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YFP 120: 5 Ways to Finish 2019 Strong

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5 Ways to Finish 2019 Strong

Tim Ulbrich talks through 5 ways to finish 2019 strong. These 5 strategies will help you enter the New Year with a sense of momentum and accomplishment, setting yourself up for an awesome 2020.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I’m excited that you are joining me as we talk about five strategies that you can employ in 2019 to finish the year strong. So last week, we heard from one of our Certified Financial Planners, Christina Slavonik, where we did our first episode of a new segment that we will be rolling out going forward called, “Ask a YFP CFP.” Of course, CFP standing for Certified Financial Planner. We had some great questions that we answered from you, the YFP community, and we’d like to tackle more of your questions in the future. So if you have a question that you would like to have featured on the show and answered by one of our fee-only Certified Financial Planners, please do us a favor and shoot us an email at [email protected]. Again, that’s [email protected].

OK, so today’s episode, five strategies, five things that you can employ in 2019 to finish out this last quarter of the year strong. The theme across all five of these strategies is intentionality. The theme is slowing down for a moment and getting out of the month-to-month rush to ask yourself, what am I trying to achieve? Or maybe to remind yourself what am I trying to achieve? To ask yourself, what progress have I made thus far? And to ask yourself, what are some strategies that I can do for this last quarter, this remaining three months of 2019 to finish the year strong and to start 2020 with a bang? You know, I’m a big believer in momentum and running into the new year with some wins. And I think this is a much different situation than just waiting for 2020 to roll around, waiting for the new year to roll around so that you can hit the reset button and get a fresh start on your financial plan on the financial year. Now, don’t get me wrong. I think hitting the reset button every once in awhile can certainly be refreshing, and it does serve a purpose. But choosing to be intentional, choosing to be intentional in this final three months, in this final quarter of the year, and digging in, that’s a growth mindset. And that is putting yourself in a position of playing offense rather than playing defense.

So let’s jump in: Five strategies that you can employ to finish 2019 strong. Now, what would an episode of the YFP podcast, what would it be without us talking student loans? So No. 1 here is reevaluating your student loan repayment option. Or maybe for recent graduates, maybe it’s just evaluating your student loan repayment option for the first time. You know, when I started Your Financial Pharmacist back in 2015, I noticed there were only a handful of pharmacists that were spending the time, the time that is necessary to navigate all of the student loan repayment options that are out there and to determine the one best option for their own personal situation. This takes work. This takes effort. This takes digging into the unknown. This takes really understanding all of the variety of the repayment options and the confusion that could come along with that. And after I graduated from pharmacy school in 2008, I defaulted into the standard 10-year repayment plan because I didn’t know what else was out there. And at the time, that was the easiest path forward, right? It’s the standard, it’s the default repayment plan. The problem was is that I could have saved significant amounts of money by either pursuing Public Service Loan Forgiveness, PSLF, as I did work for a qualifying employer, or refinancing my loans to a lower interest rate because many of my loans at the time were at a fixed 6.8% interest rate, and I certainly could have done better than that if I weren’t pursuing PSLF, which I was not. So don’t get me wrong, while I’m grateful that I eventually got them paid off, I’m grateful that Jess and I were able to work through this journey, I think we learned lots through this journey, but not knowing all of the options that were available to me and just defaulting into the standard 10-year repayment plan certainly cost me big. Thankfully, there is now a lot more resources out there in terms of helping borrowers navigate the maze of student loan repayment. And in the pharmacy space — of course, disclaimer, I’m biased here — there is no better student loan repayment piece for pharmacy professionals than the one put together by our very own Tim Church. And that is the ultimate guide to repayment of student loans. You can get that post and all of the details and all the information for free at YourFinancialPharmacist.com/ultimate. Again, YourFinancialPharmacist.com/ultimate. We’ll link to that in the show notes.

Now, for students that are listening, the question hopefully you’re asking yourself is, you know, you’re note reevaluating repayment options, you haven’t yet evaluated them, and maybe you haven’t even thought about this yet for the first time. After all, this seems like it’s off into the distance as something you need to be thinking about into the future. And so my encouragement for the students listening is to begin to learn about these options that are available. Certainly you’re going to graduate, you’re going to have the grace period, you’re going to have some time, but that’s going to come quick. You’re going to have lots of competing priorities, you’re going to be studying for the NAPLEX, you’re going to be studying for the MPJE, you’re going to be starting a new job or residency or training program, and it may seem like that’s something to worry about in the future. But I think now is really the time to start listening to episodes like this or reading blogs or other resources that are out there to understand these terms, understand what an unsubsidized versus a subsidized loan is, understand what different types of loans are in terms of consolidation and refinancing and loan forgiveness and having the vocabulary, having an awareness that when you need to choose that option, you’re in a position that hopefully does not feel as overwhelming.

I would also encourage the students listening that I think you’ve heard me talk about before on this show, I think it’s easy as a student, myself included when I was a student, to fall into the trap of worrying about this in the future, to fall into the trap of it just feels like Monopoly money, it doesn’t feel real. So I would encourage you to inventory your loans, to log on, to look at your balances, to look at the interest rates, to see how that interest is accruing, to ask yourself, what are some things that I can do, especially on my unsubsidized loans, to lower the interest that is ultimately going to be accruing while you’re in school for your unsubsidized loans and, of course, capitalizing and growing beyond that?

And then students, the other thing I would encourage you is to begin to develop a relationship with the financial aid officer at your institution. Again, really building that relationship. Now having these conversations early as possible to begin to understand the terms, understand the options that when you need to make that decision, you’re ready to be in that position of action.

Now, for recent graduates, here I’m talking to the class of 2019, this could be those that are pursuing residency or those that are out in practice already, you know very well that you are in the grace period. You have the grace period, you’re living it right now. And here we are, that grace period is going to come to an end very soon. So now is the time if you have not already done so to evaluate and compare your options. I think for myself as was true for many others probably listening to this, it’s a rude awakening when you get that statement out of the blue to say, by the way, in the standard 10-year repayment option, you need to pay about $1,800 a month for 10 years to get these loans paid off. And so now is the time, before you get that notice, to evaluate, compare your options, understand income-driven repayment, understand some of the nuances between those plans, understand loan forgiveness, understand what are your options in the refinance marketplace so that when you go into active repayment, again, you’re in a position to make an educated decision.

Now, just a separate word for residents, you know, I think the common thing among residents is an automatic decision to defer. And my question for you to consider is is deferment the best option? Have you really thought about that? Have you really determined what’s going to happen to the interest on your loans while you’re in residency? What’s your makeup of subsidized versus unsubsidized loan? And I know, it’s a busy time. It’s a busy time. You finished your orientation, you’re active in your research experiences. Many of you are probably also teaching, balancing patient care and staffing responsibilities. I understand that you’re busy. But now is the time to really dig in and understand these options. And for those that are in active repayment, my question to you is maybe you’ve never sat down and intentionally evaluated all the options that are available to you. Or maybe you at one point refinanced, but you haven’t reevaluated rates. Or for those of you that are pursuing loan forgiveness, maybe you haven’t yet submitted your employer certification form. So my challenge for those that are in active repayment is have you confirmed, have you spent time to determine that the repayment strategy that you’re in right now is really the best option for you?

And I think as we are certainly here in October 2019, we’ve seen interest rates come down, we’ll talk about that here in a moment with refinance, when it comes to student loans, that means we often see the interest rates on a refinance become a greater differentiation or separation from the interest rates that you’re going to get offered through your federal loans. Now, we’ve said many, many times before, refinance is not for everyone. There’s certain considerations and benefits that you have in the federal system that you may not have in the private system, although that gap has closed. And certainly if you’re pursuing Public Service Loan Forgiveness, absolutely you do not want to pursue a refinance. But for those that have decided that is the best option for them, I think now is a good time to check rates. Certainly if you’re just getting initial quotes, it’s a soft pull on your credit, and that’s not going to have an impact until you actually go through the full application. You can learn more at YourFinancialPharmacist.com/refinance to learn more about the refinance process, who we think it’s for, who we think it is not for, and ultimately to check and compare rates. Again, YourFinancialPharmacist.com/refinance. So that’s No. 1 is reevaluating or evaluating your student loan repayment options.

No. 2, it’s hard to think about the holidays here in October, but if we’re going to finish 2019 strong, we need to set a budget, have a plan, and save for the holidays. And that’s No. 2. Now, we talked about this in detail all the way back in Episode 023. That was a long time ago, and I don’t know about you, but I know that I could use a reminder, and I’m guessing that’s the same for you, that we could all use a reminder about by the way, we’ve got to be thinking about the holidays and the impact that has on your financial plan. So of course, ideally, we’re saving throughout the year, that’s the thing we should be doing. But if you, like me, find yourself looking up at the calendar as we roll into October saying, ‘Is it really time for the holidays again?’ then we need to develop a plan as soon as possible to avoid the stress and the debt that often comes along with the holiday season and impacts how we start the new year. After all, the data shows that on average, on average, those who take on debt accrue approximately $1,000 of new debt from the holidays alone. So if we’re going to be in an offensive position going into the new year, we cannot let the holidays derail our financial plan. So the question here is, how can you have a painless financial holiday season?

So I think first thing that you can do is list all of your holiday expenses. Now, I’m talking all of your holiday expenses. And I know, here we are, it’s October. It’s not even Halloween yet, and we’re talking about later in the year holiday expenses. But this is important, right? Because it sounds easy. But from my experience, I’m sure from your experience, a lot of frustration comes from understanding what really are the true expenses when you reflect back on it. And I think we often underestimate these true expenses. So you know as well as I know it’s not just the gifts for family and friends, although that’s where we typically stop and end with the budget for the holidays. It’s the gifts we often buy for coworkers, it’s the gifts for those that are hosting parties we attend, it’s the gifts and the things associated with various work outings. It’s the expenses associated with hosting family and friends. Of course, it’s the travel, it’s the house decorations, it’s the cards and the postage, and the list goes on and on and on. So I think where we start is listing each item, holding true to that, and hopefully eventually coming up with a budget for each line item to come up with in sum, what do we need to be planning for the holiday season?

Second, for each of those categories, once you get everything down on paper, you know, begin to think about and identify are there some ways that since here we are planning well in advance, are there some ways because of your preparation and because of your diligence that you can be more intentional and save money during the holidays? For example, perhaps an electronic letter with a photo compared to printing cards or shopping in advance to be more intentional and to give yourself time to price shop around and compare. Or maybe it’s taking up those gift cards that have been unused or cashing in on travel or credit card points to help fund gifts or putting a cap on gift amounts with family or friends. And again, the list goes on and on. But the point is if we can plan here in October as we talk about finishing 2019 strong and we don’t wait until the last minute, we can be much more intentional and I think reap the benefits of that going into next year.

Now we have a guide we developed all the way back in Episode 023 if you want more information to help you think about this further and even start to work through the budgeting process of this. Head on over to YourFinancialPharmacist/holidays to get started. Again, YourFinancialPharmacist.com/holidays. So that’s No. 2: Set a budget, be intentional, save for the holidays. s

No. 3, evaluate a mortgage refinance. So for those of you that currently own a home, you know, here we are at the time of this recording, early October 2019, and we have seen a significant reduction in mortgage interest rates compared to this time last year. And I think there’s even talks of further reduction in Quarter 4 of 2019. So as an example, this time last year, my wife Jess and I moved down to Columbus from northeast Ohio, and interest rates on a 30-year fixed loan 12 months ago were north of 4.5%. So 12 months ago, we saw interest rates on 30-year fixed loans be above 4.5%. We actually closed on a loan at 4.625%. Now, today, we are seeing rates, a year later — depending on credit scores, of course if you buy points in the process and other factors — we’re seeing 30-year rates that are below 4%, high 3’s, and we’re seeing 15-year rates that are in the low 3’s. And I’ve even seen some offers in the high 2’s, especially if you’re buying points in the process. Now, it may not seem significant, but when you talk about a percentage, percentage and a half, even three-quarters of a percentage, depending on your mortgage, depending on where you’re at in the repayment process, this can be significant, especially over a 15- or 30-year term. So what I encourage you to do is take a moment to stop, look at the interest rate, look at the current market of rates — you can look at that without having to impact your credit score — and calculate a break-even on what this would mean if you would refinance your home. How much would you save relative to how much you would cost, how much you would spend in the closing process? So pretty simple, you can run a calculator. We’ve got some great resources on our site. If you go to YourFinancialPharmacist.com/calculators, we’ve got lots of resources that can help you here. But essentially, you do a simple calculation to say OK, if this is my current balance on my loan, here’s my current interest rate, here’s the rate I’m assuming in a refinance, how much would I save per month? And obviously, you have to make this as close to an apples-to-apples comparison as possible because if you currently have 26 years left on your mortgage and you’re going to refi to a 30-year, obviously you need to account for that time difference. There’s certainly calculators that can help you do that. So once you calculate the savings over the life of the loan, then you want to ask yourself, well, how much are you going to pay in closing costs, in fees? And this would include things like bank fees, title costs, third-party costs, appraisals or attorney fees, escrow charges and so forth. What’s your total cost to close? And based on your monthly savings, when will you get to a break-even? And typically, what you see like in the situation where Jess and I are in right now, if we had a 30-year mortgage that we just closed on a year ago of 4.625% and we can get a 30-year in the low 4’s or the high 3’s, then certainly we’re going to see a significant return on investment in a fairly short period of time. So that’s No. 3 is evaluating a mortgage refinance if you haven’t looked at that in awhile.

Now, No. 4 is one that’s near and dear to my heart, and it’s something I’m becoming more and more passionate about as I really understand the power and value in continuing to have a mindset of professional development and learning and learning and learning. No. 4 is making a commitment to read at least one book per month. Some of you may already be doing that, some of you that may seem a stretch. It’s just a place, a recommendation of where to start. Now, where does this come from? My wife and I are recently watching the Bill Gates documentary on Netflix, which is fantastic, by the way. It’s called “Inside Bill’s Brain,” and one of the things you’ll notice in that documentary is he just carries around this sack of books. He’s constantly reading and reading a wide variety of things. And his passion to learn, his desire to learn is so evident as a part of the fabric of who he is as a leader. And we’ll link to in the show notes, he actually has a summer books 2019 reading list, a suggestion of books if you’re looking to get started. But he’s reported to read approximately 50 books per year, and he’s quoted as saying, “You don’t really start getting old until you stop learning.” And when you look at some of the most successful people that are out there — and here I’m defining success by a combination of both net worth as well as the impact they have had and the work that they’re doing. This could be business related or philanthropic related, which certainly Bill Gates would fall into both of those. And what you see among these people is a common thread of a quest for knowledge, a deep desire to learn more and the humility to accept that what they know is only a fraction of what there is to learn, no matter where they are in their career. And so this just got me thinking, why is this so for such famous, successful people like Bill Gates, Oprah Winfrey, Warren Buffett, all of whom are worth billions of dollars, extremely busy, have lots of competing priorities? How in the world do they have time to read, time to learn more? And why is that such a significant priority for them? In many of these leaders what you see, as I’ve already alluded to, is that despite being extremely busy, they set aside at least an hour a day, five hours a week, over their entire career, or at least most of their career, for activities that could be classified as deliberate practice or learning. And this has been written about, it is known as the “Five-Hour Rule,” this five hours a week, and there’s a 2016 article that was written by serial entrepreneur and bestselling author Michael Simmons, and he quotes these individuals as exhibiting these behaviors and habits: Warren Buffett, for example, which is referenced in the Bill Gates documentary as well, spends 5-6 hours per day reading five newspapers and 500 pages of corporate reports. Not sure how he stays awake for that, but he does. Bill Gates reads 50 books per year, I already mentioned that. Mark Zuckerberg reads at least one book every two weeks. Elon Musk grew up reading two books a day, according to his brother. Mark Cuban reads more than three hours every day. Arthur Blank, co-founder of Home Depot, reads two hours a day. Dan Gilbert, self-made billionaire, owner of the Cleveland Cavaliers, reads 1-2 hours a day.

So my encouragement to you is to start making a habit of reading and learning more, whether that is the old-school book-in-hand method, maybe it’s a Kindle, an audiobook, podcast. Make this commitment to learn more of a priority. Set a goal for the number of books — I gave you an example as we started here point No. 4, one book per month — but set a number of books that you want to read for the remainder of 2019 and do the same for 2020. So we’ll link in the show notes to Bill Gates’ Summer of 2019 reading list if you’re looking for a place to get started. And I hope that you will share with the YFP community and our Facebook group what you’re reading and what you’re learning. And of course, if you’re looking for a good financial book to get started, I have to mention “Seven Figure Pharmacist,” I have a bias for that. Also I will throw out there, “I Will Teach You to Be Rich” by Ramit Sethi, “Rich Dad Poor Dad” by Robert Kiyosaki, “Friend of a Friend” by David Burkus, which we recently interviewed on the podcast, and one if you want to get ready for an interview you’re going to be doing in the future is “The Behavioral Investor” by Daniel Crosby. It talks a lot about the behavioral aspects of finance and has built a career with his PhD studying this information about how behavior impacts our financial plan. So there’s some ideas to get started. So that’s No. 4. No. 4 is making a commitment to read and doing so with reading at least one book per month.

No. 5 is start visualizing what success will look like for you in 2020. You know, several years ago, I read a book called “The Miracle Morning,” and one of the activities they talk about in “The Miracle Morning” by Hal Elrod, it’s a great book, great process, is this concept of visualization. Pat Flynn talks about this a lot as well in his book, “Will It Fly?” And they talk about this process of not only setting goals but visualizing those goals becoming a reality and then revisiting those goals each and every day or maybe it’s once a week or maybe it’s several times a month. And when you do that, an amazing thing happens between you start with the goal that maybe feels like a hope or a dream or a wish, and then you articulate it, and then you become more specific, and then you put a number to it, and then you start to repeat that and see it and think about what would this feel like? What would this look like if this were to become a reality? And you begin to convince yourself through visualization that it will become a reality.

So I want you to answer this question as you think about visualizing success for 2020. And that question is, at the end of 2020, finish this statement: I will feel like I am winning financially if… So write it down. Look at it. What is happening for you at the end of 2020 that you will feel like you are winning financially if these things happen? The more specific you can get here, the better. Maybe it’s a certain amount that you want to have paid off of debt, credit card debt, student loan debt. Maybe it’s a certain amount that you want saved for a rainy day. Maybe it’s a certain amount for investing or for paying on a mortgage or for starting to get invested in real estate. And I would encourage you in addition to just writing these down, maybe some things that come to mind that you’re already thinking about, set one big, audacious, stretch goal for 2020. One thing that may seem like, you know what, it’s a hope or it’s a dream, it’s out of sight, it’s out of touch, but this is something I’m going to put down on paper, and I’m going to begin to think about that if I get these other things achieved, I’m going to be in a position to work towards this bigger goal.

So for Jess and I in 2019, this was real estate. We said, you know what, we want to invest in our first real estate property. We want to do that in 2019. Now, at the time, we had a big $0 invested to do that, but we knew it was a goal. We were able to articulate why that was a goal for our family. We created a sinking fund in Ally that had a big $0 for a long time, but it was a constant visual reminder of why we needed to achieve the other things within our financial plan that were ultimately going to allow us to unlock this part of it. We’re going to talk more about what that process was for us and our first property and hopefully soon our second property in the next couple weeks.

So I want to finish here with a quote from Seth Godin that I think really gets to this concept of visualizing for the future, really gets to this concept of setting big goals and often that our limitations are internal, our limitations are the variable that we can’t see a big enough picture to be able to realize what we’re actually capable of. And this is really this concept of a growth mindset. Seth Godin says, “Not the limit of our skills, not the limit of our knowledge, not the limit of our physical capacity. It’s almost always the limits of our internal narrative, our guts, our willingness to be kind, to believe, to care enough to lead. We can’t do anything about the limitations of physics, and we can never do enough to change the limitations of our culture.” But Seth says, “But we can begin today on changing the internal limits we place on ourselves. Yes, it’s your turn.” I love that from Seth Godin.

So there you have it. Five ways to finish 2019 strong. I hope you can take away one of these five, maybe all of these five, and as always, I’d love to hear what your thoughts are and would love to have you share your progress with the Your Financial Pharmacist community over at the Your Financial Pharmacist Facebook group.

Before we wrap up today’s episode of the Your Financial Pharmacist podcast, I want to again thank today’s sponsor, the American Pharmacists Association. Founded in 1852, APhA is the largest association of pharmacists in the U.S. with more than 62,000 practicing pharmacists, pharmaceutical scientists, student pharmacists, and pharmacy technicians as members. Join APhA now to gain premier access to YFP-facilitated webinars, financial articles, live events, resources, and consultations. Your membership will also allow you to receive exclusive discounts on YFP products and services. You can join APhA at a 20% discount by visiting pharmacists.com/join and using the coupon code A19YFP. For more information about the financial resources we offer in partnership with APhA, visit pharmacists.com/YFP.

And one last thing if you could do us a favor, if you like what you heard on this week’s episode, please leave us a rating or review in Apple podcasts or wherever you listen to your podcasts each and every week. Also, make sure to head on over to YourFinancialPharmacist.com, where you’ll find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Have a great rest of your week.

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YFP 119: Ask a YFP CFP®

Posted on by yfpadmin


Ask a YFP CFP®

Christina Slavonik, CFP® at Your Financial Pharmacist, joins Tim Ulbrich for a new installment of the YFP podcast, Ask a YFP CFP®. Christina answers financial questions from the Your Financial Pharmacist community covering topics such as student loans, investing and the inverted yield curve.

Summary

Christina Slavonik, CFP®, is a team member of Your Financial Pharmacist and offers fee-only comprehensive financial planning. In this podcast episode, Christina answers questions from the YFP community in a rapid fire format.

To start, Christina explains that fee-only financial planning means that we’re not getting extra commissions as many traditional firms are. Christina explains that YFP believes the best way to measure non-conflict of interest is to provide fee-only services where clients are only paying for the advice they receive. YFP also upholds to the fiduciary standard where the clients’ best interests are really the focus.

Christina answers several questions from diverse topics such as student loans, investing and the inverted yield curve. Two of the asked questions are below:

Andre asks if he’s sacrificing a lot of immediate short term investment opportunities like having a house or saving for retirement in order to pay off student loans more quickly through refinancing. Christina explains that it really depends on your goals and life plan. While there may be some comprises that have to be made, YFP believes there should be a balance of today and tomorrow so that you’re enjoying your life along the way to meeting your financial goals.

Amanda asks, “I’ve heard that given the inverted yield curve as well as many other factors that we may be entering a recession. How can I best prepare? Should I be picking up lots of extra shifts at my 2nd job to boost my emergency savings (currently 3 months) or should I continue focusing on student loan debt?” Christina responds by saying that there will always be recessions. There have been 47 recessions in the U.S. and the average recession lasts about 1 ½ years. She explains that the markets are cyclical and recessions are part of the process. The best way to cover yourself in any situation, whether we’re in a recession or not, is to be diversified in your investments and also your income. Having a second job or side hustle and having an emergency fund with 3 to 6 months of income for emergency expenses are all good practices.

If you have a question you’d like answered, email [email protected] or send us a message on Facebook or Instagram.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast, excited to be here live on Facebook for the first installment of a new segment that we’re doing, Ask a YFP CFP, standing for Certified Financial Planner, where we’re going to be taking your questions on a regular basis going forward, and we’re going to ask those questions to one of our Certified Financial Planners, Tim Baker or joining me this evening, Christina Slavonik. So Christina, thank you so much for joining.

Christina Slavonik: Yes, thanks so much for having me, Tim. I’m excited.

Tim Ulbrich: Excited to do this. We’ve got some great questions that we’re going to answer this evening. And before we jump into those, I know some of our audience and community members with your background you’ve had — you’ve been on the show before — but some may not be, so give us a quick introduction and talk about some of the work that you’re doing over at YFP.

Christina Slavonik: Sure. Well, I’ve been in the industry doing various roles for the past 13 years and really just hit the planning piece the last several years, became a Certified Financial Planner in 2017 and was working with the more traditional side of investment management, which you hear about fee-based and fee-only, this was a little bit of both mixed. And so when I had the opportunity to come on board with Your Financial Pharmacist, it’s a niche. I love working with younger professionals, and it just seems like a great segway into the next stage.

Tim Ulbrich: Well, we’re certainly excited to have you as a part of the team. And you mentioned fee-based, fee-only, we talk a lot on the show about the importance of the credential of Certified Financial Planner but also the importance of being fee-only. Break that down for us real quick. Why is fee-only so important? And what does the credential CFP even mean?

Christina Slavonik: Sure. So fee-only, when that comes to mind is you’re paying us just for the advice. We’re not getting any extra commissions, no extra fees being paid on Assets Under Management, which is how a lot of traditional firms are paid and a lot of advisors. Nothing wrong with that, but we just believe that the best way to measure a non-conflict of interest is to provide that fee-only service, which is you’re just paying us for our advice and being a Certified Financial Planner, we are held to that higher standard, the fiduciary standard, so to speak. And we’re supposed to be holding our clients’ best interests at heart.

Tim Ulbrich: Yeah, and I think one of the examples I use often that is in the pharmacy world, you know, we tend to think that OK, everyone is licensed as a pharmacist, everyone has their doctorate of pharmacy, and therefore, we’re all obligated to act in the best interests of our patients. That’s what we do. And so it was a shocker to me when I first entered into this just over about four years ago to really learn that the industry in the financial planning world is very much not the case, even that really the opposite. And for those of you that want to learn more about this topic of fiduciary, fee-only, we’ve got lots of information on the website. But I think also John Oliver has a great segment on fiduciary and fee-only that I think is worth watching. And he really breaks this down in a way that’s easy to understand. So if you’re not already familiar, we offer fee-only comprehensive financial planning over at Your Financial Pharmacist. As I mentioned, we have two Certified Financial Planners, Christina and Tim Baker. And you can learn more over at YFPPlanning.com. And so we’re going to be taking your questions on a regular basis. Some of the questions that came in this evening came via email, our Facebook group, Instagram, so you can reach us at [email protected] or you can shoot us a question in one of those social media outlets as well. In terms of format, I’m going to rapid-fire these questions to Christina, so I’m going to put her on the hot seat. We have lots of questions, student loans, investing, inverted yield curves, which is the cool term these days, so we’re going to talk about lots of different things. And certainly, if you’re on live now and you have a question, throw it out there and we’d love to answer that as well. You ready?

Christina Slavonik: I’m ready. Let’s get going.

Tim Ulbrich: Awesome. Let’s do this. We’ve got some good questions, so this is exciting.

Christina Slavonik: I’m very impressed with the lineup.

Tim Ulbrich: So Andre — first question comes from Andre, and he has two questions. He’s a new member of our Facebook group, so Andre, welcome to the community. We’re excited to have you. His first question is traditionally, most people pursue PSLF, standing for Public Service Loan Forgiveness, or refinance their student loans. But his question is are there other, non-traditional methods to consider beyond PSLF or refinance?

Christina Slavonik: Yeah, this is a really great question, Andre. So one of the things that we’re seeing more and more is non-traditional method. Some employers are actually offering reimbursement to help you pay off your loans faster in various forms and fashions. So that’s actually something to look into with your current employer. And there’s always the non-PSLF forgiveness. I know some people kind of forget about that one. Of course, you would have to pay the tax hit once that forgiveness is sent your way. It is counted as income on your tax return. But still, it is a forgiveness. And I think some people forget about that kind of forgiveness. Side hustles, you know, other nontraditional ways, I know some people have talked about giving away plasma. I wouldn’t go as far as selling an organ, but hey, you know, the sky’s the limit if you’re that committed to paying off those loans. Cutting certain expenses, just fairly small changes can move the needle in a big way over a sustained period of time.

Tim Ulbrich: Yeah, and one of the things we preach, Christina, you know this in working with clients is that unfortunately, when it comes to choosing a student loan repayment strategy, it’s probably way more complicated than it needs to be. Multiple options in the federal system, income-based repayment, standard monthly payments, extended, graduated, forgiveness, non-forgiveness, PSLF, non-PSLF, and then you’ve also got the whole host of options you see in the private market with refinance.

Christina Slavonik: Right.

Tim Ulbrich: And I think because of that confusion, I know what happened for me in my personal journey, I see with lots of pharmacists, is there’s often that paralysis by analysis where people default into the standard 10-year or maybe go into income-based repayment but wander into that and don’t really think about why or what they’re trying to do. And if you’re talking about six-figure+ student loan debt, we now know the average graduating student is facing about $173,000 on average, which is mind-blowing. But this is not a decision that you want to wander into. And we’ve seen with clients, with individuals, intentionality in this choice can be the difference of tens of thousands of dollars, especially when you consider in the context of the rest of your financial plan. So I would point our listeners, if you haven’t already checked out — shoutout to Tim Church, he did an awesome job on this piece — if you go to YourFinancialPharmacist.com/ultimate, he’s got the ultimate guide to repaying back your student loans. It talks through a lot of those options and gives you additional information. Second question from Andre, Christina, he asks, “Am I sacrificing a lot of immediate, short-term investment opportunities such a house, retirement, kids, etc. in order to pay off student loans more quickly through refinancing?” What are your thoughts on that?

Christina Slavonik: Yeah, that’s always a tough one to navigate, especially when it’s staring at you right in the face. Hard to put a price tag on that clarity and peace of mind, totally get that. But being able to be with an accountability partner that can help you put all these things on the table, it all goes back to your life plan, what goals you have for yourself. And your financial plan should be built around that life plan. Once we kind of get that clarification, it’s much easier to see where the other things will fall into place. And it can be quite a transformative experience, and your priorities become more defined. Some of the questions I ask myself is trying to find that balance, what keeps you awake the most at night? And kind of prioritizing it that way and then working with this through a Certified Financial Planner or a life coach that can help you navigate which path you should take. There’s some compromises that may be worth sacrificing up front. Just some ideas, especially little kids. I don’t know how old your children are or if you’re just planning to have kids, but there’s so many ways you can have fun when they’re young, and you don’t have to spend a whole lot of money. So there’s just different ways to think out of the box when it comes to those opportunities.

Tim Ulbrich: Yeah, and I love the approach that you and Tim take on this that there has to be a balance of today and tomorrow. Right? I mean, we have to take care of our financial house today, but if we do a great job with that for 30 or 40 years and we never enjoy it along the way, then I think we’re losing, right? We have to find this balance between living a rich life today and living a rich life in the future. And I think that happens through asking some of those probing questions that really get at the things, you know, what do you care about most? What are you passionate about? What really gets you excited each and every day? And ultimately, why does this whole topic of money even matter? And I think that’s a great question to ask before you even get into the x’s and o’s of your financial plan. And I’ll never forget, I think it was Episode 032 and 033, maybe 031 and 032, where Tim Baker interview Jess and I, talking about this concept of find your why. When you really start to challenge and say, OK, we’re paying down debt, we’re saving, we’re doing all of these things, but why are we doing these things? What are the things that really matter? And I think that’s what Andre is getting to in this question here. Alright, next one’s a big one. So to Christina from Christina, and it’s a really multi-part question that’s got some investing pieces, student loan pieces, FSA dependent savings account, so I’m going to break this down and collectively, we’ll tackle this one. So Christina asks, “I just started working at a not-for-profit hospital. As soon as that happened, I switched to PAYE, Pay As You Earn, loan and have already submitted my PSLF loan forgiveness employment verification form to the DOE, Department of Education.” Lots of acronyms here in this question. “I maxed out by 403b so that I can hit the $19,000 limit.” The question from Christina is, “Can I also contribute to my traditional IRA? Or is it one or the other?”

Christina Slavonik: Well, my answer is yes, Christina, from Christina, you can contribute to max out your 401k or 403b up to that $19,000 as well as max out an IRA. So the way I like to think about it is one is provided by your employer, the other is provided personally to yourself. So both have maximum limits. The IRA, of course, you can choose between a Roth and a traditional. You can only max one of those out or just a combination of those two. But yes, to answer that question, you can.

Tim Ulbrich: Yeah, so great point. I mean, 401k, 403b, those are employer-sponsored, one for-profit, one not-for-profit. IRA, the I standing for Individual, right? So that’s your individual retirement account. So second part of this, then, is, “I am also a working PRN” — nerdy pharmacy lingo here — so “as needed at my retail job. And I left that at a 6% contribution for my 401k since that is what they match. What happens if I get extra shifts and end up contributing more? Is there a penalty? I tried to calculate and plan on watching it very closely, but I would like to know in the event it happens.”

Christina Slavonik: Well, yeah, it’s good that you’re being proactive and not waiting. You really have until your tax filing deadline of April 15 to make any corrections if you need to. And yes, there is a penalty involved. There’s typically a 6% excise tax as well as some other double taxation issues if you cannot get that amount out in time before you file your taxes. So yes, just keep tracking on both pay stubs, maybe even getting your HR person involved if possible. But yeah, you may just have to totally not contribute to one of those altogether for the rest of the year since the year is almost over and approaching that tax deadline.

Tim Ulbrich: And I think relatively a good problem to be thinking about, right? If you’re worried about exceeding the maximum contribution.

Christina Slavonik: Yes.

Tim Ulbrich: So let’s not lose that fact, Christina, great job on making these contributions. Next part of this is, “There was also a dependent FSA, Flexible Savings Account, offered that I opted into for child care expenses. I’m trying to max as much as possible so that I can decrease my AGI, Adjusted Gross Income, for my PAYE, Pay As You Earn, loan. How do you determine when to file married separate or married jointly?” This is a great question. We get this all the time.

Christina Slavonik: Yeah, it is a fabulous question and one that’s best suited for someone, an enrolled agent or CPA that deals with taxes on a regular basis. There are so many pieces that wag the tax dog. And it’s just hard to give a specific recommendation without seeing the whole situation. Sometimes, it does make sense to file separately when doing the Pay As You Earn as the other spouse’s income does not count. But again, there are other factors to consider as well.

