocurrency is a thing that does ultimately shatter our traditional way of looking at money and investments and things like that. I don’t know. I mean, I think that it’s really too soon to tell on that. But yeah, I mean, I think so. I mean, I think it is tough. I think if you’ve been humbled enough, it can be a little bit easier to drown it out. But to me, I think of this as like singles and doubles, singles and doubles, to use the baseball analogy is that if you’re going up at every at-bat and you’re trying to hit the cover off the ball, you’re going to strike out a lot. And you might hit a few home runs, but we’re really looking at consistency. And if I know that there is this — the S&P 500 returns this, and it’s never been, we’ve never had a rolling 20-year period that’s been negative, even through the Great Depression, I’m going to bank on that unless told otherwise. So like, that can be hard for people to hear because they think of investments and they think sexy and exciting and things like that, but that’s not what I think a healthy investment plan makes. I think you want to keep the speculation low. And I’m not saying that that’s not — I still from time to time will go to a casino and play Blackjack or play poker. I still gamble just because I don’t do it as much as I did when I was younger, but just because I’m out and I’m with friends or I’m doing whatever. But if that’s the bulk of what your plan is to get to financial freedom, so to speak, I would caution you.

Tim Ulbrich: Yeah.

Tim Baker: And it could work. I mean, it could work. You could put all your proverbial eggs in the Amazon bucket and be completely OK, but you know, the way that people view Amazon — maybe not now but you know, 5-10 years ago, was very similar to how they viewed Sears back in the ‘70s, ‘80s, and ‘90s.

Tim Ulbrich: That’s right.

Tim Baker: And that company was this behemoth and they sold everything and would never go away. And then all of a sudden, it’s not a viable company anymore. So — and I can say this, I used to work for Sears back in the day, so I can say that not everything lasts. But I think that the U.S. stock market has been very predictable over the long run.

Tim Ulbrich: That’s a great example, Tim. We might be dating ourselves a little bit, but you think of — I can remember when it was the lesser known at the time Walmart and Amazon entering into the KMart and Sears world. It’s hard to even think of that in today’s day and age. I think your point about being humbled is a really interesting one. You know, we’re talking about common financial errors. So I’ll throw one out here. 2008, I was humbled by thinking I could pick individual stocks. Thankfully, I didn’t invest a whole lot of money. Circuit City, how did that work out? Right? So you know, I think your point about being humbled and again, there may be a portion of the portfolio where this makes sense for many folks, especially if they want to scratch that itch. The other thing you mentioned here, which I want to highlight we’re going to come back to next week is you mentioned fees. And we’re going to talk next week about how important it is to really understand the fees of your investment portfolio and really understand the impact that those fees can be having on your long-term returns and the importance of holding on to as much of your investment pie as possible. So stay tuned with us next week as we talk about fees. Tim, I want to transition into our sixth and final error, which is not using professional advice, not having a coach in your corner when it comes to the financial plan. And I think this is a good segue to what I just mentioned of this day and age, there’s a lot of noise. And so having somebody who’s keeping you accountable, who’s really reflecting back to you what you said were important and the goals, helping you look across the financial plan and really helping to direct you towards those end goals that you had articulated and to keep you on the path when human behavior may suggest that we want to go off the path from time to time. So obviously we’re biased, full disclaimer, we wholeheartedly believe in the value of a financial planner, otherwise we wouldn’t be doing it. So Tim, tell us why you think this is such an important part of the plan and why it’s perhaps a mistake if folks leave out a coach from their plan.

Tim Baker: Yeah, so I think if we look at it like our mission of empowering pharmacists to achieve financial freedom, I think we both agree that in a one-on-one engagement with a fiduciary, a fee-only planner, is the shortcut to that. And I think we’ve seen that a lot with our clients where we see kind of the before picture and the after picture, and those are typically because of I think that relationship that a planner has with a client and the way that is forcing them to think differently, right? So like I often joke that I’m a financial planner, but I need a financial planner because I need someone to — a third party to objectively look at our financial plan and say like, am I insane? Or are we nuts? Or are we on track? Right? So I like I know the technical piece of it, like I know what it is to be a CFP and what — just like you’re a pharmacist and you need to know the technical piece of it or a doctor, they’re still going to go to like other health providers to kind of provide that insight and those opinions. But so I think the third party is a big thing. I think the other thing that we don’t necessarily trade on that much is, you know, like for a lot of people, when’s the last time you actually sat down and talked about goals with yourself or like with a partner? So like, you know, I kind of equate this to like I’ve been in periods of my life, Tim, where you are so — I don’t want to say like zoned out but like you ever get into your car and you’re going to work, and it’s 6 o’clock in the morning or whenever you go into your work, and you drive that 30-minute commute, and then you get to work and you don’t even remember any of that drive. It’s just —

Tim Ulbrich: That’s right. Yep.

