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YFP 249: 3 Silent Killers to Your Investments

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3 Silent Killers to Your Investments

On this episode, sponsored by Insuring Income, YFP Co-Founder and Director of Financial Planning, Tim Baker CFP®, RLP®, talks about the three silent killers of your investment pie and how to keep your investment portfolio fit.

Episode Summary

In this episode, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, sits down with YFP Co-Founder & Director of Financial Planning, Tim Baker, CFP®, RLP®,  to discuss the three silent killers of your investment pie: taxes, inflation, and fees. After a brief discussion about the most recent success of YFP Speaking Engagements, Tim Baker gets into the weeds on strategies to ensure financial security and freedom by protecting your investments. Tim and Tim discuss, in detail, how to keep your financial portfolio fit through evaluating your fees, investment choices, and the utilization of tax planning. Tim Baker explains some of the most common fees associated with investment plans and that often, investors do not know what exactly they are paying in fees. He shares the impacts of inflation on your portfolio over time and how to ensure financial security after retirement. You will also hear Tim Baker speak on his personal experiences as a CFP® and how tax planning permeates all parts of the financial plan, despite many planning firms not offering tax planning as a service. Tim Baker shares his answers to frequently asked questions like: why is inflation overlooked concerning the financial plan? What is the solution to inflation? How can market stability and fees negatively impact your retirement investments?

Key Points From This Episode

  • An introduction to today’s topic.
  • The importance of including tax in your financial plan.
  • How tax permeates all parts of your financial plan.
  • Tim Baker shares some of his experiences regarding tax, working as a financial planner.
  • Some examples of simple tax reduction strategies.
  • How to ensure the withdrawal of investments after retirement in terms of tax.
  • A discussion on inflation trends.
  • Why it is important to consider inflation in your financial plan and investments.
  • We learn how investments can help you get ahead of inflation.
  • A detailed discussion on the issues and impact of fees on your investment.

Highlights

“I think what you can’t do is just not participate. I don’t think you can stuff your mattress and hope one day you wake up, and you’re going to have enough to retire.” — Tim Baker, CFP®, RLP® [0:21:32]

“I think it’s really important that we understand those dynamics and know that we’re not always going to be in a low inflation environment.” — Tim Baker, CFP®, RLP® [0:24:30]

“It’s really important to understand how inflation can play a role in your ability to sustain yourself in the future.” — Tim Baker, CFP®, RLP® [0:24:34]

“I think a lot of people are unaware of what they’re actually paying, and the transparency is a real thing that needs to be overcome.” — Tim Baker, CFP®, RLP® [0:24:09]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week, I had a chance to sit down with YFP Co-Founder and Director of Financial Planning Tim Baker, to talk about the three silent killers of your investment by taxes, inflation and fees or easier way to remember as Tim, mentioned on the show, is how to keep your investment portfolio fit by evaluating your fees, investments and tax planning. A few of my favorite moments from the show include hearing Tim, talk about common tax mistakes he sees pharmacists making, and why he decided early on to bring a tax practice in house with the financial planning services. Why inflation is often overlooked? But an important part of the financial planning consider. What the antidote to inflation is? Why those nearing retirement should be looking closely at inflation and the volatility of the market? Finally, the common types of fees associated with the financial plan. Why these fees can have such a large impact on your investment portfolio?

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

Okay, let’s hear from today’s sponsor Insuring Income and then we’ll jump into my interview with Tim. 

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

[INTERVIEW]

[00:02:41] TU: Tim, excited to have you back on the show. 

[00:02:43] TB: Yeah, Tim. Glad to be back. What’s going on?

[00:02:45] TU: It’s been an exciting start to the year. 

[00:02:47] TB: Yes. 

[00:02:47] TU: Lots of exciting things going on at YFP. We’re heating up the season of some of the speaking engagements that we’re doing for the year. Grateful for those opportunities, I think the team is humming and moving forward. It’s been a good, good first quarter of the year. You’ve got an exciting trip coming up tomorrow. I think you’re leaving, right, International.

[00:03:05] TB: Yeah, going international. My wife Shay, shout out to her. If she listens to the show, sometimes, sometimes not is running the Paris marathon. A couple of weeks ago she actually had fractured her foot in a misstep. She’s been doing a lot of cycling and pool work and things like that. She got the news a couple of weeks ago that she could run again. So she’s, yeah, she’s raring to go, heading out and excited to visit Paris again. It’ll be her first time and yeah, just enjoy some one-on-one time without the kids. It’ll be nice. I’m excited. I feel we’ve been so cooped up, because of the pandemic, haven’t really been traveling as much. Yeah, I’m pumped up. 

To go back to that thing Tim, I was shocked. I think when we actually sat down, and you tallied up the reach that YFP has had or the last couple years with, I think it was 72 different schools and associations that we’ve been speaking with and doing presentations and things like that. I think that was a little bit shocking to me but awesome to see that number and see it continue to grow. 

[00:04:12] TU: Yeah. We’re so grateful for that opportunity. We’ve partnered with just over 70 different organizations. It’s been Colleges of Pharmacy, State Associations, National Associations, Fellowship Programs, Residency Programs, some of the businesses that are out there and entrepreneurs, so super grateful for that opportunity. I think the reach to that has allowed us to have as we as we look to help more and more pharmacists on their mission towards achieving financial freedom. We’re looking to grow in that list here. If anyone is listening that, is looking to have a session on personal finance, financial education, we’d love to engage the YFP team, the YFP Planning team, so you can reach out to us at info at yourfinancialpharmacist.com. 

Tim. Today we’re talking about silent killers to your investment pie. We’re talking about things like tax inflation fees. We’ve talked about these separately on the show, but I want to keep coming back to these, we’re going to bring these together. We talked so often about the hard work of building your investment pie, right? Ultimately, we’re going to be paying ourselves out of retirement paycheck, we’ve got to do the hard work to save early, save often, take advantage of that time value of money. We might be underestimating the impact the silent killers like tax, inflation, fees that may not be as obvious or as front and center, but certainly can have an impact on our financial plan. 

We’re going to go through these one-by-one in three parts. We’ll start with the taxes, we’ll then talk about inflation, we’ll talk about fees, we’ll reference previous episodes, we talked about these for folks that want to dig deeper in any one of these topics. Again if you’re going to do the hard work, and you’re going to build that investment pie, we want to do as much as we can to maintain the integrity. Tim, let’s start with tax season. Could it be better timing, were about half a month now, away from the IRS tax deadline, the YFP tax team is knee-deep and making sure we get the tax filing and returns, and a shout out to that team if they’re listening to this episode. Here we are, it’s front and center for lots of folks, maybe they’re looking at the returns that they filed, and maybe they got it spot on, maybe they saw opportunities to improve, maybe they got a big refund, or were surprised by a bill that was due. So just talk to us about why this topic of tax is so important.

[00:06:25] TB: Yeah. I’m actually looking at the title of this, I see, Tax Inflation and Fees. I think if we were to go in reverse order FIT, this is I think, really about keeping your investment portfolio fit. We’ll go tax inflation fees as we talk here, but I think the reason we kick off with taxes because it just permeates everything, Tim. Every conversation that we have related to the financial plan, there’s a tax conversation close by, unfortunately. One of the numbers that always sticks with me is that we mentioned speaking over the course of a pharmacist career they’re going to make about $9 million. The actual dollars that flow into the bank account is closer to six. That’s alarming, because you’re like, all right, where’s 30 – where’s a good chunk of that go? 

That 3 million, that delta, a lot of that is being soaked up by Uncle Sam, the taxman. What we see related to tax is that there’s typically a lot of dollars left on the table in terms of what you can do to mitigate the amount that the government is taken from you. Again, I think everyone wants to pay their fair share, but no one wants to overpay if they don’t need to. Yeah, and I think for us, as a group I harken back to the day when we were starting, I have launched Script Financial now, YFP Planning, and even before that in my first job and financial planning, financial services. A lot of traditional financial planning firms do not do taxes. I found that to be very problematic, Tim, because, again, I think they’re just so closely aligned with what you’re doing on the planning side, that there needs to be some coordination on the tax side. 

Shortly after I launched Script Financial, we started to do taxes for our clients. It’s not a fun thing to do, the tax work, Tim, as we know, right now, it’s it can be hectic, you’re trying to cram so much work in a small window of time. It’s like trying to manage a lot of projects on a tight deadline that you have inputs and outputs from a variety of people. However, the reason that we do it is, because I think the value that it brings to the overall plan. I’ll give you some examples. When I would do planning for pharmacists, one of the biggest thing a lot of the pharmacists that we are working, with the tail that wag s the dog are the student loans, right? 

The student loans one of the major strategies there is the forgiveness strategy, particularly PSLF, or even non-PSLF, because in that strategy, one of the main techniques you could do if you’re married is to file separately to disallow the income of the spouse that doesn’t have loans and really just work off of the AGI and the student loan payment is off of one the spouse versus two. The problem is this, Tim. I say this like I would build out these dope, that’s the official term, dope, financial planning strategy related to the student loans. Then the client would say, “Hey, Tim, do you guys do taxes?” We’re like, “Nah, we don’t, but go work with his accountant across the street. They’ll hook you up.” We like what they do. But the problem is that, because most financial planners don’t understand student loans, so I think the stat out there that I saw is that 33% of financial planners will work with clients on their student loans. 

That doesn’t mean they necessarily understand them, but they’ll at least address them. That means the overwhelming majority don’t even really look at it. The problem is that because advisors don’t understand student loans, typically the accountant that they work with don’t understand it, and in 99 out of 100 times, for most people file in anything, but filing jointly for a married couple is wrong, but we just happen to work with a lot of pharmacists that it does make sense because of the huge benefit you get from maximize the forgiveness. I just got fatigued by building out this great debt plan, and then it being messed up by the lack of technical expertise on the tax side of things to see that through. 

Then I think the other piece of this is we’re planners, right? I want a plan. I remember, again, back in the early days, I would hire a tax person to do my own personal taxes, and I’m a business owner. So when I got a good referral from someone, I met with them, they’re like, “Oh, yeah, we’ll be able help diagnose some things with your business and all this.” I’m like, “Great, that sounds awesome.” Then a couple months rolls around, I’m like man, it’s April 14th, where are my taxes? I sent out an email, and I get an email back, and it’s a PDF of the tax return some DocuSigns to sign, and then an invoice. I equate, it seems like a paper route, right? It’s like, here you go. Chuck the paper out the window, you figure it out. I just didn’t like that, because again, I was looking for things that and I’m a nerd like that. 

Again, as a business owner, I want to make sure like, am I doing everything to mitigate my tax exposure. I just got zero guidance, zero planning based on – planning advice based on last year’s activities. I really wanted that. To me, I think there’s a lot of people that want that and are trying to figure out ways to get in front of the taxman. Then finally, I think just the reason that we did it is like I said before, is I think it’s just the coordination of your financial plan. It’s not just the debt piece. We would work with clients in my last firm where there probably needs to be a healthy conversation regarding the investment portfolio, just that this wasn’t had. I understand. I get it, during tax season it’s really hectic. 

You’re just trying to move the return through, but at the end of the day, the reason that we make sure that everything goes through the lead plan of the CFP, it’s a check to say, “Okay, does this jive with everything else that we’re trying to do.” Not this debt, but the investments and whatever else is on the client’s plate just to make sure that there is a clear intention of, hey this reporting period and Q1 all the way up to April 15. This is really a reaction to what happened last year. But then what are the things that we can do or what are the things that we learned from this year that we can apply to the present year in this case, 2022? 

I think if you stack just the financial plan, I think if you stack years of doing that, you really shrink that delta, that 9 million to six. I think you really start to shrink that in terms of what you’re keeping in your pocket. I think for most people out there that’s worth the conversation and with the planning. 

[00:13:11] TU: Yeah. Tim, just to that point that the delta significant and of itself 9 million to 6 million, and you and I both agree, like taxes have value, right? They provide services we all appreciate. We want to pay our fair share. It’s not just the delta, but also how can that delta be put to use, and what is the effect to that?

[00:13:26] TB: Yeah, exactly. I think that there’s just a lot of – from things that we see with clients, there’s just a lot of meat on the bone. There’s a lot of opportunity to, hey, have you thought about this? Or as an example, HSAs those are our every week, we talk about them a lot, but a lot of people don’t necessarily fund them. Even things related to children FSAs, particularly for dependent care, making sure money goes through their, education planning. Sometimes there’s this singular focus on things like Roth IRA and conversions, and backdoor and all that kind of stuff. It’s like, we shouldn’t even be having this conversation yet. I think some of it is overconfidence for the taxpayer of what’s important and what’s not. 

We see a lot of things with taxable accounts, Robin Hood, things like that, where there are, there’s a focus there that really shouldn’t be or disallow losses due to wash sale rolls or things like that. We’ve seen lack of record-keeping for side hustles as we’re talking about Schedule C, income expenses, lack of coordination for charitable giving with a larger deduction these days. There’s a bunch strategy where you should be bunching your charitable giving versus doing a consistent year over year. Cryptocurrency, we could have a whole thing on that, Tim. Cryptocurrency and then just the overlay of, hey, there’s a huge refund or a huge tax bill, that I think sometimes it’s due to either a lack of planning or a lack of follow-through on the planning or just an understanding of how withholding or the W4 works. 

This is a sample of things of what we see and I think again if you can start to work through some those issues, Tim. I think you start to see. Again, it’s hard to quantify year over year, but these are just little tweaks here that I think we talked about the investment portfolio being a rocket ship, sometimes like fees and things like that is drag on that. I think the same thing could be the case with taxes and your net worth, your financial plan.

[00:15:20] TU: Yeah. It’s great stuff. The compound effect of those changes I think about someone who unlocks things like the HSA or is able to really look at some of the bunching strategies or other things that you mentioned dependent care FSA, etc. or priority of investment and making sure you got that, right. It’s not only getting that advice, recommendation strategy put in place today, but what does that mean going forward in the compound effect of that. We talked about lots of that. We had our director of tax, Paul Eikenberg, on Episode 233, we’ll link to that in the show notes. We talked about some of the common tax strategies, tax mistakes that pharmacists should be thinking about. 

I’m glad you brought up the student loans to kick off that conversation. Just last week, we had three PSLF success stories, and through those stories, we heard about some of the optimization strategies and of course, one of that would be the filing status, which folks may mess up if they’re not getting good advice there. Tim, one of the things I’m really excited about and shout out again, to the tax team that’s been hustling this season, is you and I think are really behind this vision and approach of, yeah, “We got to file the IRS as we have to do it, or else they’re going to come knocking on our door, that’s great, we’re going to keep doing that, but we’re going to do that, really, if it’s a part of the planning and the strategy.” 

So you gave that story of April 14th, here’s the DocuSign, sign it, here’s your bill, that’s great. I mean, that’s stuff that’s been done, it’s in our rearview mirror. Let’s talk about what we can do going forward to really optimize the plan and perhaps avoid some of the mistakes that were made throughout the year. So we’re excited about really shifting away from just that filing to more that year-round planning, that strategy, that mid-year projection, that pivot, how do we really optimize this with the financial plan? Well, this tax season, we’ve closed the doors in terms of new folks that we’re going to be doing tax returns. Again, we’ve only got about 15 days, couple of weeks left in the season. We are going to start to build out a list of folks that are interested in more that year-round planning optimization and you can go to yourfinancialpharmacist.com/tax and get more information there. 

[00:17:19] TB: Yeah. I think the other thing that can take into consideration here is right now, we talk a lot about the accumulation of the portfolio and how tax is related to that. I think the other thing is really looking at the withdrawal. When you’re a pre-retiree, and again, simple if you have a million dollars in your traditional 401K, a million dollars, saying a Roth IRA, and a million dollars in a taxable account. Unfortunately, all of those dollars are not yours, particularly the traditional Uncle Sam so has to take the bite of the apple. But one of the main things that we look at when we’re trying to structure a paycheck that is going to be able to sustain that retiree for the course of their lives is the tax and minimizing the tax burden and how we draw on each type of account and the best strategy for it. A lot of that is a tax conversation. 

To me, it’s something that, it’s again, permeates every part of the financial plan, but it’s also every stage of life. There’s even conversations of okay, how do we structure, how much in this bucket or this bucket, as we are accumulating to get in front of that when we are starting to say, “Okay, I’m 65, I’m retired. We’re going to use 30 years as I’m going to live to 95, just to model this out. How do I draw from each bucket? Overlay things like social security and everything else, to make sure that I – the biggest I think stressor for a retiree is, “Am I going to have enough money? Is the money going to run out? I don’t want to be destitute or have to rely on family.” It’s really trying to, and again, if we can hold on to more of those dollars, that still have to be tax or take those moneys when you’re in a lower tax bracket, or whatever that is. It’s really important to have that coordination. It’s a frequent conversation. It’s not just, hey April 15th, come and gone, and it’s something that we continually look at and make sure we’re on top of.

[00:19:15] TU: Well, thanks for being a wet blanket, Tim.  If I’ve saved a million dollars, I might actually not have a million dollars. 

[00:19:20] TB: Yeah, yeah. Sorry about that.

[00:19:20] TU: Good plan. That’s a good summary of taxes. We’re going to keep coming back to this topic. So important for all the reasons we mentioned. Moving on to the second one is you mentioned in this concept of making sure and investment portfolios fit. The IB inflation. I think, normally we talk about inflation, and it’s like, nah, yeah, whatever. Especially for folks that are in the first half of their career, we have not seen inflation at the rate that we are seeing it right now. 

[00:19:46] TB: Yeah. 

[00:19:46] TU: Certainly it has been higher than that historically, but it’s well above what we had expected be on an annual rate. So we’ve got as of January if you look at the yearly rate we’re hovering around 7%. We talked about this in episode 239: Two Financial I’s You Might be Overlooking: Inflation, I-Bounds, will link to that in the show notes. Since that episode, I would say this has been exacerbated by the unfortunate situation in Ukraine. We see oil prices going up. We see the market volatility that’s happening. Tim, we know inflation is real, we’re feeling it in the moment. Jess and I were just talking about this and in terms of month to month with this is playing out to be in terms of expenses, but still, hard, I think sometimes put our finger on it, and the impact it can have on the plan. Why is that? Why is it so important as we think about the integrity of our investment pie?

[00:20:34] TB: Yeah. I think inflation is really one of the main reasons why we need to invest. I say that if you’re looking at the markets, and right now, the markets are very volatile, up and down, negative in some cases. What you feel is that you want to take your investment ball and go home and be like, “I just can’t take the swings, Tim.” –

[00:20:54] TU: I’m feeling right now. I’m not going to lie, Tim. 

[00:20:55] TB: Yeah. I don’t looking at my accounts and seeing X and then the next day and seeing X minus 10%, 20%, 30% if we have a major correction. I get it. I think, if you’re 20, 30 years from your retirement date, and that’s the purpose of your portfolio. I think you really have to train your heart and your mind to be like, “Okay, it’s going to come back. Let’s not worry about it now.” I mean, if you’re in retirement now, and you’re relying on that, and we don’t have a good bucketing strategy, or what have you to sustain those losses, then I think it’s more problematic. But yeah, you can’t – I think what you can’t do is, is just not participate. I don’t think you can stuff your mattress and hope one day you wake up, and you’re going to have enough to retire. 

I think the inflation piece is one of the main reasons why we need to invest. One of the examples I gave is that $4 latte that you buy at your local coffee shop in 2020. If you use historical rates of inflation over the next 30 years 2050, that same latte will cost $10. But I don’t know, that’s a great, good enough example, Tim. Let’s put it another way. If you make $120,000 as a pharmacist today, and we fast forward 30 years and we’re using historical rates on inflation, which is typically most planners are using about 3%, which we know this year is high. It’s low because we’re seeing seven-plus. 

$120,000 today as a pharmacist in 30 years, that would be equivalent to $291,000. Think about that, $120,000 today would be equivalent to $291,000 in 30 years. From a planning perspective, if we’re trying to build out a portfolio that can generate a paycheck that is some discount at that 291 because we know that social security is going to be there. It’s going to be limited than what it is today, so we can take a little bit off for that. Then you’re probably not saving some of that 291 would go to retirement savings, but if you’re going into retirement, you’re not going to be saving for retirement. 

There’s some discount to that, but the idea is that, let’s say it’s $200,000, or let’s say it’s $180,000, whatever the case is. We have to be able to build a sustainable portfolio so then, Tim, if you’re my client at 65, 30 years from now, or whatever the number is. You’re going to say, “Hey, where’s my $200,000? At 66. “Hey, where’s my $200,000.” All the way up until 95 or whatever we’re planning as nobody knows when they’re going to pass away. 

That is really important, because the investments particularly an equity portfolio, in your accumulation phase is going to be really important for you to stay in front of inflation, and the taxman, quite frankly. So yeah, and just a backup, we talked about this in the “Two I’s”, when we talk inflation, it’s really, inflation is the decline of purchasing power of a given currency over time. What it basically means is that a basket of selected goods and services in the economy will increase over a period of time. Sometimes that is due because the government is printing money, which is certainly true. In our case, we talked about quantitative easing and things that. It could also be supply and demand. So one of the things that you didn’t mention outside of the Ukraine crisis is all of the boats that are at the Port of LA or that are still need to be unloaded because of pandemic or whatever, that’s causing a lack of the supply demands, making prices go up. 

I think it’s really important that we understand those dynamics and know that we’re not always going to be in a low inflation environment. It can’t go up it has this year because of X, Y, or Z. Even back, if you look back in the 80s, in the early 80s, inflation was 13 and a half percent, and mortgage rates, as a result, were close to 17%. If you think about we know rates are going up now, there’s been a steep decline, and I think the government is trying to do what they can, but the fact is, we have printed a lot of money in the past that could rear its ugly head. I think the way that we can mitigate the impact of inflation is really to invest in equity stocks, and hold it over a long period of time, Tim. 

We know that we’re talking about 20 plus years, we know that the stock market is fairly predictable. Typically, over a 20 year period, the stock market will return about 10% on average, and if we have just that down for inflation that’s seven. So this year, that might not do a whole lot for you, because that’s the rate of inflation, so you’re breaking even at that point, but to me, it’s really important to understand that how inflation can play a role in your ability to sustain yourself in the future. Again, we’re feeling the pinch now, because inflation has gone up so high, and so much in a shorter period of time, where we’re starting to really notice. 

Tim, I’m sure with four boys, you’re noticing it with your food bill, or even we’re seeing in at the pump. Those are things that you were seeing it with housing prices, right? Those are things that get our attention, but we’re probably not thinking about how this affects us in 10 years, 20 years, 30 years, depending on your timeline for retirement.

[00:26:15] TU: Yeah. As a shout-out to your 76 years, you got to trust the process.

[00:26:18] TB: Trust the process. Yeah.

[00:26:19] TU: When you say investing is the antidote to inflation, a lot of people hear that in the moment and they see the volatility, and they’re like, “Ah, it’s the opposite of what I’m thinking.” 

[00:26:30] TB: Right. 

[00:26:30] TU: We’ve got to zoom out. I think this is where the power of accountability and a coach and having that long view is so valuable. Tim, I’m also thinking about the folks that are listening that are, “Hey, I’m nearing retirement.” Or I thought I was going to make that decision here and the next year or so and here we are when I’m going to be going into retirement in a high inflation period. I’m going into retirement, while there’s also a lot of volatility in the market. Just talk to us for a moment and another episode for another day about the timing of that decision of retirement when we start to draw from our portfolios, and how in high inflation period, and a high volatility period could have an impact on that.

[00:27:07] TB: Yeah. It’s probably – so what we’re talking about here is sequence risk. Sequence risk is essentially where what you’ve accumulated over the course of your career takes a hit. We’re talking 20, 30% which could be very well beyond the horizon for us in terms of a correction of the market. So now you’re will use a million dollars, let’s say your portfolio was a million, and then it bottoms out to $700,000, but then you’re also taken $80,000 a year, or whatever the number is. 

So in two years, and three years, you could see where your portfolio is almost half of what it was when you actually went to retire. You’re like, “Well, I had a million and now I have $560,000.” Or whatever the number is, that’s where you really see a higher rate of failure to the portfolio failure meaning that the money runs out, that balance goes to zero before you reach your end of plan year, which a lot of people use 30 years, so if you retire at 65, 95. It’s the combination of the portfolio being down, and then drawing down the portfolio at the same time, you almost can’t make it up. 

I have a little bit experience, it’s just a proxy. I remember, my first job out of the military was with Sears Kmart. It actually took over – I was a trainee for my first year. Then I took over for a lady that retired. This was right around ‘08, ‘09, and that’s when the market just completely got, the market was completely down, because of that subprime mortgage crisis. I think she actually had to go back to work because her portfolio took a beating and then she was actually drawing on it. She quickly realized that she needed to not draw on that portfolio. So really, in these periods of time right leading up, you could probably say about five to 10 years before retirement, maybe in five to 10 years after retirement, that’s where you need to be the most conservative. It’s the eye of the storm. 

In for some people, it makes a heck of a lot of sense not to retire than – and try to push it off, sometimes it’s unavoidable. Sometimes 40% of people retire sooner than they think either because of illness for themselves or for a family member or, or it could even be being pushed out of the workforce. Sometimes it’s out of your control, but when you overlay these decisions with things security, when to claim that and all that, it’s super important. You could do everything correct for 30 years leading up to retirement and then that those first couple of years in retirement be blow up your playing completely. That sequence for us at its finest.

[00:29:59] TU: We’re going to come back to some more episodes, we have planned out on building that retirement paycheck in consideration as you’re making that transition from all the hard work you’ve done, and now making sure we’re able to sustain that. We’ve talked about taxes, we’ve talked about inflation, certainly not least, but last on our list is fees. We know that fees can have a major impact on how much wealth one is able to build and something that many folks may not realize of how big that implication can be. We went into detail about fees on Episode 208, Why Minimizing Fees On Your Investments is so Important, we’ll link to that in the show notes. 

Tim, summary here of fee something that we harp on over and over again, that folks may not be aware of those fees often are not as transparent as perhaps we’d like them to be. So as we continue this theme of some of the silent killers of the investment pie. Talk to us about fees.

[00:30:52] TB: Yeah. There’s no such thing as a free lunch, right, Tim? When you’re investing or if you’re working with an advisor, there’s typically a costs associated with that. I think the thing that I think bothers me as an advisor, but then also as a consumer is the lack of transparency, right? We know even in healthcare, there’s people get upset about what is the actual price or even we talk about PBMs, and things like that. I think a lot of it comes down to transparency, and what’s going on behind closed doors. To me, and we see this a lot and actually, we recently, we have clients that are prospective clients booked time with us to see if they would be a good fit. 

We’ve added a button that they can upload a statement so we can talk at a high level, if they’re working with advisor what they’re actually paying, because most people either have the notion of, I’m not paying anything, which that’s actually a common belief or they know that they’re paying something, they just have no idea and often is the case that they’re paying a lot more than what they think. I always go back to this story. I remember, so my first job out of the military with Sears then I had another job with a construction company. I was like, “You know what, I want to do something completely different, go into a new industry.” I was like, “Hey, Mom, I think I’m going to become a financial planner.” I think verbatim, she said to me, “That’s the dumbest idea I’ve ever heard.” I’m like, “Why?” She’s like, “Well, we work with this as advisor and we don’t pay them anything.” I’m like, “That can’t actually be true.” Years later, when I understood the landscape a little bit, actually peeled back the onion, and they were paying over $8,000 in fees, unbeknownst to them so. 

To me, I think, it’s fees are aren’t necessarily a bad thing. I think it’s the transparency around that I think needs a lot of work. Really, the fees that we’re talking about here, Tim, that are most common are things advisor compensation. These are things that you would, these are fees that you would pay or commissions that you would pay to an advisor to either provide financial planning or investment advice to you. One of the more common things that we see is an assets under management fee. This is like, “Hey, Tim you have $500,000, and I’ll manage for you, I’ll charge you 1% in the fees. 5000 I’ll bill that right out of your investment accounts.” That’s very common. 

To be honest, that’s one of the reasons that pricing structure is one of the reasons why when we do find younger pharmacists that are working with advisors, so they’ll either be shut out, meaning the advisory would say, “Hey, young pharmacists, I’d love to be able to help you, but I can’t.” It’s not really because they can’t, because they don’t have those assets for you to manage that – in term of that that 1%. They’re either shut out of the market, or they’re sold, I would say less than suitable products, so they can make a commission and do some work with them. They kind of wait for the assets to build over time. 

This is where, if you’re out there, and you’re in pharmacy school, or shortly thereafter, someone tried to sell you a life insurance policy, a disability policy, those are the next best thing for a lot of advisors that can earn a commission, “help the client” and then stay in touch with them until they have some assets for them to manage. It can be the same things like, “Oh, well invest your Roth IRA, and we’ll sell you in A-share mutual.” I was looking at a statement where there’s both an AUM fee but then A-share. Any share mutual fund is a front loaded commission. You pay five and a quarter percent on that and the advisor gets the commission and goes from there. 

There’s lots of other fees there, Tim, related to advisors, hourly flat fee, there’s could be a hybrid unrelated to the investment portfolio, but still in mix, there are things like Life Insurance Commissions, Disability, Annuities, we recently saw a non-traded REIT, which is really sweet for the advisor, because that’s sometimes 6, 7, 8% terms of commission. So that’s a big piece. I think a lot of people are unaware of what they’re actually paying and the transparency is a real thing that needs to be overcome.

[00:35:08] TU: Great summary. We’ll get rolling back to Episode 208. Why Minimizing Fees in your Investments is so important. I think the transparency is one piece, Tim as you mentioned also just the tendency, we have to underestimate the impact of something like 0.1, 0.2, 0.3 right? As we look into individual investments.

[00:35:24]TB: Yeah, absolutely. I think if you’re not working with an advisor, there are other things that are present probably the biggest one is expense ratio, Tim. Justin probably – Justin was our director of business development, working with another advisor for years, before he came on to YFP. His portfolio, his all in expense ratio was about – it was almost 1%. 0.91 to be exact. What the expense ratio, it’s what the fund takes. If you have ABC mutual fund that’s managing billions of dollars, they might take 0.91% to pay for the mutual fund manager, the analyst, the fancy office on Wall Street, pay for information. They do that to keep the lights on. You basically buy that to get exposure to lots of different stocks and bonds, because that’s what a mutual fund is, or an ETF. 

0.91% on a $100,000 portfolio is $910 per year, whereas if you do something YFP portfolios, .05, so why would I pay 1000 bucks if that guy pay 50 bucks and have similar results and things like that, but so that the expense ratio is a huge one. Platform fee, some, when I was in the broker deal where we would charge $50 or whatever, just to have an IRA open. There’s things like annual account fees, closing account fees, retirement, especially in a low interest rate environment like you’re just trying to eke out fees, because you can’t make money on the float, but things trading costs, all of these things add up. 

Again, this can just be drag on a portfolio. Those are the four big ones I would say is advisor, compensation, trading costs, platform fees, and then internal to the funds that you’re in expense ratio. What we try to say to clients is like we try to minimize those as best we can, because at the end of the day, we want that portfolio to grow uninhibited as best we can. So there’s no such thing as a free lunch.

[00:37:25] TU: Yeah. That folks are going to pay for advising fee, and we’re not shy about the fees that we charge and the value they bring. The point being is you want the value to bring, right? So as you look at the coaching, the accountability, the holistic nature of comprehensive financial planning. There’s a fee there, and it’s transparent, you want to understand it, you want to feel good, that’s the return on the investment. We’re talking I think about in terms of minimizing other fees or fees that maybe don’t add value, or that are not transparent, so really evaluating closely the impact that those can have on your overall investment pie. 

I’m going to link to a blog post from way back when, that I wrote, we looked at two different individuals that were saving about $1,000 per month between the ages of 30 and 65, because of some of the difference in fees and things expense ratios, or other hidden fees, they ended up with a nest egg that was about a million dollars difference. Again, the impact that we can see over the long run and what those fees can have. 

For folks that want to learn more about the financial planning services that are offered by the team at YFP Planning, perhaps you’re working with a planner and interested in a second opinion. Want to have an analysis of that statement just to get some different thoughts as well or if you haven’t worked with the planner, we’d love to have a conversation as well. Folks can book a discovery call to learn and see if that’s a good fit with our Director of Business Development Justin Woods, also pharmacist and you can do that by visiting yfpplanning.com. Tim Baker as always great stuff and wishing you and Shay the best as you get ready for your trip to Paris. 

[00:38:54] TB: Yeah. Thank you my friend. Good to be on the episode here. I think some good stuff to be – to chat about and probably even expand on in future episodes. So yeah, I appreciate you having me back on.

[OUTRO]

[00:39:05] TU: Before we wrap up today’s episode of the Your Financial Pharmacists Podcast, I would like to again thank this week’s sponsor, Insuring Income. If you are in the market to add own occupation, disability insurance, term life insurance or both, Insuring Income would love to be your resource. Insuring Income has relationships with all of the high-quality disability insurance and life insurance carriers that you should be considering and can help you design coverage to best protect you and your family. So head on over to insuranceincome.com/yourfinancialpharmacist or click on their logo or link in the show notes to request quotes, ask a question or start down your own path of learning more about this necessary protection. 

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

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

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

[END]

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YFP 248: How 3 Pharmacists Had $700,000 of Student Loans Forgiven

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How 3 Pharmacists Had $700,000 of Student Loans Forgiven

Robert Lopez, CFP® and YFP Planning Lead Planner, discusses the current state of the PSLF program, plus three pharmacists share their PSLF success stories.

About Today’s Guest

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

Today’s episode also features PSLF stories from three pharmacists, Kimberly Gale, Ashley Hicks, and Kyle Sobecki. 

Episode Summary

YFP Co-Founder & CEO, Tim Ulbrich, PharmD, talks with Robert Lopez, CFP® and YFP Planning Lead Planner about the current state of the PSLF program and why the Biden Administration’s PSLF waiver is resulting in a lot of forgiveness earlier than expected. Robert kicks off the conversation with some advice relating to PSLF, who qualifies, what changes have occurred recently, and what it means for you. With over $700,000 forgiven tax-free combined, Kimberly Gale, Ashley Hicks, and Kyle Sobecki share their PSLF journeys and ultimately how they attained PSLF. Each pharmacist shares how they came to decide on PSLF, what challenges they faced along the way, and how pursuing PSLF helped accelerate the process of pursuing other goals. Kimberly Gale shares the story of how she first became aware that PSLF was an option, communication challenges she faced early on, and how forgiveness has enabled her to attain the lifestyle she wanted for her family. Ashley Hicks tells us about roughly $200,000 in forgiveness and the challenges that uncertainty and anxiety posed for her in the process, plus her optimization strategy surrounding the PSLF process. Lastly, Kyle Sobecki shares the details of how PSLF pertains to pharmacists in the non-profit space and tells his story of having over $189,000 in student loans forgiven. 

Key Points From This Episode

  • Introducing today’s topic: the PSLF success stories of three pharmacists.
  • A reminder of who Robert Lopez is and his role at Your Financial Pharmacist. 
  • An overview of the first and second half of the show and what we will cover.
  • The basics of PSLF, Public Service Loan Forgiveness, and who qualifies.
  • Which changes were made to the rules of PSLF. 
  • What the big news comes down to: you don’t have to rule out forgiveness.
  • What the limited waiver meant for those in the military.
  • Optimization strategy with PSLF and how Robert recommends you reallocate your finances.
  • The benefit of switching to a lower payment plan while achieving a long-term forgiveness plan.
  • An introduction to Kimberly Gale’s journey into the world of pharmacy.
  • The amount of debt she graduated with and how much was ultimately forgiven.
  • How she discovered PSLF through a friend’s recommendation.
  • Challenges she faced along the way, including communication at the beginning. 
  • How PSLF helped her to afford the lifestyle she wanted for her family.
  • Ashley Hicks’ story of gravitating towards pharmacy because of her love for people.
  • How much Ashley ultimately had forgiven through PSLF.
  • The challenge that uncertainty and anxiety posed within her PSLF process.
  • How optimization and strategy can help navigate late discovery loans.
  • The opportunities that PSLF opened up for her and her husband to focus on other goals.
  • Meet Kyle Sobecki and learn about his work as a pharmacist in a nonprofit hospital.
  • Kyle’s story of having had exactly $189,038.72 forgiven.
  • Homework he has done along the way leading up to choosing PSLF.
  • How PSLF works when you work for a non-profit.
  • Uncertainties and challenges he had along the way. 
  • His advice with regards to filing your paperwork on time each year.
  • Goals the PSLF plan freed Kyle up to pursue including paying off personal debt.

Highlights

“That really is the big news here. Many folks that may have ruled out forgiveness before or thought that forgiveness was still a few years in the future. We’re actually seeing some of those dates come to fruition.” — Tim Ulbrich, PharmD [0:07:00]

“There’s an old adage that says: money is power. I don’t believe that’s true. I think options are power and money gives you options.” — Robert Lopez, CFP® [0:13:33]

“The intent of the program was true. That’s really what they did, is make sure that, if you work for a non-profit for 10 years, you are eligible for forgiveness. They wipe away some of the intricacies that maybe held some people back in the past.” — Kyle Sobecki, PharmD [0:38:43]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week, we have a special episode for you, highlighted by three pharmacists sharing their PSLF success stories, in total, more than 700,000 forgiven tax-free. Some of the highlights from today’s show include talking with YFP planning, lead certified financial planner Robert Lopez, about the PSLF program and why the Biden administration’s PSLF waver is resulting in a lot of forgiveness earlier than expected.

We hear from those successful with PSLF about how they determined that PSLF was the best option for them, what bumps along the road they experienced, and how pursuing PSLF helped them accelerate achieving other financial goals. 

Before we hear from today’s sponsor and then jump into the show, I recognize that many listeners may not be aware of what the team at YFP planning does in working one-on-one with more than 240 household in 40 plus states. YFP planning offers free only, high-touch financial planning that is customized for the pharmacy professional. 

If you’re interested in learning more about working one-on-one with a certified financial planner may help you achieve your financial goals, you can book a free discovery call at yfpplanning.com. Whether or not YFP Planning’s financial planning services are a good fit for you, know that we appreciate your support of this podcast and our mission to help pharmacists achieve financial freedom. 

Okay, let’s hear from YFP Planning lead certified financial planner, Robert Lopez followed by three pharmacist PSLF success stories.

[INTERVIEW]

[0:01:41.9] TU: Robert, glad to have you back on the podcast.

[0:01:43.7] RL: Happy to be here.

[0:01:45.8] TU: For those that haven’t heard you before on the show, I know it’s been a while, tell us a little bit about yourself and the role that you have with YFP Planning?

[0:01:52.2] RL: Yeah, Robert Lopez, certified financial planner, lead planner with Your Financial Pharmacist, been on the team for a little over two years now. I work with clients, mostly pharmacists, we help them figure out how to adult financially, how to pay back student loans, how to be most efficient use of their assets and their income to make sure that they’re living their best life.

[0:02:13.7] TU: I wanted to bring you back on as one of our student loan experts, obviously, you do much more than student loans but have worked with many clients through the public service loan forgiveness, we’ve seen some wins recently and the way we’re going to do this show is we’re going to breakdown some of the nuts and bones of PSLF briefly. We’ve covered that on the show many times before, we’ll talk about some of the updates with the PSLF waiver.

Some of what you’re seeing and working with clients at YFP planning and then the second half of the show, we’re going to feature some YFP PSLF success stories. Robert, before we get into the waiver and make making sure folks are aware of the opportunity out there as a result of that waiver, just quick high level, nuts and bolts of PSLF, who qualifies, who doesn’t, number of payments, how the taxes work.

I know we’ve covered this before, we’ll link in the show notes episode 214, we talked about this as well as episode 90 of ask a YFP CFP but just give us the basics of PSLF.

[0:03:09.0] RL: Yeah, PSLF, Public Service Loan Forgiveness, it’s a program created back in 2008 to offer loan forgiveness opportunities for people who are working in the public sector, right? If you work for a government organization, a not for profit, any organization listed as a 501(c)(3), that just means not for profit, it’s a way for them to get their loans completely forgiven, it’s tax-free forgiveness. 

There are some qualifications, the original PSLF qualifications, which you had to have direct federal loans, which are a type of loans that were created 2010. Anybody who started school after that is probably what they have. It also works for direct consolidated loans, they had to be entered on to an income-driven repayment plan which would have been pay as you earn, which is payee, revised pay as you earn, which is rep payee or income-based repayment, which is IBR.

They had to make 120 on-time payments and that is cumulative, not consecutive, so roughly 10 years but if you took a break you continued counting right back where you left off and that forgiveness just gets wiped away like it was never there. One day it’s on your books and one day it’s not.