Tim Ulbrich: And I think for me, that’s the take-home point when I get a question like this is that making sure that those that are in an income-based repayment plan, especially those that are pursuing Public Service Loan Forgiveness, that you understand there can be a difference. And from there, you really dig deeper with an enrolled agent, with a tax professional, because they can look at the rest of your financial plan to understand the rest of your financial situation, understand what might be best. And we’re also grateful that we have Paul on our team, who is an enrolled agent, that can supplement the financial planning services that you and Tim are doing as well. OK, last part here from Christina is, “And for dependents’ savings account that are offered through your employer, is there a max that each person can use? Is it $5,000 per family and only $2,500 per person? Or can one do the full $5,000?”

Christina Slavonik: Sure, this is a really good question and one that we’ve actually seen before. Yes, the maximum is $5,000 to contribute. But really, any person in that family can utilize that. I know Tim Baker has mentioned that there are state-specific rules when it comes to FSAs, but in general, you can use it on qualified expenses for the physical care, the day care, child care, yeah. Just keep the receipts, keep good records of what you actually used it for. And one other side note with that: I know you’re wanting to lower your AGI by doing this. And sometimes, employers will also offer the Health Savings Account component for a high-deductible health plan. Sometimes having a limited purpose FSA will allow you to have an HSA as well, which can increase the deduction you can put towards lowering your AGI, so that’s another way to check into some more tax savings.

Tim Ulbrich: And good news we got back from Christina as a follow-up to this question. She says, “We max out our deductions for a total of $55,000 going into the 403b, TSA, IRAs, DSA, which should bring us to just under $100,000 of Adjusted Gross Income for the year. Thank you for reaching out and for all the help with the group.” I love that because I think that what I see through Christina’s questions is intentionality. And I see her digging in, I see her trying to understand the tax situations, understand what’s going on with the rest of the financial plan as it relates to student loans. And let me encourage those that are listening that they hear 401k, 403b, Roth IRA, FSA, HSA, DSA, and you’re following, great. But for those that are hearing some of those terms for the first time, we have a lot that we’ve covered in the investing realm on the podcast. Episode 072-076 back in fall 2018, we did an entire series on investing for this reason, so I would encourage you to check that out and certainly get more information that will help you with the rest of this decision as you’re looking at loan forgiveness and some of these situations. OK, from Stephanie, this question comes from Instagram: “Recommendations for personal loan lenders for the intention of consolidating credit card debt?” What are your thoughts on that one, Christina?

Christina Slavonik: Sure, well, congratulations, Stephanie, being one of the 2019 graduates. Like many graduates, I’m sure you’ve had your share of transitional expenses, such as the job moving, job search, budget changes. While we can’t generally recommend any specific lender, we do recommend starting with a current banking relationship as the best way to tackle that, including a credit union. They can normally give you pretty good rates. Try being careful. Some things to look out for when consolidating credit card debt is make sure that there may be a minimum that you have to consolidate. And sometimes you may not meet that minimum. So having to make sure you know that. Try not to take more than five years to pay off that loan just because the shorter we can keep that, the better. And know if there are going to be any origination fees or what those flat fees or any flat fees that are involved. Sometimes it’s a percentage of what you consolidate, sometimes there isn’t. And don’t — try not to use the credit cards once you consolidate. I know that’s one of the hardest things, but I’ve seen that happen time and time again. And I know the snowball method — now we’re venturing into Dave Ramsey territory, that’s one of the things he says — once you’re paying off those credit cards, try not to use them. You’re trying to get rid of that debt. So other items to consider, maybe a home equity line of credit is another way to approach that. And revisiting the budget. If you can avoid taking on a consolidation loan altogether, the extra steps are worth it and just finding ways that you can walk through your budget and maybe cut some extra expenses. I do want to give out a shout to Tom Eraz (?), he’s our accounting budgeting nerd at YFP Planning. And he’s helped many, many of our clients with questions just like this, what should I do in this situation? And he’s been very helpful with giving some suggestions.

Tim Ulbrich: To say Tom is a budgeting nerd is an understatement. I mean, he gets jacked up about budgeting.

Christina Slavonik: Yeah, I’ve never seen someone so excited about spreadsheets.

Tim Ulbrich: Yeah, I think he loves helping people in that area. Alright, time to get nerdy, and we’re going to talk about inverted yield curves. And I swear about a month ago, this was like the cool thing to talk about on NPR and the Wall Street Journal. Everybody was talking about inverted yield curves. So Amanda asks, “I’ve heard that given the inverted yield curve as well as many other factors that we may be entering a recession.” So the question is, “How can I best prepare? Should I be picking up lots of extra shifts at my second job to boost my emergency savings currently at three months? Or should I continue focusing on student loan debt? Thank you for your help.”

Christina Slavonik: Sure, Amanda. Yeah. And I know sometimes it’s hard not to listen to the talking heads and the people when they comment on inverted yield curves and what those indicators may mean. Typically, it may or may not say that a recession’s on the way. That’s just one of the indicators that we kind of look at. But again, it’s not something to hang your laurels on. There always will be recessions. I know we’ve had about 47 recessions in the U.S. history. Average one lasts about one and a half years, so just a little bit of feedback on that. The markets are cyclical, so what goes up will go down. That’s just part of the process. But just know that I believe you are already covering yourself the best way you can. Recession or not, it’s always great to be diversified, not just in your investments but also how you have your cash flow coming in to you. So even though you’re picking up those side hustles, working those second jobs, you’re not getting stuck in the 9-5, which is fantastic. Having a second side hustle or flow of income coming through and having that emergency fund already saved up at 3-6 months of emergency expenses for those non-discretionary items. These are great behaviors just to keep consistent during good and bad markets. So never really a bad idea to keep paying towards debt as it overall increases your net worth over time. And just be careful to keep reevaluating your lifestyle creep is a good exercise as well. So very good. Very good.

Tim Ulbrich: Yeah, I agree. When I saw this question, I mean, I think boosting emergency savings and paying down debt is good practice regardless of a pending recession or not. So I think it’s important to think about those foundational items. So Jeff asks, again, kind of along this idea of low interest rates, potentially a pending recession, “How should a prolonged period of extremely low or even negative interest rates be considered in your financial plan?”

Christina Slavonik: Sure, and one thing I like to think about first is where are you at in your life cycle? Are you approaching retirement? Are you a retiree who would have to look at those cash alternatives such as a bond ladder, which is where you can match cash flow with the demand for cash via multi-maturing layerings, and that’s a whole other topic. But yeah, mostly when dealing with young professionals, you’re generally saving for those long-term goals and objectives, so saving for retirement. And the period of a downside should really have little consequence with the long-term strategy, so I try not to get too wrapped up if you see prolonged periods of market drops. Generally, if you’re trying to borrow money, now would be a great time to do that, an extreme or low, negative interest rate environments. And capitalize on the securities and the equities, especially during the down times because you’re buying at a bargain. And so by the time the market does go back up again, you know you’re going to be well ahead if you had decided not to do that, instead take your investment ball and go home. So again, just really determining your objectives and having an investment allocation that matches that objective. Short-term goals, you may need to dial back a little bit, CDs, Money Market funds or whatnot. But yeah, just in general, I wouldn’t worry too much if you have a long-term strategy.

Tim Ulbrich: Yeah, I think that’s an important point: long-term strategy. And building off of the previous question with the inverted curve and looking at interest rates and other things, I think it is hard to take the noise out of it. I mean, I meant to keep them and I forgot to do so, but I’m still that guy who gets a newspaper delivered at home every day. And literally, you know, I was thinking back in December, January, it was like every day, it was the front page of one day the market was going up, the next it was going down.

Christina Slavonik: It’s always going on.

Tim Ulbrich: And the projections of why this was going on, and even though I’ve got a plan and I’m sticking to it, like it’s still hard to ignore the noise, and it starts to have that subconscious effect over time. But I think your point’s a good one here when we talk about negative low interest rates, really think about — the two areas that come to mind, especially for a lot of our community members, would be mortgage interest rates and whether it’s a new home or refinancing on a home, I think now is the time is probably to be looking at that if you haven’t done so in awhile. You know, when you look at a 30-year mortgage, a point on that loan can be really significant on a $300,000-400,000 house and looking at what would be your break-even on a refinance, and then also refinance on the student loans. We preach over and over again that refinancing student loans is not for everyone. So if you’re pursuing Public Service Loan Forgiveness, absolutely not. There’s certain provisions you want to consider and be looking for when you’re doing a refinance. But for those that the math makes sense and they’re really doing all of those things they need to be thinking about, you know, a point or two on your student loans obviously can be really significant. And as we see student loans still at 6, 7, 8% for many graduates, and we’re seeing refi rates continue to come down. I think it’s a good opportunity to look at those. OK, Kelsey asks, back into the student loan category, “Question about re-certifying my IBR income-based replacement income — income-based repayment income. I’m seeing that PAYE and RePAYE may be a better option for those that qualify. I’m due to re-certify for IBR this month. But would changing to PAYE or RePAYE affect anything in regards to qualifying for PSLF in the future? I’m five years in, and I don’t want to mess anything up. I’ve read the horror stories from those who’ve submitted for forgiveness, and they say not to change anything. But I’m hoping to make my payment a little lower this year if I can. Any thoughts, suggestions, or advice?”

Christina Slavonik: Yes. Three words: student loan analysis. This is one of those bigger picture things. So yeah, looking at the bigger picture, definitely changing from an IBR to a Pay As You Earn or RePAYE would not affect qualifying for the student loan forgiveness itself, but you would need to figure out which loans in particular would qualify and how to navigate that process. So that’s probably where people say if it’s not broke, don’t fix it. Stay where you’re at. So I wouldn’t want you to consolidate as that could restart the forgiveness clock all over again since you are five years in. I typically wouldn’t touch it unless you’re willing to do a little more digging and get that analysis done. As a side note, we did have a client that did go through the analysis, and she was in the IBR, went through the analysis program, and we did discover that she would be a good candidate to switch to the PAYE or RePAYE. And we were able to walk her through the steps. So in general, yes, the PAYE, RePAYE, can be more beneficial, meaning it can lower your payments, but it’s hard to say a firm yes or no without looking under the hood of the car, so to speak.

Tim Ulbrich: Yeah, and I think most of the horror stories that I’ve seen and heard and read about have been because of the consolidation piece that for many people, restarted the PSLF clock. Certainly, there’s been some qualified employer issues that have been out there. But I think if you really dig deep on this — and we talked about this in Episode 078 where we broke down is pursuing Public Service Loan Forgiveness a waste? And this really came out of the NPR story that was famous that we still have questions about. Every time we’re speaking, we’re quoting 99% of applicants that were denied. And really, when you dug into that a lot deeper, we talked about that on that episode, you know, many of those were incomplete applications, many people that weren’t in a qualifying repayment plan, and many people that ran into issues around consolidation or other things. And I think it’s important to reiterate here that this program, in terms of those that are actually qualified and eligible for forgiveness, is still relatively new. So 2007, this program was started, meaning 2017 was the first group that was up for forgiveness to take place. And I think the information that people have today and a lot of things we talk about in terms of what you need to be doing to cross your t’s, dot your i’s, is very different than the information that was available before. So I think our take is as we talk about many times when it comes to student loans, look at all your options, do the math, see how you feel about it, and make sure certainly if it’s PSLF that you’re doing all the details that you need to do to make sure you qualify. Alright, last question we have here, of course, somebody, we had to talk about the Dave Ramsey baby steps and the Dave Ramsey program. So Andrea asks — and it’s a good one — “Here’s my question. I’m starting the Dave Ramsey program at my church tonight. What are good points in his program” — so I’m pretty sure she’s referring to Financial Peace University — “that I should really focus on. Are there parts of the program that you disagree with or have a different opinion? I love his baby steps but not knowing exactly where to start.” So what are your thoughts on the Ramsey baby steps and the Ramsey plan?

Christina Slavonik: Yeah, and Andrea, I’m so excited. I love Dave Ramsey and what he has done in society in general just making people more aware on the forefront that you can get in control of your finances. And this is, I mean, a tremendous, huge first step, especially for those that have had no prior experience getting back to the baby steps, getting into the habit of saving and paying down debt, starting with that $1,000 emergency fund is a really key component to jumpstarting that. And I love the snowball method. That is one thing that we do preach on here is the debt rolldown and how to tackle that debt. We do focus more on the emergency fund part, you know, if you’re comfortable having a $1,000, that’s great. But we try to have at least three months, maybe $10,000 as a buffer, depending on what kind of income you have coming in just to forebode any huge, unexpected things coming your way. And then getting the match in your retirement plan, we think that’s a great thing. I know he preaches that. Getting basic term life insurance, we do recommend just getting basic. There’s no way you can beat that. And then working on what’s the next steps? I know he is a big component of paying down the mortgage. I guess that’s probably one of the places we may deviate a little bit from. And of course, you know, again, what keeps you up at night? It all comes back to that emotional factor. If you feel like paying down your mortgage as soon as possible is the best way to go, but most times, you can be earning a whole lot more putting that extra payments into the market or to another savings goal. You can, however, shave off 10-15 years off of a 30-year loan by just making an extra payment or two each year. So just trying to balance that out. He can be a little extreme in some of the methods he tackles, but again, it’s great. I have nothing bad to say about Dave Ramsey. And he’s really done a great service to many, many people.

Tim Ulbrich: Yeah, I’m not sure, as you know, I went through Financial Peace, Jess and I did, and it was a great experience for us and listened to his podcast for awhile. And I, like you, I think that it provides a great framework. But certainly, there’s nothing that evokes a greater emotional reaction than talking about Dave Ramsey’s baby steps, right? And I think what’s important to remember — and I actually had a chance to go visit Ramsey’s office when I was at the American Pharmacists Association in Nashville a couple years ago and quietly was able to talk to one of their team members who certainly was willing to open up and say, ‘Hey, the reality is Dave’s talking to 5+ million people every day, right? And so when you’re teaching that many people every day, there has to be a simple framework and model.’ And so he’s talking with people that have maybe an income of $20,000-30,000 but of course people that have incomes of $300,000 or more per year. And of course, their situations are going to be very different. But at the end of the day, it’s a stepwise approach, and I think you have to remember that it’s meant for that general audience. I think you also have to remember that it’s predicated on the fact that behavioral aspects related to your financial plan are really what’s going to get many people hung up. It’s not necessarily always the math, but it could be the behavioral piece. And for even the people here listening tonight, I think some people, that model and framework as is may be great to have the discipline, even if it means leaving some of the dollars, some of the math on the table. For other people, maybe that’s not an issue, and they’re going to really adjust, move things around, and create a plan of their own. So I think it very much depends on how much do you need that stepwise approach? How much does that model really resonate with you? And where are you at in the financial planning? Do you really feel like you need that motivation and reminder along the way? I, too, like you — and we talked about this Episode 068, we went back and forth a little bit on the pros and cons of the Dave Ramsey steps, and we hope to have him on the show someday, maybe doing that episode if he were to come on the show, I don’t know.

Christina Slavonik: That would be great.

Tim Ulbrich: But one of the things we talked about, of course, was employer retirement match, which is something that I disagree with him on that. For most people with few exceptions, I think we’re talking about free money. And I think the other thing that you mentioned, the mortgage. I think for some people, paying off the home really makes a whole lot of sense. I think for other people, depending on your interest rate, depending on what’s going on else in your plan, maybe not so much. I think some people are taking that home out 30 years at a low interest rate so they can free up money to do other types of investing, and they’re calculating risk appropriately. Other people maybe not so much. So again, it depends. And I think of course, the big variable and difference is that Dave’s audience is not on average facing $173,000 of student loan debt, right?

Christina Slavonik: Very good point.

Tim Ulbrich: So that’s a very unique factor. And when you think about his framework and model, baby steps, really paying off all debt before you build up a full emergency fund, I think we would agree that some of that needs to be happening in tandem because somebody may be in debt for 10+ years paying off student loans. So great stuff there, Christina. We actually had another question come in that I’m going to read. And just a reminder to those that are on live as well, if you have a question before we jump off, we’d love to answer it. Question relates to PSLF and picking up extra hours at a non-qualifying employer. So question is, “Can you work on the side at a retail pharmacy, which would be a for-profit, non-qualifying employer while enrolled and working with the Public Service Loan Forgiveness employer?” So imagine a situation here where somebody’s working full-time for a not-for-profit hospital, and then they’re picking up extra shifts at a for-profit. Is there extra penalty for making more money from the side retail job? Of course besides it having an impact on your Adjusted Gross Income and therefore, impacting your payments.

Christina Slavonik: Yeah, that’s a good question. And the answer is no. As long as you’re working at a 501c3, the forgiveness should still be OK. I mean, you have many people out there pursuing different side hustles and whatnot just to help make ends meet. And so yeah, the short answer would be no, it shouldn’t affect the PSLF. Is that what was the question?

Tim Ulbrich: That is. I think the other obvious component here if I’m understanding this correctly would be making more money of course would increase the AGI.

Christina Slavonik: It would.

Tim Ulbrich: Which would change the monthly payment, right?

Christina Slavonik: It could, definitely. Yeah. So that is one aspect of that.

Tim Ulbrich: Awesome. Well, Christina, thank you so much. We’re going to be doing this hopefully a lot more often in the future. And just a reminder to the community, shoot us your question that you have, we’d love to have it answered by Christina or Tim Baker, again, our Certified Financial Planners. You can shoot us an email at [email protected]. You can hit us up in the YFP Facebook group or on Instagram as well. And again, as I mentioned at the very beginning of the call, if you’re not already familiar, we offer fee-only comprehensive financial planning over at Your Financial Pharmacist. So you can learn more about that and working with Christina or Tim over at YFPPlanning.com. So Christina, thank you so much. And to everyone else, have a great rest of your night.

Christina Slavonik: Thank you so much, Tim.

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YFP 115: Financial Considerations for Job Loss or Reduced Hours

Posted on by yfpadmin


Financial Considerations for Job Loss or Reduced Hours

On this week’s episode, Tim Ulbrich and Tim Baker talk through financial considerations for those that find themselves in a financial hardship due to job loss, hours being cut or wages being reduced. With the recent news of some big box pharmacies planning to close stores and cut their workforce and many other employers cutting back hours for full-time pharmacy employees, this conversation of how to navigate a current hardship or be ready to weather a future storm is more important than ever.

Summary

Tim and Tim talk through several financial considerations for job loss or reduced hours. Some pharmacists are facing potential job loss, cut hours or a reduction in wages. Companies like Walgreens, Walmart, Kroger and Harris Teether are either closing their pharmacy doors or reducing hours significantly, leaving many pharmacists to question how secure their jobs are. If you’re in this position, what should you do or be thinking about? Tim and Tim discuss emergency funds, what to do with your student loans during a financial hardship, health insurance, what to focus on with retirement savings, the value and importance of a side hustle and networking.

Tim Baker shares that while many of this is out of a pharmacist’s control, you can start by looking at your foundation. How much credit card debt do you have? Is your emergency fund where it needs to be? By reducing credit card debt and having an emergency fund to cover 3-6 months of non discretionary expenses like rent, utilities, mortgage and loans, you’re setting yourself to be protected in case you face financial hardships like many are in the field today.

Next they discuss federal loans and when to use forbearance, deferment, or choosing an income based repayment plan. Tim Baker says that first deferment should be explored and then forbearance if needed as your interest will capitalize greatly with the latter.

In regards to health insurance when losing your job or having a change in your benefits, there are several options to consider including COBRA, short-term health insurance, exploring the federal marketplace, healthcare sharing, or HSAs.

When looking at retirement savings, Tim Baker says that typically, if you are in your 30s, there is plenty of time to right a ship that’s off course but that it’s also important to keep the fees associated with your investments low. They also talk about the importance of diversifying not only your investments but also your income by taking on a side hustle or entrepreneurial venture. This allows you to make money and also put the extra money into different savings goals depending on your passions. Tim and Tim also talk through how networking can help in times like these and the membership offer APhA has to those facing financial hardships.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. And I have with me back on the mic the one and only Tim Baker, fee-only Certified Financial Planner for Your Financial Pharmacist. Tim, it’s been awhile. How are you doing?

Tim Baker: I’m doing well, Tim. How are you doing?

Tim Ulbrich: Good. So before we jump in, it’s been awhile since you’ve been on the show. And big news for the Baker family with the addition of a baby. Give us the good news and tell us how everyone’s doing.

Tim Baker: Yeah, everyone’s doing well. And August 2, we welcomed Liam Baker to the fold. So we have Olivia who’s 4, turns 5 in October. And now we have Liam. And everyone’s doing well. I’ve got to give major props to my wife, Shea. She experienced 40 hours of labor, and we finally got to meet him on the 2nd. So it was a lot of stress I think leading up to it, but we’re happy and healthy baby, healthy mom, and now we’re kind of going through the storm of — I shouldn’t say storm, that’s probably a bad way to say it — but in-laws here and family here and trying to get into a routine and everything like that. So all good things, though, and thanks for asking.

Tim Ulbrich: Yeah. When people ask about like the birth of a child, I always feel like it’s easy to think of it as like the most chaotic, most joyous moments of your life, all wrapped into one.

Tim Baker: Yeah. And I’ll tell you what — and this came I think straight from you guys, you and Jess, like I don’t think I could have done it without our doulas. So shoutout to our doulas, our doulas were unbelievable and I think if I looked back on that experience, if they weren’t there to support Shea and myself, I think we would have been lost. And it’s just one of those things where you don’t know what you don’t know. It’s almost like a financial planner, you know, these individuals are just lovely people who are there to help coach you and advocate for you and in a world sometimes in labor and delivery where it’s almost like it’s very medicalized, if that makes sense, and sometimes, the things we manage to the lowest common denominator — obviously we want a healthy baby — but do we have to do this procedure? Do we have to do this? Or it gives us some time to think about it, and I think that really when we compare Shea’s birthing experience for Olivia versus Liam, they’re so different. I think the doulas are a big part of that. So not to get on a tangent about that, but that was a great process or great to have them on the team.

Tim Ulbrich: Yeah, and the value of a coach is real, right? Especially in this situation and this exciting time in life but also very stressful one. And a shoutout to YFP team member Caitlyn, who helps us with the podcast and lots of things with YFP who is also a doula, helping people up in the northeast Ohio area. So let’s transition and talk about this week financial considerations for those that are facing potentially a job loss, hours that are being cut, a reduction in wage, and this topic I think is really more important than ever in the profession if you think about the recent announcement by Walgreens and its plan to close 200 stores in the U.S. Obviously, we have others; this isn’t an isolated story. WalMart had made similar announcements. We have many others that have cut hours, notably would Kroeger and Harris Teeter. It seems like 32 is really becoming more of the norm when it comes to a community pharmacy practice, and we’re seeing certainly wages that are being reduced as well. And so I think this conversation about what should one be thinking about if they find themselves in this situation, whether that be a job loss, whether that be hours cut, or whether that be a reduction in wage. And oh, of course we’re not seeing a slowing down of the student indebtedness with the most recent data from the class of 2019 showing now an average just over $172,000. So Tim, before we jump into the strategies and what one should be thinking, what do you make of all this and what we’re seeing out there in the profession?

Tim Baker: It’s a great question, Tim. I mean, I am not — I think you and I have stated multiple times and just in our view on things is that I think we are very much the optimist. But I’ve seen it with clients that have come through my door where they’ll — it’s like OK, we’re talking about their financial plan and their net worth and income, and I’ll say, “OK, what’s your annual income?” And I work with two full-time community pharmacists, and they’re making in the $70s each. And you know, at the end of the day, I think this is all cyclical. Like I think right now, we’re in a position or the profession is in a place where it’s kind of right-sizing, and I think we’re going to see that from a job perspective, probably even an education perspective. So I think that this is something that we definitely have to I think talk about and talk through. And I think that’s where YFP I think can play a role is kind of talk through these issues and what we can do financially, but I think also what we can do as a profession — and this is me as an outsider speaking about pharmacy. But it concerns me, I think. You know, when you’re looking at a full-time job of $70,000-80,000, and you still are carrying $170,000, $270,000, $300,000+ in loans, which I see, that’s concerning, you know. And the political climate out there is such that our leaders, at least what you see on the Democratic side, and we’ve heard it from President Trump, I think there’s attention that is at least being paid to this crisis, or whatever you want to talk about. But at the end of the day, there’s a lot of things that we can’t control. And there are things that we can control, and I think what we want to do is kind of shine a light on the things that we ultimately can control and at least get something to think about and to chew on, and I think that’s really our purpose in this episode.

Tim Ulbrich: Yeah, absolutely. And we’re going to jump into those things that we can really focus on and one can control. And before doing that, I want to give a shoutout to Richard Waithe from RxRadio. And him and I talked on our podcast last week and also on his show about the debt cancellation that’s being proposed by the 2020 candidates. But what I want to mention here — and we’ll link to our show notes — I think he did an awesome job, to your point about starting and sparking a conversation, he wrote a great post on Medium that we’ll link to that talks about some of the WalMart news and other cuts and what we should be thinking about as a profession and those within that profession. And I think I’m with you. We need to have a constructive conversation, and I feel like there really isn’t a great venue for that to happen right now. But I think that’s where we’re going to see really a lot of creativity and innovation in what we can be doing going forward. So let’s jump in. What can people control? And I think No. 1 what comes to mind, Tim, for me is really developing a sound financial base. So here, I’m really thinking prevention that if somebody were to find themselves in this position, if they have their financial house “in order” or those that aren’t yet in this position but maybe find themselves in that position in the future that they can really weather a storm like this or maybe even put themselves in a position to be more opportunistic if they’re dissatisfied with their work or they want to find something else to do. And we talk on this show all the time about having a sound financial base, having your financial house in order. So when you’re working with clients, what does this really entail in terms of putting yourself in a good position?

Tim Baker: Yeah, so I think the thing — and we talked about this in Episode 026, Baby Stepping Into a Financial Plan, which I look back at I think with this episode is it’s so long ago that I think we talked about it, it’s worth bringing up again. I think the two things that I look at when I first kind of do a once-over to someone’s financial situation is what does the consumer debt look like? So I’m not even really concerned about the student loans as much because there’s a lot of things that we can do to kind of mitigate the cash flow or the repayment of those loans. The thing that I look at is what essentially do the credit cards look like? And unfortunately, I feel like more and more pharmacists that come through my door, we have a good amount — I’m talking $10,000 or more — of credit card debt that we have to really reconcile. So you know, I think figuring that out is probably first and foremost. I think secondarily is it goes back to the emergency fund. So typically when we don’t have an emergency fund, that’s when we’re reaching for the credit card when something comes up. So the emergency fund really allows us to have peace of mind so we have cash money set aside in case something were to happen, it allows our investments to keep kind of working. So we don’t want to be pulling money out of our 401k or any of our investments that are really tailored to more of a long-term approach.

Tim Ulbrich: Right.

Tim Baker: And it allows us to avoid the credit card debt, so we’ve talked about at length of why this is important, and this is typically 3-6 months of non-discretionary monthly expenses, which are just a fancy way to say if you lose your job or your hours get cut back, these are the expenses you’re going to have regardless: your rent, your mortgage, utilities, your loan payments, that type of stuff. So I think at the end of the day, those two things, from a foundational standpoint, is the consumer debt in check? And you know, is the emergency fund in place or at least phase one? Sometimes I’ll say, “Hey, client, you need $30,000 in an emergency fund,” and they’re like, they might have $10,000 worth of debt, so we kind of take it in bite-sized chunks so we can achieve that goal.

Tim Ulbrich: That’s one of the things you boo, right? Go home, Tim Baker.

Tim Baker: Yeah, yeah. And the thing about it, and I kind of talk about this at length with regard to the investments, it’s really boring to pay off a debt, right? It’s just boring. There’s nothing exciting about it. It’s really boring to save money in an account. I mean, I like doing it because I like to see my interest payments go up, I know interest rates have gone down, so we’re big Ally nerds, and I think their interest rate has gone down to 1.9%, but it’s still 20 times better than the next guy. But that’s really not — a lot of people would compare it to watching paint dry. But I think sound financial planning for the most part is super boring. So yeah, I might get booed off the stage when I say, “Hey, pay off this debt,” or “Save this money,” or “Be really, really boring with regard to your investments,” but at the end of the day, I think it’s kind of the best interests of the client.

Tim Ulbrich: Well, I think there’s a great opportunity for people to reflect, myself included, yourself included, that you know, while you may not have been impacted by some of the recent cuts or job layoffs, any one of us is vulnerable to this at any given point in time.

Tim Baker: Yeah.

Tim Ulbrich: And obviously, there’s things we can do to help protect ourselves, but if you can envision a situation where if you find yourself in a job loss or hours cut or wages reduced, and you imagine Scenario A where you’ve got $20,000 of credit card debt, no emergency fund, Scenario B where you’ve got no credit card debt and a fully funded emergency fund, the stress associated with those two scenarios is very, very, very different. And so I think that’s a great reminder, as you mentioned, Episode 026, we talked about it. The other thing I think worth mentioning here — and we talk about this a lot in terms of budgeting and really thinking about the future — is these are moments where, again, even if you haven’t been impacted, to just take a step back and say, “What can I do to create margin in the month-to-month?” so that if I were to find myself in a position like this, either you can weather it or it may not necessarily hurt as much or you can work through having several months where you may not find yourself having an income coming in. So again, you think about if somebody’s in a situation where they’re used to making $7,000 of net income per month, and they’re spending $7,000 or more of net income per month, versus somebody’s who’s maybe only spending $3,000 or $4,000 of that net income per month because of house payments and car payments and all of the other things that we’ve talked about before, obviously, again, those are two very different scenarios. So I think there’s wisdom in all of us hearing this message and taking a look at our financial plan to say hey, what can we do to build margin and take some of the pressure off if we would find ourselves in a situation like this.

Tim Baker: Absolutely. Yeah, I mean, one of the things that we kind of brushed over here recently is about interest rates. I mean, some of that margin could come from just restructuring debt. So you know, if you bought a home, and your interest payment is 4.75%, you might be able to — if we consider closing costs and things like that, it might make sense for you to do something like that. I mean, that’s something that doesn’t really test your kind of putting you outside of your comfort zone, so a lot of things when we examine inflows like making more money or outflows, cutting expenses and tightening the belt, it’s typically outside of our comfort zone, and we don’t like to do it. But it might be something as savvy as that, taking advantage of where interest rates are to kind of create that margin. But there’s lot of ways to do it.

Tim Ulbrich: Second area I want to talk about is potential need for deferment or forbearance of loans. So obviously, we have people that are listening that have been impacted by this, may currently find themselves in a position where hey, I don’t have work or I have such reduced hours or wages that I just cannot make the payments that I have. And so here inserts this option of potentially deferring or forbearing loans, which we know is not the ideal scenario but may be the reality for some people. So talk us through what is deferment, forbearance? What’s the difference? And what are some of the considerations here?
Tim Baker: Yeah, and when we typically talk like deferment, forbearance, grace period can be like also rolled up into this, it’s essentially periods of time where you don’t have to pay off your loans, where you’re basically out of school, sometimes you might be in additional training, so that’s where we talked about — and this is one of the things that I love we talk about, Tim, moving the needle. I rarely come across a resident that I work with that will automatically say, “Oh, I’m deferring my loans,” which makes me happy because I know when we first talking on the subject, I would ask a resident, “Did you defer your loans during residency?” or “Are you doing it?” Yeah, I feel like the majority of them would. So I feel like that message has come out. So like we say about the grace period, it’s not very gracious, you know, the deferment and forbearance, they’re not good. We’re really look at these as really stopgaps, like you said, Tim, when we can’t make the payment. So I typically follow the alphabet and go, deferment first — D before F — and then forbearance, typically because of how interest accrues. On some loans like Perkins and subsidized Stafford loans or direct loans, in the deferment period you may not be responsible for paying off the interest that accrues. And typically, it accrues during those deferment periods or forbearance periods and then the interest capitalizes, meaning it moves from the interest column to the principal column. And then when you’re paying back that amount of money is now bearing more interest on the bad side of things. So you know, the big thing to remember is that ultimately, one of these is typically going to be available to you, either deferment or forbearance. And I would say look at deferment first, go to forbearance second, because typically, the forbearance is for a financial hardship, that type of thing, but the deferment will be a little more gracious. So I would say if this is a you need to do this, which I would advise against, but sometimes you have to do what you have to do, go that route because it’s going to give you a little bit more runway to get your financial house in order, try to figure out ways to make the income, find a job, side hustle, whatever it is. The big con is ultimately not only are you not putting a dent into the loans, they’re growing, unfortunately. And for the amount of loans that we’re talking about with pharmacists, it can grow substantially. So you could wake up — and the terms vary. Sometimes it could be 12 months, I think some deferment periods can last up to three years. That’s a long time for you to be sitting on a loan that on average, 6-6.5% interest, that can really add up over time. So at the end of the day, what you want to do is on the federal side of things, with federal loans, this is a no-brainer. This is actually one of the benefits that the federal loan system provides is that if during a hardship or during a period of time where you can’t make the payments, they’re going to work with you. And the reason for that is that loans are not discharged during bankruptcy proceedings, so they’re not going away. Even if they do, the federal loan program is backed by the full faith and credit of the U.S. government, which has us as taxpayers to be able to support the. So this is kind of a no-brainer. And at the end of the day, the government collects more in interest the longer that you pay off or the longer that you defer. On the private side of things, it’s a different ball game altogether.