Tim Baker: You’re on like autopilot. I think that the danger of not utilizing a professional in some regard is that you get into that where you like wake up 10 years from now or 20 years from now and you’re like, what the heck did I actually do? Or like is this a wealthy life for me? And you’re not having those critical conversations with yourself or out loud, which I think can be so powerful. So where are we going? Are we sure that’s where we want to go? Is this insane? And having that kind of, again, objective third party to make sure that we’re outlining goals and we’re being held accountable to that. And then I think the other thing that like is really important is that guidance, is that knowledge, is that technical expertise with best interests in mind. So to me, like if you’re talking to a financial planner, the two things that I think need to be there and if they’re not I’m going the other way is are you a CFP? So unlike a PharmD or JD or MD, like this is a designation that there’s an ethics requirement, there’s an experience requirement, there’s an education requirement that most financial advisors don’t need to kind of do what they’re doing. So like the barrier to entry to become a financial planner is very low. So you want to make sure that the CFP designation is there. And I think the other thing is are you a fiduciary? Are you going to act in my best interests? Or can you put your interests, meaning the planner’s interests, ahead of mine? And what most people don’t know is that 95% of advisors out there are not fiduciaries. And typically if you know the names of those types of firms, they’re not fiduciaries, meaning that they can put their own client — put their own interests ahead of their client’s. So you know, I think that the technical expertise and that is, those are just table stakes. Like I think that that’s going to come with the territory. It’s really I think overlying the human element and to me, I think what we try to do from a planning perspective is make sure that we’re taking care of clients today, say in 2021, but we’re also taking care of clients in 10, 20, 30 years from now and their future self and really threading the needle between taking care of what’s going on today and then that future version of yourself. And I feel like if you don’t feel like that push and pull, if you’re always saving or if you’re always spending, that can lead to some problems. And I think that having that objective third party to kind of guide and hold you accountable, give you some tough love, give you some encouragement, give you some idea of where you’re at compared to peers, for example, I think that’s vitally important.

Tim Ulbrich: Yeah, and Tim, what you said about the human element just really resonates with me and I think will with our community as well. I mean, I think we often may have a perception of financial planners or advisors, whether that’s from movies or books we’ve read or parents that have worked with an advisor, whatever it be, but we tend to think I think of more of that tactical type of moves that folks are making, right, whether that’s certain investing decisions and insurance decisions, maybe it’s Roth conversions, things like that, tax decisions, etc. All of those are important and to your point, that’s table stakes in terms of an expertise that they’re going to provide. You want that knowledge, experience, and expertise. But it’s the human element. I think so much of the value you’ve provided to Jess and I has been in the conversations that have been initiated and the constant revisiting of what are our goals? What did we say was important, and are we actually living the wealthy life that we said we wanted to live? And the answer to that is not always yes, but we need that compass that we’re moving towards and we need that reminder, we need some accountability, we need a coach to make sure as life is racing by that we’re ultimately stopping, pausing, and getting back on the direction that we said was so important. So for those that are listening to this, if that is resonating with you, we’d love to have an opportunity to talk with you to see if what we offer from a financial planning standpoint is a good fit for you. You can go to YFPPlanning.com, you can schedule a free discovery call. Again, YFPPlanning.com. Tim or I would love to have a chance to talk with you further. Tim, great stuff. We’ve covered six common financial errors, and as always, we appreciate the community listening in to this podcast. If you liked what you heard on this week’s episode of the podcast, please do us a favor and leave us a rating and review on Apple podcasts or wherever you listen to the show. That will help other pharmacists be able to find this show as well. Thank you so much for joining, and we look forward to this episode next week. Have a great rest of your day.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 201: How and Why Trey Made the Transition from a Six-Figure to Resident Salary

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

How and Why Trey Made the Transition from a Six-Figure to Resident Salary

On this episode, Tim Ulbrich talks with Trey Lowery about his experiences taking a non-traditional path towards residency training. They discuss why Trey decided to go back to complete residency training, how he and his wife were able to make the transition from a six-figure to a resident salary, and financial tips for those going back to do residency or making a job transition.