[0:04:16.1] TU: We’re going to hear some, I think we need to talk about this, Robert. Three, four years ago, especially when there’s a lot of negative press around PSLF, it was kind of that feeling of, “Is this for real?” We’ve got success stories to share and as you mentioned, especially with the tax-free forgiveness, one day it’s there and the next day it’s not. 

You mentioned the original rules of PSLF and you just outlined those. Suggesting that things have changed. Give us a summary of the Department of Education PSLF waivers, some of the updates that came in fall of 2021 and why that’s such big news for folks out there that may qualify.

[0:04:50.2] RL: Yeah, big change came October 6th, that’s 2021, the Biden administration passed a limited waiver. Limited, meaning, you have one year, you have until October 31st of this year, 2022 to apply for this different waiver. The way it changes, is it changes the types of loans that can be forgiven, it changes the types of repayment plans that can be forgiven, then kind of just how those accounts work. 

The new rules are any previous federal loans, that includes direct, that includes FFEL loans and that include Perkins loans, those are all eligible for forgiveness under PSLF now, assuming you go through the consolidation process. For some people out there who are aware of the consolidation process, it’s where just all your loans gets smashed together and you get a weighted average interest rates, it’s no change, it’s no benefit mathematically.

What it did do is it took loans that didn’t qualify and it made them qualify because it turned it into a direct loan, so you still have to do that but it used to restart your 120 clock when you did that because it’s a new loan and now it does not, so you actually get the oldest loan count on there. Anybody with old loans, it’s a great way to do about it. 

They’ll go back in time and they’ll recalculate all those payments and if you made payments not on an income-driven plan, if you were on, say, the standard 10 year or the extended or the graduated payment plan, those previously did not count as 120 but now they do, those are the biggest change now. All that’s required is you work for a public organization, government or 501(c)(3) not for profit and you have 120 payments.

[0:06:20.0] TU: That was why Robert, as we talk about this and my goal and part of this episode is to continue to shout from the mountaintops so folks are aware and assuming that October 31, 2022 deadline stays for the temporary waiver, obviously, we’ll keep an eye on that but we don’t want folks to miss this window of time, right?

Because one of the things we’ve heard over and over again is, “Hey, I’m four, five, six years in the payments but didn’t consolidate” right? I had FFEL loans, Perkin loans or you know what? I was an extended graduated plan but I wasn’t in an income-driven repayment plan. As you mentioned, once that consolidation piece happens, still an important part of what needs to happen but those payments are then going to count. 

That really is the big news here of many folks that may have ruled out forgiveness before or thought that forgiveness was still a few years in the future, we’re actually seeing some of those dates come to fruition. As we’re going to hear with a couple of stories here in a little bit, that’s something, Robert, I know you and the planning team have been seeing as folks that maybe thought forgiveness was still another two, three, four years away but they’re starting to see that happen now, right?

[0:07:22.3] RL: Yeah, the big thing that everyone needs to be aware of is if they’ve already consolidated their loans and they currently work for a not for profit or government organization, all they have to do is submit the employment certification form and they’ve actually simplified that process even farther. If you just Google PSLF help, it will take you to the government’s PSLF help tool at studentaid.gov.

You fill that out, it’ll create the document for you for you to give to your employer, once that form is submitted, they will automatically go back and recalculate all your payments. Automatically with the government could mean three or four months but it is a process that you no longer have to do anymore work. 

If you’ve already submitted an employment certification form in the past, they’re already going to update you. Some of our clients have had those letters come out the mail that says, “Hey, congratulations, we recalculated 60 extra payments for you” and their numbers just jump from say, 65 to 125 and congratulations for this forgiveness but that’s all that’s really necessary.

Anybody that has those FFEL loans currently, you can go and get a consolidation as well again, studentaid.gov. Come to YFP, we’ll help you through the process as well. 

[0:08:25.0] TU: One of the other benefits, Robert, I’ve heard from several folks is, because of the administrative forbearance, not only are some folks finding that this is happening sooner than they thought it would but also, they haven’t had to make payments for now, going on a couple of years and those have been counting as well, correct?

[0:08:40.6] RL: Yeah, ever since the administrative forbearance for COVID started in March of 2020, no one has been required to make payments and the interest rates have been set at zero. No one’s accruing interest in this time period as well. If you chose to make payments throughout the time, that’s great. You’re just paying off a crude interest, if you had any or paying down principle, you will continue to make payments. 

If not, that’s going to continue until May 1st as of today. It’s always subject to change as we’ve seen with the government but as of right now, those loan payments will turn back on in May 1st and the interest rates will turn back on as well. Yeah, this has been – it’s going to be 27 free payments I believe and then all have counted towards PSLF as long as you qualify for PSLF.

[0:09:23.8] TU: One other thing briefly Robert, I want to touch on that you mentioned before the show that we have not talked about in much detail but for those in the YFP community listening that are in the military pharmacist position, there’s also an important part that they need to be considering here as well. Tell us more about that?

[0:09:37.6] RL: Yeah, as a part of the limited waiver that came out last October, they basically said, if you were in the military and you made payments, those all count on PSLF now as a part of that waiver. Any active-duty military members, any full-time military members, just complete that employment certification form, submit it to your superior officers and you’ll get all your payments to count.

We actually have a client that that’s going to happen for, they’ve been in the military 10 years, they have the wrong loan type, they’re on the wrong repayment plan, none of their stuff counted and now, all the payments are going to count and they’re going to get forgiveness this year.

[0:10:09.4] TU: Awesome example. One of the challenges you mentioned was you know, timeline when we think forgiveness and say, hey, one day you had your loans, the next, you didn’t, we might think of that as an overnight thing, that might be months, right? By the time papers get processed as we talking about PSLF, that could be a challenge or an uncertainty.

Anything else you’re seeing out there? I know there’s been a lot of concern with loan servicing companies that are going to be changing, there’s certainly a fair amount of horror stories with PSLF that are still out there from before the waiver. Other challenges that you’re experiencing, Robert, as you’re working with clients that are pursuing PSLF?

[0:10:43.7] RL: Yeah, the uncertainty is the big one, we know that some loan servicers have ended their contracts with the US government. FedLoans in particular is ending their contract and FedLoans is important because they actually manage all the people who are in the PSLF program.

FedLoans contract is going to expire at the end of this year, they got extended so then we have until the end of 2022 and that’s going to switch over to MOHELA. Anybody that is actually making that move and they apply for the employment certification form to get their loans counted, their loans are going to transfer to FedLoans and then transfer again later this year to MOHELA, it’s unfortunate but it’s just the way of the world at this point.

That’s kind of the biggest thing that we’re seeing is just, who do I make payments to, how does this work? If I make overpayments, will they get repaid to me? Which historically has been yes, but we haven’t seen since the admin forbearance if it’s going to be the same.

[0:11:32.8] TU: Last thing I want to pick your brain on is, I think we’ve done a decent job talking about the benefits of tax-free forgiveness, obviously less money that’s paid out of your pocket, somebody else playing the bill, that’s a good thing.

I don’t know if we’ve done as much on the optimization strategy and the optimization side of this as folks are considering this strategy among others. As we look at someone who maybe making that decision of PSLF yay or nay, I think there’s the tax-free forgiveness but there’s also the question of, what else could I be doing with dollars to move forward my financial plan if I’m not having to put as much towards those loans because they’re going to be forgiven?

I know this is an area that you and the planning team do a lot of work with our clients on. Talk to us more about the optimization strategy here with PSLF.

[0:12:19.6] RL: They, the opportunity cost is that big decision point thereof, “How can I better utilize these dollars?” Sometimes it’s easy to fall into the PSLF route, right? I had a PGY1, PGY2, I was making not a lot of money, I don’t want to make extra payments, I’m going to go income-driven in the meantime and then when I get out of my residency, I’ve got 24 months of payments but I only owe $100,000 in student loans.

I could probably pay this back if I’m going to keep working but if you don’t, we have clients paying $3,000 a month to be aggressive towards your student loans and if that’s your prerogative, awesome but if you were to switch to staying income-driven, maybe your payment drops to $500 a month and now you can better utilize that $2,500 difference there.

Maybe that’s paying down other debts. Some parent plus loans that your parents took out and helped you with to get through school, maybe it’s paying down some credit card debt that you used to travel for residencies, maybe it’s to pay down auto loans, maybe it’s to save for that home that you’ve been – that delayed gratification you’ve had for the last 10 years probably.

Maybe that’s something you want to go towards or maybe it’s starting a family. We see a lot of spouses that decide to go part-time because we have lower student loan payments. There’s a lot of flexibility that that money gives you. There’s an old adage that says, money is power, I don’t believe that’s true. I think options are power and money gives you options, right?

If you have the ability to switch to a lower monthly payment while still achieving this long-term forgiveness plan, it’s saving dollars in the long run but also giving you the option in a short-term to best utilize those dollars for your personal financial life, I think that that’s really powerful.

[0:13:54.5] TU: Great stuff, Robert. I really appreciate you sharing your expertise and experience you’ve had in working with clients at YFP Planning. Now, we’re going to transition here in PSLF success stories.

[INTERVIEW]

[0:14:05.7] TU: Kimberly, thanks for coming on the show.

[0:14:07.3] KG: Thanks for having me.

[0:14:08.8] TU: Before we talk through your PSLF journey, tell us a little bit about yourself including your journey into the profession of pharmacy, where you went to school and the work that you’re doing now?

[0:14:18.5] KG: Sure. I actually came to pharmacy a little bit later in life than most people. I went through my undergrad program like many, I think do, just kind of floundering around, trying to figure out what was a good fit, so undergrad took a little longer than usual. During one of those kind of times in my life where I just wasn’t sure of my direction, my mom suggested, “Hey, why don’t you maybe take a little time off school but maybe go work in a pharmacy?” we’re always interested in that aspect, she was a surgical nurse so I grew up around medicine. 

I was like, “Okay, sure” so I went and applied as a clerk typist for a long-term care pharmacy in my town but ended up never taking the time off school, so I was doing full-time work and full-time school. I decided to get a business degree and just be done with it and then, I just never left the pharmacy, I worked as a clerk typist and then became med tech and I spent about eight years there and then I finally was like, “Well, I’m at the top of my game with what I can do here and I want more.”

So I decided to go to pharmacy school. I went, I started at Touro University of California in 2007 when I was 30 years old and graduated from there and am now after a stint in some in-patient pharmacy work, I am now anticoagulation pharmacist.

[0:15:44.5] TU: Very cool, thanks for sharing the journey. Tell us more about the amount of debt that you graduated with when you came out of Touro and how much was ultimately forgiven through PSLF?

[0:15:56.2] KG: I think, ballpark at graduation was right around, I don’t know, like 280, 290,000 when I entered repayment and then what ultimately was forgiven was about the $352,000.

[0:16:12.4] TU: Okay, obviously some interest that would have naturally accrued on that amount and then more was forgiven than the original balance and amount you had upon graduation.

[0:16:22.2] KG: Yes.

[0:16:22.8] TU: Okay, so our listeners know, we’ve talked a lot about PSLF in the show, they know that PSLF is one of many options when it comes to paying off student loans. My question here for you is, for folks that are – especially on that front end of making the decision about, is it PSLF, is it refinancing, is it something else.

That decision, although it’s very significant numerically can be paralyzing at times and so, tell us more about how you came to the decision to pursue PSLF, especially at a time, I would argue that there wasn’t as much information, tools and resources out there to support those that were on the PSLF journey?

[0:16:59.1] KG: Yeah, I was introduced to the PSLF program while I was still in school. There was an upper classman year ahead of me, had learned about it and was sharing the information about it and then I said, “That sounds like what I’m going to need to do” just because knowing how much I was going to graduate with what a standard repayment plan would look like. I didn’t know a whole lot about refinancing outside of the Department of Education kind of loan programs.

My loans had a variety of interest rates, anywhere from three to almost 8% just across the board and just looking at what extended repayment plan would be, was basically a mortgage payment in it of itself. I was like, “I’m not going to be able to do anything else with my life while I’m under this student loans” you know? The thought of, especially in the Bay Area of being able afford a house, have a child because childcare was going to be $1,500 a month. I was just like.

I’m already older than most of my classmates and this is just going to be part of my life but if there’s a chance that I can get it forgiven in 10 years and be done with it then that was what I was going to pursue, I really didn’t consider anything else.

[0:18:23.3] TU: That makes sense Kimberly, when I think of 280 to 290, especially at a higher cost of living area, out in California, other expenses, you mentioned childcare and so forth, you know 280 to 290, that’s a big monthly payment. You mentioned a mortgage payment that would be a really big mortgage here in Ohio but in California no. 

[0:18:41.2] KG: Right, not so much.

[0:18:42.0] TU: Yeah, I certainly see why that directed you down the PSLF path. Fair or not, there still a lot of skepticism and uncertainty about PSLF and one thing I mentioned to you before we hit record is that, I think there’s some lingering’s of horror stories of early situations and missteps that folks took and that’s still having an impact on perspective PSLF individuals today that are considering that as an option.

My question here is, were there any uncertainties that you had, any challenges that you faced along the way? That is just a long process, it’s a lot of time and I think often, folks are like, “What if it doesn’t go right?” What if something happens along the away? You got to the finish line but any uncertainties or challenges along the way?

[0:19:26.6] KG: Oh yeah. There was a lot of just they were not really forthcoming early on. The servicer wasn’t ensuring that you were in the right type of loans, there’s yeah. I, for the first maybe year I was in, a couple of my loans weren’t in the appropriate format. I finally got the right information, consolidated all my loans but that restarted the 120-payment clock. 

I was already a year later than into the program and so I was like, “Okay, well that’s fine, it’s just I’ll be maybe done in another year” but there was a lot of trepidation because nobody had reached that 10-year mark for a long time so we didn’t know how hard it was going to be, how many we’re going to be rejected. It was just blind faith, all we could do was make sure we were making payments on time in the right type of loan that we were certifying our employment.

I made sure that I was annually and any time I changed job, I changed job one time that I got my employment hours certified and submitted every year and made sure that everything was in line and cross my fingers. One thing that I didn’t realize, what was considered part-time, if one employer considers 32 hours a week full-time, that’s great but if your next employer doesn’t consider 32 hours full-time, then that doesn’t certify.

That is something you have to take into account when you’re thinking about changing jobs as well is that you know, does this job meet the requirement and/or is there going to be some payments that are going to be qualified, that just extends the timeframe.

There was a lot of learning on the go that had to happen and just kind of staying on top of everything and making sure that the documents are all in line was basically all I had to do and then once – 2017, I think was when the first people reached their 10 year mark and started doing their applications and oh my goodness, so many of them weren’t getting approved and for one reason or another, all the things that you started to hear and the reports and you guys were reporting on it, it was just like, “When my time comes up, what’s going to happen?”

Yeah and I think in the back of my mind, I was always a little worried about some administration’s going to come in and they’re just going to gut this thing and before I even get to that point, it’s not even going be in existence anymore. I had that anxiety as well.

[0:22:15.0] TU: Yeah, one of the things I shared with folks, Kimberly, when we were talking on this topic is that I think there’s been more angst previously about administrative changes that might come into program. I think that’s been eased more recently just because the tone has been a lot friendlier towards PSLF and backed up with some actions here in the last couple of years.

I’ve often said, I’m not sure that’s the biggest risk, I think the risk folks need to be thinking about is, what if for some reason I can’t find myself working for qualifying employer, you know? I think, what mobility or flexibility do I have if I need to pivot or move employers, I think that’s often something that folks need to be thinking about.

[0:22:53.9] KG: Right.

[0:22:55.2] TU: Kimberly, my last question for you is, one of the things I often encourage folks to be thinking about is, if you’re going to go into PSLF, go all in. The goal is to maximize forgiveness and minimize what comes out of your pocket. We certainly don’t want to be in the middle, right? Where we’re paying more than we have to and ultimately, those dollars could be forgiven and those dollars could be used elsewhere in the financial plan.

I think PSLF affords folks an opportunity if it’s a good fit for them to be able to pursue and prioritize other financial goals beyond student loan repayment. How did PSLF for you, help you be able to pursue other goals and was that a reality for your situation?

[0:23:33.3] KG: For sure. PSLF and being an income-based repayment, so a lower repayment than standard, did definitely free up some money just on the month-to-month basis and being able to have that meant that I could maybe move to a slightly lower cost of living area but still remain in California and purchase my first home with my husband and we had a child and we could afford to do all of that and then now without any, you know, having the forgiveness taken care of, now I can shore up the other parts of the financial picture. 

You know, making sure that we’re set for retirement, making sure that the kids provided for, for his education and feel a lot more safe and financially sound, so it’s been a blessing. 

[0:24:28.3] TU: That’s awesome. I was really excited when I heard the news of the $350,000 plus that was forgiven, so really excited for you for what lies ahead for the financial plan and thanks for taking time to come on the show and share your story. I really appreciate it. 

[0:24:41.5] KG: Thanks for having me. 

[INTERVIEW]

[0:24:45.0] TU: Ashley, thanks for coming on the show. 

[0:24:46.3] AH: Thanks for having me.

[0:24:47.5] TU: Before we talk through your PSLF journey, tell us a little bit about yourself including your journey into pharmacy, where you went to school and the work that you are doing now? 

[0:24:55.6] AH: Sure, so I came to pharmacy to pursue my love of working with people, my passion for healthcare, and really just my desire to give back and so that helper mentality really brought me to my career path of pharmacy and in terms of what that path looked like, I did all of my schooling at the University of Wisconsin Madison. I am a local, so that’s pertinent to know that I paid in-state tuition the entire time I was doing my seven total years of pharmacy course work there in Madison. 

After graduation, I did do two years of residency in Minnesota to specialize in oncology pharmacy and so I graduated in 2011, so after my two years of residency, I took my first job in Chicago at Northwestern specializing in hematology, oncology as well as bone marrow transplant pharmacy and so I was an in-patient pharmacist there for about five or six years before I took another detour and discovered Informatics and so I am currently back in Wisconsin working for UW Heath and I am working in Informatics now, so it’s been a fun journey and I guess now I am somehow about 11 years out of pharmacy school. 

[0:26:20.4] TU: I can relate to that as well. I mean, cool story of chemo training. Obviously you spent time specializing, transition to Informatics not one you commonly hear, so really cool, glad to hear you found that path that you enjoy. Tell us a little bit more about the amount of debt that you graduated with. You mentioned 2011, two years of residency. How much did you graduate and how much was ultimately forgiven through PSLF? 

[0:26:41.4] AH: Sure, yes, so throughout – I mentioned I was in school for seven years in state but it was a pretty direct path and I worked my way through school as well and in spite of that, I had about $200,000 that I took out total in loans throughout that seven years, so that’s the grand total. Actually, I don’t even know if I looked at that number very closely until the last few years when things are really – when I was working with YFP and really starting to get serious about some things. 

[0:27:15.1] TU: Our listeners know if they’ve been listening to the show for any time, we’ve talked a lot about student loans. I mean, they know that there is many options when it comes to paying them all. PSLF is certainly one of those options, so I am curious Ashley, how did you come to the decision to pursue PSLF especially I think at a point in time, 2011 when you graduated where the information tools, resources to support those that were on the PSLF journey just weren’t as good as there today, to be frank? 

[0:27:40.4] AH: Yeah, I would completely agree with that. You know, I think that I sort of by luck even came across the fact that the program was available and new to me, so I truthfully don’t know that I knew a lot about my other options but I did know though was that as a part of PSLF that I had a chance of having my loans forgiven after 10 years and that my payments would remain income-based and so having done two years of residency, it made sense to me that those two years, when my payments were next to nothing would count towards those 10 years. 

Then given the leg in recalculating payments, I kind of determined that almost half of my ten years, my payments would be extremely low and that actually ended up being true. I didn’t really hit what I would consider to be really high payments until the last three years of my PSLF, which luckily for me, two of those, almost two of those ended up being during the pandemic and so it was a lot of faith and believing that the program would work for me and knowing for me that I didn’t want to deviate from kind of the academic setting. 

I think that was another consideration is I knew that I would be tied to a qualifying not for profit organization and for me that didn’t feel like a restriction based on what my projected career path looked like and so you know, given the amount of debt that I had, I kind of took a leap of faith and went for it. I will say I did encounter another professional who was able to tell me that I was doing all the right things to be in the PSLF program about four years in. 

However, I did find that I had about $35,000 worth of loans four years in that weren’t in the program and so for me, that was a point where I was like, “Gosh, do I just pay it all off or do I continue in the program?” and what I ended up doing, my husband and I saved up $35,000 over the next couple of years and earmarked it for that portion of loan that wouldn’t be forgiven in my initial 10-year mark and so that was kind of my backup plan so that I could hopefully be done with all of my loans at 10 years regardless of what was all part of PSLF at that point. 

[0:30:14.0] TU: That’s a common thing Ashley that we hear, where folks realize you know, several years in. I am hopeful as time goes on that that’s going to happen less and less. You know, I think that there’s more and more information out there but especially for folks that were early on in the PSLF, we have to remember 2008, you know, this was enacted legislatively 2007. 2008 was the first group that was really the beginning of the 10 years and so you weren’t too far off from the beginning of it. 

So again, not as great of information that was available. Besides the 35,000 of loans that were not eligible and obviously was a wrinkle in the journey that you and your husband had to kind of work through, were there any other uncertainties or challenges that you faced along the way in the PSLF journey? 

[0:30:54.0] AH: You know, I think that that was the main one. I was very – you know, I’m a pharmacist, we’re all type-A so I was very diligent about completing the paperwork. I was also very skeptical when the program did hit 10 years based on the very low number of people who are seeing forgiveness being successful but other than the late discovery of loans that weren’t consolidated, I think that that was the main hiccup. 

You know, other than that, it’s just that anxiety and that uncertainty about not knowing if you are actually doing everything correctly and when you call the loan servicer, you get a different answer sometimes depending on who you talk to and that’s not a very good feeling and so that’s why I was very excited when I came across the YFP Podcast and I was able to start working with you. 

I actually got a lot of reassurance that made me feel like I was doing all the right things, that I was doing everything in my power to ensure that I was keeping myself eligible and in a position to be forgiven when that day came around. 

[0:32:01.3] TU: Yeah, maybe easy right now that we look back 10 years, you know? It may feel like, “Oh it wasn’t that bad but in the midst of it, you know, especially if there is five plus years ahead of some of that uncertainty, having that reassurance can be really valuable. Optimization of PSLF is something that we’re trying to talk more and more about. Yes, it is nice to have debt that can be forgiven and forgiven tax free, that’s great. 

But there is also this whole other strategy of because you are not making as big of student loan payments, it allows other dollars to be put to work at other parts of the financial plan and you already mentioned earlier Ashley that because of two years of residency and because of the delayed timing of how that income-based repayment amount has increased. You made a comment about five years out of ten, we’re really at a pretty low loan payment amount, certainly much lower than what it would have been like the standard ten year. 

[0:32:52.5] AH: Right. 

[0:32:53.1] TU: Then you also had to adopt at that two years of pandemic and so you saw some great opportunity throughout that ten years because of the residency, because of the pandemic. My question here is, because you weren’t having to make massive student loan payments throughout that entire journey because ultimately it was going to be forgiven, did that allow you to optimize other parts of the financial plan that perhaps you might be playing catch up on now? 

[0:33:14.9] AH: Yeah. I mean, I think it had a number of benefits allowing my husband, myself, and our family to do some things that we may not have otherwise been able to do and so in terms of just the payment strategy, I think it allowed my husband, for example, to work in a startup industry where maybe he wasn’t making his salary that he would have been if he had been working in a more corporate environment. 

You know, I think the payment strategy allowed us to purchase our first condo in Chicago, which ended up being really great investment than when we sold it. It allowed us to purchase the home that we live in now and it also allowed us to kind of put ourselves in a financial position where my husband was able to purchase a gym that we now own and that he runs, I should say we own and that he runs. 

I think the overall strategy has allowed us those opportunities really to kind of see some of our dreams come to fruition and now that we have this money that we’ve put aside in the event that the $35,000 worth of loans get forgiven, we have a big chunk that we can put to finish our basement, which is something that we didn’t really think was going to happen so soon and so yeah, I think overall the strategy and committing and staying in the program has had a number of benefits for our financial goals. 

[0:34:40.2] TU: That’s excellent. I really appreciate you taking time to share your journey. Congratulations on getting to the finish line and wishing you and your family the best going forward, so thank you so much Ashley. 

[0:34:50.0] AH: Thank you. 

[INTERVIEW]

[0:34:52.8] TU: Kyle, before we talk through your PSLF journey, tell us a little bit about yourself including your journey into pharmacy, where you went to school and the work that you are doing now. 

[0:35:00.8] KS: Sure, yeah. Thanks Tim, I am really happy to be on the show today and just give a little story about myself. So I am Kyle, I work in a hospital, a non-profit hospital system. I have been in that position for a little over 10 years. I graduated in 2011 from NEOMED and then I did my residency a year after that, so I’ve been kind of in the non-profit world for the last 10 plus years. 

[0:35:22.7] TU: First graduating class of NEOMED, so exciting. That’s where our paths crossed back in the day when I started on faculty there. You guys had a great class and we had the opportunity to work together for a period of time there as well, so excited to get an update on what you’re doing as well as your success here with PSLF. Tell us more about the numbers, amount of debt that you graduated with Kyle and how much was ultimately forgiven through PSLF. 

[0:35:44.1] KS: Sure. Yeah, I’ll kind of run through my numbers here. My total debt loan was $186,301.07. Just a little bit of breakdown on that, about 18,000 of that was from undergrad that I kind of rolled into the loan after I graduated. About a 168 or so, 160, 170 was from just pharmacy school going through that for four years because we were in a two plus four program and then after the $186,000 or so that was the principle, I also had accrued a little bit of interest. That number was $2,737 of interest, so if you look at the total, the principle plus interest that was recently forgiven was $189,038.72. 

[0:36:28.4] TU: Awesome, love the specificity too, so tells a bit you are doing your homework along the way, which is obviously important when it comes to loans in general but specifically with public service loan forgiveness, making sure that we’re crossing T’s, dotting I’s. Now Kyle, our listeners know that there are many options when it comes to paying off student loans. I often tell folks when I am teaching this topic, you know, whether we like it or not, the system around student loans and the complexities, it is what it is. 

It’s the hand that we’ve been dealt and so we’ve got to do our work to understand it and PSLF is just one of the many options that were out there. I am curious to know, how did you come to the decision to pursue PSLF where that was what you had thought was the best strategy for you individually especially at a point in time. You mentioned graduating in 2011 where the information tools and resources to support those on the PSLF journey just weren’t as readily available or good as they are right now. 

[0:37:21.5] KS: Yeah, that is a great topic and one that almost every pharmacy student that’s graduating should have some serious discussions about is the repayment plan but for me, we started pharmacy school in the fall of 2007 and if you remember the program for PSLF was started in October 2007, so we were just hearing about this program and certainly nobody had been in the program 10 years to have anything forgiven, so we didn’t know much about it. 

By the time I graduated in 2011, we were hearing more about the program and its availability and I always knew that I wanted to do residency, which in the hospital is most likely going to be a non-profit hospital depending on if you do one year or two year, you are probably going to have two years of non-profit work and I also knew I wanted to work in a hospital, so at the end when I graduated in residency and moved into a position, a clinical position and a shared position at NEOMED it was something that kind of fit the PSLF mold. 

Where I would be working for a non-profit and as long as I work ten years and made my on time payments, everything should be forgiven. The option for me was I always kind of have it on the back burner that this might be a perfect repayment plan for me because I had already planned to go the non-profit route and work at a hospital and then it kind of just all fell into place with this and then certainly as everyone is aware, the Biden administrations, their work on expediting the PSLF program and making sure those – 

You know, the intent of the program was true and I think that’s really what they did is make sure that if you work for a non-profit for 10 years that you are eligible for forgiveness, and they kind of wipe away some of the intricacies that maybe held some people back in the past. 

[0:38:58.4] TU: That exactly is Kyle why we are seeing so many folks now come forward with, “Hey, we’ve been forgiven. We’ve been forgiven” it felt like it was at snail’s pace for so long and part of it has just been time. You mentioned the timeline of when this was an active legislatively, so we are seeing more pharmacist that are coming forward but also because of some of that work that the admiration has done to help expedite the process and remove some of the nuances that are there as well. 

With that being said Kyle, there still is a lot of skepticism that I hear, a lot of uncertainty about PSLF and I think some of that comes from, you know, maybe some horror stories that have gotten over-glorified, some things that haven’t been updated in a period of time. Tell us about for you, any uncertainties you had along the way or challenges that you faced in the pursuit of PSLF? 

[0:39:42.3] KS: Yeah, that is a big one for me, so my story, I mentioned kind of having a little bit of some undergrad debt when I started in residency, I made sure to file the paperwork right away and get into the program just in case the program was done away with that way. They usually grandfather people in that were in there but one thing that I didn’t realize is I had FFEL loans while I was in the program for about a year and then I had called them. 

They basically said, “Well, you have to consolidate your loans into direct loans” and then at that point, it was probably 2012 when I did that and I consolidated them all together but in doing so, they also told me that’s going to push back my repayment date. Before the Biden administration updated their standards and how things will be forgiven, my repayment date or my payoff date was going to be May of 2023. 

I still technically had 15 months from now to go but because they moved everything up and actually some of those payments the first year didn’t count then and they had to restart their clocks so to speak, so that’s one thing that I don’t think was the intent of the original program was to make it so difficult with the type of loan you had to be eligible for the program. I think that is one kudos to the Biden administration for trying to solidify that plan.

That hey, it really doesn’t matter what type of loan you have if you are working in non-profit for 10 years, you really should be a part of the program and I think they’ve done a really good job of that, so that was probably the biggest challenge, in the beginning, was that I lost some payment time. The other challenge I would say for anybody who is in the program is just make sure you’re – one thing I did was I filed my paperwork on the dot every year. 

When I hit my anniversary at work, which for me was August 1st, every August 1st, I would file a new sheet with PSLF and send it to FedLoan to update my payment account and that way, any kind of mailings that they sent me, any kind of confirmations, I would have a file that I was tracking it along with them. I was religious to that, I did it every year to make sure how many payment accounts I had left and then I would know when my repayment date would be. 

That was another challenge I think that as long as you’re on top of it, once a year is probably enough to do that but you don’t want to delay that because your payment accounts won’t be updated until you send in your sheet. 

[0:41:55.8] TU: Great insights Kyle and one of the things that we like to talk about in the show is, when it comes to PSLF, often the strategy side of PSLF might get overlooked, and what I mean by that is that you know, typically the goal of PSLF is usually to maximize forgiveness and minimize what comes out of pocket and one of the advantages, therefore, can be allowing someone to pursue and prioritize other financial goals beyond student loan repayment if they have that mindset of what can I be doing to maximize forgiveness, minimize what is coming out of pocket. 

For you Kyle, how did the PSLF strategy help you be able to pursue other financial goals for you and your family? 

[0:42:32.7] KS: Yeah, another great thing that I think this program allows you to do to coincide with paying off the debt or being in the program is to prioritize other things that you want to do. In my case, just taking a step back for a minute is if you notice the numbers that I stated earlier, I didn’t pay a dime of principle through the entire ten years. My 186,000 and some change, that was the number that I graduated with and it didn’t come down one penny. 

When you talk about maximizing public service loan forgiveness, you know, that’s ideally what you want to do. You want to have the most available to forgive at the end of the 10 years. One thing that my wife and I did is we ended up filing our taxes separately. We were in the old IBR plan, which I am not sure you’re allowed to get in anymore. I think they have updated and there is a new IBR plan. 

That plan if you file separately, it will only look at my income as oppose to our total income, so we would file our taxes separately. Typically, that’s not advice that you would see for most tax professionals. For most people in the United States except in the scenario where you have student loans and you are in a program like PSLF and then you know, it is just allowed us to maximize some other things we did along the way knowing that hey, we’re making our payments, the payments count and now we can invest in other things like our IRAs. 

My wife and I both have IRAs, we have 529 accounts for both of our kids that were started when they were born, and then we actually had somebody left over, so we started a taxable account so we kind of maximized retirement and then we were able to save for some other things, you know, just house renovations and things that probably wouldn’t be able to be done had we’ve been paying, understand the repayment plan, which would have ended up costing us about 800 or 900 dollars more per month. 

[0:44:12.4] TU: 800 to 900 more per month, right? I think that’s where the numbers and the PSLF math can become so favorable. You highlighted so well Kyle, you know, how can you use that additional margin to expedite prioritize other goals, right? You talk about the tax strategy, super important, you know, college accounts, IRAs, 401(k)s, brokerage accounts and again, not to say having to wait until those student loans were gone to be able to pursue those goals, which we know is so important because of compound interest and time value of money. 

Kyle, I really appreciate you taking time. Congratulations, excited for you and the family to get through this important milestone and really appreciate you taking time to come on the show. 

[0:44:51.2] KS: I’m glad to come on and just wanted to at least give some evidence that the PSLF program can work for everybody and those are in it to stick with it and make sure you’re trying to maximize the amount forgiven at the end. 

[0:45:03.2] TU: Thanks Kyle, I appreciate it. 

[0:45:05.0] KS: Thank you. 

[END OF INTERVIEW]

[0:45:05.6] TU: Well, as we wrap up today’s episode hearing about some PSLF updates with lead planner, Robert Lopez, from the YFP Planning team as well as three PSLF success stories, now is the perfect time as we await the end of the administrative forbearance to make sure that you’ve got your student loan repayment plan knocked down. 

You’ve heard firsthand through these stories about why identifying the best repayment plan, whether it be PSLF, refinancing or another repayment option is so important to make sure that you’re optimizing your student loan situation and considering it as a bigger part of your financial plan. 

That is why we’re excited to have a one-on-one student loan analysis service that is offered by the team at YFP Planning that is specifically focused on having you identify the best repayment plan for your personal situation. 

For this service, you’ll work directly with one of YFP Planning certified financial planners to inventory your loans both federal and private, evaluate eligible repayment options including student loan forgiveness, income-driven repayment, private refinancing and ultimately determine that best repayment strategy for your personal situation. 

You can get started by visiting yourfinancialpharmacist.com/sla. Again, that’s yourfinancialpharmacist.com/sla and you can use the coupon code, “YFP” for 10% off. 

[DISCLAIMER]

[0:46:25.4] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

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

[END] 

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YFP 247: 10 Common Financial Mistakes Pharmacists Make

Posted on by yfpadmin


10 Common Financial Mistakes Pharmacists Make

On this episode, sponsored by APhA, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, talks about ten common financial mistakes pharmacists make.

Episode Summary

In this episode, Your Financial Pharmacist Co-Founder & CEO, Tim Ulbrich, PharmD, flies solo to dive into ten common financial mistakes that pharmacists make. Tim talks through the math behind the age-old retirement advice that we have all heard, “save early and save often.” He discusses some common mis-prioritization of investments that leave tax savings on the table, like prioritizing non-tax favored investment accounts. Tim further discusses two common student loan mistakes that can cost folks tens of thousands of dollars and in some cases, much more than that; paying too much interest and not maximizing PSLF. Tim shares about the importance of having an emergency fund, protecting your income, and saving for your kid’s college in the correct order. He details common financial missteps such as accepting that income is fixed (because it will change) and failing to or delaying retirement savings, plus some long-term impacts of each. Tim then wraps up with another look at tax planning and how proper tax planning each year (not just tax filing) can affect the financial plan. Lastly, Tim explains how having a financial planner that does not have your best interest in mind can be one of the biggest mistakes that you don’t have to make. 

Key Points From This Episode

  • The number one mistake on our list: paying too much interest on your student loan debt.
  • Tim shares the way to shift your mindset away from the ‘monopoly money’ feeling. 
  • Diving into student loan strategy and the different buckets to consider. 
  • Talking about service loan forgiveness and PSLF strategy, and how to maximize these.
  • Why emergency funds take a back seat and how to avoid delaying getting one. 
  • Some tips on starting your emergency fund.
  • Mistake number four: protecting your income.
  • Accepting your income is fixed, and factoring in inflation and debt loads.
  • Putting numbers to the retirement savings saying of ‘save early, save often.’
  • Investing in a way that maximizes your tax savings!
  • A reminder of why it’s crucial to create a tax strategy and do your tax planning.
  • Talking about saving out of order for kid’s college.
  • How to get a certified financial planner who has your best interests at heart.

Highlights

“We tend to underestimate how much interest we’re going to pay over the life of a loan and therefore, we tend to underestimate how much we’re going to actually pay out of pocket.” — Tim Ulbrich, PharmD [0:08:37]

“When it comes to insurance, the balance point here is we want to not be underinsured, we want to make sure we can protect the time but we also don’t want to be over-insured.” — Tim Ulbrich, PharmD [0:19:23]

“You can borrow for your kid’s college, but you can’t borrow for your retirement.” — Tim Ulbrich, PharmD [0:30:48]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week, I fly solo to talk about 10 common financial mistakes that pharmacists make, no judgment as I’ve made many of these mistakes myself. Some of the highlights from today’s show includes talking through two common student loan mistakes that can cost folks tens of thousands of dollars and in some cases, much more than that, the math behind the age-old advice that we’ve all heard, save early and save often, as well as talking through some common mis-prioritization of investment that leaves tax savings on the table 

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

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

[SPONSOR MESSAGE]

Today’s episode of Your Financial Pharmacist Podcast is brought to you by the American Pharmacist Association. APhA is partnered with Your Financial Pharmacist to deliver personalized financial education benefits for APhA members. Throughout the year, APhA will be hosting a number of exclusive webinars covering topics like student loan debt payoff strategies, home buying, investing, insurance needs, and much more.

Join APhA now to gain premier access to these educational resources and to receive discounts on YFP products and services. You can join APhA at a 25% discount by visiting pharmacist.com/join and using the coupon code, YFP. Again, that’s pharmacist.com/join and using the coupon code YFP.

[INTERVIEW]

[0:02:08.5] TU: Hey everybody, Tim Ulbrich here, welcome to this week’s episode of the Your Financial Pharmacist Podcast. I’m flying solo this week and we’re going to talk through 10 common financial mistakes that I see pharmacists often making, that we see pharmacists in the YFP community often making. As I mentioned in the introduction, there is no judgment here in these mistakes.

I’ve made many of these mistakes myself. My hope with this episode, through sharing some of those experiences and other common mistakes that we see folks making, is to hopefully prevent those, right? For others that are perhaps on this journey towards achieving financial freedom.

Before we jump into the 10 common mistakes that we’re going to talk about in today’s episode, I am not going to be covering a few things that are worth noting because I’m going to assume that you’ve got these bases already covered, right? Those would be things like having a budget and being intentional with your spending, so important, right? 

We’ve ultimately got a certain amount of income to work with each month, we’ve got a lot of things that are competing for our attention financially, various goals, various expenses and so that budget is going to allow us to be intentional with our spending. I’m going to assume that that is already in place. 

I’m also going to assume that we’ve either eliminated any high-interest rate, credit card debt that is revolving each month in a current interest or we’re going to avoid that if we possibly can, right? Very important is, we look at how the impact of that interest can really hurt us as we look at trying to achieve other goals. 

Finally, of course, we need to minimize our lifestyle creep, right? For many pharmacists, we know that we see, certainly, a great income overall but that income often can be relatively flat throughout one’s career. Expenses tend to creep up on us over time, perhaps families grow, home expenses, other types of things throughout one’s career and so, we got to do our best to keep those expenses at bay and so that we can focus those limited dollars that we have on other goals each and every month. 

Again, things I’m not going to cover, having that budget, being intentional, spending, avoiding, eliminating credit card debt, minimizing lifestyle creep. Now, what we are going to talk about are some common student loan mistakes, we’re going to get really tactical with some numbers that highlight why these mistakes can really have a significant negative impact and really ultimately leave a lot on the table that could be put elsewhere in the plan.

We’ll talk a little bit of our emergency funds and protecting the income. We’ll talk about a couple of things in the long-term savings, retirement side, in terms of prioritization and delaying of savings. Then I’ll wrap up by talking about tax planning as well as looking for a planner that has your best interest in mind. 

All right, I hope you’re ready, I’m going to go quick, we’re going to hit a lot of information and we’re going to reference several resources throughout the show and we’ll of course, link to those who you could deep it to those deeper after the recording.

[0:04:49.0] Number one mistake on our list is paying too much interest when it comes to paying off our student loans. Now, you’ve heard me say a hundred times on this show, that pharmacists are facing significant student loan debt. The cost of 2021 to be exact, median debt load, have $170,000 as reported by the American Association Colleges of Pharmacy Graduating Student Survey.

