Podcast

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

Posted on March 3, 2022November 2, 2022 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 February 24, 2022November 2, 2022 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 February 17, 2022November 2, 2022 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.

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

Posted on February 10, 2022November 2, 2022 by yfpadmin

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.

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

[INTERVIEW]

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

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

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

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

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

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

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

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

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

[0:06:14.5] TU: Yeah.

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

[0:06:22.2] TU: Wow.

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

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

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

[0:08:03.1] TB: Right.

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

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

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

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

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

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

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

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

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

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

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

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

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

[0:13:21.9] TU: Yup.

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

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

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

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

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

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

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

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

[0:16:12.9] TU: Yup.

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

The emotional part of that is palpable, it’s really important to understand that because, you know, just like there’s stress and emotion around when to claim, there’s also this feeling of, you know, if you don’t create that floor and you’re dipping into your three million dollar portfolio as an example and your every month or every quarter or whatever it is, you’re deducting from that, there’s this feeling of scarcity too.

Sometimes, you know, you want a little bit of column A and a little bit of column B. Sometimes, people don’t create that floor because they want that investment to really thrive and the idea of taking a big chunk out of that to create income is scary. But from a scarcity abundance mindset, a lot more people either by delaying social security or creating that floor through social security and annuity, really allow that abundance to thrive.

I always joke, like I joked when we bought the motorhome. I look at their red shade and I was like, “Well, you know we can completely crash and burn, lose our jobs, lose our house and we can always rely on the motorhome to have a place to live.” I think that’s just a micro-chasm of what we’re talking about here, because a lot of people – the questions for retirement is, “Am I going to have enough? Will the money run out?”

That is really important when we’re talking about things like social security and where that plays in the grand scheme of things.

[0:18:11.5] TU: Tim, I want to come back to this decision on when somebody takes money out and what it means to defer, we’ll come back to that later episodes and more on the strategy side. But taking a step back into the how it works, thinking about the funding of it and the credits, you mentioned before, this is something that folks likely have already noticed on their pay stub. Tell us more about how this comes out to payroll taxes and what they can be expecting there?

[0:18:35.3] TB: Yeah, so the two main payroll taxes out there is Medicare and Social Security. Social Security is basically tax at a rate of 6.2% and sometimes you see it together at 7.65%, which is Delta, it’s the Medicare tax rate. Every year this changes, so the maximum social security contribution in 2022 is $9,114 and that’s based on what’s called the wage base or the taxable wage base.

For 2022, the taxable social security wage base is $147,000. If you multiply that by 6.2% that’s where you get the $9,114. What essentially that means in layman’s terms is, if I am a pharmacist out there and I am making $147,000 or I am Elon Musk and I am making billions, from Social Security you’re still treated as the same. Any dollar above that is not necessarily taxed from a social security perspective.

The wage basis and the maximum amount of earned income that employees must pay social security taxes on. Now, I think Medicare is uncapped, so you’ll pay a percent throughout the higher earnings so to speak. With the funding in mind and again, you’re setting aside that – those dollars, not necessarily directly for you but for the pool that you will one day dip into. Basically you are trade in those dollars for credits.

As you work, you build credits and for you to become eligible for Social Security, you need 10 years or 40 quarters, 40 credits that makes you eligible for retirement benefits. In 2022, you earn one Social Security or Medicare credit for every $1,510 in covered earnings each year and you must earn just over $6,000, $6,040 to get the maximum four credits for the year. The idea is that you’re building credits, building credits and then depending on when you actually start to draw on your benefit, you kind of convert those credits to what that benefit is and then there is also some things called like delayed credit.

For me and you Tim, and it is different depending on when you’re born but for anyone born after 1960, full retirement age for you and I, anybody born after 1960 is going to be 67 years old. For my dad who was born in the 1940s, he’s the old man in the group here so his for-retirement age is 66. But if you or I or really anybody decide to delay your retirement, so delayed retirement, the maximum you can delay it to would be 70 years old, you would receive delayed retirement credits, which are used to increase the amount of your kind of older age benefit credit.

You would earn additional dollars and it’s about 8% per year that you delay. If my for-retirement age is 67 and I decide to retire at 68, my benefit would increase by 8%, which if you think about that is very powerful. Not everybody gets 8% raises every year and then the other thing that’s important to just remind everyone out there is that it’s inflation protected. Again, this goes back, we’re going to talk about this more on a strategy perspective but it’s just very powerful in terms of how you approach this decision.

[0:21:53.4] TU: Tim, you mentioned that the delayed component, so you know, you mentioned 67 and essentially up to 70 depending on when somebody is born, but there is also the other side of it, right? If somebody decided to take it sooner than that, talk to us about that.

[0:22:06.7] TB: Yeah, great question or great point. Yeah, you’re looking at, you’re really looking at and what we’re really kind of breaking down here is how you determine your benefit. To back up on the credits, which we should have mentioned is that the credits are based on your highest 35 years of earning. You know, it looks at the top 35 and it goes back to that question of if you delay you’re later years, you’re probably going to be substituting like a year.

A year where you are making six figures from where you made tens of thousands because you’re a resident or something like that so yeah, that’s huge. Really, the three I guess phases or ages are going to be kind of the early retirement for everyone at 62. But what happens is that your benefit is based on for-retirement age. You have your early retirement, you have full retirement age, FRA, and then you have delayed retirement and that’s to 70.

For you and I Tim, our early retirement is 62 years old, our full retirement is 67 and then our delayed retirement is 70. Now, depending on where you’re at from a birthdate perspective, if you were born between 1934 or 1943 and 1954, then 66 is your for-retirement age not 67. If you are born in 1955, it’s 66 and two months, 1956, 56 and four months, I don’t know why they complicate these things like this but yeah, so that’s the big change.

Again, there could be legislation in the future that they’re going to say, “Hey Tim, just kidding. People are living longer, your full retirement age is not 67. It’s 68” that could happen or the earliest that you could retire from an early retirement is 63 not 62. It’s you’re early for us, it’s 62. It’s for your full retirement for us is 67 and for delayed retirement it’s 70 and again, those could change in the future but dependent on how you choose to then claim, so the example is if you begin taking your social security at 62 you reduce your benefit by essentially half a percent each month to your full retirement age.

If you take it 24 months, two years, every month you’re reducing it by half a percent, which can definitely add up. A lot of people they’ll say, “Hey, my job is not great.” Or sometimes I’m forced out of retirement, for a lot of people there’s just this misnomer that, “I am going to control when I retire.” That’s not necessarily the case. It’s something like 40% of people are either forced out of their job or because of a health issue of themselves or a loved one.

That’s also something to kind of take into consideration but it’s all based on this credit. And again, when I was prepping for this podcast, I went to my socialsecurity.gov and I put out my own social security statement and it outlines eligibility and earnings. It says, “You have the 40 work credits” so to receive benefits, it kind of told me what I earned last year but then you can click in and review your full earnings record now.

It goes back really from 2021 back to, I think for me, 1998 I earned in social security’s eyes like $351 but eventually that number will fall off in the calculation because I’m going to have, you know, I have 24 or 25 years of work and those lower numbers will knock off and then I’ll get a bit of benefit but the cool thing to see is, you know I can see the dollar amount of my benefit for early, full and delayed.

Right now and I can share it, so this is at for me it’s saying if I retire at 62, I wouldn’t be on track to earn a benefit of $1,603 per month. If I wait for 67, which is my full retirement age it’s $2,341 per month and then if I delay it to 70, it jumps to $2,902. And again, these are inflation protected, that’s really important to understand. That is basically the way that the credits work and how that kind of translates to a benefit.

Again, it’s something that I think and we could probably have a full episode of like how people kind of mismanage these decision of it’s, “Hey, my brother did it at this age” or my spouse or these are what people are doing in the workplace and X, Y and Z. And it’s really just like different parts of the financial plan, it’s really important that you take a look at this very intentionally because it can have major consequences in terms of your overall outlook for your retirement picture.

[0:26:39.6] TU: Yeah and I like what you said earlier is that, how you approach social security is the most important retirement income decision you’re going to make, right? Again, one of the reasons we want to do this episode followed up with other content, if folks haven’t yet checked out their social security account, I would encourage you to do so. It is really neat to kind of see and log in and start to dig into this deeper, you can go to ssa.gov/myaccount.

Tim, I was looking back too at my earnings record, it was fun going back like starting when I used to work for the family business, Ulbrich’s Tree Farm, back in my cashier days working at a top grocery store in Western New York, so fun just to see some of those earnings history and see where things are at in terms of that really full and delayed phases. Tim, the other thought that comes to mind and we’re not going to go down the Medicare pathway right now but if you think about that early benefit and you mentioned someone begins taking it at the age of 62, they reduce their benefit by 0.5% each month.

They’re also then is that potential gap of age eligibility for Medicare benefits, so you’ve got some other considerations also with just the intersection of this and the healthcare cost as well.

[0:27:45.5] TB: Yeah, I mean it’s so much. It’s so true like when we’re talking about the financial plan, it’s kind of like you can’t just treat one system of the body like you’re looking at the entire picture and it is so true in this kind of question as well as that there is so many – I mean, just even the overlay of the taxes and like, “Okay, what’s the best way to build that retirement paycheck from a tax perspective?” And then also you invoke things like Medicare and even like gifting strategies, if you are trying to minimize tax there.

There is just an array of questions that you have to answer and a lot of them are really less about the numbers and more about, “Okay, what does this look like for you?” And so many retirees go into retirement thinking like, “Hey, I’m just so done with work and I just want you to know” but then they all often return to work sometimes because of the money but sometimes because of like the – they don’t have the social infrastructure to kind of carry on in terms of like having a passion or a meaningful life.

It’s so funny because some of the similarities with the different phases of life in terms of like, “Okay, what’s a wealthy life for you?” And answering that question in your 30s and 40s and saying, “Okay, we can’t just stock away money and not live today.” But there is a balance to that but also when you reach the end of your work in life, what’s a wealthy life to you? That question still stands and a lot of people either don’t ask themselves that question or they struggle to answer it because for a lot of us unfortunately, a lot of us we really define ourselves by our career, our role, our professional roles.

It’s important to slow down and ask the question of, “Okay, what do I actually want to do? What do I want to get out of my 60, 70, 80s and beyond?” And then execute to that. It’s a common thread no matter where you’re at in the financial journey.

[0:29:51.1] TU: Yeah, I think this too is another good reminder as you are talking about this range from, I’ll just use 62 to 70, right? The early to then the full to the delayed benefits, obviously we can see the negative impact of financially just numerically speaking, if we pull the benefit early whereas if we’re able to delay that, that number goes up. And just another reminder that for folks that are able, to build up those savings outside of social security throughout their career, you take some of that pressure off, of getting into those early retirement years.

Tim, I know we’re going to come and do a lot more detail on some of the breakeven analysis and factors that go into, that but I know that a lot of pharmacists are listening to this and I know there’s a lot of math nerds that are just looking at some of the numbers of like, “Man, it seems so obvious that if you wait, you’re going to have more.” If you defer, you’re going to see that benefit go up but there’s really more behind that.

You know, you start to think about what is someone’s health situation look like, what are other savings that they have in place and I think that that is one of those areas. And you gave and commented on this just a moment ago, this is not one of those areas you say like, “My friend Gerald John is doing this and so therefore I’m going to do that as well” right?

[0:31:02.9] TB: Yeah, no and even with the health stuff there are again, we’ll get into this later but when you look at that and you’re like, all right, there is a history in your family where people will pass away in their 70s or 80s or whatever, so that might press the decision. But also sometimes depending on what the spousal benefit is, you might even decide to delay that because if that person has a greater benefit, the spouse takes over that benefit in the surviving, you know, the surviving spouse takes it.

There’s just a lot of nuance there that you know again, there’s breakeven, there’s the total benefit, all that analysis that goes into play here but you know at the end of the day, you’re really trying to manage and plan for the unknown and that makes it really difficult. I think it goes back to, you just want to be intentional. Like you said, it’s like don’t necessarily go with the herd mentality and have this question answered way in advance.

Sometimes there are pressures like the employment and like your outlook on employment, your overall happiness factor that really presses the issue. But at the end of the day, what we’re really trying to do is come up with a plan where again, you’re living a wealthy life and the money doesn’t run out. That’s paramount.

[0:32:25.3] TU: Great stuff Tim. Again, the hope for this episode is we’re going to lay a foundation around social security to talk about some of the history of social security, the funding of the benefits, the credit concept, how the benefit is determined, what are the different points of beginning to draw on that benefit. We’re going to come back in later episodes talk in more depth on the strategy side as well as common mistakes that folks might make in social security.

As we wrap up, I want to remind folks that we’re now approaching mid-February, which means we’re in the midst of tax season. Those tax forms are likely piling up on your desk, it’s time to have that tax filing and planning for the year top of mind and we’re excited at YFP tax that we’re opening up our tax planning services to an additional 125 pharmacists households. We do taxes as a part of the comprehensive financial planning for those that our clients of YFP Planning.

We are opening the doors to an additional 125 pharmacists households. Really proud of the team at YFP tax and what they have been building. I really believe that that team is not just focused on getting the return done, rather providing value care and attention that you and your taxes currently deserve. Those 125 spots are filling up quickly so don’t wait too long. If you’re interested in working with YFP Tax, head on over to yourfinancialpharmacist.com/tax to sign up. Again, that’s yourfinancialpharmacist.com/tax.

[END OF INTERVIEW]

[0:33:48.1] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information of the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

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

[END]

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YFP 241: The Top 5 Objections to Investing in Real Estate

Posted on February 3, 2022November 2, 2022 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]

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 January 27, 2022November 2, 2022 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.

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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YFP 239: Two Financial I’s You May be Overlooking

Posted on January 20, 2022November 2, 2022 by yfpadmin

Two Financial I’s You May be Overlooking

Tim Baker talks through two I’s that you might be overlooking as it relates to your financial plan: inflation and I-Bonds.

Episode Summary

Today, Tim Ulbrich and Tim Baker sit down to talk about the two ‘i’s that you may be overlooking in your financial planning – inflation and I-Bonds, more formally known as series I savings bonds. While these words may not scream excitement, understanding these two aspects can be valuable in helping you to get the most purchasing power out of your money in the future. During the interview, Tim and Tim discuss why inflation can sneak up on you and why it is an important yet often underestimated consideration for the financial plan. Tim Baker discusses the basics of inflation and some potential ways to combat its impact on your financial plan. Tim Baker also shares basic information on I bonds and who they might be a good fit for, considering the personal financial plan and situation. Listeners will hear about how to acquire I-Bonds, some interesting and quirky rules to take into account regarding this type of investment, and a detailed explanation of why these bonds (not to be confused with E-Bonds) can be used as one strategy to hedge against inflation. This episode has all the percentages that you’re looking for to figure out if I-Bonds are the right vehicle for you.

Key Points From This Episode

Kicking off with inflation; what the term actually means and why it’s the current hot topic.
Breaking down the inflation statistics and how it’s affecting your buying power over time.
Encouraging the listener to start by listening to Ask a YFP CFP® episode 93
Introducing I-Bonds, not to be confused with E-Bonds.
Who the I-Bond is suitable for, and the big potential drawback: the holding period.
Some of the interesting and quirky rules of I-Bonds.
Why methods to protect you against inflation are important.
How folks often underestimate their nest egg needs because of not considering inflation.
Talking about inflation in the context of an emergency fund.
Tim offers some different ways you can slice the apple, depending on the scenario.