Tim Ulbrich: Yeah, and I think that’s worth noting because when we talk about on the private side of things, obviously you’re now at the mercy of the private lender — and mercy may not be the right word, that makes it sound terrible — but the reality is that we talk about this all the time: When it comes to refinancing your loans with a private lender, full transparency, you have to consider both the pros and cons in that. And while many of these lenders have really come into line with having all of the benefits — or many, if not all — of the benefits of the federal system, one of them that you have to consider is one important one here that we’re talking about is if you were to find yourself in this position, what’s going to be the option if you don’t have a deferment/forbearance option with a private loan? So how have you handled that with clients? Or what advice might you have for them? Because they’re probably not going to just throw this out there and market it and say, yes, we’re going to offer you forbearance or deferment. So you’re probably going to have to dig a little bit deeper here.

Tim Baker: Yeah, one of the risks moving from — although we believe that — so when I first started advising clients on student loans, basically, what we were told is never have the client move from the federal system to the private system. So never have them refinance. And obviously, the big reason was because of all the federal protections: They forgive upon death or disability, there’s forgiveness, there’s lots of different plans that you could pay off the debt, that’s also hardship. Now, because this is a $1.5 trillion issue that affects 45+ million Americans, a lot of these companies have said, hey — the CommonBonds, the SoFis, the LendKeys of the world — have said, “Hey, we’ll match those benefits. We’ll forgive upon death and disability, we’ll try to make you basically as similar to the federal system as we can.” Now, one of the things where I think they fall short a lot of times is a lot of these companies don’t necessarily advertise that they’ll work with you on a hardship. Kind of behind closed doors, I think that they will because at the end of the day, they want what you want. They don’t want you to — you can’t really default on the loan. Well, you can default on the loan. But it’s not going to go away. So eventually, what the companies will do is they’ll sell the loan for pennies on the dollar to a collector, and then they kind of hound you for it. They don’t want that because they want to get as much of the interest and principal paid back as possible. So what I would say to someone that has private loans that is struggling to make the payments is just level with them. I think pharmacists have a little bit more cash because you have a professional degree, you have the ability to make a good income, even if it’s not now but in the future once you kind of get sorted out. So to me, it’s just level with them and say, “Hey, I want what you want. I want to be able to pay this back, but I need some time to figure this out, or I need some grace.” And I think more often than not, they’ll figure it out. But at the same time, they are running a business. And they are not backed by the full faith and credit of the U.S. taxpayers, so sometimes they might call you on the loan, and then you’re kind of left paying with it. So it’s a little bit of give-and-take. Obviously, when you move from the federal system, you’re getting a better rate, but there’s a little bit less flexibility in repayment. And sometimes, a hardship is chalking that up to that.

Tim Ulbrich: Yeah, Tim, I think that’s a great point in terms of the private companies and at the end of the day, they’re running a business. I think this is also a good time to remind our listeners that are in the federal system that maybe haven’t refinanced their loans to the private sector that before they go through and pursue a deferment or forbearance option, is to see whether or not one of the income-driven repayment plans, if they’re not already in an income-driven repayment plan, would allow them to right-size their payment to match the income in terms of the time period that they may have a reduced wage or have lost their job. Of course, deferment/forbearance always being an option, but not overlooking the income-driven repayment plans that might provide some temporary relief without having to go into a deferment or forbearance situation.

Tim Baker: Yeah, and I think one of the — we often talk about — especially on the federal side — there’s lots of flexibility in repayment, and I often say it’s almost too much flexibility because there’s so many different options with the different repayment plans and deferment and forbearance. And what it typically does is it just confuses people in terms of like what they should actually do in practice when things are normal. But when they’re not normal or when things aren’t going as well from an income perspective, it’s actually a good thing on the federal side. And just to recap, like I said, the private companies, they do want you to pay back the loans, so they’ll try to work with you I think the best they can. But sometimes, they’re not going to be as flexible as the federal system. So again, lots of flexibility in the federal system. But I think there’s typically an avenue for everybody that might hurt the long-term gain or long-term approach to the student loans but can give you some relief in the short term.

Tim Ulbrich: Yeah, and I think to wrap up this section here as we continue to reemphasize the importance that when you’re refinancing student loans or looking into refinance, of course, interest rate is a big variable. You want to calculate the savings. But it has to be the savings plus looking at some of these other variables. And I think that’s more important than ever now as we see rates continue to drop. Those refinance offers are going to become attractive. Here we are in September, end of August 2019, that making sure you’re looking at OK, what are some of these other benefits that you may be losing from the federal system, although you’ve talked about those have really equalized across the board. But certainly it’s not an apples-to-apples comparison between the two.

Tim Baker: Sure.

Tim Ulbrich: So again, as we continue this journey talking about financial considerations for those that have potentially a job loss, hours cut, or reduced wages, we’ve talked about first developing a sound financial base, really the prevention aspect. Then we talked about loan deferment or forbearance. I think the next thing, Tim, we need to talk about is if somebody ends up in a situation where they lose their job or potentially they get hours cut to a part-time where they no longer have access to health insurance benefits, or I know we have several side hustlers out there that may make the decision to say, hey, I’m going to jump ship from my day job and ultimately, they carry the responsibility of health insurance coverage. But this factor, especially if you’ve always been used to having employer-provided health insurance, is a huge consideration. I mean, the cost of this is no joke, right, Tim, when you look at this relative to the rest of the plan?

Tim Baker: Yeah, absolutely. And this is one that’s going to be dependent on the region or the state that you live in in terms of the coverage. This one’s a hard nut to crack, and I’m of the belief hopefully that eventually, the employment will be separated from this benefit and that everyone can get coverage separate from who their employer is because I think it is one of those things that sometimes, it prevents people from moving away from a job that isn’t necessarily a good fit for them and they feel stuck. But it’s either looking at the exchange per state — and some states, you can really find something that can fit your needs, and other states, there’s almost nothing available. But the big one — and Tim, I think you have some experience with this here recently — is going to be COBRA and what that basically provides for people in kind of a transitionary period.

Tim Ulbrich: Yeah, and I think this question’s really interesting because I think it’s just a good activity for everyone to look at, even if you’re not foreseeing a situation where you leave a job is to look at what you’re paying out of pocket per month for your plan and what percentage that is of the overall cost. I mean, most likely, the employer is carrying about 90% of that, right? You know, varying degrees, obviously less or more, varying degrees depending on how catastrophic the coverage is or not or high deductibles, all those things. But at the end of the day, again, it’s easy to get lulled into this is one of the real benefits, just like we’ll talk about here in a moment with retirement where if you have a match provided and then all of a sudden that’s fully on your back, you’ve really got to factor that in, especially for those that are thinking about making a jump that’s of their own choice, especially to pursue some type of entrepreneurial option or side hustles. You’ve really got to factor this in when you’re thinking about your business, pricing your services, all of those things because often, people will say, “OK, I’m making $100,000. I need to replace $100,000.” And obviously, we know it’s probably more like $150,000-200,000 when you factor in all those other things. So yeah, Jess and I actually had a little bit of experience with this last year when we made the transition down here to Columbus from northeast Ohio, and we were looking at, OK, what are our options for health insurance coverage? And the reason why we were looking at this is we made a really specific decision for our family that we’re going to take two months off in the transition, which was awesome. And then we had the holy cow moment of oh, wait a minute, we have three kids, and we’re not going to have any health insurance, so what’s the game plan? So the most obvious option we ran into is Cobra, which is essentially extending your employer coverage that is offered to you for a period of time, but you’re going to really foot the bill for doing that. And this allows you to take out the plan you have now, you know who’s in network, you know who’s not in network, especially if you’re staying in the area, you’re comfortable with the offering of what’s there, so it’s essentially the continuation of your coverage that was being fully funded by your employer or a combination of employer and you, and now you’re able to continue that offering, have access to that offering, but really, the cost is going to be on you to do so. And the reason we didn’t go through this — and this is really a good bridge option for many people, especially if this is only a 3-6 month period is that the plan that we had offered at my previous employer was so rich and we necessarily weren’t really using a lot of those benefits that we looked at the cost and said, “Wow, like we don’t really want that,” and I think this really highlights us having the opportunity to talk about the importance of an emergency fund that if you have a fully funded emergency fund and you’ve been relatively healthy, you may not necessarily want to pay out of pocket for an expensive Cobra coverage. Or if you’re looking at options in the exchange, you may be able to take on something that has a little bit higher deductible or that has more catastrophic coverage because of the other savings and funds that you have. So Cobra is certainly an option. The other option that I honestly, Tim, wasn’t aware of, is short-term health insurance. And we ended up doing this when we took a couple months off between jobs because at the end of the day, it was cheaper than Cobra, and for us, it really just provided what we needed, which was catastrophic coverage. So the cost of this was really, really significant in terms of the savings, pretty simple to get signed up, simple to find, so for those that are relatively healthy, have a good savings in place, I think this is a good option. If you’re looking longer term, I think of course the exchange, all those you mentioned, state-to-state you’re going to see a significant variety. From my experience looking at some of those, those policies, many of them are very expensive, even just for catastrophic type of coverage. But obviously, healthcare.gov is a place to go to look there. Then the other one that I think is often overlooked are some of the healthcare sharing service organizations that are out there. You probably have heard of terms such as MediShare, Liberty HealthShare, these are essentially individuals that are coming together, a lot of them are faith-based organizations that come together with the idea that you as a community are, through contributions, sharing in the cost and essentially pooling together money and resources that can help fund one another. So that, of course, has upsides and downsides. And then if somebody moves into the route of being self-employed through opening up their own business, then of course, you have the opportunity to open and provide health insurance coverage through yourself and the tax advantages and benefits that come with that as well. So I think at the end of the day, for most people that are listening that may find themselves as one of those pharmacists that either is losing their position or is getting cut down to part-time hours, doesn’t have healthcare coverage, most likely, they’re going to be looking at either Cobra coverage for that transition period or potentially some short-term health insurance really would probably be the two predominant options.

Tim Baker: Yeah. The other thing that we talk about more is almost like a longer term stealth IRA is the HSA where that’s something that if push comes to shove, you can use for medical expenses in the near term. We talk about as a triple tax benefit account that can almost act as a secondary retirement account. But if push comes to shove and we need to dip into that, I mean, by all means. I think having that as part of the overall thing to tap into is something to look at as well.

Tim Ulbrich: That’s a great point. Next bucket, Tim, is this idea that people in this situation may find themselves with a loss of the option of saving for retirement through an employer-sponsored account. So if they no longer have their job, they can no longer access a 401k or 403b, maybe they’re losing the match, or even just the option to contribute to that beyond the match or even in the absence of a match. So if you’re working with a client who’s in this situation, how would you handle this in terms of evaluating, OK, are we just going to put on pause through this temporary time of hardship, and what are the things we’re going to be looking at? Or if we do want to continue to save, what are the other options that are out there?

Tim Baker: Yeah, I mean, typically, when we’re looking at a situation like this where it’s either job loss or maybe even significant cutback in hours, you know, this is kind of an emergency situation where we might not look at even getting the match. Most of the time, I would say, get the match as best you can. But I think this is where some people can get in trouble with kind of the longer term because it’s really hard to put numbers and calculate, OK, if this happens, what are the long-term repercussions? So one of the exercises that I think we do at YFP Planning, which I really think kind of turns the light on, is actually just taking a client through a nest egg calculation and showing them, OK, if we give a set of certain assumptions and kind of we can see what your current savings rate is, what you have saved, how long we have until retirement, we can kind of see are we on track or off track? And then we can take some of those variables and change them to say, OK, if before, we were putting 8% in and now we drop that to 4%, how does that change the overall bottom line? So I think if I was working with a client, that’s essentially what we would do. And most of the time — I wouldn’t say all the time — but most of the time, given the fact that the majority of the pharmacists that we work with are kind of in their 30s, there’s a lot of time between now and retirement to kind of right a ship that’s not necessarily on the right track, but my belief is that from an investment perspective when it comes to retirement investment is trust in the market. It will take care of you over long periods of time. So my thought is to be fairly aggressive with those accounts and make sure that expenses are low. So I think when you couple those two together — I had a couple recently that they felt, I think they were in their late 20s, didn’t have a whole lot saved for retirement, just getting started out, and we kind of went through the numbers, and I think they were like flabbergasted that they weren’t like 10 or 20 years behind. So I think when we actually do the numbers, it can be a powerful reassurance to see if the variables change, how that changes the overall thing. But you know, I think, again, this wouldn’t be something that I would necessarily fret at in the short term if we were in this scenario because I think at the end of the day, this could be figured out.

Tim Ulbrich: So Tim, I think it’s worth talking through here, you know, somebody who finds themself in a situation like a job loss, maybe even a time period before they find another opportunity, so they have this 401k or 403b account that’s sitting there. What do you typically advise — or maybe better yet, what are the factors or variables you’re helping a client think through in terms of determining, do I leave those monies there as is until I may have a new position that I can make that decision to compare what I might get in an IRA versus what my new employer offers? Do you move forward with a rollover into an IRA? How do you typically work that through with a client?

Tim Baker: Yeah, so to me, this decision really begins and ends with expense. So in a 403b, 401k environment, I always say that we have to operate within the sandbox that the employer and the custodian, whether it’s Fidelity, Vanguard, whoever it is, allows us to basically play in. So in those retirement plans, you typically have 20 or 30 different investments that you can put your money towards, and that’s it. In an IRA environment, the world’s your oyster. You can invest in just about anything that you’d like. So but I think the big difference is that in the 401k, 403b environment, it’s not as transparent as we would like. So most people, they sign in, they say, oh, I’m putting 5% in, here’s x amount of funds, I like these four or five or six funds, and then that’s it. But what they don’t know is there’s typically a lot of fees that are associated with that that are very opaque to them. So I actually did an analysis with a client here in Baltimore. He’s one of the clients that is not a pharmacist, but he has a 401k with a major company here, and basically, when we went through his analysis, I had not yet analyzed his 401k yet, but he has an IRA with us, and I say, “Look. Depending on when we do the analysis, depending on what comes back in terms of like how expensive your 401k is, is going to really determine if we should contribute future dollars to the 401k or to the IRA.” So when I did the analysis this morning, and his 401k was about five times more expensive than the IRA that we have. So basically, the move was to keep his 401k contribution static, so basically get the match. And then as he increases his contribution to his retirement account, it will go into the IRA until we max that out. So this is kind of — and sometimes, this can be shades of gray. This is like looking at expense ratios of .1% versus .05%, so it’s very, very minimal. But if we’re talking hundreds of thousands of dollars or even millions of dollars over the course of a career, that stuff definitely adds up. So the decision, longer answer, Tim, the decision to move those monies is going to be dependent on the actual plan themselves. You know, if you’re in a TSP, as an example, those are really efficient funds. But what most financial planners will say is they’ll say, “Hey, move the funds for me to manage,” because that’s typically how they get paid is the investments that they’re managing. So it’s typically sound advice, but not advice that is not necessarily in the client’s best interest. So I say it just depends on what the analysis shows, if that makes sense.

Tim Ulbrich: Yeah, absolutely. I appreciate the insight. I think fees, at the end of the day, we’ve talked before on this show, the impact those can have. And with a few exceptions, I think you mentioned the TSP being one, and maybe there’s a couple others out there. I mean, more often than not, what we’ve seen is that employer-sponsored accounts just typically don’t always have as low of fees as you can get out there in the open market through index funds and other things. But I think being aware of where the advice is coming from is really important as well. The next one we have here is the value and importance of a side hustle. And obviously, we’ve talked at length on this show, we’ve had lots of examples as recent as Brett Rollins coming on the show to talk about his two side hustles in writing for Pro Football Sports and then doing some work around expert witnesses and his area of expertise. But when it comes to side hustling, especially for those that are potentially in a time period of loss of job, reduced income, reduced wages, what do you see as the value of this side hustle in addition to, of course, just what they’re going to get from potentially the monetary income?

Tim Baker: Yeah, you know, when we talk through like a savings plan for a client, when we do goal-setting, we’ll talk about things like, what are the things that are important to you? And a lot of people will say, you know, it could be travel, it could be starting a side business, it could be whatever that — retiring at a certain age. So we typically like to marry up what they’re actually passionate about in life and what they want to do with kind of how we’re deploying our savings and our money. So one of the things I like to kind of point to is basically a savings plan. So the baseline or the bedrock of that is going to be the emergency fund, but it might be where we have a savings plan for our trip to Disney World. We have a savings plan for Benji, our dog, so when he gets sick or he needs grooming. So one of the things I really like about the savings plan is that it clearly shows where the money comes from. So for nine out of 10 of us, it’s going to be like a paycheck, right?

Tim Ulbrich: Right.

Tim Baker: So when we talked about at length with Shea and I, when we basically funded our trips to Disney World, Brazil, and Iceland through Airbnb and Rover, in our savings plan, that’s what we outlined was that everything else was paycheck except for those two things or that one thing was all going to be from those dollars. So what I like to clearly show to clients is that typically, all of our proverbial income eggs are in one basket. It’s going to be WalMart, like we talked about in the beginning of the show, or it’s going to be a hospital, or it’s going to be CVS, whatever it is. We’re at risk because if a decision is made in a boardroom in some city in the country, it can affect all of us. So my belief — and I understand that I’m biased because I’m an entrepreneur, Tim, you’re an entrepreneur — but it should be to not only diversify our investments but to diversify our income streams. One of the conversations that we’re having in our household is, Tim, is about YFP profit distribution. So as we distribute profits to the business owners, Shea, what should we be doing with this money? So like for me, it’s like, I really want to buy an RV and travel the United States. So that might go into an RV fund. Or it might be, we really need to catch up on retirement, so it might go strictly into retirement. But I like to clearly delineate lines of income for a purpose. And part of that is to show that most of us are very susceptible to kind of a one-income or two income streams if there’s two people in the household.

Tim Ulbrich: And one of the things I love that you do with your clients — and Jess and I have experienced this firsthand in working with you — is you mention as you’re working through that savings allocation worksheet, if you have a prioritized list of what you’re working on, when that extra income comes in the door, boom. Like there is no question about where that is going. It doesn’t go off into the ether of no-man’s land or expenses come here or there. So I think the clarity, and obviously, that then gives you that feeling of acceleration of your financial goals, which fuels on itself and I think helps things move forward. The other thing I really love — and we’ve experienced this personally, and I know we’ve heard this over and over again from the guests we’ve had on the show — is that while there’s not a direct monetary value necessarily from it, but that value of having a creative outlet, you know, where you can really contribute to something that you’re really passionate about and that you want to implement and to have the fun in terms of the creative side of the business and working through the problem and the challenges. And I think especially for people that find themselves stuck or dissatisfied in their day job, I think beyond the cash, there’s incredible value in being able to have that creative outlet while you may be pursuing other opportunities or even just working through that difficult time.

Tim Baker: Yeah, and I think one of the things that is worth mentioning — and I remember something that I think Tony Guerra said that I’ll paraphrase — is like, he almost set his schedule off the bat at like a 32-hour schedule so that he could have one day of just thinking or working on different progress.

Tim Ulbrich: The entrepreneurial 8.

Tim Baker: Yeah, exactly. So to me, a lot of people sometimes bemoan the fact like, oh, I can only get three days this week or four days this week. To me, I would flip that on its head. It’s like, well now you have a day or two that you have capacity to do something else that you can monetize your time in a different way. So and sometimes, it’s just getting there and getting outside of your head or maybe doing something that you would never do. Like I said, like when I launched my business, Tim, I drove Uber. And it was one of the best jobs because I love to drive, and I love to talk to people. But for me, when I was launching my business, I was just stuck in a room and I was kind of bouncing off the walls. But when I got out and looked at the world in a different space and talked to different people, it made all the difference. But to me, it was to earn income so I could pay my rent and feed myself. But it was also to think through a problem or work through a problem or do something that’s kind of outside your comfort zone. So I think sometimes with a lot of pharmacists that we work with, I say, “Hey, look, whether you’re growing top-line revenue, top-line income or cutting expenses, typically, both of those things are going to be outside of your comfort zone. But I think doing a little bit of both is good, especially to tighten the belt if you’re expecting hey, I thought I was going to make $120,000, but now I’m only making $80,000-90,000. So I think capacity in your workweek is something that we should value and really try to figure out ways to go from there.

Tim Ulbrich: I agree. And one of the last things I think about with a side hustle, which takes us into our last plan around networking and professional development, that I don’t think it’s talked about as much as the extra income and the creative outlet is this idea that as you pursue a side hustle, as you get yourself out there, as you meet more people, you’re naturally going to expand your network, right? And you’re going to take yourself out of your comfort zones, you’re going to have to really talk about the work that you’re doing and why you have a solution to a problem that needs to be solved. And those are skills that if you’re working in a 9-5, let’s say a traditional community pharmacy job is one example, you’re probably not forced to do those things. And your opportunities to expand that network may be a little bit limited unless you take that step above and beyond yourself. So I think this last point here of networking and professional development — and this timing is really good as next on the show, we’re going to have David Burkus, the author of “Friend of a Friend,” to talk about this concept of hidden networks and really redefining how we think about networking and why networking is so important, not when you need it in the moment of holy cow, I don’t have a job, I now need to tap into my network, but why you should be fostering and developing that network all along. So stay tuned to next week, we’re going to talk about that a lot more. I think this is also a good chance, Tim, for us to highlight what APhA is doing here as we continue to partner with them and value their partnership, is they just a couple weeks ago announced that they’re offering complimentary APhA membership to those that have found themselves in a position where they have been laid off or work hours have been significantly reduced, and they’re really positioning this as for people, whether they need CE, whether they’re looking to network, they’re trying to find new opportunities, pursue new skills, that this membership that they feel like will help them do that. And I really commend them for doing that. I think there’s been a lot of discussion nationally about hey, national organizations, where are you in this difficult time? And this is really somebody stepping out there and saying, we’re going to invest in this. And this is one way we’re going to show this is a priority. So for those that find themselves in that position of either a job loss or hours that have been significantly reduced, you can email the APhA membership team at [email protected]. Again, that’s [email protected]. Or you can call APhA as well, and it sounds like they’re going to be able to move that forward, which we’re excited about. So networking, professional development, when you think of your journey, Tim, and the work that you’re doing obviously now with YFP, but formerly Script Financial, I mean, how important — I hear you talk about a thousand cups of coffee all the time, right? I mean, this concept of networking.

Tim Baker: Yeah. No, it’s true. I mean, when I kind of had this Eureka! moment, I’m like, I’m going to start a fee-only financial planning firm for pharmacists for Gen X, Gen Y pharmacists, I’m like, I’ve got a lot to learn. So that 1,000 cups of coffee really put me on the path so when I sit in front of prospective clients, and I say, “Hey, prospective client, these are typically the things that I hear, and by the way, we have a solution to kind of hope ease some of that pain,” most of the time, they’re like, “Wow, Tim, you just described my life. Yeah, I’m struggling with debt. And yes, I’m unsure about my budget or my long-term projections and things like that. So to me, it’s so huge. And I think that any way you can expand your network, not just for — I think looking at it from like how you can help others is the best approach, not necessarily being in it for yourself, is the way to go. So I’m looking forward to that episode.

Tim Ulbrich: Well, great stuff, Tim. I want to remind our listeners if they’re not already aware and if they’re here listening at the very end of August, we’ve got a few days left in our exciting giveaway for the end of this month. So for those that are interested in pursuing something entrepreneurial, building off what we talked about today, or a side hustle, but if you’re not sure where to get started, we’ve got a giveaway for you this month that includes some awesome books and resources that will hopefully help spark some ideas and remove some of the barriers to getting started. So for three different winners, you will receive a copy of some great books: “Will It Fly?” by Pat Flynn, “Failing Forward” by John Maxwell, “The $100 Startup,” “The Freedom Journal,” and, of course, a Hustle Mode T-shirt. What would this be without a Hustle Mode T-shirt? So giveaway ends end of August, Aug. 31, 2019, and for those that are interested, you can sign up at YourFinancialPharmacist.com/giveaway. Again, YourFinancialPharmacist.com/giveaway. And if you’re hearing this after the end of August 2019, don’t worry. You can go to that same URL, and it’s likely we have another giveaway that’s ongoing right now. So Tim, as always, great stuff and looking forward to connecting soon on future episodes.

Tim Baker: Yeah, thanks, Tim.

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YFP 109: An Interview with Suze Orman

Posted on by yfpadmin


An Interview with Suze Orman

Suze Orman, a #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 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.

Summary

The one and only Suze Orman joins Tim Ulbrich on this week’s podcast episode. Suze, #1 New York Times bestselling author on personal finance with over 25 million books in circulation, talks 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.

Suze shares her journey of being a waitress until she was 30 years old and going through a giant loss of $50,000 from an investment through Merryl Lynch in a 3 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 make sure other people’s investments make more money than she’s earning.

Suze says that 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), as well as the taxes that will have 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.

Suze has created a protection portfolio with the four must have estate planning documents: will, living revocable trust, advanced directive and durable power of attorney. Setting these forms up with a lawyer can cost upwards of $2,500 with additional fees each time they need to be amended. With Suze’s must have documents, you can update as often as you’d like with no additional charge. At the release of this podcast, the offer for these must have documents is available here.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. And joining me this week is a special guest, Suze Orman, who is an extraordinary individual, has transformed the financial lives of millions of people across the world through her passion for teaching personal finance and empowering others. While many of you I’m sure are very familiar with Suze’s work and have been impacted positively by her teachings, let me provide a brief background on Suze. She has been called “a force in the world of personal finance” and “a one-woman financial advice powerhouse” by USA Today. She is a No. 1 New York Times bestselling author, magazine and online columnist, writer, producer, and one of the top motivational speakers in the world today. 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. To mention a few of her many accolades, she is the single most successful fundraiser in the history of public television. In 2007, “Business Week” named Orman one of the top 10 motivational speakers in the world. In 2008, Orman was presented with the Amelia Earheart Award for her message of financial empowerment for women. In 2009, “Forbes” named Orman 18th on their list of most influential women in media. And in May 2009 and May 2008, “Time” magazine named Orman as one of the Time 100: The World’s Most Influential People. It is without question an honor to welcome Suze Orman to the Your Financial Pharmacist podcast. Suze, before we jump in to discuss how pharmacists can be more intentional with their financial plan, I want to give a shoutout to one of our avid listeners, Amanda Copolinski (?), who is a superfan 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. And because of your work, your message will now impact thousands more in our community. So thank you so much for coming on the show.

Suze Orman: 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 — you see what I mean? So Amanda, you go girl, you go girl, you go girl. Alright, we can go now.

Tim Ulbrich: So before we jump in and talk more about your book, “Women and 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?

Suze Orman: Yeah, it was a very simple story, actually, where I was a waitress until 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, and within three months, all $50,000 was lost. And 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. And 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. And 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. And because I sued them, they couldn’t fire me. And during the two years until it came to court — and they then settled outside of court because I was their No. 6 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?

Tim Ulbrich: Right.

Suze Orman: Like alright, 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? And so that’s when I became — 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. And before you knew it, I just rose and rose in the ranks, started my own firm, and here we are today.

Tim Ulbrich: Indeed. And I think that’s a good segway into talking about your 1 million-copy, No. 1 New York Times bestselling book, “Women and Money: Be Strong, Be Smart, Be Secure.” And 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, and so I think this message and your book is certainly going to resonate with our audience. And 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?

Suze Orman: 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. And I don’t say that as a put-down to men. It’s just that women, 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. And 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 would think, 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.

Tim Ulbrich: Which is a good segway 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?

Suze Orman: Yep. You know, in the book, I talk about truthfully that there is no blame big enough or shame big enough you who you are meant from being. There just isn’t. And it’s 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 5-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?” And I mean, “You mean a dog?” And he said, “No, really. I want this Pluto to be alive.” And 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. And 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. And 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. You know, it’s — and fear, shame and anger are the three internal obstacles to wealth. They just are. You know, 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 and Money podcast because it’s on the Women and 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. And a lot of these women are so powerless because they’re not powerful over their own money.

Tim Ulbrich: 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?

refinance student loans

Suze Orman: You start by No. 1, really understanding the ramifications that student loan debt that goes unpaid will have on your life forever. So you’re No. 1 priority, 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. And 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. And when they forgive it, when a debt is forgiven, you need to pay taxes on that as if it were ordinary income. And 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.

Tim Ulbrich: Right.

Suze Orman: So you have to be realistic here. If you’re going to go in this industry, 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. And your first priority is your student loan. After your student loan, hopefully on the standard repayment method, 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.

Tim Ulbrich: Yeah, and that’s really timely 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 6-8%. And so obviously those interest rates and the growing interest and the baby interest can have an incredible negative impact on their financial plan. So that being a good segway 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. And 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. And 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?

Suze Orman: 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?

Tim Ulbrich: Amen.

Suze Orman: 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 No. 1 question that I am asked. And it is so sad it is the No. 1 question that I do not really have an answer for because they will not let you discharge it in bankruptcy. 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, No. 1, 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.

Tim Ulbrich: Right.

Suze Orman: 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? And 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 a.m. every morning. I started at 7, 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. And 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.

Tim Ulbrich: 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? And 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, and 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, 6-8%. So how do I balance the two of these?’ What advice do you give people to help think through that?

Suze Orman: 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 401k or a 403b 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? And 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.

Tim Ulbrich: You’ve got to do what you’ve got to do.

Suze Orman: You’ve got to do what you’ve got to do. And 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 where it is five or six of you get together and you go, OK, we have this problem. And 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? You know, Uber and Lyft and Zipcars, all of that came about — you know, especially Zipcars — about people who couldn’t afford to have their own car. So 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.

Tim Ulbrich: Yeah, and my wife and I talk often, as we think about our own financial situation, 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, it 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. And 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.

Suze Orman: 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, 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. And I’m driving, you know, 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. Alright? And I mean, five minutes before then, they were on this private island having a fabulous time, and 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.” And they go on and on and on about it. And 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 ‘til 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. And 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. And 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, and durable power of attorney for healthcare? And every time you need to make a change, where are you going to get the money to do that? And 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.

Tim Ulbrich: Wow.

Suze Orman: And 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. And if you’re interested, really, in that offer, you can just go to SuzeOrman.com/offer, and 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.

Tim Ulbrich: Yeah, and I think it’s also important for our listeners just to consider the peace of mind of having all 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. So 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. And 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?

Suze Orman: You know, 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. We just have to want to. So 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. And 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 you know, with the Women and Money podcast, people write in their emails. And I keep saying, “I’m not going to answer them. I can’t answer all these emails.” And now, I’ve answered almost every one except four. You know, 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. And so, you know, I just, I hope I leave a legacy of love and power. That’s what I really hope I leave.

Tim Ulbrich: Yeah, and what really stands out to me, Suze, is 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. And let’s say they’re a mother, and they pass that on to their kids and their friends and their cousins and their network, and that’s passed on to another generation. That is incredible, transformational work that will forever have impact. And 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. So to our listeners, as Suze mentioned, she responds to her requests as it relates to the podcast she has each and every week, the Suze Orman’s Women and 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]. And again, as a reminder, make sure to head on over to SuzeOrman.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. So 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.

Suze Orman: Anytime, boyfriend. Anytime.

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YFP 108: How to Effectively Talk with Mom & Dad About Their Finances

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How to Talk to Your Aging Parent About Finances

Cameron Huddleston, an award winning journalist with more than 15 years experience writing about personal finance, joins Tim Ulbrich on this week’s show. Cameron and Tim talk about her recently released book Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances. Cameron discusses why it is important to have these conversations with your parents, how to start the conversation and what to do if your parents are reluctant to talk.

About Today’s Guest

Cameron Huddleston is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. She also is an award-winning journalist who has written about personal finance for more than 17 years. Her work has appeared in Kiplinger’s Personal Finance magazine, MSN, Yahoo, USA Today, Chicago Tribune and many more print and online publications.

Summary

Cameron Huddleston joins Tim Ulbrich to talk about her newly released book Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances. Her inspiration for the book came from the stories of her parents. Her father died at the age of 61. He was in his second marriage and didn’t have a will. At 65, Cameron’s mother was diagnosed with Alzheimers and her biggest regret is not talking to her about her finances, the type of care she wanted and how to pay for it before her memory started to get bad. Cameron didn’t want others to go through the same mistakes and suffer their consequences as she did.

Cameron shares why these conversations regarding finances and end of life care aren’t talked about, the biggest being that for older generations it’s taboo to speak about money and that it can make people uncomfortable as some people haven’t managed their money well and don’t want to divulge that information with their family. Unfortunately, consequences like lengthy and expensive court battles to prove that parents are no longer competent to handle their money or make decisions can come out of not speaking about these sometimes difficult topics.

Cameron shares that one of the biggest mistakes you can make is assuming that the conversation can wait. If your parents are healthy it’s the perfect time to have the conversation. She suggests focusing on speaking about the basics first, such as a will or living trust, power of attorney and advanced healthcare directive. From there, you can get deeper into how to pay bills and manage bank accounts. Cameron also talks about where to begin in having this conversation, what to do if your siblings aren’t on the same page as you, and when and how to have this conversation with your parents.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I have a special guest on the show this week, Cameron Huddleston, author of “Mom and Dad, We Need to Talk: How to have essential conversations with your parents about finances.” Some brief background on Cameron, she’s a contributing editor for Kiplinger.com and wrote the popular “Kip Tips” columns, which was syndicated in the Tribune newspapers nationwide. Her work has appeared in Business Insider, Chicago Tribune, Fortune, Huffington Post, Money, MSN, and USA Today. She has appeared on Fox & Friends, MSNBC and CNN and has been a guest on ABC News Radio, Wall Street Journal Radio, NPR, WTOP in Washington, D.C., and KGO in San Francisco. She currently is the Life and Money columnist for GoBankingRates.com. Cameron, welcome to the show.

Cameron Huddleston: Hi, thank you so much for having me.

Tim Ulbrich: So first of all, congratulations on the recent release of your book. What an amazing accomplishment in putting together a book that is going to have I believe such a positive impact on so many families, and obviously, more specifically, we’re going to talk about here in the pharmacy community. But writing a book is no small feat, so congratulations on getting this book out there.