Now, the good news is for the first time in over a decade, we’ve seen that number come down was $175,000 for the class of 2020. Bad news is, that’s still $170,000 and when we look at how interest accrues on a $170,000, those start to be really big numbers. One of the things I often say is that for me in my journey of paying off debt, when I was in school and even early on in the repayment journey, to be frank, it felt a little bit like monopoly money, right? 

Once we get into active repayment, once we see the impact of that interest accruing, it starts to become really real, really quick. One of the ways I like to shift that mindset away from that feeling of monopoly money is to calculate the daily interest that is accruing on our loans. The way you do that is take your loan balance that currently remains, you multiply it by your interest rate and you divide it by 365 days.

If you were to have $170,000, let’s just say the Median debt load, $170,000 if we multiply that by 6% and assume that’s an average interest rate across our federal loans, and we divide them by 365, we’re looking at about $28 per day of interest that is accruing. $28 per day. Now, of course, as that $170,000 gets paid down to 160, 150, 140, et cetera or, and/or, we’re able to reduce that interest rate either through our process of refinancing or perhaps some forgiveness opportunity.

Then of course we’re going to see that impact of interest go down but that really is the opportunity cost that we need to be thinking about. $28 per day, if we look at the median debt load of a pharmacy graduate that is going towards interest alone as they begin that repayment period.

[0:06:47.8] One of the feelings I had early on in my repayment journey is I felt like I was spinning my wheels in terms of making substantial monthly payments but not feeling like I was really making a whole lot of progress and momentum towards getting that debt load paid off.

The reason that was and the reason that is for many of you that might be listening to this show, is because the amount of that payment that goes toward interest, right? When we look at big debt loads like 170, 180, $200,000 or perhaps even more at interest rates, six, seven percent, maybe higher on some private loans, what we see is pretty big monthly payments but we also see a lot of that that is going directly towards the interest. 

Let me give you an example. If somebody has $170,000, again, let’s just use a 6% average interest rate, if we assume they’re going to pay that off over a 10 year period, that would be the standard repayment option, 120 fixed monthly payments, what we see is a monthly payment of about $1,900 per month for 120 payments or 10 years. $1,900, fixed payment for 10 years.

Now, of that $1,900 that first payment, about $1,000, 45% or so is going to go towards principal and about $850 is going to go towards interest. Right out of the gates, we see that in a standard 10-year repayment about half is going to put a dent in the actual principle and about half is going to go towards interest. And of course, with each monthly payment that we make, we’re going to see a little bit more going toward principle and a little bit less going towards interest.

[0:08:19.2] This is why folks often feel like, “Hey Tim, I’m making big monthly payments but I don’t feel like I’m progressing as quickly as I would like to in terms of getting this paid off” and that’s because of the interest that is accruing on those payments.

One of the common mistakes here that we’re talking about in terms of paying too much interest is we tend to underestimate how much interest we’re going to pay over the life of a loan and therefore, we tend to underestimate how much we’re going to actually pay out of pocket. 

I see this all the time and talk with the pharmacy students, they may say, “Hey, I’m borrowing $20,000 a semester” let’s say for tuition cost, the living expenses, they multiply it by eight semesters and they think, “Hey, that’s roughly my student loan debt number.”

Now, what they’re forgetting is of course the interest that’s accruing while they’re in school, outside of administrative forbearance period, such that we’re in right now, and they’re also not including the interest that’s going to accrue while they’re in active repayment, right?

If we’re looking at a 10 year, perhaps for some it’s even a little bit longer repayment journey, then we’re going to see a significant amount of interest that’s also accruing throughout the life of a loan. 

That’s why often, folks look up and say, “Wow, that’s a lot more that’s getting paid back than I really had anticipated was going to initially be the case.” What we want to be thinking about here as we talk about this first common mistake, paying too much interest is, what can we be doing to minimize the interest that we’re paying?

[0:09:38.9] That’s where we really get into student loan repayment strategy, right? A topic we have covered, lots of different ways on this show and there’s several different buckets that we need to consider. 

That could be tuition reimbursement programs, forgiveness programs, either public service or nonpublic service loan forgiveness programs or we’re going to pay them off but we have an option perhaps to move our loans into the private sector through a refinance that’s going to help us reduce that interest.

The first couple of areas that come to mind if I’m thinking about, “Hey, how can I avoid paying too much interest?” is number one, could I have somebody else pay the bill, right? That could either be through a tuition reimbursement program or through forgiveness, whether that’s PSLF offer or non-PSLF, if that’s not viable or of interest, then perhaps, might I be able to reduce my interest rate through a process of refinancing.

One of the things that we want to avoid is staying in a status quo position in terms of staying in the federal system, paying a high-interest rate, or paying a high private rate, if there’s a better option out there, whether that be forgiveness or whether that be considering a refinance.

A couple of things to think about as we talk about that first mistake of paying too much interest and I’m going to reference a resource here where you can dig more into student loan repayment strategies to evaluate that further.

[0:10:50.9] Number two mistake on our list of 10 is not maximizing public service loan forgiveness. Now, we have talked about this on the show extensively but I feel the need to continue to shout from the mountain top about this topic because there’s a lot of folks that maybe have the option or pursue public service loan forgiveness and for whatever reason aren’t making that choice or folks that are kind of half in and they’re half out, right? 

We’re leaving something on the table. When it comes to public service loan forgiveness, assuming that’s the right play for you and your personal financial situation, if we go that pathway, the goal is optimize and maximize forgiveness and minimize what’s out of pocket, right?

When I say, the common mistake here is not maximizing PSLF, what I’m referring to is that we’re leaving something on the table, either we’re paying more interest that we could have forgiven, or/and potentially, we’re not optimizing certain situations that would allow us to be able to also save through our forgiveness period. 

One of the things we need to do here is actually break down the numbers of what this means for your personal situation. Now, I’m not going to go through the rules of PSLF, again, we’ve talked about that extensively on the show before, highlights here, we have to work for the right type of employer so 501(c)(3), not for profit or federal government agency or organization. 

You have to be in the right kind of loan, so a direct loan, we’ve had some provisions with the Biden administration that have allowed some forgiveness and latitude on that, we’re going to talk about that more in an upcoming show. You have to be in the right repayment plan, which is an income-driven repayment plan.

[0:12:22.8] You have to make 120 payments and be consecutive but 120 qualifying payments before you’re ultimately applying for and receive tax-free forgiveness. Now, one of the things folks often omit, when they’re thinking about optimizing PSLF is really trying to figure out what can I be doing to pay less towards my student loans so that more is forgiven and that really gets to how the monthly payment is calculated towards your student loans when you’re in PSLF through an income-driven repayment plan.

The formula that is used is they take an amount that’s called your discretionary income and that is included of your adjusted gross income, so your taxable income reported on your tax returns, so your AGI, minus 150% of the property level, that is your discretionary income and then that gets multiplied by a certain percentage.

Just by definition of that calculation, there’s some things that we can do if we look at that discretionary income. That AGI minus that 150% poverty level, hopefully, you’re asking yourself, “What could I be doing to lower my AGI?” right? We don’t want to make less money but, “What I could be doing in terms of optimizing strategies to lower my AGI so that I can pay less towards my student loans, increase the amount that’s forgiven, and perhaps also, move forward other financial goals at the same time?”

What we know, what you know from listening to the show is there are strategies that we could do to lower our AGI, right? We think about accounts like 401(k) contributions, 403(b) contributions, HSA contributions. This is where we get to the strategy and the numbers start to become pretty wild in terms of not only optimizing what is forgiven tax-free but also, what could we be putting towards investments that over this repayment period of 10 years with PSLF, we also take advantage of compound interest and compound growth over that period of time. 

[0:14:16.0] You know, it doesn’t take a whole lot of whole numbers in terms of putting money away at three, five, seven percent of compounded growth each year. Again, it’s not just the tax-free forgiveness that of course is a huge benefit but also, what can we be doing to moving forward in accelerating our investment plan. That’s the second mistake, not optimizing our PSLF strategy. 

Now, a couple of resources I want to point you to here. Student loan repayment, you’ve heard me say it many times, one of the most important decisions pharmacists are going to make early in their career, one that we don’t want to walk into blindly, one that we don’t want to replicate what somebody else is doing that may not be a good fit for our situation.

This decision can be the difference, easily of tens of thousands of dollars, if not more, based on the option you choose and so, I really want you to invest the time and the energy to understanding this loan repayment options, as nuanced as they are. We’ve got a great comprehensive resource, The Ultimate Guide to Pay Back Pharmacy School Loans. It’s a free blog, comprehensive, almost like an ebook, to be honest, you can download that, read that blog at yourfinancialpharmacist.com/ultimate and we’ll link to that in the show notes.

Now, for those of you that are saying, “Hey, the information is great but I want one-on-one help with an expert that knows this in and out.” We do have a one-on-one student loan analysis survey that pairs you up with a YFP Planning certified financial planner and the goal of that is to analyze all of your options and ultimately decide on the best repayment plan for your situation.

You can learn more about that service at yourfinancialpharmacist.com/sla. Again, yourfinancialpharmacist.com/sla. All right, that’s number two, not maximizing PSLF. 

[0:15:57.3] Number three is delaying the emergency fund. Now, we just came off of talking about student loan repayment, right? That’s a gorilla that is often in the room. Many folks are also trying to think about saving and investing for the future, perhaps there’s a home purchase, kids that might be involved, kid’s college, the expenses, and the list of expenses goes on and on. 

Sometimes, the emergency fund can take a back seat for a couple of reasons. Number one, it’s not very exciting, when you think about making progress on our debt, to become ultimately debt-free whether that’s by paying them off or forgiveness or saving for investing for the future.

Those are typically a little bit more exciting goals to be thinking about. Putting money away in a savings account that’s going to earn minimal but not too exciting amount of interest and it’s there if we need it but hopefully, you don’t, not super exciting, right?

This often may fall by the wayside but the purpose and the goal of that emergency fund is to protect the financial plan when, not if, but when an emergency happens, and work from a position of financial strength with the rest of the plan, right? 

[0:16:57.2] This could be a short-term job loss, gap of employment, this could be a health emergency, an emergency with the home, the list of things that could be involved here obviously go on and speaking from personal situations, something will come up at some point, probably not too distant in the futures that is going to require you to tap into this emergency fund.

Generally speaking, our target here is three to six months’ worth of essential expenses. Not to say three to six months’ worth of income but three to six months’ worth of our essential expense because there can be a place where we have too much in this emergency fund. Obviously, we want to be comfortable with that amount but too much means opportunity cost of dollars that could be used elsewhere in the plan.

Now, in terms of where to put it, generally speaking, we’re going to be looking at a long-term savings account, a money market account, somewhere that we can get to the money, it’s a liquid, it’s accessible, it’s running a little bit of interest more than you’re going to see in a checking account, typically which is closer to zero. 

Maybe you’re going to getting 0.4, 0.5, 0.6 right now, not too exciting, we’re getting a little bit of interest but it’s a liquid, it’s accessible, this is not the place we’re trying to take a risk with our financial plan, right? We’re going to do that in the savings and investing for the future. 

[0:18:05.9] Now, one of the tips that I could share with folks is I think it’s incredibly helpful to get these dollars out of your checking account, right? This really gets to the intentionality of the financial planning.

If we have a bunch of money lumped into our checking account that is for our month-to-month expenses and then we say, “Yeah, I’ve got some of that, that’s earmarked also for an emergency fund,” get it out of the checking account, put it in a separate savings account. Number one, out of sight, out of mind. 

Number two, we’re really going to call that account an emergency fund and that’s going to show us our intentionality towards building that and protecting it and getting that out of our month-to-month checking account where we’re either doing our expenses or that we have tied to a credit card where those expenses are charged, so that’s number three. 

[0:18:44.0]: Number four is not protecting your income and this obviously gets to a whole laundry list of types of insurance we need to be thinking about including health, home, auto, renters, and so forth, professional liability. 

The two that I just wanted to touch on briefly here are term life and long-term disability, and one of the things I often share with pharmacists is “Hey if you are going to do the hard work to really figure out how we’re going to manage just a $170,000 student loan debt if you are going to do the hard work to build a nest egg and a retirement portfolio, we’ve also got to invest some time to make sure we’re playing defense so we are preventing the catastrophic from disrupting that progress in our financial plan. “

When it comes to insurance, the balance point here is we want to not be underinsured, right? We want to make sure we can protect the time but we also don’t want to be over-insured, which is something we often see folks might be in a position of a policy that has been sold to them that is not necessarily coverage that they need or that is in their best interest. 

When we are talking about term life insurance what we are talking about here is insurance that would be able to replace your income and what that income provides in the event that you were unexpectedly passed away, right? We’re big advocates of term life insurance. Other types of life insurance out there are whole life, permanent, value types of policies not to say that those don’t have a place anywhere but for the vast majority of folks that we talk with, a coverage with a term life insurance policy might be a 20 or 30-year term. 

A million, two million dollars, it really depends on your personal situation but that is going to allow for an affordable monthly payment that is a fixed monthly payment that is going to then allow us to free up dollars to be able to put towards other parts of the financial plan. 

[0:20:24.9] In terms of a term life insurance by definition, let’s say somebody buys a 30-year term policy for a million dollars and they’re 30 years old, they are going to pay a monthly or annual premium, depending on how the policy is set that is a fixed monthly payment over that policy length, so it will be a 30-year policy in this case. From 30 to 60 years old in that situation, they would pay a monthly or annual premium. 

Now, if they were to die unexpectedly at some point, so let’s say at the age of 50 that person passes away, well at that point their beneficiary would receive the money that’s known as the death benefit and that would be a tax-free policy that would be paid out to the beneficiary. Now, if they don’t die in that 30 year period, which is a good thing that’s the goal, a term life insurance policy, you’re paying those premiums on but you are not going to get those dollars back, right? 

If we get to 60, we’ve made it, we are still alive at that point, the policy ends and we are not going to recoup any of those dollars. We are really preventing things on the catastrophic side. We are not looking at this as an investment vehicle. Now, on the disability side, what we are talking about here is really trying to address a scenario where what if you are unable to work as a pharmacist because of a disability?

Car accident, chronic illness, whatever it may be, and obviously at that point, you are disabled and so you are unable to work, in that case, your expenses still live on but your income now here is in jeopardy. A long-term disability policy is the one that we’re often referring to here, again, monthly or annual premium, typically a percentage of your salary that you are going to purchase a policy for. 

It could be a five-year, 10-year, 20-year policy up to the age of 65 so it depends on the type of policy, lots of nuances here to think about and then if you were to become disabled, there is going to be known what’s an elimination period, which is the time period between when the disability happens and when your policy kicks in and you have to self-fund that period. It might be 30 to 180 days depending on the policy and then after that point, your monthly policy kicks in to help replace your income. 

[0:22:16.8] This is one of the areas we see pharmacists often overlooking and both with term and long-term disability, you may have some base coverage that is provided by your employer. It works a little bit different on the tax side of things of how that benefit is taxed or not taxed depending on where the policy lies and how the premiums are paid and really the question here is, what additional coverage might we need beyond what we have offered through our employer? 

If you go to yourfinancialpharmacist.com/insurance, we’ve got two additional resources pages on term life and long-term disability where you can learn more about those and see where that fits in with your financial plan. So that is number four, not protecting your income. 

[0:22:57.1] Number five is accepting that your income is fixed. Now, many pharmacists graduated in 2008. If you look at the average of pharmacists in 2008 versus what it is here in 2022, if you factor in inflation, not a whole lot has changed, right? Pharmacists tend to make a great income coming out of the gates but depending on the area of practice that they are in, that income may be relatively flat throughout their career. 

All the while our expenses are going up and we also see debt loads continue to creep up through that time period. One of the things we want to be thinking about here is how can we potentially maximize our income, right? This would be a benefit to both diversify your income, so I talk with many pharmacists that might let’s say, full-time at a community pharmacy pick up some PRN hours at a hospital pharmacy so they have their foot in the door at a couple of locations. 

Again, additional income but also to diversify, pharmacists that are working on side hustles and doing some medical writing or other businesses to generate additional revenue, also areas of interest. And so this could help us diversify but also can help us accelerate our financial goals, so lots to think about here and this really is very much an individualized decision and we’ve got a great resource available, 14 Extra Ways That Pharmacists Can Consider Making Additional Income. That is a blog that we have in the YFP blog, we’ll link to that in the show notes with this episode. 

[0:24:19.5] Number six is delaying retirement savings. Now, many of us have been told by parents, grandparents, perhaps multiple people that you need to be saving as early and often as you can, right? Time value of money, compound interest, as Albert Einstein said, it is the eighth wonder of the world and so what we’ve been told, what we’ve been taught is the longer we delay our savings, the harder it is going to be to catch up. 

I want to put some numbers to this because I think sometimes we hear that, were like, “Yeah, yeah, easier said than done. You don’t have $170,000 in student loan debt, you aren’t trying to purchase a home and doing all of these other financial goals at the same time” but the math here is really compelling. 

If we look at a pharmacist who is making about the average salary of a pharmacist that’s out there if we assume they are putting away about 15% of their income and they are getting an average annual rate of return on their portfolio around 6%. So if you look at the historical rate of return of the stock market around 10% net of inflation closer to 7% and so if they are putting away 15% of their income and they have a desired retirement age of 60, what we see is by putting away about 15% of their income each and every year, if they start at the age of 25, when they get to the age of 60, they’re going to have about 2.6 million dollars saved. 

Now, if they wait to the age of 30, that 2.6 turns into about 1.8. If they wait to the age of 35, that 2.6 that could have been if we started at 25 turns into 1.2 and if we wait to the age of 40, that 2.6 turns into $800,000. So that value, that advice is real, right? The earlier we invest and save, obviously we are going to have more time for that money to grow and to do its thing in terms of compound interest throughout many, many years.

Again, we’re just talking about one factor here in a vacuum as we talk about delaying retirement savings. We of course have to zoom out and consider this with other financial goals that we’re working on but ultimately, as we are able to do. We want to be focusing on starting as early as we possibly can. 

[0:26:17.9] Number seven here is prioritizing non-tax favored investment accounts. Now, we talked in episodes 72 through 75, we did a series on kind of an investing 101 series meant to be a crash course for those that are wanting to learn more about investing in terminology, some of the biases associated with investing, some of the information on fees, types of accounts, 401(k)s, IRAs, et cetera and so that is a great primer if you want to go back and listen to episode 72 through 75. 

What I am referring to here is investing potentially out of order. Now, this is certainly not investment advice, right? We don’t know anything about your personal situation but there is some low-hanging fruit from a tax advantage investing standpoint, right? When you think about 401(k), 403(b), employer-sponsored retirement accounts especially when we think about employer match, free money, right? We have all been told that before. 

If we keep working down there, we think about things like health savings accounts, triple tax benefits. We have talked about that on the show before, Roth IRA accounts. Again, another account where we might be putting dollars in that have already been taxed but they’re going to grow tax-free, we pull them out without a future tax burden, so if we are contributing to let’s say a brokerage account, whether it is through a tool like Robin Hood or Acorns or Betterment or whatever be the app or tool. But we are not yet taking advantage of some of those other things, the question we want to ask ourselves is, are we investing in a way that’s going to allow us to maximize our tax savings, right? 

Are we investing in appropriate priority? There certainly is I think a place and a role for a brokerage or taxable account but let’s be thinking about the order in which we are doing that relative to employer retirement accounts, IRAs, HSAs, and so forth. 

[0:28:02.1] Number eight here is tax filing without tax planning and strategy. Now, we’ve been hitting on this in the show in the last three to six months, shout out to the team at YFP Taxes doing a great job servicing the clients of YFP planning as well as some new clients here in 2022 and what I am referring to here is someone who is doing tax preparation but is not thinking more strategically on the tax planning side. 

So, if we look at a pharmacist on average, if they are making an average income working 40 years or so, and if we adjust up that salary for inflation of pharmacists throughout their career as going to earn about $9 million in their career. But only about six million of that depending on their tax situation is going to hit their bank account, so that delta of $3 million is what we want to be thinking about to pay our fair share, right? But we want to optimize how we can be able to use dollars elsewhere if we can allocate those towards a financial plan. 

Tax preparation, that’s what we are all doing, we’re required to do it, right? If we don’t file our taxes by April 15, the IRS is going to be coming knocking on our door unless we file for an extension. Tax preparation is historical. It is looking backward, so it limits the impact that we can truly have on our tax liability because things have been done at that point in time, so it is mechanical, we have to file, it’s looking back. 

Where tax planning is more of the forward-focus strategic part of integrating the tax plan with the financial plan. Here is where we can avoid common issues in advance, right? We can look at how we can adjust withholdings, do some projections, how can we optimize our savings accounts, how might we look at our savings and philanthropic contributions to be able to optimize those as well. 

Lots of things to consider, there’s optimization strategies around long term savings accounts HSAs, 529s, we know there is tax saving strategies with PSLF, lots of child-related optimization strategies, child care credits, dependent care FSAs, maximizing charitable contributions, you know really the list goes on, right? If we are able to do more of that planning and strategy work and look ahead, then we’re obviously able to take advantage of those, so that when we do the filing, we know we have optimized the situation throughout the year. 

I would reference folks to episode 233, where our director of tax, Paul Eikenberg and I talked about some tax moves to consider from an optimization standpoint and we’ll link to that in the show notes. 

[0:30:27.2] Number nine here is saving for kids college out of order. Guilty as charged, right? I found myself in this trap and as I reflect on that, I think about, “Well, why was that the case?” right? I knew about tax advantage, retirement vehicles, I knew that I have been given the advice over and over again that you can borrow for college, you can borrow for your kid’s college, but you can’t borrow for your retirement, so why was I not focused on the correct order of that? 

The more I thought about that, was that it was my reaction to my own journey of not wanting to see my kids incur a couple hundred thousand dollars of student loan debt, right? I think for many pharmacists, that may be the same thing where they are going through their own journey, they are living through that, obviously, the pain of it may be right in front of them right now. And therefore, they might be looking at saving in a 529 account with good intentions, but are we doing that in the right order, right? 

This is a great example of where we don’t want to look at one part of the financial plan and the silo because if we just answer the question, saving for kid’s college in a 529, is that a good financial move? Sure, there is tax benefits in doing that especially if we look at the potential growth over 10, 15, or 20 years. If we zoom out and look at what else we’re doing to financial plan that may or may not be the move to make at that time. 

We talked on episode 211, the ins and outs of the 529 college savings plans and we’ll link to that in the show notes for more information. 

[0:31:51.5] Finally number 10, hiring a planner that does not have your best interest in mind. Now full disclaimer of the bias of the planning services that are offered by YFP Planning, we wholeheartedly believe in fee-only financial planning and we’ll talk about that here in the moment. Obviously, I have a bias towards the services that the team at YFP planning offers, so we need to keep that in mind as we talk about this tenth point. 

Now, we talked on episodes 15, 16, and 17 way back when we did a three-part series on working with a planner, what to look for, questions to ask and we also talked about why fee-only financial planning matters. When you think about working with a financial planner here, is the term financial planner or adviser in it itself does not necessarily mean something that we can hang our hat on, right? 

We, in the pharmacy world, we’re used to the PharmD board certifications and residencies. We know exactly what those credentials mean and there is a relative amount of consistency in those credentials, so that when someone says, “I completed a PGY-1 residency.” We know what that means. 

When it comes to financial planning, financial advisors, wealth managers, wealth advisers, there are a wide variety in terms of education, training, and experience. And what those services look like that will inform and help inform whether or not those may be a good fit for you. So we need to be looking at, what is the educational background of these individuals, what is the credential, how are these individuals regulated? 

We firmly believe in the certified financial planner credential, we’ve got five CFPs on the YFP planning team. The CFP is certainly not a credential that is required to do financial planning but very robust in terms of the requirements of the educational portion of the CFP or rigorous examination to pass as well as an experiential component that we would think of as like appys in terms of pharmacy education. 

[0:33:42.7] Other things to consider here, I have mentioned the term fee-only, so fee-only by definition is that you are paying the planner and the planning team for the advice that they are giving, so they are not getting paid by recommending products such as insurance or investments where they’d be on a commission, and obviously a potential bias on that recommendation. And then we also really encourage folks to look at whether we are or are not the solution that is the best fit, someone who really offers comprehensive financial planning. 

The reason that’s important is that historically, the industry has focused a lot on investments and insurance, you know, think of folks that might be a little bit further along in their career, they have a substantial amount of assets to manage. And so, often there may be a minimum of assets to work with a firm, but when it comes to other things that might be of significance like student loan debt, like some of the early insurance discussions. 

Like, “Hey, I am thinking about starting a business or a side hustle” or “I’m looking at purchasing a home or investing in real estate” or “What about the estate plan?” or “What about the tax part of the financial plan?” Making sure the adviser regardless of the stage that you are in of your career, making sure the adviser and the advising team has the expertise and the experience to be able to serve you and the needs that you have for your financial plan. 

When it comes to working with YFP Planning, we’re really proud of the work that the planning team does. I mentioned five CFPs, shoutout to our lead planners, Robert Lopez and Kelly Reddy-Heffner who lead those two teams, working with Robert is Kim CFP and Savannah, working with Kelly is Christina, CFP, and Sarah. And then we also have a tax team that supports the financial planning. 

We are currently working with about 250 households and over 40 states all across the country, very robust in terms of the comprehensive nature of the plan. For folks that are interested in learning more about that service and what it would look like in terms of working one-on-one with a YFP certified financial planner, you can visit, yfpplanning.com, and you can book a free discovery call with Justin Woods, also a pharmacist who is our director of business development.

[0:35:40.8] Well, that’s 10 common financial mistakes that we see pharmacists making. I really appreciate you joining me on this week’s episode and we’ll see you here again next week. 

[END OF DISCUSSION]

[0:35:48.4] TU: Before we wrap up today’s episode of Your Financial Pharmacist Podcast, I want to again thank our sponsor, The American Pharmacist Association. APHA is every pharmacist’s ally advocating on your behalf for better working conditions, fair PBM practices and more opportunities for pharmacists to provide care. 

Make sure to join a bolder APHA to gain premier access to financial educational resources and to receive discounts on YFP products and services. You can join APHA at a 25% discount by visiting pharmacist.com/join and using the coupon code, “YFP”. Again, that’s pharmacist.com/join and using the coupon code “YFP”.

[DISCLAIMER]

[0:36:28.5] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

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

[END] 

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YFP 246: Why This Pharmacy Entrepreneur is on a Mission to Make Pharmacy Profitable Again

Posted on by yfpadmin


Why This Pharmacy Entrepreneur is on a Mission to Make Pharmacy Profitable Again

Dr. Lisa Faast, Founder & CEO of DiversifyRx, discusses her mission to make pharmacy profitable again. 

About Today’s Guest

Dr. Lisa Faast is an innovator, experienced business executive, and leader in the independent pharmacy industry. With over 20 years of experience as a pharmacy owner, consultant, compounder, and businesswoman, she is able to bring a unique perspective to the industry’s problems. Her passion is helping independent pharmacy owners thrive by focusing on diversifying and then growing revenue streams. She is currently CEO at DiversifyRx, a consulting and education company, in addition to being a wife and mom of 4.

Episode Summary

Every single independent pharmacy wants to thrive, but the leap from pharmacist to pharmacy owner is a big one for many reasons. Today, Your Financial Pharmacist Co-Founder & CEO, Tim Ulbrich, PharmD, sits down with Dr. Lisa Faast, founder and CEO of DiversifyRx, to talk about what she learned from this journey and how it became her mission to help make pharmacy profitable again. Dr. Faast begins by talking through her career arc, from her first job out of pharmacy school to opening and ultimately selling her first pharmacy. She shares about launching DiversifyRx, a business that aims to educate and support pharmacy owners through resources, membership, and a ton of free content. Dr. Faast dives into how she’s developed a “figure it out” mentality as an entrepreneur and how failure, or perceived failure, set her up for later success. The conversation also touches on that balancing act most pharmacists know all too well, juggling the financial demands of owning a business and raising a family, something that Lisa jumped into when she opened her first pharmacy while pregnant with her first child. Even if owning your pharmacy is not in the cards right now, this episode holds some fascinating insights into the industry. 

Key Points From This Episode

  • Hear the story of Lisa’s grandmother and how she was drawn into this profession.
  • The roundabout path from her first job out of pharmacy school to pharmacy ownership.
  • What gave her the confidence to take a leap of faith and start Faast Pharmacy.
  • The biggest lessons she learned as an entrepreneur and business owner!
  • Juggling life as a first-time mom and first-time business owner.
  • About selling the business and making marketing her best friend.
  • How she started DiversifyRx and created a profitable buffet table for pharmacy owners. 
  • How pharmacists often have different priorities to business people. 
  • Scaling the business to reach more pharmacists at once. 
  • Hear about Pharmacy Badass University.
  • About all the free content Lisa puts out and where you can find it.
  • How characteristics that help you in pharmacy school can hinder you in business.
  • Tackling ideas of what failure is and how perfectionism impacts business.

Highlights

“That was just one of our mantras: if we can do it, we do it. That’s just the way that we operate.” — Dr. Lisa Faast [0:11:59]

“When you own your pharmacy, marketing needs to be your best friend.” — Dr. Lisa Faast [0:14:23]

“These pharmacy owners can’t afford hundreds of dollars or thousands of dollars a month. It’s just so hard these days. Providing a solution that is affordable and cost-effective is really at the core of my offering.” — Dr. Lisa Faast [0:31:32]

“I put so much stuff out there for free because if I can help a pharmacy owner for free, I am A-okay with that and if you get all you need from that, perfect.” — Dr. Lisa Faast [0:36:24]

“You really have to reassess what failure is and what it is not when you are looking and making decisions as the business owner, as the owner of the pharmacy, rather than looking at it as a pharmacist.” — Dr. Lisa Faast [0:41:02]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week, I had a chance to sit down with Lisa Faast, founder and CEO of DiversifyRx. During the interview, Lisa and I talked through her career journey, up to launching DiversifyRx, the “Why” behind the business including her mission to make pharmacy profitable again. How she balances the financial demands of owning a business and raising a family, how she’s developed a “figure it out” mentality as an entrepreneur, and how failure or apparent failure set her up for later success.

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

Okay, let’s jump into my interview with Lisa Faast, co-founder and CEO of DiversifyRx.

[INTERVIEW]

[0:01:24.8] TU: Lisa, welcome to the YFP Podcast.

[0:01:26.4] LF: Thank you so much for having me, this is an honor and I’m excited to chat with you. 

[0:01:30.5] TU: So happy to connect with you here and to have you on the show. I’d like to start with before we get into your entrepreneurial journey, I’d like to start with some of your pharmacy background, where you went to school, when you graduated and what really drew you to the profession, to begin with?

[0:01:45.1] LF: Yeah, I graduated from UOP, the University of the Pacific over in Northern California, and what had kind of drew me, you’re in high school, you’re kind of trying to decide and I was looking at becoming a doctor. And I realized that 12 years of school didn’t sound really fun at all and I was hoping to take care of my grandma at the time, she was a diabetic and she had pretty much lost all her fine motor control skills and her eyesight was terrible. We were having to go over to her house twice a day to do her insulins and things like that.

That’s kind of what got me on the path to pharmacy and then what really solidified it is, one of those school projects that you’re – you know, handed out to go follow this profession, do a report kind of thing. Me and my best friend at the time, we were like, “I don’t know what we’re going to do.” He’s like “Hey, my mom is dating a pharmacist, let’s just go do that.” I was like, “Okay.” We went and followed his mom’s boyfriend at the time and did all that and I realized, “Hey, this pharmacy thing sounds really interesting.”

Looked into the school and looked into all the different things because chemical engineering was kind of like the other alternative as supposed to medical school and, bam, it just felt right. I applied to one pharmacy school at the very last minute right before the deadline and thank goodness that I got accepted. I guess you could say, the rest is history. I graduated from UOP back in 2001, so a little over 20 years ago now.

[0:03:07.2] TU: We’re going to talk, when I talk, when I think about chemical engineering and I think about pharmacy, it’s very linear, structured pathways typically, right? The degree as well as career. But you have taken, I think, a very unique and somewhat non-traditional pathway throughout your career. But also into the work that you’re doing now with DiversifyRx and leading that mission and company. And we’ll get to that here in a minute.

UOP 2001, you graduate, tell us about your first job out of pharmacy school and what that experience was like?

[0:03:35.8] LF: Yeah, all during pharmacy school, I wanted to be a nuclear pharmacist. I just thought that’s what I was going to go do and I even did one of my rotations in my third year, I did nuclear pharmacy at Syncore, which is kind of the gold standard. And so I graduated, they didn’t have any space in their class because you have to go and get certified and all those kinds of things, and I was kind of like, “Man, what am I going to do?”

I graduated at the time when there were still some pretty good signing bonuses and all of that kind of stuff going on. I had worked for Rite Aid at the time as an intern and I knew I didn’t like that. I didn’t want to go do that and so, I was lucky enough that actually, my mom had worked for Kmart for many years. That was her main job with us growing up and so, I looked into that. Kmart at the time was looking for a pharmacist and it ended up being the best job ever, not just because Kmart was a good corporation to work for. 

Of course, now, I don’t even know if they’re still even in business anymore, but the way they treated pharmacy, because it wasn’t their main line of business, I pretty much got to run it like I wanted to. They were pretty hands-off, which actually was really great training for owning your own pharmacy and so, Rite Aid – interned as Rite Aid, went to Kmart, and then my friend, one of my friends came up and said, “Hey, I’m going to be selling my pharmacy, do you want to maybe buy it?” And I was like, “Okay.”

I did all this work and all these business plans, all the things that you can expect of going through the SPA process and it was taking forever. The SPA takes forever, FYI. Yeah, I finally got an approval and I called him and I was like, “I got the approval.” And he’s like, “I signed to sell to Rite Aid yesterday.” And so then, I was left with this big dream and nowhere to go. I just decided to go ahead and open my own and started that path. That’s what eventually became Faast Pharmacy, which was my first pharmacy and I started that from scratch. 

Kind of a roundabout way of winding up into pharmacy ownership, never expected it when I was in pharmacy school, might have taken like their joint MBA course and things like that that they offer but that’s kind of how I ended up there.

[0:05:40.4] TU: 2001 you graduate, you take a position with Kmart, you mentioned the way Kmart had run their pharmacies, and I can remember that. Some of my classmates and colleagues worked for Kmart. Very different than a corporate pharmacy position today, probably an experience that you’re able to get that started to be the learning ground for you before ultimately moving to own your own pharmacy in 2006.

I don’t want to overlook that, that’s still a big decision and transition that a lot of folks might have an interest in but aren’t willing to really take that leap of faith and feel confident in themselves to move forward and that step of ownership. Just tell us about your mindset and that transition of what gave you the confidence, what gave you, ultimately, the path? Or that said, “I’m going to go from this stable position, this stable income to really taking that leap of faith and owning my own business.”

[0:06:32.2] LF: Yeah, it feels, looking back, because it’s my own life, it doesn’t feel like a huge leap of faith but even you describing it right now, it really was. It really was a leap of faith and I think there was a couple of things that gave me that confidence.

One, I knew I was a good pharmacist and I was also a nerd, I liked numbers. I understood financials, again, going back to Kmart, I got to see all their financials of the pharmacy. I knew what drugs cost, I know what they got reimbursed and I was able to kind of hone my skills that way. But the thing that I told myself is – and I was in my early 20s at this point, I think I was 25 or something like that. I said, “What’s the worst that can happen?”

I painted a worst-case scenario. Nobody comes to me, I make no money, I go out of business, I go bankrupt and I go back to my $150,000 a year because I was working tons of hours job from now. I guess that’s not such a bad case, worst-case scenario.

I kind of figured that I could live with the downside, and that’s something that I’ve learned, and just decision making as a mature – just kind of saying, “What’s the upside, what’s the downside, and can you live with the downside?” I didn’t really know I was kind of living by that mantra back then. Essentially, that’s what I told myself as like, what’s the worse that can happen, and can I live with that? Can we have a plan for that? We figured out that we did, that we could have a plan for that.

And I just – I really wanted to do pharmacy my way. Kmart gave me a lot of leeway but not total leeway, there was always more than I wanted to do for patients. And I was getting into functional medicine at the time and getting into all these other interests, and I just wanted to offer more. So really, that desire became an obsession to come up with bigger, better, and more awesome services to offer to the community. And it was really, probably that desire just outweighed the fear with owning your own business.

[0:08:18.3] TU: Yeah, that desire for autonomy, right? Being able to be kind of in control of that future, and even pursuit of some things that might not have been traditional or allowed or under your scope of responsibility in that role with Kmart. The ‘worst thing that can happen’ exercise, I hope folks will hear that and apply that. Tim Ferris talks about that in The Four-Hour Workweek, he gives several examples where when you’re facing a decision, you mention, Lisa, using that in the context of decision making. We often tend to over-emphasize in our minds what is truly the worst-case scenario, and I think many pharmacists, even with the challenges we’re seeing in the profession right now, being able to fall back on a six-figure position is a pretty worst-case scenario. 

I think sometimes in your profession, perhaps because of the student loan debt which is near and dear to our heart and what we do here at YFP and helping pharmacists or perhaps pharmacists are graduating at a relatively young age and stepping into that great salary, there’s sometimes is that mentality of, the golden handcuffs and not willing to take those risk and sometimes perhaps allowing those fears to be greater than might even be the reality of that situation.

Owning your own pharmacy, tell us about that experience, so April 2006, your pharmacy is open. Tell us about the pharmacy, what your focus was, the skills that you learned throughout that 10 years as you owned that store, give us some more details there.

[0:09:37.7] LF: Yeah, I did just about everything right and everything wrong that I think you can do in a pharmacy and in a business. Because back then, in 2005 and 2006 when I was planning on opening this, Facebook groups weren’t a big thing and I didn’t know any pharmacy owners. I didn’t come from a long line of pharmacists or even pharmacy owners. I was really just figuring it out for myself and so certainly, a lot of things that I did wrong and a lot of things I did get right.

I think the biggest thing that really happened is I understood niching and I understood that I didn’t want to be competing for the same people that the other independents in my town were. The place that I picked was far away from lots of other independents but yet close to chains. I was actually sandwiched between CVS and Walgreens, which ended up being a perfect location.

I wasn’t near any other independent pharmacies, there was kind of a little independent pharmacy desert in my town. And so to me, that became really important, going above and beyond. I just served my patents as the best I could and if it was physically humanly possible, I did it.

I remember very early, I was probably opened a month or two, there was a dermatologist across the street, it was a Saturday, she had a prescription for biaffine, a  patient forgot to get it before the appointment kind of thing. And biaffine is like a chemotherapy but it’s also used after laser treatment in dermatology. It was a popular drug back then and I didn’t have it in stock, she hadn’t sent me any of the prescriptions for it, I was only just open but I knew another pharmacy that had it, it was actually my old employer, Kmart.

I knew we had it on our shelf because I had dispensed it at that store and I was able to arrange for the biaffine to get filled, I went and actually picked it up, delivered it to the patient, and all for basically free of charge because I wasn’t the one filling it and – but I went above and beyond and when I started to do that, people started to realize that I was in it for the long haul. 

Business is all about relationships and you know, I may not be very good at social relationships but when it comes to business relationships, I know how to go above and beyond and always be the one that provides the extra value. That’s how I started to gain such a loyal following of prescribers and patients because they saw that in me, and then eventually, my staff, as I started to get staffed and started to grow, that was just one of our mantras.

If we can do it, we do it. That’s just the way that we operate and you know, we eventually grew to seven million annual revenues, had 35 employees, I had a really awesome thriving pharmacy and – but still, that was at our core, was just, whatever we could do to serve the patient is what we’re going to do and that paid us back in dividends year after year.

[0:12:23.5] TU: Between opening your own pharmacy in 2006 and we’re going to get here in a few moments about talking about your current efforts and work with DiversifyRx, I know you had several other roles in between there as well. Talk to us more about those positions and ultimately, the additional skills, those help you hone as both the pharmacist and eventually as a business owner.

[0:12:41.6] LF: Yeah, so when I opened the pharmacy, we were – one of the first positions that I added was mom, becoming a mom. I was actually pregnant with my first child when we opened our pharmacy and I bring that up because I think that’s actually a very good skill set. I had my children at my pharmacy for the first year of their lives but I had to learn how to juggle. I’m one of those people that, I don’t believe in such a thing as work-life balance, especially when you’re an entrepreneur and you own your own business.