Highlights

“Inflation is a thing that it’s kind of like death and taxes, right? Typically, it follows economic progress.” — Tim Baker, CFP® [0:05:44]

“The average value of houses has risen by 58% just over – Since 2011, in the last 10 years. The Dow Jones has been up 147%, Nacre Farmland up 37%. But I think it doesn’t really hit us in the face until we’re at the grocery store.” — Tim Baker, CFP® [0:09:16]

“For people who are on fixed incomes, retirees, or are looking for something safe, [I bonds] are definitely something that you can look at.” — Tim Baker, CFP® [0:11:47]

“Methods to protect you against inflation are really important because you really want to protect your purchasing power on your dollars, which means not standing on the sidelines. It means invest it. It means thinking of things like I bonds .” — Tim Baker, CFP® [0:17:53]

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 sit down with YFP Co-founder, Co-owner, and Director of Financial Planning, Tim Baker, to talk through two ‘i’s that you might be overlooking as it relates to your financial plan, that being inflation and I bonds, more formally known as series I savings bonds. During the interview, Tim and I discuss why inflation can sneak up on you and is an important yet often underestimated consideration for the financial plan, some strategies to combat inflation, and what I bonds are and how they are one tool to consider hedging against inflation.

Now, before we jump into today’s episode, now that we have put the calendar on 2022, it’s time to think about tax season. I’m excited to share that YFP Tax can file taxes for an additional 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 worked specifically with pharmacists, they’re familiar with aspects of your financial plan that have an impact on your taxes. The YFP Tax finally waitlist is now opened. If you’re interested in working with a team of highly trained tax professionals, I invite you to add your name to the waitlist by visiting yourfinancialpharmacist.com/tax. Again, that’s yourfinancialpharmacist.com/tax.

[EPISODE]

[00:01:31] TU: Tim Baker, Happy New Year.

[00:01:33] TB: Yeah. Happy New Year, Tim. Hopefully, you had some good time off with the fam over the holiday.

[00:01:37] TU: We did and really excited for 2022. We’ve got a lot of exciting content plan for the YFP community. Today, we’re going to be talking about inflation and I bonds. I know that the words inflation and bonds don’t really scream exciting topics, but we’re going to have some fun with this episode, and I’m confident our listeners are going to take away something valuable that hopefully they can apply to their financial plan. Our approach for today’s show is we’re going to talk about inflation first, and then I bonds as one strategy to hedge against inflation.

Now, inflation, Tim Baker, something we haven’t really talked about in detail on the show, which I think is fitting because we’re a few hundred episodes in. If we think about inflation warnings, I think about is that we often hear that term. We think about it. We know it’s somewhere in the background. But it might not be front and center or something that’s top of mind as it relates to our financial plan. So we know it’s real, but it can be hard to put our finger on it, exactly what is inflation, what is the impact that it might be having to my financial plan. That’s something that I think hopefully folks will be thinking about, especially over the long run when we think about the impact that inflation can have.

So, Tim, kick us off. What is it, inflation, and why is that term getting so much attention right now?

[00:02:49] TB: Yeah. I’m going to steal Investopedia’s definition, and they define it as the inflation as the decline of purchasing power of a given currency over time. I think like for a lot of people, myself included, before kind of getting into financial services, I’m like, “What? What is this?” I kind of knew very high level what it means but I didn’t really connect the dots. I just thought, “Okay, like prices go up.” To date myself, I think when I started driving, gas was at like under a dollar, whenever that was, so 89 cents. I think that’s when my brother started driving, my older brother.

[00:03:22] TU: That’s when we were in high school, Tim.

[00:03:24] TB: Yeah. Then you think about where it’s at now. I think gas is very tightly controlled in a lot of ways because of one of those numbers that kind of hits us in the face every day when we’re going to work. So it really is reflected in the increase of the average price level of a basket of selected goods and services in the economy over like a period of time. We typically represent inflation as a percentage. So like when we do planning, we look at historical rates year over year, and most planners I think use a 3% inflation mark. Or right now, where inflation is, which is it’s been reported 6.8% there towards the end of the year, that’s not necessarily good enough.

But over time, typically 3% is what we use as planners. What it means is that our currency, the dollar, effectively buys less than it did in prior periods. I’ll talk about inflation when we typically talk about investments because I’ll say for a lot of people that are more conservative in nature or just don’t really understand investments, they’ll say like, “Tim, do I have to? Do I have to invest? I don’t like the swings in the market and like the news and all that kind of stuff. So I’d rather just not if I could.” Again, this is the extreme example, and I’m like, “Yeah, you kind of have to.” Because if you’ve heard one of my webinars, I’ll invoke my dad who’s in his 70s, and we talk about back in his day, a nickel would buy the whole candy store. Now, it doesn’t buy anything.

We also kind of illustrate the point of that, that Starbucks coffee that costs $4.20. In 30 years, using historical rates of inflation of 3%, that same Starbucks latte is going to cost you 10 bucks in 30 years. So what we can’t do is stuff our mattress full of dollars and hope that we’re going to have enough at the end of the rainbow there. We’re not, and it’s because of those little inflation termites are going to eat away at the purchasing power of your money. So that’s really what’s at stake here. Typically, the financial services world will say, “Invest, invest.” That’s typically what we want to do to kind of keep in front of inflation.

But here, what we’re going to talk about is more about what these I bonds are, and kind of follow that inflation and I bonds discussion. The idea here is that inflation is a thing that it’s kind of like death and taxes, right? Typically, it follows economic progress. Sometimes, it comes when there’s too much money in the system, which we’ve seen over the last couple of years of what the government is doing. So this can lead to an escalation of prices. This is – It’s important to understand, at least at a high level, and then that’s one of the reasons why we wanted to bring this up today.

[00:06:08] TU: Yeah, and I think it’s something – The time is right, Tim, right? I’ve mentioned on the show before, I’m still that old guy that gets the Wall Street Journal in my house every day. Every day, it’s either front page –

[00:06:18] TB: Like the paper version?

[00:06:19] TU: The paper version. I like –

[00:06:20] TB: Wow, that is old school. Do you like shake your cane at the kids that run through your yard? I love it.

[00:06:27] TU: I don’t know. There’s like – it might be from playing paperboy. Did you play that game growing up, Paperboy?

[00:06:31] TB: I did, yeah. That was cool.

[00:06:32] TU: There’s like some feel good. It’s like when I hear the car go by in the morning, I hear the paper hit the driveway, so yeah. But inflation is front page, and it has been for several months now. I think we’re getting practical here, which is what we need to because I think inflation, and you mentioned kind of a concept of termites, is a really good example because you might go to the grocery store. Even in this time of period where we’re seeing six plus percent for those of us that aren’t that old yet, this is pretty big for us historically, right? We’ve heard our parents talk about double-digit inflation and so forth. But for us, this is significant and perhaps something new that we’re dealing with.

But even on a $100, $200 purchase at the grocery store, you might not be like, “Oh, wow, that’s having a big impact.” But if we take a step back and extrapolate that across all of your expenses, it could be groceries, it could be households, it could be goods, it could be utilities, it can be cars that are being purchased, the list goes on and on, like and you’re spending X thousands of dollars per year, obviously that has a big impact that we need to be thinking about. If that continues to go on, we’ve got to have some strategies that can mitigate that over time.

I think it’s really important as we think about some strategies. We’re going to talk about one of those today, which is the I bonds, more formally known as the series I savings bonds. Just a reminder, before we dig into this discussion, certainly this is not intended to be investment advice, right? We’re going to be talking about one vehicle. I think the strategy of inflation and mitigating inflation across the financial plan over several decades, of course, goes well beyond just considering series I savings bonds. So, again, not investment advice but I think one unique opportunity and tool.

A shout out, this question actually came originally from an individual that attended a YFP investing webinar in 2021. We then addressed it briefly on Ask a YFP CFP, which we publish weekly, episode 93. The question at the time related to, “Is it okay to have a portion of my emergency fund in an electronic US Treasury savings bond, specifically in reference to the I bond?” What was interesting was at the time that question came in, the I bond combined rate, which we’ll talk about what that means, was 3.5%. Now, because of inflation and the discussion we just had, we’re seeing that rate now north of 7%. So, again, one vehicle, but something I think that’s worth considering might be something of interest to many that are listening. So, Tim, give us an overview of what I bonds are. Then we’ll talk about some of the pros, cons, and potential role that this may play in the financial plan.

[00:09:01] TB: Yeah, and just to address the point to piggyback on. Before I talk about the I bonds, there’s a piggyback on the idea of like why is inflation, outside of it going up a lot – I think that what’s happened over the decade is that – I think people have seen this, but then now we’re seeing it more tied to consumer goods. The average value of houses has risen by 58% just over – Since 2011, in the last 10 years. The Dow Jones has been up 147%, Nacre Farmland up 37%. But I think it doesn’t really hit us in the face until it’s like we’re at the grocery store or that type of thing.

I think that’s why outside of the huge increase, and I think it’s leading to discussions about double-digit inflation and kind of returning. I looked up some numbers back in the early ‘80s, again to kind of when I was born. The interest or the inflation percentage was like 13.5%, and that was leading mortgages to go up as high as 17%. I think even higher than that. So think about that. Like I was kind of complaining when I bought my house in Baltimore. That was like 4.5%. I’m like, “Oh, man. This is so high.” Especially now it’s like 3%. So a lot of this is relative, and we’ve seen this has been cyclical. It was really high in the ‘70s and ‘80s. It was high, I think, in the ‘40s at one point. It was high like right before the Great Depression. That was kind of one of the causes there, so yeah.

I think to talk about like how to mitigate this, which is, we talked about the I bonds, the tried and true is always talking about equities, stocks, like investment in stocks. Investment in real estate’s another thing. So to kind of preface that, and I would encourage everyone to kind of listen to the Ask a YFP episode because we kind of talked about even just setting it up and how that experience was, it’s really about going to the treasurydirect.gov, and you can buy them directly from the government that way. What we’re talking about here, the series I bond, not to be confused with the double E bonds. It’s really, again, I think what I said in the episode is kind of eye-popping where those were when I bought mine, which I think was like 3.5%. Now, the inflation component is like 7.12%.

The way it works is you buy the I bond. I think it’s every six months, the Treasury looks at the inflation rates, and they basically adjust that inflation component. So when you buy an I bond, there’s really two components. There’s the fixed component, which is at 0% and then the inflation component, which is at 7.12%, which I think holds until April of this year. Then those two things combined are your composite rate, and that’s basically compounded semi-annually. Right now, for these first six months, it’s going to be locked in at that 7.12%, and they’ll reassess, and it could go up, go down. It sounds like it could go up based on the news and things like that. It’s really a – in the episode, I kind of talk about tips, like where it basically follows inflation. It’s kind of the same thing.

For people who are on fixed incomes, retirees, or are looking for something safe, these are definitely something that you can look at. We talked about it in the context of emergency fund. There’s tax advantages here. The big drawback to the I bond is the holding period. So basically, the reason that we were kind of not an advocate for using it for an emergency fund, especially as you’re building it, is that you cannot touch the dollars that you put in there for a year. So obviously, that’s not ideal for an emergency fund. But once you get beyond the year, you can touch it, but you’re penalized. So I think there’s like a three-month penalty of the interest that’s been accrued, and then you can get to it. Then after five years, you can essentially do what you want with it. But the rates are interesting because it’s really been the highest that they’ve been since I think May of 2000.

Again, if you’re thinking like, “Man, I’m looking at my high-yield savings account, which is paying half a percent,” or a five-year CD is paying less than 1% or 1%, whatever they’re at today, this is an interesting way. I talked about it again, so I’m going to keep it simple like investments, high-yield savings account, not a lot of variation from that. But I think where everything is in terms of the state of rates and things like that, I think it’s a viable way or viable way to go.

Some of the things that are interesting about I bonds, there’s just kind of some quirky rules. So like as an example, if Shane and I want to buy these bonds, we’re really limited to $10,000 each per year. Then you might say like, “Well, that’s quite a bit of money,” and I would agree. But if you’re looking at this as a major component of, say, your retirement portfolio, retirement paycheck, that might not necessarily be enough.

But if you have children, you can also buy I bonds at the same rate per year for the kids that you have. Then the other thing that you can do, and, Tim, this might be something that we just often talk about, is you can buy them for entities. So we might be able to buy them for, say, the business entity, even though that we own the business entity and we have our own portfolio. That’s something that I think allows you to be a little bit flexible. Then the other thing is that the levels of which you can buy are basically set but outside of like if you were to use like a tax refund. So right now, we’re hitting tax season. If you’re thinking, “This sounds really interesting. Maybe I want to do this to kind of eke out a little bit more yield from what I’m doing and kind of my cash components of my wealth building,” you can actually use the refunds that you get from the IRS to purchase additional amounts of I bond.

It’s something that, again, it’s tied to the consumer price index, which is very much related to inflation, that the US Treasury Department basically reviews and then adjusts the inflation component of the rate accordingly. So if you’re out there and you’re like, “Man, I do not like the rates that I’m currently getting in kind of my cash and cash-like investments,” this is definitely something to potentially look at, given what you’re looking at it for, your financial situation. Again, I wouldn’t necessarily do this if you have no cash component, but I look at it as a very viable way to kind of hedge against the inflation. Because just to talk in broader concepts, Tim, if you have a savings vehicle and you’re earning 1% on that savings vehicle, which is very generous right now, and inflation grows by 7%, which is kind of what it’s been trending to last couple months, you’re essentially 6% poorer.

You might feel richer because you’re putting those dollars aside. That’s why a lot of people call inflation the worst tax because it kind of goes back to that idea of like it’s the termites that eat away your purchasing power. It’s that hidden ninja, that hidden assassin, that’s just really beating you down in the background. So these are things that, especially because of where it’s trending, just to be cognizant of. So you kind of talked about how powerful this can be. One of the things we do with clients, Tim, is go through the nest egg calculation of like, “Hey, you need $4 million to retire,” and that’s where a lot of people look at us, like we have 4 million heads, right? Because it’s a number that’s in the future that’s very large that tangibly I can’t really wrap my head around.

What we say is, and I’m going off just an example here, if you make $125,000 as a pharmacist and say you’re 35 years old and you want to retire at age 65, that gives you 30 years left to work for the man, right? So you have 30 years of earning potential and you’re going to retire at 65. We’re going to assume that your wage is going to increase over time as well. We’ll say that for the purposes of this, we kind of do a wage replacement ratio of what you need to live off from 65 until basically the end of life. That allows us to get to that number of three, four million in that range. But that wage replacement ratio of, say, $125,000, if we discount that sum, we’d usually discount it by about 30%, and we’re planning for that 70% is what we need to live in retirement. That’s 80 cents. So 70% of $125,000 is $87,500.

But in 30 years, when you are 65, no longer 35, use in historical rates of inflation 3%, that paycheck is not at $87,500. It’s grown because of inflation. So now it’s $212,000. So think about that. Right now, I’m saying if I were to retire right now at 35, I would need $87,000, and I’m making $125,000. I would need – If we discounted a little bit because typically we don’t plan for like saving for retirement while we’re in retirement, right now I would need $87,500. So that’s where I kind of talked through, Tim, you would come to me and you would say, “Tim, I need $87,500 for 2022 and then basically the next year, $87,500 for 2023, given some inflation.” But if we don’t retire and we wait until we’re 65, that $87,500, you’re going to basically hand out and say, “Where’s my retirement paycheck for $212,400, essentially?”

If you think about it in those terms, you’re like, “Holy geez. $87,000 in 30 years is going to be $212,000.” That is why methods to protect you against inflation are really important because you really want to protect your purchasing power on your dollars, which means not standing on the sidelines. It means invest it. It means thinking of things like I bonds, etc. So I know very much tangential here, Tim, in terms of stream of thought in terms of this. But that’s what we’re essentially talking about when we talk about inflation and then kind of how I bonds can keep pace with that.

[00:18:19] TU: Yeah. I’m glad you went there, Tim, because I think this is something I’m sure you and the planning team see with clients. I’ve seen it over and over again when we do sessions with pharmacists on investing, right? We have them dust off that nest egg calculator. We punch in the numbers. They spit out a number, and like you can see that overwhelm look.

[00:18:37] TB: Or crickets like, “What does that mean?”