About Today’s Guest

Trey Lowery is a clinical outpatient pharmacist at the Iowa City VA Health Care System. He attended pharmacy school at Mercer University College of Pharmacy in Atlanta, Georgia and moved to Iowa City, Iowa with his wife, who attends graduate school at the University of Iowa. He began his pharmacy career as a staff pharmacist for Hy-Vee Pharmacy following graduation in 2018. He then matched to the Iowa City VA’s PGY1 pharmacy residency program in 2019 and continued there in his current position upon completion. In the few years following pharmacy school graduation, Trey experienced the transition from student to the seemingly never-ending job search, to full-time salaried pharmacist, to resident, and back to pharmacist salary again. He is excited to share his experiences with other pharmacists in hopes it will encourage them to not allow potential decreases in pay to prevent them from pursuing their dream job as a pharmacist.

how to Summary

On this episode, Tim Ulbrich welcomes Trey Lowery to the show to discuss his experiences with his non-traditional plan towards residency and the many adjustments that came along with it. Trey shares some of the challenges he and his wife worked through along his journey to residency and how both compromise and financial savvy helped them through the transition.

Some of the best tips and advice that Trey shares in this episode include making sure that you have a solid budget and financial plan ahead of time. Trey shares his long history with budgeting and how he views it as a tool for success rather than something limiting. Tim and Trey go over Trey’s very practical advice on budgeting during residency, including a formula for building your residency budget even when you are not sure of your salary and specifics.

Additional advice includes building your emergency fund up to be able to fund at least 3-6 months of expenses. The reasoning for this is simple, with a 6-figure salary, unexpected expenses and events are much easier to manage, but with a resident salary, those same unexpected expenses and events can be a bigger problem.

Trey closes with a little motivational push and encourages anyone who is looking to take a non-traditional path to residency to do so.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Trey, welcome to the show.

Trey Lowery: Thanks, Tim. Appreciate you having me.

Tim Ulbrich: Appreciate you taking time to come onto the podcast and really share your story and pearls of wisdom for transitioning from a student pharmacist to a pharmacist with a six-figure income to a resident salary and what that meant for you, for your personal situation, and how you were able to financially plan for that transition. And so let’s start with your pharmacy background and give our listeners a little bit more of a picture of where you went to pharmacy school, when did you graduate, and then the route that you took through residency to your current role.

Trey Lowery: Sure thing. So I grew up in the state of Georgia and then went to pharmacy school at Mercer University College of Pharmacy, which is in Atlanta. I then got married after school and my wife decided she wanted to pursue a PhD program. And she chose to do so at the University of Iowa, so then we made the transition and moved from Georgia halfway across the country to the great state of Iowa. And when I got here, I didn’t really have many connections, I wasn’t licensed yet, so I had to figure out how to transition into passing all the different licensing exams and attempting to find a job without a license and without any knowledge of anyone in the area. So thankfully, I was able to do so after a couple of months. And I ended up working at Hyvee pharmacy. It was about an hour away from where I lived, so the job search was certainly expanded. And then after about 9-10 months of working at Hyvee, I applied to the several different residency programs and ended up matching at the Iowa City VA, where I completed my PGY1 and then after finishing it, I was happy to continue on in my current position as a clinical outpatient pharmacist there at the Iowa City VA as well.