There is no separation. Calling work-life balance makes it seem like there’s a separation and they’re at different ends of the spectrum. And that’s not the way that I live my life now and I learned not to live my life. When I’m with my kids and I’m present with them, I’m 100% focused on them but when I’m at work, I’m 100% focused at work. It’s a mixture and I learned very quickly that the whole work-life balance really doesn’t exist, that it’s all a mish-mash. And the better that I accepted that and went forward, actually, the more effective I was and the better I was at being both, at being a pharmacy owner and being a mom.

When I sold my pharmacy in 2012, I went to work for Pharmacy Development Services, PDS, which is fairly well-known in the industry, and there, I did just about every job that you can do. I think the only position I never held was like CEO. And you talk about skillsets, you know, having to do all the various coaching and the project planning and project management and new program implementation, and then I went into marketing. And I’ve done all the business development, all the marketing, all the sales, that kind of stuff. It really did give me a well-rounded education if you will on kind of C-suite activities.

It was a lot of the stuff that I did in my own pharmacy because I do believe that when you own your pharmacy, marketing needs to be your best friend. You’ve got to develop certain skillsets because you can’t go around paying for all of it, you know? Just like some things you’re going to have to do for yourself, definitely doing that and also, other entrepreneurs. 

I never stopped being an entrepreneur, even if it wasn’t a pharmacy, my husband and I have always owned some other types of businesses. Before we had the pharmacy, we had a used car lot with my brother and then we had the pharmacy and then we opened franchises and then we opened up just other startup businesses. We always had that entrepreneurial thing going, “on the side” type of thing.

I was always constantly going back and forth with my skills and I think that really honed me to that I can accomplish a whole lot in a small amount of time because my desire to spend time and be present with my kids was really strong, and to spend time and do things like be able to take a vacation or to go to a conference or something like that. I had to get the work done.

When you give yourself a finite amount of time, you realize how to get really efficient and really good at things and so really, the experience that all of that gave me was working with a ton of pharmacy owners, I mean, probably thousands of pharmacy owners and I’ve spoken at all the major events, anything that you can think of, I’ve probably spoken at.

Also, being in other institutions or systems or franchises got me a lot of exposure to other ways of doing business as well. I try to bring some of those lessons into the pharmacy world because there isn’t a whole lot of pharmacy business education and training and so, I try to bring a lot of the other industries, the best of the best of what they have to offer and really bring that in and apply it to pharmacies.

[0:16:05.4] TU: As we make the transition here to talk about the work that you’re doing with DiversifyRx, I want to pause for a moment and just reflect on the point you are at now, has been 20 years in the making, right? I think sometimes, especially in a day and age where entrepreneurship is glamorized, right? I think, where we can hear stories and examples and founders and IPOs that are happening and we don’t often see a lot of the skill development, the sweat and the tears and the hard work that go behind it as those stories continue to come forward.

When you shared, not only the experience you had at Kmart, the experience you had in running your own business for six years and even getting into that, having some obstacles to overcome a business that you thought was going to be available for purchase that was not. All that’s involved in skill development of growing your own business. Other franchises you’ve been involved with, used car lots, rolls that you have, chief revenue officer, marketing skills that you gained. All of that that over two decades has allowed you to obviously continue to grow as an individual but also, grow as a business owner. I think that leads to the efforts that you’re doing right now. Tell us about DiversifyRx, what is it, how did it start and what problem are you trying to solve?

[0:17:21.1] LF: Yeah, wow, that’s a fun thing to talk about. DiversifyRx was really just started almost as therapy for myself. When I was deciding to leave PDS in the summer of 2020, I didn’t know what I wanted to do. I was kind of at that conundrum where I don’t know what I want to be when I grow up, you know?

I was looking at a ton of jobs, I had just moved to the Dallas metro area and the economy here is booming and there was all kinds of executive jobs and I was strongly considering leaving pharmacy and going and doing something else and so, the only anxiety that I had about that was I’m not going to be able to help pharmacy owners. I just kept filling this pool and that was the only thing that I was sad about.

I started DiversifyRx really as just a way to have a weekly email and a weekly blog and kind of stay connected to my brethren that I had been in the trenches with for the last 20 years and I was happy with that. That was great, that’s all it was and I took another job, chief revenue officer, within pharma industry and that was great, then I actually ended up getting fired from that job in February of 2021 and you might say, “Fired holy heck.” Yeah, it was the first time I ever got fired but it was a gentle loving firing, we just agreed that we just didn’t – we weren’t having the same vision for the company and so it was very amicable I guess as firings can go.

I was kind of left again with ‘what I want to be when I grow up.’ I was like, just had an “aha moment” with my husband where I turned to him and I said, “I know what I love doing. I am the happiest when I’m talking to pharmacy owners and I help them get “Aha, that’s my favorite”. It’s when I help them become aware of something or achieve a win, that’s when my face lights up and so I was like, “I think we just need to figure out how to do this full-time, I don’t know what it looks like.”

Again, kind of back to that leap of faith, I have no idea what it was going to look like, I had no idea what the plans were but I was like, this is where I’m happy and I need to be happy if I’m going to be a good wife, a good mom and a good person to everybody else in the planet.

Really, was in the beginning of 2021 where I said, all right, I’m going to do full-time diversify, let’s go figure that out and what that is. And really, the whole name comes from my fundamental belief that pharmacy owners need to diversify their revenue streams, you can no longer just be a passive pharmacy that just dispenses whatever prescriptions happen to walk in your door, you’re not going to make it that way. Being average and being normal is not going to keep you in business for long. 

Profitable pharmacy strategies do not just fall from the sky. You have to go out there and look at them but gosh, there’s so many bad things out there, there’s so many great things out there. And pharmacy owners, when do you have time to vet, when do you have time to decide, when do you have time to go through all of that and so, essentially, I took all of my skills and all of my industry, contacts, and knowledge and things that I gathered that it’s like, I felt like it was kind of my job to create that pharmacy ownership profitable buffet table if you will.

Where it’s like, “Here is all the opportunities” because I firmly believe that there is more opportunity now to succeed as a pharmacy owner than there has ever been but it’s not in the typical way that it’s always been done in the past. I feel like my mission on earth here is to create that buffet, that smorgasbord of profitable opportunities because what fits for one pharmacy isn’t going to be a fit for another, it’s going to be the perfect fit for somebody else and so, if I can just come up with all of the opportunities and help pharmacy owners decide what’s going to work for them based on their demographics, their own passion, and their insight, then let’s go do that in your pharmacy so you can have a profitable thriving pharmacy.

Really, that’s what DiversifyRx is all about, is helping pharmacy owners diversify and optimize their revenue stream so that every single independent pharmacy that wants to stay open, that wants to thrive, that wants to be a generational business that they can hand down to their children and grandchildren, that they’re able to achieve that dream. 

[0:21:20.5] TU: Lisa, I love the mission, I love the passion, love the why behind what you’re doing and I don’t want to lose as well that as folks go on your website, we’ll link it in the show notes and they see all that you’re doing now, it started with the idea and you mentioned a newsletter, right?

That important action step that I think, often folks will look at other pharmacy entrepreneurs, other businesses out there and get paralyzed by seeing the current state. It started in a very different state, right? It has grown over time and you know, I think taking that first step is such an important one and to some degree, put yourself out there in terms of, “Yeah, I have this vision, I have this belief, I see a need in the market and I’m going to be a voice in this space.” And allowing you to sit in that uncomfortable space of, “Is this going to resonate, is this not going to resonate, where is this going to go?” and I love that first step in action that you took. 

I want to ask you that when you say there’s more opportunity than ever for independent pharmacies, from an outsider’s perspective, I can’t claim to live in the independent pharmacy space. I have been in the profession for 13 years, largely in the academic world prior to moving full-time with the work that we’re doing at YFP but when I look from the outside looking in and even as you say in your website, the onslaught of DIR fees, abusive PBM audits, low margins, poor cash flow, clawbacks have many owners on the verge of tapping out. I mean Lisa, from the outside looking in, why go into this business? 

I mean, how can one even plan when you think about things like DIR fees, PBM audits, clawbacks like even trying to build out a proforma from that seems like a nightmare and it really feels like the deck is stacked not in the favor of the pharmacy or the pharmacist, so give us the compelling argument of, why is this a better opportunity than ever before? 

[0:22:57.8] LF: I think the reason why it’s a better opportunity more because pharmacies and pharmacists are more than just dispensing destinations and that really comes from, we do so much more. Yes, our primary function is to dispense, we’re not getting rid of that but to me, where the opportunity comes from is consultation, functional medicine, cash-based services, supplements, compounding. 

You know, all kinds of things that really are available and the broad – whether it’s under your “scope of practice” as a pharmacist or it’s completely outside of your scope in the sense that you don’t need to be a certain licensed person to recommend supplements or something, why would somebody go to a GNC and listen to a 19-year-old about supplements when they could come to your pharmacy and get somebody that is far more educated and probably get a higher quality product that’s very specific and tailored to their exact needs, you know? 

These people out there are spending cash everywhere. You know, they are spending cash at GNC, they’re spending cash at the gym, they are spending cash at the spa, you know for all of these different kinds of services that really pharmacies should be in my opinion the place that the healthcare that healthcare destination, people kind of use that as kind of a catchy phrase nowadays but what does that really mean? 

It’s really, pharmacists are positioned to really help patients to take care of their health in ways like never before. There is more testing available. You know, one of my favorite supplements has a neat little saliva test that you test the patient to even see if they need it, you know? It’s like then you can test them to see if it is working. There is just so many great things out there nowadays that pharmacies can be the conduit for if we’re willing to look up and outside of solely dispensing. 

That’s really where that comes from because yes, if you’re just going to bank on patients coming to you and they’re just going to pay their copays and they are going to grab their bags and turn around and leave then yeah, it is going to be a very tough ride being a pharmacy owner. 

[0:24:54.2] TU: Yeah and what I love about that vision Lisa and I think this is a healthy discussion for us as a profession, you know I have always felt that arguably, we’re just incredibly well-positioned across the country already having a physical footprint in many, many communities, right? 

As we think about the dispensing of medications perhaps becoming a commodity to some degree and we look at the many threats that are there, if we can begin to diversify that and begin to really even look at, perhaps the dispensing of medications is kind of the entry point and at some level though lead generation to other opportunities where pharmacists is well-positioned, just a completely different way of thinking rather than that is the core business model, right? 

[0:25:36.0] LF: Exactly, so pharmacy owners generally aren’t business people in the sense of what they’re really truly not thinking about their business from a marketing sales funnel conversion, all of those types of things that lots of other businesses do. I mean, there are so many businesses out there that would kill to have the traffic that independent pharmacy does. 

They pay tens of thousands of dollars a month just to get people to come in and yet people are freely walking into pharmacies and it’s just pharmacy owners don’t have the skillset and the knowledge to know what to do with that traffic. And that’s where I feel like I come in like, “Man, that lowest hanging fruit is every single time you have a physical person walking into your pharmacy is an opportunity to sell them something else that they need.” 

[0:26:19.5] TU: Talk about warm leads, my goodness. 

[0:26:19.8] LF: They need something else, exactly. Yes, you have that traffic and that’s what most pharmacy owners, they don’t even understand the word traffic in the sense of how it applies to marketing. And so that’s where I really get my passion from is teaching them those fundamental business skills that are often taught for other solopreneurs and other types of verticals of businesses but really isn’t taught in pharmacy. 

You know, really getting them to understand that that dispensing of a prescription is your front in offer. You know, that might be something that people know you for but where you make your money is on the back end offers and you know it started with drug-induced nutrient depletion. In my final year of pharmacy school when you have to do your big project, you know, I did mine on drug-induced nutrient depletion and that was back in 2001. 

Nobody was talking about that then and so it’s like there’s always a way, I truly believe there is always a way for every pharmacy to thrive and survive, you know? We just have to figure out what that thing is and that’s to me the extremely fun part like I get just so much joy. It is like I am a little Sherlock Holmes and everybody’s little pharmacy figuring out what’s going to help work for them and because there is always something that’s going to work. 

It doesn’t matter your demographics, it doesn’t matter the income level, there is always something that those patients are paying for, they are spending their hard earn money on and you just have to offer it to them. 

[0:27:37.2] TU: Yeah and they are probably spending it elsewhere, right? To your comment about, yeah.

[0:27:40.4] LF: Absolutely, yep. They are spending it, they are spending it somewhere else and you just need to capture that. 

[0:27:44.0] TU: Love it. So you are bringing this business mindset and perspective to independent pharmacy owners and you are trying to do it really on a level that I see as being scalable, so not necessary one-on-one. I am working with this pharmacy but really this membership type of model, which gets to the aspect of how you’re monetizing the business, so tell us more about the membership model and why you came up with that approach to be able to provide this solution to independent pharmacies. 

[0:28:08.7] LF: Yes, so ultimately the mission that I am on is to save independent pharmacy and I am never going to accomplish that if I have to talk to every single pharmacy owner out there for an hour a month and help them that way and that one-on-one consulting. I have to figure out how do I scale it and to do many to one and frankly, I personally, my zone of genius kind of understanding when you’re a pharmacy owner, whether you’re a solopreneur or running your own PGX business or whatever, you need to understand what you excel in. 

I learned early on that I do not actually excel in that one-to-one type of interaction. I excel in the many to one and frankly, it is the only way I am going to ever reach my mission, so I set out. I eventually figured it out, it took me a couple of months after going full-time into Diversify that I wanted to start a digital membership, which you see in lots of other verticals of companies out there but it just didn’t really exists in the way that I wanted to bring it to pharmacy and so, we named it Becoming a Pharmacy Badass, so Pharmacy Badass University. 

My podcast and my YouTube channel is kind of like becoming a pharmacy badass and that’s a bold brand and you know there is some people that are like, “Oh my gosh, I can’t believe you said that” but to me, if you’re going to survive in this world because we do have so many things stacked against us, you can’t be average. You can’t even be good, you have to excel and you have to become something different. 

Pharmacy Badass University is our digital membership and you get it all. It’s you log in, you get your membership and it’s like, “Well, what’s included?” it’s like you know, all of those online e-courses, we are constantly creating them. I am creating the initial ones because we’re just going to be launching but how do you manage your inventory, how do you do that? Well, I don’t know. Here, let’s go and let’s just watch this on-demand course that either you can give to your technician, you can give to your pharmacist or if you are a startup, you know maybe do it yourself. 

How do you control your cost? Well here, here is how, the method I go through and how I can look at my PNL and how I control my cost and what those costs should be. And so it is going to be on-demand courses, a ton of done-for-you stuff because you know, as easy as Canva is or some other graphic designs, not many pharmacy owners are going to have the time to go do that, so it is like every month, we’re going to be creating those templates and those emails and those things for them. 

We’re going to have those office hours because I get calls all the time from pharmacy owners and I’ll end up doing a podcast or something about it. I am sure you kind of get this too, it’s like, “Man, everybody could benefit from that question. That was such a great question and I had such a great discussion with you but I didn’t record it and I can’t share it” and so it’s like we’re going to have those open office hours where everybody gets in that kind of shared knowledge.

Those monthly mastermind calls where I bring in other experts, I bring in sometimes outside of the industry, sometimes within the industry and so it’s really going to be this super low-cost no complications at all, no contracts, no minimums. My golly, if you don’t want to be a member anymore, you know, cancel and we’ll make it happen because I only want to serve people that are truly getting value. I want to be the best value in pharmacy because I know, I am still a pharmacy owner myself now. 

I sold my original pharmacy but I got back into pharmacy ownership. I actually have parts of three different pharmacies and I know how tight money and time is for pharmacies. Those are the two tightest things and so we want to help you save time and we want to help you use your money wisely. So we literally we’re trying to be stupid cheap as I say because it’s just you know, these pharmacy owners can’t afford hundreds of dollars or thousands of dollars a month. It’s just so hard these days and that’s part of that is providing a solution that is affordable and cost effective is really at the core of my offering. 

[0:31:46.1] TU: Well, I love what you’re building Lisa. It reminds me of, for folks who have not read Tribes by Seth Godin, you know what you’re building as, yes, Lisa is the founder of the company. Lisa, you have the idea, you’re obviously growing it from the ground up but you are developing a community of folks that are coming together that are passionate about this topic of making independent pharmacy profitable again, right? 

Bringing a business mindset to independent pharmacy and obviously you are building it in a way that you can then scale that going forward. And it’s not about Lisa, it is about Lisa being a facilitator of this community that’s coming together towards this common mission and I think that speaks volumes. I love that business model when you look at memberships, especially when memberships have a community component, where you as the owner, you then move into yes, I am providing some service but I am really a facilitator among this community. 

I think that people really resonate with and stick with those groups long-term because they really feel like there’s value in being part of that community. 

[0:32:45.3] LF: I could not have said that any better myself. You are absolutely right and that is exactly what I’m going for because I might know a lot about a lot of things but I don’t ever claim to be an expert on everything. There is always going to be somebody else out there that can share some of their wisdom and if we’re all committed to helping independent pharmacy owners thrive, then everybody wins when you share what works and sometimes, what doesn’t work. 

Sometimes you learn more from what doesn’t work and so no, you’re absolutely right and along with the membership aspect, we are doing our own live events that are very focused around pharmacy profit, like, I am unabashed and unashamed. We help pharmacies increase their profits and that’s not a bad game. 

[0:33:27.8] TU: As you should, it’s a business. 

[0:33:28.9] LF: Yeah, it is a business you know? Pharmacy owners are the worst people, you know, the saying that I founded [Long Deer 0:33:34.5] ago, is profit is not a four-letter word. Now granted, can you make profit bad ways? Absolutely, everything comes with the good and the bad side but making a good profit in your pharmacy is not something you should be ashamed of. There is right ways to do it and there are plenty of them out there and it is not a four-letter word and something that should be avoided. 

I am unashamed in helping pharmacies improve their profitability. So we have the Pharmacy Profit Summit, which is a two-day event and then we have the Pharmacy Badass University, which is centered around the six pillars of pharmacy profit, so we are unashamed in helping pharmacies improve their profits because that is the only way that they are going to stick around and be able to help and continue to serve their communities. 

[0:34:17.0] TU: That’s right and we are going to link to the website and you can get more information by checking that out in the show notes but just to bring that full circle, right? If we’re not profitable as a business, you can’t continue to offer the service, which is providing value to the community, which is why you started doing that in the first place. Amen to what you just said there Lisa. 

Let me ask you as a follow up then, you know, I often think about differential advantages for businesses and so when I think about independent owners and other things that are already out there for them, right? I am thinking about organizations like NCPA, I am thinking about state organizations and interest groups within state organizations. I am thinking about buying groups and what they often will offer independent pharmacy. 

What is different about what you’re doing and how are you differentiating that from other services that are already out there to serve independent owners? 

[0:35:01.2] LF: Yeah, so I look at NCPA and a lot of the state organizations as legislative efforts. I mean, I think that’s all their ultimate goal is to affect things either on state and national levels from a legal standpoint, which I certainly support and I am not doing. Diversify does not do that, not to say that I won’t write my own letters to my congressman or something like that but I am certainly not starting a legislative moment on anything. 

I think that is one important distinction there but sometimes when you get into buying groups and things like that, you kind of start to wonder who they’re actually fighting for, who is ultimately the best interest of what they’re recommending because sometimes what they recommend does not make sense when you are looking at it from that financial standpoint. It’s like, “Hmm yeah, buying my products from you is actually costing me money, so how is this better?”

You know, you kind of just maybe start to wonder where their ultimate loyalties lie and so really, what I am doing is I am bringing together that 20 years’ experience, I pretty much know just about everybody in this industry. I know what the companies are doing, a lot of people reach out to me, even startup companies, I often hear about companies that are just getting started a year before they launch for the public and those kinds of things. 

I really try to keep my pulse on this industry and a lot of what I do is free. I try to put out a ton of free content, you know just follow my social media, follow the podcast, follow the YouTube, any of those kinds of things. I put so much stuff out there for free because if I can help a pharmacy owner for free, I am A-okay with that and if you get all you need from that, perfect. 

If you want to go up to the next level where you kind of want some done for you, you want to be able to ask some questions, you need that little bit more of handholding, that’s where Pharmacy Badass University comes in and we’re less than $200 a month. I mean, we’re talking I am trying to keep it as low as possibly low as it can be and so really, I think that’s how it difference is, is that I am truly here for the success of other pharmacy owners not just to charge them by the hour or something like that in terms of helping them. 

Where there’s lots of consultants, some good, some not so good, it’s just a different model because they are doing that one-on-one, well, you can only have 10, 15 maybe pharmacies when you do that one-on-one so you have to charge higher prices and you have to do things because you still got to put food on the table. 

We’re a business as well and so my approach of the many-to-one I think not only benefits the industry because I am able to help more pharmacies, but it also benefits the individual owner because the cost for them interacting with me is next to nothing, $200 a month. It’s like, it doesn’t get any cheaper than that. 

[0:37:36.1] TU: You know, just another different advantage of outside looking in is you are an owner. You’ve lived it, right? You are in it and I think you can resonate as both the leader of this community as well as somebody who is in the community looking to learn from others. I want to come back just for a second here talking about providing value. For folks that have not listened to Pat Flynn has a site podcast, a resource called Smart Passive Income, we’ll link it in the show notes but was very influential to me early on in my journey of starting YFP. 

He often talks about, if you lead with providing value to address a problem that people care about and you have a solution, which is one that they eventually be willing to pay for, lead with value and the business will come. And I think you are demonstrating that very well. You mentioned leading with a lot of free resources and then you’ve got kind of next level opportunities for those that are willing to make that further investment of both time and money. 

Lisa, I want to come back, final question for you is this aspect of figuring it out. If I reflect on your past 20 years, I would argue that less than 5% of the work that you are doing today and the success that you’ve had from your career is from what you learned in your training to become a pharmacist. 

And you know, I think as I think about folks that are going down the path like you have gone down, there is this hunger to learn and there’s this mentality through all these different roles that you’ve had both as an employee, as an owner of just figuring it out, right? Being willing to learn and to grow and to get better and perhaps making some mistakes along the way. Tell me about that mentality for you and where has that come from? Am I right in reading that as a part of your success? 

[0:39:13.7] LF: No, I think you’re spot on. I have a very – you know, I’ve taken probably every personality and skill test out there and I do have a very high figured it out factor partly because that’s the fun part to me. I like problem solving. I always like math in school, I like coming up with the right answer, it gives me my little dopamine hits and so I really do like the figuring it out part but I think what comes in as you mentioned a big thing about fear and we kind of started off with that is the fear of failure. 

Even pharmacy owners, you know, I will sometimes get on the phone call with a pharmacy owner and give them 10 different options of what they might want to focus on for the next year or something like that. It is really the only ones, the ones that fail or the ones that don’t succeed or don’t implement are the ones, that – we’re afraid of doing it wrong. And as pharmacists, I think that particularly hinders us because in pharmacy school and in your primary pharmacists job, you want to be perfect. 

You strive for perfection, you never ever want to make a mistake on a prescription, which is a perfect mindset for a pharmacist working the bench. However, when you take your bench hat off and you put your pharmacy ownership hat on, you cannot bring that thought process into your pharmacy ownership decision making. It is okay to make mistakes in business. In fact, I’m a big fan of fail fast. If I am going to fail, I want to figure out what’s not going to work as soon as I can so I can move on to what is going to work. 

I am very much a subscriber to that belief of failing fast. And you have to understand that business mistakes are not the same as dispensing or pharmacist mistakes. If you try a type of advertising on the radio and you spend $1,500 and it was a raging success, great and if it was a raging failure, well, you lost $1,500 but nobody died, nobody was hurt. You probably did some good, you probably got something out of it even if it wasn’t what you thought. 

So you really have to reassess what failure is and what it is not when you are looking and making decisions as the business owner, as the owner of the pharmacy, rather than looking at it as a pharmacist. And I think that is the hardest part for pharmacy owners who also happen to be pharmacists. It is really hard for them to separate themselves and I do a lot of what I’ll call therapy sessions on that in trying to help them figure that out because as you said in the beginning, the first step is just taking that first step, just putting out a newsletter. 

I look at my very first newsletter that I sent out and I cringe. I’m like, “How did anybody read that and enjoy it?” but you know what? I got a ton of complements on it, you know? But looking back it’s like, “Oh just remember you’re always your worst critic but you can never succeed if you never try.” And you know, failure in business is to be expected. You know, perfection is not the gold standard and so we just have to understand that that’s different from when we’re working the bench as opposed to working on our business, and I think that’s the biggest lesson that pharmacy owners can learn. 

[0:42:04.9] TU: That’s so good really differentiate what failure is and what is not and the difference between that mindset as a business owner versus as a practicing pharmacist and to be fair, you know, if I think back to my PharmD training, Lisa, we’re taught rightfully so, you know, when we are thinking about our roles as a pharmacist and mitigating and preventing medication errors. 

That mindset is drilled into us of, failure cannot happen from that standpoint. And that makes sense from the pharmacist-patient perspective but to your point, which is spot on, very different when we think about that as a business owner and how we can learn and grow through that failure. This has been awesome. I am energized from this interview and I think that’s going to go to our community as well and those that are listening, so thank you so much for your time. 

Finally, where can our listeners go to learn more about the work that you’re doing at DiversifyRx and to connect with you further? 

[0:42:49.7] LF: Yeah, so our website is diversifyrx.com, that’s probably the easiest way. You can send me an email at [email protected]. Feel free to find me on all of the social channels either by the business name, DiversifyRx or my personal, Lisa Faast and then we have a podcast, we have YouTube and you can find all of those resources plus tons of free downloadables all on our website. 

We try to make it super easy to help people for free as a primary method, so head over to that website and that is where a great place to get started. 

[0:43:22.3] TU: Awesome, thank you so much Lisa. We’ll link to those in the shownotes and I really appreciate your time coming on the show today.

[0:43:26.9] LF: Thank you so much for having me. I greatly appreciate your shows. 

[END OF INTERVIEW]

[0:43:29.9] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

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

[END] 

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YFP 245: Getting Under Contract in a Competitive Home Buying Market

Posted on by yfpadmin


Getting Under Contract in a Competitive Home Buying Market

On this episode, sponsored by First Horizon, mortgage manager, Tony Umholtz, discusses getting under contract in a competitive home buying market.

About Today’s Guest

Tony Umholtz graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants, and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay, and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine, and Mortgage Originator magazine.

Episode Summary

If you’re looking to buy a home shortly in an area with a competitive market, this episode is for you. Today we welcome Tony Umholtz back to the show, a mortgage manager for First Horizon, formerly IBERIABANK. In this episode, Your Financial Pharmacist Co-Founder & CEO, Tim Ulbrich, PharmD, sits down with Tony to talk through the tips for securing a home purchase contract in a competitive housing market, the current state of the housing market, the current housing shortage, and reasons behind that shortage. Tim and Tony discuss interest rates and trends Tony has seen through his experiences working with pharmacists across the country. Hear why the lender and agent you choose to purchase a home through matters, why the type of loan you choose to get matters, top advice for first-time homebuyers looking for a low down payment, and the pros and cons of various strategies to make an offer stand out. Tony also shares information on how to get out of your contract if necessary without losing your earnest money. From escalation clauses, and appraisal gap clauses, to waving inspection contingencies, this episode breaks down everything you need to know as a pharmacist trying to secure a home in the current real estate market.

Key Points From This Episode

  • Hear about Tony’s background and the work he’s doing right now with First Horizon.
  • How we’re still at historically low-interest rates, even with the recent rise we’re seeing. 
  • Some context on the current market and why we currently have a housing shortage.
  • Tony shares why it matters what type of loan you get.
  • Important factors to consider when evaluating and considering the lender that you choose. 
  • What an escalation clause is and some of the potential pros or cons to look out for.
  • Tony comments on the recent trend of waving inspection contingency.
  • Whether the earnest dollar amount is going up in this market and if offering more makes a difference.
  • The three pieces that will allow you to get out of the contract and not lose your earnest dollars. 
  • Some advice on what to do if you’re looking for an option with a lower down-payment.
  • Why there are so many cash offers out there at the moment.
  • We talk about some great strategies to help out with the seller cost.

Highlights

“We’ve had the lowest interest rates we’ve ever seen as a country the last couple of years during the pandemic. Now they’re just slowly going back up again and we’re still at historic lows, even with the move higher that we’ve seen in the last six, seven months.” — Tony Umholtz [0:04:47]

“I think having a very good realtor who is trusted in the market and has a good reputation can really help you get a contract right now. That’s a big thing, a big deal.” — Tony Umholtz [0:15:00]

“We have the housing shortage and rents are escalating at a faster pace than appreciation on housing is, so that is why owning real estate is valuable right now.” — Tony Umholtz [0:26:26]

“Learning as much as you can about the seller and the situation can help you in getting that under contract.” — Tony Umholtz [0:29:15]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] TU1: Hey everybody, Tim Ulbrich here and thank you for listening to The YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

 This week, I had a chance to welcome back on to the show, Tony Umholtz, a mortgage manager for First Horizon, formerly IBERIABANK. During the interview, Tony and I talked about some tips for securing a home purchase contract in a competitive housing market. If you’re looking to buy a home in the near future and live in an area that has a competitive market, this episode is for you. 

During the show, we talk about the current state of the housing market interest rates and trends Tony has seen through his experiences working with pharmacists across the country, why the lender and agent you choose to purchase a home matters, and the pros and cons of various strategies to make an offer stand out, including escalation clauses, appraisal gap clauses and waving inspection contingencies.

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

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

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

[SPONSOR MESSAGE]

[0:01:38.0] TU: Does saving for a down payment on a home feel like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities including high student loan debt, meaning that saving 20% for a down payment may take years. We’ve been on the hunt for a solution for pharmacists that are ready to purchase a home with a lower down payment and are happy to have found that option with IBERIABANK/First Horizon. IBERIABANK/First Horizon offers a professional home loan option, AKA, a doctor or pharmacist home loan that requires a 3% down payment for a single-family or townhome, has no PMI, and offers a 30-year fixed-rate mortgage on home loans up to $548,250.

The Pharmacist home loan is available in all states except Alaska and Hawaii. To check out the requirements for IBERIABANK/First Horizon’s pharmacist home loan and to start the pre-approval process, visit yourfinancialpharmacist.com/homeloan. 

[INTERVIEW]

[0:02:42.2] TU1: Tony, welcome back to the show.

[0:02:44.0] TU2: Tim, thanks for having me, always good to be here with you.

[0:02:46.4] TU1: Really looking forward to this, our first recording together in 2022. We’ve had you on the show many other times before, we’ll link to those in the show notes for folks that are looking for guidance in the midst of that home buying process. We’ve talked before about the professional home loan option, the pharmacist home loan and we’ll get to that at the end as well but if folks want other references and resources on that, we’ll certainly link to those previous conversations in the show notes.

Tony, I don’t want to assume that all of our audience knows who you are and so if you just take a moment to give us some background on yourself and the work that you’re doing with First Horizon.

[0:03:21.5] TU2: Sure, well, I’m a mortgage banker and I’ve been doing mortgage lending now for almost 20 years I’m afraid to say, it would be 20 years in October but we handle residential lending and I run a team here, we’re based in Florida but we lend all over the country, we are actually in 48 states. The lower 48 we’re licensed in and we handle the residential financing both purchase loans, purchase money, and refinancing but it’s been a lot of fun, I’ve had a lot of fun in my career. We’re in a very interesting time now, Tim.

[0:03:53.4] TU1: We are and I appreciate you as always, sharing your expertise, and today, we’re going to be talking about some tips and strategies for getting under contract in a competitive home buying market, I would say that’s a timely topic for sure. Tony, we’ve been talking over the last few years and it seems like each season we talk, it’s just a wild time to be buying a home, the home market as a whole. 

Here we are in another time period, I think there’s some uncertainty, we see some changes that are happening to interest rates, for those especially, they are first time home buyers, I think it right to be a little bit anxious about the process and the competitive nature of what’s out there. From your viewpoint of working with pharmacists and others all across the country, just give us a quick summary of what you’re seeing as we really get into the beginning of spring of 2022. 

[0:04:41.6] TU2: Sure, Tim, you’re exactly right, the market has been changing here this year. We had some of the lowest interest rates – the lowest interest rates we’ve ever seen as a country the last couple of years during the pandemic. Now, they are just slowly going back up again and we’re still at historic lows, even with the move higher that we’ve seen in the last six, seven months. We’re still near very historic lows. 

Back when I started in the industry, 7% for 30-year fixed was actually not bad, it’s trended lower during that time frame but it’s – we’re in this time right now where we have a housing shortage throughout most of the country and a lot of that happened post the downturn of ‘08 and ‘09, we just didn’t build enough homes and apartments for the population growth. We saw people moving in together, builders couldn’t get financing for a number of years so we went through a decade of underbuilding and now, this is the consequence. 

We don’t have enough housing inventory and housing stock and what’s caused the further delay is that builders can’t build as quickly as they like to because we have supply chain issues. Builders can’t – I work with builders as well and they’ll tell me, “You know, it’s taking me six months to get roof trusses” and different things, different components of the building process are constrained. 

They can’t output the number of units for demand and I think that’s a good thing over time, I mean, they’re going to catch up eventually and it will normalize but we’re going to be in this type of market for the foreseeable future until they can catch up.

[0:06:19.1] TU1: Naturally, Tony, what we see then is, and of course, we’re generalizing across the country, certainly different in parts of the country, different markets but that means, home prices going up significantly, supply and demand, more people that are looking for homes. And we’re hearing from our community, as to be expected, whether it’s their first home, second home or third home, that they’ll be on the pinch, right? 

For many pharmacists, we see salaries – great salaries coming out of school but are relatively flat over the course of one’s career. Obviously facing many folks is significant student loan debt that first decade or so of their career and now, we’ve got rising home prices that are layered on top of that and so, all the more reason that we’ve got to be thinking about the home buying decision and the context of the rest of the financial plan. 

Before we go into individual tips or strategies for getting under contract in a competitive home buying market, I’d be remiss if I didn’t first say that we need to make sure that we’re not losing perspective on the budget for buying a home and how that fits into the rest of the financial plan, right? As we say many times in the show, we can’t look at any financial decision in a silo, and if the end goal is to get under contract but we do that in a way that significantly disrupts the rest of the financial plan, we’ve got to obviously put that in check.

Really taking a step back, what is your home buying budget, what is your personal situation as it relates to investing and saving for the future, other debts that you have incurred and are paying off, and how can we make sure we’re purchasing a home in a way that also allows us to thrive with the rest of the financial plan?

Tony, first question I have for you as it relates to getting under contract in a competitive market is, does it matter what type of loan someone may have? If I’m a seller and I’ve got 10 offers that are on the table and some folks are coming with maybe an FHA loan, a VA loan, a conventional loan, perhaps something like a doctor loan, a pharmacist home loan product, that does that really matter in terms of what type of loan someone is bringing to the table as they’re trying to bring that competitive offer forward?

[0:08:18.6] TU2: Well, it certainly does. I think it’s a really good question because when you get an FHA or a VA pre-approval letter, if you’re a seller and if you had experience with that, there’s typically a much stricter appraisal that’s done on your property versus maybe a conventional loan or like a special pharmacy or doctor product. It’s going to be a much more stringent appraisal and it’s just because those loans, FHA and VA loans are federally backed loans that are backed by what’s called Ginnie Mae, which – anyway, not to get into the complexities of the mortgage market and everything else, they’ve got sets of guidelines for these products. 

Now, they’re good programs, they have opportunities for individuals to qualify for different things but as a seller, you’re going to probably, if all things being equal, right? If that price is the same, you’ll probably going to want to avoid those offers just because they do come with some extra sets of eyes. And the other thing too that both these types of loans, if you get the home appraised and that appraisal comes back lower or whatever it might be, that’s attached to the home for quite a while.

[0:09:31.1] TU1: Yup.

[0:09:31.3] TU2: That seller cannot – if another buyer comes in, they have to use the appraisal that was done on your unit. It’s – there is some overlays to those two products so that will probably put you in a more inferior position.

[0:09:44.6] TU1: One tangible story I have here, Tony, personal experience, we were selling, my wife Jess and I are selling our home up in Northeast Ohio before we moved to Colombus and the buyer had FHA loan and I remember during the inspection process, this was my delinquency as the homeowner, I think one of our boys had pulled the railing off the wall or just something normal that happens in our house with four boys.

I was in the process of kind of getting that back up of the rail going up to the stairs and at the time when they came out to the inspection and there wasn’t a whole lot of notice, they take a bunch of pictures and whatnot and they had requested that that be put back on and they had to come back out to see that it was put back on. This was in the pre-pandemic time period so maybe now they allow for photos or other things but that time gap could be significant, right? 

If you’ve got multiple offers and things that are going on and if folks again are looking for ease of closing and they’ve got options of different buyers with loans that may not be astringent, it certainly could be something that can come into play.

[0:10:41.6] TU2: Absolutely, there’s no question, it happens all the time. When we do approvals for – we do FHA and VA loans too and when we have them, I have listing agents call me and tell me these things. This is just from experience and – but there’s no question that can put you at a disadvantage but again, those programs are there to serve a purpose. They’re not bad loan programs for different people, they have pros and cons. 

I don’t want to downplay it but they certainly, if you are qualified with you, those products are going to put you in an inferior position going into getting the offer, for sure, and to getting it accepted, the contract accepted.

[0:11:15.6] TU1: Next thing Tony, I want to ask you about is the who on your team. Specifically, first, I want to talk about from a lending standpoint and then second, from the agent standpoint and really highlighting that not all options are created equally. And I think when it comes from a lending perspective, speaking from personal experience as a former first-time home buyer, I was very fixated on getting the best rate, right? 

That was something that had been drilled into me that you’re looking at something over 30 years on a 300, 400, $500,000 purchase, 0.1% or whatever would be the difference, can be significant. But not stopping there, of course, a competitive rate really matters but other things, communication, timing to close, accessibility of that individual during the process, so important to bringing a competitive offer for it. 

Tell us more about how we can really evaluate and consider the lender that we’re using.

[0:12:07.9] TU2: Yeah, another good point, Tim. I mean, during this time where everything’s so competitive, most markets around the country have less than two months of inventories, that’s very much a seller’s market and very competitive. We had a situation happen this weekend with my team and we had a borrower that said, “Hey, I’m going to go in at this set purchase price for a home.” And they actually had to pay quite a bit more and the seller was going to go with them but they didn’t have a letter stating that, and they were approved for that amount and even more than that. But they thought like a negotiating tactic would be, “Hey, let’s go in at this, what my offer price is going to be.” Which was under value.

They almost didn’t get the contract. Fortunately, a member of my team was able to send them the updated pre-approval letter this weekend so they could get the house under contract. Communication is really important and especially during this time. And I will say also that the listing agents call us, and we don’t disclose anything personal and we don’t – we can’t do that but a lot of them will want to know, “Hey, can you close on time? Can you get this done, can you get an appraiser out there and have an appraisal done in a meaningful matter of time?” 

And also, the commitment letter deadline, a lot of contracts call it commitment letter, which is basically a formal underwriting approval where you’ve been through underwriting formally, a lot of orders are done within a few days and other lenders, some other lenders may be like this too, but having it done quickly is so important. And being able to get underwritten quickly and having open communication is critical with the lender in this time because it’s – I always tell people, you can go with certain lenders if you’re just refinancing, if it takes 90 to 120 days, it’s okay, it might cause some stress a little bit for you but it’s just a refinance, right?

On a purchase, you have to hit these deadlines, you have to hit these timelines or you could be out of contract, and not only lose the contract but also lose your earnest money too. Yeah, it’s very important. And I would also say with the agents too, your real estate is very important that you have a good real estate agent that knows the market and I’ve seen just from my years of experience, I’ve gotten feedback where listing agents would call me and say, “Hey, this buyer’s represented by so and so,” we’ll call it Mr. Smith, “Everything he brings me has been over the years has been great.”

“He’s always transparent with me about his buyers, he keeps things together and I have these six offers but I think all things being equal, he’s always treated me right so I’m going to go with him.” I’ve heard that, just because they feel all things being equal, right? All these other buyers’ kind of equal pricing, whatever else, I know that he, what he’s telling me from experience is going to happen. I think having a very good realtor who is trusted in the market and has a good reputation can really help you get a contract right now. That’s a big thing, a big deal.

[0:15:12.3] TU1: Yeah, it’s the second or third time Tony, you’ve mentioned, with all things being equal, right? I think that’s worth highlighting, that you can have the best lender and the best agent but if you’re not bringing a competitive offer for it, brother, that’s not going to help you. But I would argue, a good lender that’s a partner and a good agent who really knows the market, assuming it’s within your budget and other goals and whatnot, they’re going to help you put forward a competitive offer, right? 