[00:18:39] TU: Yeah. I think one of the things that the planning team does an awesome job of is when you’re thinking 30 to 40 years out, like it can feel like fake fuzzy math. I think it really has to be discounted back to what does this mean today. What does this mean today in terms of, here we’re talking about commodity inflation? But also, what does this mean today in terms of my savings plan, and really trusting the math, and trusting the process in terms of where we’re trying to go for long term? But that’s why when I say, “Hey, audience. How much do you think you’re going to need to have to save for retirement,” inevitably folks are underestimating what is the true need, right? Because they’re not thinking about it in terms of inflation and the impact of what future dollars are going to be needed. They’re thinking about it of, “Okay, I make $100,000 today. I’m going to retire in 30 years.” They’re not thinking about what might be the impact of what they’re going to need, if that income continues to rise. Obviously, the expenses rise with it accordingly.

A separate conversation for a separate day, but I think one of the concerns that we need to be thinking about talking about pharmacy is, when I then go down that path in a presentation and have that discussion, people are like, “Man, is a pharmacist really going to be making $200,000 in 30 years,” whatever that would be. Obviously, that gets to supply and demand and rules and all those types of things. But certainly, we need to be thinking about what is the impact of this over many, many, many years over time.

Tim, talk me off the ledge. Okay, so I’m looking at my Ally account. A couple years ago, we would have been better off storing some cash in a high-yield savings account when they were – Remind me. I think we were almost at 2% a couple years ago, weren’t we?

[00:20:14] TB: I remember Ally. I think it was like 2.35%.

[00:20:18] TU: Yeah. So I’m looking at .5.

[00:20:19] TB: I would twist my mustache every time, Tim. I would get the email saying, “Hey, your Ally interest rate has gone up.” Then when we just get those emails,” that like, “Your rate’s going down because rates have gone down.” But they’re kind of back on the rise, yeah.

[00:20:31] TU: So I’m looking at 0.5%. At the time, obviously, we’re looking at the composite rate reminder. I bonds includes both a fixed component currently 0% and inflation component currently 7.12%. So that combined rate of 7.12% clearly beats 0.5%. But that was a very different scenario a couple years ago. If you look at what those rates were then, you would have been mathematically better off stashing your money in an Ally account.

In this period of time where folks might be feeling that pressure of inflation, I want to talk about this in the context of an emergency fund specifically. So let’s say that, Tim, you personally, so this is not advice for anyone else. You personally, maybe you have a need of, I don’t know, $40,000 in emergency fund, %30,000, whatever the number is. As you’re kind of evaluating that, especially where you’re seeing this discrepancy of 6.5% or so, like how are you thinking through or questions you’re asking yourself about, “Hey, what might I keep right here? It’s liquid. It’s accessible. I can easily get to it when I need it.” Versus something I might put in an I bond, try to beat some of this inflation or keep pace of what is going, knowing that there’s these limitations? You talked about them in terms of within a year, no bueno. Within five years, we got to pay a few months penalty on the interest. So obviously, we lose some liquidity and accessibility. Tell me more about how you’d be thinking through that.

[00:21:49] TB: I value simplicity a lot. I think, for me, the numbers would have to really be I think telling for me to like kind of change up my, I guess, pattern of how I do things. So if you take an example, say we shave off $10,000 of that $30,000 or $40,000 dollar emergency fund, or say you have something that’s going to come up because the hard part about – investing long term I think is fairly easy. It’s when you start investing in the medium term or even the short term where it kind of gets funky because, again, the market. If you look at the S&P 500, I think like the worst year-over-year return in the market, it’s like down 37%. But then it’s been up 40% year over year.

So when people say like, “Tim, what should I do with this money,” I’m like, “Just put it in a high yield. Don’t even mess with it.” If it’s like three or four years, that’s when you’re like, “Okay, is there a portfolio you can build out where you’re going to take some risk?” That’s a stock and bond portfolio that you’re taking some risk, but you’re kind of hedging in some bonds that can eke out more return than like what a high-yield or a CD can do. So if we take this example and we say, “Okay, there’s $10,000 there, whether it’s for an emergency fund or something that’s in the future,” if it’s a half of a percent that you’re getting from a high-yield, at the end of that year, you’re going to have not $10,000. You’re going to have $10,050. $51. Because of some of the compounding period, $52.

But if you were to do the same thing right now with the I bond, the I bond would be worth $10,360 bucks. Now, I’m thinking. I’m like, “All right, do I want to do it for an extra $300?” For me, I don’t know. The answer might not be great enough. Maybe if it’s $100,000, which, again, I’m not putting $100,000 myself into an I bond, maybe that’s a different. So the thing is like, okay, so then if you say a year out, I need this money, but then you take the haircut on the interest penalty, it’s probably not worth it, right? But the further you go out, and that’s the case with any investment is typically the longer that you own it, the better it is.

So I’m going to go back to my age-old saying, which it just depends. Again, if your emergency fund is not built, then I would say probably not. Get that level of cash, and then you can start looking at a deeper reserve or for something like if you know that you have something out, that’s two years out that you’re like, “Hey, we’re going to save for an investment property or for a wedding or something like that,” then this might be a good way to go. Because if you invest it, there’s a chance that you could have a negative return, which that is not here. This is backed by the full faith and credibility of the – even if we go into a deflationary period, where interest rates are negative, which that’s not the case, it’s still buoyed by the composite and even like past earnings that you’ve had at that 7.12%.

It really depends, Tim. I think you have to figure out like the penalties, how long you’re going to hold it. For retirees, this might be a good component of even like a bond ladder or things like that. So people that know, “Hey, I’m 60 years old and I want to retire at 65,” this might be a component where you are building out the first couple years of your retirement paycheck that it makes sense. So there’s just a lot of different ways to kind of slice the apple here, and I think it just depends on your situation. But I think if you’re out there and you’re like, “I’d rather do this with my emergency fund than I’m building right now,” I would say pump your brakes because, again, I don’t want you to have to reach for the credit card, if something comes up, to kind of cover that emergency.

Again, if we’re kind of trying to keep pace with inflation, this is something that kind of automatically does it for you that the Treasury sets. But it’s not going to get you – so the caveat to all these conversations, Tim, is that if you need three or four million when you retire, investing in I bonds is not going to do it, right? You have to have a stock portfolio that will get you there. Now, if you’re approaching retirement, a bond portfolio and a bond ladder or some type of SPIA or something like that that will kind of get you to where you have basic needs and can kind of also [inaudible 00:25:55] market and get some return is going to be important as well. So it just really depends on where you’re at, what you want to use it for, as is the case with everything. But if it’s something more near term or if you want to kind of – because I would even argue that a bond portfolio compared to an I bond, you’re probably going to be better in a bond portfolio even right now. So things ebb and flow as well. It just really depends on the situation, but there’s a lot of factors to consider.

[00:26:21] TU: I think there’s a lot of good stuff in there, Tim, though, and that was partly why I asked the question because I think sometimes I’m speaking here to my fellow hyper-analytical pharmacy nerds that are looking at the percentages. But it’s a good reminder. I think sometimes we see a savings account. We’re like, “Oh, .7 versus .2.” But do the math, right? I mean, if you’re looking at 10,000, I mean, even if inflation keeps at this rate, and we see the composite rate for two or three years, even if you max that out, like what is the true net difference, right? I’m not mitigating what a few hundred dollars 100 can mean. It’s important, but let’s not lose the big picture of what we’re trying to go or let’s also make sure we’re factoring in some of the downsides, considering the liquidity, the time periods, and things like that.

Hopefully hitting home that there’s some value, there’s a role. But I think a tendency, when folks hear about something like this, myself included, is like, “I’m logging on to US TreasuryDirect. I’m buying right now,” right? Take a step back, pump the brakes, look at the math, look at the bigger picture, and I think that’s something obviously the planning team in the process can really help with as well.

[00:27:24] TB: Yeah. I think it’s probably a good place for me to acknowledge because sometimes I beat up on people that will do things out of order a little bit where I’m like, “Well, we have a bunch of credit card debt but we have like $5,000 in like Robin Hood, kind of out of order.” I think sometimes that happens because of just curiosity, and this is kind of like what we did. We’re like, “Oh.” I’ve always kind of said, “Hey, keep it simple, high-yield, maybe CDs, that type of thing.” When this was brought forward, I obviously knew what I bonds were, but I was not necessarily paying attention to the rates because they’re typically very, very minimal because of where inflation has been. But we kind of went through that and experimented a little bit and like as we see kind of with people that do Robin Hood and don’t necessarily have the foundation set.

I don’t think that’s a bad thing. Again, I don’t necessarily have my I bonds on my balance sheet right now because it’s just kind of something that is in the background. But I do think it is, I think, a viable vehicle to consider, kind of depending on where you’re at. Again, at the end of the day, I’m always going to go back and say work with your advisor and see if this is something that fits with you or your spouse and kind of get a sense of what that particular vehicle has a place in your wealth building in your portfolio.

[00:28:32] TU: Yeah. I think is we say often, Tim and I know we talk about student loans. We often say, “Hey, payment plan decision, it’s the math plus, right? It’s the math, plus all these other factors.” I think it’s a good example of that here as well. I’m thinking about folks that might be hearing about this thing, about their emergency fund, looking at inflation and like, “Yeah, I’d love to do that.” But does something like having your money liquid and accessible to you, does that provide some peace of mind? Like don’t undervalue that, if that’s important to you and that idea that something might be tied up for a period of time. Is that worth it? Maybe yes, maybe no. I think that’s, again, a reminder of take a step back and look at how this can be considered as a part of the broader financial plan.

[00:29:11] TB: Yeah. I think to that end, Tim, like when I logged into my account again today, there’s no like get-my-money-out button because I’m still under the one year. Again, like if that – thankfully, I have a pretty robust cash reserve, emergency fund, that if something does hit the fan, I can always tap into that. But if that’s not the case, I’m like – that’s just a number on the screen right now. I’m assuming after a year that kind of unlocks, and then kind of probably we’ll talk about penalties and things like that, interest penalties. But there is something very satisfying about, okay, like if there is.

Again, like I’ll harken back to the beginning of the pandemic when it was a very nice reminder, if I can say this without sounding like a jerk. The pandemic was a reminder that when the markets and – it seemed like everything was falling. It’s why we have the emergency fund, right? Because the emergency fund is never – it’s just not fun to – for me, it’s fun to like, when we dip into it, to like replenish it. I’m kind of a nerd there. So like if it’s below the level, I’m like, “All right, I want to make sure that we pay attention to this, so it’s back to its regular level.” But when you’re building it, especially from scratch, it kind of just stinks. Like it’s good to make progress. But you kind of want to get to steps five and six and seven. But it’s kind of following that, “Let’s do one, two, and three first.”

So this is where I think you can get in trouble because you don’t keep it simple, you do a little bit too much than what you need to do, and you can be burned by it. But I think sometimes we need those reminders to say like, “Okay, the emergency fund at the end of the day is not really to make you money. It’s to be there in case something happens.” But we try to put it in places that we can maximize the value because, again, that $20,000, $30,000, $40,000, whatever it is, that money that’s sitting there is going to buy you less in the future. So that’s another thing to consider as you’re looking at your cash level.

[00:31:01] TU: Great stuff, Tim. I’m going to make sure in the show notes we link to a few things. One, the Ask a YFP CFP episode where we talked about this as well. That was episode 93 of Ask a YFP CFP. We’ll link to the treasurydirect.gov website. Folks, lots of great information on there about the series I savings bonds, rates, terms, tax considerations, and so forth.

Then another thing I’m going to link to is, Michael Kitces has a blog called Nerd’s Eye View, and he had a blog out in December 8, 2021, series I savings bonds, some of the end of year consideration strategies. I thought there’s a lot of good information in there as well. We’ll link to that in the show notes.

For folks that are hearing this and wondering, “Hey, how might this fit into the financial plan?” As well as other things that you’re working through, whether that be debt management, whether that be saving and investing for the future, insurance considerations, estate planning tax, and so forth, the team at YFP planning would love to have an opportunity to talk with you further to determine if our services are a good fit for your financial planning needs. You can learn more at yfpplanning.com.

Thanks again for joining. Have a great rest your day.

[END OF EPISODE]

[00:32:02] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

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

[END]

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YFP 238: The Mindset, Habits, and Behaviors of Pharmacy Influencers and Entrepreneurs

Posted on January 13, 2022November 2, 2022 by yfpadmin

The Mindset, Habits, and Behaviors of Pharmacy Influencers and Entrepreneurs

CEO of Kay Pharmacy and host of The Business Pharmacy Podcast, Mike Koelzer, joins Tim Ulbrich to discuss the mindset, habits, and behaviors of successful pharmacy influencers and entrepreneurs.

About Today’s Guest

Mike Koelzer is the host of “The Business of Pharmacy” podcast. In addition to hosting the podcast, Mike owns an independent pharmacy in Grand Rapids, Michigan. When not working, Mike enjoys spending time with his wife and 10 children, following the news, and improving his sight-reading at the piano.

Episode Summary

Today, Tim Ulbrich welcomes Mike Koelzer, CEO of Kay Pharmacy and host of The Business of Pharmacy Podcast, to the YFP Podcast to discuss lessons learned from his experiences interviewing pharmacy leaders. Mike has interviewed over 100 well-respected pharmacy influencers and entrepreneurs on his show. Today, he shares his takeaways on the mindset, habits, and behaviors of these individuals as they strive to be the best versions of themselves and create positive change in the profession of pharmacy! Mike shares some common threads his guests have in how they overcome fear and take calculated risks. You’ll get a peek into the daily habits of successful pharmacy influencers and entrepreneurs that lead to a mindset of success and whether those individuals believe that their success is attributed to luck or hard work. Hear him recount his professional pharmacy journey of more than 30 years in a family business and how he manages to balance his time while running a business, hosting a podcast, being a husband, and father to 10 children. This motivational episode is for anyone unsettled with the status quo and itching to take it to the next level personally and professionally.

Key Points From This Episode

How the family business started.
Hear about the creation of The Business of Pharmacy podcast.
Mike’s approach to maximizing his time each day, and how to use lists more efficiently.
What common threads Mike’s guests have, striving to achieve something great.
How focus and goal-setting are like sailing.
The amazing ways we are now able to receive feedback faster and pivot quicker.
Mike shares some actionable advice about how to get started with any new idea.
The general outlook most guests have on the pharmacy profession.
Talking about luck versus hard work.
A common thing that takes people out of just being satisfied with the status quo.
Mike’s strong advice for those who have dreams but are struggling financially.

Highlights

“Start focusing on something. And whether it’s a day later or a week later or a month later, you see that goal changing, [and] change it.” — Mike Koelzer, PharmD [0:13:32]

“You don’t have to monetize something right away for it to be valuable for your career. Sometimes it’s just getting off of TikTok and getting off the couch and putting out valuable content instead of just reading the content.” — Mike Koelzer, PharmD [0:36:19]

“If you’re married, make that relationship the most important thing in the world to you.” — Mike, Koelzer, PharmD [0:40:50]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

This week, I had a chance to sit down with Mike Koelzer, CEO of Kay Pharmacy and host of The Business of Pharmacy Podcast, as Mike has interviewed over 100 well respected Pharmacy Influencers and Entrepreneurs on his show. Today, I asked Mike about the takeaways he has had, from hearing about the mindset habits and behaviors of these individuals as they strive to be the best versions of themselves and leave a positive dent in the profession of pharmacy.

This episode is for anyone, students, residents, seasoned practitioners that are unsettled with the status quo and itching to take it to the next level personally and professionally. A few of my favorite moments from the episode are hearing Mike recount his own professional journey of 30 plus years in a family business, how he manages to balance his time running a business, hosting a podcast and being a husband and father to 10 children and his takeaways from interviewing influential leaders within our profession, on how they overcome fear and take calculated risks. Their daily habits that lead to a mindset of success and how they view how much of their success has been luck versus hard work.

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 to the pharmacy professional. If you’re interested in learning more about how working one-on-one with a certified financial planner, may help you achieve your financial goals, you can book a free discovery call 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.

[INTERVIEW]

[00:01:57] TU: Mike, welcome to the show.

[00:01:59] MK: Thank you, Tim.