Tim Ulbrich: And I’m excited to share your story with others as I suspect there may be many pharmacists out there listening that for whatever reason, you know, didn’t complete residency training right out of school, which may have been Plan A for them in their mind or perhaps they discovered later on that they wanted to do residency training. And that could either be a financial decision, that could be a family situation, a move that’s going on, it could be a match situation, lots of reasons why folks may not necessarily complete residency right out of school. But there may be an interest to go back and complete a later program at a later time. And I think one of the common barriers is wow, this is a big financial change to be considering, right? Going from student income to finally you’ve got that pharmacist six-figure income and then taking a step back at least financially in terms of that resident income. And so we’re going to dig into that in more detail here in a little bit, but I want to give our listeners more perspective on your Plan A and then obviously your work that you ended up doing at Hyvee. But my understanding is your goal was if possible to do residency right after your P4 year and because of the timing, because of the move, you weren’t able to enter Phase 1 of the match, didn’t yet know where you were going to be because of location with your wife’s PhD programs and the options and then at that point were able to move into Phase 2 — for all that have been through this process know how difficult Phase 2 of the match can be in terms of the number of applicants that are out there relative to the position. So talk to us through about that experience. How challenging was that in terms of that being up in the air, unknown, as well as having to make that decision that this is Plan A but I’m going to put that on the back burner because of this move. And if it works out in Phase 2, great. If not, then you’ll pursue something else.

Trey Lowery: Sure, I think that’s one of the interesting parts of my story is that I went into pharmacy school thinking I didn’t want to do a residency because I had worked originally as an intern and as a technician for a company called Kroger, which is very similar to Hyvee, back in Georgia. And I thought that that was the path I wanted to do. I was thinking retail pharmacy, maybe some type of independent or ownership later on. But it wasn’t really until my fourth year rotations when I actually got experience in the clinical and hospital side of pharmacy that I really decided, you know what? I actually really like the idea of the work that I’m doing here, so much so that it was basically around September when I decided OK, I definitely want to pursue a residency. But then the applications were due in December. So that was also part of the speeding up process that I had at the time. So I did what I could in those couple of months, tried to get some research experience, doing some more experience in the clinical areas and bolster my CV as much as I could. But yeah, the unknown of having to wait for Phase 2 was certainly challenging I suppose would be the word. I mean, we didn’t know where we were going to move, we didn’t know how we were going to financially survive after the move because if I didn’t match, then I wouldn’t have a job already lined up in the area. So it was certainly a challenging time. And it was one of those things to where we basically had to decide which of our careers would help the other one, sort of. So my wife was willing to take a year off if that meant that I could pursue a PGY1 anywhere in the country. But ultimately, we decided to go with — stick with the plan of her going ahead and going into school because it was going to take significantly longer and then my ability as a pharmacist to find a job would likely be a little bit easier than hers just coming out of undergrad.

Tim Ulbrich: Yeah, and I’m glad, Trey, that you guys were able to work through that and come to that decision as a family because obviously now you guys are in a great position at the Iowa City VA, your wife’s continuing on in her PhD degree, so it all worked out, but I’m sure that was incredibly stressful in the moment as you guys were evaluating the options that were in front of you. And so you make this move, you obviously get into Phase 2, limited options, lots of applicants, and ultimately weren’t able to land a position in Phase 2. So now you’re at the point of getting a job, right? So you land a position with Hyvee pharmacy, and my question here is once you were in that role, obviously I’m sure in the back of your mind you’re still thinking about residency as a path that you may be interested in, some of your career goals that you identified here in the fourth year that were of interest to you, but you’re making a good income. And I think this can be a hard thing to really objectively say, “I want to go back and pursue this training pathway,” knowing that it’s going to reduce my income by a half, certainly probably even more than that for some positions. And so talk to us about that decision-making process, you know, how you were able to really objectively evaluate, you know what, this path of residency is best for me, even if it means taking a pay cut to go back and do that.

Trey Lowery: Well, for me, Tim, it really stemmed from thinking about what my long-term career goals were as well as my wife’s — you know, obviously that was certainly a sacrifice for both of us in doing that. So when I got to thinking about what I wanted to do over the course of my career for the next 40+ years, I really just didn’t think that my current position was something that I was comfortable with thinking about in the long term. I really thought that I wanted to get more involved in the actual act of patient care, being able to handle some of the decisions instead of being more reactive by when they just come to the pharmacy and drop off prescriptions, it’s hard to really make a lot of interventions in that setting. And depending on when my wife finishes her PhD, we don’t exactly know what’s going to happen there. So it may involve another move, it probably — it will likely involve another job search. And I figured that if I could do anything to bolster my ability to be more marketable in that area by having residency training, then I’d also improve my chances of finding a job in the future and then hopefully being able to land something that I really enjoy like I have right now.