Those things I think do go hand in hand. Shout out here to Nate Hedrick, a friend of YFP who does our home buying, concierge service who helps connect pharmacists with agents in their area, that are certainly going to be coming forward as someone who is reputable and able to take someone through that deal. We’ve got a home buying page where folks that are looking to get connected with an agent, looking to learn more about the First Horizon professional home loan option, if you go to yourfinancialpharmacist.com and then click on home buying, you’ll see all that information and can read through that further.

Tony, one of the things that I’m hearing a lot in this competitive market is escalation clauses and why it’s potentially valuable to have an escalation clause built into the contract? What is an escalation clause and what are some of the potential pros or cons that people need to be on the lookout for?

[0:16:26.0] TU2: Well, the escalation clause are essentially saying, we’re going to pay – we’re going to stay in this bidding war, right? We’re going to stay at this bidding war for this property and we’ll go up X amount. I have seen these happen where you’re putting in your offer and you’re willing to go X amount higher than just to keep up with the next guy, right? Whatever that number might be, $10,000, $5,000, 10% or 5% and you’re escalating above the sales price essentially and we’re seeing that happen, right? 

There is a bidding, a bid up of housing. You know, the pros and cons, clearly the pros are you can stay in the transaction and maybe it will help you secure the home. The cons are you may be bidding at more than it’s worth and when we have that appraisal done, you are going to have an appraised value that might be at the original sales price where they started. 

Now, you are paying, let’s say $10,000 more than where you started because you participated in the escalation clause and now when we get that appraisal, you’re $10,000 under the value. So lenders can only lend off the original appraised value and if you owe $10,000 more, because if you want the property that’s what you are going to have to do because there is other buyers that are willing to do it too, then you’re going to be bringing your down payment plus the $10,000. 

That’s the risk, Tim, is that you’re getting in a situation where it may not appraise and you are having to bring more money to the table than you anticipated in the beginning. 

[0:18:13.5] TU1: Yeah and I think this is a very natural feeling in the moment, right? Where people are living in areas where they are hearing of 30 showings in a weekend and 25 offers that are on the home. And so you come in maybe asking a little bit more and then you put these clauses that go up another 20 or $30,000, but then the risk, as you mentioned, which is part of just the reality of the market, but also one that somebody has to plan for is, what happens when you have to bring more cash to close? 

Are you ready for that, right? What does that mean for the rest of the financial plan? Is that coming out of savings? Is that putting you behind on their goals or is that something you can cash flow without causing too much headache or concern? Tony, the other thing I am hearing a lot, of course again, as we are talking about just a competitive market, is waving an inspection contingency, and that one gives me a little bit of heartburn but I didn’t buy a home in the chaos that is today’s market. Has this become a norm, what is this all about? 

[0:19:11.4] TU2: Well, I never recommend it so I come in the same boat as you. You know, I’ve had a few of my clients ask me this, and you just never know what you’re getting into and you want to know, “Is my roof going to last? Is there another major issue, a foundation problem or whatever it might be?” I always think you get an inspection and then you know what you are getting into, and so I am not a big believer in that. But I do know some clients have waved it especially if they are familiar with the property and if they have been looking at it for a number of years. 

I had someone that had – it was a property they had been in before, someone that they knew they lived there and they wanted it and they knew it was good and sound. I think I would not be in a case where I would not wave it personally and I do not recommend it. But you know, that would be my opinion. But again, it happens and as lenders, we don’t look at the inspection. We look at our appraisal but we don’t look at the inspection, so we don’t need it. 

We don’t require it, so anyway, that is just some feedback from us. And I would say that I am a big believer in getting an inspection though. 

[0:20:19.4] TU1: Yeah, just to define this further for those that are first-time home buyers. Inspection contingency meaning that the offer would be contingent upon the completion of an inspection and that inspection often would allow folks for an out if something significant would come up. And so, by waving that, you are essentially waving the contingency of that result of an inspection. 

[0:20:41.4] TU2: That’s right. 

[0:20:42.1] TU1: You either have a really good understanding of the home or you are taking on that risk that there might be something there. 

[0:20:48.2] TU2: Or what happens too, Tim, if they wave their inspection rights and they decide not to buy the home and they put $5,000 in earnest money to secure the contract, they walk away from the contract, they lose the $5,000. 

[0:21:00.0] TU1: Yeah. 

[0:21:00.6] TU2: That’s what’s happening and I’ve had people call the listing agent and say, “Hey look, we’ve got two offers but they’re waving their inspection contingency.” And you know in that case, what it is is, if they put their earnest money up, they’ll lose it. They can still get an inspection but if they walk away from the contract, they are going to lose their money. 

[0:21:24.7] TU1: Got it, good clarification, thank you. Since you brought up earnest money Tony, let me ask about that. Maybe I am dating myself, the last time we bought a home 2018 would have been, I feel like the earnest money was more than the house in dollar range. You just mentioned five, is that something that we have seen go up in terms of earnest money that folks need to be planning for? Hopefully they would be able to re-coop those dollars but you give an example where that maybe wouldn’t happen. 

Is that earnest dollar amount going up in this competitive market and does offering more earnest money make a difference? 

[0:21:58.7] TU2: Well, I normally see a couple of things here. I think I normally see Tim, earnest money is more tied to the price of the home. If it is a larger contract, usually a bit more earnest money versus a smaller purchase price. I think on average that there’s earnest money – earnest money has gone up a bit but I haven’t – you know, I would say on average it has, but I definitely believe the more you put up, the stronger your offer is going to look. 

If there, again, all things being equal, you have the same price and one person puts up a thousand dollars in earnest money and the other puts $5,000 and all things are equal, well, if I am the seller, I am taking the $5,000 because I have a little bit more if something goes wrong, right? In this transaction. I think a larger earnest money deposit definitely puts you in a better position. 

Again, you want to have some – typically in the contract, there is going to be an inspection contingency and appraisal contingency and a financing contingency. Those are the three main pieces and if you have those in place in the contract and one of those things falls through, you have the ability to get out of the contract and not lose your earnest money, so that is what the importance of having those pieces in the contracts. 

Again, all things being equal, I think the more you can put down, the stronger you’re going to represent yourself to the seller but then again, a lot of these programs we offer don’t require a lot of money down.

[0:23:26.7] TU1: That’s right, you can ask that, yeah, exactly. 

[0:23:29.3] TU2: Yeah, so I will say this, there’s another program, I had a builder call me and said, “Hey, we require 10% to build the house for this client and I see that your approval letters is 95% financing, so are they basically going to get 5% back at closing?” And I said, “Yes because they advanced money to you to build the home, and then when we do the loan at the end, we are going to give 95% financing so 5% of their earnest money will come back.”

So different situations but clearly, everyone is different in how much they can put up and I think in speaking with their realtor so they can get a better idea what’s a good offer. 

[0:24:10.8] TU1: Tony to that point, you know I would imagine if someone is selling a home and there is, I don’t know, 10, 12, 15 offers, I would expect we are seeing more cash offers that maybe are out there. If I am a first-time home buyer and I am looking at an option that has a lower down-payment, I am wondering, do I even have a shot in that market? In terms of competing with cash offers or even offers that have more earnest money down, what advice, what thought would you have there? 

[0:24:37.9] TU2: In that case, I mean there are all sorts of sellers out there and you’re right Tim, a lot of cash offers. Typically cash offers are lower-ball offers, a little bit lower than the market, right? Most of them do that because “Hey, if I am paying cash I want a better value.” They are going to ask a seller to sell it for it less. A lot of times, people with financing will pay a little bit more and that’s how you are able to secure it above them, because you are paying a little bit more than the lower-ball cash offer. 

Now the other thing with cash is, not all but a lot of them are investors, right? They are investors, it might not even be people. It might be corporations that are buying rental properties and some sellers, I mean not everyone but some sellers, if you have raised your family in a home or your kids have been in this house and your family has been in this house, you kind of like the idea of another family moving in, right? Or another owner occupant moving in. 

Not necessarily a family but just someone that is going to live in my house and take care of it like we did, you know? That is the mentality that some sellers have versus some investor coming in, right? I think that that sometimes can connect with people too and you know, you might have to write a letter or say, “Hey, this is who we are.” And again, I am just giving an idea here but I think that can hold value.

All things being equal, if I have a pre-approved person, they are going to pay $5,000 more than the 10 cash offers are, “Hey, I am going to live in your house and this is where we are living and I own it.” Owner-occupied versus those 10 cash offers where 90% of them are investors, right? I think that is a good way to kind of position yourself differently. And I think we are talking about all of these things, guys, and it sounds scary and it does this like, “Why would you want to compete with and deal with this?”

Well, the reason there’s all these cash offers is, we have the housing shortage and rents are escalating at a faster pace than appreciation on housing is, so that is why owning real estate is valuable right now. Because rental, the rental market is going up faster than the percent appreciation. But I guess all things being said, any connection you can have with the seller can help you in this market and help you compete with cash but naturally, you are going to have to typically pay a little bit more than cash normally to get the home. 

[0:26:59.1] TU1: Yeah, a good clarification that often cash offers might, generally speaking, might be a little bit lower and also might have a greater pool of folks that are looking at that as an investment property. Again, if somebody was selling this owner-occupied and they want to maintain that as an owner-occupied unit, that could be good, be able to communicate that to the seller.

[0:27:17.0] TU2: That’s right. 

[0:27:17.9] TU1: Tony, other strategies out there. I know there is a myriad of things that I have heard different folk use in terms of helping out with seller cost. It could be moving expenses, it could be having some flexibility to seller align and to stay in the home longer. Other strategies that you are seeing or recommending that seemed to be working in terms of again, getting under contract in this competitive market?

[0:27:42.0] TU2: Well again, we mentioned the seller. I did see, I have another contract that came in where some folks connected with the seller and that seller stayed with them, even though they could have gone and got a higher price on the market if they listed it. So that connection with the seller anyway is important. Now, what they did do, I will say this, they are letting them stay in the house 60 days after close so they can move all their stuff out and take their time because their place won’t be ready until then. 

Clearly, any sort of connection with the seller on some other variables is going to help you get the contract. And if you allow them to stay in the house, now you got to be careful with post-occupancy agreements because meaning that the seller is going to rent back from you or stay in the house a set amount of time after you purchase it, because most buyers that are listing are buying to owner-occupy the property. 

If you are essentially buying it and letting them lease from you for a period greater than 60 days, it can be looked at as a problem with the lender. So you do have to keep that in mind when you are allowing someone to stay, but I think flexibility is really an important way to help you look stronger in the eyes of seller, just meeting them on other terms that aren’t just financial, you know, giving them that extra time. 

Because a lot of sellers are maybe moving into a new condo or they’re downsizing into a new community where it’s being built. And then the builder is taking a little bit longer to build a property, so there is always these other variables. I think learning as much as you can about the seller and the situation can help you in getting that under contract. 

[0:29:23.0] TU1: Great stuff Tony. As always, I appreciate your insights from your experiences each and every day talking with pharmacists and others across the country looking to purchase a home. I think this is a good segue and transition to talking more about the pharmacist home loan product that is offered by First Horizon formerly IBERIABANK. And we’ve got lots more information, educational information. 

You can learn more about this product and other information related to purchasing a home, at yourfinancialpharmacist.com/home-loan. Tony, give us some of the highlights, some of the key facts as it relates to the First Horizon pharmacist home loan product, down payment, how that works with PMI, maximum loan amount and then we’ll reference folks to more information from there. 

[0:30:06.0] TU2: Sure, so we will allow up to 97% financing if you are a first-time home buyer with 3% down and then if you have owned a home before, it is 95% financing, so 5% down. As Tim mentioned, there is no PMI insurance, which is the most compelling piece of this and we do have a minimum credit score of 700, a maximum loan amount currently of $647,200, which serves plenty of markets at that size. 

Then we do offer a 30-year fixed mortgage and the rates tend to be every bit as good as if you put 20% down for a normal buyer so that’s what’s been compelling too as you are not getting penalized to put less money down. And there are no prepayment penalties, so it’s got a lot of flexibility for those that are in this occupation. And we can write it, as Tim mentioned, in 48 states. Alaska and Hawaii are the only two I can’t write it, so we haven’t gone that far yet. 

[0:31:02.9] TU1: Yeah, that was really a big part of, when we formed the collaboration a few years back, was a national option for pharmacists that were looking to make that home purchase, right? You mentioned the lower 48, obviously, we’ve got a community of pharmacists all across the country, so really grateful for your insight and the contributions you made to the YFP community. 

Again, if folks want to learn more about that product, you can go to yourfinancialpharmacist.com/home-loan. Tony, great stuff as always, and looking forward to continuing the conversation as we go throughout the rest of 2022. 

[0:31:37.4] TU2: Thanks again Tim, I enjoyed being with you today. 

[END OF INTERVIEW]

[0:31:39.8] TU: Before we wrap up the show, I want to again thank this week’s sponsor of Your Financial Pharmacist Podcast, IBERIABANK/First Horizon. We’re glad to have found a solution for pharmacists that are unable to save 20% for a down payment on a home. A lot of pharmacists in the YFP community have taken advantage of IBERIABANK/First Horizon’s pharmacist home loan, which requires a 3% down payment for a single family home or townhome and has no PMI on a 30-year fixed-rate mortgage. 

To learn more about the requirements for IBERIABANK/First Horizon’s pharmacist home loan and to get started with the pre-approval process, visit yourfinancialpharmacist.com/homeloan. Again, that is yourfinancialpharmacist.com/homeloan.

[DISCLAIMER]

[0:32:21.8] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

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

[END] 

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YFP 244: 6 Common Home Buying Debates

Posted on by yfpadmin


6 Common Home Buying Debates

Nate Hedrick, the Real Estate RPh, is back on the show discussing 6 common home buying debates. 

Episode Summary

During today’s episode, Nate Hedrick, co-host of the YFP Real Estate Investing Podcast, joins Co-Founder & CEO, Tim Ulbrich, PharmD, allowing us to tap into his expertise as a real estate agent, helping plenty of pharmacists through the process of buying a home. We discuss six common home buying debates and talk through both sides. Sometimes we think of many aspects of the home buying process in black and white when there are many times when it depends. How you feel and choose to move forward with these decisions that ultimately impact your financial plan often depends on your financial situation, how you feel, other goals and priorities, and many other factors. We talk through the pros and cons of a 15-year mortgage versus a 30-year mortgage, debate why a 20% down payment on a home purchase sometimes makes the most sense and other times not, and consider how you can buy a home while paying off those pesky student loans. Listeners will be able to tap into the pros and cons of buying versus building a home and whether you should consider a starter home as your first home purchase or plan on saving for a forever home. You’ll also hear why renting is not a terrible decision, despite what we may hear about the need to build equity through buying a home.

Key Points From This Episode

  • An introduction to today’s guest, Nate Hedrick, co-host of the YFP Real Estate Investing Podcast. 
  • Why home-buying decisions are not absolutes, but rather another aspect of the financial plan.
  • How there’s no wrong way to go about financial planning, it just matters what you care about.
  • Some of the pros and cons of 20% and why the most important question is what your capabilities are.
  • Nate’s thoughts on the opportunity cost of money that’s being tied up in low-interest rate debt.
  • Building versus buying and who each option is best suited to.
  • Buying property with and without student loans.
  • Weighing up buying a starter home versus buying a forever home.
  • Why the term ‘forever home’ is a bit of a misnomer.
  • The benefit of having multiple exit strategies.
  • Why renting is not necessarily a terrible financial choice.
  • The unforeseen costs of owning a home.

Highlights

“It feels to me like we sometimes treat home-buying decisions as absolutes, as black and white one solution for all. When in fact, it’s yet another area of the financial plan.” — Tim Ulbrich, PharmD [0:02:20]

“[For] the average American, something like 11.5 or 12 times is the number of times they move in their life. The concept of the forever home is actually a misnomer.” — Nate Hedrick, PharmD [0:18:50]

“It’s important to try to factor those pieces in when making that decision because it’s not as simple as comparing the mortgage to your monthly rent. There’s a lot more that goes into it.” — Nate Hedrick, PharmD [0:24:32]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week I had a chance to welcome back onto the show, Nate Hedrick, the Real Estate RPh. Now, many of you may know Nate as the co-host of the YFP Real Estate Investing Podcast. But today, we are talking home buying and tapping into his expertise as a real estate agent who has helped many pharmacists throughout the home buying process. On today’s episode, Nate and I talk through six common home buying debates, and have some fun playing both sides of these debates. Some of my favorite moments from the show include discussing the pros and cons of a 15-year versus 30-year mortgage, debating why 20% down sometimes does and does not make the most sense. How one can consider purchasing a home while paying down those pesky student loans, and why renting is not a terrible decision despite what we may hear about the need to build equity through buying a home.

Whether you are a first-time home buyer planning to move or looking for an investment property, get started today by scheduling a free call with Nate, by visiting yourfinancialpharmacist.com, and clicking on “Home Buying” at the top of the page and then selecting “Find an Agent.” From there, you can book a no obligation free call with Nate to see if his real estate concierge service is a good fit to help you walk through the process and to find an agent in your area that has your best interest in mind. Okay, let’s jump into my interview with Nate.

[INTERVIEW]

[00:01:26] TU: Nate, welcome back to the show. 

[00:01:28] NH: Hey, Tim. Always great to be here.

[00:01:29] TU: How are things for you, for the family, for real estate? What’s new and exciting?

[00:01:33] NH: Everything’s good. We’re snowed in Cleveland, Ohio, but that’s nothing new. It will be like this until April, I’m sure. But yeah, we’re good. Real estate is cooking. We just finished up rehab on one project. Actually, it’s funny. On the day we refinance, the next day, we have closer back to the house for a new property that we’re purchasing. We’ve been busy. It’s been good.

[00:01:51] TU: Awesome. And it’s been a hot minute since we had you last on the podcast, episode 241, where I talked with you and David. You’re a co-host for the YFP Real Estate Investing Podcast. We talked about five common objections to getting started in real estate investing. But today, we aren’t talking real estate investing, but rather home buying and common home buying debates. As I mentioned to you Nate before we hit record, it feels to me like we sometimes treat home buying decisions as absolutes, as black and white one solution for all. When in fact, it’s a yet another area of the financial plan. Where if Tim Baker were here on the show today, he would say, “It depends. It depends on your financial situation. It depends on other goals and priorities. It depends on how you feel and many other factors as well.”

We’re going to have some fun today beating up common home buying debates, like 15 versus 30-year mortgage, whether or not somebody should put 20% down. Again, let’s keep in mind that there is no right answer, and certainly no one solution for all. All right Nate, you’re ready?

[00:02:51] NH: Yeah, let’s do it.

[00:02:51] TU: Number one on the list, and this I think hits home for you as you mentioned before we hit record. You’ve had experience in both sides of this debate. Number one, home buying debate is 15 versus a 30-year mortgage. Talk to us about your experience, and then some of the pros and cons of each approach.

[00:03:06] NH: Yeah, absolutely. As somebody who owns a home, I’ve actually gone through both types of mortgages and on this exact house. We bought it with a 30-year mortgage. Again, when we were purchasing our house, we’re scraping together whatever we could just to be able to afford it. So a lower payment and all the other things that go with that. A 30-year kind of made sense. As we got a little further down the road, a couple years into owning the house, we refinance. And at the time, there was a fantastic rate available for doing a 15-year. So we got – I think it was a full point more, or more actually as a reduction on our rate just by going down to a 15-year. We looked at our finances, said, “Yeah. We can actually afford the monthly costs on this, pay off the house faster.” We took it from wherever it was, like 26 years that we had left on the 30-year, refinance that down to 15. 

Well then, more recently, we refinanced again, because the market has gone up, the value of the property has gone up and wanted to tap into HELOC. When we looked at rates, again, they were very much the same between 15 and 30-year rate at this point, so there wasn’t that advantage any longer. When I look at things like a home, where it’s very good debt, in my opinion, you’re looking at an interest rate that’s pretty comparable, why not spread that out over a longer period of time, knowing that I can always pay it faster if I want to, but I don’t have to, right. If one of us decides not to work for a while, we can take a step back and all of a sudden, I don’t have that larger payment looming. There’s advantages and disadvantages to both sides.

[00:04:31] TU: Yeah. I think for folks that haven’t really dug into actually looking at the amortization schedule, if they’re in this decision point, and as you mentioned, there’s some flexibility right as you looked at refinancing and other options going from the 30, to the 15, to the 30. I think that this is an area to me, Nate, where someone really has to take a step back and just like we talked about with student loans, it’s how do you feel plus the numbers, right? Here as well, I think for me emotionally, there’s one aspect, it’s like, “Man, I’d love to have a paid off home tomorrow if I could. It just would feel good. It’d be an asset that I could tap into potentially, in terms of equity and so forth.” But then there’s the more objective analytical side of me, that’s like, “Wait a minute! When you look at these rates, what else could I be doing with this cash flow, right, which gets to comfort level, other goals you’re trying to achieve?” I think your comment about the 30-year, you can pay it off faster, if need be, you’re going to have some flexibility to cash flow. But certainly, an individual decision that folks need to be thinking about. 

[00:05:29] NH: Yeah, 100%. I think there’s no wrong way to go about it. It just matters about what you care about, right? That idea of a paid off house, while interesting to me, when I look at it as a broader piece of my financial picture. It doesn’t get me out of bed just to get that 3% rate washed away.

[00:05:44] TU: Yeah, and I think it’s worth, obviously, Nate, we’re talking about this in February 2022. Interest rates are historically low levels, right? That definitely matters. As we’re thinking about what else might I do with this money? Obviously, we’re doing that in the context of these rates being very, very low. If that were to change into the future, you know the discussion might be different.

[00:06:04] NH: 100%. 

[00:06:05] TU: Okay. Number two home buying debate is 20% down versus something less than 20% down. Maybe that’s zero, we’ll talk about options there. Maybe it’s 5%,10% or 15%. But I think, 20% down for conventional loans is what folks may be used to hearing, that hey, you got to have 20% down to buy a home. But there are lots of options out there that don’t require 20% down. You look at VA loans, FHA loans, professional mortgage loan options. You talked to us about some of the pros and cons of 20% or something less than 20% down.

[00:06:37] NH: Yeah. There are a number of things that can factor into this. The biggest one to me though is, do you have the ability to save up for that amount, right? Twenty percent down in a market where the houses are $500,000 or more, that’s a totally different amount to save up versus a $200,000 starter home, for example. I think part of it is, what are your capabilities in terms of being able to save that money? And then once you start to look at that, trying to figure out how does this affect our budget, right? If we put 20% down versus 0% down, the payment we have every single month is going to be vastly different. Understanding how that affects your monthly budget can really be a big deal.

The other thing is that in a market like this, where housing prices are continuing to rise, and almost getting to the point where I think people are kind of getting nervous at how fast the prices have gone up. To me, it feels nice to have that 20% down that equity built in. Because if there’s a downturn, if things start to move in the wrong direction, I’ve built in some equity into that place. That if I do need to sell it for some reason, I’m not taking a bath going and selling that house for a loss. There’s advantages to that. The other thing, though, on the flip side is that I’ve seen people say, “Well, the market is crazy. I’m going to wait and build up my 20% down.” And in the meantime, the market has increased so much. The amount they’ve saved isn’t even enough to keep up with the appreciation of the market. They actually lost money by doing that, which is crazy to me. There’s again, both sides of the coin on this one.

[00:07:59] TU: Another example too of really taken a step back, Nate, what’s the opportunity cost of money that’s being tied up in low interest rate debt? How do you feel about the risks that are associated with having less equity versus having more equity in the home? I think that again, this gets back to, “Hey! What else is going on in the financial plan? Is there other high interest rate debt? Are we behind on investing or saving for the future? What is the importance of that cash flow? How do you feel about it? I think your comment about the instant equity in a market downturn is good, or the other thing I think about here, Nate is, if pharmacists maybe end up in a career transition that they didn’t anticipate, or perhaps worth thinking about, just the costs of being unable to sell that home, buy a new home, the transition, if there’s no equity in that home, then that’s going to be further expense into the future. Also thinking about what that equity might be used for into the future in the event of something like a home move that would happen.

[00:08:54] NH: One thing we didn’t mention too, with a 20% down, is that a lot of times, with those loans, you can’t avoid things like PMI, or even get a better interest rate. Factoring in all those costs of, if I do the 0% down, or if I do a low money down option, is there going to be built in PMI. Has the interest rate been impacted by that move? It’s not just that upfront financial decision, but it’s the long term as well.

[00:09:15] TU: I think one disclaimer, Nate we should make here. Is that, you have worked with pharmacists nationally helping them get placed with an agent that is a good fit for them and you’re very aware of what’s going on national trends. We got to Ohio guys here talking about real estate, and I recognize even, you’re in the Cleveland area, I’m in the Columbus area and we certainly seen significant appreciation. But this is not Washington DC, this is not New York City and this is not San Francisco, right? As we throw out numbers and we recognize that pharmacist’s salaries don’t necessarily correspond to home prices, right? Pharmacist in Columbus, pharmacist in San Fran, maybe there’s a little bit of income differences, but that housing difference is going to be massive and well surpass that income differences there. 

Obviously, when we talk about down payments and things to your point about the feasibility of the down payment, someone’s looking at a $600, 000, $700,000 home because of the market. Do the math on that in terms of what it’s going to take $120,000, $140,000 to put 20% down. But one counter argument to that is, despite it taking so long to be able to build that up, is that, I do think a lesser down payment can sometimes open up the realm of what is possible in terms of home price that may or may not be within the realm of someone’s budget and long term financial goals. What I mean by that is, if you were to say, “Hey, Tim! You’ve got to put 20% down, whether I like it or not, that’s going to probably force me to really look at that overall purchase amount differently, because I’m going to part ways with a significant amount of cash upfront.” If I don’t put anything down, I’m not going to feel as much of that upfront. So just another reminder of like you as the individual, setting your budget, whether you put 20% down, 15%, 10%, whatever the number is and not letting the bank set that budget for you.

Number three home buying debate, buy versus build. We talked about this a little bit on episode 193, so we’ll link to that in the show notes. But Nate, I think this is a really timely question that I suspect folks might be thinking about, giving the market being what it is. It’s [inaudible 00:11:09] and that seems to not be stopping anytime soon. Folks might be looking at the bidding wars, the competition, all the thing that’s going on and be like, “Man, just forget about it, I’m just going to build a home. Talk to us about some of the considerations here. We’ll certainly point folks back to episode 193, as well, of what might be some of those nuances, and differences and things that people need to think about in the buy versus build debate.

[00:11:32] NH: Yeah. I’ve had multiple clients, have that exact same conversation with ourselves about, “Well, I can’t find a place that isn’t in a bidding war. Maybe I’ll just go build one, this will be a lot easier.”

[00:11:40] TU: I’m out. Yeah.

[00:11:42] NH: Yeah, I’m out. I’m going to do this in nine months, right? That really is an option for some folks, but it comes down to a couple of key things. The first is, the lending and financing on building versus buying, it’s very different, right? Especially if you’re talking about – and again, 193 goes into a lot more detail here. But especially, if we’re talking about purchasing raw land, and building on that specifically. A lot of times, even if you don’t purchase that way, where you’re buying a lot within the development, you still have to obtain a construction loan, which is very different than a typical end loan or a mortgage loan. There are a number of factors to consider in terms of the amount of down payment required, reserves that are required, and all the pieces that go with that. The second thing is timing.

Obviously, building a home takes time. In most cases, you’re looking at a 9 to 12-month window, but I have seen delays of over a year. In fact, I worked with a client that ran into a ton of delays and actually had to walk away from a deal a full – gosh, it was a full eight or nine months after it was supposed to be done and it wasn’t even halfway complete because of supply issues. The timing is definitely a factor. If you are on a strict timeline of any kind, I would recommend avoiding the build, right? You don’t want to be set to what has to be done by June because of X, Y and Z. That’s going to be a recipe for a mess. 

Then the last thing is really the budget and the costs, right? Building a home is generally more expensive than buying an existing home. Of course, you can set your budget lower, and you can make that all work. But it’s very easy to sort of have these escalations take place where you walk into a place, and it’s $300,000 as the starting cost of the home. But once you start adding in all the things that you want, now you push it to 400 without even choosing your cabinet color. It can really get out of hand quickly. And if you’re not able to rein that in, you can easily overspend. I think going into it with that mindset of, “I know my budget. I’m going to stick to it and here are the sacrifices I’m willing to make on that budget.” That’s a healthy way to do it. But most people don’t, most people go in and get that eye candy of what can I grab? What can I add to this?

[00:13:38] TU: Great stuff, Nate. Number four on the homebuying debate is buying with or without student loans? What would a YFP episode be without talking something about student loans? This is a question I get all the time, which is, “Hey! I’m the average pharmacist that graduated within the last five or 10 years. I’ve got $150,000 to $200,000 in student loans. But I’m in the phase of life where I want to buy a home, and I recognize that I’ve got this gorilla of student loan debt and I’m potentially layering on another gorilla of debt in terms of the home. Largest purchase folks are typically going to make. What does that mean for my financial plan? Should I wait until I have my debt paid off? What are some considerations if I’m going to buy a home while I have student loans?”

You wrote a great blog post on this topic that we’ll link to in the show notes, Three Strategies for Buying a Home with Student Loans. Nate, what are some initial thoughts that folks need to be thinking about if they’re in the weeds of that situation, lots of student loan debt, actively looking for home or planning to look for a home in terms of how to balance that, as well as things like how is that debt is factored into the equation of the lending process?

[00:14:43] NH: Yeah. I think the very first thing you want to sit down and do is figure out what your debt payoff strategy is for your student loans, right? This is a totally different conversation if we’re talking about PSLF or some sort of forgiveness, versus actually attacking that debt yourself. For the sake of argument, I’ll assume we’re not going for PSLF on this one, and we’re just going to pay down the debt, right? We’ve got X hundred thousand dollars and we’re going to take care of it eventually. I can tell you that, looking at your budget, looking at what those monthly costs are, is a really great place to start. One of the reasons is, because you need to know how much you’ve got going out the door, one for yourself, to set your own budget. But two, how it’s going to factor into your debt-to-income ratio.

As we’ve talked about in the past, the bank is going to look at that loan as what the monthly payment is, and how that’s affecting your debt to income. We’ve seen pharmacists get priced out of their own market, because their student loan balance, the student loan monthly payment is actually pushing their DTI too high. Knowing those numbers, and really understanding what you’re getting yourself into in terms of those is a great place to start. From there, I think you really need to start asking yourself a few key questions. You can absolutely buy a home with student loan debt writing. I’ve done it. We invested in several other properties before we even paid off our student loan debt. It’s not undoable. But what you have to look at is, are those student loan debts causing me a lot of stress? Am I so hyper focused on that, that I can’t fathom the idea of creating extra debt until those are gone?

I think looking at something like that is a great place to start. And then also looking at some of the key pieces of your financial picture. Like, do I have an emergency fund? That absolutely essential before you get on any other road. And then, how will buying this home affect my other financial goals? Will it shoehorn me into 10 years of all I can do is pay back this debt and not quit my job? This is all I have. I think asking yourself those questions up front, before trying to figure out how can I do this. It’s, should I be doing this and how do I feel about it?

[00:16:35] TU: Yeah, Nate. As it relates to the question you brought forward, which is a really good one. Are my student loans and other debt causing significant stress? I have the opportunity to talk with lots and lots of pharmacists about this topic. Typically, we’ll ask them, “On the 1 to 10 student loan pain scale, which is ten is, these are keeping me up at night, causing me a lot anxiety. It’s the last thing I think of before I go to sleep. First thing I think in the morning.” Versus the one is like, “Nah! It is what it is. It will take care of itself. Where are you on that scale?” My follow up to them, which I think is significant here is how much of it is the dollar amount, and how much of is the lack of clarity on having a strategy and a plan. More often than not, when we can start to put together a plan, and that number isn’t going to change tomorrow, right? If you’ve got $200,000 of student loan debt, and today, we don’t have a plan. Tomorrow, we do have a plan. In fact, you might have more debt tomorrow, because of interest than you do today. 

But the peace of mind that comes from hey, we’ve evaluated all these options. We’ve looked at forgiveness, we’ve looked at non-forgiveness, we’ve dissected the strategies, we understand what’s going to come out of pocket, we know how this is going to fit in with other parts of the plan. That is a game changer. I would say that here and encourage folks, if you’re in this position right now, really getting clarity as Nate mentioned, on the student loan repayment plan, because even though that number may not change, I think that certainly might change your mindset heading into the whole mind decision.

[00:18:01] NH: That’s a really good point. I mean, it’s something that again, we had Tim Baker sit down with Kristen and I to actually look at this stuff and feel like, once we got our head around the plan, the number itself didn’t matter as much. It was just about sticking to the plan and realizing how other things puzzle pieced into that. I agree that’s super important.

[00:18:19] TU: Number five in the home buying debate is buying a starter home versus a forever home, which obviously those terms are subjective in and of themselves. This is one, Nate that I recall my wife Jess and I talking about. Knowing that there are real costs in buying and selling of a home. And as we have seen with the market appreciation over the past few years, waiting might mean paying more. Why not just jump in your forever home right away, I think is the question that we often hear, and talk to us about some considerations here.

[00:18:47] NH: Yeah, it’s a great question and it’s a bit of a misnomer, the forever home. The average American, I think something like 11.5 or 12 times is the number of times they move in their life. The concept of the forever home is actually pretty misnomer. But anyway, if you’re looking at, what should I be doing first? Should I go for that big house right up front or should I start with something a little bit smaller that I can then progress from? It really comes down to what are your goals with that property? I think for me, looking back, when we bought our first house, we really looked at it like this is going to be a good “starter home”. Also, we can grow into it a little bit, right? It gives us flexibility. I really encourage that is you’re never going to know what your life’s going to look like in five years from now. Plan for the unexpected by giving yourself some of that grace and that flexibility. From there again, once you start to realize what you really like in the house or what your goals are with a property, that’s when you can start thinking that forever home type of deal. 

Most people I would argue, for the starter home kind of being an upfront move, knowing that you’re getting yourself into the game, you’re starting to build equity. And then once you figure out what you like, once you figure out what your kind of stable life period looks like, then you can look at that more forever home. But again, there’s no wrong answer here. If you just want to jump right in, go right for the end line. I get that too.

[00:19:58] TU: Yeah. Comment about being a misnomer is a good point, right? I can speak to that firsthand. Jess, and I moved into our current home. Let’s see. That would have been October 2018 when we moved to Columbus. Our first home, which I think you’d consider kind of our starter home, in the booming metropolis of Rootstown, Ohio. We lived in for nine years, and just seeing kind of the jump in our expectations naturally. We didn’t have four boys, and now we do have four boys. So that’s real and that’s different. But even now, when we looked at this home in October 2018, we’re like, “Yeah. That’s our dream home.” It’s got everything and it’s been a fantastic home. 

But human behavior, which is true for us, and is true for many others is, after a while, you’re like, “What about this? What about that?” What about this part of the home? Or could this be a little bit different?” I think really challenging on some level, that assumption of like, if you’re looking to make that move into the forever home, is that really the end point. And then again, thinking about that in the context of the rest of the financial goals that you’re trying to achieve.

[00:20:55] NH: And something else that I think is relevant here that David and I talk about on the YFPREI Podcast a lot is multiple exit strategies. Whenever we’re buying investment property, and I know, this is a little bit different. But when you’re buying an investment property, you want multiple exit plans, right? We can rent this out, we can sell it, we can flip it. But you kind of need the same thing with your own house, right? I think having multiple plans or multiple avenues to walk down, we could eventually rent this out or we could easily resell this because of X, Y and Z factors. Going in with that mindset, rather than just, I’m buying this asset, and hopefully it works out forever. Like that’s not the right plan. So go into those multiple exit strategy approach, and you’ll be set up for success.

[00:21:31] TU: Selling a child account is what an exit – no, I’m just kidding. I love you my four boys. Love you all. Number six, our final one here in the home buying debate is rent versus buy, perhaps saving the most contentious for last. When I suggest to folks Nate that renting isn’t all that bad, I get this look of like, “You said what?” I get it because it doesn’t support their narrative and desire that we often have to buy a home. I think that’s a big goal for many folks. That’s the dream that we have. How can one objectively evaluate this decision and not just blindly accept that all renting is bad and all homeownership is good?

[00:22:09] NH: Yeah. This is a question that comes up all the time. I know we’ve talked about it before in the past. I’ll give you a brief story that I think kind of shows some of the ways to think about this that’s maybe a little bit different. My brother actually lives out in San Francisco and has been looking at buying a house here for a little while. The houses out there, obviously, as everyone on this well knows are in the millions of dollars, at 1.1, 1.8. I’ve seen him looking at. It’s just absolutely outrageous. I can’t even fathom that amount. His argument for buying is that, well, I want to build equity, I want to not have my rent payment “thrown away” every single month. And arguably, he’s right. His rent payment is super high and I totally get it.

But if you took that same amount of money that would be required to buy that home in San Francisco, and you invested in several other properties that then paid you back, you could probably actually cover your own rent in whatever city you wanted to live in, while building equity with four other properties around the country. So this idea of, it’s always better to buy, it’s always better to build equity. It doesn’t always hold water. If you look at the areas you’re buying in, and you look at the factors that go into that right, how much am I putting down? What am I gaining by renting? For example, is there flexibility in that approach? Is there amenities that I wouldn’t be able to get if I were to buy a home like this, and all those factors have to come into play, and it’s not as easy as buying is always better, we should advocate for buying.

[00:23:27] TU: I think Nate, we talked about this a little bit on episode 113. We’ll link to that in the show notes, when we talked about exactly this topic, that American dream of owning a home. Is it for everyone that true costs, really evaluating the true costs of homeownership, when to consider the rent versus buy tips for knowing when the time might be right. But I would encourage folks, objectively evaluating the expenses. This is probably the most common thing I experienced myself back in 2008, 2009. My wife Jess and I were renting a condo. We’re paying by $1,100 a month. For folks that are living in higher cost living areas, I get it, the shock factor when you hear those numbers and we’re looking at a home that was principal and interest, about $1,100 a month. Naturally, I said, “Why are we renting? We should buy.” Then you start to really obviously dig into the other costs in terms of insurance, and property taxes and, “Oh, yeah. We’ve never lived in a home so we have all these things we need to buy to furnish the home, lawn mowers, equipments, other things, maintenance, upkeep, really objectively evaluating it from apples to apples or as close as you possibly can when one is making that decision.

[00:24:30] NH: Yeah. It’s tricky to do, obviously. You don’t know what you don’t know, but it’s important to try to factor those pieces in when making that decision because it’s not as simple as comparing the mortgage to your monthly rent. There’s a lot more that goes into it.

[00:24:42] TU: Great stuff as always, Nate. Love having you on the show and we know firsthand, you know firsthand, the community knows firsthand that buying or selling a home, it’s certainly an exciting journey but can quickly leave you feeling overwhelmed and confused throughout the process. And that’s why we have teamed up with Nate Hedrick featured here on this podcast. Nate, real estate RPH to provide a simple solution to jumpstart your home buying or selling process with a free concierge service that you can take the guesswork out one of the biggest purchases that you’re ever going to make.

As both a real estate agent and pharmacist, Nate has the insider’s view. He understands how busy your schedule can get and how difficult it is to interview and hire a real estate agent on your own. This free concierge service, Nate will take some time to learn about your budget, learn about your goals and connect you with a YFP real estate preferred local agent that he has vetted himself. They will then stick by your side even after closing in case you have questions or need an extra opinion along the way. If you’re ready to buy or sell a home, you can get started today by scheduling a free call with Nate by visiting yourfinancialpharmacist.com. You can click on home buying at the top of the page and then select find an agent. From there, you can book a no-obligation call with Nate to see if his real estate concierge service is a good fit to help walk through the process and to find an agent in your area that will have your best interest in mind.

Nate, continued to have appreciation for this collaboration. Love the perspective you bring on to the show. Appreciate the work that you’re doing on the real estate investing podcast. Thanks so much for joining today.

[00:26:10] NH: Yeah, happy to be here as always, Tim.

[OUTRO]

[00:26:12] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it’s not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

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

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

[END]

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YFP 243: A Non-Traditional Pharmacy Path From Pharmacist to Software Engineer to Entrepreneur

Posted on by yfpadmin


A Non-Traditional Pharmacy Path From Pharmacist to Software Engineer to Entrepreneur

Derek Borkowski, PharmD, founder and CEO of Cosmas Health and creator of the Pyrls app, talks about how and why he built the Pyrls app, what problem he was trying to solve, and some of the challenges he faced in the early days of being an entrepreneur.