Cameron Huddleston: Thank you. You’re right, it is not an easy task. It’s probably one of the hardest things I’ve ever done, I feel like.

Tim Ulbrich: So rewarding and difficult. I really, truly believe, as I just finished up the book here in the past week, I know it’s going to have an impact on me personally. I’m excited to share with our community some of the tips and strategies and wisdom that you share for how to have what I think is such a difficult conversation with family and especially parents around finances. So as I had a chance to read through your book prior to the interview, I was really, really impressed — and I shared with you before we recorded here today — about how comprehensive it is, how many stories you use, and I think how those stories reinforce the concepts throughout the book, how you’re able to break down what can be a very overwhelming and scary topic to one that I believe you present in a way that is easy to understand and that results in action. And I found myself taking notes, saying, “Hey, my brother and I really need to get together and make sure we have some of these conversations with our parents, even though we have had many of them already.” So let’s start with why write this book. So talk us through some of your personal story and the inspiration behind getting this book out there into the hands of others.

Cameron Huddleston: So I feel like I’m the poster child for why these conversations need to happen, sooner rather than later, because both of my parents, their stories caused me to write this book. My father died when he was 61. He was in his second marriage, and he died without a will. And he should have known better because he was an attorney. And of course, when you die without a will, the state decides who gets what. So your wishes are not expressed. And you don’t even have to be a wealthy person to need a will. And I make this point very clear in the book. At least, I try to. You know, wills aren’t just for the rich and famous. They are for anyone who has anything that they are going to be leaving behind, and they want to have a say in who gets what. So my dad did not leave a will telling us who gets what. And like I said, he was in a second marriage, and it just, it didn’t turn out as bad as it could have turned out, but it was certainly awkward. And then a few years later, when my mother was 65, she was diagnosed with Alzheimer’s. I was 35 at the time, I still had young children. And suddenly, I was thrust into the role of caregiver for my mother. And my biggest regret is not talking to her about her finances before she started having memory issues. I had had a conversation with her when I had moved from Washington, D.C., where I was working for Kiplingers, back to my home state of Kentucky. And I told her when I moved back home, I said, “Mom, you need to look into getting long-term care insurance,” because knowing that she was alone and that if she ever needed care, a long-term care insurance policy would help pay for that care. And by care, I mean care in an assisted living facility or nursing home. It even pays for care in your own home. She took my advice, looked into it, but could not get coverage because of another pre-existing condition she had. Then after that conversation I had had with my mother — and that was when she was in her early 60s — she ended up developing dementia. And I look back at it now, and I realize that after she discovered that she couldn’t get coverage, I should have said to her, “OK, Mom, you cannot get long-term care coverage. Let’s figure out how you would pay for it if you ever need this sort of care. And let’s talk about what sort of care you would want.” But I didn’t do it. And I was a financial journalist. I still am. But I didn’t realize that I needed to have this conversation. And so I wrote this book because I don’t want people to make the same mistake I made. And I don’t want people to have to figure out things on their own like I did because it’s not easy. It really is not easy. So I’m sharing my experiences in this book. I’m sharing the experiences of other people who’ve had these conversations. I’m sharing the advice of experts, financial planners, financial psychologists, elder care experts, estate planning attorneys, trying to cover as many bases as I possibly can in this book.

Tim Ulbrich: Yeah, and I think your story with your mom and with your dad really, to me, laid the foundation of the importance of this topic. And you have many more stories that you use throughout the book that I think do that as well. But you know, when you talk about the situation with your mom and dementia and you as a financial expert and writer not having or pressing on some of those conversations, you know, I often feel that way often with my family as well. Or you mentioned your dad being an attorney who had experience writing wills but didn’t necessarily have a will himself. I think that speaks to how difficult these conversations can be and how necessary they are and often how emotional things can get. They can prevent some of these from happening. So one of the things you start with in the very beginning of the book, you outline — to the point we were just talking about — so well the fears that can present themselves when we consider talking about money with our parents. So much so that you reference a — I think it was a 2016 Care.com survey that found more than half of parents would rather have the sex talk with their kids than talk to their parents about money and aging issues. And the result being, as you also mentioned in the book, about three-quarters, 73% of adults, not having detailed conversations with their parents about their finances. So what are some of these fears that are holding people back from having these critical conversations? Because after all, we know that they are essential ones to have.

Cameron Huddleston: You know, I want to touch on this first because you said we know that these are essential conversations. A lot of people actually don’t even realize that they need to be having these conversations. That same survey that you mentioned, that I mentioned in my book, about 73% of adults not having had this conversation with their parents, a very significant percentage of the people who were surveyed said they haven’t had the conversation because they didn’t realize that it was important. They didn’t realize it was an important topic to discuss. And we can talk a little bit later about why it is so important, but the fears, that’s a big one. So that same survey found that people have a variety of fears about having this conversation. A big one is that people are afraid their parents will think they’re being nosy. And I’ve heard this from people, I’ve talked to, I’ve interviewed for this story, for my book and just in general, friends I’ve talked to, and people say, “Oh yeah, my parents tell me that their money is none of my business.” And the point I make in the book is you might be afraid that your parents are going to think you’re being nosy, but the reality is that if you let them know that you want to have this conversation because you’re looking out for their best interests because you might have to care for them someday, you might have to help them out, that you’re not being nosy. You’re just simply trying to gather information that will make it possible for you to help them if they ever do need that help. You know, and so the thing is you don’t want to come at them and say, “Mom and Dad, let’s talk about the details of your finances.”

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Tim Ulbrich: Right. Right.

Cameron Huddleston: Because it is — because money is a taboo topic. If you approach it by saying, “Mom and Dad, you took great care of me. I want to return that favor as you get older if you ever need help from me. And we need to discuss some things.”

Tim Ulbrich: And I think that’s what I love in this chapter but also throughout the book. In this chapter, specifically, you present some of those fears and then the realities. And you have some ideas throughout the book about specific language, conversation starters, things people can do to initiate these conversations. And in situations where they find themselves up against a reluctant parent, what are some strategies of how they do that. So I hope our listeners will take the time to get the book and read the book and really hopefully apply it with their own money — or their family situations as well. I want to ask you, since you mentioned this concept of money being a taboo topic. You know, when we’re out talking with other pharmacists and I mention this concept of money being a taboo topic, I see everybody’s heads nod in the audience. And I’m just curious, from your experience, from your expertise, for somebody who’s written on this for so long, is that just overall? Is that a generational thing? And then we know, as I think about myself with four young children, how can we reverse that trend? And what are some of the things that we can be doing to not make it a taboo topic so we’re not in the same cycle again with our children, you know, as they go through their life?

Cameron Huddleston: It certainly is generational. I think that younger generations are a little more open to talking about money, still not as open as we should be, but I’m a Gen X’er. My parents’ generation, they were actually, they fell into the silent generation. Money is certainly a taboo topic for them. And their parents told them — I remember growing up, my father would say, “You don’t talk about money. It’s impolite.” And he was always very reluctant to talk about money. And I feel like if I had tried to have a conversation with him when he was still living, he would have balked. My mother did not treat money as a taboo topic. We didn’t talk about it a lot, but I did not feel uncomfortable discussing it with her. I do feel like, though, the millennials are more open to discussing money freely. It’s not such a taboo topic among them. I think too that my generation, Gen X, is starting to open up a little bit more because we are already running into those struggles of talking with our parents and realizing that we need to be having these conversations with our kids. I have been having these conversations with my kids since they were young enough to talk. You know, of course when your mom is a financial journalist, and your dad is an economist — my husband teaches economics — you get it thrown at you all the time. And I remember my middle daughter coming up to me a couple years ago one day, just out of the blue, saying, “Mom, why are people so afraid to talk about money?” And I thought it was so interesting that she asked me that, and I tried to explain to her in the best way that I could — I think she was about 10 at the time — that people are uncomfortable talking about money because you either are afraid that you have less money than the person you’re discussing it with, or you have more. And in either situation, it can be uncomfortable. I think parents are particularly uncomfortable talking to their kids about money for a variety of reasons. Either they were taught you don’t talk about money, maybe they haven’t managed their finances well and they’re embarrassed, which anyone’s going to be embarrassed if you made mistakes, and you don’t want to admit to your kids. Or sometimes, it’s not so much the money issue that they’re afraid to address, but if you’re talking about things like wills and estate planning or long-term care, you’re talking about aging and death. And when you realize that you’re already in the midst of getting older and death is no longer such a in-the-future thing, but it could happen at any time, when you are older, it’s a scary thing to discuss for a lot of people. And when you talk about planning for long-term care, planning for end-of-life, a lot of parents don’t want to have those conversations. Because it’s scary for them.

Tim Ulbrich: Yeah, and I like how you highlighted in the book that even though both parties may come at it where it’s a difficult conversation, it’s uncomfortable, it’s that unknown territory, often, you may leave it with this feeling of, I’m really glad we had this conversation. And so I think that’s the outcome we’re hoping for is obviously some clarity around the plan. And I think the strategies you present in a great way in the book about how to do it effectively so it’s not necessarily focused on you as the individual and what you’re getting but really trying to look after your family and their wishes and all the complexities and things that are involved. One of the things that I really enjoyed in the book — I think it was Chapter 2, it was titled “Don’t Wait,” you mentioned that one of the biggest mistakes you can make when it comes to talking to your parents about finances is assuming that the conversation can wait. So what are some of the potential consequences of waiting to have these conversations until a point when maybe it’s too late? What are some of the things that could go wrong?

Cameron Huddleston: I hear from people all the time in just day-to-day conversations with friends when this topic comes up — because my friends know that I have been dealing with my mother and her Alzheimer’s for a decade now. And what I often hear from them is, ‘Well, we’re not at that point yet. I don’t need to be talking to my parents about this because they’re still healthy.’ But that is the perfect time to have the conversation. If you wait until there is a health crisis or when your parents are having memory issues, at that point, it can be too late. For starters, if there is a crisis, emotions are running high, you don’t think rationally when you are in the middle of a crisis. And the last thing your parents are going to want to do is discuss their finances with you. You know, you might need to be stepping in and helping them make sure the bills get paid, but they don’t want to talk about that because they’re in the hospital recovering from a stroke, a heart attack, something horrible that has happened to them. So waiting until that emergency happens is a terrible time to have the conversation because of the emotional issues that are going on. But the even bigger issue is that things may not be in place to actually allow you to step in and start helping them. The biggest of these is power of attorney and healthcare power of attorney. Both of these are legal documents, and you have to be mentally competent to sign them. So if you wait until you are in the later stages of dementia, it is too late. No attorney is going to let you sign a power of attorney or an advanced healthcare directive naming a healthcare power of attorney because they’re going to assume that maybe you had been pressured into signing these documents. You are no longer mentally capable to make sound decisions, and so I don’t think a lot of people realize this. They think, well, you know, if Mom and Dad need help, I can just step in and start helping them. I can write checks for them and make sure the bills get paid. I can talk to their doctor for them. I can talk to their financial institutions for them. No, you cannot. Not unless they have named you power of attorney, healthcare power of attorney. No financial institution is going to talk to. Most doctors will not talk to you. You know, pharmacists should know this. Some, you can’t hand out a prescription just because they say, ‘Hey, I need to get this prescription for my mom because she’s in pain.’ I mean, there’s no way that’s going to happen. And so if you have not sat down with your parents to find out whether they have a power of attorney, an advanced healthcare directive that names someone to make healthcare decisions for them, and that spells out what their end-of-life care that they want is, if you wait until something has happened, it can be too late. And the consequences of that are a very lengthy and expensive court battle, basically. You’re going to go to court to try to prove that your parents are no longer competent so you can become their conservator. You’re putting your parents on trial, which is a horrible thing.

Tim Ulbrich: And you did a really excellent job in the book of outlining exactly what that could look like, the cost of it, the time of it. Because I think you’re right, I think there’s the assumption that, hey, you know, maybe I’m an only child or my sibling and I get along, and yes, we don’t have power of attorney or we don’t have healthcare directives, but we’re all kind of on the same page. But if those documents aren’t signed, and you don’t have the copy of them that can be ultimately put in place, like it doesn’t mean you might not eventually get to where you had hoped to get, but it’s going to cost a whole lot of money, a whole lot of time, and a whole lot of heartache to get there that is really unnecessary, right? And I think you outlined that well in the book that my wife and I just updated this for our own family and our process, especially now that we just added a fourth child to our family. And for how easy it is — even though it seems overwhelming — for how easy it is to ultimately execute these papers when you consider that against what it would take if those were not executed, it’s really a no-brainer. I mean, you have to take action on these things. And we’ll come back here in a little bit and talk more about those documents specifically. So what I want to transition to here are some of the common reasons that you outlined in the book that parents may be reluctant to have these conversations. Because I think that if our listeners know what these are, then it can really help them frame what might ultimately be the right strategy. So what are some of the common reasons that parents may be reluctant to have these conversations with their children?

Cameron Huddleston: We hit on a big one already. The biggest is that they think money is a taboo topic. And they don’t want to discuss it, with you, with anyone, so you realize that. And you’re going to know this. I mean, you are going to know if money is a taboo topic with your parents because any money issue that might have come up in your family, if they dodged that topic, you know that they’re going to be reluctant to discuss their finances with you. And if that is the case, if you realize that is the case, then you don’t want to make the conversation about money, which sounds kind of silly being I’ve written a book about how to talk to your parents about their finances. But you don’t want to make the conversation about money. You want to talk about bigger picture issues. You know? Like, “Mom and Dad, what do you see retirement looking like for you?” And their answers might give you clues. They might be like — or, “How is retirement going for you?” “Oh, well, you know, it’s kind of boring, actually. We’re just kind of sitting around home.” “Oh really, I thought you wanted to travel.” And they might say, “Well, turns out traveling is expensive.” And that’s going to give you a clue that maybe they don’t have enough in savings for their retirement that they wanted, which can also give you a clue that if they don’t have enough in savings for the retirement they wanted, they probably don’t have enough in savings to cover any long-term care they might need. So find another way, find kind of a big-picture issue that you can discuss that they might be more comfortable talking about than actually details about their finances. But like I said, the answers that they give you, the responses, are going to start cluing you in. And then when you hear that response, don’t just let it go. Ask more questions.

Tim Ulbrich: And I think one of them that stood out to me was, you know, you had mentioned that they may be embarrassed about their finances. And if you look at the data that’s out there, in terms of the number of people who have the right documents in place and how much money people have saved for retirement and who actually has long-term care insurance relative to those who need it, more likely than not, for many of our listeners, that may actually be the case that maybe they’re embarrassed about their finances. And so you as the child and your point of reference of why you think this is important for them to have in place, well, for them, the struggle is that they’re really embarrassed about uncovering about what maybe they’re not comfortable you seeing. Obviously, there’s two different angles and viewpoints there. So I think really trying to understand why the reluctancy may be there would really help frame the strategy in which you approach it. And I think you did a really nice job of outlining those. So as I was reading the first few chapters, it was almost as if you were predicting my thoughts as I was going through the book because I read through the first few chapters, and I’m like, gosh, where do you start? You know, where do you start with this process? I understand the problem, I understand the need, I understand there may be reluctancy, but where do you start when it comes to having these difficult conversations, especially considering how complex of a topic that this can be. And your suggestion is to start by talking to a sibling. So tell us more about why you think this is a good place to start and some of the strategies to do that.

Cameron Huddleston: If you have siblings, you need to be sitting down with them before you even go to mom and dad. And there are several reasons why you should do this. For starters, you want to get on the same page with your siblings. You don’t want to go to mom and dad and have this conversation, and then your brother and sister find out, and then they’re angry. Wait, why did you do this without me? What, are you trying to get in good with mom and dad so that you get everything when they die? You don’t want to create any resentment. And you don’t want them to try to second-guess what you’re doing. So you want to let them know, ‘Hey, I think we need to talk to Mom and Dad about their finances.’

Tim Ulbrich: I really like that.

Cameron Huddleston: And so they might say, ‘Well, why? They seem to be doing fine. They’re not having health issues.’ ‘I know. And that’s why we need to do it now, before any issues arrive, so that we can make a plan together.’ And when you talk to your siblings, you want to agree on the roles you’re willing to play. You want to decide, who’s going to initiate the conversation? Maybe it’s one of you, maybe it’s all of you. Then you have to decide, OK, when are we going to do this? How are we going to approach this conversation? You also want to decide what roles you’re willing to play going forward. Maybe you live closest to mom and dad, so you’re willing to be the one who’s going to step in and provide any care that they need, take them to doctor’s appointments, you know, if you have to, let them move in with you or you would move in with them depending on your situation. Maybe your younger sister is better at money, and so she might be willing to step up and say, ‘Hey, Mom and Dad, I’m willing to be your power of attorney. I’m willing to help you out with any financial issues that you face going forward. I can be the one who will make those decisions for you if you no longer can.’ Hear out what roles you’re going to play so that when you go to your parents and have these conversations, when they see that you’ve talked and you are on the same page, that is going to lift a little bit of the burden off them. Because parents oftentimes are afraid to have these conversations because they’re afraid that perhaps it will create fighting among their children, especially when it comes to issues of wills and who’s going to get what. Because parents don’t always divide things up equally. And they don’t even want to discuss their will because they don’t want their kids to know who’s getting what because they don’t want their kids to fight. And so when you go to them and say, ‘You know, Mom and Dad, sister Susan and I have been talking, and we want to talk to you because we want to make sure that as you get older, we can help you out if you ever need it. And Susan’s willing to do this, and I’m willing to do that. But to do this, we need to get some information from you. We need to find out what sort of legal planning you’ve done. We need to know — you know, we don’t need to know details, we don’t need to know how much is in your bank account, but we do need to know where you bank.’ Coming to them as this united force is going to help, as long as it doesn’t look like you’re ganging up on them.

Tim Ulbrich: Sure.

Cameron Huddleston: The last thing you want to do is be like, ‘OK, Mom and Dad, my brothers and sisters and I, we need to sit down and talk with you right now, and you’re going to tell us everything we want to know.’ That’s the last thing you want to do. You don’t want to issue any sort of ultimatum, but if you can show them that you are on the same page, it can make it easier to have these conversations because they know that all of you are involved, that you’re looking out for their best interests and no, we don’t care what we’re getting. We just want to know whether you’ve put your wishes in writing.

Tim Ulbrich: And I love, I love that angle of laying that out there, of not only having a unified voice among your siblings but also coming at it from a, hey, this is not about what we’re getting us. This is about making sure that we have an understanding of exactly what you want and that we’re able to execute and minimize a lot of the difficulties and things that we already talked about. So what if we have somebody listening that says, ‘Hey, you know what? Me and my sibling aren’t on the same page. We disagree,’ or I could see a situation where maybe there’s multiple children, four or five, six kids, and just naturally, there’s going to be difference of opinion, even if they largely get along otherwise. What strategies or what advice would you have in those situations where there’s disagreement among siblings?

Cameron Huddleston: Actually, that can be very common. And what you want to do when you ask your siblings to have this conversation, beforehand, what would probably be a good idea is to actually make your own list of things you want to discuss so that you can kind of sort it out in your head. You know, you’re not flying by the seat of your pants when you have this conversation. And by putting it in writing beforehand, it’s going to help at least you stay calm when you have the conversation because you know the issues you want to address and you can anticipate, if you write this down beforehand, some of the responses you might get from your siblings. But when you sit down and have this conversation or if you’re going to do it on the phone or do it by Skype, you want to make it clear, we are having this conversation because our primary interest here is Mom and Dad. We want to look out for their best interests. And I think we can all agree on that. We want to do what’s best for Mom and Dad. Now, we might not agree on how to go about that, and that’s OK. And so basically, you want to do — I kind of walk you through this process that you can use that was suggested by a financial psychologist. You let everyone say, get a turn in saying what they want to discuss, how they want to go about talking to your parents, what they think is important. And you, as the person who calls the meeting, you go last.

Tim Ulbrich: Oh, I love that.

Cameron Huddleston: Everyone gets to say something. No one can interrupt. You go last. And then, this is what’s important to me, this is what I think we should discuss, and I hear what you’re saying. Let’s figure out a way that we can all come to an agreement. You want this, I want that, and you want this. Let’s find some common ground here. And always bring it back to Mom and Dad because in all honesty, they are your common ground. And so you’re looking out for them. And hey, maybe you want to do this, but maybe our brother perhaps has a good idea about how to approach it from this other way. Give everyone a chance to speak. You go last, and then find your common ground.

Tim Ulbrich: So once the siblings hopefully are on the same page, there then comes this conversation, the conversation with the parents. So what is the best time, what recommendations do you have in terms of when to have or not have this conversation? So for those listeners that are out there saying, ‘Alright, I’m ready. Me and my siblings are on the same page. We haven’t had it, but we know we need to do it.’ What advice would you have on when to have it? Or maybe when not to have this conversation?

Cameron Huddleston: Don’t do it in the middle of a family holiday gathering. All of you — a lot of people think that’s a great time to have the conversation because everyone is there together.

Tim Ulbrich: Everyone’s together, right.

Cameron Huddleston: Everyone is there together. But you don’t want to ruin a good family meal by bringing up the topic of your parents’ finances or end-of-life planning or long-term care. Don’t ruin a good family gathering by bringing this up. And there might be people there who don’t need to be part of the conversation: cousins, aunts, uncles, your children. They don’t need to be part of the conversation, and sometimes, family gatherings aren’t happy events. There are tensions there already, and so you don’t want to add to that tension by bringing up a difficult topic. If you and your parents and your siblings are only together, though, during these holiday times, at least wait until the next day. And you don’t necessarily have to have the full conversation then. You just simply let your parents know, ‘You know, Mom and Dad, my sisters and brothers and I have been wanting to talk to you about something. We don’t have to talk about it now, it’s the holidays, this is a happy time. We should be celebrating. But we want you to know that we want to have this conversation. So let’s figure out a good time when we can have the conversation.’ Let your parents have a say in this so that they feel like they have some control over the situation. If they’re having to give up some information that they might be uncomfortable sharing, let them have some control by setting up a time when they can talk, when it’s best for them.

Tim Ulbrich: And I think this is an example in the book where you get very practical — and I hope our listeners will pick up a copy and read this — Chapter 7, you have 10 tried and tested conversation starters. And I know, again, to my comment earlier, I felt like you were unfolding the text as I was wondering what could come next. And here, as I began to think about, OK, I’m ready, I’m comfortable, my sibling and I are on the same page, how do I actually execute the conversation? And I think your 10 strategies is really helpful in doing that. One of the things I want to talk through briefly — I know we could have a whole separate episode, and we probably will at a different point — talk about in more details the estate planning process and documents. But I think you do a nice job in explaining these concepts in a very easy-to-understand way. And you mentioned in the book that when talking with reluctant parents, one should start with the basics, essentially, the must-haves, and then work from there. And so I want to talk about these basics for a moment. Here, you have four things that you mentioned: will or living trust, power of attorney, advanced healthcare directive, and then the fourth being how do you pay for your bills. So let’s just walk through those briefly. Will or living trust, tell us exactly what is that document and why is it important?

Cameron Huddleston: A will spells out who gets what when you die. It’s a legal document, and if you don’t have one, your state has laws that determine who gets what. And so when you discuss this with your parents, your parents might say, ‘Well, I don’t need a will. You guys get along. Or your mother’s going to get everything.’ That’s not always the case. It’s not guaranteed that your spouse is going to get everything because in some states, the laws will divide everything up evenly among the closest family members who are still alive. So it might your spouse and your kids. And maybe you don’t want your kids to get that, you want everything to go to your spouse. But I don’t think people realize this because we’re not all attorneys. And unless you point these things out to your parents, they might have no idea why a will is important. A living trust is similar to a will, but what it does — again, it lets you say who gets what. But having a living trust helps you avoid what is called probate process.

Tim Ulbrich: Right.

Cameron Huddleston: Even if you have a will, you still have to go through court proceedings where everything is kind of sorted out. And if your parents have any debts, you know, they’re going to look at the assets that are left in the estate and with certain, they will use those assets to help pay off the debts. You will not have to pay them off as long as your name isn’t on those debts. And I know people worry about that, oh my gosh, I’m not going to inherit anything from my parents except their debt. No. You will probably not inherit their debt. Anything that they have left will help pay off those debts and so you go through this probate process. With a trust, it avoids the probate process. But a trust can be more expensive to set up, and you have to name a trustee. And if you, for example, have a home, and you don’t want to have to go through the probate process, you have to basically deed, put the title, in the name of the trust. It can be a little more complicated. It’s more expensive. And so a trust is not the right thing for everyone, but it is certainly an option that your parents might be interested in, that you might be interested in. But in general, the will and the living trust, they let you spell out who gets what when you die. And you don’t have to be someone rich and famous to have a will and trust. Everyone needs to have one.

Tim Ulbrich: Amen. And a special urgent call to action for those that have children and have wishes for where their dependents would go and what would happen with that situation, I mean, this is a must-have for everyone, but the sooner the better. And I can assure you as going through this process recently with an estate planning attorney, it is not as complicated as it may seem from the outside looking in. And I think, again, to our listeners, you did a really nice job succinctly in this chapter outlining these different areas, these documents, what they are, that I think would be a great read before working with an estate planning attorney to understand exactly what would be out there.

Cameron Huddleston: Right. And people should also know because your parents might push back and say, ‘Well, I’m going to have to pay money for this, right? I’m going to have to pay an attorney to get a will or a living trust or to get a power of attorney,’ which is a legal document that lets you name someone to make financial decisions for you if you no longer can, an advanced healthcare directive lets — it spells out the end-of-life care you want, whether you want to be on life support, it lets you name someone to make healthcare decisions for you. Without this, your family has to make that decision. Do we keep mom and dad on life support? Do we continue spending thousands of dollars? And that’s a terrible decision for you as a child to have to make. And so you want to let your parents know, I want you to make this decision. I want you to decide. I don’t want to have to make this decision for you. And your parents might say, ‘Well, this is going to cost me money. What’s it going to cost me to meet with an attorney?’ It will cost you money. It can cost several hundred dollars, more than a thousand, depending on how complex your situation is, to have all three of these documents drawn up. But that upfront cost is so much less than what your loved ones are going to have to pay if they end up in court, fighting over who gets what because you didn’t have a will, going to court to get conservatorship because you never named a power of attorney, going to court because one child thinks mom needs to stay on life support and the other one does not. Those can cost tens of thousands of dollars, those court proceedings. And so it does save your loved ones money down the road, but you don’t necessarily have to go to an attorney. There are fill-in-the-blank type documents that you can find online. I’ll list some resources. Sometimes, your state bar association will have free wills available. Now, these do-it-yourself options are certainly better than nothing. But they are not ideal because they’re not tailored to your own situation. So if you can afford to meet with an attorney, if your parents can afford to meet with one, I would encourage them to do that. And you might even offer it as a gift to your parents.

Tim Ulbrich: Yes.

Cameron Huddleston: ‘Mom and Dad, I recently met with an estate planning attorney. I didn’t even realize how important these documents were. I think that if you haven’t done it already that you should. And I’d be more than willing to pay for them for you. Think of it as a gift from me. Happy Father’s Day. Happy Mother’s Day. Merry Christmas. Happy Hanukkah. This is my gift to you.’

Tim Ulbrich: I agree in your assessment of if I had to rank order, then, because I’ve been in all three situations. I’ve been with I have nothing, I have a DIY, and I have documents drafted by an estate planning attorney. I put those in that order from worst to best. And even if I could speak to for a moment, the DIY versus the estate planning attorney, not just the peace of mind of having the documents in place for your family but also what you learn through the conversations and the back-and-forth to the attorney. So we did — my wife and I did an hour video call with the estate planning attorney, then they drafted up the documents, and then we had a follow-up call as well. And there was just a lot that you can talk through, you can process, they’re asking good questions, they’re beginning to understand your personal situation, what’s unique and what you need to consider in helping you make those decisions but also then being there to answer questions. You know, I’ve learned a lot of things about making sure obviously life insurance policies and other types of things and what would fall in the trust, what would not. So there’s a lot of things I think you learn through that process of working with an attorney that I didn’t necessarily learn when I went through the DIY approach. And so for our listeners, if you want, just a point of reference — knowing this is different, obviously, by state, by attorney — it cost my wife and I about $1,000 to have a will, a living trust, a power of attorney, and an advanced healthcare directive drafted for both of us. So you know, certainly it was a cost. But I think you also have to factor in peace of mind into the process as well. One of the things, Cameron, I think you — at least for me — was a “holy cow, Aha!” moment was that I often think, as I think many others may think, is that once you have the will or living trust, the power of attorney and the advanced healthcare directive, it’s sort of a moment of like, look at me, I’m doing a good job, all is settled. And then I saw your list of, you know, how do you pay for your bills? And what are the sources of income, bank account access, household debt, monthly bills, insurance policies, investment accounts, real estate, final wishes, social security, Medicare account logins, like oh my goodness. Like if something were to happen to my parents tomorrow, my brother and I are in a very good position with the estate planning documents, but I don’t think we are with the others. And so I really liked that section on, hey, start with these as the basics, but the more advanced, when they’re ready to share, don’t forget about these aspects as well.

Cameron Huddleston: Yes, so if you — this is so important, especially if you are your parents’ power of attorney or you are the executor of their will, you need some details about their finances so that if something does happen to them, and especially if you’re executor, I mean, everyone dies. And so when they do die, you need to know what they have. You need to have their financial inventory because if you don’t, things get lost. Like I’ve heard people say, estate planning attorneys saying that there were people who found boxes under their parents’ bed with old stock certificates. I mean, they could have tossed that stuff out. That’s just throwing away money. And this happened with me and my mother. And I would just go back —

Tim Ulbrich: Oh, the $50,000, right?

Cameron Huddleston: Yes.

Tim Ulbrich: I remember, yes.

Cameron Huddleston: Yes. And so I did get my mother in to meet with an attorney before her memory issues got to be too bad. She was still competent enough to sign the documents, and that meeting with the attorney, like you said, was so good because we learned about other things we needed to be doing, like how I should go to the bank with her and get on her account as a representative payee, how we discussed Medicaid planning, which I kind of touch in the book, which is something you do need the help with an attorney. Medicaid is the only federal government program that will pay for long-term care. Medicare does not. But I think as most of your listeners probably know, you have to be very low-income to qualify for Medicaid. You have to have very few assets, typically $2,000 or less. And you can basically go through the process of transferring your assets so that you can qualify for Medicaid, but this is something you need the help of an attorney with. This is something that my mother and I discussed with an attorney when we there. So meeting with the attorney opened our eyes to a lot of options that were available to us. But even though we got those documents in place, I had not gotten details about my mother’s finances. And because she was starting to have memory issues, and as her memory got worse, and I was trying to figure out what accounts she had, there was one that slipped under my radar. And I didn’t discover it until we had moved, and the people who bought our house, they were getting mail from some investment company saying that there was an account my mother had they were about to turn over as an unclaimed asset to the state. I had no idea it even existed. It was $50,000 worth of investments.

Tim Ulbrich: Wow. Makes you wonder how often that happens. Yeah. Wow.

Cameron Huddleston: And so because I was her power of attorney, I was able to get access to it. I just went ahead and cashed it out and used it to pay for about a year’s worth of care. But I almost lost that money because I didn’t even know it existed. And so start by finding out whether they have the legal documents, find out whether they pay their bills automatically or by check. Because if they’re paying them by check, then that power of attorney is especially important because you cannot write checks from their account unless you’ve been named their power of attorney. And then once they give you that sort of information, press a little bit more. Like you had mentioned, I tell people to find out what their sources of income are, what sort of investments they have, what sort of retirement accounts they have, do they have real estate property, what sort of insurance policies do they have, and you don’t have to get them to tell you this face-to-face. You could say, ‘Mom and Dad, there’s some information I would like to know. You can write it down for me.’

Tim Ulbrich: Absolutely.

Cameron Huddleston: Which makes it so much easier. Write it down, put it someplace safe, and tell me how to access it.

Tim Ulbrich: Yeah, and I like that. Ryan Inman, another financial planner with Physician Wealth Services, mentioned in the book with his family setting up a DropBox account and sharing files that way. I thought those strategies of some of the electronic communication and sharing might even be easier if there’s not as much comfort with some of the face-to-face conversations. So before we wrap up — because we really are just scratching the surface of I think the value and how rich this book and resource is. I hope our listeners will pick up a copy of the book, again, “Mom and Dad, We Need to Talk: How to have essential conversations with your parents about their finances.” You can get it on Amazon, on Barnes & Noble, and also make sure to check out Cameron’s easy-to-understand financial advice on CameronHuddleston.com or by following her on Facebook @CameronHuddlestonMoneyExpert. But I want to close by acknowledging something that you wrote in your final note at the very end of the book that has nothing to do with personal finance but really stood out to me, and I think it will with our listeners as well. And that’s this concept of listening and writing down stories from your parents. Tell us more about that.

Cameron Huddleston: You know, as I was finishing up the book, I thought, one of my biggest regrets, as I mentioned already, is not talking to my mom about her finances. But an even bigger regret that I have is not ever sitting down my parents and recording the stories that they would share with me when I was younger. My dad would tell me these wonderful stories when I was little at night, when I was going to bed, about his childhood. And my mother had some great stories too. But I didn’t even think to do this until it was too late. You know, my father had passed away when I was 28 and he was 61. My mother, you know, she was 65 and having memory issues, and my kids were little. I was too busy thinking about raising my kids and trying to take care of her to ask her to share her stories with me. And I regret that so much. And you can even use that as an opportunity to have these conversations with your parents about their finances. You know, ‘Mom and Dad, you always tell me these great stories when I was a kid about your childhood. Would you mind if sometime, we sit down together and you let me record you?’ And then from those stories, you can take that experience and say, ‘Thank you so much for sharing this with me. This is going to help me pass along your legacy to my children. But I also want to make sure that I really, that I can really make sure that we uphold your legacy. And to do that, I need to know what your wishes are. Do you have a will? Can we talk about what sort of care you want? Because this is important to me.’ And so that can be a very easy way to actually get them to start talking about their finances by getting them to share their stories first, letting them know your stories, your history, these are important to pass along. But there are other things I’m sure you want to pass along too. Let’s make sure we have things in place so that can happen.