[00:02:00] TU: Really excited to have the opportunity to share your story with the YFP Community, as we continue on this journey of trying to feature more and more pharmacy entrepreneurs on the podcast, to highlight some of the ways that a PharmD can be used. I like to say the PharmD is the starting point. It’s not the finish line and our interview today talking about your career journey and that of other pharmacists that you have interviewed is really a great, great example of that. So Mike, before we get into some of the lessons that you’ve learned from various influencers and entrepreneurs that you’ve interviewed on The Business of Pharmacy Podcast, tell us about your career journey as a pharmacist, including the role that you have currently as CEO of Kay Pharmacy.

[00:02:42] MK: Well, as my dad would say, our business is a family business, but it runs best on having one benevolent dictator. So it’s questionable if I’m that person, but my grandpa started and my dad was there until he passed on there. I’m the only family person to speak of. I have some children that work there, but I was never a fan of going into this with my siblings. That’s part of the reason maybe why I chose pharmacists, because I came from a family of 12 children and I was down at the bottom of the children as far as age goes.

So I maybe subconsciously – once I realized that none of my siblings were going into it, and also that my dad would then be at the age where he would not be around for a long time, because it’s okay to have a partner, but if I don’t need it. And I thought that maybe five or 10 years would be enough and not a 30 year period with him. I went into pharmacy, took a while. Tim, you and I talked on my podcast about bouncing around different things. I finally got my pharmacy degree, which is a five year degree back then, in seven years, I guess. I had done a few different things in there.

So basically, I joined the family business and worked with my dad for a while till he passed away. So I’ve been running the show for the last 20 some years, where I typical corner pharmacy. I suppose that’s what pulled me out of that. Doing some of this stuff, taking advantage of social and podcasts and things to maybe break out more into the world, because I knew that my area of influence, I suppose, was fairly small in my city. I think that’s what broke me out into the internet more with the podcast.

[00:04:29] TU: My time is something I often think about as a father of four. I can’t stack up as your father-of-10. I’ve come to really appreciate with a young family that that time is finite. We all have the same amount of time available each day. I think when you stop and think about that, that we all have the same amount of time available each day. It really at least for me has changed my mindset around, how am I making the most of this day. I think for many, especially me, pharmacists that are more task-oriented, that have developed ways to become more efficient with their time so that they can complete more tasks. But I have found that that often ends up in a spiral of just more and more tasks to complete.

However, I think if there’s finding ways that we can create more time, as Rory Vaden says, and one of my favorite books Procrastinate on Purpose, doing things today that save time tomorrow, and therefore increases our time available. As someone who owns their own business, as someone who’s a father of 10 kids, hostess of a successful podcast, what has been your approach for making the most of each day and ultimately, the limited amount of time that you have?

[00:05:41] MK: Dropping a book in here early, David Allen, Getting Things Done. That was a huge book for me. What I loved about what he teaches is that, the real reason for lists, which are a very important part of my day, a very active do-list. The main reason for that is not to get things done. It’s to know what you’re not getting done exactly when you’re taking that free time to create, and whether that’s creating a podcast or exercising or practicing piano or just screwing off, but you know exactly what you’re not doing. Then when it’s time to come back and get to work, you’re ready to roll.

The do-list for me has never been so much a list of difficult things to get done or monotonous things to get done, but it’s allowed me to have that free time and those goals that I have, go right onto that list. So I have a goal every day, it says practice the piano and do this and do that. Even the fun, relaxing goals are tasks out. Again, the whole thing is not to necessarily get things done. It’s to allow that free space in your head, that creative space to do things, knowing that your important tasks will be waiting for you when you get back.

[00:07:08] TU: Absolutely right. I think there’s freedom in being able to see those things on paper, sometimes giving yourself permission to not do things, but also to make sure you’ve got the right things prioritize as well. I know for me, and it sounds largely for you as well, like getting that out of our head onto paper, so we can start to see it and prioritize it as well.

Mike, as you mentioned, I recently came on your show Business Pharmacy Podcast, we’ll link to that in the show notes, to talk about the ROI of the PharmD. Great discussion. After doing that recording, I was reflecting on all of the movers, shakers and entrepreneurs in pharmacy that you have interviewed and the insights that you must have to share from those conversations, being an aggregator of some great minds. 135 episodes at the time of this recording that you’ve done. So first of all, congratulations, you know that’s no small feat. That’s really awesome. So I’m going to use this episode to pick your brain about the lessons learned from being in the interviewer seat talking with some of the great minds in our profession.

So for those that are familiar with the How I Built This podcast and book by Guy Raz from NPR. I view Mike as the Guy Raz in pharmacy, who has had not only his own experiences to draw from, but a lot of insights that he’s gained from picking the minds of lots of folks that we can certainly all learn from. Some of the individuals you’ve interviewed, Mike, are folks that own their own business. Others don’t, but the thread that I see is folks that are on a mission to achieve something great, that likely aligns with a strong vision that they have and a personal why and motivation for the work that they’re doing.

So one of my passions, is trying to understand what makes folks tick. And today, we’re going to get your viewpoint on that with some of the folks that you have interviewed. So first question out of the gate, since we talked about education on your podcast, in the ROI of the Pharmacy Degree, what threads if any, do you see in the folks that you’ve interviewed? Some of these that we would consider to be movers and shakers, pushing the envelope and the professional pharmacy, threads that you see and their view on education, either the background of getting education formal or even on their philosophy of continuous learning and professional development?

[00:09:20] MK: I guess, I’ve never seen a real strong emphasis on a certain degree or getting a certain amount of education or getting a certain degree. I think the value that I’ve seen from my guests, and a lot of them are PhDs and PharmDs of course and across the board, attorneys and so on. I think, the value I’ve seen in them has been that they are goal-oriented people and that’s what college has done for them. And advanced degrees, that they’re goal-oriented. That shows I think, that’s the, whether it’s the chicken or the egg, but I think when you see that degree, you’ve seen a purposeful goal that they’ve done.

I think the other thing it shows is, besides just a goal, I think it shows that they’re able to niche down to the market and they’re able to focus. I think that’s been very important too and in fact, when I look for guests, so out of the hundred and some guests, my listeners don’t want to hear just about a good pharmacist, even though a good pharmacist is of course, very important. I know the most interesting guest and I know the listeners, and I always think about what am I going to title this show. I can’t just title a show A Good Pharmacist, I have to for the purpose of the show notes or not the show notes, but the title, I have to say, this is what we’re talking about. This is the niche. This is the goal of the show.

I think that all of my guests, and I think the one the guests that I’ve been attracted to, to get on the show have always been in their schooling, in their job, even coming on the show. There’s always been that focus to that niche and to that point and to that goal, and I think that’s probably the overall personality I’ve seen of everybody in the show has been niching down, going for a goal, moving forward, pointing towards a target that target might switch, but it’s pointing towards a target.

[00:11:45] TU: You mentioned focus, Mike which I recently read something from Tim Ferriss, he’s got a great, short PDF document, we’ll link to in the show notes called 17 Questions That Changed My Life or questions that he asked himself at various pivot points in his life. One of those which I like to think about, and I’m going to ask you about, what you maybe have heard from other folks in terms of focus. One of those questions is, if I could only work two hours per week on my business or in some cases within my organization, what would I be doing with that two hours? Now, of course, it’s intentionally dramatic, right? To get us thinking about the most prioritized, focus, valuable use of our time that has a greatest return on investment.

As you mentioned, some of these folks that have a strong ability to focus, what do you think these folks would decide in terms of distilling down the time available and prioritizing the tasks that are most important to them and the work that they’re doing?

[00:12:42] MK: Here’s the problem with focus, Tim, is that when we focus, it’s like it’d be easy for the naysayer to say, “Yeah, but what if you’re making the wrong focus? What if you’re going down the wrong path?” I don’t see it that way. I see that – it may be cliched, but I see it as getting onto a boat, you can sit there on shore forever and say “What if I’m steering in the wrong direction?” It’s like, “Yeah, fair enough.” You might go in the wrong direction if you get on the boat and start steering, but if you don’t, you’re just going to be sitting on the shore forever.

I’m always thinking, get on the boat, push off, show yourself that you know how to sail, show yourself that you’re able to leave the confidence of the shore and start going somewhere. Start focusing on something, and whether it’s a day later or a week later or a month later, you see that goal changing, change it. I’m a big fan of Jordan Peterson, a psychologist online and his rule of thumb is, make a goal and if you find out that you want to switch to that goal, ask yourself this one question, “Am I switching to something easier or maybe to something even more focused and more challenging?”

If it’s something easier, well maybe you just have to rethink the purpose of goal setting and go back and reevaluate why you’re maybe not able to set a goal. But if it’s something more focused and more difficult, that’s probably a good sign. I think the main thing I’ve seen from a lot of my guests is, I think it’d be hard for me to maybe say what do they do for two hours of day that’s very valuable for them. I think more generally, I can say they all seem not only goal focus, but they’re moving and they’re willing to pivot not to something easier but to something harder.

[00:14:37] TU: You’re willing to take action, willing to step into it, right? Willing to have to pivot. I think all of those are great things and when you mentioned get in the boat, right? Get in the boat start sailing. I think that’s just great, great wisdom. I read several years ago at the very beginning of my journey, starting YFP, Start by Jon Acuff and that was the book that really just sent me over the edge of like. I was very much and always been an idea person, but quickly the objections might come in the fears, the risks, what’s this going to look in five years? What about this? It was like, enough. Just get started.

That’s the advice I give to folks often to have an idea, business within the organization side hustle, whatever. What is really the true risk? Let’s evaluate that, let’s put it on the table, let’s call it what it is, typically is not as big as we may build it up to be in our mind. Then let’s take a step forward without getting paralyzed in what this may or may not look like 12 months from now, because you and I both know that I could do my best to predict what YFP is going to look in 12 months in terms of both the challenges and successes. Some of it I have right and a bunch of things I could never predict.

[00:15:42] MK: It’s amazing, Tim. I tell my kids this all the time. It’s amazing the world we’re in right now, because even 20 years ago, if you had a business idea, especially if it was like a retail business idea. I mean, you’ve got maybe a business plan in your head, maybe a dream, but then you have to go rent the brick-and-mortar and buy the cash register and buy the sign and do all this stuff. Then harkening back to Tim Ferriss, in his Four Hour Workweek book, he talks about the beauty of like A/B Testing on Google, for example. You can even do it more easily now on social by just putting out a post, just writing a little article on LinkedIn, and maybe putting two of them out there a week apart in whichever one gets more thumbs up or more comments.

It’s like, “Oh, maybe the world needs more of this.” You focus and things like that and Boy, and as far as the actual technical part of it, you can buy 10 different URLs for a total of $20 for the first year trial or something that, and see which one gain some attraction, just an amazing time. As far as switching goals and pivoting and so on, we’ve never had a time like this in history where you could have those dreams and goals get feedback so easily, and then change direction. I’m not saying you should do it this fast, but you could change direction within 24 hours.

[00:17:14] TU: You’re spot on, Mike. I think the asterisk there is that, we can either look at that half-full, as we live in a time with no greater opportunity to do many of the things that you just mentioned to learn, anything that we want, right? Which wasn’t afforded at the same level and degree generations before us, but also there’s an infinite amount of material of things that we can digest. And to your common a focus that can be overwhelming and paralyzing, if we can’t distill it down and figure out what we’re going to be doing.

So that paralysis by analysis definitely can happen. Social media could be a good example. Mike you mentioned, some of these folks having an ability of what I heard, set goals, certainly an ability to get started on their journey, even if the end is not fully scripted or they’re not aware. You mentioned focus, are there other habits, disciplines that you have noticed in these folks that those listening could draw from of, these are some of the rhythms, these are some of the trends, these are some of the behaviors of these folks that might put them in the right mindset, to then be able to do some of those things of setting big goals and focusing and moving towards your vision?

[00:18:26] MK: I guess, one of the things that I see, and sometimes this can be taken to an extreme of faking it till you make it, but one of the things on the goal setting and what I’ve seen a lot of the guests do, it seems to me is it’s easy now, because we’re all with the internet and with social media. We’re all our own media company right now. So a lot of the people that have the goals, and I say this to my own team at the pharmacy, it’s like we’ve got the idea for this and on a small scale, I’m like, “All right, write up the procedure of what that would look like in real life, if we went down this road?” And quite often looking at it negatively, quite often they might say, “Yeah, we started writing this, we realize how in the hell would we – how can we check this for quality control or how could this happen?” It’s like, “Yeah. Well, I figured that, but I wanted you to see it on your own.”

On the positive note, how easy is it to go in and have this idea for something, whether it’s a business or whether it’s a personal goal of whatever, learning how to play tennis or something like that. But how easy is it to say, “Well, let’s picture this down the road and for the business part, maybe we make a website.” It’s not going to be published, just make it, just see if that works and make a sign up form online, just start picturing what this looks like, what this success would look like. Even before you have to take it to the market and get A/B testing across a real world, just in your own head.

I think the point on that is, it’s okay to have a goal, it’s okay to have thoughts, but move forward even if you’re not moving forward into the world at least move forward on your own damn computer by making a fake web page and making a fake whatever. I think that’s important. Along that same vein would be start writing. Start writing a book, start writing an article, go on LinkedIn, write an article. Anytime you’re doing that and you’re able to take those words out of your head and put them into paper, that’s a great thing.

It’s not great only for the world potentially and rarely it is, because how many of us are going to be, well besides yourself Tim, how many of us are going to be famous, well paid authors. That’s not the point. The point is can you get it onto paper and sometimes that is indicative of whether it’s just a dream up there or it’s something that could actually happen someday.

[00:21:09] TU: Mike, I think that’s really great advice and something that I’ve fallen into, but haven’t thought about as intentionally as you just described there. But whether it’s drafting a webpage, right, beating up a procedure and writing it out, getting some writing on paper, even if you don’t share that. I mean, I would encourage folks to share it, I think it would stimulate good conversation, but as you were talking it made me think of the importance that does in a few areas. One, it helps you to begin to validate the idea, right? Whether you get feedback on that or not but just because you’re going to start to develop it a little bit further.

The other thing is, it’s going to really help you start to beat up the idea that I have found when I do activities like that. I start to continue to think about it all throughout the day, right? To your comment earlier about goal setting, getting things down on paper, we get that out of our head, and we can start to see it for what it is and really take it to the next level to try to figure out, is there something here is there not. And I have found that when I start to do that, one of two things usually happens, either I can’t let the idea go for days, weeks, months, that’s a good sign, right? In terms of some of the energy passion or I put it down and I’m like, “Oh, my gosh. What was I thinking right?” As you start to flesh that out further and giving yourself some space to do that and start to see it, to play out. Love that, great stuff.

[00:22:31] MK: That’s quite often why I’ve heard it said that, as humans, if we were in solitary confinement or not able to see other humans, sometimes it would make you go crazy, literally crazy, because other humans are the way that, when you say something – if I say something crazy and I see someone’s face go into shock, it’s like, “Oh, I went too far in the human race” or “I guess I’m not stepping outside of what it means to be a decent person” and so on. I think that writing can do that too, because maybe you don’t have someone across from you listening to your three hour thesis on your new business, but just getting it down on paper, it forces yourself to get this fake, like another person even though it’s just the paper against yourself, but it forces you to say, I can’t even write anything on this. This must not make sense.

[00:23:24] TU: Then to distill it down, right? I think at least from my experiences, I tend to be very long-winded whether I communicate that externally, only to myself when I put something on paper, and then you start to say, “Okay, what’s the two or three –” taking a play from Steve Jobs, “What are the three things that folks need to take away from this? Have I clearly and succinctly and effectively communicated that?”

[00:23:46] MK: For sure.

[00:23:47] TU: Often I find that I don’t, right? That’s part of that process of doing that.

[00:23:51] MK: Yeah. If you can’t do that in yourself, how is the world going to listen to you through a real quick – social media scroll or a short blip online or something like that.