About Today’s Guest

Derek Borkowski, PharmD is the Founder and CEO of Cosmas Health. His background includes experience in community pharmacy, digital health, and the pharmaceutical industry. He is a pharmacist and the software engineer of Pyrls.com, a drug information website and mobile application for clinicians and student-clinicians. Additionally, he continues to practice community pharmacy. Derek is a 2018 Doctor of Pharmacy graduate from the University of Minnesota.

Episode Summary

Community pharmacy and digital health are two spaces that are finally starting to intersect. Here to talk to us about his non-traditional path in pharmacy that provides this double expertise is Derek Borkowski, Founder and CEO of Cosmas Health and Creator of the Pyrls App, a drug information website and mobile application for clinicians and student clinicians. In this episode, Derek shares his pharmacy story and how he found himself in the interesting position of combining his pharmacy degree with technology to better serve the pharmacist community at large. Derek shares how and why he built the Pyrls app, what problem he was trying to solve, and how he was able to see that problem while working as a community pharmacist. You’ll also hear about some of the challenges he has experienced in his early days as a pharmacy entrepreneur. Derek shines a light on useful concepts for pharmacist entrepreneurs, like skills stacking and the regret minimization framework. Derek also has some advice for other would-be entrepreneurs on the need for pharmacists who can embrace programming skills like data analytics as well as opportunities available under the umbrella of digital healthcare. Derek shares the key to staying motivated when things are slow-moving.

Key Points From This Episode

  • Hear about the incredible support he’s received from the pharmacy community.
  • Introducing today’s guest, Derek Borkowski, and what drew him into this profession.
  • Hear about the moment he realized he wanted a more non-traditional path in pharmacy.
  • The opportunity he found and pursued that pushed him into the tech space. 
  • Skill stacking and what can come out of an intersection of expertise.
  • Derek shares one of the opportunities available under the umbrella of digital healthcare.
  • How he first acquired and developed these skills and some advice from his experiences.
  • How his love of technology sparked his entrepreneurship goals. 
  • About the regret minimization framework and taking the leap to start Cosmas Health.
  • Some of the struggles he overcame in the first year. 
  • Finding the right lens to market to your audience.
  • What makes Pyrls really stand out from the crowd as a resource to invest in. 

Highlights

“I would just say, anyone who thinks they might be interested in learning some technical skills, it’s just as approachable as any other domain. You’ll find out whether or not that resonates with you.” — Derek Borkowski, PharmD [0:13:06]

“I very much subscribe to the philosophy of double down on your strengths and collaborate for your weaknesses.” — Derek Borkowski, PharmD [0:13:46]

“I’d do anything for my customers. They could call me any time of day. I’ll come pick them up if they are stranded on the highway..” — Derek Borkowski, PharmD [0:29:13]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week, I had a chance to welcome on to the show Derek Borkowski, Founder and CEO of Cosmas Health and creator of the Pyrls app. His background includes experience in community pharmacy digital health and pharmaceutical industry. He’s a pharmacist and software engineer of Pyrls.com a drug information website and mobile application for clinicians and student clinicians.

Some of my favorite moments from this show include talking with Derek about how and why he built the Pyrls App, what problem he was trying to solve and how he was able to see that while working as a community pharmacist and some of the challenges he has experienced in the early days as a pharmacy entrepreneur.

Now, before we jump in to today’s show, let’s pause to acknowledge that we are in the midst of tax season. Those tax forms are piling up and it’s time to have your tax filing and planning top of mind. Now, tax strategy and planning is an undervalued but very important part of the financial plan and YFP Tax is working hard to help pharmacy professionals optimize their tax situation. YFP Tax is opening up its services to file 2021 taxes for 125 pharmacist households this year. These slots are filling up quickly so don’t wait too long. If you’re interest in working with a team of highly trained tax professionals, head on over to yourfinancialpharmacist.com/tax. Again, that’s yourfinancialpharmacist.com/tax. 

Okay, let’s jump into my interview with Derek Borkowski, Founder and CEO of Cosmas Health.

[INTERVIEW]

[0:01:39.0] TU: Derek, thank you so much for coming on the show.

[0:01:40.2] DB: Yeah, I appreciate it and I’m really excited for this chance, Tim, thanks.

[0:01:43.3] TU: I too am excited to have you on, talk about your entrepreneur journey, your business, how and why you got into the tech space of pharmacy, so we’re going to talk through that on this episode. Before we jump in and do that thought, let’s go back to the beginning, where did you go to pharmacy school and what drew you into the profession?

[0:01:58.7] DB: Yes, I think my pharmacy journey actually starts a little earlier than most, even definitively so I can remember back in as early as eight grade saying, “I want to be a pharmacist.” That’s because my mom actually worked at a community pharmacy and so when I would go and visit my parent at work, I was like, “Oh, this seems really cool, the pharmacist you work with were really nice.” I knew I was already getting interested in science and medicine so I remember, as early as 8th grade saying, “I think I want to be a pharmacist.”

Of course, that changes, most people wanted to be something when they’re 8th grade but then they just got interested in new and other things. For me, every step along the way through high school and then undergrad just kept reinforcing my interest in pharmacy and so originally, community pharmacy is what drew me into the profession and so, I went to the University of Minnesota on the Duluth campus and graduated in 2018.

[0:02:46.1] TU: 2018, graduate of University of Minnesota, you mentioned interest in pharmacy since 8th grade. And we’re going to get into throughout this interview, I would say, you’re on a very nontraditional path in pharmacy, based on what you’re doing with running and starting the business, also in more of that tech space of pharmacy. With that initial interest in community pharmacy and the profession, tell me more about when you realized a more non-traditional path as a pharmacy graduate was going to be the path for you.

[0:03:14.3] DB: Yeah, another thing on that point is I would say, if I had nine lives to live simultaneously, I would want to be a community pharmacist in one of them, an AM care pharmacist in another, and then right away, when I started pharmacy school, I remember even first semester seeing all the different things people were doing with their pharmacy degree that you don’t necessarily have exposure to before pharmacy school. So I got really interested in some of the non-traditional opportunity that I saw right away when we had medical science liaisons from pharmaceutical companies come and speak to us, other pharmacists doing unique things with their degrees. 

It was actually – I remember one summer, I was between years of pharmacy school, I was reading Steve Jobs biography and maybe like I don’t know, impressionable or naïve as it sounds, I was just blown away by this, I was like, by the story of Apple. “Oh my gosh, they built these revolutionary products that have changed our society. Are people still doing this? Are people still starting technology companies?”

At that point, I had no background or knowledge about startups or technology companies but I was like, “Wow, is there any way that I can combine my pharmacy degree with technology?” Healthcare seems like an area that needs disruption and so, I started, during my third-year pharmacy school, I did an internship at a digital health startup company here in Minneapolis and you know, I can get more into what I did next but that was the kind of the beginning of my interesting technology.

[0:04:33.5] TU: Derek, I want to spend another moment there because I think in my conversation with many – I’m calling specifically the pharmacy students I’ll talk with, they might be interested in a specific area, the profession or perhaps want to pursue something that’s more nontraditional but aren’t exactly sure what step to take to pursue that interest a little bit further and I would argue, pharmacy school is such a great time where you can really put yourself in those scenarios and situations, learn more, often for a condense period of time, obviously not a longer-term commitment.

That internship you mentioned at digital health, tell us more about how you pursued and found that opportunity?

[0:05:08.8] DB: Yeah, I remember, I got really interested in technology and startups. The phrase, Silicon Valley, that didn’t really mean anything to anyone where I’m from, right? I didn’t really know anyone technology growing up but that in particular, I got really interested in so I started just looking up like, are there any startups here in Minneapolis where I was going to be based for the summer and I found this company called MyMeds, which is a digital health startup that’s focused on medication adherence.

I remember I was just coming back from Pittsburg where I was doing an internship over the summer and I drove right to the address that I found on the website for MyMeds. I was like, “Oh, there might be mailing address or maybe it’s an office, I guess I’ll find out.” I drove up there and just went and knocked on the door and there’s a few people in the office and somebody answered and I said, “Hi, I’m Derek, I’m a pharmacy student. I think I’m interested in technology, is there anything I can help with around here?”

Fast forward a few weeks later, the CEO of the company called me and said, “Hey, I heard you stopped by and left your CV. Yeah, I think we could use the help of a pharmacy student, when could you stop in next?” And then it went from there. Some advice I would give and I can go more into this kind of – what we think might be interesting is, Mark Henry and I believe, he was maybe the person who I had heard give this advice first which – he’s a famous Internet entrepreneur who helped invent the web browser. 

He talked about this concept of skill stacking, how there’s always something unique to be found at the intersection of two really deep domain expertise. And I think with healthcare, it’s very – healthcare domain expertise as a clinician is very hard to attain because of just the amount of time it makes to become a practiced clinician. Like we as pharmacists, in my mind, even know, a kind of tongue and cheek joke that I’m a five out of 10 pharmacist, and I’m a five out of 10-software engineer and what that allows me to do are things that somebody who is a 10 out of 10 pharmacist but is zero out of 10 software engineer couldn’t do. Or someone who is a 10 out of 10 software engineer but is zero out of 10 pharmacist wouldn’t be able to do.

[0:06:59.8] TU: I love that, and that connects with me, right? Derek, as I think about my career journey in pharmacy, I would maybe give myself a four or a five out of 10 in the pharmacy side as well but I think about combining that with some of the financial education, passion and work that we’re doing. You put those things together and you know, I think that’s a great example of a unique combination and I would add, I love the concept of skill stacking. The thing I also don’t want to overlook and gloss over is just the initiative, right? 

I’m reading right now Warren Buffett’s biography and he was famous for stopping by companies, walking in the front door that he was looking at investing and just to talk with people and learn more. The fact that you stopped by that office, introduced yourself and specifically said, “Hey, is there anything I can help with here as a pharmacy student?” That type of initiative, I would argue is certainly not common and I think something that I’d recommend folks consider and making some of those bold moves if they’re looking at trying to get themselves out there about other opportunities that might be there. 

Skills, for sure, have to be there, willingness to learn but also, you know, that initiative to seek those opportunities. 

[0:08:02.7] TU: Derek, for pharmacists that are listening that maybe they’re considering a career move or practice student pharmacist that are listening, we’ve talked for a moment here about the intersection of healthcare and technology. Can you talk just at a high level about the types of opportunities that may be out there for a pharmacist that is interested in this intersection of healthcare and technology?

[0:08:23.8] DB: Yeah, I would just say, I’ll start by saying that it’s a giant umbrella of different opportunities and one thing I frequently hear is when I’ll meet another pharmacy store or someone at a conference and start to talk about what I’m doing, they’ll be like, “Oh, you’re an informatics pharmacist or you’re an IT pharmacist?” I’m like, “Eh, well, close enough” but truly, what I’m doing right now is I’m sort of a technology entrepreneur, and I do software development but it’s kind of different than, it’s very different than I should say like, typical informatics, which also I guess is another area that needs to be unpacked.

I’ll just speak to one sort of specific area that I have had purview in that I think would be worth pharmacists taking time to learn about, that’s data analytics. I actually do, when it comes to learning programming skills or technology skills, I actually do website and mobile app development which is a little different. But in an area that’s adjacent to it, what I notice a ton of demand for and need in is pharmacists who can embrace programming skills in the areas of data analytics like learning SQL or Python or R, because there’s so much data in healthcare.

There’s so much domain expertise required to understand what’s happening. This is just kind of a micro example to illustrate the issues. I remember hearing about a large analysis that was done on a patient population and technically, Gabapentin is a calcium channel blocker, it’s how it works. In some drug lexicons, it’s a calcium channel blocker. 

Anyway, they were doing this study on hypertension patients and you know, the data analyst didn’t have a healthcare background. Basically, everyone on Gabapentin was coded into this hypertension analysis and it’s such a simple thing that a pharmacist with just some data analytics skills would have been able to contribute greatly to.

That was just a small example of – there’s tons of demand in my mind, well, or at least that we in budding demand for pharmacists who understand how to work with data and are willing to interface with that at their current work places or certainly, hopefully there’s going to be more future linear pass towards future opportunities for pharmacists to utilize those skills.

[0:10:24.3] TU: Derek, short of someone pursuing like – I know, there’s informatics residency programs and everything’s out there. In lieu of someone pursuing that formal training opportunity, when I hear you talk about things like SQL and Python which are foreign language to me, and obviously as we’ll get to here in a moment – the work that you’re doing and building your own business. The learning curve of that seems astronomical.

And I can tell you’re obviously a self-initiator, clearly, you have a desire and passion to want to learn but what does that look like in terms of how you’ve been able to acquire and develop these skills, has that all been self-taught, has it been mentors, has it been training programs, tell us more about how you’re able to overcome that learning curve of the work that you are doing now and obviously, the gap that was there from the traditional pharmacy degree.

[0:11:07.5] DB: I’m so glad you asked this because it’s actually one of my favorite. This is one of my favorite things to harp on when I’m allowed to say and it wasn’t intuitive to me at first which yeah, some background on my domains here. It was while I was in pharmacy school. Once I started that internship at MyMeds, a mentor there he said to me, “Hey Derek, you really love giving suggestions on what sorts of features we should be adding into our website and app. You know, if you’re curious, I think one way that you could help our engineers better understand the ideas you’re giving them is that if you were to start learning some programming too so that you could have some of their language under your notes, have some of their vernacular.”

I was like, I thought that seemed preposterous like I don’t have a computer science degree. It’s really funny, I did take his advice and started learning just some really basic website development on the academy was the first website. I started learning them. Software engineering or programming, just the aforementioned skills I mentioned, they’re just like any other domain but I think they seem to us as pharmacists. I think it seems uniquely like opaque of an area to learn. 

You know, no one bats an eye at a pharmacist getting a duress doctor degree or an MBA or MPH or all these – that’s perfectly normal. Programming? I was the same way. It’s actually no different and actually, it’s in my mind, it’s easier to learn. As clinicians, one of the main things I was concerned about was you can’t learn to be a clinician without actually going to school for it because you need to be able to see patients and so you need a system that allows you to train your clinical knowledge with patients.

Website development, programming, that takes place on a computer and so, you can start learning on any computer you’re on. That being said, I don’t necessarily think anyone – it’s like any skill where, if it resonates with you, that’s going to help you learn more, just don’t tell anybody Tim or to anybody listening. I actually really don’t like the business aspect of my business.

The books and the bottom, all that stuff, like the MBA knowledge of running this business. I don’t find it very interesting but I love programming. I would just say, anyone who thinks they might be interested in learning some technical skills, it’s just as approachable as any other domain and you’ll find out whether or not that resonates with you.

[0:13:14.2] TU: Yeah and Derek, your differential advantage is obviously the skills you’ve acquired, plus your degree in background as a pharmacist, right? I think about you as a business owner. Sure, as you’re getting started, a lot of that stress and work is going to fall on you but as you grow, that stuff you hire out, you probably already are. 

What you bring is your differential advantage as a business and I think naturally, if we fast forward five years, like Derek isn’t in the weeds of any of that because your time spent and the impact you’re going to have on your perspective customers is going to be bringing your unique skillset, right now, worrying about the books and other things.

[0:13:46.5] DB: A 100%, I very much subscribe to the philosophy of double down on your strengths and collaborate for your weaknesses and so yeah, that’s totally how I view this as well.

[0:13:57.0] TU: Were you working as you’re developing, acquiring these skills, and we’re going to bridge that to the work that you’re doing right now on building Cosmas Health. But were you working as a community pharmacist alongside of this journey so you’re essentially side-hustling your way into the beginning of the business, tell me more about that?

[0:14:11.9] DB: Yeah, totally. So that’s another interesting story I think just how – well, I’ll just say, so many, even guest you have in this show, Tim, and yourself, so many of these fall into our current position, backwards, sideways, you know, I have no idea what the – one thing we need to solve is in the pharmacist profession is how to create more linear paths to non-traditional careers. But what happened with my mind is, I would say, I was actually – one thing I remembered doing my first few years of pharmacy school was taking part of the NCPA business plan competition.

Entrepreneurship was something that I think I was interested in actually. My dad and grandfather and uncles and aunts, they own a small business but I was around it, and I wasn’t the kid who is selling candy out of my locker or anything. 

Really, it was when I discovered my interest for technology startups that I started to consider, “You know, I think I do want to start my own business someday,” but once that idea hits me is when I’ll start working on it. Yeah, after graduation in 2018, I knew I wanted to work full-time at a startup and so, but MyMeds, it didn’t quite work yet for me to work full-time there.

I started working full-time as a pharmacist at Walgreens and in my nights and weekends, I would still help out at MyMeds as much as I could but then after about six months, I was sort of able to reverse the roles. This is about December after graduation, I was now full-time as a product manager at MyMeds but then I was still a market pharmacist, afloat pharmacist at Walgreens just actually up until this last summer.

Throughout the course of 2019 is when I actually started to – in my nights and weekends program, the concept I had for Pyrls, which is the primary product that our business builds and what I’m working on today and so that was the beginnings of that transition.

[0:15:45.3] TU: That’s one of the reasons why I ask the question there because that’s one of the things I love about pharmacy, is the profession for those that maybe have an idea that they’re itching to pursue – there’s very few jobs out there that you can potentially work PRN and flex that maybe it’s full-time to start, maybe it’s eventually 30, 20, 15 hours, especially if you’re a great pharmacist, you have good relationship with your district manager in your stores, performing all that. 

It can be a really good bridge and a darn good paying bridge as you’re looking at exploring other opportunities. You mentioned working full-time in the pharmacy, kind of part time nights and weekends on some of the business ideas and stuff and then obviously over time, they had flips. I think that’s a great example for others to consider. 

Now, it’s one thing, Derek, to pursue a non-traditional career path and be willing to take that leap of faith in both learning and belief in yourself and to do that, hopefully as an employee where you earn a good wage. It’s a whole other thing to say I’m going to pursue this non-traditional career path and I’m going to own my own business, right?

I think that hurdle, for many people, it’s a big hurdle to get over for a variety of reasons. Tell us about what happened in 2019 that you said, “Hey, I’m going to start this company” Cosmas Health and how you were able to get over that hurdle to get started?

[0:17:00.9] DB: Yeah, it actually – as I mentioned, I had been sort of learning some programming skills as early as during the middle of pharmacy school but towards the end of pharmacy school, especially in my 4th year, just like learning programming, like website and app element became like an obsession. I remember very vividly going to rotations from seven to three or eight to four, coming home, taking a nap and then like coding for like four hours because it was the most fun thing I could ever think of doing.

By the time I graduated, I was a relatively competent web developer. In 2019, when I was still sort of thinking about ideas for starting my own business, I created Cosmas Health which is, you know, just as in Minnesota LLC, so I could do freelance web development work out of which I know you’ve talked to many other pharmacists on here who started their own. I recommend a new one as soon as you have any sort of thing you may want to do, form a business around it just to get yourself started, if other factors make sense regarding it. 

I started, I created my own business that I was doing some freelance work out of but then I started building my own projects within that. Pyrls, which is the primary product that I build today is, it’s essentially like a digital version of those top 400 drug study cards, plus some other features we’re working towards building some sort of next generation drug information reference. Like the ones that we rely on today in practice. 

And so the idea for it started, I was thinking about it while I was on fourth year. It was building a better reference for me to use there and so it was one of the projects I just started, just sort of hacking on in my nights and weekends as I mentioned and anyway, I started to get some traction with it to the point where – this was in the fall of 2019, I was pretty much like, “I need to go all in on this.” And so I basically planned where I still kept my position at Walgreens that I was one or two weekends a month, but then I can pick up shifts as needed if available. 

In January of 2020, yeah, I just sort of – you know, I had some money saved up but you know, still had some huge student loans and you know big thanks to the support of now wife, kind of jumped out of the airplane without a parachute in January 2020, we had – I’d love to talk about some of the struggles of that especially in that first year with trying to build and grow curls but it was what I sort of use – 

Again, anything, any quote that you attribute to anybody, I am sure was said by somebody else too but the person I saw mention this was Jeff Bezos. He talks a lot about this regret minimization framework he has where he is trying to make a decision, he says, “Am I going to regret, on my death bed, what am I going to think of this decision?” And so for me, it was like, “Can I picture myself at age 40 having not yet taken the leap to start my business?” 

It’s like, “No, nope. No matter where I’m at with everything, you know I am young right now, I have some money saved up, I have some runway here.” And so in January 2020 is when I said, “All right, let’s do it, I’m going to go full-time on this business.” And so while still, as you mentioned, having the comfort of I am so grateful for the role I was able to have as a pharmacist at Walgreens while I was growing my business towards a place to be sustainable fully full-time. 

[0:19:53.1] TU: I’m glad you mentioned, I have never heard that terminology, the regret minimization framework. Tim Ferriss talks about that concept, essentially the essence of that that was really critical for me and my own journey as well. He talks about a lot in terms of yes, what might you think looking backwards but also really trying to objectively call the fears that you have, and through that process you realize that many of the fears that you might have are not rational, right? 

That’s really part of the process of really trying to put those onto paper and really looking at them as objective as you can. But Derek, my question is that you still made that leap. You eluded to savings but many pharmacists, even if they have savings, if they are looking at big student loan debt, perhaps there’s a family, you know, “I’ve got safer retirement, I feel all these competing pressures.”

You know, there is this known thing of a good six figure income and there is this unknown thing which has risk but also upside in a business. I want to dig a layer deeper of, even with a little bit of savings, how are you able to lean into that and feel comfortable and as you said, kind of flying out of the plane without a parachute? 

[0:20:54.2] DB: Yeah, you know I think that for better and for worse, I’m a major optimist but also I tend to sort of think and plan for my life in really short-term terms. I was, you know, when I started full-time like I said in January 2020, I was like, “Well, we’ll see how this goes and we’ll re-evaluate it in three months and then I can make a decision from there.” And so like I mentioned, this is certainly a very personal decision but for me, there was no better time. 

It was only going to get harder to make a riskier decision. The more savings saved up or the more I climbed the corporate ladder, it is was only going to get harder to risk or if they have children, it is only going to get harder to risk that and so that combined with as I mentioned, I was very lucky to be and to have a very supportive partner who actually kind of structured things financially was either through my business and/or working extra pharmacy shifts. 

I had to make sure that I could cover half of all of our expenses and if I couldn’t do that, then I need to stop. And so that was sort of the rules of the game or for myself or the bounds of the risk I could take and so having a plan like that I think helps with the decision as well because you all right, have made this decision that we are going to play with these rules and then we’re going act next based upon what happens. 

[0:22:10.4] TU: I really like that, having some ground rules, having some structure. My follow up here is you eluded to a struggle in that first year and I think any new business is going to have some growing pains in the first year financially as well as just kind of what you’re trying to build in the operations of the business. But this is an area we don’t talk a whole lot about in entrepreneurship. I think there is so much, maybe overqualification to some degree, of people who make this jump, right? 

Other people are like, “Oh man, I want to do that.” But we don’t hear as much and we probably don’t share as much of like it’s really hard to build something not only in terms of the time and the sweat and the energy but also some of the financial struggles and challenges that can come. It takes some real mental fortitude and I think belief in yourself and what you are trying to build to really be able to overcome some of those fears and challenges in the first year. 

Tell me more about, for you, Derek, and for Cosmas Health, and perhaps more specifically your primary product and Pyrls, what some of those struggles were in that first year? 

[0:23:02.0] DB: Oh my god, I’m just smiling over here as you are saying all of that because yeah, I remember before launching the first version of Pyrls, which again for the reference for the audience, so Pyrls is a drug information tool for pharmacist, for pharmacy students. It is not for patients, it’s for in deck clinicians and so I remember thinking like, “Oh this is going to be so easy.” 

Tim, we’re going to launch this and like actually want 10,000 people to pay a $100 a year and that’s a million dollars, you know there is over 300,000 pharmacist so like, that’s just a tiny percentage of them. So I am just going to launch this and then everyone is going to be like, “Wow, this is super cool!” and sign up, and “Wow, you know it is going to go great.” Nobody cares about what you are doing, you know? 

That is one of the hardest things to learn with businesses, you can be super excited about what you’re doing but nobody else has to be. And so I remember the first – let’s just go back to January 2020 when I went full-time on this, that is actually when Pyrls was officially launched to the public as well, and I remember getting ready to launch this new feature in February and we had a pretty good Instagram following at the time. 

We have an Instagram account where we share medication facts, and so we ended having a few thousand followers at a point and so I remember getting ready to – and we are reasonably sure it was mostly pharmacy students, pharmacist, you know our target audience and so one of the strategies we use for a number of reasons is we have a free tier, which people would just sign up for free.

I remember getting ready to launch this feature and all of the text around the promotion was, “Just sign up for free and check this all out,” And we were launching it on Instagram, you know, we made a post, we made the stories were there, and I am sure we made stories, and I remember 24 hours went by and not a single person even signed up let alone a sale. 

[0:24:35.5] TU: You’re like, “It’s free, come on.”

[0:24:37.3] DB: Yeah and I remember just being like, “Wow, this is going to be…” you know? Honestly, I don’t know how I wasn’t more discouraged. I think what I am most happy about nowadays and sorry, I don’t mean to take us in a different direction but I am so happy that two years into this, I am actually more excited about what I am doing now than I was when I started and that’s really important. 

You know, I could have found that the business could be doing ten times better than it is now but I wouldn’t be happy if I wasn’t enjoying it, that would be hard. It would be hard to wake up and dread my day. And so, I think that was a really obviously, a really critical part of starting something new when you don’t know if you have traction. You don’t know if the business is going to work, is you’d be loving it, and so I certainly was loving it and yeah, so it was all of 2020 was a slow – 

You know, the growth – I don’t know if it is the combination of – I think with any new business, I think there is some – actually you might know Tim, I don’t know if this is – again, this is maybe something I am pulling out of my head, but I remember seeing like a marketing rule of thumb that was, like, people don’t respond to your ad until the sixth time they see something. I don’t know if it is just a factor of being around long enough to start getting the compounding growth and or obviously as you build your business you are going to learn what people actually find valuable and double down on that. 

[0:25:46.7] TU: Yeah and Derek to that point, you now there can be a lot of head trash, at least I am speaking for myself and other pharmacy entrepreneurs I’ve talked in a regular basis, that we tend to look at our audience and what they want through our own lens and our passion and how we’re sending content out and marketing materials and other things. And that is not how they’re looking at it, right? 

If I think about your avatar client Derek, of what I know of your business, they have a million things going on in the day, right? With their work, with family, with other things and so when they see that Instagram story, they are seeing ad for a free Pyrls app, you’re looking at it through lends of like, “Yeah, this is a home run. I know the value, I’ve built this. I know how it competes with everything out there.” 

The same thing with our end on financial services piece of content, whatever it be like that’s one small snippet of their day, it is everything in my day of what I am passionate about and working on. And so I think that we may tend to under promote our content out of fear of like, “Am I being annoying? Am I sending out too much content?” But really seeing some of that data, and Grant Cardone talks about this stuff like you know, most folks from a business standpoint have enough security problem that people don’t know who they are. 

They may think that people know who they are and you know, it’s finding that balance of course of what you’re comfortable with but you know I think that resonates with me of what you shared in terms of the number of times that people might have seen something. 

[0:27:02.2] DB: I am going to share one more thing in that Tim too. I remember or this is something I will tell, I have one employee now and a few interns and this is something like when I am onboarding people, I will talk to them about how because I learned this for myself. It is such a miracle anytime somebody pays for your product because as I said, a lot of users of Pyrls, they’ll find us on, let’s just say, Instagram is honestly really the place for them to find us. 

I was like, all right, picture in, I would say most of our customers are like fourth year pharmacy students or first year new practitioners and so I was like, picture our users. They’re in New York riding the subway to school and they may be looking at Instagram and they see a post Pyrls makes and they click on our profile and then they’re about to go to our website and buy but then they got to their subway stop – 

[0:27:43.8] TU: That’s exactly right, yeah. 

[0:27:46.2] DB: But let’s say that they even signed up. Okay, and they’re at the checkout page. Say, they even think to themselves, “This is the coolest thing I’ve ever seen in my life. It costs $40, why would I even pay a $100 for this?” But their dog starts barking and then they forget about it because they have to go take care of their dog. The process of building a business is, there’s so many factors and just putting in the work is ultimately how you get the full cycle going and I just encourage people not to be discouraged by any one little thing. 

[0:28:13.6] TU: You are so spot on. I mean, the subway example is so good, right? Because I often say, “Hey man, there are 330,000 pharmacist out there and I am so confident in the solution that we have.” But what you shared is like, I hope we never lose that appreciation and admiration and gratitude for someone that not only follows us and engages with the community but ultimately makes that decision to trust us to provide a service or a product that we offer. 

I never want to take that for granted because you know what it takes of 330,000 people to actually get your content out in front of eyes. You are already kind of working down the funnel there, those that then take action on it are able to invest the time to read your content, follow your content and ultimately make that decision approaches and you know to me as a business owner, that is the ultimate vote of confidence in what your doing is to raise their hand and to purchase something, they’d trust you with a product or a service and I am just hopeful as I can tell in your voice and gratitude, I am hopeful to never lose that as a business owner because it is so special, it really is. 

[0:29:13.5] DB: I’d do anything for my customers. They could call me any time of day, I’ll come pick them up if they are stranded on the highway. Yes, I share your sentiment of gratitude so deeply. 

[0:29:20.8] TU: Derek, I am curious, and we are going to link too in the show notes and I hope folks will check it out if they haven’t already, Derek you have mentioned Cosmas Health, we’ll link to that, cosmashealth.com in the show notes. That really was the LLC that you created to start freelance work, Pyrls, which is pyrls.com, we’ll link to that as well as the Instagram @pyrls.app you mentioned in the show notes so folks can check that out. 

As I look at the work that you’re doing, I ask this of any business owner that I talk to, which is, what differentiates your product from what is out there in the market. Now, it’s been some time for me since I’ve been in a pharmacy working with a patient or an inventory cures thing but I think about traditional tools that I trained with, right? Whether that’s Lexicomp, Micromatics, up to date other tools, what really differentiates the Pyrls product and what problem is Pyrls really trying to solve that again, we are hoping to entrust folks support that they invest in this resource among others that are out there? 

[0:30:12.3] DB: Yes, so as I mentioned the original idea, you know drug information references, that these has been around since stone tablets I’m sure but the rendition that we are building now, my original inspiration started while I was on rotations. I was, in particular, as a fourth year, interested in a faster reference for counseling points and/or clinical pearls, you know, hence the pun there. 

The two or three most common things that differentiates Pyrls are now is number one, the counseling points. You know, we have a custom set of curated counseling points for all medications and that’s by far the most common feature that our users love, is they look up a drug and go check out the counseling points. Whether they are studying or on site, and it actually was really fun in the early days of Pyrls of getting to use, like I’d be at the drive through on the phone with a patient counseling them. In my hand I’d have Pyrls like looking down on it, and yeah, take it with food. 

And so the counseling points. And then the next piece is helping decide – we have a really popular section for most medications called place in therapy where “Hey, you are looking at this [Ason Edgar 0:31:10.7]. Well yeah, that’s for hypertension.” But like where does it – when is this used versus another first line [inaudible 0:31:16.4]

We have nice summaries of guidelines for chronic conditions. There is about 2,000 drugs or so that actually matter, and right now Pyrls only covers about 400 of them. And so we covered the – for the most part the most commonly prescribed medications. So that is the area that we’re focused on like if you are an orthopedic surgeon, Pyrls doesn’t have much utility for you now and so how we’re thinking about expanding this. 

Whereas traditional references is sort of organized information kind of just like a book would or it’s like a table of contents. We sort of organize information around workflows like counseling of patient or you know, you need to decide prescribing or reviewing, essentially, you need to understand those place and therapy concepts so that’s what differentiates us now as the information for a specific workflows, and where we’re headed is building that out for more drugs and for more workflows. 

[0:32:03.2] TU: Love it and I can see as I look at your website, just an opportunity to continue to expand upon the awesome work that you’ve done. Derek, my question for you as I hear you talk about your journey, from idea to obviously getting the product out there that you use yourself when you are working at Walgreens, to now having an employee and obviously having some interns and the growth that you have, the plan going forward is, what support or infrastructure support have you had as a business owner? 

Has this been all learn-as-you-go? Obviously beyond the tech side, I am thinking about as I look at your website, there is of course the web design to be able to take purchases, looking at your pricing tiers and structures as a marketing aspect, there is a strategy piece, there is a business development portion, there is an HR piece as you are hiring, are you going at this alone? Do you have a group of entrepreneurs or an incubator or something that is supporting you along the way? Tell us more about the support you have as a business owner.

[0:32:58.4] DB: Yes, so well, you know other people have certainly mentors, like most people, mentors have been just – I can’t even put into words how influential and responsible for any success that Pyrls has had so far. Pretty much everything that you just mentioned, you know, marketing, finding customers, solving problems, learning through the experiences of entrepreneurs who went through it or further along has been so huge for me. 

Yeah, Pyrls has been fortunately working in 2021. So we went through an accelerator out in San Francisco over the summer, which connected myself personally with tons of other founders in the technology industry. And so that from the business growing side of things has been very beneficial but honestly the support of the pharmacy community has been probably the main thing for Pyrls success thus far. 

The most important thing in my mind is the integrity of our content and I think the trust in the information is probably the most – that is the most important pillar of the house we are building and so talking to other leaders of medical information companies who are entrusted with a similar responsibility of their product has been the most I would say, that’s why I think it was just people. 

[0:34:04.6] TU: Yeah, I love it. I love what you’ve built Derek, I love the passion you have behind the work that you are doing. Also just my business partner, Tim Baker and I often talked about like we love the puzzle of business. We just love the challenge opportunity to build products and services that hopefully meet the needs of the community and I can tell you’ve got that passion as well. 

I am excited to see where this builds out in the next several years, hopefully we can have you back on the podcast and share some of that growth with the community. We will link to the Pyrls website, the Instagram account. For folks that are already aware, they can check that out and share the good news. Beyond that, Derek, what is the best place that folks can go to learn more about you and to follow the journey? 

[0:34:40.2] DB: Yeah, well really any pharmacists who is either interested in a business idea they have or talking to other pharmacists and non-traditional roles or interested in, honestly like I said, if I had nine lives to live most of them would be in a different pharmacy role. So if you are somebody who thinks that we could have something interesting to talk about, please connect with me on LinkedIn. 

I am the only Derek Borkowski, PharmD, and so we’d love to connect there as well as, yeah, please if you – to whatever degree of interest anybody has, follow our Instagram, @pyrls.app. And Tim, thank you for everything you are doing bringing voices like mine on your show and all the other inspirational and super important advice and information that Your Financial Pharmacist puts out into the world. 

[0:35:21.6] TU: My pleasure, Derek, thank you so much for taking time to come on the show and I am so glad our paths have crossed, so thank you again. 

[0:35:26.5] DB: Likewise. Thanks, Tim. 

[END OF INTERVIEW]

[0:35:28.2] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

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

[END] 

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

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

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

Episode Summary

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

Key Points From This Episode

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

Highlights

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

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

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

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

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

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

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

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

[INTERVIEW]

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

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

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

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

Tim, I was looking at a recent Wall Street Journal article and I know you’ve got some other stats as well that we’ll draw out throughout the episode but that article, which we’ll link to in the show notes references some work that was done by Boston Colleges Center for Retirement Research. They say that for the typical American household aged 55 to 64, the present value of social security’s represent about 60% of their retirement assets. And with that in mind, even if that number is half, let’s say, 30% for those that are listening to the podcast because they’ve been diligent in setting up their own savings plan, why aren’t we talking more about such a big part of one’s retirement assets?

[0:03:39.4] TB: Yeah and it is crazy Tim, because there is the tenure out there that, “Social security won’t be there for me in the future, I can’t trust it. I have to go do this all myself.” I don’t think that’s necessarily true. I think that social security will be a program that will endure and it might take tweaks and pushing for retirement age out and payroll taxes and things like that. I think there could be things that happen along the way that make it more enduring. 

I think that for that sense of the fold, it would be catastrophic because, to your point and your stat, so many people rely on this for their ability to survive in later stages of life. I read a stat that a third of retirees, 90% of their income comes from social security, think about that. I think it goes to show, it’s like, we’re not great at kind of transporting ourselves into the future and saying like, “Hey, I really could use this nest egg of dollars” because we just disassociate ourselves from things that are 20, 30, 40 years out and it’s such an important thing to kind of breakdown and look at because it’s one of those things that you wake up and you’re like, “All right, I’m 50, I’m 60, I’m looking at retirement and what do I have?” And it’s not enough.

Social security, we’re going to go into the some of the background and everything but it is a major piece of this Rubik’s Cube that is, “Okay, once I stop working, how can I convert or how can I build this retirement paycheck that I’ve been really working my whole life for?” Social security is going to be a big part of that, with the stats support that. How you approach social security is one of the most important retirement income decisions you’ll make. I would say, most of the retirement, one of your most important retirement decisions, not even income decisions. 

To me, yeah, we haven’t talked about this enough. I think it’s really important because it is going to be a major piece of the pie when we’re breaking down, “Okay, we need X amount of dollars per year, this percent is going to come from social security, this percent’s going to come from your 401(k) IRA, this percent is going to come from here.” That’s really important to break it down and I read a stat Tim, this will blow your mind, we’re talking about – with some clients, the power of working longer.

[0:06:14.5] TU: Yeah.

[0:06:14.8] TB: The stat is that, delay in retirement by three to six months is equivalent to saving 1% more for 30 years.

[0:06:22.2] TU: Wow.

[0:06:23.2] TB: That’s insane. Then, to break it down a little bit more, defer retirement by one month is equivalent to 1% more savings for the 10 final years before retirement. What’s going on here, there’s lots of different variables. When you work longer, you are earning and typically, you earn at the top end and we’ll talk about that with social security, you’re making the most in your career towards the latter part of your career. 

You’re also not – that’s one last month or year that you’re digging into your 401(k), 403(b). It’s one less year that if you live to age 90 that you’re drawing on that. Social security is a big part of that in terms of delay and deference, so there’s just a lot going on that really is important to understand. And again, social security is going to be a big part of that and that’s why I’m eager to kind of dive in with you and kind of crack the nut, so to speak, in a very important topic.

[0:07:19.9] TU: Well, thanks Tim, for dashing my hopes of early retirement. No, I’m just kidding. Let’s start with the history of social security. I think it’s important, your comment earlier was a good one, right? I think for many of us, myself included that it’s easy to disassociate with something that’s 20 to 30 years out. I think even more so, there’s been such negative talking points around social security that I think especially for us that maybe are on the early or mid-part of our careers where it’s kind of been not a big thing that we’re thinking about. Which on one hand, you could argue as a blessing because that means hopefully we’re building our own retirement paycheck and social security might be a bonus. But on the other hand, I think as we’re going to expose today, that probably means we’re not thinking enough about it.

[0:08:03.1] TB: Right.

[0:08:04.1] TU: You mentioned, it’s an important part of the Rubik’s Cube. Understanding the history and what it was intended to do and not intended to not do, I think, is a good segue into understanding some of the benefits and credits in how we determine how we’re going to approach the strategies for withdrawal. Talk to us about the history of social security starting with the social security act of 1935?

[0:08:24.0] TB: Yeah, this was an act that was signed in the law by FDR, President Franklin Delano Roosevelt in August of 1935 and really, what it was the main effort here was, it created a social security administration and thus, the social insurance program designed to pay retired workers at retirement, age 65 or older and to continue throughout retirement until death.

It was really meant to kind of look at the problem of economic security for those in old age by setting up this system, which you contribute as a worker throughout the course of your career into this huge fund and it’s not – it’s different. We just had a question about, “I’m maxing out my 401(k), what should I do from here?”

In that case, when you put money into a 401(k), that is your own individual account. Every dollar that you put in, again, dependent on your investment selections like you’re going to get that back. Social security is not the same, it’s a big pool that then pays benefits as you kind of hit those retirement ages.

You’re funded. And when you look at your pay stub, Tim, you’re going to see a big line for social security and you’re going to see that money’s coming out each paycheck and how much you contributed for the year, but it’s really meant to kind of be based on the fund and based on the payroll tax contributions that you make during the course of your working life.