Tim Ulbrich: That is great. I really like that. I’m so glad you shared that at the end. I know it was something that will stick with me for a long time. One of the things I talk about on the show a lot, and I interview other entrepreneurs about is the concept of legacy and what they’re leaving behind in the work that they’re doing. And as I read through your book — and I’m not yet as familiar with the other work that you are doing, although I’ll be following that from here on out — I really am confident, and I genuinely mean this, that I think this book in terms of legacy of the work that you’re doing is going to be transformational, not only for our audience but obviously for many others that read it and are listening, that these are such important conversations that I think are going to provide peace to families, provide clarity, and really help people with practical strategies to have some of these difficult conversations. So Cameron, thank you for putting together this excellent resource. Again, the title of the book, “Mom and Dad, We Need to Talk: How to have essential conversations with your parents about their finances.” You can get it on Amazon, Barnes & Noble. And again, thank you for taking time to come on today’s show. I appreciate it.

Cameron Huddleston: Thank you.

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YFP 105: How Jamie Leigh Tipton Started a Compounding Pharmacy

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Jamie Leigh Tipton on Starting a Compounding Pharmacy

Jamie Leigh Tipton, a new practitioner from North Carolina and owner of Tipton Compounding Pharmacy, shares her journey of starting her own business and the importance of building a strong financial foundation to be able to do so. Jamie Leigh’s mom, Janet, also joins the show to talk about her involvement in the family business, how she helped Jamie Leigh graduate debt free and why she has encouraged Jamie Leigh to start her own business.

About Today’s Guest

Dr. Jamie Leigh Tipton completed her Doctorate in Pharmacy from Creighton University School of Pharmacy in May 2017 after studying pre-pharmacy at Western Carolina University. She has always had a passion for compounding and dreamed of bringing this unique practice to her hometown of Franklin, NC.

During her time in pharmacy school, Jamie Leigh spent time working with Professional Compounding Centers of America (PCCA). This PCCA education included compounding boot camps, advanced compounding techniques, and drug information research on how compounded medications affect each individual patient. Her research was published in one of PCCA’s Apothagrams which is distributed to compounding pharmacists throughout the country.

Jamie Leigh participated in educational and training rotations at various locations such as retail pharmacies, compounding pharmacies, hospitals and a local veterinarian practice. She also took part in the National Community Pharmacists Association (NCPA) student ownership workshop and was accepted to attend Live Oak Bank Pharmacy Ownership Student Summer Program.

While a pharmacy student, she was a member of the Rho Chi Honor Society and received many awards including the 2017 Merck Award for academic excellence. As the owner of Tipton Compounding Pharmacy, located in the beautiful mountains of Franklin, NC, Dr. Tipton’s dream has now become a reality.

Summary

Jamie Leigh Tipton grew up in Franklin, North Carolina and knew that was where she wanted to continue her life. She was accepted to an online pharmacy program and knew early on that she wanted to open her own pharmacy. Being enrolled in an online program allowed her to continue to network and connect with her community.

Jamie Leigh graduated from pharmacy school in 2017 at the age of 23. She was single with no children and had built a strong financial foundation. She knew that if she entered into a comfortable six figure pharmacy job, she would have a hard time leaving to start her own business. With a lot of support from her family, Jamie Leigh was able to graduate from pharmacy school debt free and open up Tipton Compounding Pharmacy shortly after graduation in her hometown.

Her family is committed to supporting Jamie Leigh and the business. Her mother and aunt work in the pharmacy, truly making it a small family business. Janet, Jamie Leigh’s mom, encouraged her to follow her dream and to find happiness in what she was doing. Janet and her husband helped Jamie Leigh pay for college through her high-end real estate career and their 529 college savings plan. Scholarships helped to fund Jamie Leigh’s last couple of years of school.

Jamie Leigh explains that the family members working at the pharmacy aren’t taking a salary yet and are investing back into the company. This will set back her personal retirement age, however they knew that going into the business and have planned to fund retirement accounts. One of the biggest pressures Jamie Leigh feels is the financial sacrifices her family has made to make this dream a reality. Jamie Leigh knows how much they have invested both financially and with their time.

Jamie Leigh shares that she did a lot of online research in the beginning stages of starting the business. She says that you have to be 100% passionate about the business you’re wanting to begin. If you are, you’ll be dedicated in doing research and learning more which are the best steps you can take to start your own business.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I’m excited to welcome Jamie Leigh Tipton and her mom Janet to the show to talk about their journey opening up Tipton Compounding Pharmacy in Franklin, North Carolina. Before we jump into the interview, let me introduce Jamie Leigh. She completed her doctorate of pharmacy from Creighton University School of Pharmacy in May 2017 after studying pre-pharmacy at Western Carolina University. She’s always had a passion for compounding pharmacy and dreamed of bringing this unique practice to her hometown of Franklin, North Carolina. And she did just that, which we’ll talk about here during today’s show. During her time at pharmacy school, Jamie Leigh spent time working with Professional Compounding Centers of America, also known as PCCA. This education with PCCA included compounding boot camps, advanced compounding techniques, and drug information research on how compounding medications affect each individual patient. Her research was published in one PCCA’s apothagrams, which is distributed to compounding pharmacists throughout the country. Jamie Leigh participated in educational and training rotations at various locations, such as retail pharmacies, compounding pharmacies, hospitals, and a local vet practice. She also took part in the National Community Pharmacists Association Student Ownership Workshop and was accepted to attend Live Oak Bank Pharmacy Ownership Student Summer Program. While a pharmacy student, she was a member of the Ro Chi Honor Society and received many awards, including the 2017 Merc Award for Academic Excellence. As the owner of Tipton Compounding Pharmacy, located in the beautiful mountains of Franklin, North Carolina, Dr. Tipton’s dream has now become a reality. So Jamie Leigh and Janet, welcome to the Your Financial Pharmacist podcast.

Jamie Leigh Tipton: Thank you for having us.

Janet Tipton: Thank you.

Tim Ulbrich: Well, I am so excited to do this interview. And I want to give our listeners some quick backgound to how this episode came to be and why I am so energized and excited to finally be at the point of recording this. So several weeks ago, Jamie Leigh joined the Your Financial Pharmacist Facebook group, and in her responses to the questions we asked to join the group, she mentioned owning her own compounding-only pharmacy as a new graduate, so a graduate of 2017, as I mentioned in the bio. We have not yet featured an independent pharmacy owner on the podcast, and I thought it was unique that Jamie Leigh had taken the path that she did, owning her own pharmacy, right out of school. So I reached out to Jamie Leigh to schedule a time to talk via phone to learn more about her story, and when I called the pharmacy, Jamie Leigh’s mom, Janet, picked up the phone as Jamie Leigh was compounding a troche before the store opened. Janet and I had the opportunity to talk for a few minutes, and I quickly realized that this was a family business at its core, all hands on deck. I myself grew up in a small business family, and this got me excited, this got me fired up on so many levels, as I’m excited to be their story to the YFP community as I’m hopeful it will inspire some of you out there that have entrepreneurial dreams, that have the entrepreneurial itch, whether that be a side hustle or a full-time venture, to take one step to pursue that desire and passion. So Jamie Leigh, let’s start with your decision to pursue an online PharmD program at Creighton. So obviously, Franklin, North Carolina, is home, you pursued an online pharmacy degree program at Creighton, which I believe is one of the only if not the only one that’s out there in the country. So why did you make that decision to pursue your pharmacy degree online?

Jamie Leigh Tipton: I had done a lot of research with different pharmacy schools, and I knew that I always wanted to stay in Franklin. And I also knew that staying here would enable me to be able to network better. I always had dreams of owning my own pharmacy. At the time, I wasn’t sure what that would mean, at the time. But I always wanted that to be my end goal. And so when I was researching different ways to do cyber (?) pharmacy school, distance pharmacy school, whatever that meant, Creighton at the time was the only distance pharmacy school. And they were really good. I just kind of took a leap of faith there and applied and was able to interview and get in. And it is a great program. They’ve been doing it for over 20 years, so I felt comfortable that this wasn’t their first go-around with distance learning. And that really helped kind of set the path of being able to network here, setting up everything here to be able to not only do the pharmacy school but also do all the research I needed to hopefully set the path of opening my own eventually.

Tim Ulbrich: Yeah, I love how strategic you were with the decision. I mean, we know that small business, especially in small communities in town, it’s all about that networking, the community, and being a part of that community. And making that decision to stay involved in the community and build that network while pursuing your pharmacy program, as you mentioned, a quality program that had been doing it. And I think that that speaks to the vision that you had in terms of getting the company started. So in your bio, as I had read earlier, you mentioned an interest in compounding pharmacy that you had early on, which I think is somewhat unique not only in business aspirations but also knowing a very specific area of practice of pharmacy that you wanted to do. Where did that interest in compounding pharmacy come from?

Jamie Leigh Tipton: When I was in pharmacy school, when I first started, I really didn’t understanding completely what it was, especially since there was not one in Franklin. So it wasn’t like growing up in a big city where you have a lot of different compounding pharmacies and knew what it meant. So when I started in school and learned a little bit more about it, I thought it was so interesting because I actually had a friend that would not, could not swallow a pill. And I always wondered if she got sick in any way, what would she do? And learning that through pharmacy school made me very interested in it, knowing that the children, animals of the world that can’t just swallow a pill, as easy as it sounds, would need help along the way. And that’s kind of where my passion more started, just learning about in pharmacy school all the different things that you could do. And then they also offered an extra course that you could take through PCCA, and that’s where I was able to fly to Houston and see and be able to do in the lab a bunch of different compounds, depending on the unique need. And that’s all kind of in pharmacy school where it started.

Tim Ulbrich: So let’s fast forward a little bit to 2017. You graduate with your PharmD, and at this point, you decide as a new graduate that you’re going to take on opening your own pharmacy from the ground up, building and all. And we’ll talk about that in a little bit. Why did you want to take that path rather than working for somebody else, having a stable, six-figure income? And was there one or two deciding factors that really pushed you in this direction to open your own business?

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Jamie Leigh Tipton: I always knew that some form of ownership was what I wanted to do. It was interesting because I was born and raised in Franklin. And when people would see me, they always would say, “Oh, I can’t wait until you graduate so that you can open a pharmacy.” It’s almost like the whole community kind of knew the plan, even probably before I did. So just being able to go through the process — on the fourth year of rotations, it was probably the most evident that I wanted to do that. And so with the whole family, it was a lot of discussions throughout all of the fourth year, getting prepared, because as soon as I graduated, we already had a lot of the building blocks in place to be able to do this. And it is a risk. I was 23? When I graduated and single with no kids. So the risk for me was different than probably other people graduating at different times of their life. But it, to me, was a risk worth taking. I felt like I’m not one that likes change very much, so if I would have gone immediately into a six-figure position at a community pharmacy or a chain, that I would get so comfortable and used to what I was doing that it would be really hard to leave afterwards and go and do such a big risk later on in my life. So for me, it was just one of those things, you start at the very beginning while you’re going and just don’t stop until you can make the dream happen.

Tim Ulbrich: I really appreciate what you said there about the difficulty of it being if you’re comfortable in that position, if you’re comfortable with a six-figure income, especially if you’re living up to that income, maybe there’s a home that’s involved, there’s other expenses, you know, pursuing that dream, not impossible, becomes a little bit more difficult versus jumping right out of the gate and being able to establish expenses and other things off of a lower income and salary, especially as you want to invest that money back into the business. So I’m going to ask you one more question about risk before I put your mom, Janet, on the hot seat because I think that, you know, as I heard about your story to begin with, it wasn’t like you were buying into an existing store that had a proven business model but rather, you were starting this from the ground up. So obviously, that means you most likely did a needs assessment, you did a business plan, you really evaluated what was out there. Did you ever weigh at one point, should I buy into an existing business versus start something from the ground up? Or did you know and have clarity that you wanted to start your own thing from Day 1?

Jamie Leigh Tipton: I talked to a lot of different pharmacists along the way and kind of what we gathered from them was either open your own business from the ground up here in this area or move away and open one eventually after getting some experience. Some different pharmacists were saying the city may be the place to go. We’re about two hours away from both Atlanta and Asheville, North Carolina, so that was one thing they were saying is maybe it would be best to try the city or maybe it’s best to get compounding experience for a few years first before you open it. And for me, wanting to stay here in Franklin, the options were a lot more limited because for me, I didn’t want to go to Atlanta and open up my own because I know for me, it was a community aspect of wanting to stay where I’ve been all my life. So really, as far as working somewhere, buying an existing one in Franklin, that wasn’t an option for us just because there was no compounding pharmacies in Franklin at the time. So to buy an existing one would have meant to move away, which at the time, I didn’t want to do. I wanted to stay in my hometown and grow it from there.

Tim Ulbrich: Yeah, I think the reason — in part, one of the reasons I asked that question I think is I’ve talked with others that are thinking about opening up their own pharmacy. I think sometimes, there’s comfort in going into an established business model. But that often comes with a higher price tag or a lower equity position or other things as you’re establishing that business. So really identifying if there’s a market, where there’s a need and a gap in that care, and obviously, you’ve identified. But the compounding-only aspect of your business I think certainly, that’s an opportunity worth pursuing. So Janet, first of all, thank you for joining us as well. And you know, when I went home after Jamie Leigh, you and I talked a few weeks ago, I was so jacked up because as a father of three boys and soon to be a fourth boy, very, very passionate about teaching my kids about entrepreneurship and encouraging them in their dreams around business. I was really struck in a good way about how supportive and encouraging that you’ve been to Jamie Leigh to pursue this entrepreneurial dream that she has. And I feel like many parents — and it may be a generational thing, and this is certainly a very broad statement — but many parents I think would encourage their child to take the “safe” and comfortable option, which would be in pharmacy the contract that has a six-figure salary. So tell me a little bit more about where that encouragement comes from and why you have been so encouraging to Jamie Leigh in this journey.

Janet Tipton: Well, I’m not going to lie, it would have been really easy to encourage her to use her doctorate degree and get a job as a pharmacist somewhere else and not have the headaches that come with owning a business. But on the other hand, it was weighing the options of the rewards of owning your own business and the benefits that come with that. I had been raised in that spirit. My father owned his own business. My grandfather owned his own business. So it was something that was familiar to me and that I was raised in. So encouraging her to follow her dream and do what would make her happy was our No. 1 goal.

Tim Ulbrich: And so as I understand it, a big part of this — and I’m going to ask Jamie Leigh more about this a little bit later about the financial position that allowed her to take on this opportunity — but as I understand it, you were able to help Jamie Leigh with paying for college so that she wasn’t graduating saddled with student loan debt as many pharmacists are right now, with the average being about $160,000 when they come out of pharmacy school I think really handcuffs — to refer to the golden handcuffs — really handcuffs what you’re able to do in terms of if you have high student loan debt, that might put you in a position where you have to depend on a six-figure income or a corporate position. So how did you practically manage to do that, to save up, to help her pay for college? And what are some strategies that our listeners might employ that are thinking about trying to do something similar for their own kids when they send them off to college, whether that be in the short-term or the long-term?

Janet Tipton: My background is in education. I got my Master’s in education and taught for several years. But then things changed, and my path changed to real estate. And I became a broker in real estate and worked in the high-end golf and lake community locally. By doing that, by pursuing real estate, honestly, that gave us the vehicle of being able to save and invest for Jamie Leigh’s education. And I funded and invested in a 529 college plan. And there were a lot of questions at that time as to how much to invest because you don’t know at the time you’re starting to set up a 529 plan where they’re going to attend college, if it’s going to be a four-year college, if it’s going to be an eight-year college, if she’s going to get a degree, you know, just with her Master’s or with her doctorate. So it’s kind of a guessing game to decide how much to invest to begin with. But I’ll have to be honest that the 529 plan really helped us be able to fund her college. It did not all of it because I guess at the time, I really wasn’t anticipating the doctorate, but her having academic scholarships helped fund the last couple of years of her education. So it was very important to us, all the pharmacists that are out there, they know how much it takes to get their degree and how much they work toward it. So we, my husband and I, always wanted to try to help with education and get that funded. So thankfully, because of the 529 plan, we were able to do that.

Tim Ulbrich: That’s great. So it sounds like a combination of 529 played a big part in that, scholarships, a piece of that, real estate investing, you know, that certainly played a portion of that as well. And so Jamie Leigh, my follow-up to that is, you know, how important was having a solid financial foundation? Here, specifically, no student loan debt and being able to take on the risk of starting your own business.

Jamie Leigh Tipton: It was critical. I would not have taken this risk had I had student debt. It would have been too much to bear with all of the weight and the stress of opening and running a business along with the stress that would be added of paying off student loans. It would be too much to have both.

Tim Ulbrich: And so in addition to the student loan debt, were there other aspects or things that you would recommend to those that are looking to start their own business around emergency funds or other things in terms of building that solid foundation that you can approach your business with confidence and be able to take on some of that risk?

Jamie Leigh Tipton: We knew starting out that no one would be taking a salary family-wise just so that everything we make could go back into the business. So I’ve always been a saver. Any Christmases, birthdays, graduations, I’ve saved all the money and tried to invest a lot of it. Just like I said, the unkown of knowing what I would do eventually but something around ownership, so I’ve always tried to save everything I’ve got gift-wise in order to invest some of it to have a little bit of the wiggle room while we get up and running, knowing that there wouldn’t be a salary for awhile and going from there.

Tim Ulbrich: So let me ask you about that for a minute because I think often, we can get enamored and caught up in the things that come along with starting your own business and it’s exciting. But there’s also the reality of things that are challening, like deciding to invest in the business and not necessarily taking a salary for a period of time. And so I’m guessing some of our listeners are thinking, how are you personally reconciling, you know, eventually at what point might you take a salary? And does this mean delayed retirement savings? Or are you counting on sort of the equity in your business as being an asset that you’re building over time? So how are you reconciling that component of when to take a salary versus putting that back in the business and potentially delaying retirement savings because of that?

Jamie Leigh Tipton: (inaudible) an estimate of how long we’re not going to take a salary versus starting to take a salary, so we have that planned out as far as a timeline. And it does kind of set back the retirement as well. But we’ve kind of planned for that too that eventually, getting into a Roth IRA and different pieces of retirement. I know a lot of pharmacists sometimes hit the high end of the Roth IRA and can’t invest, but as we’re growing, I hope to be able to take some of what I make and put it to that and keep investing in mutual funds as we grow. But yeah, we’ve always had kind of a timeline of at this certain point, we’ve got to start taking a salary. But it’s just as we can and are able to, we are trying to always take everything and put it back into the business.

Tim Ulbrich: And I think too, it’s important for our listeners to understand, you know, the value of equity and ownership in a business certainly has a monetary value. And I think from many different perspectives, which we won’t necessarily get into detail here, but can play a very significant part from building long-term wealth, tax advantages, eventually at some point, maybe a sale of a business, but as you’re putting some of that sweat equity in, there’s obviously value that’s being built through that equity as well. So Janet, one of the questions I wanted to ask you is I know when we talked a few weeks ago, you had mentioned as you built this pharmacy from the ground up with Jamie Leigh, very much being a family type of endeavor, the building, as I understand it, has the pharmacy that is in one part of it, but the other part is open to eventually be rented out I’m guessing as commercial real estate. Talk us through how you made that decision collectively to take on potentially more loans to build a bigger building but also have the long-term vision that some of this could be used for real estate investing.

Janet Tipton: I think my background as a broker in real estate has helped in that because obviously, anybody that’s in real estate knows that it’s location, location, location. So when I was thinking and hearing from Jamie Leigh that that’s what she was kind of wanting to do, I started looking around in our town for some land and trying to find a location that I thought would be good. And we were able to find the land that our pharmacy has been built on, and it’s, in my opinion, a great location that’s right on our main street, it’s adjacent to our local hospital. And so we were able to obtain the lot and plan the building. And yes, we have Plan A, B, C, D, E, F, G, H and so forth. But one of the things that the way that the lot lays, we were able to build not only the pharmacy on the top level, but the way the land lays, we were able to also include a lower level to our building. And we are finishing that off and going to rent that. As a matter of fact, it’s going to be finished at the end of this month. And we have most all of it rented. And so that will also help us to be able to bear the financial burden that comes with building a building. And then hopefully, if hopefully this business will go well, but even if not, I think this will be a great real estate investment for Jamie Leigh down the road to have a building, to have a location, to have the land, and to have the rental income.

Tim Ulbrich: Well, I will say if our listeners need a visual, when you Google “Tipton Compounding Pharmacy,” a picture comes up of the building. And it is beautiful, so I love the design, I love the look and the feel of it. And I would also encourage our listeners to check out the website, which you also both have done a great job with, TiptonCompoundingPharmacy.com. I think the website looks great. It’s a great design and I think really nicely describes your services and the vision that you have for the company. So great work on that. Jamie Leigh, one of the things that stuck out with me when we talked a few weeks ago is that you said you would have been wondering, what if? your whole life if you didn’t pursue this dream. Tell me a little bit more about what you meant by that.

Jamie Leigh Tipton: The stress of owning a pharmacy is a certain beast. But going to bed every night with a really comfortable job but not necessarily a job that you have always dreamed of is even more of a mental taxation on you. I would have hated to wonder every day what if it would have worked? but be too afraid to try. One of my favorite shows is Shark Tank, and this week, Daymond John put on social media a quote that I thought was really relatable to this question. He said, “It’s scarier to watch your dreams slip from you than it is to know you tried to make them happen.” And he also said, “Who’s farther, the person that took a step forward and fell? Or the person that stood still and did nothing?” And I think both of those quotes were really good. He was responding to someone saying, “Should I open the dream business I’ve always wanted to do?” And I think that’s so true. I mean, there are good days, and there are bad days of owning your own. But if it’s truly what you’re passionate about and what you want to do, I think it’s worth it because the wondering every single day of what if? would just be such a heavy burden to have to bear.

Tim Ulbrich: Absolutely. And I think with small business or any business in general, I think sometimes we talk so much about the monetary piece. But I know, for me personally, while the business aspect is critical — if you’re not generating revenue and a profit, it’s ultimately not a business, so that has to be there. But at the end of the day, the feelings of creativity and autonomy and being able to create vision and execute vision, that, to me, is just so incredibly rewarding. And I think that it’s something that people should keep in mind if they want to pursue something of their own. So let’s talk a little bit about, you know, the other side of owning your own business. As I mentioned earlier, it’s not always peachy along the way. And there certainly are struggles. So question for both of you — and we’ll start with Janet — you know, what are some of the struggles, maybe some of the sacrifices that have come from having a family business and jumping into this venture of starting this compounding pharmacy?

Janet Tipton: Well, my husband and I, we kind of lived our lives in reverse. We did a lot of traveling and went to places we wanted to go when we were younger. Both of us were, at the time, in education, so we had summers off. And we traveled there. So now that I’m in the retirement age, I really had no desire to go anywhere else. Kind of been there, done that. So there’s no point of pleasure trips in our future. We have given that out. So yes, there’s financial sacrifices, and there are many sleepless nights, but Jamie Leigh is our only child, and as parents, we wanted to do whatever we could to help her get started in this business. And so that’s what we’ve done. And you mentioned about this thing of family business, and that’s true. I am pretty much in the retirement age, my sister, my only sister, is also at retired. And so both of us work here, trying to help Jamie Leigh. So it just is at the right time in her life and our lives to try to pursue this dream of hers. And like I said, hopefully this will work. And if it doesn’t, then at least it’s a good investment, and we’ll go to the next plans if we need to. But we’re going to do everything we can to try to make this venture of hers happen.

Tim Ulbrich: So Jamie Leigh, what about for you? And I would also follow that up with, you know, one of the things I think I would be thinking about owning my own business, especially if I had my family involved, might be some of that pressure of having the family involved and wanting to have it be successful, especially if there’s been an investment in that. So talk us through that aspect and then just also globally, what are some of the struggles and challenges that you have had in terms of owning your own business?

Jamie Leigh Tipton: I would say (inaudible) that the whole family basically sacrificing all their time in retirement time, it is one of the probably the biggest struggles I have, just because I know how much they’ve sacrificed financially in time to try to make this work with me. I know that they say they did a lot of their traveling before I was born, so I hear wonderful stories about it, but at the end of the day, retirement’s also a time to where you can just sit and do nothing if you want to. So I know what all of their sacrificing just to make my dream come true. So it is a lot of pressure. It’s a lot — like she said — a lot of sleepless nights worrying about different things, feeling sometimes like the weight of all of this on your shoulders. But then having their support means everything. But it is kind of a back-and-forth. You basically eat, sleep and breathe the pharmacy. On the weekends, we sit and talk about it. On the weekdays, we come and work. And then at nights, we talk about it some more. And there’s really no extra time, at least at this stage, to have a life and vacations, really, not much of anything except just doing everything we can to talk and plan to just make this work.

Tim Ulbrich: That’s great. Thank you both for sharing there. And Jamie Leigh, my last question for you, as I know we have many listeners that might have entrepreneurial dreams, whether that’s their own business, a side hustle, but I think often are struggling with where do I start? And where do I draw inspiration from? Besides Shark Tank, which I also love, is there a podcast, a book, a blog, a TV show, or something that you’d recommend to our community that they may be able to draw inspiration from?

Jamie Leigh Tipton: I really just did a lot of online research. I’ve read different financial books and Dave Ramsey books, the “Rich Dad, Poor Dad,” just different things, financial bonds. I think really, above everything, the one thing I would say if you want to open a business, you have to have passion for it. It’s not for the faint of heart, so if you don’t have passion for what you’re doing, it won’t work. It just takes too much time and effort to not be completely dedicated and happy with what you’re doing. I don’t know that there’s a TV show or a book that will do anything more than what just pure passion can do. I had found a quote earlier that I liked that success isn’t made in a microwave, it’s made in the crockpot, and that’s so true. It’s not an overnight success. I know some different books, some TV shows, you get the wonderful overnight successes, but it takes time to grow and build a business. And it takes a lot of planning, many months were spent just talking for hours about the big picture but also short-term goals that it takes to get there. When I first started pharmacy school, one of our head advisors said that pharmacy school was like eating an elephant. You have to do it one bite at a time. And I think it’s the same way in opening a business. So ultimately, I think the main thing you have to have is passion for it. And then if you have the passion, then you’ll be dedicated enough to research different areas and depending on if it’s a pharmacy or if it’s a totally different business, there will be different podcasts, different shows and books that will meet that need of learning more information. But overall, you have to be dedicated to want to pursue this way.

Tim Ulbrich: That is great, great wisdom. So thank you for sharing. And I would encourage our listeners to check out TiptonCompoundingPharmacy.com. I also know and have seen Tipton Compounding Pharmacy on Instagram and Facebook group. And if any of our listeners are in the North Carolina area, around Franklin, North Carolina, I’d encourage you to check out the store and have a chance to talk with Jamie Leigh and Janet as well. So thank you both for coming on the show, for your time, for your willingness to share your journey. I know it has inspired me in a significant way, and I’m confident it’s going to do the same to our listeners. So thank you both very much.

Jamie Leigh Tipton: Thank you.

Janet Tipton: Thank you.

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YFP 104: Jason Long’s FIRE Journey

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Jason Long’s FIRE Journey

Jason Long joins Tim Ulbrich to share how he retired from his retail pharmacy job at the age of 38. Jason dives into what the FIRE methodology is and how he and his wife saved for retirement.

About Today’s Guest

Jason Long is a husband, former retail pharmacist, early retiree at age 38, self-made millionaire, distance runner, author of three books, and advocate of rational thought. He holds a Bachelor of Science cum laude in Chemistry from Middle Tennessee State University and a Doctorate in Pharmacy cum laude from Mercer University. Since retirement, he has volunteered as a tour guide at a natural history museum, a teacher for a non-profit ESL program, a marathon pacer at numerous charity events, and a voter registration assistant. He is the current state half-marathon champion and former state full-marathon champion. His interests include Japanese culture, classic cinema, classic music, astrophysics, running, cycling, swimming, traveling, reading, painting, and playing video games.

Summary

Jason Long retired from his retail pharmacy job at age 38. He was able to retire at such a young age by seeking out FIRE (financial independence, retire early). Jason shares that FIRE is a lifestyle choice that’s starting to spread to more people. This methodology is less interested in wealth accumulation and is more focused on leading a meaningful existence, in Jason’s opinion. Jason was able to save up enough money to where the revenue from his investments will provide enough income to live on, meaning he no longer has to work for money.

Jason shares the FIRE is based on the Trinity study which focused on sustainable withdrawal rates for retirement spending. If you have a million dollars, you can withdraw 3-4% a year, giving you an income of $30,000 to $40,000 a year. Jason says that you have a 95% chance to still have money left if you’re withdrawing this amount for 30 years. He and his wife have closer to a 3% withdrawal rate and he’s not worried about them running out of money.

In June 2017, Jason retired at age 38 after saving just over $1 million. He says that it’s still surreal that he’s been retired for two years as it hasn’t fully sunk in yet. Jason decided to pursue the FIRE route in 2005. He was in his last year of pharmacy school and had come to the realization that pharmacy wasn’t what he wanted to do in life. He became curious to know where he’d be in the future if he lived at the same standard of living as his parents did but earned a pharmacist’s salary. He used a spreadsheet to start calculating scenarios and found that if he was earning $105,000 but only spent $35,000 a year, around the age 39 or 40 a return on investment from his portfolio would exceed the cost of living. He didn’t realize that this was a methodology that others were using. In 2015 he found others who were also following this FIRE path.

To reach $1 million, which was in savings only and doesn’t include social security or home equity), Jason and his wife really stuck to only spending $30,000-35,000 a year. His starting salary as a pharmacist was $110,000. The first step they took was to buy a house, but not a mansion. Then, all their money after maxing out 401ks and IRAs, went into Vanguard accounts. They steered clear of getting caught up in big buckets that drive up expenses, like expensive homes and cars. Jason reminds listeners that houses depreciate in value and land appreciates and feels like viewing home ownership as an investment is a myth.

Jason explains that you have to shift your focus and remember that earning $30,000 a year gives you a better standard of living than 99% of people who have ever lived on this planet and to not compare yourself to others. He also shares that it’s necessary to invest beyond a 401k or IRA if you’re wanting to retire before age 59 ½ as there are federal limits to those accounts. Lastly, he shares that happiness doesn’t come from having material things, instead it comes from being financially secure, from having your life in order and being content with what you have.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week of the Your Financial Pharmacist podcast. Excited for this episode. I’ve been wanting to talk about the FIRE movement for some time, FIRE standing for Financial Independence Retire Early, and I’m glad to have the opportunity today to do that alongside of Jason Long, a pharmacist that retired at the age of 38. So Jason, welcome to the podcast.

Jason Long: Ah, thank you for having me.

Tim Ulbrich: Excited to be here, and I have to start by telling our listeners, which I think is just an indicator of what FIRE is all about, when we were trying to schedule this interview, you know, I think I first started out by proposing several dates and times, and your response was something along the lines of, “Hey, I’m retired. I can do this whenever.” So here we are, and obviously, flexibility of time and freedom of time is one of the positive aspects of Financial Independence Retire Early, and we’ll talk about that. And when I heard about your story, it was published in the New York Times, and we will reference that and link to that in our show notes, and that story from the Times mentioning your retirement at the age of 38, leaving a job making roughly $150,000 a year, I thought, we have to have him on the show. And I think that there’s many pharmacists that will not only be interested in your story but may have similar aspirations and want to know why you did it and how you did it and certainly what could be the path for them to move into that in the future. So before we jump into the specifics of your story and how you achieved early retirement, let’s talk about what exactly is FIRE. I think many people may not be familiar with that concept. So Jason, give us a summary of what is Financial Independence Retire Early. What is this movement all about? And what defines someone achieving FIRE status?

Jason Long: Well, I don’t know it’s so much of a movement as it is just a lifestyle choice that’s starting to grow. I think people, my generation, younger, are becoming a little less interested in wealth accumulation and just living a meaningful existence. And the whole thing with being financially independent, retire early is that you have saved up enough money to where the revenue from your investments will provide enough income for you to live on. That can be a small amount or that can be a large amount. It’s just up to the individual. But yeah, it’s basically just not ever having to work for money. That doesn’t mean you can’t work or that you don’t have something going on on the side, but in my instance, I don’t really have anything going on. I’m just living off the income from the investments.

Tim Ulbrich: So we’ll come back later and talk about your withdrawal and how you’re functionally doing this, but just to build off of what you said, is there kind of a specific rule of thumb in terms of, you know, x amount is needed to be able to draw this much so that you can live off the savings? Knowing that that could be different from one person to another. But what typically is that definition in terms of what is needed to get to that point of achieving FIRE?

Jason Long: Sure. There’s some debate around that. But the generally agreed upon amount is based on something called the Trinity Study. It was done a few years ago to see what percentage you could withdraw on a year-to-year basis. And the way that works is — we’ll just use some round numbers for example. If you have $1 million, you can withdraw something like 3-4% per year, that would be $30,000-40,000. The Trinity Study said that if you withdrew 4% per year and adjusted upward for inflation, and you didn’t adjust that $40,000 amount based on market performance, that you would have a 95% chance over 30 years to still have money left. Turns out the original researchers have amended that to actually be 4.5% because expense ratios have dropped. The cost of managing your money has actually decreased over the years. A lot of people will do it themselves or they’ll use fiduciaries. But for a longer timespan, a lot of people are looking at 4%, maybe 3.5%. In our instance, we’re actually a little closer to 3%. So there’s no historical precedent for a 3% withdrawal rate.