Tim Ulbrich: Well, and good call on the VA. You know, obviously we have many, many VA pharmacists that listen to this show that we work with as clients. And we know how much they enjoy the VA from a scope of practice, from obviously the quality of employment, the benefits, but also from the ability to transition. You know, one of the benefits of the VAs, if you guys have to pick up and move across the country, if you’re able to locate with another VA, you know, that minimizes a lot of the licensure concerns and other things of transferring your practice. So what a great opportunity that you have there. What about the experiences at Hyvee? You know, one of the things I’ve noticed as a residency program director and previous experiences is I have found that those that have some work experience, so graduate from pharmacy school, go out and work for a year or two years, however long that be, and then come back and do residency, seem to be a little bit better prepared to take on the demands, the challenges, the rigor of residency. Are there specific experiences that you had at Hyvee or skills that you obtained through that year that you felt like really benefited you during the residency year?

Trey Lowery: Yeah, and I think that’s an important point for those seeking to go back to do residency is using that to your advantage rather than saying, you know, I’m actually multiple years out of school, I’m well into one specific area, how can I go into a residency program that’s going to require well-rounded, maybe things that I haven’t done before? But I think like you mentioned that that is actually something to use to your advantage because one thing you’ll have over the other candidates that are applying that are still in school is that you’ve actually made that transition into I am an independent practitioner, I have ownership over my practice, when I scan the barcode to verify my prescription, that’s the last check. It’s completely up to my abilities as to whether or not the patient is getting the right thing, and I’m now the one responsible. So I think between that, you also gain some supervisory experience because you’ll actually have technicians that it will be just you in the pharmacy, you have to do a little bit of kind of management of time and management of people in that area. And then for me, it was just kind of the relationships that I really was able to develop with my patients. You know, actually seeing that your work is having an impact on them really makes you want to take more ownership of that. And so then going back into residency, I’d already seen the effects that I could have as a pharmacist on my patients. And so I think that made me care about it a little bit more knowing the sacrifices that I was making to be there.

Tim Ulbrich: Trey, one of the things I think about besides the financial transition, which we’ll get to in more detail here in a few moments, you know, just having a year I guess off — not necessarily off, you obviously were practicing, using skills, but you know, it’s a different pace from happy clinical rotations where you’re being evaluated and you’re expected to do so many interventions and have a certain autonomy of practice. So being, having that transitionary year and even just schedule differences, you know, I think about the pace typically of a residency probably were in more of a normal, not going to say not stressful, but normal schedule, so you finally graduate from school, you get to somewhat of a normal scheduled routine, and then you say, “You know what, I’m going to raise my hand to make a lot less money, to work a lot more, to be able to develop these skills further.” So money aside, just talk to us about the transition of a year off, not using some of those skills perhaps that you obtained in your final year of school or throughout your PharmD as well as just the schedule differences and how you were able to get back into the flow and the rhythm when you started residency.

Trey Lowery: It was definitely a transition, to say the least. For the first couple of months when you’re getting licensed and studying for your board exams, it still feels a little bit like school because I was taking most days of the week to study for that and for job searching purposes and that kind of thing. So for the first couple of months, I didn’t feel like I could just completely relax and not have to worry about the scheduling part. But you’re right, once I got into the position I was in, it was very much I go to work and then I come home and then I don’t necessarily have a bunch of projects or schoolwork or studying to do. And it is definitely easy to get caught up in that position. So when making the transition back, I’ll be completely honest, it was difficult the first couple months. I really felt like I had to do some extra reviewing so that I knew the topics I really hadn’t used in a year or plus, since my rotations when I’m actually going through my rotations in residency. And the scheduling, it was very much a team aspect in our household. My wife definitely helped so much with figuring out ways that we could be able to make sure that we spent time together, that we were — that I had time to focus on my residency projects and had ample time to be at work when I needed to. And it was certainly not easy. But after the first couple of months of residency, I suppose you kind of get used to it. You know what you have to do at that point, but yeah. Certainly a big difference from how it was before then.