[00:24:02] TU: Mike, outlook of the profession, I think we’re at a time period – I have only been in the profession, started school in 2002, graduate in 2008. I certainly have seen in my short career, I would say some of the shift in the optimism of the future, the profession and what folks are looking at in terms of 10, 15, 20 years from now, some of the threats, some of the challenges around debt loads and salaries.

So I think we’re at this place where, when I talk with pharmacists, there tends to be a half glass, full half glass, empty feeling. Either that gloom and doom of, it’s inevitable things we talked about in your show Automation Technology, other providers coming into the space, writing’s on the wall, the challenges that we have, especially if we look at certain segments of the profession. Then I’ve been a part of many groups, organizations, associations and conversations with thought leaders that it’s very much they look at this as, “Yeah, those are real challenges, but that means it’s ripe for opportunity, disruption and innovation.” I’m curious from your viewpoint of interviewing some of these folks on your show, what is generally the outlook that they have on the profession of pharmacy?

[00:25:14] MK: Well, of course, Tim. I’m inviting people on that have typically their own goal or individual forward thinking goal inside of the profession. I’m the person that gets to sit on there and gripe about stuff. I don’t want to just have someone on there that just a general griper. As you and I talked a bit on our episode on, when we talked on my podcast, I think that anybody, going into any profession, whether it’s an architect or an attorney or whatever it is, I think anybody should go in saying, “I’ve got this idea that I want to get my degree and then do this novel thing or I want to invent this or I want to conquer the world with this goal.”

Now, is that going to happen? It doesn’t matter, in my mind, it doesn’t matter if that individual goal, but I think it shows somebody coming into a profession especially one that’s a lot of the money in there is paid by a third party where you’ve got someone else like pushing you down with their thumb, but when you go into a profession, when you’re an 18, or 20 year old, you want to go in with the idea that you want to change the world with something that 95% of that profession are not doing. I think what that does is, if that never happens, but at least it shows that you’re going in, that knowing that you’re not just going to be the status quo of the rest of the profession. Also, you do have a dream and if maybe that goal doesn’t work out with that degree, it shows the person you are that you are able to set goals and pivot and things like that.

The actual profession of pharmacy, it’s like, I’m an old guy that seen a lot of negative stuff in the profession, but the people that I’ve talked to, are the ones that are moving forward and doing things with a lot of success. But you’ve got to have that mindset. It’s not just going to come at you. You’ve got to be the person that we talked about from the beginning of this show, with these goals and ideas and fortitude and all that kind of stuff.

[00:27:33] TU: Yeah. I love what you shared there. We talked a little bit on your show as well. That idea of are you entering the profession with the expectation that you’re going to perhaps change, evolve, add something new, different and not entering into the status quo. That is a totally different mindset. Granted, I’ll give myself a little bit of grace, I went into the profession at 18, but as I think about how fast things are changing in our society, but in the profession of pharmacy as well, if you go in, it’s just such great advice, because if you go in with the mindset of entering into something status quo, and you’ve got 60 years to get to that finish line, maybe two more years if there’s additional training, like wow, that’s going to change, right? Even in that short period of time.

[00:28:19] MK: Right.

[00:28:20] TU: Mike, one of Guy Raz’s questions that he asks of every entrepreneur on How I Built This, and I just love hearing the variety of answers and how folks look at this, is how much of your success would you tribute to luck versus hard work? Luck versus hard work? So when you’ve interviewed these folks and I’m not asking if you’ve asked this question specifically, but just your perception of these individuals, the positions that they’ve been in, the success that they’ve had, the momentum, the mindset. How do you think they would respond to that question of how much of their success is luck versus hard work?

[00:28:57] MK: That’s a difficult question, because I think there’s always a sense of false humility in people. I think the natural first answer would be say, “Oh, it’s a lot of luck.” I think that people would say that to look good to cover the bases, then I think they would say, “Have been a hell of a lot of work into this.” Look around, no one else is doing it, I suppose. I look at myself, I think of, I wouldn’t be where I was without my grandpa and dad being in the business. That was luck of the draw. Then I guess what I would say for myself is that’s where the podcast has been a lot of fun for me, because that’s still luck in itself of having social media not having the middleman pushing you down, like the old TV networks, always had that middle person in that.

I guess, I would look around what I’ve done and say, “Oh, yeah. The podcast, maybe after 40 years in the industry.” Oh, yeah. The last year, that’s been hard work that got me above because I look at all my comrades. I said, “No one else did this.” It’s like, “Ah, okay. I’ll take a little bit of that.” I think most of the people that I would interview, I would think that a lot of luck, a lot of family status, how they were born, all those thing probably goes into saying, “Yeah, that helped me get my education and this and that.” I think most of them would probably say, “Yeah, but I did something pretty cool to get this going.” Whether it was, whatever the reason, I think at that point, they would say, that’s maybe where the hard work was, and maybe getting to the status quo was a lot of hard work, but also a lot of luck getting there.

[00:30:45] TU: Yeah. That’s right. Building on the status quo concept, I’m curious of your thoughts, individually in your own career or what you’ve heard from other folks. What takes someone over the edge of just being satisfied with the status quo and playing it safe? I’m thinking about how have these individuals or yourself address their own fears about failure, about not being significant enough, about not being able to achieve a goal and then had made a decision to take some calculated risk that moves beyond the position of status quo? What are your thoughts there?

[00:31:21] MK: I would probably say that almost everybody I have interviewed has built what they have from an area of pain, whether they think it’s their own failed goals in their day to day business or whether they think someone screwed them over. I think that pain has pushed all of these people to where they are. I think there’s a lot of beauty that comes from that pain, because without that pain, you would have probably been at status quo, which might have been okay, but maybe not see the joy in some of these people’s eyes.

I know, for me, if it wasn’t the PBMs and all the problems with stuff and all this, I wouldn’t have done my podcast, let’s say that was a mini goal of mine. I wouldn’t have done that, because I would have been so busy, I would have been content, I would have been all that. I think probably if you look back across history, to all the explorers and everybody who’s either found a country or found a business, it probably started with some pain.

[00:32:19] TU: Mike, speaking of pain. Financial pain is top of mind for me, not only my own journey, but what I see in our community of some of the stress that that can cause and one’s ability to be able to achieve their full potential and the goals that they have. So I think lots listening might get enthused by this conversation, but fairly quickly start to think of the objections to why they, themselves can’t take some calculated risks.

Of course, the one again, I’m interested in here is the financial aspect, but could be met many other objections as well. As I mentioned, on your show a lot of good ideas and dreams die with financial stress. I believe that wholeheartedly. So what would you say to the folks listening that are like, “Mike, I’ve got an idea. I’m excited about something not exactly sure where it’s going to go.” If you’re really passionate about doing X, Y, or Z, “But Mike, I’m behind retirement savings. Mike, I’ve got $200,000 of student loan debt. Mike, I’ve got a young family and all the expenses that come with that. Mike, I’m taking care of my elderly parents while also trying to take care of my children.” How do you reconcile that?

[00:33:27] MK: I would say you’ve got to play both sides of that. You’ve got to go to work from nine to five, come home, have dinner with the family, read to your kids, give him a bath, put him to bed. Then you’ve got from 10 PM until 1 AM, to make that work, as we talked earlier, what a great time. I mean, you can, you’ve got your own production studio at your home and no complaints, because the dog sleeping and the kids are in bed and all that stuff and the wife’s watching Hallmark movies on TV. I mean, that’s your time.

So there’s no better time. I don’t think there’s any excuse to not do that. The better part of it is, we just talked about that. It’s like you don’t want to do what they did in the past of selling everything, so you could buy a brick-and-mortar and open up a shop and buy a sign and all the stuff that goes along with that. You don’t want that, because then you can’t pivot. There’s never been a better time for people to put in their two or three hours, hopefully, it’s something that they would enjoy too, but that can all be done and I think there’s never a better time for that, to try these things out.

[00:34:43] TU: Yeah. Mike, I found personally, when I feel stuck, when I start giving myself excuses as to why I can’t do something when I come up with a list of objections. I usually go back to that means, my ‘why’ envision is not strong enough. It’s not compelling enough or it is but I need to remind myself have that. Maybe that resonates with folks, maybe it doesn’t, but I would encourage folks, if you feel stuck and again I’m not suggesting that everyone should go out and start their own business.

I think, there’s many opportunities to obviously be the best that you can within your position to create to innovate, to move things forward, rather than just showing up and going through the motions. But if you feel stuck, if you feel there’s objections that are coming to the mind, if there’s excuses that are there, is your vision, is your why strong enough? I just think that’s something I try to reflect on often.

[00:35:33] MK: Yeah. I think, there’s a lot of things you can do that you don’t necessarily monetize that can very much help that end goal of your finances down the road. I mean, for example, I haven’t monetized my podcast at this point yet, but that doesn’t mean it doesn’t have a financial value. Because let’s say, God forbid that I lose the store tomorrow or something happens or I choose to go to the store tomorrow.

Now, I’ve talked to 135 people and one of them being you, Tim. Not only have I talked to them, they’ve spent a couple hours with me. I’ve sent emails back and forth and this and that, the same with whether it’s writing an article or doing whatever online. You don’t have to monetize something right away for it to be valuable for your career. Sometimes it’s just getting off of TikTok and getting off the couch and putting out valuable content instead of just reading the content.

[00:36:34] TU: Yeah. Back to your comment earlier, even if it means just opening up a Google doc on your screen and not hitting publish yet. Don’t underestimate the energy that comes from sitting down, getting your thoughts on paper, beating him up and the momentum and compound effect that, that can have over time. Mike, I’m going to put you on the hot seat with some of my favorite questions and rapid fire style from Tim Ferriss book, Tribe of Mentors. You ready for this?

[00:37:00] MK: All set.

[00:37:01] TU: All right.

[00:37:02] MK: Born ready.

[00:37:04] TU: What is the book that you’ve recommended most are given as a gift and why is that the case?

[00:37:11] MK: I already talked about it, Getting Things Done by David Allen. It lets you create the free space in your head. You can be creative and get out of the mundane tasks that would typically overwhelm somebody.

[00:37:25] TU: I want to come back to you, you mentioned Jordan Peterson, is there something specific you like of his work or follow?

[00:37:31] MK: Jordan Peterson, there’s two books I would recommend. One is his, 12 Rules for Life. Then his second book is basically another 12 rules. Jordan spends a lot of time talking about something. He’s a psychologist, psychiatrist. One of the things I love most about Jordan Peterson, he spends a lot of time talking about the division or that step between chaos and order. There’s a beautiful line between chaos and order where I love to live.

You know what it is, it’s either, you’re either bored at work, some people are bored at work or there’s too much to do at work, but there’s this really sweet line in the middle, whether it’s work or hobby or something like that, where you get lost in time a little bit. That’s where it’s just a sweet spot and that’s where we want to live. That’s what I love so much about him, is just that line between order and chaos and sweet line that really makes life interesting. He’s a huge influence of mine or a huge influence to me, I should say.

[00:38:38] TU: Yeah. No, that’s good. Failure is, there’s a specific favorite failure of yours?

[00:38:45] MK: My biggest failure, if I could look back, was saying that I spent too much time worrying, too much anxious time. That doesn’t necessarily go away just by effort. It goes away, maybe by professional help and maybe goes away with medication and it goes away with a lot of reading and things that. So I don’t know if I’d call it a failure, but I’d call it my biggest cross. I think that, I’m turning it into some beautiful things and I still hope to, but I’ve spent too much time in my head and not always enough time present.

[00:39:36] TU: Mike, that’s really reassuring. As a young father, that’s something I’ve identified early in my career is the difficulty I have with presence. I’ve just realized our last five years through talking more of this out loud, reading coaches and others, one being aware of it and then two taking baby steps to move things in a different direction, but really uncovering that and making it a priority. Really appreciate you mentioned in the beauty that you’re turning that into.

[00:40:05] MK: Yeah. That’s not all. I mean, it’s not your fault. I mean, when you’re with your family but away from them mentally, you’ve got a lot of stress on you and you’re basically trading that current time for the future. You’re thinking about how are you going to whatever, feed your family or at least deal with a situation that ultimately is maybe you don’t dealing with someone ultimately, it’s because there may be in the way of taking care of your family and things. It’s not something that you have to beat yourself up over, but it is something that’s been my biggest cross.

[00:40:37] TU: Mike, if you get a gigantic billboard, anywhere, with anything on it, metaphorically speaking, getting a message out to millions or billions of people, what would it say and why?

[00:40:48] MK: I probably say, it would say, if you’re married, make that relationship the most important thing in the world to you. I’ll start there, because a lot of people – if you’re not married, stealing from Jordan Peterson, I would say clean your room. Get your room cleaned up. If you are married, I would say make that relationship the primary thought on your mind at all times, because it’s easy to save the world as you’re stepping over a bunch of crap around your bedroom. You can’t even get that cleaned up. It’s easy to save the world when your wife and or your husband and you are – when that relationship doesn’t mean much to you. I would say, I would say a billboard would say “Work on your marriage.”

[00:41:34] TU: Clean up your room. I love that too. That’s a great plot to be thinking about. Last one here, Mike. When you feel overwhelmed, unfocused, again, you’ve got a lot of different things going on or even have lost your focus temporarily. What are some things that you do to get back on track?

[00:41:48] MK: Probably the biggest thing is always getting everything on my one do-list, computerized do-list. So it doesn’t happen too often, but when things are really flustered, the first thing I do is collect all my thoughts, all my papers, all my whatever, it all goes on the list. Until it’s on the list, then you can start to prioritize, you see what’s important, doesn’t keep going through your head. It’s all in that list and then you can say, all right, my world is right there. Let’s take a look at it. That can happen through, you can have a crazy hour at work, you got to get back to your list. A crazy week got to get back to your list, hopefully not a crazy year, but if you do, you get back to your list. At least look in one spot for everything and then you can go from there.

[00:42:35] TU: We’re going to link, you’ve mentioned it a few times now, Getting Things Done. We’ll link to that book in the show note, as clearly that work by David Allen has had a really important impact on you. Mike, this has been great, really appreciate the conversation, the work that you’re doing at The Business of Pharmacy Podcast, the work that you’re doing for our profession, and really being a microphone to bringing the voice of many different leaders and influencers and making that available to other folks. So number one, thank you. Number two, where is the best place that our listeners can go to learn more about you and the work that you’re doing?

[00:43:06] MK: I would just say on LinkedIn. Just my name on LinkedIn, that’ll take you to my thing. I’ve got stuff on there. I guess the official probably going to my podcast. I have a URL, but basically look up, The Business of Pharmacy Podcast, and I’d be fun to have people join in there too.

[00:43:24] TU: Awesome. We’ll link to your LinkedIn as well as The Business of Pharmacy Podcast in the show notes. Thanks so much again, Mike.

[00:43:30] MK: My pleasure, Tim. Thanks for all you’re doing.

[OUTRO]

[00:43:31] TU: 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 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 archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of your financial pharmacists unless otherwise noted, and constitute judgments as of the date publish. Such information may contain forward-looking statements that are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements.

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

[END]

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YFP 237: 5 Financial Moves to Make to Crush Your 2022 Goals

Posted on January 6, 2022November 2, 2022 by yfpadmin

5 Financial Moves to Make to Crush Your 2022 Goals

Tim Ulbrich talks through 5 financial moves you should consider making in 2022 to accelerate your financial plan.

Episode Summary

Every New Year is a chance to turn the page and reset. That means this new year is the perfect opportunity to refocus those financial goals and clarify your plan and vision moving forward! This week, host Tim Ulbrich is flying solo to talk through five financial moves you should be making in 2022 to accelerate your financial plan or re-energize and remind yourself of the plan and goals you’ve set up. Hear about the importance of setting quantitative and qualitative financial goals and how to strike a balance between both. Discover some ideas for how you can button up your financial record-keeping systems and use the turn of the New Year as a chance to revisit and update those important financial documents. Learn about the importance of a legacy folder, what it is, and why it’s important to revisit each year. Tim also talks through some considerations on optimizing your tax strategy in 2022. He also takes a quick moment to touch on the end of the administrative forbearance, which is right around the corner, and what it could mean for your student loans.