Tim Ulbrich: So just again, for our listeners to get a step back, the idea being here that you’re building up some type of nest egg, for lack of a better word, you know, it could be $1 million, it could be $1.5, $2 million. And then some percentage, you know 3-4%, which obviously what we’re getting to is that what you’re going to be living on and what you need in that nest egg is largely driven off of your expenses and that percentage and of course trying to maintain that amount so you’re not having to dip into that over time. So let’s get into for you specifically, June 2017, the day you retired at the age of 38. You noted on your blog it was the day before you’re 20th anniversary from high school graduation. And at the time, you had savings of just over $1 million. So talk us through what you were feeling at this point in time. I mean, obviously you made the decision that you were going to retire. Were you anxious? Were you excited? All of the above? Talk us through that situation.

Jason Long: Well, honestly, it was a little anticlimactic. You reach a certain amount that you want to get to, and that’s a great day. But it’s not like you’ve reached the finish line, you know? There’s a few things you have to brush up on. And I don’t know, I guess it was kind of surreal to realize that, you know, I had just called and put in my work notice. And two weeks from then, I would work my final shift and then never have to go back to it. There was a sense of relief, I guess, that I’m not — you know, it’s been almost two years, and I don’t think it’s fully sunken in yet. But anxiety, no. Like I said, there’s no historical precedent for a 3% withdrawal rate to fail. Now, that doesn’t mean there’s not going to be unforeseen expenses or that there couldn’t be some future event that might bring catastrophe. I mean, there’s always a chance of an astroid strike or nuclear war or what have you. I mean, but all we have to go on is historical precedent. And we have even a slight buffer above that, I think maybe 3.2%. If you were to have retired in 1968, I think is the worst year you could have picked due to a flat market and large inflation. But you know, even now, we’ve moved up to $1.2, so it’s so far out of the realm of danger that I don’t ever give it any thought.

Tim Ulbrich: Right. Which I’m glad you brought that up, Jason, because I think often, people hear FIRE, and they think risk and without really digging into the math and what do the numbers say, and I appreciate your comments around kind of the historical perspective and 3%. And I would argue, as I think you would agree with me, I mean, people who are $200,000 in debt that have no savings, that are spending all of their income working for whomever, that that job could change tomorrow, go away, whatever. Obviously, there’s a risk position in that that has to be considered as well.
Jason Long: Another risk that a lot of people overlook is that you risk wasting your life working 30-40 years in a job that you really despise. I mean, so is the alternative of going broke early really that bad?

Tim Ulbrich: Well, and I’ll talk about this at the end, but I’m grateful to be in a position that I love what I do each and every day, and I know many pharmacists do. Some do not. And so I think if for somebody for whatever reason does not and there’s not another opportunity that’s available or for whatever reason the transition can’t happen or maybe somebody has found themselves in a career path that wasn’t necessarily a great fit, then I think the FIRE option and really digging into the math, as we’ll talk about here in a little bit, is certainly a viable option. But if nothing else, as I think about the Financial Independence, Retire Early, I’m passionate about independence period, whether or not there’s the retire early component of it. As I’ve talk about before on this show, having options and having flexibility is always a good thing. You never know what’s going to be thrown at you in terms of life events, and you never know what may change over the course of time, either related to your interests or the profession or other variables. And so when did you, Jason, when did you determine that you were going to pursue this route? And talk us through not only when that moment was or roughly that moment was — because obviously, there had to be a timeline of planning to go to a place to accomplish what you did — but also what motivated some of that decision to pursue early retirement.

Jason Long: I think it was 2005, I was in my last year of pharmacy school. And I had kind of come to the realization that it wasn’t exactly what I wanted to do in life. And you know, how I got to that point there is a different story altogether, but I was putting some spreadsheets around, and I was just kind of curious — I was like, if I lived at the same standard of living that my parents had, but I made the amount of money that a pharmacist does, where would I be at financially at age 40, 50, 60, 65? Just running the numbers just to see. And I think I had assumed — I don’t know what pharmacists were making. I think maybe $105,000-110,000 a year. And you know, we grew up working class. Just my dad worked, and my mom took care of the kids, but made about $35,000-40,000 a year. And then I assumed maybe like 3% interest, which was pretty safe at the time, just based on a CD or whatnot. And I plugged those numbers into the spreadsheet, and I noticed a strange thing kind of happened around age 40. I was 26, so somewhere around age 39-40, I noticed that the Return on Investment from the portfolio exceeded the actual cost of living at that point.

Tim Ulbrich: Yes.

Jason Long: So I was like, this is strange. You could foresee, you could feasibly have the amount of money to live off of by not working. And being naive like I was at the time, I just kind of thought, well, hey, I’ve discovered something here. And I went all the way to probably 2015 never having encountered another person who had discovered this. And then I kind of did a Google search one day. I was like, well, yeah, that was kind of stupid of me. There were plenty of people. And you described it as a FIRE movement. So yeah, that was the day back in ‘05, I said, you know, I don’t think I really want to be a pharmacist. I was like, but you know, I’m three-quarters of the way across the street. I’m going to go ahead and cross it and put in 12 years, 13 years, 14 years, and try to make the best of it that I can. And then when that day comes, I can kind of transition over to something else if I want to do something else or if I just want to sit around and play video games and watch movies, I can do that too.

Tim Ulbrich: So I’m going to read something from your blog before we jump in and talk about the saving strategy and how you actually did it and how much you were saving because I think it resonated to me a little bit about your journey and put some life to kind of your passion and motivation. From the blog is, “It’s been said that retirement is merely a decision to stop trading time for money. Since I no longer need more of the latter to sustain my standard of living and since I do not enjoy, never have enjoyed, the primary method at my disposal to acquire the latter, I have decided that the former is of more value to me going in life.” So you mentioned, Jason, kind of your last year of pharmacy school, 2005, and then obviously you had a 12-year time period roughly to that point where you actually retired. And so we look at that point of retirement at the age of 38, you’ve got a little over $1 million, so that’s a fairly short runway to get to a net worth of $1 million or more. And to clarify for our listeners, we’re only talking here in terms of savings. So we’re not talking about home or other assets, and we’ll come back to that in the future. So we’re purely talking about savings that had been accrued over time. So how did you practically do it? For those that are listening, thinking, hey, maybe this is a path that I’m interested in in some shape or form, you know, what percentage of your income were you saving? And where did you put it? And how did you get to that point?

Jason Long: Sure. Like I said, I think I started out at about $110,000 a year and was spending $30,000 a year, not including the house payment I believe. It may have been $25,000 plus the house payment.

Tim Ulbrich: OK.

Jason Long: But my first step was to, of course, buy a house. And I say house, I don’t say mansion or McMansion, or something on a cul-de-sac near a golf course, you know. If you want those things, that’s great. But you really have to step back and ask yourself, is it going to make you happier? Is it worth trading perhaps 10 years of your life to have a nicer place, maybe even just to impress people that you don’t like? But you know, our answer was a 1,600-square foot house in a neighborhood in Ohio. And I think that house was $120,000 or $125,000. We paid that off in about two years, maybe. And after that, all the money went into — well, of course, at the time, we were doing the 401k, IRA, contributions. I think after that, it pretty much transitioned — well, after a few years, we had moved back to Tennessee and had gotten more land and we built another house here. But after all the house and real estate was paid off, which was maybe around 2010, all the money went into a Vanguard account. And there are a different number of companies you can use. I like Vanguard because they’re nonprofit, and they have low expense ratios. But yeah, you just basically open up an account and decide what you want to invest in. There’s, again, a lot of healthy debate about your asset allocation. But the main things that I look for are index funds. And that is basically just a — you can think of a mutual fund as being a collection of stocks. But an index fund is a collection of basically all stocks on an index, like an S&P or the Dow or the Nasdaq or whatever. Vanguard offers one called the ETSAX, or basically all U.S. stocks. So instead of trying to pick and choose or knowing or pretending that you know things about a company that you don’t, you can invest in the market as a whole. And there’s very little management that goes into that. Therefore, there’s very little expense that Vanguard charges you to manage that fund. I think it’s at least maybe .04% per year. But you open that up, and anything in excess of what you can contribute to your 401k and your IRA, we would put into that.

Tim Ulbrich: I love the approach of low expense. And you mentioned the advantage of those coming down historically. I mean, I personally have funds, .03%, .04%, .05%, .06%. And so you, I think from the blog I saw, you rep basically three major funds, roughly 60% in U.S. stock index fund, 20% in an international index fund, and 20% in a municipal bond index fund. So keeping it simple, keeping the expenses down. So am I correct, then, as I look back and hear you say making over $100,000 a year, obviously started at $110,000, that went up, your expenses roughly $30,000 a year. So you were saving north of 70% of income? Or were there other expenses not accounted for?

Jason Long: No, it was about 70% per year. I think it’s probably important — some people are going to be listening to this and pulling their hair out over $30,000 a year. That’s not probably feasible out on the Coast. If you’re in New York, LA, Silicon Valley, whatever, you’re listening to, you’re paying $30,000 a year probably in just rent. But the cost of living out in rural Tennessee is a lot lower. So yeah, I think I ended up — we started out maybe about $30,000. It may have moved up to about $36,000.

Tim Ulbrich: OK.

Jason Long: One of the things you have to watch out for is something called lifestyle inflation. You know, that’s where you’re starting to make more money, and then you start to get more tempted about buying things that maybe you want and don’t really need. So you’ve just got to make your choices there.

Tim Ulbrich: Yeah, and I know you’re very well, obviously, versed in this. And our community is as well, but I talk a lot about cost of living, as you mentioned, West Coast, Northeast, other cities, other areas, obviously even within Ohio, cost of living varies significantly from one part to the next. But pharmacists’ salaries don’t adjust accordingly, in terms of at least accounting or offsetting that. I mean, maybe slightly. You know, for example, let’s say an average pharmacist’s salary in Ohio, let’s say is $110,000-115,000, maybe that’s $120,000 to $125,000 to $130,000 out in California, but that percentage bump is nowhere near obviously the cost of living difference from rural Ohio, rural Tennessee to the West Coast. And as we think about retirement and what you need and coming up with that calculation, determining that number, that expense number is really what’s driving that. So if you’re making $100,000 a year, and your expenses are $90,000 a year, that runway to retirement and what you need obviously is much, much longer. If you’re making $100,000 a year, and you determine that you can swing it either through strategically cutting expenses, cheaper on home, cheaper on car, strategically choosing where you live, obviously, there’s some sacrifice here in the equation, although we talked about what you’re weighing that against as a potential pro, but that is a much different nest egg that you need. And obviously, your situation of what you’re living off of I think highlights that perfectly. So I do want to highlight, Jason, to just build off of what you said, I mean, buying a relatively small home, affordable home, $120,000-125,000, paying that off quickly, you know, for me — and I’ve seen this in my own life but also in working with many other pharmacists — home and cars tend to be, you know, probably the two big buckets that can drive up expenses. Certainly many other things that go into lifestyle creep, but you know, if a home is 40-50% of your take-home pay, it’s going to be difficult to keep these expenses down. So for those listening that have not yet purchased a home, I think strategically looking at the home buying, especially if this concept is a priority, and keeping the cars down, really focusing on money going into assets and things that are growing and not depreciating value is really important.

Jason Long: Yeah. You know, a lot of people don’t realize, houses depreciate in value.

Tim Ulbrich: I agree.

Jason Long: There has been a lot of research on this. Land appreciates, houses depreciate. There’s been a myth that home owning is an investment. And it’s just not. At best, you can probably hope to break even.

Tim Ulbrich: Break even, yep.

Jason Long: And you know, that’s fine. You know, I’m not judging how other people live. But to get philosophical about it, people need to ask themselves, like I said, are they going to be happier having a large house? You know, George Carlin, comedian, once said — and I’ll clean this up a bit for the podcast.

Tim Ulbrich: Appreciate it. We don’t have the explicit rating, so I appreciate that.

Jason Long: He said, “People buy stuff they don’t need with money they don’t have to impress people they don’t like.” And when you realize that happiness doesn’t come from having things, happiness comes from outside. It’s from being financially secure, it’s from having your life in order, it’s from being content with what you have. When you realize that, and you realize that you’re probably not going to be that much happier in a $.5 million home versus a $100,000 home, you know, that opens up all sorts of possibilities for you. The house and the car, you know, if you’re the kind of person who wants people to look at you and think highly of you and envy you because you’re driving the $50,000 Lexus, that’s fine. I’m not going to judge how that person lives, but I guarantee that the person driving that car is not any happier for having that car than someone who’s driving a dependable $10,000 car.

Tim Ulbrich: Absolutely. Great stuff there. I think a lot for our listeners to take away and reflect on there as they think about their future plan and what matters most. And I would reference to our listeners, and we’ll link in the show notes, you know, Jason, I mentioned earlier, often — before we recorded — I mentioned often when I ask a group, “Hey, have you heard of FIRE?” typically, I don’t get a whole lot of hands raised. But when I say, “Hey, have you heard of Mr. Money Mustache?” people are like, “Yes, I have!” So I’m going to link to an article back from 2012, I know it’s a very popular article but really highlights the importance of looking at the math on this, and that article’s called the shockingly simple math behind early retirement. And you know, essentially what Jason’s highlighting with his own journey, what that article highlights is that saving a significant percentage of your income and keeping your expenses down really changes the projected timeline to retire. And so, for example, saving 50% of your income towards retirement can move that timeline of retirement from 50 years down to less than 20 years. So again, for you, when you talk about your journey and putting numbers into a spreadsheet, whether it’s looking at an article like this, I think it’s a matter of doing the math, looking at the expenses, and asking yourself some more of those philosophical questions that you had talked about.

Jason Long: Yeah, let me say one other thing. People who question whether or not they want to live on a $30,000, $40,000, $50,000 a year or whatever, it’s good to remember that $30,000 a year is higher, gives you a better standard of living than 99% of people who have ever lived on Earth. And if you find that I don’t think I could live that cheap, then that statistic should probably tell you, it might be a good idea to reevaluate your position in life.

Tim Ulbrich: Yeah, Jason, I’m so glad you said that. One of the point of comparisons I often use because I think it’s helpful for pharmacists to shift the point of reference away from peers because it’s not a helpful comparison.

Jason Long: Comparison is the thief of joy.

Tim Ulbrich: Yes, yes. And often, I’ll talk with resident that, you know, residents’ salaries have actually come up, some in the mid-$40,000’s, low $50,000’s. And I hear things like, I can’t save anything, I can’t make any headway in my student loans. And I get it, cost of living is different, no judgment in terms of that. But if you shift the point of comparison to what you just mentioned or the median household income for a family of four in this country is in the low- to mid-$50,000’s. I think shifting that point of comparison can help put some of that into perspective. So one of the things I want to talk about, Jason, and you mentioned in your story, I read in your blog, is that you’re purely looking at the numbers based off of the investments that you’ve grown north of $1 million. And you’re obviously trying to draw that down — or not draw that down, I’m sorry — live off a percentage of the growth so that you’re not drawing from and letting that fall below $1 million. But you are not including any of your assets in terms of house or land or other assets, or you’re not banking on social security or inheritances, equity in the home, other types of things, correct? You’re purely just looking at the savings component?

Jason Long: Yeah, I would say equity on the home would be an absolute last resort, you know, absolute worst-case scenario, not even historical precedent but an unprecedented territory would you have to rely on house equity or social security or inheritance or anything like that. I fully expect those things to be there, but I’m just not going to rely on them.

Tim Ulbrich: OK. So in terms of the withdrawal plan, currently, you mentioned the numbers you’re working off of. So what does that practically look like month-by-month if you look at the percentage that you’re drawing from, trying to keep the portfolio above $1 million?

Jason Long: Yeah, so basically, just assume $1 million and assume $30,000 a year of living expenses. Quick, back-of-the-envelope math, that’s 3% a year. A lot of people may say, “Well, hold on. The average return on investment in the market historically, adjusted for inflation, is 7%.” And some people may say 10%. Dave Ramsey’s one of them who greatly overestimates what the market returns. But the reason you can’t withdraw 7% a year is something called sequence risk. And that is when is the bad year going to come?

Tim Ulbrich: Right.

Jason Long: And these scenarios, these simulations, you can play out basically shows that if you get the bad years up front, it’s going to have a lot more impact than having the bad years toward the back.

Tim Ulbrich: Right.

Jason Long: So you have to put that extra buffer in. You can’t just assume that you’re going to get the steady 7% a year. You will run out of money if you do it that way. So yeah, we basically just withdraw out whatever we need to every month. In our case, we’re on about 3.5% withdrawal, minus whatever the side income might be coming in from a variety of different sources. But yeah, it’s just log on every month and see where you’re at and withdraw what you need to pay off the credit card and rebalance and go from there.

Tim Ulbrich: So Jason, I’m sure many pharmacists are thinking, hey, I’ve got an employer match in a 401k or should I be taking advantage of those types of retirement accounts that have tax advantages, 401k’s, 403b’s, Roth IRAs, and you mentioned earlier that you did a little bit of that. But obviously, you’re depending on assets that you can draw before the age of 59.5 without a penalty. So any words of wisdom or advice for people that are thinking about trying to achieve retirement status prior to the age of 59.5 where they would need funds? And how they might think about balancing where they’re putting their money?

Jason Long: Yeah, if you’re wanting to retire before traditional age, before 59.5, it’s going to be necessary to invest beyond 401k and IRA. There are federal limits to what you can contribute to those. So you’re going to have to invest in taxable accounts. And you put that into some investment firm like, like I mentioned, Vanguard. You put all your money into that after you’ve contributed to the 401k, IRA. And like you had said, you have to be mindful of the fact that it’s not easy to get your money before 59.5. There is a clause called 72T. Basically, if you convert your IRA over to an annuity and take a certain amount of withdrawals per year based on your expected living, you’re allowed to withdraw it without penalty. I don’t know exactly how it works. I don’t plan on having to dip into that. We have enough in our already taxed accounts to go until maybe 60, 61, 62. But yeah, you have to be mindful that there is a 10% withdrawal penalty on the 401k. And that’s on top of any taxes you’d have to pay because it does count as regular income. I’m probably not the best person to ask about all that. I’m, of course, not a financial advisor. You just have to be mindful that you’re going to have to pay penalties if you withdraw the wrong way. And that’s going to increase your cost of living.

refinance student loans

Tim Ulbrich: Yeah, and I think the takeaway there for our listeners is to be thinking about those logistics in advance and where you’re putting your money and some of the tax implications and things if this is a desire that they have to retire before traditional age. So Jason, one of the counterarguments to the FIRE movement is, you know, you’ve got 50+ years of living and satisfaction from work and social connections from work and fulfillment and won’t you get bored? You know, that type of a thing. Which I know is a very individualized situation and really depends on current fulfillment from work and hobbies and other types of things. So talk us through a little bit of that and what you’re currently doing with your time and hobbies and interests and things that you’re working on and exploring.

Jason Long: So basically, I guess it would be fair to say I do what I want. I have a ton of hobbies. I do volunteer work. I have picked up a lot more of the housework and errands and things like that since I’ve left. I’ve been able to spend more time with family. As far as like hobbies, you know, like anyone else, I read and watch movies, play video games. I build things. I exercise, I run, I cycle, swim, go to the gym, cook, kayak. I picked up some new things: golf, started collecting baseball cards again, which is something I haven’t done since I was a child. I volunteered. I’ve been a tour guide at Natural History Museum. I have taught English as a second language to adults here for a nonprofit. I volunteered in voter registration. I’ve done litter pickup. It’s just a lot of things to keep you busy. And if for some reason, you eventually run out of things, you can always go back to work, you know? There’s nothing saying you have to stay this way. But yeah, I’m pretty much on my own schedule. And I do what I want when I wake up.

Tim Ulbrich: So I think you probably answered this question for me in the list of things that you’ve been doing and even new things that you’ve picked up, but I have to ask the question, do you have any regrets looking back?

Jason Long: Zero.

Tim Ulbrich: OK. Awesome. So one of the questions I have is I’m guessing we have many of our listeners that are hearing your story and thinking maybe for the first time or second time, this might be a path they want to pursue or at least be on a path toward financial independence, whether or not they decide to retire early. However, many of our listeners, what we know is the average student loan debt, $160,000 a year, we have some salary compression that’s going on, 32 hours often is sort of the new 40. So for a graduate today coming out with $150,000-160,000 of debt, let’s say they’re making $100,000 a year, is FIRE an option for them? I mean, is that a path they can pursue? And if so, what advice would you have for somebody listening today that is looking at their debt load and looking at things and saying, I’m not even sure this is an option.

Jason Long: It’s always an option. It’s just depending on the circumstances, it may take you a little bit longer to get there than it did, say, 10-15 years ago. As far as the steps, you know, it’s going to vary on an individual basis. It’s going to be dependent upon what your student loan interest is. It’s going to depend on what your mortgage interest is. We — personally, I took the safe route, and I paid off the house first. The house mortgage was only 5% a year. Well, I could have put that money in the market instead and make, on average, 7% a year. So maybe that wasn’t the smartest choice, but it was probably the safest choice. If a person has student loans at, say, let’s say they have some at 7% and they have some at 4% and then they have a house at 6%, it makes sense to go ahead and pay off the 7% student loans first and then the 6% house and then the 4% student loans. Or you could maybe go the route of well, I’m just going to not worry about that. And I’m going to invest in the market first. And you know, maybe that works out for you. And maybe it doesn’t. The safest route is to just pay off your highest interest rate loans first. And work your way down from there.

Tim Ulbrich: Yeah, and if I could build on what you said there, you know, since your number is pretty much on target, many of the students coming out today with their pharmacy loans, unsubsidized, 6-7%, but there are options out there that I think somebody could look into as a strategy to allow them to invest aggressively. So we’ve talked before on the podcast about loan forgiveness, which certainly comes with risks that need to be evaluated, although appropriately evaluating the risk and the benefit, but obviously being a strategy that could allow for freeing up additional moneys to invest and invest more aggressively at a younger age, looking at competitive refinancing rates that can lower your interest rate and incentivize investing. So really looking at the options that are available out there if this is a path that somebody wants to pursue. So Jason, let me end here by asking for your recommendation for something that helped you on your journey, learning more about FIRE and kind of strategies around pursuing this, whether that be a book, a blog, a podcast. Is there a resource you would recommend that was helpful for you?

Jason Long: I have a pretty unconventional one. It’s “Walden” by Henry David Thoreau. I’m sure a lot of people have read it in high school or whatever. But it’s basically just the accounts of one man going to live off in nature for a couple years and realizing, hey, I don’t need money to do this. I’m happy. And then he would have visitors come over and be like, well, why are you eating this? Why don’t you eat nicer things? And he’s like, well, you’re only eating nicer things to compensate for the stress that you’re experiencing in your daily life. I kind of like to think of that as maybe the original Financial Independence book. It’s probably not, but it is pretty influential on my mind mindset as far as not wanting things I don’t need, just being content with what you have. Because like I said, I didn’t even realize this was a movement, a so-called movement or a thing until about 2015. There’s a lot of good stuff out there. There’s — some of the people that got me started — or not got me started but kind of helped me along the way there toward the end was on Reddit. There’s a sub-Reddit on there called “Financial Independence” that people can basically share their stories, share their goals, ask questions, and it’s a helpful community. You know, there are maybe a few naysayers on there. You have to be mindful of the fact not everyone is fortunate enough to have a six-figure job, you know. A lot of people say, well, it’s all hard work and this and that. You know, I couldn’t disagree more. No. You did nothing to be born in this country. You did nothing to be born in this era. You did nothing to be born intelligent. You did nothing to be born with good, helpful parents. You know, it takes a lot of different things to be in this situation. But when you find yourself in this situation, yes, it does require hard work and discipline to be able to do it. But always be mindful of the fact that if this is a thing that you can even think about doing, there are a lot of factors that went into that that’s beyond your control. You got lucky. The rest of it, the hard work, that’s up to you. So don’t go preaching to other people about how you can do it. If you go on these forums, be mindful that there are people on there who may not have had the same opportunities as you did. So be careful about what you say because there are real people online, and they can be hurt by, you know, what you say on there.

Tim Ulbrich: Yeah, and I think, Jason, it’s a great reminder that there is not one right financial path or plan. And I think what I really appreciate you helping me and our listeners think about is some more of those philosophical questions about why are we doing what we’re doing? And really evaluating, self-reflecting on that and then for some listening, this may be the path. For others, maybe a version of this, maybe something different. But you know, I think for each of us to focus on our own and certainly find resources and support. But in no way do we have to judge the path that others are taking. So Jason, I appreciate the time that you’ve given here. I appreciate you sharing your story with our listeners. And I wish you the best going forward.

Jason Long: I enjoyed it. Thank you.

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Celebrating 100 Episodes of the YFP Podcast!

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Celebrating 100 Episodes of the YFP Podcast!

Tim, Tim and Tim celebrate 100 episodes of the Your Financial Pharmacist podcast by reminiscing about their favorites, talking about the future of the podcast, and hearing updates from several guests and pharmacy entrepreneurs that were previous guests on the podcast.

Summary

YFP celebrates 100 episodes! Tim, Tim and Tim talk about their podcast journey so far, what’s to come in the next 100 episodes, and hear updates from guests and other pharmacy entrepreneurs.

The Tims agree that it has been incredible to witness the growth of the YFP community and extend their gratitude to all of the listeners. They find it inspiring to see how people are impacted and empowered by the content on the YFP podcast.

After discussing their favorite episodes, several previous guests come back on the show to share updates on their financial journey and they way the YFP podcast has impacted their lives. We hear from Nick Ornella, Jill and Sylvain Paslier, Derek Schwartz, Blake Johnson, Alex Barker, Blair Thielemier, Adam Martin, Ashlee Klevens Hayes, and Nate Hedrick.

The conversation shifts to why the YFP team continues to publish podcast episodes and what the next 100 episodes will consist of. Tim Baker shares that they are just scratching the surface and have so much more content and stories to uncover. Tim Church says that what motivates him to continue is when he hears stories of the transformation of people from the YFP brand. Tim Ulbrich is excited to continue moving the issue of personal finance and how it affects so many aspects of one’s life. Although the team at YFP are working hard to share the impact of personal finance, the collective community of pharmacists that have formed are where the big changes and movement will be seen.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode, Episode 100 of the Your Financial Pharmacist podcast. Excited to be here in-person with Tim Church and Tim Baker. I don’t think there’s any other way we could have done this than being in person in Episode 100. We’re going to have fun with this episode. We’re going to reminisce a little bit on the journey, we’re going to talk a little bit about what the community means to us. We’re going to talk through some of our favorite episodes, and then we’ve got some special guests coming back on to the podcast, giving us an update and talk about what Your Financial Pharmacist has meant to them in their own journey as well. And then we’re going to finish off this episode talking about what do we see as the future of Your Financial Pharmacist? And what are the hopes and dreams that we have going forward? Now, before we get in and get a little bit sentimental on, you know, what this journey has meant for us, I want to first express I think as I was reflecting over the last few weeks, awaiting Episode 100, I was trying to think of what is one word or one feeling that comes to mind when I think about Episode 100. For me, it was a feeling of gratitude, of gratitude to the Your Financial Pharmacist community that really, without this community and without the support of empowering and helping one another and being so encouraging to one another, none of this is possible. And I think as we think back to starting this journey of the podcast back in summer 2017, it was all about creating a platform that inspired and empowered people to take on the steps that they needed to take towards their journey of financial freedom, whatever that might look like in their own financial plan. And to see some of that beginning to happen, to see the community empowered and helping one another is an incredibly powerful feeling and I think one that is more rewarding for us than certainly anything else. So Tim and Tim, as you kind of think on this journey, here we are at Episode 100, what are some of the feelings that come to mind, Tim Baker? It’s been a fun ride.

Tim Baker: Yeah, it’s really been unbelievable to me. And I think the podcast has really been a great conduit to really push forward I think our vision of what YFP, what we want YFP to be and I think what YFP is really doing for a community of like-minded pharmacists. And you know, I think when we met via Twitter and we were kind of looking at those messages back and forth — maybe we’ll post those on the show notes, you know just kind of the screenshots, which are fairly funny.

Tim Ulbrich: For someday when everybody’s like, what is Twitter?

Tim Baker: What is Twitter, yeah. You know, I guess I never would have thought that like this would have been a thing. So I think that I can’t really express the feeling that I get when we get feedback, either about the podcast or just us speaking, going around and speaking with different pharmacy schools and communities. And it’s just – I said it, it just jacks me up. It gets me fired up, you know, because other people are getting fired up about a topic that can be fairly dry and boring. But I think that that’s what this thing, YFP, is really – and it’s like when we started the podcast, it was me and you. And we’re like, what’s a podcast?

Tim Ulbrich: And will anybody listen?

Tim Baker: And will anybody listen? And I think the answer to that is yes. And you know, it’s kind of figuring that out and like now, it’s kind of taken on a thing of its own. And we’ve had so many great contributions and so many great stories and voices. Like, I’m a fan of the show. And lots of times these days, I’m not part of the show. But I listen and I get inspired by the community. And you know, that’s kind of been in the – it’s kind of poured over to this Facebook group and some of these other avenues that we see interaction and engagement. So if we would have – we’re at Episode 100, so we started the podcast two years ago, essentially, like I never would have thought it would have been this. I thought, you know, I thought we would have a few episodes. I think the average podcast is like eight episodes long or something like that.

Tim Ulbrich: Seven or eight is what I’ve heard.

Tim Baker: And we’re at 100. And I think it’s a credit to you, Tim Ulbrich and really Church, I think being all three of us kind of putting out great content, in my opinion, and seeing that engagement level rise and that needle move is what we talk about.

Tim Church: Yeah, first off, kudos to you guys because I had nothing to do with the podcast in the very beginning. And just taking it from idea and vision and actually making it happen, I mean, I think it’s unbelievable. I mean, when you look back, even the quality and the organization that you guys had to make this happen has been unbelievable. And to watch that grow over time has been really cool. And the opportunity to jump in on some episodes and then now kind of getting to interview some of the guests on the side hustle edition, it’s been really fun to be a part of that. But one of the things that really fires me up too is just seeing how this has been able to get the word out that this topic of personal finance is so important. But it’s not just about, you know, getting your finances in order and growing your net worth but just that feeling of relief, peace, the passion, and of being on that journey and feeling like you can do anything beyond just getting your finances in order. So I think it’s really cool to see that. And I think the pod has just been a great way to get the message out, to get people involved, and it’s resulted in a lot of great relationships over these two years, you know, with pharmacists in the community, with even non-pharmacists, with schools of pharmacies, organizations. So I think it’s just been a fun ride.

Tim Ulbrich: Yeah, and I think that empowerment piece is so important. I mean, I’m thinking back to Tim Baker, when were at APhA in Seattle just a couple months ago, and people coming up to the booth and talking about the podcast. And you know, I think while it’s fun that people recognize the podcast, you know, that’s rewarding for a lot of the work. What gets me more excited is when somebody says with such enthusiasm, “Hey, I listened to this episode and now, my spouse and I or I did this or one step closer,” and they start to light up with energy that they feel like their finally in control of their financial plan. And it may be a baby step, it may be multiple steps, but that sense of empowerment as I think about the vision of where we were a few years ago, that’s what it’s all about. And it’s not about us, it’s about people feeling like that they are in a sense, in control of their finances and that peace of mind that comes with it. And I think that as I reflect, you know, Tim Church, when you talk about kind of not being involved as much in the podcast on the front end, like the work you’ve done with the side hustle series and as we really look back at the journey of 100 episodes, the front 50 really being focused on a lot more content and topics and we’ve shifted and done a little bit more on featuring more stories and side hustles and entrepreneurial types of journeys, we’re going to do a little bit of both going forward, but I think the evolution of the show over time has been a lot of fun. So let’s on that note, talk about favorite episodes because I think it’s fun to reflect back. And I think I have about 95 out of 100 of them memorized in terms of which episode. But I don’t think we could mapped out all the content that we’ve done. It’s been fun as we’ve had people reach out and say, “Hey, I’ve got a cool story.” And it kind of takes on a life of its own over time. So Tim Church, favorite episode? And maybe a runner-up.

Tim Church: So this is very tough. There’s a ton of them. And none of the ones that were my favorite are with me in them. So I’ll throw that out there. But Episode 057, the Power of Automating your Financial Plan, which is one that you did solo, Tim Ulbrich, which was awesome because I did one episode solo, and it’s really hard.

Tim Baker: It’s hard. It’s really hard.

Tim Church: It’s really hard to talk, but you did such a good job. And when I think about that topic, I think it’s so important to not only make it as a convenience factor, but really, that’s one of the most powerful ways to grow your net worth over time and getting that in play. And I think there’s a lot of cool technology out there that you can make it happen. But that, to me, was really powerful. And then my runner-up was Episode 073, How to Determine the Priority of Investing, which –

Tim Ulbrich: The buckets.

Tim Church: Yeah, which I nicknamed “Baker’s Buckets” because we talk about kind of the order in which you put in your tax-favored retirement plan. So that was a cool episode too.

Tim Ulbrich: Awesome. Tim Baker, what about you? Favorite and a runner-up.

Tim Baker: Yeah. I think my favorite, the one that sticks out to me, I really liked the episode with Adam and Brittany Patterson.

Tim Ulbrich: Oh, so good.