Tim Ulbrich: Yeah. So let’s transition to talk about some of the financial tips that you shared with us prior to the interview that I think would be really helpful for folks that are considering a similar pathway, you know, student, practicing pharmacist going back to residency or folks that may be transitioning jobs or careers. I can think of situations where someone’s salary might be reduced or they’re looking to go part-time or they’re making a transition to another position that doesn’t have the same salary and just general financial principles that I think are helpful for individuals that find themselves in a similar situation. And the first one that you mentioned, Trey, is to make sure you have a solid budget and solid habits around budgeting before you get started. So tell me about budgeting, how you and your wife created good budgeting habits and effectively budgeted prior to making this transition back into the residency position. What did this look like?

Trey Lowery: So I am thankful that both of my parents are very financially savvy and both of my wife’s parents are the same. So I actually started my first budget when I got my first job at age 16 because for me, I looked at budgeting not as something that was limiting what I got to spend and where I got to spend the money that I was earning, but I felt very relieved in that I could actually allocate where certain parts of my income was going and then it was OK for it to go to those areas. So when I — when we got married, that was very important to me. I had listened to plenty of examples from different financial advisors throughout the country and from YFP as well to where I knew that money can certainly become an issue in marriage. And so we really wanted to focus on that at the beginning to make sure we were on the same page and go ahead and knock that out. So I use primarily Mint.com and then a couple of other different spreadsheets to track the budgets that we make. And it certainly took a couple of months for that to really become an effective tool. It took some balancing in certain areas and making sure that we were on the same page of all the different categories and that kind of thing. But the reason I say that that’s such an important aspect is because if you don’t have that going into residency, you’re not going to be able to create it while you’re there. You’re not going to have enough time, probably not enough energy, and then if you do have a family, it’s going to be very difficult to get everyone on the same page in the chaos that is residency. So that’s why I recommend if you can, go ahead and — I mean, useful budgeting, good budgeting habits are beneficial for anyone at any time I believe. But if you can make sure that you have those working effectively beforehand, it will only benefit you once you actually enter the reduced salary stage.

Tim Ulbrich: That’s great advice, Trey. And I think sometimes it’s easy, you know, P4s that are listening that are going to be starting a residency, starting a job, folks that are in a position such as yours that might be making a transition where there’s a salary change, sometimes it’s easy to say, “I’m just going to wait until I see what that actual pay stub and take-home pay is,” but I think you can get close enough, right? You can estimate close enough, work through the budget. It won’t be perfect, but the point is you’re being intentional, you’re being prepared with the transition, and then you can fine tune and refine it once you actually get that first pay stub and begin to move forward there knowing that you’ve been intentional and been prepared. Yeah, we have a budget template for folks that are looking to get started with a budget. If you go to YourFinancialPharmacist.com/budget, we have an Excel template that you can download, work through that. We use a zero-based budgeting method and system, and then you can take that information and plug it into a tool like Mint.com, like YNAB, or any other budgeting tool or software or good ol’ pen and paper or Excel if that works best for you as well. So that’s No. 1 around budgeting. No. 2 here is increase your emergency fund if you don’t already have 3-6 months of expenses saved. So why, Trey, did you decide to focus on building emergency fund prior to residency? How did you guys practically do this? And did you end up having to use that fund at all during residency?

Trey Lowery: So this is something that we did initially upon finishing school. That was kind of our first major goal. And it was fun because it gave us something to work towards together that wasn’t high-risk, high-reward, that kind of thing. It was something that we knew that once we got there that would just be a nice cushion for us to have going forward. So the reason that I would recommend increasing your emergency fund or at least having the usual is kind of 3-6 months’ expenses is the recommended is because obviously if you’re decreasing your salary that much, a $1,000 home repair or a car expense or some kind of unexpected family emergency happens, when you’re on a six-figure salary, that isn’t that big of a deal. You just say, “OK, I’ll just move around this part of the budget, and we’ll cover it.” But when you’re in a residency salary, you know, let’s say you bought a house, you have a family, it’s going to be very difficult to make that unexpected expense be able to be covered. And then that could lead to things like putting it on a credit card and then that will only amplify and amplify as things continue to happen. So when you’re in residency, the last thing you want to be concerned I think is some kind of unexpected financial emergency. You’ve got plenty enough on your mind already. So if you can already have a good-sized emergency fund going into it, I think that will just help everything going forward.