I think around this time, you got to think. I think there are lots of measures that kind of protect the worker, not just in this in terms of economic security but I think even safety and things like that and I think the data shows that even today. And maybe it’s because of this, but we’re just not great savers. We don’t think that far ahead and social security kind of forces that issue and, by law, makes you kind of set that money aside for that future benefit.

But social security, from the outset Tim, was never ever meant to be, to meet 100% of the needs of retirees. Although, like we said in some of these stats, for some people, it comes pretty darn close. Again, to me, depending on where you’re at in the income scale, if you’re lower income, it could be 100%. 

If you’re a higher income, it could be a very much smaller percentage of the overall need but it is one of those incomes for life that is inflation protected which you just can’t find anywhere. Even if you were to say, “Hey, I have a three million dollar portfolio and I’m going to drop $500,000 or a million dollars into an annuity that I’m going to buy,” it’s not going to be as good or as beneficial to you as what social security is going to provide.

Like you said Tim, the history – I think this just comes with different amendments but it was really also meant to protect disabled workers and also, families where the working spouse or parent died. It is a monumental piece of legislation and I think really paved the way for people to have a benefit that they can lean on in older age and not really work for the entirety of their life.

[0:11:26.5] TU: Tim, when you say it’s inflation protected, just to clarify there for folks that are diving into some of this, perhaps the first or second time, that’s because the benefit itself is inflation adjusted, right? I remember talking with folks this year that our drawing social security benefits because we’re inflation and they saw a significant bump in that benefit heading into 2022 and to your point, that’s just really hard to find that type of benefit and we think about traditional kind of retirement planning, 401(k), Roth IRAs and other types of things, you’re having to account for that yourself, right? As you’re building that portfolio.

[0:12:01.4] TB: Yeah, exactly. That’s why when we talk about, “Hey, you can’t just stuff the mattress full of dollar bills and hope that in 30 years, your purchasing power is going to be there.” In social security, that’s built in for you. I think it’s by law so every year, they set the COL, the cost of living and then they adjust the benefit accordingly. I think recently, it’s been lower, I think I saw a number, it was like 1.7 but next year, it will be a lot higher because we’re seeing rates start to tick up. But that benefit alone, Tim, is not to be underestimated. 

Because again, if you go on to the marketplace, either an annuity – when I say annuity, essentially, what I’m saying here is – that’s all really social security is, in the sense that – an annuity is, you put money in either in like a lump sum over time and then sometime in the future, you annuitize it so you basically start to draw on that benefit and they say, “Okay, based on the amount of money that you put in and our ability to invest on your behalf, we think that we can pay you a benefit of $2,000 per month.”

What a lot of people do is, they’ll take some of that nest egg, some of that defined contribution like a 401(k) and they’ll peel that off so they’ll say, “Okay, if I need a paycheck…” Kind of tangent here but I think worth going down.

[0:13:21.9] TU: Yup.

[0:13:22.5] TB: “If I need a paycheck of $5,000 per month and $2,000 is going to come from social security and I know that for me to keep the lights on, housing, food, kind of the basic necessities, I need $3,000.” Basically, what I would do is, I have $2,000 from social security, I’m going to purchase an annuity that’s going to give me an additional thousand dollars per month so I’m going to take, I’m going to make up a number, I’m going to take from my portfolio of half a million dollars and basically buy that annuity that it will give me a thousand dollars per month.

There’s lots of different ways to go, you can have a joint rider where you can have a term certain, there’s lots of different ways to do this on how it’s invested and things like that. Essentially, what you’re doing is you’re creating a floor. You’re saying, for me to keep the lights on, it’s $3,000 per month, social security is going to cover two, I’m going to purchase the one.

[0:14:15.4] TU: The one, yup.

[0:14:16.9] TB: Then the other two is more like discretionary where I might be traveling and spoiling grandkids or that type of thing. That’s all this is and again, that’s one of the beautiful things about – to go back to the annuity thing, for you to find that same type of inflation protection, it either doesn’t exist or it’s capped. 

If we have a huge year next year from inflation perspective and it’s 4%, 5%, 6%, 7%, the annuity might say, “You’re capped at whatever, 3%, three and a half percent.” Then, what happens and really in that year is that your purchasing power is diminished. That’s one of the things is like, the social security – and it’s backed by the full faith and credit of the US government, the tax payer, which you can argue, “Okay, that’s good.” But from an investment perspective, it’s about as safe as you can get in the world. 

Yeah, that’s important. It is really important to understand that, in terms of the context of where those dollars –  we can get into this a little bit more but just like everything we talk about this with different parts of the financial plan, Tim, this is such an emotional thing. And you see, we’ll get into the decision to claim, to claim or not to claim when you do that and what age.

It’s really important and people stress out about, “Oh if I wait the claim and then I die and I don’t get all those dollars, what a waste.” The other thing Tim, to really consider in this whole conversation is, it’s really so true for the rest of the financial planning is that, this is not just a ones and zeroes decision. It’s not just a money decision, it’s very much emotional. 

This decision on social security and when to claim, when not to claim, and there’s lots of different approaches out there in terms of total benefit of social security versus the break even analysis. And the idea is like, “If I wait to claim,” there’s so many retirees that say, “If I wait to claim at 70 and then I die at 75, I left a lot of money on the table.”

[0:16:12.9] TU: Yup.

[0:16:12.6] TB: There’s a lot of different pieces of that to consider but I think the other – so there’s lots of stress and uncertainty there but I think the other thing to kind of mention in this discussion is that if I kind of invoked the example that I’ve said, “Okay, if we’re looking at $5,000 paycheck, two is going to come from social security, we bought another one.” In that $3,000 total, out of the five is just what we need to keep the lights on. It’s for living, food and all that kind of stuff. 

The emotional part of that is palpable, it’s really important to understand that because, you know, just like there’s stress and emotion around when to claim, there’s also this feeling of, you know, if you don’t create that floor and you’re dipping into your three million dollar portfolio as an example and your every month or every quarter or whatever it is, you’re deducting from that, there’s this feeling of scarcity too.

Sometimes, you know, you want a little bit of column A and a little bit of column B. Sometimes, people don’t create that floor because they want that investment to really thrive and the idea of taking a big chunk out of that to create income is scary. But from a scarcity abundance mindset, a lot more people either by delaying social security or creating that floor through social security and annuity, really allow that abundance to thrive. 

I always joke, like I joked when we bought the motorhome. I look at their red shade and I was like, “Well, you know we can completely crash and burn, lose our jobs, lose our house and we can always rely on the motorhome to have a place to live.” I think that’s just a micro-chasm of what we’re talking about here, because a lot of people – the questions for retirement is, “Am I going to have enough? Will the money run out?” 

That is really important when we’re talking about things like social security and where that plays in the grand scheme of things. 

[0:18:11.5] TU: Tim, I want to come back to this decision on when somebody takes money out and what it means to defer, we’ll come back to that later episodes and more on the strategy side. But taking a step back into the how it works, thinking about the funding of it and the credits, you mentioned before, this is something that folks likely have already noticed on their pay stub. Tell us more about how this comes out to payroll taxes and what they can be expecting there? 

[0:18:35.3] TB: Yeah, so the two main payroll taxes out there is Medicare and Social Security. Social Security is basically tax at a rate of 6.2% and sometimes you see it together at 7.65%, which is Delta, it’s the Medicare tax rate. Every year this changes, so the maximum social security contribution in 2022 is $9,114 and that’s based on what’s called the wage base or the taxable wage base. 

For 2022, the taxable social security wage base is $147,000. If you multiply that by 6.2% that’s where you get the $9,114. What essentially that means in layman’s terms is, if I am a pharmacist out there and I am making $147,000 or I am Elon Musk and I am making billions, from Social Security you’re still treated as the same. Any dollar above that is not necessarily taxed from a social security perspective. 

The wage basis and the maximum amount of earned income that employees must pay social security taxes on. Now, I think Medicare is uncapped, so you’ll pay a percent throughout the higher earnings so to speak. With the funding in mind and again, you’re setting aside that – those dollars, not necessarily directly for you but for the pool that you will one day dip into. Basically you are trade in those dollars for credits. 

As you work, you build credits and for you to become eligible for Social Security, you need 10 years or 40 quarters, 40 credits that makes you eligible for retirement benefits. In 2022, you earn one Social Security or Medicare credit for every $1,510 in covered earnings each year and you must earn just over $6,000, $6,040 to get the maximum four credits for the year. The idea is that you’re building credits, building credits and then depending on when you actually start to draw on your benefit, you kind of convert those credits to what that benefit is and then there is also some things called like delayed credit. 

For me and you Tim, and it is different depending on when you’re born but for anyone born after 1960, full retirement age for you and I, anybody born after 1960 is going to be 67 years old. For my dad who was born in the 1940s, he’s the old man in the group here so his for-retirement age is 66. But if you or I or really anybody decide to delay your retirement, so delayed retirement, the maximum you can delay it to would be 70 years old, you would receive delayed retirement credits, which are used to increase the amount of your kind of older age benefit credit. 

You would earn additional dollars and it’s about 8% per year that you delay. If my for-retirement age is 67 and I decide to retire at 68, my benefit would increase by 8%, which if you think about that is very powerful. Not everybody gets 8% raises every year and then the other thing that’s important to just remind everyone out there is that it’s inflation protected. Again, this goes back, we’re going to talk about this more on a strategy perspective but it’s just very powerful in terms of how you approach this decision. 

[0:21:53.4] TU: Tim, you mentioned that the delayed component, so you know, you mentioned 67 and essentially up to 70 depending on when somebody is born, but there is also the other side of it, right? If somebody decided to take it sooner than that, talk to us about that. 

[0:22:06.7] TB: Yeah, great question or great point. Yeah, you’re looking at, you’re really looking at and what we’re really kind of breaking down here is how you determine your benefit. To back up on the credits, which we should have mentioned is that the credits are based on your highest 35 years of earning. You know, it looks at the top 35 and it goes back to that question of if you delay you’re later years, you’re probably going to be substituting like a year. 

A year where you are making six figures from where you made tens of thousands because you’re a resident or something like that so yeah, that’s huge. Really, the three I guess phases or ages are going to be kind of the early retirement for everyone at 62. But what happens is that your benefit is based on for-retirement age. You have your early retirement, you have full retirement age, FRA, and then you have delayed retirement and that’s to 70. 

For you and I Tim, our early retirement is 62 years old, our full retirement is 67 and then our delayed retirement is 70. Now, depending on where you’re at from a birthdate perspective, if you were born between 1934 or 1943 and 1954, then 66 is your for-retirement age not 67. If you are born in 1955, it’s 66 and two months, 1956, 56 and four months, I don’t know why they complicate these things like this but yeah, so that’s the big change. 

Again, there could be legislation in the future that they’re going to say, “Hey Tim, just kidding. People are living longer, your full retirement age is not 67. It’s 68” that could happen or the earliest that you could retire from an early retirement is 63 not 62. It’s you’re early for us, it’s 62. It’s for your full retirement for us is 67 and for delayed retirement it’s 70 and again, those could change in the future but dependent on how you choose to then claim, so the example is if you begin taking your social security at 62 you reduce your benefit by essentially half a percent each month to your full retirement age. 

If you take it 24 months, two years, every month you’re reducing it by half a percent, which can definitely add up. A lot of people they’ll say, “Hey, my job is not great.” Or sometimes I’m forced out of retirement, for a lot of people there’s just this misnomer that, “I am going to control when I retire.” That’s not necessarily the case. It’s something like 40% of people are either forced out of their job or because of a health issue of themselves or a loved one. 

That’s also something to kind of take into consideration but it’s all based on this credit. And again, when I was prepping for this podcast, I went to my socialsecurity.gov and I put out my own social security statement and it outlines eligibility and earnings. It says, “You have the 40 work credits” so to receive benefits, it kind of told me what I earned last year but then you can click in and review your full earnings record now. 

It goes back really from 2021 back to, I think for me, 1998 I earned in social security’s eyes like $351 but eventually that number will fall off in the calculation because I’m going to have, you know, I have 24 or 25 years of work and those lower numbers will knock off and then I’ll get a bit of benefit but the cool thing to see is, you know I can see the dollar amount of my benefit for early, full and delayed. 

Right now and I can share it, so this is at for me it’s saying if I retire at 62, I wouldn’t be on track to earn a benefit of $1,603 per month. If I wait for 67, which is my full retirement age it’s $2,341 per month and then if I delay it to 70, it jumps to $2,902. And again, these are inflation protected, that’s really important to understand. That is basically the way that the credits work and how that kind of translates to a benefit. 

Again, it’s something that I think and we could probably have a full episode of like how people kind of mismanage these decision of it’s, “Hey, my brother did it at this age” or my spouse or these are what people are doing in the workplace and X, Y and Z. And it’s really just like different parts of the financial plan, it’s really important that you take a look at this very intentionally because it can have major consequences in terms of your overall outlook for your retirement picture. 

[0:26:39.6] TU: Yeah and I like what you said earlier is that, how you approach social security is the most important retirement income decision you’re going to make, right? Again, one of the reasons we want to do this episode followed up with other content, if folks haven’t yet checked out their social security account, I would encourage you to do so. It is really neat to kind of see and log in and start to dig into this deeper, you can go to ssa.gov/myaccount. 

Tim, I was looking back too at my earnings record, it was fun going back like starting when I used to work for the family business, Ulbrich’s Tree Farm, back in my cashier days working at a top grocery store in Western New York, so fun just to see some of those earnings history and see where things are at in terms of that really full and delayed phases. Tim, the other thought that comes to mind and we’re not going to go down the Medicare pathway right now but if you think about that early benefit and you mentioned someone begins taking it at the age of 62, they reduce their benefit by 0.5% each month. 

They’re also then is that potential gap of age eligibility for Medicare benefits, so you’ve got some other considerations also with just the intersection of this and the healthcare cost as well. 

[0:27:45.5] TB: Yeah, I mean it’s so much. It’s so true like when we’re talking about the financial plan, it’s kind of like you can’t just treat one system of the body like you’re looking at the entire picture and it is so true in this kind of question as well as that there is so many – I mean, just even the overlay of the taxes and like, “Okay, what’s the best way to build that retirement paycheck from a tax perspective?” And then also you invoke things like Medicare and even like gifting strategies, if you are trying to minimize tax there.

There is just an array of questions that you have to answer and a lot of them are really less about the numbers and more about, “Okay, what does this look like for you?” And so many retirees go into retirement thinking like, “Hey, I’m just so done with work and I just want you to know” but then they all often return to work sometimes because of the money but sometimes because of like the – they don’t have the social infrastructure to kind of carry on in terms of like having a passion or a meaningful life. 

It’s so funny because some of the similarities with the different phases of life in terms of like, “Okay, what’s a wealthy life for you?” And answering that question in your 30s and 40s and saying, “Okay, we can’t just stock away money and not live today.” But there is a balance to that but also when you reach the end of your work in life, what’s a wealthy life to you? That question still stands and a lot of people either don’t ask themselves that question or they struggle to answer it because for a lot of us unfortunately, a lot of us we really define ourselves by our career, our role, our professional roles. 

It’s important to slow down and ask the question of, “Okay, what do I actually want to do? What do I want to get out of my 60, 70, 80s and beyond?” And then execute to that. It’s a common thread no matter where you’re at in the financial journey. 

[0:29:51.1] TU: Yeah, I think this too is another good reminder as you are talking about this range from, I’ll just use 62 to 70, right? The early to then the full to the delayed benefits, obviously we can see the negative impact of financially just numerically speaking, if we pull the benefit early whereas if we’re able to delay that, that number goes up. And just another reminder that for folks that are able, to build up those savings outside of social security throughout their career, you take some of that pressure off, of getting into those early retirement years.

Tim, I know we’re going to come and do a lot more detail on some of the breakeven analysis and factors that go into, that but I know that a lot of pharmacists are listening to this and I know there’s a lot of math nerds that are just looking at some of the numbers of like, “Man, it seems so obvious that if you wait, you’re going to have more.” If you defer, you’re going to see that benefit go up but there’s really more behind that. 

You know, you start to think about what is someone’s health situation look like, what are other savings that they have in place and I think that that is one of those areas. And you gave and commented on this just a moment ago, this is not one of those areas you say like, “My friend Gerald John is doing this and so therefore I’m going to do that as well” right? 

[0:31:02.9] TB: Yeah, no and even with the health stuff there are again, we’ll get into this later but when you look at that and you’re like, all right, there is a history in your family where people will pass away in their 70s or 80s or whatever, so that might press the decision. But also sometimes depending on what the spousal benefit is, you might even decide to delay that because if that person has a greater benefit, the spouse takes over that benefit in the surviving, you know, the surviving spouse takes it. 

There’s just a lot of nuance there that you know again, there’s breakeven, there’s the total benefit, all that analysis that goes into play here but you know at the end of the day, you’re really trying to manage and plan for the unknown and that makes it really difficult. I think it goes back to, you just want to be intentional. Like you said, it’s like don’t necessarily go with the herd mentality and have this question answered way in advance. 

Sometimes there are pressures like the employment and like your outlook on employment, your overall happiness factor that really presses the issue. But at the end of the day, what we’re really trying to do is come up with a plan where again, you’re living a wealthy life and the money doesn’t run out. That’s paramount. 

[0:32:25.3] TU: Great stuff Tim. Again, the hope for this episode is we’re going to lay a foundation around social security to talk about some of the history of social security, the funding of the benefits, the credit concept, how the benefit is determined, what are the different points of beginning to draw on that benefit. We’re going to come back in later episodes talk in more depth on the strategy side as well as common mistakes that folks might make in social security. 

As we wrap up, I want to remind folks that we’re now approaching mid-February, which means we’re in the midst of tax season. Those tax forms are likely piling up on your desk, it’s time to have that tax filing and planning for the year top of mind and we’re excited at YFP tax that we’re opening up our tax planning services to an additional 125 pharmacists households. We do taxes as a part of the comprehensive financial planning for those that our clients of YFP Planning. 

We are opening the doors to an additional 125 pharmacists households. Really proud of the team at YFP tax and what they have been building. I really believe that that team is not just focused on getting the return done, rather providing value care and attention that you and your taxes currently deserve. Those 125 spots are filling up quickly so don’t wait too long. If you’re interested in working with YFP Tax, head on over to yourfinancialpharmacist.com/tax to sign up. Again, that’s yourfinancialpharmacist.com/tax. 

[END OF INTERVIEW]

[0:33:48.1] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

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

[END] 

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YFP 241: The Top 5 Objections to Investing in Real Estate

Posted on by yfpadmin


The Top 5 Objections to Investing in Real Estate

David Bright and Nate Hedrick talk through five common objections to getting started in real estate investing.

Episode Summary

If you’re interested in learning more about real estate investing but have yet to take the first steps, today’s episode is for you. During today’s conversation, Tim Ulbrich speaks with David Bright and Nate Hedrick, hosts of the Your Financial Pharmacist Real Estate Investing Podcast, highlighting five of the most common objections and fears that pharmacists have when considering getting started in real estate investing. Nate and David further explain how they have overcome those common concerns about real estate investing. They dig into ways to overcome not having the time or expertise and ways to combat the potential to become overwhelmed with the commitment of owning additional properties. They talk through fears about the current state of the real estate market and when the right time to invest is. They also address feeling like investment goals may be too far out of reach and not knowing how to build a solid real estate investing team. David and Nate reveal why investing in real estate doesn’t have to demand too much of your time. They also share tips on how to learn from other pharmacist investors and share their experience of finding the right team to help you get the ball rolling and achieve those real estate investing goals.

Key Points From This Episode

  • An introduction to today’s guests, hosts of the YFP Real Estate Investing Podcast, David Bright and Nate Hedrick.
  • Addressing Objection number 1: I don’t have enough time! 
  • Why hiring a property manager saves you money and saves you time.
  • The second common objection: not knowing where to get started. 
  • What David’s strategy has been at the forefront of his plan.
  • Responding to the objection that managing just one property is already overwhelming.
  • Answering the objection that the market is volatile.
  • How there is no way to time the market and the best call is to make sure the numbers work no matter what. 
  • David’s response to the objection that folks don’t know how to build a real estate team.
  • How connecting with a real estate agent can be the first step to putting together the team you need.
  • Why they launched the YFP Real Estate Concierge: to help you find investor-friendly agents.
  • Nate’s biggest takeaway from hosting the podcast: the interesting ways that pharmacists are investing.
  • What David has learned through hosting the podcast: getting out of his own head and into the community with others is critical.
  • What listeners can expect from the YFP Real Estate Investing Podcast going forward including the None to One Group Coaching program. 

Highlights

“What got me over this hurdle personally was understanding that it didn’t have to be me to do all those things! I just had to make sure that there was someone that could do those things. There were people that could be hired to do them.” — David Bright, PharmD [0:03:18]

“I was trying to rent out a property, trying to be my own property manager, trying to do it all and I was unsuccessful at doing it, a property manager came in, had the place rented out super-fast, and was able to rent it out so much more per month.” — David Bright, PharmD [0:03:50]

“I think the trick is that no one has a crystal ball, there is no way to time the market and so waiting for it to do what you want just means that you end up waiting.” — Nate Hedrick, PharmD [0:16:24]

“My story started with finding a great real estate agent that was then able to introduce me to other people around that could be a great team.” — David Bright, PharmD [0:20:22]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week, I had a chance to welcome back on to the show, David Bright and Nate Hedrick, cohost of the YFP Real Estate Investing Podcast. During the interview, David, Nate, and I talked through five common objections to getting started in real estate investing. Now, if you’ve been interested in learning more about real estate investing and have yet to pull the trigger to take that first step, this episode is for you.

Some of my favorite moments from the show include hearing David and Nate talk about why investing in real estate doesn’t have to be a huge demand on your time, how to learn and benefit from other pharmacist investors without getting paralyzed by the comparison gain, and how to get the ball rolling with the team to support you and achieving your real estate investing goals.

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

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

[INTERVIEW]

[0:01:35.6] TU: David and Nate, welcome back to the show.

[0:01:37.8] NH: Hey, thanks for having us.

[0:01:39.5] DB: Thank you.

[0:01:40.4] TU: You guys have been busy with the YFP Real Estate Investing Podcast and other happenings geared toward pharmacists on their real estate investing journey, we’re going to get an update from you guys on those efforts towards the end of the show but I want to jump right into today’s topic, which is some main objections to investing in real estate. I continue to hear from many pharmacists that are interested in exploring real estate investing further, many folks that say, “Hey, I want to get involved. I understand how this can help me achieve my long-term goals, diversify my investing plan but…” there are reasons, objections, things that are getting in the way of them moving from that step of learning to actually taking action with that first property so we’re going to talk through some of those common objections today on the show. 

David, one of the most common things that I hear, I suspect you guys hear all the time, we’ll call this objection number one is, “I don’t want to unclog toilets at 2 AM” or if we broaden this out a little bit further, “Maybe I don’t have the time” and to some degree, the expertise to be in the weeds on actually overseeing and managing properties but I realize the potential that’s there as an investment and as I mentioned before, potentially diversifying my portfolio. Talk to us about this common objection and fear of really being in the weeds on these properties and the time that it can consume?

[0:03:01.7] DB: Yeah, it’s a super common objection and I think that it was one of the things that almost scared me off as well because I am not handy enough to handle most things in my own house, let alone to be responsible for another house if I’m the one that has to go out there and be handy with those things. For me, I think what got me over this hurdle personally was understanding that it didn’t have to be me to do all those things, that I just had to make sure that there was someone that could do those things and there were people that could be hired to do those things.

I know one of the things that we talked about, Tim, you and I back at YFP episode 167 of the podcast was that hiring a property manager was just huge for me, taking 95% of the work off my plate in that process. At that point, I was trying to rent out a property, trying to be my own property manager, trying to do it all and I was unsuccessful at doing it, a property manager came in, had the place rented out super-fast and was able to rent it out so much more per month than I thought was possible in that the property manager’s fee was entirely covered just in that spread of what I wasn’t even able to get. 

Ended up saving me money and saving me time. It’s just one of the best decisions that I’ve made when it comes to real estate investing and then by doing that, the property manager handles any 2 AM toilet clog or the furnace is out or the roof is leaking or any of the really scary things like that no longer becomes my responsibility to take that call and to figure out what to do and again, that has just been a huge help.

[0:04:43.1] TU: Nate, I know you have property local to you and then you have property not local to you. I think that this gets into a little bit of maybe some of the value as well as challenges of more that distance real estate investing but you know, even as you look at your property local to you where maybe there’s that urge in temptation of, “Hey, I could just go take care of this, right? I don’t have to pay eight, nine or 10%” that option’s not even on the table, right? When you look at properties that are not near to you and that even forces the hand further in having a model that depends upon property management here we’re talking about but also just a larger system in place to manage your properties.

[0:05:20.5] NH: It’s been a really nice way for me to build a business and a portfolio because you’re right, it lets me see both perspectives and both sides. It’s funny, we’re actually in the middle of buying another property here locally and my challenge for myself and more importantly, my challenge from Christine is to not go over there and do stuff.

I can paint a room, I can change a light fixture, I can do some of the basic stuff that I know, if I hire it out, it’ll get done better and faster but it cost 200 bucks or it cost 500 bucks. The challenge for me is going to be to not do that stuff and I’ve shown myself with the – on estate investing that it can be done and it can be done profitably, you just have to set it up that way from the beginning.

I completely agree, this is a challenge I hear all the time or objection I hear all the time but you can do that as much or as little as you’d like to.

[0:06:09.9] TU: Yeah, I think it goes back to what are some of the goals that folks have around their potential portfolio into the future, how involved do they want to be and I think both of you have done a great job. I’m thinking of several webinars that you’ve done with pharmacists and certainly have talked about your own show as well of really building out your model and even the financial model and even the financial model too from jump street, account for property management fees, to account for some of these other things that realizing your time is valuable, right? 

We have many busy pharmacy professionals that again, maybe have an interest in real estate but don’t want to be unclogging toilets at 2 AM. By the way, who came up with that saying, right? Because I feel like, that has been the reason probably why so many people have never gotten started and involved, the 2 AM toilet clogs, I’d be curious to know how often that actually even happens?

[0:06:56.0] NH: It never happened at my house, so I don’t know. Now I’m just jinxing myself though.

[0:06:59.6] TU: Yeah, tonight, right? It’s going to be a thing.

[0:07:01.2] DB: Exactly.

[0:07:02.0] TU: Nate, the second common objection I think about is, especially if someone’s able to get past the, “Hey, I could never be responsible for another home” or that 2 AM toilet clog issue is, “I just don’t know where to get started” right? It’s so overwhelming, there’s so many different options, even if I listen to the YFP Real Estate Investing Podcast, my gosh, there’s a ton of different ways to get going and I just don’t know where and how to get started. Talk to us through this.

[0:07:30.7] NH: Yeah, I mean, especially with all of the different promotions from individuals in the community right now between vacation rentals, long-term rentals, people that do college flipping or college housing, then there’s just general flipping like we see on TV or commercial properties and self-storage and house hacking, the list goes on and on, it’s just crazy and so to say, “I want to invest in real estate” and not have an idea of what that looks like, I completely understand how that’s overwhelming.

That’s why we really try to encourage on the podcast and I’ve talked to a lot of individuals where you just go for that lick and the least glamorous, most boring approach and that’s the long-term rental. And I am not saying this is a fit for everyone but it’s a really great way to just kind of get in there and try real estate investing and figure out how to set and forget it. Let the property manager handle it or build up your system to handle it and just let things kind of progress from there.

Now, again, that’ snot a fit for everybody but what I encourage you to do is to learn a little bit about each different option, see the pros and cons and then once you dial into one, just learn that, stick with it for a while before you start branching out because it’s super easy to try to evaluate everything and get completely lost in the weeds.

[0:08:42.1] TU: David, talk to us more about – for your individual, Nate alluded to this as well of the approach towards the long-term rentals, kind of the buy and hold strategy and that certainly is one of many different pathways that folks may go, you’ve been at this for a while, why has that strategy really been at the forefront of your plan?

[0:08:59.8] DB: Yeah, I think for us, one of these values that we had is that we didn’t want real estate investing to feel like it was taking over our world and became our everything and sucked every last minute out of every last corner of life. That made the long-term buy and hold with the property manager managing things with me not out there painting and doing whatever else, that made that a really good fit.

There’s certainly other things that are enticing like vacation rentals and self-storage and other things like that but it was just a much simpler start in the long-term rental space. I think, the other thing that’s nice about that though is that early on, when there was a little bit more time and sweat equity was something that we were able and willing to throw in there, earlier on, that was a great fit and I was able to go out and paint and do things and help that process move a little further forward but the long-term rentals have a disability for you to do some of that if and when you want to and then back off of that if and when you want to.

Just from lifestyle and all of that really helps that to be a fit for us and then to Nate’s point too, once you get started in that space and you start to get good at it, the second and the third and the fourth becomes so much easier for acquiring those rentals or whatever that is because it’s getting that first property that’s the hardest step.

[0:10:25.3] TU: That’s why I love it and we’ll come back to this here in a little while. I love what you guys are doing with the one-on-one coaching program, right? Because from my experience and I think certainly from your guys’ experience, working with other pharmacists, investors, many folks that, “Hey, this is top of mind but I just can’t get over some of the hurdles” some of these objections that we’re talking about here today. Obviously, once you start to align what strategy of real estate investing fits best with you individually as well as your financial plan, getting over that first hump and then obviously, building the confidence to continue to snowball further.

I think if you guys have done an awesome job on the show, kudos to you guys of really featuring pharmacists that are doing lots of different types of investing and I think that can help people get an idea of, “Yeah, I hadn’t thought about that” or some of the pros of this strategy and cons of that strategy as well which takes me to my third objection, David, which is I heard so and so on the YFP Real Estate Investing Podcast and that’s awesome for them but that feels so far out of reach of what I think I can do.

I heard Jarred or I heard the pharmacist investor talk about the portfolio that had been building and all of the processes and systems and teams that he has in place and I’m just trying to get started with my first one and it feels really overwhelming and maybe this whole real estate investing thing just isn’t for me, talk us through this common objection?

[0:11:44.9] DB: Yeah, there’s a real pro and con to hearing some of those major success stories because on one hand, we hope and one of the things that we say on all the podcast is we hope that we’re after some education and some inspiration for people to take that jump and to get into their first property or to try that on for size and see if it’s for them, if that’s what they want to do.

Then, yeah, when you hear some of these killer success stories of someone that made $100,000 on a flip or where they bought 20 houses in a year, something like that, those kind of things then start to get intimidating too and you start to think, “Well, I don’t know that I can make $100,000 in a flip, I’ve never flipped a house before” so that intimidation can set in. 

I think you’re right, there’s something about backing off of that. Understanding that folks that share their beset win of every game that they’ve played on a podcast that isn’t necessarily reflective of their first deal, their average deal, their mediocre still win out there and so setting aside some of those comparison things can be helpful to make sure that it’s not delaying someone’s start.

[0:12:58.3] TU: Yeah, you’ve really got to hold this line, right? I remember several years ago, I started listening to the bigger pockets podcast which shout out to you know, the great content they have in the platform community built and I would feel the highs and lows of those emotions, right? You’d feel the high of the education, the examples of stories, it was like those lightbulbs going off of I had no idea about this or that opportunity and then right behind that would be the fear of my gosh, where do I start? That seems so overwhelming.

I think that’s where the community, that’s where the accountability, that’s where that focus on the first property can be so valuable and as you mentioned, David, some of the pros and cons that can come from certainly, sharing some of the stories from other individuals. Nate, real estate investing to David’s comment, we often see some of the glamorous things, there’s certainly lots of YouTube stars that are out there, right? that are doing this that can further worsen this. What’s your advice for how we hold this line?

[0:13:54.6] NH: Yeah, I think something to keep in perspective is just like what Dave was eluding to is that the norm is not to have a ton of these properties and really, one of the things we try to advocate forward during our podcast episodes is, you don’t have to leave pharmacy and just do real estate full-time, you don’t have to be a millionaire real estate investor.

If you look at just a couple of stats here for you from roofstock.com, 16.7 million properties in the United States are owned by mom-and-pop landlords with one or two properties each. Meaning, this is just somebody adding extra rental property in their portfolio, maybe too that they’re using that to supplement their long-term retirement plans, right? You’re buying a property, you’re doing that early in your 30s, maybe even in your 40s, you’re sticking a 30-year mortgage on that and then you’ve got a paid off property in retirement, right? 

That’s kind of what a lot of people are doing actually. It’s not these huge takeovers of real estate portfolios. Don’t compare yourself to those people that are doing that if that’s not your goal. Really taking that into perspective and trying to reset that expectation can be helpful.

[0:14:58.6] TU: That’s a really good reminder and I’m glad you shared that stat, Nate because I think it does feel, that surprises me when I hear that number because it does feel through listening to podcasts, reading books, reading real estate blogs, it feels like that would be the minority, not the majority in terms of folks that only own one or two properties and have that long-term strategy in mind so that’s a good reminder, you know, I think of really taking a step back and what is truly the market out there of how folks are investing. 

Nate, number four, objection number four, market’s red hot, you know this all too well as an agent and the work that you’re doing with clients in that capacity. “The market’s red hot and I’m worried about buying at the peak, you know what? Maybe I should just wait and kind of let this be a thing into the future.” Talk to us about really trying to invest in real estate and this issue of timing based on what’s going on in the market.

[0:15:48.8] NH: Yeah, it’s super tough. I mean, the real estate market is still up. I think I was just looking at stats the other day and it was something like 17% increase in home prices year over year already and that’s on top of what we saw in 2020. I mean, we are seeing huge, huge increases in home prices, things are still flying off the shelves in multiple markets around the country. 

I just heard of an agent yesterday that there was a property listed on the market, it was by all accounts about falling down and it had five offers by the second afternoon of it being on the market, so it’s a tough time to jump in. I think the trick is that no one has a crystal ball, there is no way to time the market and so waiting for it to do what you want just means that you end up waiting. 

I think the better play and again, we’re not trying to convince anybody to do anything either direction, is to make sure the numbers work no matter what. And if you can do that, it doesn’t matter what the market is doing, right? If it goes down but you’ve built in that cushion and that base, you’ll be fine. If it goes up, fantastic news. The goal is not to try to time the market, right? I don’t buy a property and think, “Oh man, if I buy this now, it will be in good shape but about in six months I’ll…” you know, no one can figure that out. 

If you can go in and look at it from a very objective perspective and say, “The numbers work, the numbers work even if there is a small downturn and the numbers work even better if there is an upturn” then you just commit to it and go for it. 

[0:17:13.5] TU: David, as someone has been at this for longer than a decade, you’d seen certainly the dips and where many folks were jumping in and buying properties that have obviously appreciated significantly and then you’re in the midst right now as an active investor trying to navigate this hot, hot market. Talk to us about it from your perspective. 

[0:17:32.2] DB: Yeah, I think what’s wild about that is that, you know, we bought our first house as a live in flip a little more than a decade ago but we still have it really see, like we have a person who lived through a down market because it’s been that long, which then I think a lot of people are saying like that’s probably overdue and if you ask people that live through that 2006, ’07, ’08, they probably still feel those scars of where the market really turned. 

I think that that’s a reality of investing in general is that you know, the stock market as an example has some average returns that are positive if you look at big enough ranges but at any given year, that’s not necessarily guaranteed. I think real estate is a little different still because it is not quite as liquid. It is not like I could just go into an app somewhere and sell some index funds and five minutes later it’s done, right? 

You definitely can’t do that with a house, so I think if your goals are to buy that property and hold it for 20 or 30 years, that’s a much different conversation than if you want to buy a rental, I want to try for six months, I want to sell it particularly when you think about the cost of transacting real estate, so taxes, fees, realtor commissions, all those kind of things. I think there is definitely some downside that we all need to keep in mind if there are thoughts of a market decline. 

I don’t know what anyone’s crystal is saying this week, you know, we may see that or we may not but one of the things that I keep thinking in this market is that saying that I have heard lately of when is the best time to buy a rental property 20 years ago. When is the second best time? Today, you know, if you really have that long-term perspective if owning rental property, if you are buying right today still, maybe a good time to do that. 

[0:19:20.8] TU: That’s great stuff and the reason I brought this one forward is I think especially for folks that, you know, are feeling overwhelmed by some of the other objections we’ve already talked about, you know, looking at a market like we’re in right now can be an easy opt out, right? Like, “Well, there is all these things but also the market’s where it’s at, so I am just kind of hold off” and I think David, what you shared there is a good reminder of what’s the long-term horizon that we might have involved or in mind as we look at our investing goals and plan. 

David, objection number five is, “I don’t know how to build a real estate team” so you know, what I am referring to here is often what I would hear other pharmacist investors or other investors at large talk about their experiences, you know, people talk about connections and relationships they have with realtors that are investor-friendly agents and contractors that they are comfortable working with and that they vetted. 

Perhaps lawyers, relationships with lenders, right? They are a phone call away for many of these folks and for those that are just getting started, “I don’t know where to start and I don’t know necessarily how to build the team and to build these relationships.” Talk to us through that. 

[0:20:21.7] DB: For me, my story started with finding a great real estate agent that was then able to introduce me to other people around that could be a great team and I know there is definitely that perspective out there where like, “I need to have three contractors and backup contractors and two lawyers” and all these people lined up before I even go walk a first house for the first time and I certainly understand particularly from the personality of the pharmacist that wants to dot all the I’s and cross all the T’s very carefully and very methodically. 

I definitely get that and particularly, if you are taking on a really risky scenario like if you are jumping into a house with a major rehab need, I can definitely see some hesitation in that but for us, we found comfort in just buying a more standard house that didn’t really need a ton of work, not trying to get in over our heads on our first transaction and just finding a great realtor that could recommend great people and then from there, kind of learning that network too. 

Talking with that contractor to meet other contractors, talking with the lender that our realtor introduced us to, to find even contractors from there. Networking with the local real estate investors association that we were then introduced to and meeting accountants and attorneys and other lenders and other contractors, other wholesalers and so just getting to know a bunch of people kind of methodically and jus that organic growth process rather than going out there and feeling like, “If I don’t have 20 people that I can call in a first name basis and text a really quick response, I can’t jump into any of these” but no, just starting off with who is that realtor that I know can help me build that team. 

[0:22:07.8] TU: Yeah and this is one example why I’m so excited about what you guys have built in the Facebook group, the YFP Real Estate Investing Facebook group and the community at large focused and interested in this topic is we’re seeing a lot of, “Hey, I’m an investor in Buffalo and I see you’re a pharmacist investor there as well, would you happen to know so and so?” right? They can build those relationships through referrals. 

You mentioned the value and power of networking and I think it becomes a lot more comfortable when I can connect with another pharmacist who has worked with somebody or another investor that I know and trust that has worked with somebody and built those relationships for those referrals. Nate, David mentioned a couple of times the value in starting with a good realtor who really could then help shepherd some of those other relationships. You wouldn’t happen to know one would you by any chance?

[0:22:51.9] NH: Hey, if you’re in Cleveland, Ohio, give me a call. No, really this is why we launched the YFP home buying concierge and then eventually, the real estate investor concierge where you can go and get an investor-friendly agent because we found so much value for everyone that we’ve talked to, that that’s where it all starts from. If you don’t know how to build a team, that’s okay. 

Take one step forward and a lot of times that one step is a really good real estate agent because they are going to be that Rolodex of people that you need to tap into different avenues. Again, if you go to yftrealestate.com, you can tap on, find an investor-friendly agent, connect with me and we’ll actually get somebody local in your area and again, the cool thing about working with an agent is that especially if you are a buyer or an investor, there is no cost to doing it. 

It is a free person basically to walk you through all the steps that you need to understand, give you access to the resources that you need and be someone that can give you some advice along the way. Again, really advocate for that, that’s exactly why we have the service available because that’s a really great starting point for a lot of people. 

[0:23:54.3] TU: Yeah, we will link to that in the show notes for folks that want to connect with Nate to learn more and have some further discussion. I would highly recommend looking at that further. Those are five common objections that certainly are things that I thought about. I suspect many other pharmacists might be thinking about it, “I’m embarrassed to get started.” I want to shift gears here and talk about some of the takeaways that you guys have had now. 

That your 40 plus episodes into the YFP Real Estate Investing Podcast, you have interviewed many pharmacists, investors, connected with others beyond that. I suspect there has been some positive takeaways not only for you guys individually but also in seeing some of the wins of that community and growth of this niche of pharmacists that are interested in real estate investing. 

Nate, I’ll start with you, as you guys are now more than 40 episodes in back to April 2021 when the podcast started, what have been some of your takeaways from the podcast and the launch of some of the YFP Real Estate Investing initiatives?