Tim Baker: Where, you know, I think Adam was the first episode in Episode 031 where he was just walking us through the journey of paying off $211,000 in 26 months. It’s unbelievable to me that to be able to achieve something like that in that short a time frame is just something that, you know, causes me to really pause and really think about that feat. And it’s impressive to me. And I think we had both of them back on Episode 059 to kind of talk through life after debt and really, the world’s their oyster. And obviously, I know Adam and Brittany. They’re actually clients of YFP Planning. And they’re just fantastic people and great to just learn more about what drives them and really help them to kind of take their journey to the next level. So I think those would be my 1A and 1B. I think my runner-up to that one, I really liked the episodes that Alex Barker, I think we had him on a couple times.

Tim Ulbrich: Three, right, now?

Tim Church: He holds the record.

Tim Ulbrich: Yes.

Tim Baker: He’s one of those individuals that, like I think when he talks, I listen. I think he has a very conversational way to kind of get his point across and his story, and to be honest — I think I’ve told him this in the past is that when I was, you know, thinking about launching Script Financial, now YFP Planning, I needed an education. I needed to really understand more about the clients for which I was to serve, and at the time, I didn’t have a lot of pharmacy clients. But I really wanted to plug into that world and see what makes pharmacists tick, what are they really looking for? And in Alex’s podcast was actually one of the ones that I reviewed and listened to. And I really like it. And the fact that we had him on our podcast so many times, and he’s a big supporter of our brand and we of his, you know, I think what he’s trying to do with Happy PharmD is just commendable. And I think I really enjoy having him on the podcast.

Tim Ulbrich: Great recommendation — sneaking in three, by the way, with the 1A, 1B. We’re going to let it slide.

Tim Baker: Yeah, you know, I’ve got to have some more.

Tim Ulbrich: You know, I would add — certainly I agree with everything you said about Alex. I think he’s a thought leader, I think he stimulates great conversation, great discussion, which we need in our profession. You know, the Pattersons, what’s so cool when I think about the journey that they’ve had, they are now out there doing education.

Tim Baker: Yeah.

Tim Ulbrich: You know, they were at their state association right now in Alabama. So I think back to the compounding empowerment, like they had such a transformation. Now they’re sharing that journey to help others along that way. And that is awesome. I mean, that fires me up.

Tim Baker: It’s inspiring, yeah.

Tim Ulbrich: That’s the exponential factor in terms of allowing the message to get out there and really having a true impact and change. You know, for me, I think that — this was really, really hard. I think about a lot of these episodes, and one of the things I’ve never talked about on the show before is I think selfishly, by doing so many of these interviews, being able to talk to these people is just an amazing benefit. It’s so inspiring and there’s stories that stay with me. They make me better as a person, as a father, as a business owner. And as I had to really think about which one of these, what rises to the top for me is Episode 060 with my colleague at the Ohio State University is Breanne Porter. And she talks so much about her lessons learned through accruing $224,000 of student loan debt. But I think why that episode stands out to me is her transparency and her honesty of what she didn’t know and what she now knows and how she feels throughout that journey. And I think that while we have featured so many debt-free stories along the way, what I really like about that is she’s not yet to the point of being debt-free. And she’s in the grind, she’s in the weeds, she’s working through it. And I think that’s going to resonate and will resonate with so many people as well. The other one that stands out to me, which I’m excited we’re going to have her back on the show in Episode 109 is we had Carrie Carlton on Episode 009. And she talked about her journey beginning to build a real estate empire. And spoiler alert: That empire has expanded. But real estate’s a passion of mine going forward and I think will be a great asset for many pharmacists to consider. And that opened up for me just a whole new area to think about of how she’s really leveraging her skill set in a very different way from pharmacy but is diversifying her income and building up assets in other ways. So those are our favorite episodes from the Your Financial Pharmacist podcast. We’d love to hear from you about what you thought your favorite episodes were and of course, content ideas you have for us going forward, always welcome it. [email protected]. At this point, we’re going to bring back some of the guests that we’ve had on the show before, some of our favorite episodes and stories. We’re going to ask them, we have asked them to give a quick update of their story, where they’re at. And so let’s hear from those guests right now.

Nick Ornella: Hello, this is Nick Ornella from Episode 079 of the YFP podcast. Since being on the show in December, my wife and I submitted the final payment on her student loans, so over $37,000 paid off in a little over 10 months. We took a two-week trip to Spain and Morocco to celebrate and also to celebrate our 1-year wedding anniversary. And after that little spending splurge, we started saving again, this time hopefully to start a family here in the near future. I’m still working full-time as a pharmacy manager at Walgreens, and I’ve been working hard on my blog, the Young Professional’s Guide to a year off. And as YFP celebrates its 100th episode, YFP had an impact on my own journey because Tim Ulbrich was there for me way back in 2016 when I decided to take a year-long sabbatical from my pharmacy career to travel. I found the YFP website and blog and reached out to Tim, and he was there to give me advice and encouragement. He was a big reason why I decided to hit pause on my career and to pursue my dream of traveling for a year. And that year ended up being just an incredible experience and one of the best years of my life. So I’m forever grateful for Tim and YFP for the help and inspiration that he gave me. And I think the work that YFP is doing is important because it helps young pharmacists get out of debt, become financially independent so they can live more intentional lives and not be controlled by debt obligations. You know, it allows people to take bigger risks like starting a new business or becoming an entrepreneur or doing something crazy like I did and quitting their job for a year to pursue a lifelong dream. So a big congrats to Tim and the YFP team on 100 episodes. Please keep up the good work!

Jill Paslier: Hey, it’s Jill and Sylvain Paslier from Episode 050. We wanted to give you a little update on what we are up to now. We’re still budgeting every month, and it feels really great to be saving money instead of sending so much back to the bank for loan payments. Our current spending plan has a little more room for fun stuff like traveling and enjoying our hobbies like playing music. I’m also trying to be a resource for the local college of pharmacy to help encourage financial literacy education for the students. I’m also facilitating Financial Peace University, which is a Dave Ramsey course, at our local church.

Sylvain Paslier: Being in control of our finances and becoming debt-free has given me peace of mind to actually leave my 9-5 job and launch my own business. And I think it’s working well because I could focus on the work instead of worry about the money. I even started my own podcast.

Jill Paslier: I think YFP is a great resource, especially for students and new pharmacists as we are learning how to manage our own personal finances. Many of us make the transition from making very little money to making significantly more, and I think it’s important to make this adjustment wisely so that we have a purpose and a plan for our money. I also really love the online YFP community, such as on Facebook. We can ask questions and have peer support as we continue to learn about managing our money together.

Sylvain Paslier: While there are plenty of resources out there on wealth management and personal finance, finding a specific community of people that you can relate to makes for meaningful connections and increased motivation and progress, which is great about the YFP community.

Jill Paslier: Thanks for listening. Bye!

Derek Schwartz: Hi, this is Derek Schwartz from Episode 014 of the YFP podcast. My podcast aired in September of 2017, when I was still on my journey to becoming debt-free. And my journey started in late 2014, when I made my first student loan payment, and I had over $180,000 in student loan debt to tackle. 40 months later, in early 2018, I made my last student loan payment ever. I paid off $180,000 in debt in 40 months, and looking back on it, it was such an incredible time to not do things with money because I sacrificed every dollar that I could to go into student loans. Every penny I could pinch would go back into it. And that’s the secret. That’s what you’ve got to do. I tell people, if you’re really serious about paying off your debt as soon as you can, you have to budget and squeeze out every dollar and cent you can to go back onto the student loans. Trust me, it’s worth it being on this side. Since I’ve been debt-free, I’ve been able to save money for an emergency fund, I’ve increased contributions to my retirement accounts, and this summer, I’m looking to purchase my first home. All of that couldn’t have been accomplished without paying off my student loans first. And one of the reasons I’m really excited about the YFP community is it’s a group of other pharmacists that are looking for the same goal. They’re looking for financial stability. They want to get their student loans paid off. They want to save money for retirement so they can have some. And it’s such a great community that brings in all the questions, you can get all the answers there, and it’s been amazing to have been a part of it since Episode 014 of my podcast. Happy 100 episodes of the YFP podcast! And I look forward to the next 100. Thanks, everyone.

Blake Johnson: Hey, guys, this is Blake Johnson from Episode 082 of the YFP podcast. Just a quick update on where me and my wife are. We just finished up rehabbing our eighth rental property with our business partners. And that was exciting for us because in April, that marked one year of being in business, and we were able to close, rehab and rent out our eighth property. So we’ve made good strides here in our first year, and we hope to continue to do that in the following years. However, at this time, our market is getting flooded with investors, so we’re planning on slowing down the purchasing a bit and make sure we invest wisely and purchase at the right price. Outside of that, we continue to invest in our Vanguard funds, specifically, our BTSAX mutual fund and also invest and max out my wife’s 401k. This summer, we’re going to enjoy a little trip, bigger than usual. We’re going to go over to Europe and spend a week in Paris and Prague. We both like looking at architecture and just kind of soaking in the environment and culture over there. So we’re going to enjoy that. That’s just a quick recap on where we’re at. But I just want to congratulate the guys over at YFP for celebrating its 100th episode coming in. These guys are making a huge difference, and the reason why is as pharmacists, we just don’t receive, in most schools, financial matters. We spend so much time learning about clinical decisions and learning about all of the different chemistry and pharmacology of drugs, but we never have any education on finances. And that’s a problem because we’re in a profession where it’s great, we come out making six figures, but we have no education on how to invest that wisely. And the guys at YFP are making sure that we know how to do that. When we graduate, we can take two roads. We can go on one road and just spend it all and never invest it and when we retire, have no money. Or we can take another road where we learn to live on less than we make and invest it wisely. And the guys at YFP are laying out a great road map on how to do that. They’re teaching people how to invest it wisely, how to protect ourself with insurances and make sure you know who to talk to if you don’t understand the stock market and how to invest your money. So guys, congratulations on your 100th episode, and I hope down the road as we look back 20 years from this that we see pharmacists that are retiring with lots of savings and lots of money saved up. That way, they can continue to give of their time and also of their money, just like we give in our profession now. Congratulations, guys, and I hope to see more good from you.

Tim Ulbrich: So thank you to those guests that came back on the show, took time to give us an update on your story. We appreciate your contribution, obviously, to the podcast and the community. And at this point, we’re going to hear from some of the pharmacy entrepreneurs out there that have been just incredible collaborators and partners for us over at Your Financial Pharmacist and in large part, have allowed us to be successful in the work that we’ve been doing.

Alex Barker: Hey, this is Alex Barker, the Happy PharmD founder, where we help pharmacists create fulfilling careers and lives. I had the privilege of being on Episode 007, 038 and 092. 100 episodes! Congratulations, YFP team, all of you Tims. Few podcasters reach this milestone, so this is great. But what should be celebrated more is their mission because the more pharmacists who pursue financial freedom, the more impact our profession can make. Because I believe what stops most from pursuing a dream, a goal, a great ambition, something risky, is the excuse of not having enough money. But financial freedom makes that excuse go away. And in turn, it frees up pharmacists to pursue greater and bigger things. Look, I was able to pay off $200,000 in debt. And that has financially freed my family to live our dream. And this summer, we’re actually celebrating by going around the country in a road trip. This is something that we would never be able to do if we were financially burdened. And it may seem like a long way for you to go. But trust me, we thought the same thing when we first started this journey. You can do it. Financial freedom is possible. Cheers to the YFP team and all you financial freedom-seekers.

Blair Thielemeier: Hi, this is Blair Thielemeier, founder of Pharmapreneur Academy and author of “How to Build a Pharmacy Consulting Business.” I was a guest on Episodes 039 and 089 of the YFP podcast. And as they’re celebrating their 100th episode, I was reflecting on the difference that YFP is making in pharmacists’ lives in helping them create a solid financial foundation on which they can build a business. So we all know that the job market is somewhat shaky these days. Being able to build a side hustle in pharmacy consulting is literally changing pharmacists’ lives. And having a solid financial foundation just gives you the ability to take more risks in your career and do something you truly love. So I just wanted to say thank you to all the Tims for creating this amazing podcast and doing this work in helping pharmacists change their financial lives.

Adam Martin: Hello, this is Adam Martin, founder of the Fit Pharmacist, speaker and author of both “Rx You: The Pharmacist’s Survival Guide to Managing Stress and Fitting in Fitness,” and “Scripting Your Success: How to Jumpstart Your Career,” as well as host of the Fit Pharmacist healthcare podcast. I was a guest on Episode 091 of the Your Financial Pharmacist podcast, and as Your Financial Pharmacist celebrates its 100th episode, I want to congratulate the Tim team on this monumental achievement. Seriously, job well done, guys. I believe that Your Financial Pharmacist is making a difference in our profession because as pharmacists, we are trained to perform root cause analysis to medication error review. This translates to finances perfectly, as stated in their book, “Seven Figure Pharmacist,” as root cause analysis unveils that financial problems, regardless of the specific situation, stem from the five behavioral biases that impact financial decisions: overconfidence, hyperbolic discounting, loss aversion, status quo and herd mentality. In the book, Tim and Tim share their experience with all of the pharmacists and students they have helped to overcome financial burdens through their work. Overall, they help us to overcome the most common financial pharmacy pitfalls, keeping us away from financial fitness through the work that they do. Congratulations, guys, on all you have given through investing in our profession. Wishing you great success on the interest you have compounded throughout the years. With gratitude, Adam.

Ashlee: What’s up, listeners? Ashlee here from RxAshlee. I was on Episode 095, just a couple weeks ago, with Tim Ulbrich. And I had so much fun. And when I found out that you guys are celebrating your 100th episode, I was like, oh my gosh, I have to congratulate you. I know what an accomplishment that feels like. I understand the hard work, the blood, sweat and tears that go into building a podcast, building a platform, creating such an awesome, valuable show for the pharmacy profession. I believe the work that YFP is doing is critical because of the need that we are going through in pharmacy. So many of us are graduating with student loans. So many of us are graduating with all of these questions of how do I invest in myself? How do I prepare for my future? And all three of the Tims are really meeting us there. They’re giving us what we need and that support, tips, advice on how to strategize and making sure that we can live our best lives inside the profession and, most importantly, outside. So thanks again to all the Tims, to all the YFP community, you guys are really the future of this profession. And I love, love, love supporting you. Thanks again, and congratulations! I am always going to be one of your No. 1 fans.

Nate Hedrick: Hi, this is Nate Hedrick, founder of the Real Estate RPH and frequent guest of the YFP podcast. Just wanted to take a second to congratulate Your Financial Pharmacist on their 100th episode. I really feel like YFP’s making a difference in the pharmacy world. They’re providing some much-needed financial education. Especially as someone who graduated pharmacy school with literally hundreds of thousands of dollars in student loan, it’s been really nice having them as a resource as I work toward paying off that loan and ultimately, trying to achieve financial freedom. Looking forward to partnering with you guys even more in the future, and I’m excited to see what you have in store for the next 100 episodes. Congratulations, guys!

Tim Ulbrich: So to those pharmacy entrepreneurs, thank you so much for taking the time to provide your input and know that we, the collective Tims, have so much respect for the work that you’re doing. You’re an inspiration to us each and every day, each and every week, and it’s certainly fun to be a part of this community of pharmacy entrepreneurships that are, I think collectively helping one another and hopefully paving the ways for others that want to go into this area as well. So I want to end this episode in us having some conversation about why do we keep going? So as we think about episodes 101 through 200, you know, what’s the point? What’s the purpose? What’s the content? And why do we continue to go on this journey? And so Tim Baker, as we think about the future and where we’re heading and the mission of YFP and really, I think that we believe we’re just kind of getting started on this journey, what’s the future look like? Why do we keep going from here on?

Tim Baker: Yeah, so you know, I think sometimes it’s hard with the day-to-day, you get so busy with what you’re doing and obviously working with clients and things like that it’s sometimes hard to slow down and reflect, which is a little bit — I don’t want to say it’s hypocritical, but what I try to do is force clients to do that on their journey and with their financial plan and really take stock of where we’ve been and where we’re going. But you know, there’s a few times recently — obviously with this episode that you think about just where the heck we were a couple years ago and I think where we’re at. But I think more recently, you know, when we were at the APhA conference in Seattle, we had a booth there, and I wish Tim Church was there with us because he would have ran through a wall after that experience because he would have just been so fired up about I think the buzz that we saw there. And literally, I don’t even know how long we stood there just meeting different people that walked by our booth. But it could have been two or three, four hours, I have no idea. It felt like two minutes because you just talk to people — and I think one of the things that’s really crazy about the podcast is that you feel — people speak to you as if they know you. And maybe they do because they’ve heard us so much on the podcast. And you know, I don’t take that lightly. And I think for me, it’s just like you said, seeing people fired up about a topic that they maybe weren’t fired up about it two years ago. And I think about all of the content that we have out there with the podcast and the guides and the blog posts and things like that, but I really think that we’re only scratching the surface. I think that there’s so many things that we have yet to uncover, and I think the scope of what we’ve talked about it broad, but I think even doing a deeper dive or even expanding our scope and our discussion. And I think wanting to be thought leaders, you know, in and around the profession of pharmacy I think is important to us and really, ask those good questions. So I just get really, like I said, I get really fired up about thinking about where we still I think need to venture and go. And like I said, it’s been a great ride. Like I kind of reflect on my own personal journey, and I think about how grateful and how lucky, really, I am to have come across you guys, you know, Tim and Tim. And I think without you guys, like none of this is really possible. And I think like when we start to go down the path of saying, hey, we’re doing this podcast and we’re doing financial planning and the book and all this stuff, and I think the mindset from Day 1 is can we row this ship in the same direction, this boat in the same direction and one Tim looking out for the benefit and the interests of the other Tim has just been, it’s been an honor, really. Not to sound cheesy, but I know I’m exactly where I need to be because none of this feels like work to me. It feels like I am perfectly positioned to be doing what I’m doing because I enjoy working with pharmacists as a financial planner as much as I enjoy trying to figure out the business and where we’re going to go with YFP and, really, the direction that’s still ahead of us. So thank you guys. That’s my thought.

Tim Ulbrich: Tim Church, what gets you jacked up about the next 100 episodes?

Tim Church: Yeah, it’s been a really fun ride. And I think that the one thing that really gets me fired up — and you guys kind of mentioned that already — is just the transformation. There’s been a number of people that have said as a result of interacting with our brand, whether it’s the podcast or some other form, that a change has happened for the better and that they’re in a better position than they were before they heard of us, before they listened to some piece of content, before a story was told. And so I think there’s a lot more people out there that need to hear some of these stories to get inspired and motivated because I think it can have just an incredible amount of change and movement across everybody in the profession. I think one of the other things that really fires me up is when schools and organizations reach out to us to come in and really be able to cater to a larger group. And I think that’s really a cool thing when we’re able to make a bigger impact in that way. So I think those things are really interesting and motivating to me to kind of keep things going.

Tim Ulbrich: Absolutely. And I think one of the things we’ve talked a lot about this weekend together is while certainly we are running a business, I think what gets us more excited is actually moving the needle on this issue. So as we all know that personal finance is such a thread of every part of your life that if your financial house isn’t in order, it impact lots of things. It impacts marriages, it impacts relationships, it impacts your quality of life, your satisfaction at work. And I think really moving the needle with helping on these transformations and helping people put their financial house in order is really what we want to hopefully continue to do and look back and say, ‘That was a really fun journey in doing it.’ And one of the things I think we’re super passionate about is this education around personal finance and financial literacy needs to be in every college of pharmacy across the country. And we’ve begun to pave that road, but we have some exciting plans hopefully to continue that into the future, but making sure that every graduate is coming out with some basic skill level and understanding of what they need to do as it relates to their financial plan. And I should say that the only way we’re going to move the needle on this issue is not through the three of us running as fast as we can. The way we move the needle on this issue of personal finance and everything that comes with it is through the collective community of thousands and thousands of pharmacists saying, we care about this topic and we want to do this a different way than maybe it’s been done before. And that’s what it’s about. It’s about empowering the community to collectively move this issue forward. And we’re not going to do it as the three of us. It needs to be this group as a whole. And so I want to also thank — you know, I think just to echo Tim Baker’s comments — I mean, without the three of us, I think the collective power of what we each bring, you know, this wouldn’t be where we’re at. So I think us working together and running the same direction is where we need to go with the community alongside of us. I think we also would be remiss if we didn’t thank Shea, Andrea and Jess for — this takes a lot of time. I think we’ve been spending three or four hours this afternoon putting together a couple episodes, and that means sacrifice, it means time away from family. And that’s not easy. And I think for them, allowing us to pursue our dream and our passions, you know, I think it goes without saying that we love you guys and certainly appreciate what you do. And Caitlyn and the entire team at YFP, Caitlyn, Paul, Frankie, Tom…

Tim Baker: Christina.

Tim Ulbrich: Christina, I mean, as we think ahead to the future, hopefully more on the team as well. We’re so grateful for your buy-in to the vision, your commitment to what we’re trying to do. And again, it’s about the team, and the team is really I think moving everything in the same direction. So let me wrap up by saying to the YFP community, we thank you. We’re grateful for your continued support of the work that we’re doing. We’re excited to be here at Episode 100, but I think we’re more excited about what lies ahead for the next 100 and beyond.

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YFP 099: Key Financial Moves for Pharmacy Graduates

Posted on by yfpadmin

Key Financial Moves to Make as a Pharmacy Graduate

Tim, Tim and Tim discuss several key financial moves to make as a pharmacy graduate.

Summary

Tim, Tim and Tim are live for another episode of the YFP podcast. On this episode, they discuss several moves every pharmacy graduate should make as they are transitioning into new practitioner life (based off the blog post: https://yourfinancialpharmacist.com/20-financial-moves-every-pharmacy-graduate-should-make/ ).

Two important first moves pharmacy graduates should make is having an emergency fund and eliminating credit card debt. Tim Baker explains that you should eliminate credit card debt as it’s the most predatory with high interest rates and doesn’t allow you to build wealth on your own. Creating an emergency fund gives you a cash reserve so that you don’t get into more credit card debt. He suggests having a 3 to 6 month emergency fund.

Long-term disability insurance is an important move to make because you never know what is going to happen. Disability insurance provides you with income in the event of an illness or an accident causing you to not be able to work.

Determining a student loan strategy is always a decision that new graduates are faced with. However, the answer depends on many factors including how you feel about the loans, what type of loans you have and whether you are going to work for a qualifying employer (PSLF), among others. Tim Baker reminds listeners to be intentional and to find a professional that understands loans to help guide your decision making.

Another important move to make is to begin investing in your company’s 401k, 403b or TSP retirement fund by at least contributing to the match. As mentioned many times before, an employer match provides essentially free money that you are unable to go back in time to get. Tim Church also shares that lowering your AGI by contributing to a retirement fund could lower your student loan payments, thus allowing you to simultaneously build wealth.

Considering a side hustle is important during this time as so much is changing in the job market. Many pharmacists are experiencing pay cuts as full-time hours are changing from 40 hours to 30 hours/week. A side hustle utilizes your skills to bring in other income, whether it is through pharmacy work or another passion you have.

Lastly, the Tims discuss the importance of avoiding lifestyle creep.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode, Episode 099 of the Your Financial Pharmacist podcast. One episode away from Episode 100. We’re going to talk about financial moves we think every pharmacy graduate and every new practitioner and even others should be making when it comes to their own financial plan. Now, we’re going to talk about a handful of things that come from a great blog post that Tim Church wrote, “20 Financial Moves that Every Pharmacy Graduate Should Make,” and that entire list of 20 and that blog post is available over at YourFinancialPharmacist.com/20. Again, that’s YourFinancialPharmacist.com/20. So when I pulled up this blog post, Tim Church, there’s a lot here. I mean, how long did this one take you to write?

Tim Church: That one took awhile because you guys had some input on that as well and we kind of went back and forth and tried to hit all the key moves that we wanted people to know about.

Tim Ulbrich: Absolutely. And you know, as I think about back to graduating from pharmacy school — I’m sure you feel the same way — this would have been a list of, wow, I wish I would have known these things at graduation, right? So that’s the goal. I think a lot of lessons that we’ve learned along the way, lessons we’ve heard from the community, wanting to help out graduates and new practitioners as they’re making this critical, important transition into new practitioner life. So Tim Baker, the first two that I want to talk about are what you referred to in Episode 026 of the Your Financial Pharmacist podcast, which are around emergency fund and eliminating credit card debt, which you call “baby stepping” into your financial plan.

Tim Baker: That’s right.

Tim Ulbrich: So talk me through why those are so important in terms of getting started with a financial plan.

Tim Baker: Yeah, I think those are really the two things that I look at when I look at someone’s financial situation is what do we have in cash reserves and what’s the consumer debt look like? You know, typically from a consumer debt perspective, the debt’s going to be the most predatory. You know, paying high interest credit card for balances that you’re carrying, you’re never really going to transition to the ability to build wealth on your own. We talk about the eighth wonder of the world is compound interest. You’ve got to make that work for yourself, not for a credit card company. So that’s probably, you know, from the get-go, what’s that picture look like? And almost everything else stops — almost — maybe everything. I’m thinking of like an employer match, but almost everything else stops if that’s a thing because it’s just, like I said, it can be tough to get out of. The second, basically once we get out of that predicament, the second thing is having some cash reserves a la an emergency fund so we don’t get back into the credit card debt. There’s a stat out there that says 40% of Americans can’t cover a $400 emergency. That’s super scary. So for that percentage of Americans, what is their emergency fund? It’s the Mastercard. It’s the Visa. It’s the American Express. And then we kind of just repeat the cycle. You know, I have clients that they have a ton of credit card debt, and then they consolidate down into a personal debt, they wipe the slate, and then they clear it eventually, and then they do it again. And hopefully, now that they’re working with me, we’re going to break that cycle. So the emergency fund really allows you to do three things. First, it gives you peace of mind. Knowing that you have cash money in the bank allows you to sleep better at night. The second thing it does is it really allows you to avoid that predatory credit card debt. You know, like we said, most people will reach for the Mastercard, the Visa, to get out of those emergency situations. And then finally what it does is it allows you to get your money working in the investment world and keep it working without having to basically withdraw that in the event an emergency happens.

Tim Church: So Tim, where do you recommend your clients keep their emergency fund? And how much do you recommend that they have?

Tim Baker: That’s a great question. So you know, typically what we say is you want to have 3-6 months of non-discretionary monthly expenses, which is just a really a fancy word to say expenses that are going to go out the door regardless if you work or not. So those are going to be things like your rent or your mortgage, groceries, utility bills, your loan payments. So if you’re a single income earner, and you have $5,000 of those expenses after you add them all up, then you’d take $5,000 times 6 months, and it’s a $30,000 emergency fund. If you’re a dual income earner, you typically are allowed or should, recommended to have closer to 3 months. So it would be in that situation, $15,000. And the idea is that, you know, a dual income earner, you’re not putting your proverbial income eggs in one basket. Typically, both spouses or both partners are not going to lose their job at the same time. So that’s basically how you calculate it. Now, where to put it is a great question as well. So you want, typically you want something that is liquid that you can get to it at a known price, which is cash is best. Maybe not too easy to get to, something that bears some interest, but that’s not typically the point of the account. So when I started advising clients on emergency fund, I looked at a lot of different routes, a lot of different banks, actually. Ally, Synchrony Bank, Capital One, to name a few. I really like Ally; that’s what I use. I typically recommend that. It’s just easy to use, easy interface, app is clean, website is clean and easy to use. And it gets 2.2%, which I like. So that’s typically the high-yield savings account that we’ll look at for the emergency fund.

Tim Ulbrich: So as we think about the graduate coming out today, May 2019, they’re facing $150,000-200,000 of student loan debt, overwhelmed, likely, with that and what it means, lots of other competing priorities. And now they’re hearing 3-6 months worth of expenses and all of a sudden, they might look at their budget and figure out this is $10,000-30,000, and they say, “Thanks, Tim, Tim and Tim, but here’s the reality of what I’m working with.

Tim Baker: Yeah.

Tim Ulbrich: So the question is, where do I even get started with this? And what’s the baby step I can take to begin this process?

Tim Baker: I think you want to phase, you have like a phase plan. So as an example, if I’m looking at $10,000 worth of credit card debt, which I see all the time for a P4 or resident, I really don’t have anything cash at all, I sit down with a client and say, “OK, let’s build a baseline emergency fund.” So maybe it’s $2,500. Maybe it’s $5,000. Maybe it’s $10,000 of, in that case, a $25,000 or $30,000 emergency fund. So I think building a baseline emergency fund, a target that we can get to that once we achieve, then we can kind of look at the credit card debt and be gazelle-like, if you want to say, laser-focused, and really plow through the credit card debt. Now, and the reason that we do that is because, you know, obviously in an ideal world, we’d like to snap our fingers and all of a sudden, we have cash reserves for credit card debt. But the reality is is that that’s not going to happen overnight. So typically, my recommendation is to take bite-sized pieces, get to a baseline emergency fund that you feel comfortable with, and once we achieve that, then go to Phase 2, which is turn off the emergency fund contribution, apply that completely to the credit cards, hustle, side hustle, listen to Tim Church in that regard, and really start making moves towards that. And then once that phase is over, let’s get back into the emergency fund and get that going.

Tim Ulbrich: So we talked about several important things around emergency fund, 3-6 months of expenses, we talked about you want it liquid, you want it when you need it for an emergency, get it out of your checking account so that you can hold some of that temptation of pulling from it from your day-to-day expenses. One of the things we didn’t mention is just the power of actually naming it an emergency fund.

Tim Baker: Yeah.

Tim Ulbrich: So I think we often talk with pharmacists — which I’m sure you see this with clients — where they say, “Hey, I’ve got this lump savings account,” and in their mind, they have five or six things they’re saving for. But really, the power of calling it an emergency fund, which is really true with any other goal.

Tim Baker: Yeah, I mean, it’s so true because the psychology says that you’re less likely to steal from your emergency fund if you call it an emergency fund if it’s not for an emergency. It’s just like we talk about with a travel fund, it’s great to have a travel fund, but if you can actually call it where you’re planning to go next, you know, Disneyworld, Iceland, wherever that is, you’re less likely to steal from Minnie and Mickey Mouse because it’s named “Disneyworld” if I want to go buy something that I’m not necessarily, that that fund is not necessarily for. So I think it’s important to do that. You know, we kind of do the mental accounting. I see a lot of clients that have cash in an account, and it will be $20,000, and I’ll say, “What’s that for?” And they’re like, “Well, I think it’s an emergency fund. I don’t know.” So my thing is clearly delineate what it’s for. And if there’s a travel fund mixed in with the emergency fund, break it out, you know, separate those funds.

Tim Ulbrich: So first two moves that we’re talking about here are eliminating credit card debt, coming up with a plan, and establishing an emergency fund. Again, we’re pulling from the “20 Financial Moves that Every Pharmacy Graduate Should Make” over at YourFinancialPharmacist.com/20. Next one, Tim Church, is get long-term disability insurance. So you know, I think this one is tough. Nobody likes to think about a situation where hey, for whatever reason, I’m no longer able to work as a pharmacist because of a car accident, chronic illness, whatever. And certainly, this isn’t as exciting as paying down debt or building wealth, right? Nobody likes to send in insurance premiums. So why should pharmacists, even young pharmacists and graduates, be thinking about having disability income protection in place?

Tim Church: I was one of those people for awhile that felt that, you know, nothing was going to happen to me. I’m young, I’m healthy.

Tim Baker: Invincible.

Tim Church: Not much is going to happen. But the reality is when I learned a couple pharmacists that I knew that I was working with, they were unable to work, at least temporarily, because of autoimmune diseases, accidents that they had in their cars. I mean, the reality is stuff happens. When you look back, how much time, energy, focus, money, did you put in to become a pharmacist and be able to practice, be able to make an income? So when you look at that, all that was put in to get there, I mean, don’t you think it’s a good idea to protect that? And that is really where long-term disability comes into play. And long-term disability insurance, it’s really income insurance. And what it does is it provides you with money in the event that you’re not able to work because of illness or accident.

Tim Baker: Yeah, and I think a lot of people, they forget that one part is most disabilities occur because of an illness, not because of an accident. And you know, like I always tell pharmacists is like, you’re not going to like it. You’re not going to like paying premiums for a disability policy because quite frankly, they can be expensive.

Tim Church: Yeah, a lot of times, even more expensive than life insurance that you’re trying to —

Tim Baker: Yeah. But the fact is that you’re more likely to be disabled than to have a premature death. You’re more likely to have way more expenses when you’re disabled versus a premature death because alive, you probably have medical issues that you have to deal with, so this is doubly important because it’s one of those things where you always think it’s going to happen to somebody else. And the fact of the matter is, you’re right at the precipice of your career and really, your earning potential, and you want to protect that. Becoming a PharmD is — I don’t know firsthand — but I understand it’s very difficult. And you spend a lot of blood, sweat and tears to get to where you’re at. So you want to protect that ability to earn.

Tim Church: Yeah, and I think one of the questions that often comes up is well, my employer provides it. So I don’t really need to worry about it or need to get that. And you know, that may be the case, and I think there are some situations where you may have enough coverage and you may be protected, but I think a couple things that you want to consider is that even if you do have something through your own employer, the couple things you want to consider is No. 1, is it portable? Because the days of working for the same employer for your whole entire life, that may not necessarily be the case now. So if you move and change jobs, you know, is your new employer No. 1 going to offer it? But what if your health status changes and you need to get coverage on your own? So a lot can change. And the second thing is just because your employer provides it, it may not be exactly what you need. So one of the things when I was working part-time for a hospital, I was checking out what was offered based on my fellow employees who were working there, and what we found was that they only offered own occupation coverage for two years. So own occupation is one of those riders or add-ons, sometimes baked into the policy, that you really want to be aware of. But essentially, what that is is if you can’t work as a pharmacist, you’re going to get a percentage of your pay every month as a benefit. Whereas other policies and other coverage, they’re having any occupation, which means if you can do any kind of meaningful work, you’re not going to get that monthly benefit. So that sometimes is a little bit even more expensive as well but something you want to keep in mind.