Tim Ulbrich: That’s great stuff. And this third one, you know, really caught me off guard the first time I read it. I had to reread it, and then I got to what you were saying exactly. And it’s really a great, great piece of advice. And that is look for salaries at prospective residency options, pick the lowest salary option — say what? — pick the lowest salary option, create a new budget using that salary. Depending on the results of your new budget, you may need to make adjustments. I think this tip is bold. Trey, tell us about what you mean by this, why you took this approach, and why this can be so valuable.

Trey Lowery: Like you mentioned, you may not exactly know the dollar amount that you’re going to have in your paycheck in order to create a full budget around. So for us, because we knew we were going to be located in the Iowa City area, I knew I was going to be applying for residencies within, you know, a 30-minute, hour range and not too much further. So I went on the forecast website and they have actually all the information regarding the salaries and some of the benefits of each of the programs that you’re applying for. And so when you match, you’re very much committed to that program that you match with. So if you have a bunch of different salary options, if you’re looking all over the U.S., it certainly I’m sure varies. If you can create your budget around the lowest one such that if you happen to match to the lowest salary option, which I actually did, so it ended up working out well. I didn’t have to change any of my budgeting once I actually started residency from that perspective. But if you can pick the lowest one, that will be your most strict option for your budget. And if you end up matching with a program that’s anything above that, then at that point, you’ll have extra to put towards other goals or other discretionary expenses, that kind of thing when you’re going into residency. But for me, it was just a way of not getting caught off guard when you had such a massive decrease in income all at once.

Tim Ulbrich: That’s great advice, especially considering the separation you can see of resident salaries, depending on where they’re located, types of roles and things like that. So that can be a big difference if you’re looking at, I don’t know, $48,000 versus $40,000 for example. That can be a significant impact on that year and during that year as well. No. 4 is have a plan for your student loans during residency. What would it be in terms of a YFP podcast if we didn’t mention or talk about student loans? So let’s go there for a minute. How did you decide to handle your student loans during your first year working and then also in residency? Talk to us about the plan, the approach, the strategy you’ve taken, and how you ultimately have gotten to that decision that that is the best repayment plan and option for you.

Trey Lowery: So when I first figured out that I was going to be using student loans to get through graduate school, I had to figure out basically what was going to be my approach to either whether I’m going to pay them off or attempt to go for forgiveness, that kind of thing. When I first started pharmacy school, I really didn’t know that there was such a thing as forgiveness. And my dad always told me, “You know what, you’ll make enough, you’ll be able to pay it off. It’ll be good in the long run. Just go ahead and take them out. You’re going to need to because we couldn’t afford to send you all the way through graduate school.” So I went through pretty much all the way through school thinking that that was going to be my plan, that I was going to pay them off. And then in my fourth year of school, I actually went to a financial advisory meeting led by one Tim Ulbrich from Your Financial Pharmacist. And that is where I discovered that there actually were forgiveness options available, which I had not realized at the time. I feel like I might have already been somewhat committed because the financial gurus that I followed were like Dave Ramsey and some others, which are very much you took out the debt, you need to attack the debt and tackle it in order to make your own financial goals become a thing. But like I said, I hadn’t considered that there were actually other options. So ultimately after looking at the numbers and weighing how we felt about our debt, I did decide to go for the pay-it-off method, which I’m currently doing now, although granted the 0% interest and no payments are certainly a benefit in that.

Tim Ulbrich: Right.

Trey Lowery: With them being federal. But that was what we ultimately decided, and additionally, because I was at first at Hyvee and I wasn’t at one of the accredited organizations that would qualify for PSLF, I really didn’t know if I was ever even going to be in a position to do that.

Tim Ulbrich: Right.

Trey Lowery: So I did use my first year to do some paying off of the debt then as well.