Key Points From This Episode

How to take advantage of this time to reset, refocus, or create your financial plan.
Finding the balance between your qualitative and quantitative goals.
Tim offers to be your accountability partner.
How to take your tax strategy to the next level.
Updating your important financial documents: what is a legacy folder and why you should get one.
Revisiting your student loan game, plus some great resources to help.
Set your personal learning plan with our top book and podcast recommendations.
A reminder of the YFP services and community available to support your financial journey

Highlights

“Quantitative goals are really important: we need to be thinking about those and planning for those. But let’s not lose sight of those qualitative goals that help keep us focused on living that rich life today while also planning for the future.” — Tim Ulbrich, PharmD [0:04:14]

“Tax, in my opinion, is one of the most underappreciated and overlooked parts of the financial plan. Think of tax as a thread that runs across your financial plan that must be proactively considered and evaluated when making financial moves.” — Tim Ulbrich, PharmD [0:06:00]

“At YFP one of our core values is optimize you. We believe that when we live as the best version of ourselves, we’re more likely to achieve our goals.” — Tim Ulbrich, PharmD [0:13:38]

“Learning is one thing, but learning plus action plus accountability is where things really start to happen.” — Tim Ulbrich, PharmD [0:14:47]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[00:00:00] TU: Hey everybody. Tim Ulbrich here. Happy New Year. 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. Hope everyone is enjoying the holiday season, has had a chance to reflect on 2021 and is ready to chart a path forward for 2022. This week, I’m flying solo to talk through five financial moves that you should consider making in 2022 to accelerate your financial plan.

Specifically, I talk through the importance of setting both quantitative and qualitative financial goals, some ideas for how you can button up your financial record keeping systems, and use the turn of the New Year as a chance to revisit and update those important financial documents, considerations for how to optimize your tax situation in 2022. And, briefly, I talk through some of the considerations around student loans considering the end of the administrative forbearance that is right around the corner.

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, these 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.

[EPISODE]

[00:01:40] TU: Happy New Year to the YFP Community. Let’s jump right in with five financial moves that you may consider in 2022. Now we know that every New Year is a chance to turn the page, to reset. Yes, it’s just an artificial point in time and day that really is no different than any other day except for some tax reasons and for those of you that might have some benefits that are changing compensation and so forth with the New Year. But really it’s any other day of the year, right? However, it’s an opportunity for us that we can take advantage to reset our financial plan, to refocus where we’re trying to go in both defining and achieving our financial goals.

Perhaps for some of you, you’re listening and saying, “No, I feel pretty good. I feel like I’m on track.” This might be an opportunity to remind yourself of the plan that you’ve set, and celebrating some of the success and wins that you’ve had along the way. For others, maybe you’re listening to this, saying, “You know what, at one point, I had a good plan, but I feel like I’m off track for whatever reason.” This is an opportunity, of course, to reset that course and make sure we’ve got that vision clear heading into the year.

Finally, for those that are saying, “What plan?” Rightfully so, for many that – multiple competing financial priorities, perhaps feeling overwhelmed with how to best tackle those individual priorities and to put them all together in one plan moving in the same direction. Today is an opportunity to begin to set that path, to put those ideas, those priorities on paper and begin to have that plan for how we’re going to execute those into the future. Let’s walk through five financial moves that you may consider either making or perhaps for those of you that already doing some of these things to refresh or improve in these areas.

Number one, is setting both quantitative and qualitative financial goals. Shout out here to the planning team at YFP Planning that does an awesome job of finding the balance between living a rich life today and caring for our future self. As Tim Baker says, “It can’t just be about the ones and zeros in the bank account.” As you say, your financial goals for 2020. Yes, let’s focus on those important quantitative things. The things that we talk about often on this show, could be how much you want to move the needle on the net worth or your assets minus liabilities. What we talked about in the book, Seven Figure Pharmacists, is your financial vitals check, or perhaps you’re thinking about how much progress you’re going to make on any outstanding debt, or how much you plan to save and various investment accounts.

Or for those of you that have been thinking about real estate investing for some time, after listening to David and Nate, on the YFP Real Estate Investing Podcast, maybe you’ve been thinking about how much you need to save to pull the trigger on that first property. Those quantitative goals are really important. We need to be thinking about those and planning for those. But let’s not lose sight of those qualitative goals that help keep us focused on living that rich life today while also planning for the future.

Perhaps, we have some newlyweds that are listening, that have a long lost honeymoon to take that the pandemic disrupted? What’s the plan to make that a reality and who is keeping you accountable? Or for some, maybe you’ve been considering making a move to part time or reducing hours for whatever reason. Again, what’s the opportunity here? Have we evaluated that? What’s the plan to begin to see that through? Or how about those interests and hobbies that we used to long for, resuspend time on and prioritized that have gotten lost in the busyness of life and work? How is that going to be a priority and a focus? Perhaps that side hustle business, project that you’ve been dragging your feet on to take the first step on.

Let’s make this year, 2022, the year that we move the needle on both our quantitative and qualitative goals. While goals are good accountability is where it’s at. I’ve seen the power of accountability in my own life, and I want to see you achieve your 2020 financial goals. Here’s my offer. If you email me with one to two of your top goals, perhaps one qualitative and one quantitative, along with your why and motivation for achieving that goal. I’ll reach out a couple times this year to check in, see how you’re doing and perhaps provide some motivation along the way. You can send me an email [email protected], put Episode 237 with your first name in the subject line, so I don’t miss it. I look forward to hearing from several of you.

All right, so that’s number one, setting both are quantitative and qualitative goals. Number two is we have to take our tax strategy to the next level. Tax, in my opinion, is one of the most underappreciated and overlooked parts of the financial plan. Think of tax as a thread that runs across your financial plan that must be proactively considered and evaluated when making financial moves. Now, it sounds so obvious, but I used to view tax very much in the rear-view mirror. Filing each year by April 15, to meet the IRS requirements, and to account for what happened the previous year, and ultimately hold my breath and I would either get a refund aka paid too much throughout the year, let someone else hold on my money for a while, or I’d have a payment due. Less than ideal for obvious reasons, and indicative that I could have done more proactive planning.

So we need to shift our attention from tax preparation to tax planning. A very important distinction, that YFP Director of Tax and IRS Enrolled Agent Paul Eikenberg talked about on episode 233 of the podcast, along with other strategies for how to optimize your tax situation. If you don’t already know your key numbers, things like your marginal tax rate, your effective tax rate, your adjusted gross income. It’s time to nerd out a little bit. Let’s make a commitment this year to start there. These numbers help give us insights in the why tax planning and being proactive is so important. AGI one example, Adjusted Gross Income has important implications on student loan payments, especially for those that are pursuing public service loan forgiveness through an income driven repayment plan and of course, certain phase outs on child childcare credits, IRA contribution, student loan interest deduction, and more.

Some of the common mistakes that we run into, some that I’ve made myself is, number one, having an unexpected balance due on April 15. Less than ideal. This could be due to under withholding throughout the year, perhaps on accounting for self-employment earnings and tax and unique this year would be for those that have been taking advance child credits and making sure that we’re accounting for that, and expecting that, when we go to file in early this spring.

Another common mistake that we see, number two is having non-qualified IRA or 401K, 403B contributions from over contributing. This obviously creates a lot of headaches for both the prepare, as well as for the individual to correct and misunderstanding of the rules around Roth and traditional phaseouts, is often what is causing this problem. Number three in terms of common mistakes, would be missing deductions and credits that are applicable. So of course, beyond these mistakes, there’s opportunities to optimize our situation. HSAs, Health Savings Accounts, we talked about this on Episode 165, in terms of the power of an HSA and why from a tax standpoint, this is one of those optimization strategies.

Other optimization strategies we see that is frequent among clients, would be deducting qualified business related expenses for those that are side hustling or for those that own a business. And of course, the many benefits that are available for those that have children or childcare expenses, including the childcare credit dependent care FSAs, child tax credits in 529. As Paul helped me understand some of the strategies for bunching itemized deductions for further tax efficiency. It’s easy to see the value of a good proactive tax plan and why it’s worth its weight in gold. So for those that have not yet checked out Episode 233, Hot Optimizer Tax Strategy, I hope you’ll do that.

Also, we understand at YFP that filing your taxes and figuring out how to optimize your strategy can be stressful. That’s why YFP tax this year is opening up its tax filing services to 125 additional pharmacist households. So you can visit yourfinancialpharmacist.com/tax to learn more, put your name on the waitlist and we’ll be in touch from there. Again, that’s yourfinancialpharmacist.com/tax.

Number three is, button up your financial documents. Not necessarily the most exciting part of financial plan but the New Year is a great time that we revisit things\ like our insurance policies, our savings accounts, retirement accounts, looking at beneficiaries. Is that information correct or do we need to update anything?

I also think here about the concept of a legacy folder. I first heard of the idea of legacy folder when taking Dave Ramsey’s FPU, Financial Peace University class. I remember thinking, “Wow, it’s so obvious, yet so important.” And something that my wife, Jess, and I had not done yet at the time. Essentially, the idea of a legacy folder, whether it’s physical electronic or both, is a place where you have all of your financial related documents, so that in the event of emergency, others would be able to quickly assess your financial situation, get access to those documents and accounts that pertain to your finances. This type of folder could include things like birth certificates, social security cards, marriage certificates, passports, insurance policies, wills and powers of attorney, login information for accounts and so on.

I think one of the benefits of putting this document together is, it also tends to spur good conversation that might allow you to also look at other parts of the plan that have been either ignored or just perhaps need to be updated. Speaking of some of the wills and powers of attorneys, we think about the estate planning side of the financial plan. That’s another part I think, about hearing “Buttoning up your financial documents.” If you haven’t yet, listened to Episode 222, Why Estate Planning is Such an Important Part of Financial Plan. We had Nathan and Notesong from Thoughtful Wills, to talk about the different parts of the estate plan, why that’s so important, who should be considering the estate planning process and how that fits in to the rest of your financial plan. Again, not the most exciting part of the plan to think about, but really important, and using the New Year is an opportunity to refresh or to set that information for the first time.

Number four is, revisit your student loan game plan. Now, what we know as of the first of the year, is that the extension of the administrative forbearance is expiring January 31st, 2022. Now is the time. We’ve got to have a plan in place. We had several extensions of that forbearance dating back to the beginning of the pandemic in March 2020 and all signals are pointing to that, this is the end. Last week Episode 236, certified Financial Planner, Lead Planner at YFP Planning, Kelly Reddy-Heffner joined me to talk about some common questions around Student Loan Refinancing, including who should and should not refinance, how you evaluate multiple offers, some of the considerations for refinance as one of many different repayment options that are out there. And some of the timing questions of when potentially to refinance, as we look at the end of that administrative forbearance period.

This is a great time. I’ve talked many times on this show, as we reiterated last week, that the decisions around student loan repayment – we think about the average debt of a pharmacy graduate today as around $170,000. We think about not only the amount of that debt, but the various options that are available both federal private forgiveness, non-forgiveness, taking the time to understand the nuances of student loan repayment and to ultimately find and adopt the strategy that is best for your personal situation is time well spent.

If you’re looking for more information about which student loan repayment option is best for your personal situation, looking for one-on-one help to make that decision, we have a student loan analysis service that we offer. You can learn more at yourfinancialpharmacist.com/sla. This is a one-on-one service that we have with one of our certified financial planners at YFP planning that will help you inventory your loans, federal and private, evaluate eligible repayment options including loan forgiveness, income driven repayment, private refinancing. And ultimately help you determine the best repayment strategy for your personal situation. Again, yourfinancialpharmacist.com/sla and you can use the coupon code why YFP for 10% off.

Number five is, set your learning plan. At YFP one of our core values is optimize you. We believe that when we live as the best version of ourselves, we’re more likely to achieve our goals, and we believe that for ourselves for our team and for you, the YFP Community. So what are some opportunities to learn? Of course, podcasts, you’re listening to this one. For those that are interested in in real estate investing, I hope you have checked out the YFP Real Estate Investing Podcast that David Bright and Nate Hedrick are doing a great job releasing episodes each Saturday. Bigger Pockets, another great resource if you’re looking at information resources on real estate.

Some of the books that might make it to your reading list in 2022. Some of the classics my favorites, Rich Dad Poor Dad, The Millionaire Next Door. A couple other books that have been favorites of mine over the past couple years, The Compound Effect by Darren Hardy, The Truth About Money by Ric Edelman. Tax Free Wealth by Tom Wheelwright, for those that are looking to date a little bit more into the tax strategy and part of the plan. The Automatic Millionaire by David Bach, The Behavioral Investor, by Daniel Crosby. Happy Money, this one by Elizabeth Dunn and Michael Norton, Looking at the Science of Happier Spending. So just a few ideas of ways that you can learn, in terms of personal finance books.

Certainly learning is one thing, but learning plus action plus accountability is where things really start to happen. My hope is you’ll find a community and you’ll find a coach for accountability and guidance, if you’re not yet a part of the YFP Facebook Group, I hope you’ll join more than 7000 pharmacy professionals across the country that are really committed to helping empower and encourage one another in the financial plan. You can join that group if you’re not already part of it.

For those that are looking at one-on-one planning, YFP planning offers accountability and customization of the financial plan specific to pharmacy professionals, and you can learn more at yfpplanning.com, you can schedule a discovery call today to see whether or not those planning services are a good fit for you. Thank you so much for joining me. Again, Happy New Year to the YFP Community, looking to a great year that’s ahead. My hope is you will take these five financial moves for 2022 and begin to apply them in your own plan.

[OUTRO]

[00:15:41] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment, or any other advice. Information to the podcast and corresponding material should not be construed as a solicitation, or offer to buy or sell any investment, or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

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

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

[END]

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YFP 236: Gen X Pharmacists: Financial Challenges and Money Strategies

Posted on December 30, 2021November 2, 2022 by yfpadmin

Gen X Pharmacists: Financial Challenges and Money Strategies

On today’s episode, sponsored by Thoughtful Wills, Tim Baker talks through the unique financial needs and considerations of Generation X.

Episode Summary

Often referred to as the sandwich generation, Gen X is a big group of people that’s often set on the sidelines when compared to Gen Y, the millennial generation, and baby boomers. Financial planning can be hard enough by itself, but supporting your young (or not-so-young) children often at the same time as aging parents, all while trying to save for retirement, creates a unique strain on finances that requires some specific financial planning! Today on the YFP Podcast, Tim Ulbrich is here with YFP co-founder, co-owner, and director of financial planning, Tim Baker, to talk through the financial needs and considerations of our Generation X pharmacy colleagues who are well beyond the new practitioner phase, but perhaps not yet at that traditional retirement age. We talk through why this generation has some unique financial challenges and touch on how to tackle the pessimism and inertia that often comes with changing or leaving your financial planning too late. We discuss the challenges this generation face, how their debt position and accrued retirement savings compare to other generations, and some strategies to chart a successful path to independence and stability, despite the tough economic hand dealt in their lifetimes. This episode may focus on a specific age group, but all listeners will hear valuable advice and insights that would benefit anyone!

Key Points From This Episode

An introduction to today’s topic of Gen X; the sandwich generation.
How Gen Xers are often providing for their parents, plus a young child or a child over 18.
How these financial expectations are often overlooked or pushed to the side.
We talk about average incomes, the rising cost of education, and what their debt load is.
The impact of the ups and downs in the last few years on their financial mindsets.
How Gen X wants stability but might not have the financial plan or means to get it.
You can take out education loans for your kids, you can’t get retirement loans.
Hear how Tim Baker follows the one-third plan and a reminder of what that is.
Relying on the act of planning, versus having a plan.
Some important questions Gen Xers can ask themselves to get financially stable.
Making sure you’re not on autopilot, particularly in your peak earning years.
Tackling the fear and inertia of having left it so late in life to start saving and planning.
Having empathy for Gen X needing different priorities from the previous generation.
That Gen X really wasn’t dealt a great hand economically, but the problems are fixable.
Reigniting the vision and finding the motivation to do things differently.
Speaking about the lack of confidence in social security for future retirement.
Tim shares a great exercise you can do to check your retirement age and benefits!
We discuss the shifting dynamics of generations and the transfer of wealth.
Some parting words of encouragement from us here at the YFP team!