[0:24:51.6] NH: Yeah, I think the biggest thing for me as I look back is all of the really interesting ways that pharmacists are doing this. I think when David and I started developing the concept of this podcast and what it was going to look like, I think in my head it was going to be a bunch of people coming on talking about their long-term rental they have down the street and it’s like their one piece of it but there are pharmacists doing things from commercial to mortgage lending to – 

We’re going to have a little spoiler down the road, we’re going to have somebody on the podcast here a little bit who bought a motel and what that looked like. I mean, there is all these really cool stories of pharmacists doing things that I never would have expected and it’s just been so great talking to them and hearing their stories and how they got there because it is all a little bit different but all remarkably the same in terms of, “You know, I had this problem. I started looking into it and here’s how I solved it and here’s what my life looks like right now.” 

That’s just been so fun for me to see how those people do that and connect with the community that shares one thing in common but ultimately shares much more than that. 

[0:25:48.6] TU: David, what about for you? 

[0:25:50.0] DB: One of the things that I’ve found is getting out of my own head and getting into community with others is just so critical whether that’s real estate investing or even all of our shared experience in pharmacy school. We probably all had that like walking in a group from class to class and things like that, finding people to study together and that just helps to kind of keep you grounded and keep you focused on what’s important. 

There’s so much that I think can be overwhelming, whether it’s pharmacy school, whether it’s real estate investing, whatever you’re trying to learn and that community is helpful and not just a community of people that are interested in that topic but a community of people with some shared experiences, so it’s just been so fun to hear pharmacists on this podcast. Pharmacists, they’re all wired similarly in terms of personalities. 

Pharmacists that all value their career that they have invested heavily in, where they aren’t really trying to quit their jobs to be full-time investors like I think is common in a lot of other channels out there but pharmacists that just want to reimagine what life could be if they had additional income streams or more diversified retirement plan. It just seemed that diversity of pharmacists and non-pharmacist guests as well has just been a lot of fun to see that community grow. 

I think if I could sneak a second takeaway that I’ve had in there is that and I think we alluded to this earlier but there is no value statement on goals. I think we have seen some really unique goals the pharmacists have brought. I think that talking with Blake and Zach early on and how they’re buying house after house after house and in kind of a rapid speed as they are trying to grow something there is a very different experience than when Eric Geyer came on and talked about what he’s doing with real estate investing a small number of deals, something that he doesn’t have to spend a lot of time on. 

It’s you know, having one rental house can be a great goal, two could be a great goal, a hundred could be a great goal that there’s not necessarily a value statement in one goal is good or a goal is bad but just seeing pharmacists set those goals and achieve those goals has just been a lot of fun and really inspiring.

[0:28:04.5] TU: Kudos to you guys for bringing those guests on, asking good questions, right? Which allows folks to really tell and share their story and some of the motivational why behind what they are doing and certainly recognition of the time that goes into doing those episodes, planning for those episodes and I certainly think it’s adding a ton of value to the YFP community at large, so thank you very much to you guys for that. 

Nate, 2022, again, we’re 40 plus episodes in. Obviously, I feel like we’re just kind of scratching the surface to some of the opportunity and education in this area. What can we expect, what’s ahead for 2022 when it comes to the real estate investing podcast and some of those efforts for the community? 

[0:28:43.4] NH: Yeah, I think we’ve got a lot planned and pretty excited about. I think the biggest thing on my mind right now is we’re about to launch is our one-on-one coaching program. If you have seen anything about this in the Facebook group or heard about it on a podcast, the goal here is basically to say, “How can we take our community who is right on that edge?” right? 

They are pretty ready to buy a house, they just need that motivation to kind of get to the finish like or to answer a couple of questions and so how do we take them from none, no real estate investing at all to that first house and so we launched this coaching program as sort of a beta test with a small cohort of individuals. We just had our kind of final applications due and acceptances go out and really excited to see where that takes us. 

If we can get everybody over that line and actually buying their first rental property that would be really fun to see. 

[0:29:29.1] TU: I am really looking forward to hearing some of the output and I suspect some of the success stories that are going to come from that group not only going from none to one but perhaps even some of the future growth that will come for those individuals and I sense the motivation we’ll provide for the rest of the community as well. I really appreciate you guys and the efforts that you’ve provided. 

As we wrap up here, I would point folks in a few directions. If you’re not yet listening to the YFP Real Estate Investing Podcast, I hope you will tune in each and every Saturday. Nate and David are bringing you new episodes and if you are not also yet a part of the YFP Real Estate Investing Facebook group, I hope you’ll take a moment to join that community and we will link to that and both of these in the show notes. 

Finally, David and Nate put together a great guide just about a year ago as these initiatives were started, The Pharmacist’s Guide to Real Estate Investing, we have that available for download for free at yfprealestate.com. David and Nate, thank you guys so much for joining and looking forward to an awesome 2022. 

[0:30:24.8] NH: Thanks Tim. 

[0:30:25.7] DB: Thanks so much. 

[END OF INTERVIEW]

[0:30:26.7] ANNOUNCER: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

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

[END] 

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YFP 240: How & Why This Pharmacist Started a Business in the Middle of the Pandemic

Posted on by yfpadmin


How & Why This Pharmacist Started a Business in the Middle of the Pandemic

Dr. DeLon Canterbury recounts how early setbacks motivated him to start a business in the middle of a pandemic and how his personal ‘why’ shaped the work he is doing to help solve the problem of mismanaged medications in the senior population. 

About Today’s Guest

Dr. DeLon Canterbury is the CEO/Founder of GeriatRx which specializes in Pharmacogenomics, Medication Deprescribing, and Health Cost Savings for providers, caregivers, and patients. DeLon was fired in the height of COVID, and took this opportunity to pursue his passion for patient advocacy and empowerment while battling for health equity by addressing social barriers to care. GeriatRx has saved our patients well over $150,000 within its first year while keeping loved ones from being involuntarily committed into a nursing home!

Episode Summary

The senior population is a group that is often left to the wayside when it comes to healthcare, fraught with duplicate therapies, errors, and cost barrier issues that may be avoided with adequate knowledge and care. Dr. DeLon Canterbury, founder and CEO of GeriatRx, is a pharmacy entrepreneur who has made it his mission to help solve the multibillion-dollar problem of mismanaged medications that lead to preventable deaths in the older population. This week, Tim Ulbrich sits down with DeLon as he recounts his professional setbacks as a new practitioner, how those setbacks motivated him to start and lead a business, and why he decided that the middle of a pandemic was a good time to begin a new business venture. DeLon shares how his personal and professional ‘Why’ has shaped the work that he is doing at GeriatRx plus a few stories that exemplify the need for this type of senior care. You’ll hear how DeLon came to the position of strength financially, able to start his own business, and some apt and inspiring advice for fellow pharmacists who have a seed of an idea but no idea how to move forward with it.

Key Points From This Episode

  • How DeLon’s love of medicine was inspired by his mother’s expertise in herbology.
  • What moved him to get his Board Certified Geriatric Pharmacy degree.
  • The recognizable dark road that almost led him out of the profession. 
  • How the experience of not getting into residency turned out to be a blessing in disguise. 
  • How DeLon’s involvement with community helped him learn to lead by service. 
  • The pivot point that reinvigorated his passion for pharmacy. 
  • The power of patient advocacy and teaching patients to advocate for themselves. 
  • About his work with a local nonprofit for older patients and what services they provide.
  • Hear about the care GeriatRx provides, from advocacy to deprescribing methods.
  • DeLon’s moving story of his ‘Why’ and becoming the voice for caregivers and patients.
  • Some of the groups he works with and their incredible service to underserved people. 
  • A story of being an expert medical witness and the ugly part of families and elderly care. 
  • Getting into the finances; how he got the capital to create this business. 
  • Learning to articulate his value when he was starting out. 
  • DeLon shares some great entrepreneurship advice for his fellow pharmacists out there.

Highlights

“Being in a pharmacy is not just pushing scripts, you’re literally learning how to motivate, energize, drive goals, and bring the best out of others.” — Dr. DeLon Canterbury [0:10:40]

“Truly teaching a culture of how patients can advocate for themselves can honestly improve health outcomes and build their confidence and trust in you, [not just] as a pharmacist but in the system.” — Dr. DeLon Canterbury [0:13:23]

“Our seniors are grossly overmedicated and we waste nearly $528 billion a year on mismanaged medications. That equates to nearly 275,000 people that die each year due to drug-related adverse events. Unfortunately, our seniors are the most susceptible to these numbers.” — Dr. DeLon Canterbury  [0:17:44]

“It’s been such a blessing to know that I can be relied on and give a talk or give a presentation and empower people with the knowledge of a pharmacist but also show how versatile our roles can be in this profession.” — Dr. DeLon Canterbury [0:26:40]

“I learned that in business, capital is supposed to be fluid. Yes, you want to put some, pay yourself, put some in the business but your money is meant to help you make more money.” — Dr. DeLon Canterbury [0:38:06]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

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

This week, I had a chance to sit down with Dr. DeLon Canterbury, founder and CEO of GeriatRx. A few of my favorite moments from this episode are hearing DeLon recount his professional setbacks as a new practitioner and how those motivated him in his journey to start and lead a business, why he decided that the middle of a pandemic was a good time to start this business and how his personal and professional “why” has shaped the work that he is doing at GeriatRx and his mission to help solve the multibillion dollar problem of mismanaged medications that lead to preventable deaths in the senior population.

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

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

[INTERVIEW]

[0:01:26.8] TU: DeLon, welcome to the show.

[0:01:28.5] DC: Hey Tim, appreciate you having me on. Thanks so much, how are you doing?

[0:01:32.8] TU: I am well, it’s a great day here in Ohio, I’m excited to have the opportunity to share your story with the YFP community as we continue on this journey of featuring more and more pharmacy entrepreneurs. To highlight the various ways of PharmD can be used, as I’ve said before on the show, the PharmD in my opinion is just the starting point and I hope this story with DeLon is a great example of that and I’m hopeful for those that are listening, it will provide some motivation and inspiration.

DeLon, before we get into the why and what of the work that you’re doing as the CEO and founder of GeriatRx, tell us more about your decision to enter pharmacy school, the profession and what you’ve been up to since graduating from UNC?

[0:02:14.3] DC: Yeah man, I would love to. You know, my family, they’re actually from the Caribbean so my parents are Guyanese and when we grew up in Brooklyn, they came as immigrants in the 80s. You know, a lot of my family members would use herbal products and remedies to treat common colds or constipation and we generally call them bitters and we would just boil a bunch of tea pods and we would feel better even though it tasted gross.

My mom became this master herbologist, I don’t know how she did it but she grew up with all of these plants in our backyard. She got very used to knowing what to use and which plant and what situation, what indication. For the most part, they seemed to work, you know? We lived off of Tiger Balm and Vicks and these bitters that we would drink to purify the blood. That got me super interested in the world of medicine and healing and knowing the science behind these plants that lead to the drugs that we have today. 

Try to get that nerdy side of how can I use this ability to understand, you know, the science and chemicals to treat and heal was what grew me to pharmacy. That background I attribute a lot of it to her and then of course, it does help to actually be good at chemistry and some of the math, but what I like the most about pharmacy before I got into UNC was really just the ability to know what all the drugs are doing.

I mean, it’s simple and plain but that was the best part of it, and it affirmed that if I can use this power to heal then this has to be my journey.

[0:03:57.0] TU: You graduate from UNC in 2014, here we are in 2022 and we’re going to talk about the business and the work that you’re doing with GeriatRx but of course, we got that time in between, 2014 and current state. Tell us more about goals when you are leaving pharmacy school and some of the initial work that you were doing as a new practitioner.

[0:04:17.7] DC: For sure, I was heavily interested in becoming an MPH PGY2 to work in the public health sector as a pharmacist and so I was interested in admin residencies, I was interested in being an administrator in a hospital setting. But unfortunately, I did not match. I mean, I had some stellar interviews and it took some final rounds here and there but no, nothing really matched for me and this was while I was working as a grad intern with Walgreens because I worked there for a year prior.

Here I am, literally at Walgreens, filling some scripts on a busy day and I get the email saying, “You did not match on match day” and I’m like, “Oh damn, this is – I’m stuck here, I’ve been trying to escape.” I was mad for a couple of days, got some drinks and realized, “Well, if this is what God has in plan for me then hey, I’m just going to keep doing it.”

Lo and behold, after what, six months of floating all over North Carolina, I was promoted to a pharmacy manager. This was back in 2015, 2014 in a really quick amount of time in Henderson North Carolina. I was there for about two and a half years and was able to move the metrics, was able to drive a team and meet goals but after a while, it got a little bit taxing on my mental state and in particularly in this high volume, high traffic store, it was rural, I had pretty much 50% geriatric patients. 

That was some majority population there but in addition to that, you can see some of the health disparities among my Latino black patients, as well as my elderly geriatric patients and they’re the ones that had the most duplicate therapies, errors, cost barrier issues that all could have been avoided with just a switch of a drug and that got me thinking, one, I don’t know a thing about geriatric pharmacy at all. I went back, I said, “All right, let me get this credential because I want to learn more to better serve my patients.” I did that on my own time but –

[0:06:34.7] TU: Was that the CGP or –

[0:06:36.6] DC: Yeah, it was the CGP, Board Certified Geriatric Pharmacy degree. I got that in 2017, took me about two, three years to get it but truth be told man, the retail setting, you kept seeing the same thing day in, day out. Here we are taking care of people for metrics. That really isn’t taking care of people. It’s just what your boss want you to do and it doesn’t align with you and your spirit really as a pharmacist, it’s now what you came to school for. 

We’re not here to be glorified cashiers and I’m not condescending anyone in the field, but that’s how we were perceived and unfortunately, you kept seeing the same issues with not just med errors but just the broken healthcare system as a whole. I mean, majority of care is at the urgent care in this small town. It’s like, those are the majority of your scripts and you start wondering, there’s got to be a better way. 

If the one family doctor dies in town, half of the people are in turmoil, they’ve seen this one doctor for years and years and they had to rely on other sources, and it becomes a bit of a nightmare. And this is where we had to survive in that store, but lo and behold man, this journey got me down a really dark road. A dark road of not just chronic anxiety but literally just depression as a whole.

I mean, went in, was just super robotic, I would put on a face for my team but deep down, I hated every moment of my life, every second, every day. The one or few times you get that patient that says, “Thank you so much for being here.” It warms your day, it will always warm your day, you’re here for your patients. But it does not compare to the metrics, the pips, the disciplinary actions, the “You missed your flu shot by goal by five, so no pizza for you.” #pizzanotworking. 

It doesn’t have to be this way and I felt, as a whole, I lost my soul in the pharmacy profession.

[0:08:34.8] TU: We’re going to come back to that because when you shared that with me DeLon, “I lost my soul in the pharmacy profession,” that idea of falling out of love with the profession, right? We all went into the profession with some aspirations, you know, personally and professionally, but also that love for, how can we better serve our patients and community?

I think for many listening, an opportunity to reinvigorate, reflect upon that love for the profession, it’s a great time to be doing that as we hear your story. I want to go back though, as you reflect back on your journey of not getting into residency and you mentioned potentially of the MPH advance programs, PDUI1 PDUI2 admin master types of program. 

These are very intense, well-defined career paths and if you would have gotten into those programs, you know, I think for many, that script is written to director of pharmacy, chief pharmacy officer. And DeLon might be doing something very different and obviously, that didn’t go that path and led to the business opportunity.

As you look back on that journey of not getting into residency, what many students listening might consider their top and most important short-term professional goal? How did that experience – perhaps in the moment, leading to an illusion of failure but how did that experience help shape you as a person and ultimately as a business owner?

[0:09:52.9] DC: Oh my gosh, look, I can easily say, I was pretty darn depressed about that too and I mean, I was so confident. They were like, “Oh my god, here’s my cell, I’ll call you and speak and just ask anything, we want to see you in the future.” It was like, almost intentional how much they were like, “Oh yeah, we’ll see you soon” you know? When people give you that assurance and it was just crickets and it’s like, “Nah, bro, you’re not it.” 

That was heartbreaking man, it killed my ego, killed my confidence a little bit, but man, I cannot overstate how much I learned about being an actual manager, being an actual driving force for a team, learning different soft skills and communication, understanding that being in a pharmacy is not just pushing scripts, you’re literally learning how to motivate, energize, drive goals, bring the best out of others even though you feel like complete crap.

I mean, you have to deal with it every day and you really do grow and build relationships with the people next to you. That was an intangible skill that I grossly underestimated while learning during this time in retail. Not only did it provide me a little bit of sustenance, pay off some student debt, we all have that. Also, it just taught me how to be a better DeLon when it came to management. 

It put those tools into play. Don’t get me wrong, when I’m in the trenches, you’re not thinking, “Oh man, I’m a great manager.” You don’t care, you just go about your day and live your life and looking back, I had to learn so much about just being a team leader and leading by service. That was part of what helped me grow GeriatRx because I was all about community involvement, I was all about going to middle schools and doing health fairs or career days or drug awareness, like drug abuse awareness programs for the boys and girls club, all the things that I really liked in pharmacy school, I ended up doing in that job and it gave me the power to build some deep connections and just grow.

I subconsciously didn’t realize, I do that now with GeriatRx.

[0:12:11.9] TU: Yeah, when you just shared, you know, it taught me to be a better DeLon, that was why I specifically said the illusion of failure, right? Because I think in those moments, the weight of that is real, you felt it, right? Even in some of those days you reflect back on, in the moment, were you at the bench chain, “Hey, I’m becoming a better DeLon today” Probably not always, right? The compound effect of those experiences and learning, so important and obviously, the application to what you’re doing now. 

DeLon, you mentioned leading by service, that’s something that’s been an interest and a passion of yours. When we first met, I was asking more about your career journey, you shared with me your experience volunteering and getting involved in different opportunities. Tell us more about what those opportunities were and how this was a pivot point that reinvigorated your passion and love for pharmacy and the role that a pharmacist can and should play in our broken healthcare system?

[0:13:05.0] DC: Man, for sure. You know, one component of healthcare that I think is grossly underestimated is the power of patient advocacy and of course, we do it when it comes to “Yeah, you should ask about this.” Little things here and there in our clinical settings. But truly teaching a culture of how patients can advocate for themselves can honestly improve health outcomes and build their confidence and trust in you as a pharmacist but in the system.

What I found with this broken system was, we weren’t doing our jobs to fully applicate. I got a little bit, I told you, depressed about that, but I found, thank god, a local nonprofit called Senior Pharmacist. This was while I was still in Henderson, moving on to Durum. They were a team of pharmacists and social workers that strictly helped people 60 and up in Durum County to not only enroll in appropriate Medicare plans, but they were this ship site for the county, needing state health insurance and information program. 

They literally understand all the ramifications of Medicare and Medicaid within that state and county which, guess what, we don’t learn that in school, right? I don’t know any of that stuff and even when I hear Medicare, all I know is like coverage and deductible, donut hole, yeah, that’s it. That’s all I got.

This not only forced me to become a certified trained SHIP counselor, that means that I’m legally allowed to basically guide patients on what Medicare plans and Medicaid plans and what options are available for patients who are low income. This just changed my whole perspective of complete patient advocacy because here I am doing brown bags and net reviews and deep prescribing initiatives with this amazing nonprofit that’s not only saving patients on average $400 to $700 a year per person who are on fixed incomes, right? They’re literally making like, 18k a year if not less.

These are 65-year-olds who have already dedicated their lives to their healthcare, to our working force. This team of people saves thousands of dollars. In addition, they have their own prescription copay card. When people hit the gap, they can use a senior pharmacist copay card in addition to their Medicare, build them together and get the price cheaper. Because you and I both know that gap can be detrimental to people. 

Again, this was like, complete opposite of Walgreens, I mean, we’re getting people off of drugs, we’re saving them money and the best part is, we are tracking things in real time because they were partnered with Duke University Hospital system.

Any communication was communicated in epic and documented and there was a drug change, there was a PA, we would do it for them, I mean, it was like an all-encompassing service, a concierge service so to speak, for low-income people who otherwise would have been lost to our healthcare system.

My god, that blew my mind and to this day, I still volunteer with them because that’s how much they mean to me and that’s how much I have actually based my business model off of what they do, which is cost of what it’s deep prescribing and patient advocacy. You really don’t know how to advocate if you don’t understand all the intricacies of Medicare and you know, parody levels, like, how low are you, what benefits are out there for you and I tell you, we don’t learn this in school. 

It changed the way that I’ve perceived paraenesis and social workers and how the two are both needed to really mesh those barriers and social determinants of care. I love it, it’s been a driving force for why I’m here today.

[0:17:09.8] TU: Great stuff DeLon. We’ll link to Senior PharmAssist in the show notes for folks that want to learn more, whether they’re in the area and perhaps an opportunity for volunteering or folks that just want to see another model and perhaps find something, start something similar in their own area as well.

Let’s take a peek behind the curtain at your business that you started, GeriatRx, we’ll link to the website in the show notes, it’s geriatrix.org. DeLon, what is the problem that you are trying to solve when it comes to the business at GeriatRx?

[0:17:44.3] DC: I firmly believe that our seniors are grossly over-medicated and we waste nearly 528 billion dollars a year on mismanaged medications. That equates to nearly 275,000 people that die each year due to drug related adverse events. Unfortunately, our seniors are the most susceptible to these numbers and that is really the driving force on why I specifically help older adults get off of harmful medications, high-risk medications and not only focus on cost savings but focus on reducing the needs of our healthcare system to respond to mismanaged medications.

We’re directly and indirectly saving money but the key to GeriatRx is providing a holistic concierge, telehealth-based service where we use genetic testing, we’re here with deprescribing methods and of course, we use the patient advocacy piece by not only addressing sole determinants of health by looking for cost savings, food barriers, ability to reach needed services but we communicate things in real time to their doctor. We’re literally closing the loop that’s much needed in our senior population who sadly, I feel have been left to the wayside when it comes to our healthcare system. 

[0:19:16.3] TU: Tell us more, DeLon, about your personal “why” specifically as it relates to your experience with your grandmother who is suffering with personal pain from unnecessary prescribing and the influence that that had, on starting the business and the work that you’re doing.

[0:19:29.6] DC: Yeah, I’m glad you asked. Yeah, my grandmother, Mildred, she was actually in the nursing home in New York for most of my college years. This happened when I was a junior/senior in college, thinking about pharmacy school. She was in a nursing home for a minute and we started noticing some changes in her behavior. She just was kind of forgetting her grandkids, my mom was a little nervous about that and it got to the point where in this nursing home, she was given the medication that completely spiraled her dementia out of control.

We at the time had no reason why she was declining so rapidly. The irony is, that very same nursing home kicked her out because she was having behavior issues. My parents are pretty much given the choice to basically invite her back home with them in Georgia and essentially raise another child because they both have full time jobs and now they have to be full time caregivers and balance with their work life schedules how to take care of my mom’s mom. This was a tough time for them. 

My mom was a teacher who has to commute and my dad luckily had his own business and he was able to be flexible but for four months, my parents kept seeing her worsen. She was wandering out of the house in the middle of the night, she would snap at my mom, she would literally ring the doorbell at three AM and asked where she is.

Things that our parent’s worst nightmare to see who was once the rock of your family decline mentally. Again, we didn’t know what was going on for months and it got bad that we had to start getting home health services, we had to basically get some round the clock attention for her and put her into another nursing home because my parents couldn’t do it.

Again, more money wasted. Four months into it, luckily, a retail pharmacist, I believe it was Rite Aid, found that she was on Ziprasidone and she was on it quite a while but it had no indication and for those who don’t know, there is an FDA Blackbox indication for any anti-psychotic for dementia behavioral symptoms, which was why it was given to her which is wrong, it’s inappropriate and in fact, harmful.

Not only is there a risk of increased debt but of course, there’s a risk of, guess what? Delirium, dementia, acting out, having behavior issues. It wasn’t until this pharmacist, four months down the road advocated and pretty much demanded the doctor, stop it, who was still the prescriber in New York.

Two weeks later, her symptoms resolved. She remembered who she was, she was calm, she was just fine. Imagine how many families deal with this and don’t even second guess the medications that their loved ones are on. How many people spend tons of money and don’t even think that, “Well, the doctor ordered it so it must be safe.” This conception that patients have is they don’t think twice about the meds. 

If they do, they’re afraid to speak up so I said, “You know what? I’m going to be that voice. I am going to be that advocate. I am going to provide a concierge personalized service where I do that for you and you don’t have to worry or have any doubts that it’s the actual litigations.” And that’s why I focus on senior patients even though I can help any older adult who’s medicated, I still do that too but this is such a passion project for me because I don’t want anyone to go through what my parents went through or what Mildred went through, who honestly could have died. 

Just to be frank, she died, she lived until 90, which was fantastic but I got a text during my last day of rotation fourth year that she died as I was getting my presentation from my final rotation. You know, I knew she was at peace but she could have easily died during my time in pharmacy school if not earlier because of that pharmacist who saved her life. 

[0:23:38.1] TU: Shout out to that pharmacist if they happen to be listening, what a cool testament to pharmacists who are in the frontlines being diligent about identifying some of those and raising the red flag, right? Sometimes in the midst of you’ve talked about the business, the chaos that can be the expectations, it takes time not only to identify but also be willing to kind of address and enter into the messiness that that can be sometimes. 

DeLon, you highlighted I think and articulated very well the problem with mismanagement occasions, the need for deeper prescribing, the impact that mismanagement of medications can have on preventable deaths, so then tell us more about from a business standpoint as you’ve built out the work that you’re doing at GeriatRx, who is the customer and what are the products and services that you’re either offering or that you’re working on building out? 

[0:24:26.0] DC: Sure, so customers tend to be frankly the caregivers, who are I would say the most neglected person in this loop of health care shenanigans. The caregivers are the ones who have pretty much minimal resources, they’re usually condescended to when it comes to the doctor’s office, they’re not listened to, they don’t have advocates and I figured why not be the clinical advocate for them. 

I partner with caregiver support groups, I work with nursing homes, basically anyone who is senior facing. It could be an adult day care center and I give them the ways that they can advocate for themselves and their loved ones. I talk about de-prescribing. I particularly do a good deal of social media marketing. You know, a lot of the caregivers are on Facebook groups so I provide some solace to some of their questions on, “Hey, we’re starting Risperdal. What do you think?” “No, don’t do it.” 

I do that a lot just to be a resource and I’ve gotten clients literally from my feedback, so you know, I do consulting and with telehealth. It’s interesting how the reach can be spread but again, there is a fine line on what you can and can’t do but even so, genetic testing has given me some versatility so patients who are interested in getting the best out of their meds who want to understand side effects, their genes, how it works with their bodies, I get a lot of support from the caregiver community.  

Being in this space has allowed me to work with the Alzheimer’s Association, the Parkinson’s Association of Carolina, the North Carolina Dementia Support Group, you know I am creating content with Emery and we’ve done some Dementia Black Caregiver Supports with churches with an initiative to inform local churches on signs of dementia because we fail to remember that Blacks and Latinos actually have doubled the risk of dementia. 

It usually is more undiagnosed in that population, so again, the social barriers to care play a part and so I have strategic partners across the states. It’s been such a blessing to know that I can be relied on and give a talk or give a presentation and empower people with the knowledge of a pharmacist but also show how versatile our roles can be in this profession. 

[0:26:55.6] TU: That’s great stuff DeLon. I love the work that you’re doing, the passion that’s coming through here in the microphone that I’m sensing and I suspect those listening are feeling as well. One other story I want to highlight, you shared with us prior to the interview and this story relates to helping a family not only get off of 36 medications, let me just say that again, 36 medications down to eight but also being able to testify on behalf of the patient and prove that she was suffering from overmedication, which had led to her dramatic decline and behavior cognition attitude and chronic symptoms. 

Tell us more about this example and probably how it’s unfortunately too common and obviously, the motivation that that’s provided to you as you continue to focus and grow in the business? 

[0:27:40.2] DC: Yeah, I’d love to. That case means so much to me, that was literally my first leap of faith into this business, into GeriatRx, that happened in the middle of COVID like July-August and so, this was me hitting the ground running. I’m putting ads and basically talking everywhere I can on Whatsapp, Group Me, Next Door, Facebook. I’m saying, “Hey, I’m doing this” and believe it or not, this case was actually a referral from a fellow pharmacist. 

She wasn’t a geriatric pharmacist but she felt something was off and so when she sent me that med list, I had a heart attack. There are like four antipsychotics, there was a Benzo, there was Dilaudid, why is she on Dilaudid? There was Benadryl, there’s all types of madness going on. I was like, “Oh yeah, we got a case here” so I said, “Hey, let’s just do a med review. Let me see what I can do.” 

This is a 70-year-old African-American woman, barely 90 pounds and unfortunately, her caregiver described her as being a walking zombie and this was for months, just depressed, cathartic, irritable and I very much felt that my symptoms my grandma experienced were just like hers. This was going on for a month, I do the med review and I say, “Hey look, we got to create an action plan with the provider to get her off this things safely.” 

Not just cold turkey stop but taper as we can and they agreed. They hired me to do the review but in the middle of me doing the review, like literally the week before the court case, which guess what? I didn’t know what’s happening, they’re like, “Hey DeLon, can you appear as a medical expert and give that testimony you gave about your med review to a jury of our peers?” and I was like, “Whoa, uhh, I don’t know. Do I need a lawyer?” 

“No, no, just do what you got to do” and so I prayed on it man. I was like, “Okay, fine. I’ll do it” and so they hired me to serve as a medical expert in court and in this moment, I’ll tell you Tim, this was the ugliest litigation I’ve ever seen. I’ve never seen a lawyer try to make this sweet woman look stupid. That was just evil, it was literally seeing someone make her look like, “You can’t even remember your own accounts so of course she need to be put into a nursing home.” 

Unfortunately, the family was divided on the perspective of the medications being the problem. The majority of the family wanted to throw her into a nursing home, why? Here’s the ugly part, she had assets. Her husband was wealthy, she had a beautiful home, they wanted to seize her assets, her bank accounts and everything else and throw her into a home so that they can get the resources. 

This is the ugly side of senior care because this happens a lot and unfortunately, the daughter who’s the only one who believed that it was the meds was the one who hired me. I did that favor, I played it my case, I gave my review, I talked about anticholinergic toxicities, I talked about sedative properties, I talked about overmedicating. I mean, the statistics of just being on more than five all in front of court, this is like the first time a pharmacists is in court to me. 

I mean, I didn’t even know this is a thing. In fact, that could be a whole business model side, that’s for free guys, you can have that yourselves. It’s actually free, you can do that so I did that. The jury just was stunned, they even tried to cross examine me like, “What do you think about this report from the psychologist?” I mean, first of all, this was six months prior. Second of all, what you’re reading is proving my point that she is overmedicated. 

Anyway, long story short, but the point is, they tried to be so evil. I was like, “I know it’s their job but I was like, damn dude, you’re making this woman, you are literally asking her to remember a date two years ago if she recalls that. I don’t remember what I ate yesterday, you’re trying to make her look like this woman who just has to be in a home.” Needless to say, I get my case, I talk about the meds. 

I give my full report, the jury completely dropped the case. They completely dropped the case and they completely agreed that she was being overmedicated and they were able to keep all their assets and I shed a tear, man. She called me two hours when I got home, “DeLon, we won. We won! We won!” I was like, “Yes! Yo, yes” and that was God’s sign to me of “Yo, this is what you need to do for the rest of your life.”

For the rest of your life, I don’t care what and I was like, “You know what? You’re right because this was the happiest I have been in my career and just in my life, you know?” To have that level of impact, the keeper out of the nursing home and then the best part is a week later, we meet with the doctor, I gave all my recommendations, he’s like, “Okay, this is great, let’s do it” and a months’ time passes, a month and a half, she’s down to eight. 

She’s down to eight and her symptoms did resolve, she did get better, less constipation, less irritability, she’s only on eight meds and she’s still going strong. I talked to them last week during the holidays and they’re doing great. Again, it was a blessing and that was my affirmation that taking this leap of faith is what I had to do, it’s my calling. 

[0:33:06.4] TU: That’s awesome stuff and it’s inspiring as that example and the story is, it just makes me wonder DeLon, how many more are out there that don’t have DeLon in their corner, that don’t have a pharmacist that is advocating or family member that’s raising the concern that leads to the pharmacists who is recognizing and advocating on their behalf, right? You know, I think it’s just for me individually, it’s just such a great example and I’m inspired by the connection of the work that you’re doing at GeriatRx with your compelling vision and why, right? 

I firmly believe that every great business, side hustle, project, whatever you want to call it, non-profit ultimately is solving a problem where there’s real pain, we’ve outlined that and as one that you personally care about and feel conflicted about and you’ve got both of those here, which I think is the recipe for success. Some folks might be wondering why on the YFP podcast are we talking about entrepreneurship. What’s the connection of personal finance? 

I think as I think about the intersection of pharmacy and entrepreneurship and I am using entrepreneurship in the broadest sense, you know that could be folks that are internal within an organization that are kind of moving and shaking and identifying the opportunities for change, it could be somebody starting a non-profit, it could be starting your own for profit business but really, there’s a couple of reasons why I think this intersection and conversation that we’re having is so important. 

Number one, there’s passion that I have through my own journey that the pharmacists I mentioned earlier really is the starting point I believe to a multitude of different pathways that someone might take. And I often hear from folks that listen to the show that say, “Hey, I feel stuck” or I hear from students that say, “I feel like I just have one or two options that I’m aware of” and so my hope is, is folks here, DeLon’s story, your other stories that some of the door start to open of the ideas of possibility that may be out there. 

Then second is, how often have folks come to me and said, “Tim, I have a great idea for a side hustle, for a business, for a non-profit but…” insert lots of financial pain points, right? I have $200,000 of student loan debt, I’ve got this financial stress or I feel like I am behind on retirement saving and you know, this business endeavor is going to take some risk and perhaps, even take some capital contribution. It may certainly have an impact on the financial plan. 

The reason I give that background DeLon is, as I reflect on my own experience and talk with other pharmacy entrepreneurs, I come to appreciate the connection between one having a strong personal financial foundation and that laying the ground work for them being able to approach a business idea, with the confidence and the attention that it deserves. 

For you individually, tell us more about how you were able to get on solid financial footing such that you felt comfortable and ready to ultimately leave on the table what can be any six figured job that’s out there that would of course, pay the bills plus some but to be able to pursue this passion and interest that you have in the business? 

[0:35:58.1] DC: Yeah, I think I’m still trying to find that. No, I’m joking but honestly, I didn’t expect to be fired in the middle of COVID. I stepped down from Walgreens in 20 – gosh, what was the year before COVID? Jeez, it’s been that long, 2019, I stepped down in 2019. I honestly took a pay cut because I wanted to work at the poison control and I would be paid, it was like a $50,000 pay cut. 

I was burned out with Walgreens so they let me just step down and do something different, so I worked as a poison control pharmacist for like, I don’t know, $34 an hour and I loved it. I loved it but I ended up working a bit too much overtime because guess what? The poison control fields of the COVID calls and this was like in the beginning of the pandemic, so we didn’t even had any idea really much about COVID but we, a team of 12, ended up fielding the state of North Carolina’s nearly averaging 700, 800 calls a day. 

Of course, not normal so that honestly burned me out. I honestly fell asleep at the desk after that period of time of still being exhausted and for that time period of five minutes falling asleep because it was policy, I was fired. And this was in the middle of COVID and because I was fired, I couldn’t file for unemployment so I was even more livid and I was like, “God, again, another step down into a dream job and I get fired. It’s just fantastic.” 

I didn’t have as much of a financial plan in that regard for starting a business, however, I did have good financial standing and that was the best part I would say of working with Walgreens was having those buckets in reserve, whether it be savings, your 401(k), mutual funds, stocks, liquid assets, I had those and so, I did have to dip into the funds and guess what? I didn’t feel great about it. 

I didn’t like having to rely on the things that I worked so hard to save but I learned that in business, capital is supposed to be fluid. Yes, you want to put some, pay yourself, put some in the business but your money is meant to help you make more money and it always takes money and some assets to make more money. It’s just the truth and I had to learn that the hard way so, I had some stocks that I can just sell and guess what? 

I was riding a Tesla wave, it was just I have no footage of disclaimer so this closed but anyway, I rode Tesla and that made money during COVID and I was able to not only save but I was able to put that into the business and so the first thing I did was start getting – of course, I told my financial adviser. If you don’t have a financial adviser by now, talk to them, get your mind right because you got to have one in this game. 

You really do because you don’t know it all and we’re not perfect at everything, so get one, but I have a financial adviser. I told him what I was doing. He was like, “Okay, let’s move from this front, let’s do some things here” and that helped me have a little bit of a guiding compass so I’m not sweating bullets to make the next paycheck. I also worked a little bit part-time, independent to help out with COVID shots, so that helped me with some income but guys, have some type of capital. 

Have some type of plan for real, like I know it wasn’t as cookie cutter for me and I was forced into starting GeriatRx, which thankfully happened. But I found that having those buckets, the mutual funds, the savings, the stocks, allowed me to have that flexibility not to worry as much and so that gave me room to make mistakes because guess what? You’re going to make mistakes in business that will cost you money. 

You’re going to undercharge for your services because you just want to do it and you realized, “Dang! I could have charged 10X that and it would have had the same effect. I would have felt better about it.” I remember one of my first packages, I sold for like what? I was like $1,800, which feels good, right? But it was for six months of service. I was getting paid $300 a month so that was like what? A dollar a day? 10 dollars a day? That’s crazy. 

Anyway, I had to learn some things about how to better articulate my value and that takes some time to learn, we have a whole new business model. Again, it was critical that I had those buckets in place. I didn’t want to dip into them but I’ve gotten to a point now where I’m seeing it as what am I loosing if I don’t do this. What’s the cost of inaction? What’s the cost of not making that move, not getting that mentor, not investing in yourself, not growing yourself and your brand in a relatively quick amount of time? 

I mean, here I am on your podcast, it’s only been a year and a half since I started GeriatRx, so I think it is part of the plan. It does help to have that financial capital but keep in mind that money is fully, you can make money doing all types of stuff. You could write, you could blog, you could review, I don’t know, charts. You don’t have to feel so confined to that job especially now with the great resignation, COVID has woken up people to doing better for themselves. 

This has been a time where some of the most businesses have launched, really in the height of COVID, so don’t feel like you have to be stuck. Well, I had, guess what? I had debt too, are you kidding me? I went to every annuancy out of state so I know I got more debt than all of you all, but jokes, but still, you got to see things as gradual progression, fall forward, fail forward and keep pushing, keep moving and don’t – money is important. 

Take care of your bills, take care of your family but know that if you’re investing in some things that you may do for free that the value and return down the road is going to be worth more and that’s something that I did not know. I did not know that at first and it really has grown my business with strategic partners and referrals and ongoing projects to this day. 

[0:42:16.6] TU: Great wisdom DeLon, love the mindset that you have and you know, I’ve gotten a chance to know you a little bit here, a year and a half into the business but I would suspect if we would have talked a year and a half ago, you know, that same confidence, that same mindset, that same view and approach on, “Hey, what can I invest in that’s going to help me continue to grow” right? More of that abundance mindset I suspect has been an area of growth for you over the last year and a half. 

Lots of takeaway there from the last few minutes and as we talk about so much at YFP, having that strong financial foundation, right? You mentioned savings and capitals, options, options, options, right? You never know what life is going to throw at you. It could be a business idea that you want to pursue, it could be a job, hours get reduced, you get let go, it could be a sick family member, an emergency. It could be an opportunity, right? 

Having those options is so important. DeLon, this interview has been fantastic. I’m so excited to get it out to our community. I think it is going to be a great source of inspiration and motivation to many. Where is the best place for our listeners to go to learn more about you and the work that you’re doing with GeriatRx? 

[0:43:17.9] DC: Yeah, I am all over social media, so Facebook, LinkedIn, Twitter, Instagram, you can just follow me @geriatrx, of course my website is geriatrx.org. You can always get me there, my cellphone is literally on the website, you can email me at [email protected] but I’m most accessible on all of my social media, so I respond in any way, shape or form but LinkedIn has been probably the most easiest way to go and get in touch with me. 

[0:43:52.9] TU: Great stuff, we’ll link to all the social, website, email in the show notes. DeLon, again, thank you for your time. I really appreciate it. 

[0:43:59.7] DC: Absolute pleasure Tim, have a good one. 

[END OF INTERVIEW]

[0:44:02.5] ANNOUNCER: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. 

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

Thank you again for your support of the YFP Real Estate Investing Podcast. Have a great rest of your week. 

[END] 

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