Tim Ulbrich: Yeah, and unfortunately, navigating the selection of a disability insurance policy isn’t always super easy, just the way these products are sold and the options, the riders you mentioned, the time periods, the elimination periods, and so we’ve got some great resources that we would point you to. Episode 045, we talked about how to determine your disability insurance needs. And then also, if you go to YourFinancialPharmacist.com, at the top, you’ll see an option that is “Protect Your Income.” We’ve got some great information about life and disability, which connects you with our partner for both of these, which is PolicyGenius. And I just recently went through this process of purchasing additional disability insurance as well as life insurance, very easy, very transparent, a great process to follow. So make sure to check out those resources if this is something that you need. Alright, Tim Baker, we’re going to take on the, probably the No. 1 question we get from new graduates is, what the heck should I do with my student loans? I’ve got $200,000 of student loan debt, I’ve got all these options available to me. Unfortunately, it’s incredibly confusing, forgiveness and non-forgiveness, federal and private. You know, as you talk with clients and specifically those that are just coming out of pharmacy school, where do you start in terms of this question of determining a student loan payoff strategy?

Tim Baker: Yeah, it can be a monster. You know, it can be a monster topic, a monster thing to kind of wrap your arms around. And you know, a lot of times, I’ll have a pharmacist that will talk to me, and they’ll say, “Hey, this is my situation. What should I do?” And I’m like, “It depends.” You know, it depends. And like I said, I always say that’s the worst answer ever, but it truly does. And there’s so many ways to kind of tackle the student debt. And part of it — the question I would ask first is like, how do you feel about the loans? And you know, it’s probably a question that you know the answer to, but you probably haven’t asked yourself. So you know, if you’re feeling like, meh, the loans are there and I’ll pay them off when I pay them off and it’s kind of like, I view it as like a mortgage debt that I’m just going to pay off over time, and I’m cool with that, versus I can’t sleep at night, it’s a weight on my chest, I get anxiety about this. And these are all like real-world answers that I’ve gotten to that question. That’s going to affect the ultimate strategy, the strategy that you ultimately pick in the end in terms of how to attack the loans. So I think having an inventory, an emotional inventory, of the loans is I think a good first step. But then transitioning to an actual, physical inventory. And I’ll tell you what, like I think back when I first started advising pharmacists on the student debt. And I’d say like, “What do you have?” And they’re like, “I don’t know.” You know? And there was no awareness or there was less awareness than I think that I see more pharmacists that kind of walk in my door — virtual door, I guess — but I think that having a physical inventory of what you have, who you owe, when that starts, is important as well. And then from there, I think you start selecting a strategy that fits your needs and kind of what you want to do, whether it’s a forgiveness strategy, a refinance, like be aggressive with it, which might coincide with refinance. There’s a lot of ways to kind of go about this. I think one of the things that I would be cautious about is really twofold. One, you want to be intentional. You don’t want to get out of school and meander and be like, oh, like I’ll figure it out later because later happens, and you’re still in the same amount of debt that you started with. The second thing is that if you’re working with a professional, if you have six figures worth of debt, and you’re working with a professional that doesn’t understand loans, find a professional that understands loans. There’s so many — so going on another rant — there’s so many young professionals that I talk with, and they say, “Yeah, I’m working with an advisor at Blah, Blah, Blah, and the advice is that the loans will figure themselves out.” And I want to like fall on the floor because literally weekly, we show pharmacists that the path that they’re on could potentially cost them six figures in difference. And I think it’s like, I’m incredulous. I’m incredulous.

Tim Church: Yeah, I mean, I think you make a good point. And I’ll attest to that personally because I was one of those people that made a huge mistake, you know, not pursuing the Public Service Loan Forgiveness program cost me over $100,000. Now, you know, the benefit is that my loans are paid off now, and I can tell other people about it. But you make such a great point that — and I don’t think we can emphasize this enough — is you really have to lay out all of the options that are available to you. And you have to kind of complement those emotions behind the loans with also the math, right? You have to couple those two together to figure out, OK, what is the best plan going to be? And then I think even kind of taking it a step further is when you look at the average student loan debt that a pharmacist has, we’re talking $160,000, which could be a lot more if you go to a private school, is if you’re able to get forgiveness through the Public Service Loan program, then go for it. I mean, the math really makes sense there. And that could actually have a lot to do with the job that you choose or that you ultimately go from your first one.

Tim Ulbrich: Yeah, and I think this really is the time that we have to emphasize further what Tim Baker just said is it’s about intentionality of choosing an option and a plan. You know, I spoke with a group of probably about 120 students last week, and when we get to this topic, I think what they want often is a slide that I know I wanted as a student, which is the “here’s the best option.” And the reality is when it comes down to these variables like how do you feel about it? What’s the rest of your personal situation? You know, do you work for a qualifying employer or not? You know, what are the interest rates? What’s the goals? What are you trying to achieve? Are you a nontraditional student? All of these factors go into choosing the one best repayment strategy for you as an individual. And that might be different than your classmates and others that are out there. And so I think what we’re really advocating here, especially to those that are coming up on graduation, you’re going to enter the grace period, which is really everything but gracious when we think about interest continuing to accrue during that time period. But using this time so that when that notice comes to you that says, “Hey, by the way, here’s your payment, Johnny,” that you’ve already come and decided upon a plan that is best for your situation. And I think that this concept of intentionality goes well beyond just student loans but empowering yourself and putting yourself in a position that I have done the work, I’ve done the research, and I know that this one option is best for me. And now, you’re on the trajectory to get those paid off or whatever the plan might be around forgiveness as well. I can also speak, Tim Church, as I think about the forgiveness and costing, I think you and I did the calculation the same weekend we were together, but also PSLF-eligible, and as I tell many people, for me, wandering into the standard 10-year repayment plan, keeping my loans at 6.8% was probably the worst thing I could have done. You know, refinancing certainly would have been a better option than what I did, Public Service Loan Forgiveness would have been as well. Alright, so finding a student loan repayment strategy, and credit here to Tim Church, I can’t even count how many resources we have on the website around student loans. We have multiple podcast episodes, we talked about PSLF, we talked about the recent news with PSLF. And if you go to YourFinancialPharmacist.com/ultimate, Tim Church wrote the blog post of all blog posts on how do you evaluate the strategy of choosing the best loan repayment option. We’ve got a quick-start guide on student loans, we’ve got calculators.

 

refinance student loans

Tim Baker: We’ve got a quiz.

Tim Ulbrich: Got a quiz. So head on over to the website, YourFinancialPharmacist.com, where you can get started today. Alright, next one we have here as we continue to work through financial moves that every pharmacy graduate should be making is begin the process of investing in your company’s 401k, 403b, or TSP. So Tim Baker, talk us through briefly, if we’re thinking of a new graduate coming out, they start to work for an employer, find out that they have this retirement option, maybe they have a match, maybe they don’t, they’re probably asking themselves the question of, what do I do with this? Where do I begin? And how do I evaluate the balance against debt, emergency fund, and all these other things?

Tim Baker: Yeah, and sometimes, you don’t have to do anything. You know, President Obama was in office when they really started to put forth an auto-enroll feature. So a lot of the psychology behind that was we’re more likely to participate in something if we don’t have to opt into it. It’s more, given the option to opt out, it really pushes participation rates up. So for a lot of retirement plans, you know, you start with a job, and eureka! You’re starting to contribute after maybe a certain period of time, and you’re beginning to see a balance into a 401k, a TSP, a 403b, which is a great thing. And sometimes, you don’t even have to pick the funds yourself. It’s just a target date fund. So what I would say to this is absolutely, if you have access to a 401k or any type of retirement plan, get with your HR department and try to learn as much as you can about them. Sometimes, you’re not going to need to do anything, but the big question that I would ask is, what is the match? And that should be something that you probably should be evaluating as you’re looking at employers. So what is the match? And 9.5 out of 10 times, you should be at least contributing to the match. I don’t care if every other part of your financial house is on fire, most of the time, it’s free money, we talk about it. You want to be contributing up to the match. Now, if you do have, if you’re in a lot of trouble with credit card debt, and it’s almost too much to get out of, that might be a situation where you don’t do that. But at least contribute until you get the match, and then in terms of looking at the funds, that’s less important. It’s time in the market, not necessarily time in the market or picking the individual funds. That’s kind of next-level stuff that I do with clients. But you know, you’re going to want something that’s low-cost in terms of expense. You know, it might be out of the scope of this particular episode, but I would definitely look for things like index funds and that type of thing to really buy the market rather than try to beat the market.

Tim Church: Yeah, and I think Dave Ramsey probably would fundamentally disagree with what we’re saying right now because —

Tim Ulbrich: Is he listening, do you think?

Tim Baker: Maybe.

Tim Church: Because we’re basically saying that most people should be in the match, regardless of your student loan debt. I think one of the caveats is that if you look at the amount of student loans that the typical graduate’s going to have, it’s not going to be a quick fix in one year, two years. I mean, we’re talking this could be a decade-long, maybe a little bit longer or could be a little bit faster, depending on the track you’re on. But the big thing is you can’t go backwards in time and get the match and make up for those years that it was available to you. So I think that’s really big. And then the other point that I would make is depending on what student loan repayment strategy you go in, that if you’re in PSLF and you’re all-in or you’re even doing the non-PSLF forgiveness, you may actually be going way in on your 401k, your 403b, because by doing that, you can actually lower your adjusted gross income, which ultimately will lower your income-driven repayments that you have to make and so you can basically be simultaneously be building some incredible wealth while you’re paying off your student loans.

Tim Baker: Yeah, so that’s kind of like, the next step in terms of an inventory of your loans, selecting a strategy and optimizing that strategy. Really, that’s what we’re talking about here is getting the most out of the strategy and from the forgiveness perspective, the more that you can into those pre-tax buckets that lower your overall adjusted gross income, the better. You’re paying your future self, but then you’re AGI, which lowers your payment and maximizes your forgiveness.

Tim Ulbrich: Yeah, and I think what we’ve often seen with new graduates, new practitioners, is that evaluating what your options are inside of your retirement plan, you know, we talk about on the podcast about fees and asset allocation and calculating your next egg, and all that can quickly become very overwhelming, but I think your point is such a good one to emphasize. Again, get it started, take the match, begin to build that time for compound interest to work, certainly make an investment to learn more about this. And I’d point here too, we spent a lot of time really detailing — I think it was chapters 12, 13 and 14 of “Seven Figure Pharmacist” — all about investing. We tried to write it in a very fundamental, basic way of understanding the strategy, but just beginning that education, whether it’s “Seven Figure,” the podcast or some other resource, making that commitment to long-term knowledge. And I think investing is one piece. But not letting that component of, hey, I don’t have all the knowledge, be a barrier to start in the first place. OK, the last one I want to talk about before we wrap up here, since we have the king of side hustles here, Tim Church, is for new graduates to be thinking about considering a side hustle. And Tim, you’ve done an awesome job with the podcast, the side hustle series. We’ll link in the show notes to an article, “14 Practical Ways to Make Extra Money as a Pharmacist in 2019.” But why should a pharmacy graduate today be thinking about a side hustle?

Tim Church: It’s a great question. And I think in 2019, a lot of things are changing with pharmacy, in terms of the job market. A lot of pharmacists are experiencing pay cuts because, you know, what’s considered full-time may be cut down to 30-some hours. And so I think that’s one of the things that is why people are getting more excited about this topic, but I think it’s really risky in no matter what job that you have, to really rely on one income source. And I’m not saying that every single person needs to go out and have eight jobs. But I think it’s important to look at other ways to diversify how you’re getting that income. We have a great blog post on there called “14 Practical Ways to Make Extra Money in 2019,” so if you go to YourFinancialPharmacist.com and you click on “Make More Money,” there’s some suggestions there. But a lot of them are pharmacist-related, so really taking the skills and the knowledge that you already have and kind of utilizing that to look for other ways to bring value and eventually bring income. But I think also, one of the things that I would have you consider is really looking at do you have other skills even outside of pharmacy that you can monetize?

Tim Ulbrich: Absolutely. And I think one of the things that doesn’t get talked about enough with a side hustle is just an opportunity, you know, some of the things could be creative outlets, they could be things that you’re passionate about, and some certainly make more money than others. But you know, what is that worth? And what is that value of having that opportunity to create and to be innovative and to think of some entrepreneurial opportunities? So I would agree, and we won’t get on the career soapbox right now, we’ll save that for a later date. But I think that in 2019, I’m not sure — and at least as long as we’ve been in the profession, you know, for 10-15 years — I’m not sure there’s a better time to be taking some entrepreneurial risk than there is right now. You look at some salary compression, you look at a healthcare market that’s very complex, when you put any of those two together, that means it’s ripe for innovation and entrepreneurship. And so I think we’ve been in a period where pharmacists have been very comfortable in their salary, and I think that often diminishes the need to feel like they need to take some risk, but I think we’re seeing that changing. And while that may be a difficult period, I think there’s some excitement to be had there as well. So again, make sure to head on over to the website, YourFinancialPharmacist.com. As Tim mentioned, we’ve got a section on that about “Make More Money.” We’ve got the side hustle series on the podcast. And the last thing we would mention here is in avoiding lifestyle creep. And we talked about it in Episode 098 of the podcast, but I think it’s just fundamentally important for every graduate, new practitioner and I think in general to be thinking about it. What can you be doing to avoid lifestyle creep? And when we talk about retirement savings and contributions, at the end of the day, your expenses is really what drives much of that. So what can you be doing to live off less than you make and be balancing the things we talked about on that last episode of taking care of your future self but also enjoying some things today?

Tim Baker: Yeah, I think one of the things to highlight here is, you know, there’s probably a lot of people out there that are listening that are saying, “OK, Tim and Tim and Tim, you want me to have a huge emergency fund, and you want me to pay off my credit card debt, and you want me to buy disability insurance. There’s a long laundry list of things that you’re saying I need to do. How am I supposed to do that?” And you know, I think the thing that I enjoy about working with students and residents who are in that transition process is guess what? Like you’re a resident, you’re making $40,000, you’re probably going to be making quite a bit more in the coming months when you kind of transition away from residency. Or if you’re a P4, and you’re going to work for a community pharmacist or whatever that looks like, you’re going to be making more than you’re going to make as a student. So let’s imagine a world where you’re not making $110,000 or $120,000. You’re making $70,000. You’re making $80,000. And these goals and these things that we want to check off become a lot more workable, a lot more manageable. And that really requires some doing. It requires some — what we essentially are doing is stepping into the income. And we’re paying ourself first in the emergency fund, checking off the block with the disability. We’re building that into the budget because what often happens is that we go and we say, man, I’m going to get that large new apartment, I’m going to drive the Beamer, I’m going to do all those things. And then it’s like, oh, I need an emergency fund. Oh, I need to pay $120 a month for my disability policy? And it’s so much harder to go back. So if we can step into it — and this is like, remember when we were talking to USC this time last year, whatever it was, I was like imploring, I was like, this is for you P4s, you know, this is a perfect time to really put a plan together and be intentional and step into the income because it’s so much harder to go backward in that spending behavior.

Tim Church: Yeah, and I think it’s a great opportunity to basically let people know about your services and what you’re doing because I think one of the things that you do really well is you take all of these things and you help break it down for people in a way that’s easy to digest because I think it can be really overwhelming. I mean, I know when I was graduating and trying to figure this out, I didn’t figure it out at first. I made a ton of mistakes, and then it cost me, you know, doing that. So I think if you’re somebody who feels like just overwhelmed with all these different moves that we’re recommending that you make, I think you should definitely reach out to Tim Baker and book a call. See if you guys are a good fit. Not everybody is going to be a good fit, and not everybody needs that extra attention. But if you’re somebody who feels that way or just interested in learning more, I think it’s a great opportunity to do that. And if you want to book a free call, you can do that YFPPlanning.com.

Tim Ulbrich: Awesome. So we’ve covered I think six or so of the 20 financial moves that you talk about in that blog post. Again, we’ll link to that in the show notes. It’s YourFinancialPharmacist.com/20. So if you’re a regular listener, maybe you’re not a graduating student, maybe you’re not a new practitioner or a year or two out, do us a favor, share this with somebody that maybe you have somebody, a student on rotation, maybe you know a student, an intern that you work with, but you know, one of the most common things we hear is hey, I wish I would have known these things sooner. And that’s exactly what this list of 20 is all about. So as always, we appreciate you, the YFP community. Thank you so much for taking time to listen. If you like what you heard on this week’s episode of the podcast, please head on over to iTunes or wherever you listen to your podcasts each and every week, leave us a review. We’d love to have a rating as well. And certainly we hope you will join us on next week’s episode, Episode 100 of the Your Financial Pharmacist podcast.

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YFP 096: How to Do a Backdoor Roth IRA

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How to Do a Backdoor Roth IRA

On this episode, Tim Baker welcomes Christina Slavonik, CERTIFIED FINANCIAL PLANNER™ and the newest member of the YFP family, to the show. Tim and Christina break down how to do a backdoor Roth IRA conversion, a move that most pharmacists should consider making.

About Today’s Guest

Christina joins us with approximately 15 years of experience in the financial services industry. After serving in various capacities, she attained her Registered Paraplanner℠ designation in 2013 and then her CERTIFIED FINANCIAL PLANNER™ designation in 2017. She currently resides in Ft. Worth, Texas with her husband, Paul, and their two cats.

Summary

Christina Slavonik has been working for YFP for a couple of months as a CERTIFIED FINANCIAL PLANNER™. On this episode, Christina and Tim discuss how to do a backdoor Roth IRA, also known as a Roth IRA conversion.

First, Tim Baker reminds listeners to follow “Baker’s Buckets”, meaning that you should always start saving for retirement with an employer match when available as this is free money. From there, it might make sense to max out an IRA or HSA. After you’ve maxed out your IRA and HSA, go back to your employer 401(k) or 403(b) plan to add in the $19,000 you can put in every year.

Most pharmacists bring in around $125,000 a year, meaning they cannot deduct their traditional IRA contribution as they are above the income limits. In 2019, single taxpayers with a MAGI of $122,000 and married filing jointly taxpayers with a combined income of $193,000 can’t contribute directly to a Roth IRA.

Christina explains that you can instead do a backdoor Roth IRA. First, open up a traditional IRA if one is not already opened and contribute the first $6,000. Then, you can make the conversion by filling out and submitting the appropriate forms. You are then able to convert the nontraditional money to a Roth IRA.

Christina and Tim discuss how to contribute to these accounts, best practices for waiting periods, steps for filing taxes if you contributed an excess amount to an IRA, and a recap of the Roth IRA conversion process.

Check out this blog post for more information on backdoor Roth IRAs.

Mentioned on the Show

Episode Transcript

Tim Baker: What’s up, everybody? Welcome to Episode 096 of the Your Financial Pharmacist podcast. I am so excited to welcome back Christina Slavonik, our newest member to the YFP family. I know, Christina, we heard a little bit from you at APhA Seattle, so welcome back to the podcast.

Christina Slavonik: Yes, thanks so much, Tim. I’m glad to be back.

Tim Baker: So I guess, you know, Christina, just to put you on the spot here, you know, you’ve been working with us for the last couple of months.

Christina Slavonik: Yes.

Tim Baker: How has it been at YFP? And what’s different about us?

Christina Slavonik: Sure. Yeah, it’s been so refreshing. Just really a breath of fresh air just working with —

Tim Baker: Awh, shucks.

Christina Slavonik: Younger people, you know? And we all have, you know, the same kind of not really have the same backgrounds, but at least we have the same things that we’re all working through and especially when you’re able to narrow down your clientele to one niche, it really helps you focus on what they’re really needing, what they’re really wanting, and then being able to share your own life stories as you go through that path together.

Tim Baker: Yeah, I think it’s one of those things where, you know, in my past life, I would work for firms that was kind of a jack-of-all-trades, kind of master-of-none type of thing. That’s not really our game. You know, we really want to focus in on the big issues that are facing pharmacists out there and really provide good service and solutions to really tackle those issues. So today, we’re going to talk about Roth conversions. Like I mentioned, it can be a little bit of a technical subject, but one of the things that we probably should mention first as we kind of get into our list of steps here is way back when in Episode 073, How to Determine Priority Investing, we kind of talk about what Tim Church has deemed “Baker’s Buckets.” So typically when I sit down with clients, you know, I say, “Hey, client, typically how we like clients, pharmacists to really fill their retirement buckets, you know, you should always start with your employer match. So if your employer match is 3%, 5%, 7%, that’s free money.” And nine times out of 10, that should be what we are trying to get, get at least to the match. But from there, depending on the 401k or the 403b, what that plan looks like, not everyone’s 401k, not everyone’s 403b, is going to be equal. So there are some really great 401k’s and 403b’s out there. There are some that are kind of not so great. So it might make sense to kind of go into the IRA world or the HSA world and really max out that bucket next. So typically, for the IRAs for 2019, you can put in aggregate between the Roth IRA and the traditional IRA, $6,000 per year. So that’s roughly $500 per month. In the HSA world, the Health Savings Account, which we’ve talked about time and time again, it’s the only account out there that has a triple tax benefit. So basically it goes in pre-tax, it grows tax-free, and then it comes out tax-free if it’s used for qualified medical expenses. You typically, for a single individual, it’s $3,500 per year that you can do. Or if you’re a family, $7,000 per year. So once we max those out, then it might make sense to go back into the employer plan, the 401k, the 403b, and get to that $19,000 that you can put in — this is not counting your employer contribution — that you can put in every year into that 401k. So Christina, now that we kind of have “Baker’s Buckets” aside and we’re diligently putting in a contribution into the IRA, what happens next with regard to this whole conversion? And why would I convert I guess to begin with?

Christina Slavonik: Sure. Well, in looking at the typical pharmacist’s salary, which I believe is around — latest stats is around $124,000-125,000. You already know that you cannot contribute directly to a traditional IRA. Well, you can, but you can’t deduct it. So that’s the caveat with that. So where the Roth IRA comes into play is most of the times, you won’t be able to contribute directly to the Roth because of your income limits. So I know for 2019, if you’re single and you make an income, a modified adjusted gross income, of $122,000 or if you’re married filing jointly and you’re making an income of $193,000, then you can’t contribute directly to a Roth. So how you can do that is by doing a backdoor Roth IRA or it’s also known as a Roth conversion. And what you will need to do is open up a traditional IRA, and this is assuming you don’t already have a traditional IRA open. We’ll get into the reason why — what will happen if you do currently have a traditional IRA. But first things first, you open the traditional IRA, you put your — say you’re going to max out your contribution for the year — you’d put your contribution in there first of $6,000. And then you can make what’s called a Roth conversion, and normally your firm, your wealth provider, whoever you have your investments with, they should be able to walk you through what forms are needed. You fill out the form, submit it, you have a Roth IRA opened. And then you’re able to convert those traditional dollars, non-deductible traditional dollars, into your Roth IRA. And the beauty of that is not only is your money going to be in the Roth, but it’s going to be after-tax, you’re not going to have to pay any taxes for it going in because you just made the non-deductible contribution. You will have the earnings grow tax-free. And then if you’re — there’s certain stipulations about once you hit retirement or you’ve had the account open for five years, you can start to withdraw those contributions and earnings tax-free. So there are many, many other benefits to having the Roth IRA. One, you do not have to make what’s called a required minimum distribution. And with a traditional IRA, you have to start pulling out money at the age 70.5. You have no choice.

Tim Baker: Right.

Christina Slavonik: But with the Roth IRA, you avoid that altogether as well.

Tim Baker: So just to recap on that, you know, and to back up, anytime that you see “Roth,” you automatically should think after-tax. So whether that’s a Roth IRA, a Roth 401k, a Roth 403b, the money that goes into that bucket is going to be after-tax. The flip side of that is the traditional IRA, the traditional 401k, the traditional 403b, those are all funded with pre-tax dollars. So in simple terms, you know, if I have a traditional 401k and I’m putting in 10% and I make $100,000, then basically I’m putting $10,000 into that account, and the government sees as if I’m being taxed on $90,000. So it lowers my income for which I am taxed on. In that same breath, you know, if I’m putting into a Roth, once I’m putting in with after-tax, so I don’t go from $100,000 to $90,000. I stay at $100,000. But when the money comes out in retirement, I’ve already been taxed on it, so I’m not going to be taxed twice. Whereas traditional, when it comes out, it will be taxed. So it’s important to understand that dynamic. So everyone can contribute to a traditional IRA as long as you have earned income. But not everyone can contribute to a Roth IRA. So if you make a certain amount of money — so it’s if you’re single, if you make more than $137,000, married filing jointly, if you make more than $203,000, then the door slams shut for the Roth IRA for you. So what the Roth conversion does it takes those non-deductible IRA contributions — so everyone can contribute to a traditional IRA, not everyone will get a deduction. So because we don’t get a deduction, we want to move essentially those moneys from the traditional IRA to the Roth IRA and, you know, for a variety of reasons, Christina, that you mentioned, that’s the thing to do. So Christina, if I am a Do-It-Yourself investor out there and I’m looking at kind of my investment game, I don’t have anything open outside of the 401k that I have through my employer, basically you’re saying first step is to open up the traditional IRA and the Roth IRA concurrently? Is that right?

Christina Slavonik: That is correct. If you can, yes.

Tim Baker: OK. And then if I know that I’m not going to be getting — I’m not going to get that deductible IRA contribution so I’m single, I make more than $122,000, how should I actually go about contributing. Should I wait ‘til the end of the year or the tax year to contribute? Should I be contributing per month? Like what’s your thoughts on that?

Christina Slavonik: Sure. Well, it really just depends on personal preference. I’ve seen both sides of the spectrum where a person will save money, like just put it aside in a regular bank savings account, set that aside for their IRA contribution at the end of the year, and right before the tax deadline, they will put it in and do the conversion right away. You know? Others will contribute monthly to that traditional IRA and over time, once they get the contribution to where they can max it out for the year at $6,000 for 2019, then they would make the conversion. And so yeah, the only caveat with contributing directly to the traditional on a monthly basis is if you do have it in any kind of interest-bearing account or if you do decide to put it in a short-term investment, when you do convert, you are going to be converting those earnings as well, which may have a little bit of a gain or may have a little bit of a loss.

Tim Baker: Right.

Christina Slavonik: So it’s just something to consider when you’re going about that process.

Tim Baker: And I think that’s kind of the nuance is it can be a fairly complicated situation, so that’s kind of some of the nuance that a lot of people may not think about is that, you know, if you contribute $6,000 over the course of the year but the account has grown $100-150 in appreciation, that’s something to consider when you’re doing your conversion. And most likely, you’ll have to pay the tax on that, on the difference. So Christina, when you go to make a non-deductible contribution to your IRA, there’s some say that you should have, there should be a small waiting period to let the funds settle. Can I actually go and convert that right away? What does that look like? What’s best practice with regard to making a conversion?

Christina Slavonik: Sure. The common consensus is just to wait a few months, you know, just to let that contribution settle. There are some people that will do the conversion right away, but just because you just want to look like you are making a non-deductible contribution and not immediately converting, it just kind of puts some space between that. It’s just kind of a best practice.

Tim Baker: Sure. Well, and I think there’s some think that the Roth conversion is something that’s illegal or that we shouldn’t be doing. That’s not the case. This is a perfectly legal kind of technique to move the non-deductible traditional IRA contributions into the Roth that is part of the how the tax code is written. So let’s fast forward to it’s April 2020, we’re hopefully in the process of filing our taxes, which we just recently got through, what are some of the steps that we should do in terms of any forms that we need to file or anything that we need to worry about with regard to filing the taxes? And then secondarily, if we see that maybe we’ve contributed in excess to the IRA, how do we fix that issue?

Christina Slavonik: Sure. Well, make sure your CPA or whoever is doing your tax return, that they know that the contribution you had originally made into the traditional was a non-deductible contribution. And most likely, they will have a form 8606, which they will need to fill out. And yeah, just make sure they’re aware of what you were doing. And as a best practice, we try to say if you can do your contributions and your conversions in the same tax year, that helps your CPA or tax preparer out a lot so he doesn’t have to be tracking what happened in 2018 versus what happened in 2019, so to speak. So there’s for that one. And if you for any reason get a massive pay raise and you had been contributing directly to a Roth and then you go back and you look and you see, oh my goodness, I’m making — my income is being phased out, I shouldn’t be able to contribute directly to a Roth, well, you’re going to have to figure out — there’s a calculation or you can have your tax preparer help you — that you’re going to have to remove whatever excess contribution you had put into the Roth IRA.

Tim Baker: Right.

Christina Slavonik: And so again, there’s a calculation to go about figuring that out, but just know that there are three ways that you can remove it. If you happen to catch it before the tax filing deadline, by all means, withdraw it. Journal it back over. You could talk to your firm and see how they go about doing that. Some will just, you know, say to recharacterize, which normally doesn’t happen until after the tax filing deadline, or you can apply the contribution to the next year. Just don’t make a Roth IRA contribution directly. But just know that if you do decide to leave that excess contribution in the Roth IRA, there is a 6% excise penalty that you will have to pay every year that excess remains in there. And so generally as a best practice, if it’s not a whole lot, I would just say carry it forward to the next year. You may have to pay a small 6% on whatever that excess was, but at least you’ll be covered for the coming year, if that makes any sense.

Tim Baker: Yeah, so just to kind of recap, from basically January to April of say 2020, you can still contribute towards your 2019 bucket for the IRA. So if we were to kind of determine that we’re at our limit already, you could essentially contact your custodian, whether that’s Vanguard or Fidelity or whoever, and say, “I’d like to apply that excess contribution forward to the 2020 bucket.” So Christina, you know, in terms of the process, we have determine what your adjusted gross income, which again, that’s going to be the number that really drives the train on a lot of this tax stuff that goes on. And typically, you take the gross income and you subtract out any contributions you make to the retirement plans. And if you have HSA contributions, student loan interest deduction, if you’re a resident out there, you can probably still get those. That gets to that number, and that’s going to be the driving force of what you can do from a traditional IRA, a Roth IRA, if it determines that you can only make non-deductible traditional IRA contributions, make those contributions, typically, you want them to season a little bit. So wait 30-60 days to get those into the account, and then go ahead and basically fill out the necessary to make the Roth conversion. So we’re essentially, we’re moving those non-deductible IRA contributions from the traditional bucket into the Roth bucket, which is the after-tax bucket because we’re going to pay the tax on it anyway, and there’s lots of benefits to do that. And come tax season, working with your CPA, your advisor, to fill out Form 8606 just to track all of that. It’s best to do that kind of in the same year, so contributions basically marries up with the tax season that you’re filing. And if there is excess contributions to the Roth, we can fix it before the tax filing deadline or recategorize after the fact. You could also contribute to the, move it forward to the next year just so we kind of stay within compliance. So Christina, any other thoughts on the Roth conversion? Anything that we missed that probably listeners should know about when they’re trying to tackle what sounds at first glance kind of can be a very simple procedure but when we peel back the onion a bit, it can be a little bit complex. Any other thoughts?

Christina Slavonik: Yes, just one final thought. When it comes to look at your traditional IRAs — and this is just assuming you have other traditional IRAs when you are considering doing a Roth conversion — that amount that you convert, you can’t just pick that ‘Oh, I want to do this sum of money in this IRA.’ It takes into account your entire balance, not just the $6,000 contribution for the year. So say you were to have your traditional IRA, you have $20,000 in there. Well, for that initial tax year, you may have to move over the full $20,000 because it’s going to take into account — the conversion piece will take into account all the money you have in that one traditional IRA. It’s blind. It can’t really see that you only want to do $6,000. So that’s just one other piece of advice to keep in mind. Most people that do this kind of transaction, they do not have traditional IRAs. If they do, it’s only for this purpose. So that is just one thing that I’d like to point out there, Tim.

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Tim Baker: Yeah. Another thing to also point out is I think this particular technique is going to become more and more valuable. With the new tax code, for a lot of people out there, taxes are going to be lower in the near future. So to kind of do this conversion and get these moneys in the right bucket, I think is very valuable. But also remember when you make the contributions into the IRA, whether it’s the traditional or the Roth, that’s just half the battle. The next part of it is really selecting the investments that are inside of that. So we come across pharmacists that are putting money into an IRA, but they’re not actually investing that, whether it’s in a mutual fund or an ETF or a stock or a bond, that type of thing. So understanding that when the money goes in there, we still have to take the necessary steps to get that invested and get that money working because at the end of the day, intelligent investing where you’re taking risk in the market and know that the market is going to go up and down is necessary really to become that “Seven Figure Pharmacist” and really get ahead of things like tax and inflation. And these are some of the things that we work with when we go through the investment module with our clients is making contributions is only half of it. And we have to make sure that we’re building out a proper low-cost asset allocation that has exposure across a variety of sectors in the market, whether it’s large-cap or small-cap or international, bond, that type of thing. So Christina, great job today kind of going through this kind of somewhat complex topic. Like I said, Christina recently helped Tim Church on this blog post that we put out. So if you go to the Your Financial Pharmacist web page, YourFinancialPharmacist.com and check out our blog, you’ll be able to see a lot of this information, also, five steps that we talk through. If you go to YourFinancialPharmacist.com/096, YourFinancialPharmacist.com/096, you can get the basic steps for the backdoor Roth conversion, the checklist to kind of work your way through this process. And like I said, if you’re working with another custodian, a Vanguard, a Fidelity, they’ll be able to walk you through this hopefully to provide the necessary forms and guidance — maybe not guidance but at least point you in the right direction to go through the logistics of converting that. At YFP Planning, we kind of do this on behalf of clients as part of the investment management that we do. So Christina, thank you so much for coming back on the podcast, really enjoyed kind of having your voice on here. We’re going to have to do it again soon. Yeah, thanks again for coming on.

Christina Slavonik: Thank you so much, Tim. I look forward to doing it again.

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