Highlights

“[Gen X] is a generation that probably has some of the most important, or probably the most urgent needs in terms of their finances and financial planning.” — Tim Baker, CFP [0:04:34]

“39% feel of Gen Xers feel that they’ll never have as secure a financial life as their parents’ generation. As parents, you always want your kids to have a better upbringing.” — Tim Baker, CFP [0:09:26]

“What can you do for your kids? What do you want to do for your kids in terms of an education plan? At the end of the day, your retirement should take precedence, because you can’t take retirement loans. You can take education loans.” — Tim Baker, CFP [0:15:17]

“If I’m a Gen Xer and I’m 50, and I know that I have a decade left if I want to retire by 60, you can do a lot in 10 years. You can.” — Tim Baker, CFP [0:25:29]

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, co-owner and director of financial planning, Tim Baker, to talk through the financial needs and considerations of Generation X; those born between the mid-60s and early 80s, falling between the baby boomers and the millennials. That would be our pharmacy colleagues well beyond the new practitioner phase, but perhaps not yet at that traditional retirement age.

Whether you are a student pharmacist, or a new practitioner anticipating some of the financial opportunities and challenges that may face you in the future, or you’re a Gen X pharmacist listening, my hope is that you’ll have something to take away and apply to your own personal situation.

On the show, Tim Baker and I talked through why this generation has some unique financial challenges, and is often referred to as the sandwich generation. We discuss the challenge this generation faces and the balance taking care of themselves, their children, perhaps, as well as their parents, how their debt position and accrued retirement savings compares to other generations, as well as some strategies for a Gen X pharmacist to chart a successful path boards, despite some of those challenges that they may be facing.

As we wrap up another year of the show and are knee-deep into the planning for 2022, I want to say thank you to the YFP community for entrusting us with your time, by listening to the show. We don’t take for granted your support and encouragement of the work that we’re doing at YFP, to help pharmacists on their path towards achieving financial freedom.

Also, a big shout out to YFP members Caitlin Boyle and Rose Mercado for the engine behind making them YFP podcasts a reality each week. Caitlin and Rose, your contributions to the team and the YFP community are truly appreciated. Okay, let’s hear it from today’s sponsor, and then we’ll jump into my conversation with Tim Baker.

[SPONSOR MESSAGE]

[00:02:00] TU: This week’s episode of Your Financial Pharmacist Podcast is sponsored by Thoughtful Wills. Let’s take a minute to hear from Co-Founder, Nathan.

[00:02:08] NK: My name is Nathan Kavlee, and I’m one of the founders of Thoughtful Wills. Our law firm spends a lot of time thinking about the process of estate planning. There’s no way we can get around the yuck of death. Instead, we focus on being lawyers that you’ll actually enjoy working with. We pride ourselves on being approachable. Then, we take the extra time to draft documents that are actually understandable. Then we pair that with technology to make the process cheaper and more convenient. Please visit our website thoughtfulwills.com/yfp and poke around. Then book a meeting with us, please. We are genuinely excited to chat with you.

[INTERVIEW]

[00:02:46] TU: Tim, excited to have you back in the mic.

[00:02:48] TB: Yeah. Good to be back for a full episode, Tim. How’s it going?

[00:02:52] TU: It is going. We are just a couple days away from the New Year, and hard to believe that we’ve had another year of the podcast, another year of the growth of the YFP community, growth of the team at YFP, and so much to be grateful for as we roll the calendar into 2022, and excited for what lies ahead as well.

[00:03:13] TB: Yeah. It’s been a year of change, I think, with everything that’s going on. I think, all for the good. I’m excited for what 2022 brings in. Hopefully, we can continue to crawl out of this pandemic, and we don’t have too many more of the variants that are shutting things down. I’m excited for what’s ahead, though.

[00:03:33] TU: We’re going to start to dig into this topic, one that we haven’t covered in great detail before. Today, we’re talking about the financial needs and considerations of Gen X pharmacists. I think, it’s worth noting that we’re talking about generations, we’re obviously talking in general generality and general form. Certainly, unique situations are going to apply here. Tell us a little bit more about why we want to delve more into this this topic on the podcast as we look at financial needs and considerations of Gen X?

[00:04:02] TB: Yeah. I think, just like the generation, it’s kind of like the forgotten middle child. When we’re talking about Gen X, we’re talking about a group of about 65 million people that are born between 1965 and 1980. The youngest is in their early 40s, turned 41 this year, and then the oldest being in their mid-50s, turning 56 this year. It’s a big group of people that it’s often set on the sidelines when compared to Gen Y and the millennial generation, or baby boomers.

I think, it’s a generation that probably has some of the most important, or somewhat, probably the most urgent need in terms of their finances and financial planning. This generation, it’s called the latchkey generation. A lot of kids after school would go to this latchkey programs. I’ve also heard him them called, Oregon Trail generation, the Trapper Keeper generation. I have a personal affinity.

[00:04:59] TU: Oregon Trail. It’s good.

[00:05:00] TB: Yeah. I’m technically part of the Gen Y. I’m an I’m an older Gen Y-millennial, born in ’82. Well, my brother was born 80, so he’s a young Gen Xer at the end of ’80. I see both, I feel I fit in between both generations, and I see both sides of it. It’s also often called the sandwich generation, which really entails a Gen Xer taking care of not only themselves, but their kids that are coming of age, but also aging parents. 47% [inaudible 00:05:33], 47% of adults in their 40s and 50s have a parent over age 65, and are either raising a young child, or providing financial support to a young child over 18.

You can imagine, Tim. Before I had kids, I’m like, “Man, I can barely take care of myself. How can I take care of another human being?” That’s what’s going on here as their adult, and as they got to take care of themselves, and then they have to basically take care of parents, and then their kids that are coming of age. It’s a daunting task. Unfortunately, there’s a lot of – I feel like, there’s a lot of negativity and cynicism, not just even around the coverage of Gen X, but even inside of Gen X, as you see some of the things that they experience over time. It’s something that I think needs to be talked about more, because I feel all of the press, all of the language is either for baby boomers, or this Gen Y generation, baby boomers – Gen X are just left on the side.

[00:06:36] TU: It’s really true. It’s something that I’ve observed, since we’re prepping for this episode, is when you hear generational news that’s out there, the millennials get a lot of love. Gen Z gets a lot of attention, baby boomers. This concept of a sandwich generation, a generation that’s often overlooked but has some significant things that they’re facing financially. Hopefully, some things that we can turn into opportunities may get overlooked in terms of the stress and the burden that that group is carrying.

You’ve laid the foundation, Tim, in terms of Gen X. So, people born approximately 1965 to 1980. We’re looking at early 40s to mid-50s, known as the sandwich generation, and between millennials and baby boomers. That concept of being caught between taking care of their children, as well as aging parents.

I just talked with a prospective client earlier this week, young family, two kids under the age of four, going through their own student loan, debt repayment scenario, trying to get investing off the ground, and get some early momentum there. Then also, the prospect of potentially having to take care of their elderly parents in the near future. That’s weighty, right? I think, you and I would both argue from individual experiences, as well as the pharmacists that we talk with all across the country, that financial planning can be hard enough in and of itself, without having to think about an additional burden that might be placed upon something like, having to take care for elderly parents.

[00:07:58] TB: Yeah. I think, this is the start of many sandwich generations, unfortunately. Maybe not unfortunately, but I know, a lot of our Gen Y clients are, they have a bucket of money that’s just like, “Hey, my parents either got me here because they immigrated here.” Or, that’s what our culture says, “My job is to is to make money and take care. I am my parents’ retirement plan.” That’s not just related to Gen X, I think, that’s going to be a common theme in Gen Y and Gen Z.

I think, the difference is that the year – it’s upon us already for Gen X. They’re already doing it. Probably, haven’t really planned for it. The good part about Gen X is that they’re approaching their peak earning years. On average, they make more money. I think, I think the average household income was something like, in the $130,000s or something like that. On average, they make a lot more than baby boomers who are winding down, or they’re already retired. Then Gen Ys are still – and we know in pharmacy, it’s a little bit different.

Average net worth for – if you’re if you’re clocking this average net worth, I think I saw a number out there, it was about a $168,000. That’s not a lot, especially if you’re thinking you only have 10, or 20 years left to work, if you’re going to retire in your 60s, that type of thing. I think, the one thing that came out to me when I was looking at this was, 39% feel of Gen Xers feel that they’ll never have a secure as a financial life as their parents’ generation. Which, and that’s one thing is like, as parents, you always want your kids to have a better upbringing.

I think, the other thing that is interesting about Gen X, as you’re looking at the data, and just some of the editorial comments, they are sandwich in terms of – they have a lot of the consumerism that baby boomers had. It was like, Gen X spends more than any other generation in terms of consumer goods, but they also got hit with the rising cost of education. Now not to the degree where pharmacists are coming out today. We have charts where the income was pretty close to what the debt levels are for a PharmD, and then the PharmD debt just raced by the income.

I think, to a lesser degree that the debt, and obviously, they’ve had years, a decade, or more of paying, 15 years of paying off student loans. I think, the biggest portion of what they’re seeing in terms of debt loads are coming in the form of mortgages, credit cards, auto loans. But also, still having those student loans.

Unfortunately, Tim, we see a lot of pharmacists that are in this generation that haven’t put that big of a dent into their student loans at all, because of I think, the construct of “Hey, you just pay the least amount and you drag it on forever.” Unfortunately, you’re left with a large sum, even 10, 15 years into your career, 20 years of your career, unfortunately.

[00:11:07] TU: Tim, one of the things I was thinking about recently, I graduated in 08, was that – 13 years ago or so, that was shortly after the requirement to the PharmD. This group, most of them, unless they went back and got – PharmD would have been in the BS period, before the PharmD was required. One of the things I’ve been reflecting upon is that I graduated in 08, obviously, the recession of 08 was what it was. I was in residency making $31,000 and didn’t have a whole lot of focus, or attention on savings. I didn’t really feel that very much, even though I observed it and lived in it.

All I know, is what has been a pretty wild market ever since then, that’s only been on the up and up overall, obviously, outside of some dips and so forth in between. I often think like, “Man, what kind of overconfidence has that led?” Potentially, not only my situation, but others that are in that window that have graduated in the last 13 years and have not experienced a significant downturn and has had that real impact, where you’ve accumulated savings, and you’re like, “Oh, my gosh. This is real.” I see the dip.

We look at this generation, they’ve been through the dot-com bubble. They’ve been through the 08 financial crisis, and they’ve been through what has been the wild, last couple years on the market, since the beginning of the pandemic, in terms of the ups and downs, and even within a given week, ups and downs. What impact do you suspect that has had in terms of their approach to savings and investments?

[00:12:35] TB: Yeah. I think, it’s had a great impact. I think, it was often documented that a lot of Gen Xers were very, very much educated, but underemployed, especially dot-com. Talk about swings of wealth in markets in dotcom. Then, the subprime mortgage crisis. I think, it’s led to a lot of asceticism, and a lot of the – some of the rhetoric that you see.

I guess, to bring my point full circle, what I was trying to compare to go back to that real quick. Baby boomers, no student loan issues there, but spent and had mortgages and things, car loans and things like that, credit card debt. I think, notoriously not having been great about saving for retirement, and I think, so security’s going to definitely help them. I think, Gen Y have been more adverse to home buying and taking on a big mortgage, and less consumer debt.

Whereas that, with Gen X, you’re seeing the ugly on both sides. You’re seeing the student loans, but you’re also seeing some of the other – that other debt it’s piled on. I think, with regard to investments, I think, that I saw a stat that Gen Xers, they’re thinking, “Yeah, we probably should be –” I think, the number was like, “We’ve probably should be saving 11%.” It’s probably closer to 20%, where they’re at in their career, if you count all of the things that you should be putting in to retirement. I think on average, they’re saving about 9%.

I think, some of the things that you’re seeing that baby boomers are working more into retirement and they don’t have confidence in their money lasting, I think, you’re going to see that compound with Gen X, unfortunately. I think, one of the things that often will buoy the Gen Xers is, as that wealth generation or wealth transfer happens, so baby boomers dying off, you’re going to start to see windfalls that are going to fix some of the ills, unfortunately, that happen.

It’s having a plan for that, and having a plan for that windfall. Gen X wants stability, but they’re not necessarily doing a lot to help their financial future. I think, what they’re just trying to do is get through the day in terms of like, “Hey, I have to take care of myself, my parents.” Then, I’m also looking at, and the whole – we can have a whole other discussion just about education and sending your kids to college, and not experience – Sometimes that, your own experience can color that for your kid. You have some people that are like, “I never want my kids to have an ounce of student loans.”

Or some people would say like, “Hey, I had to deal with it. They have to, too.” There’s no right or wrong answer, but it’s really cutting through that and understanding, what can you do for your kids? What do you want to do for your kids in terms of education plan? At the end of the day, your retirement should take precedence, because you can’t take retirement loans. You can take education loans, and hopefully, they start to figure out how to make this a little bit better, which again, that doesn’t necessarily help. It might help our kids, Tim, in the future, but it’s not going to help Gen Xers whose kids are in college, or approaching that age right now.

[00:15:43] TU: Yeah. Jess and I were just talking about that the other night, of really fighting against some of that gut and emotional reaction of wanting to over – potentially, over-contribute on the college side at the expense of other things, because of the pain we felt in our own journey, and how front and center that is.

[00:15:58] TB: Well, and I just got an email from Ohio529. They’re like, “Hey, if you put this much in, you can max out your $4,000.” Yeah. I’m like, “All right, well, we have this plan” but I’m torn to say like, “Okay. How can I get that just for the tax benefit?” Again, I think, people sometimes do things for the good of the taxes, or at the detriment of their financial plan. I mean, it’s never a bad thing to, I think, save for the future expense that hopefully will be there in the form of college.

At the same time, I had to take a step back and say, well, this is not really what Shane and I talked about in terms of our – what we want to do. And we follow that that one-third plan, which I think we’ve outlined in previous episodes of, one-third is going to come from our – the 529s that we’re saving. One-third is going to come from hopefully, that’s something I can cashflow, as our kids are in college. That present income in the future, if that makes sense. Then one-third from hopefully, scholarships, grants, and then last but not least, loan.

That’s ours. Again, at the end of the day, we’re making sure that we’re trying to fill that retirement bucket, because we want options. We went options as we approach retirement to say, “Okay, we want to work until this, or not have to work, or whatever.” To me, that’s something that the Gen X generation is also dealing with. I think to, again, it’s more into a heightened degree. One, because I think resources are scarce. You’re just dividing up between many more people, because typically, bigger households, and then we talked about again, taking care of parents and things like that. Yeah, I mean, it goes back to relying on the act of planning, versus having a plan. I think, that’s definitely something that Gen Xers should look to do if they’re grappling with all these different issues.

[00:17:53] TU: Yeah. I think, as we’ve talked about many times on the show, and something I know, we both worked through personally, and I sent it in the individuals that we talked to that are considering coming onboard as clients of YFP Planning. Sometimes there’s just so much emotional stress that we carry around related to financial planning, because of all of these things that are swirling in our mind.

We’ve talked about, many of them here is really, to Gen X in terms of debt that might be hanging around, thinking about the college for kids, or grandkids, caring for elderly parents might behind on retirement. Should I be thinking about diversifying other revenue streams? The list goes on and on. So much value from my perspective of the planning process, and what you’ve done, even with Jess and I is, “Let’s get all of these out of our head, onto paper. Let’s talk through them, let’s prioritize them, let’s beat them up. Think about how they fit in with the bigger vision of the plan and where we’re trying to go, what we’re going to try to do. Even if those numbers don’t change drastically tomorrow, we’ll get there over time.” Having that plan just provides an incredible amount, I think, of confidence, and hopefully, at some level, some peace as well.