Tim Ulbrich: Yeah, I think that’s great, Trey. And you know, as I shared with you before we hit record, as I’ve said many times on this podcast before, this really is an individual situation. And you know, I think at the end of the day, it’s about having a plan, that you understand the options that are out there, and you feel confident in evaluating those options and knowing that when you apply those options on top of your personal situation that you’ve gotten down the path of the best repayment option or strategy for you personally as an individual. And I think for folks that are listening, you know, this can be a topic that obviously can be overwhelming, there’s lots of options, there’s forgiveness, there’s nonforgiveness, there’s federal, there’s private, the list goes on and on, and it can feel overwhelming. It can become paralyzing. And I think really digging in to understand the options is important and a great piece of advice here for those that are — really for anyone with student loans, but especially for those that are going back into a residency position or going through residency training to make sure that you’re using this time to evaluate those options. So I would recommend to our listeners, Tim Church wrote an awesome book on student loans for us, “The Pharmacist’s Guide to Conquering Student Loans,” really an A-Z guide of all things student loans, customized to the pharmacy professional, really meant to go through all of those options and help you apply that to your personal situation. You can learn more about that at PharmDLoans.com. Trey, this has been outstanding. I think for those that are currently in training, going to pursue training, whether it’s right from pharmacy school, going back, I think they’re going to find a lot of value in your advice and there’s a lot of wisdom here. Any other advice that you have, financial tips, wisdom to share with those that are listening that are going back into a residency position or going right into a residency position, making this transition? Any tips or advice that you would have for them as they go through that transition?

Trey Lowery: Well just like with finances, I think this is really a personal decision, and it depends on what your career goals are. Personally, I feel that if you are someone that is committed to pursuing your residency and you know that that’s the path that you want to take, you’re going to be able to figure out the finance part and make it work if you’re committed enough to following that path. So I think just taking some time to figure out what your career goals are and what steps you’re going to need to take to get there are probably the most important. And when I look back on my time during residency, obviously I’m not 40 years down the road at the moment, but I can say even nine months out that I really, really absolutely feel that it was worth it. And I think that in the long term, having a position that I really enjoy, that I feel like I gain a lot out of and I’m really able to make an impact on my patients’ lives the way that I think I would like to, no matter what, that’s going to be worth the $60,000, $80,000, however much you’re giving up for just one year. And if you were to develop good budgeting habits before that time ever comes, then that actually may end up benefiting you financially even more in the long run than not doing a residency in the first place. So I think there may be multiple benefits to pursuing that. But like I said, for me it’s really just depending on the individual.

Tim Ulbrich: You beat me to it, Trey. One of the things I believe — I have no evidence to support this, you know — but one of the things I believe is that a benefit of that year, if you take full advantage, or two years perhaps, is that it really does force you on some level to build some of the behaviors that can have a very long-term benefit throughout your career. So I think one way of looking it at is ‘Oh man, I’m not going to make much money at all.’ Another way of looking at it is, ‘Hey, maybe there’s an opportunity to learn some things throughout this year, whether it’s goal-setting, budgeting, being intentional in other parts of the financial plan, that can have a benefit well beyond those training years.’ So Trey, again, thank you for your time. And appreciate you and your willingness to come on the show to share your story.

Trey Lowery: Thank you so much, Tim. I’d like to say if anybody is in the YFP community on Facebook, feel free to reach out. I’d be happy to continue to share any other points that I might have. If this is something that you’re pursuing, definitely consider it because you definitely can do it. Thank you, Tim.

Tim Ulbrich: Thank you, Trey.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

Episode Summary

Key Points from the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

About Today’s Guest

Episode Summary

Key Points From the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

About Today’s Guest

Episode Summary

Links Mentioned in Today’s Episode

Episode Transcript

About Today’s Guests

Episode Summary

Links Mentioned in Today’s Episode

Episode Transcript

How to be Frugal During Inflation

About Today’s Guest

Episode Summary

Links Mentioned in Today’s Episode

Episode Transcript

Checklist for Building a Strong Financial Foundation

Summary

Mentioned on the Show

Episode Transcript

The Ins and Outs of the 529 College Savings Plan

Summary

Mentioned on the Show

Episode Transcript

Why Net Worth Matters

Summary

Mentioned on the Show

Episode Transcript

How to Avoid These 6 Common Financial Mistakes

Summary

Mentioned on the Show

Episode Transcript

How and Why Trey Made the Transition from a Six-Figure to Resident Salary

About Today’s Guest

how to Summary

Mentioned on the Show

Episode Transcript

Compliance/Legal

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