[00:18:59] TB: Yeah. The plan touches so many things. We touched briefly on the investment retirement stuff. You could talk about just that whole thing for Gen Xers. It’s like, okay, what does retirement look like? Is it early? Do we have dollars that we can access, if it is early retirement? If it’s not, what’s the plan for that? Is the asset allocation correct? Are you working with an advisor and paying too much in fees? What are they actually doing for you? We’ve got a lot of clients where it’s like, when the comparison of what we do at YFP, which versus what an advisor somewhere else would do. It’s a different offering.

Again, I think, that the nice thing about Gen X is that they’re not shut out of the game of financial services, like Gen Y. Because Gen X, at least has investable assets that can be managed, and that’s typically what advisors look for. If you have negative wealth and no money to invest, most advisors will say, “I can’t help you.” Gen X doesn’t have that, and so you have that problem, because if they’ve changed careers that they’ve accumulated money in their IRAs over time, they do get attention. Is it the right attention, is what I would I would argue?

The other thing that we haven’t talked about, that’s about this is, is the protection stuff or the financial plan. Over time, things change. Are your life and disability safe? What are the deductibles? Do you need umbrella policy? We could probably go back to the episode that we have Cameron Huddleston on, which is, Mom and Dad, We Need to Talk.” Not just having a state document for you and a state plan for you, but your parents.

It was also, it could be where you are to a point, as a Gen Xer, where there is more that you can potentially give and maybe, there’s charitable intentions and could be a lot of – sometimes we see Gen Xers that have worked some of these things, it’s that big-pot-of-money syndrome. It’s like, “I have $80,000. I have money in my investments. I have $80,000 in savings account.” Okay, what’s this money for? What are we earmarking it for?

Then, if we’re expecting inheritance, what’s that going to be used for? Have we reviewed our emergency fund lately? There’s so many things here that, I think, Gen X, especially as they proceed through and they’re approaching their peak years of earnings, just need to make sure that they’re not on – I hear autopilot all the time when it comes to a financial plan. There’s typically, tons of things to look at, and do and plan for, and assess. As you’re taking care of parents and sending kids to college, and the one thing we haven’t talked about is taxes, and what that looks like, there’s just a lot – there’s just a lot on the plate.

To me, it just goes back to the idea of sitting down, and building out a plan, but then engaging in the act of planning. As the years go on, and you’re in this last decade, or two of earning, so you can set yourself up for the best retirement that you can.

[00:22:02] TU: Two resources, Tim, I want to point folks to that build on some of what we’ve been talking about here. You mentioned that interview with Cameron Huddleston, who wrote Mom and Dad, We Need to Talk. Great conversation I had with her about how to effectively talk with your parents about their finances. So many good takeaways that I’ve been able to apply in my situation. That was episode 108. We’ll link to that in the show notes.

Then the second thing, we’ve been talking a little bit about kids’ college education, and that was episode 195, where we talked about how to save for your child’s education. That highlights some of what you were sharing in the “thirds” approach. Tim, one of the things I want to ask you about is, I suspect many in Gen X, you’ve given some data here about folks that may not be on track “statistically” or what they think they should be in terms of retirement savings. There’s probably that lingering feeling of like, I’m behind. I’m also maybe trying to pay off some student loan debt, but I’ve got all these other competing expenses that are taking on some of the priority as well.

The question here relates to how to get past that inertia of feeling behind. The best time to invest would have been 20 years ago. The next best time is right now. How do you begin to coach folks through not having that mindset, or approach of like, “Well, at this point I haven’t done it. Therefore, I’m not going to be able to get to that goal anyways.”

[00:23:20] TB: Yeah. I think, I equate it to for some people, it’s like going to the doctor. You don’t want to go to the doctor and talking about, like if you smoke, or if you’re overweight, or things like that. You have this block that, that you know that the answer is bad. There’s this feeling of being judged. I think, from the professional standpoint, we’ve seen it. We’ve seen a lot of things. Just like, doctors have seen it all. It’s not about that. It’s just about changing course, and saying, “Okay, this is what happened, or this is what’s happening. How can we make this better? How can we proceed?”

The thing that, and I hear this all the time, even from clients that we have that are younger, that are in their 20s. I hear throughout all the generations. Really, it’s like, I’m never going to be able to retire. I’m always going to be working. I think for Gen X in particular, because of some of the downfalls in the market, and the investment in education, being under employed, at least from the beginning, that is that pessimism. There was a study by, I think, it was T. Rowe Price that said, 12% of Gen Xers say that they will retire before age 60. Compared to 26% of millennials.

Millennials are more optimistic about that. I guess, to bring it back in terms of where to start, my belief in financial planning is very – it’s very absolute. Meaning, I think, if you engage with a professional, an objective third-party that has your best interests in mind and is really rooting for you to achieve the goals that you want, I think if you do that for years, we have people that really do well with their financial planning in a span of a year, or two, or even three. If you can imagine stacking a deck – If I’m a Gen Xer and I’m 50, and I know that I have a decade left if I want to retire by 60, you can do a lot in 10 years. You can.

If you’re a younger Gen Xer, if you’re 41, if you’re my brother’s age, 1980, and you have say, 20 years, or even 25 years, there’s just so much that you can do in 20 years. If you’re stacking intentional years of working on your financial plan, and thinking about it and revising your goals, and making adjustments and protecting yourself and having those conversations of like, “Hey, is this what I really want? Am I on track?”

There’s this feeling. I think, sometimes it happens with our clients, even just through the first meeting, where they just look at and they can see their balance sheet and all of their things. Then even more so, the second meeting, we’re actually talking about what are their goals, what is a wealthy life for you? Just to have that exercise, to go through that exercise, I think, is empowering. Then it’s like, “All right, let’s get to work and actually get into the financial plan.”

I look at as a very much a glass half full. Whereas, I think, a lot of people, it’s a glass half empty. We know that inertia is a thing. You’re more likely to do what you’re doing currently, than to take the leap to do something different. I think, to answer your question that you originally answered, I think it’s – You have to get over that, because at the end of the day, you’re going to have to get over it, eventually. Whether it’s in your 40s, or if you’re in your 60s, where you have to actually plan to say, “Okay, can I shut this income stream off, that is my livelihood?”

Because eventually, you can’t do the work as a pharmacist in your – It’s really hard to do. It’s a demanding profession. To me, it has to come sooner, or later. Then as a planner, I would advocate sooner. I would just think of it from a – I’m just thinking of it from a patient’s perspective. I’m sure, lots of pharmacists work with patients, which have those anxieties. If you approach it as well, they’ve probably seen it all, which we have, then just have solace in that that you’re not going to be judged, or it’s more about moving forward from here than anything. That’s the best I can – advice I can give.

I know, I get it. I understand. No one wants to be judged, or a lot – sometimes we double down, because pharmacists are your doctors, you’re educated. That doesn’t necessarily mean that you’re a doctor of money, right? We put that on ourselves, or PharmD’s put that on themselves that they should know better, or things like that. I think, that’s crap, to be honest. I think, Gen X, again, you were dealt a not-great hand, because you’re in that sandwich, where baby boomers, my parents are baby boomers, they’re like, “Buy a house. Don’t have credit card debt.”

I didn’t necessarily want to buy a house right away. That was what you did. You got the best education. You would pay whatever you could to get the best job. You buy a house and you have kids, and that’s it. That wasn’t for me. I feel like, Gen Xers were still put in that. They had that appetite for the non-student loan debt, but then, they also had the student loan debt that baby boomers didn’t experience.

That’s the thing that I have to – I would say, it’s cool. That’s where you’re at in terms of the run of things. I think, millennials learn from baby boomers and Gen X, and more like, “I don’t want to rush into marriage, or a house, or things like that. I want to figure this out first.” You had a little bit more, I think, leeway even than Gen Xers did, because Gen Xers, again, because of all the different recessions and things like that.

I think, that’s where, and even things like forgiveness. Gen Xers are probably looking at forgiveness and they’re seeing all these things come off the board here, all these loans. PSLF and things like that.

[00:29:46] TU: I wish. I wish.

[00:29:49] TB: That would have been nice. Because back in my day, shake their cane. Back in my day, this is how – I had to walk uphill to school and the stone -those are some of the things that you weren’t afforded those, because I think, it was President George W. Bush that put that into effect back in the early 2000s. That’s the thing, Tim, is it’s not a great hand. I think, at the end of the day, it’s what you make of it going forward. Again, the nice thing about Gen X is that a lot of these problems, I think, are fixable, because there’s still time. There’s still time. They’re approaching, peeking earning years, like I said. Again, it’s more of the process of planning and making sure that what they’re doing is what they want to do.

[00:30:32] TU: Yeah, the thought that comes, too, Tim, is it’s a great opportunity to re-ignite the vision. I think that, I’m thinking about all the issues we’re talking about that are getting thrown at Gen X. It’s fair that you might feel beaten down and you feel like, “Man, I’m behind, or I wish I’ve done this, or I wish I’d done that.” To reignite the vision a little bit of, okay, where are we trying to go? What are we trying to achieve? Hopefully, that provides some motivation to get over some of the humps to be able to accelerate the plan into the future.

One other thing I want to ask you about, Tim, we’re going to come back and talk about a lot of these in more detail into the future. This episode is really meant to lay the foundation of some of the financial issues that Gen X is facing. We’re going to come back and talk about social security in great detail in the future, which I think is relevant for folks that are in benefit, for folks that are getting ready for benefit decisions, and for even younger practitioners that are maybe asking some questions around, well, how do I factor this in? What might this mean in terms of my long-term planning savings?

I think, there’s a little bit for everyone to learn as it relates to social security. Tim, from Gen X’s perspective, talk to us about confidence in social security, or lack thereof, and how this may factor into some of what they’re working and facing through?

[00:31:48] TB: Yeah. I think, there’s a T. Rowe Price article that basically, said that there’s very little confidence in social security. I think, it’s something 56% of Gen X expects that social security will be bankrupt by the time they retire. A full 73% agree with the statement that I’m expecting some security benefits when I retire, but nothing as generous as what today’s retirees get. I think, there’s two different things at play. One is, will social security not be there at all when I retire in 10, or 20 years as a Gen Xer? Versus, will it be there, but at a diminished amount?

I’m in the camp that I think, social security will always be there in some form or fashion. I do think that it’ll be either funded with a tax increase, or like a payroll increase, or something like that. Or it will be a diminished benefit, either pushing out for retirement age, or just a lower amount.

I think, an exercise, a good exercise for a Gen Xer, and I just did this recently just to check is to go on this socialsecurity.gov website. You can sign in and actually, see what your full retirement age is, if you retire at this age versus this age, what your benefit would actually be. If you have all the quarters that you need to do to qualify for social security. I think, this warrants probably a full episode, but the confidence is not there.

I hear it. Baby boomers, they feel pretty good about it, because a lot of them are approaching – already drawing on it. Gen Xers, very cynical about it. I think, Gen Y is like, “Yeah, I’m not counting on it.” At the end of the day, and we plan as if it’s not going to be there. At the same time, I think, it will be and I think it’ll be a much lower percentage of your retirement paycheck than the average American. It’s going to be there nonetheless. It’s just a matter of what would that be? At the end of the day, I think, it’s always smart to plan for retirement as if it’s going to be you all the way.

I don’t see it going bankrupt. I think, there’s a lot of people that I respect and following the industry that says, “It’ll be there. It might be a diminished benefit.” At the end of the day, it will be a part of your retirement paycheck, Gen X and even Gen Y as we proceed here.

[00:34:09] TU: Tim, this reminds me a little bit of some of the discussion around loan forgiveness. Not to say there won’t be changes or challenges to social security. I think, this has been well-documented, but some of the fear and angst around public service loan forgiveness. We have to think about, to, what would be the fallout if the plug got pulled, right?

I mean, there’s a lot of people, especially with social security, more so than loan forgiveness that, I mean, that would – especially if you’re 10 years away or less to retirement. That’s a big deal. Might there be transitionary phase, or smaller changes made along the way, same thing with loan forgiveness. We talked about making sure objectively evaluating some of those risks, considering them, but also, looking at some of the upside of the plan.

I like your suggestion and solution of, “Hey, let’s plan as if it may not be there and perhaps, even running some best case, worst case, middle of the road type of scenarios, and seeing how that fits out in terms of other savings that we have, and how social security would be complemented by that.”

[00:35:04] TB: Yeah, funding aside, it makes sense. I wouldn’t be surprised, because we live longer. I think, we’re just living longer. It makes sense for us to work longer than previous generations, because people just live in longer. I think, the fallout of – what we said about the loan forgiveness is that people are on track to count on this program. For the government to say, “Hey, psych, just kidding.” At a minimum, I think it would be grandfathered in. I think, if social security would ever go away, which I don’t think you would ever would, but I think it would at least be grandfathered in, in terms of a new account on this. Anybody born after year 2100 or something like that, then maybe that’s not.

I think, a lot of people, because we are really poor at saving for our future, it’s a necessity that I think, needs to happen. It’s a forced way for us to save for retirement. We pay for it out of our paycheck, so we have to save for retirement. One of the things that was a big headline, as baby boomers were going to retire, is they were going to bankrupt the system, right? I read, I think, somewhere that Gen Xers will outnumber baby boomers, by I think, year 2028. That’s not too far away.

I think, the dynamics in the numbers are changing. There’s going to be, again, a big transfer of wealth from generation to generation, which again, could buoy some of these years. I’m not necessarily doing a great job of saving for the future. Again, that would be where I would have a plan for that. I remember, my parents received a small inheritance, and I think, they redid their kitchen. If that’s a goal, then that’s great. I would also want to make sure that everything is on the up and up in terms of retirement. That’s going to be more so the case for Gen X pharmacists, where they have to go further to save for their own retirement, because the social security benefit, it’ll be there, but a much smaller percentage of that paycheck that you’re going to build in retirement. I think, you’re going to want to have the 401k and the IRAs, and some of these other accounts there to build that out.

Yeah. I think, Tim, it’s probably one of the things that we should probably dedicate a few episodes on is, just that whole picture of what that looks like in terms of security and some of those other things that are going on as you’re approaching retirement age.

[00:37:26] TU: Great stuff. Tim, again, intention here was to do somewhat of a high-level overview of some of the financial issues and challenges facing Gen X pharmacists that are in the YFP community. We’re going to dig into some more of these topics in the future. For those that are listening to this episode, and you find yourself thinking about many of these different priorities financially, whether you’re currently working with a planner, looking for a second opinion, not working with a planner, we’d love to have the opportunity to talk with you to see if the services at YFP Planning are a good fit for you. You can schedule a free discovery call at yfpplanning.com.

Again, as we get ready to turn the calendar into 2022, just another thank you to those that take time out of their schedule each week to listen to the podcast. We don’t take that for granted. We appreciate the feedback, and the encouragement that we get. If you have ideas for future episodes, we’d love to hear from you. Wishing everyone a happy and healthy New Year and looking forward to seeing everyone in 2022.

[SPONSOR MESSAGE]

[00:38:23] TU: Today’s episode of Your Financial Pharmacist Podcast was sponsored by our friends at Thoughtful Wills. If you haven’t created your estate plan yet, we urge you to reach out to Notesong and Nathan. They draft custom estate planning documents, like wills, trusts, healthcare directives and durable powers of attorney that fit your situation and reflect your wishes. This is key. These are custom legal documents created and reviewed by actual attorneys.

Thoughtful Wills created to cut to the chase packages, designed for pharmacists who are ready to get their estate planning in order. You’ll really appreciate their dedication to approachable lawyering, and they charge about half of what most law firms charge for the same documents.

These documents are such a gift to your loved ones. If you haven’t created them yet, please just get it done. Reach out to Notesong and Nathan by going to thoughtfulwills.com/yfp. Go ahead and book a meeting with them. They’ll take such good care of you.

[END OF EPISODE]

[00:39:20] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment, or any other advice. Information to the podcast and corresponding material should not be construed as a solicitation, or offer to buy or sell any investment, or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

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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